The Queen's Speech

HL Deb 11 November 1981 vol 425 cc235-307

ADDRESS IN REPLY TO HER MAJESTY'S MOST GRACIOUS SPEECH

Debate resumed on the Motion moved on Wednesday last by the Lord Bethell—namely, That a humble Address be presented to Her Majesty as follows:

"Most Gracious Sovereign—We, Your Majesty's most dutiful and loyal subjects, the Lords Spirtual and Temporal in Parliament assembled, beg leave to thank Your Majesty for the most gracious Speech which Your Majesty has addressed to both Houses of Parliament".

2.54 p.m.

The Chancellor of the Duchy of Lancaster (Baroness Young)

My Lords, this is the first time I have had the privilege of opening a debate on the gracious Speech. My first very pleasant task is to say how much we look forward to hearing the three maiden speakers in the course of this debate, which will take place over two days; that is, the noble Lord, Lord Marsh, the noble Lord, Lord Constantine of Stanmore and the noble Lord, Lord McFadzean of Kelvinside. Each brings to this debate his own particular expertise and knowledge of the industrial world. It is not surprising that they should have chosen this debate on economic and industrial affairs in which to speak. Nor, indeed, that the House should have wished to have two days for it. For economic and industrial affairs today dominate political thought and action.

The mid-term point of every Government's term is an opportunity to take stock. We do so in the knowlecge of the immense problems which have to be faced. We are all deeply conscious of the tragic level of unemployment and particularly of its effect on the young. And my theme today is this. We owe it to our country, which is struggling so hard, to try to remedy years of failure of Government and lack of success in industry, to see our policies through. In saying this, we must not be insensitive to social need nor to political argument. We must be flexible, and we have been. We must listen, and we do. We must be ready to adjust our plans and measures to meet new circumstances and unforeseen events, and this we have done.

But future generations would accord us little thanks if, for whatever reason, we shirked our task of reversing Britain's long relative economic decline for temporary popularity. For that—the reversal of decline—is what we are determined, and were elected, to do. It will not be easy. We never said that it would. Governments can only slowly, inch by inch, try to restrain the momentum of rising public spending and borrowing, particularly when it is fuelled by ever increasing expectations, and re-create the confidence and conditions for enterprise. To judge from much of the debate on unemployment and the recession one might imagine that Britain's economy only began to slither downwards on the 1st May 1979. The fact that over recent years the great issues of political debate have been almost exclusively economic is proof itself of a growing awareness of the seriousness of Britain's plight. Only slowly has the understanding that we were slipping behind other industrialised countries dawned on us, and the truth grasped that unless we could restore Britain's economy to health all our other cherished goals were unattainable.

For, from behind a facade of rising money incomes, the unpleasant facts of our economic position had by 1979 clearly emerged. Many of our great industries had been falling behind in the battle for customers at home and abroad. On quality, on reliability and, in some degree, on price, our goods were ceasing to satisfy. We could not compete. Industry after industry declined; in a few cases, for example, motor cycles, they were effectively eliminated. Our share of world trade fell. In 1979 our share of world exports in cars was only a quarter of what it had been in 1967. Twenty years ago we exported half a million more cars than we imported. Now is is the other way round.

In this situation governments came and went. Despite devices of freezes, and "over-heating", stops and goes later, the underlying causes of our lack of competitiveness remained more deep-seated than ever. First, our industries' profitability was not only lower than most of our competitors—and lower profits meant less productive investment and fewer lasting job opportunities—but, excluding North Sea activities it had also fallen from between 11 and 12 per cent. in the early 1960s to 3 per cent. in 1979. Secondly, our productivity growth, already lower than most of our successful competitors, had become even more sluggish in the 1970s.

As our trading base was weakened, so the incomes of our people and the pensions and social services which we could afford suffered. It is a sobering thought that twenty years or so ago Britain's national income per head ranked second among Common Market countries. By 1979 we had fallen to seventh place.

But economic decline was not just "economic" in its impact. It bred, and was accelerated by a lack of pride and of purpose, an inclination to pursue factional interest at the expense of that of the nation, a lowering of standards. I believe that the winter of 1978–79 was not just an economic calamity—it was a national humiliation. We saw that successive Governments, of both political colours, had too often tried to treat the symptoms and not the disease. They had responded to the loss of industry's competitiveness and to the ever higher levels of unemployment by boosting monetary demand. But the result, in the long term, was not rising national output, but rising prices. Between 1970 and 1980 money income rose by 345 per cent. but output rose by only 17 per cent. Ultimately the process was self-defeating. Successively higher peaks of inflation followed successively smaller increases in the number of jobs.

As a result, the level of adult unemployment grew in each successive cycle. During the 1971–72 recession under the last Conservative Government it reached 850,000. Under the last Labour Government in 1977 it reached 1.4 million. Now it stands, after the latest deep recession, at 2¾ million. It is possible to dispute the exact balance between the causes of that worsening of our economic performance, but I believe that two lessons are clear, and lessons which I would hope members of all major parties would accept.

The first lesson is not economic but moral. It is that politicians should be more modest. For they have not managed to change the long term trends of the economy. They have not managed to make our industry more competitive. They have pulled the monetary levers. They have devised more or less elaborate systems of regulation and control. They have planned, directed, nationalised, bribed and some times browbeaten employers and unions alike. And nothing very much has come of it. The first lesson is that the ability of Government to do anything more ambitious than set the right framework for sustainable economic growth is, at the very least, unproven.

The second lesson is, I believe, that simply "more of the same" will not do. Reflation has been tried. Incomes policies have been tried. Increasing public spending over the last 20 years as a cure for the nation's ills has also been tried. I believe it is right that the Government should expect some common ground on these matters. Was it not the present Leader of the Opposition who told one of his honourable friends that he: must face the fact that inflation helps to cause unemployment". It is widely said that Governments lose elections and that Oppositions do not win them. To the extent that this is true it is a salutary reminder that no incoming Government can wipe the economic and political slate clean. The worst aspect of the last Government's legacy to us was inflation—on a swiftly rising trend from the middle of 1978. Pay restraint in 1979 in the public sector had collapsed, and the public service pay bill increased by 25 per cent. between 1979–80 and 1980–81. And then, on top of that, like the rest of the world, Britain suffered the second great oil shock of the decade, when prices more than doubled.

What is certain is that the difficulties which any Government would have faced in 1979 were compounded by policies and attitudes over the years which left Britain less able to cope with those pressures than most other western economies. For we had failed to adapt and adjust. And when adjustment had to come—as inevitably it did—it was all the more painful, because it had been so long delayed.

What has been happening since up and down the country in private and public sectors of industry is that concealed unemployment in the form of over-manning has suddenly come through in perceived unemployment. I do not wish in any way to minimise what has happened or the tragedy for so many people, but I must say that to the extent that blame lies anywhere it lies upon successive Governments, managements and unions which implemented or pressed for measures to preserve overmanning—not just upon today's Government, and managements which are living with today's unemployment.

Let us take the case of the British Steel Corporation for example—struggling to raise productivity and win back markets against a backdrop of collapsed markets and cut-throat competition. About half the jobs in it since 1976 have gone. Whole communities have been affected. But is not this a commentary on the state-directed over-investment in the first place, on state planning and above all on the failure of the last Government to force the British Steel Corporation to face the problem of over-manning earlier on.

Let us take British Leyland. I live in Oxford. I spent years as a member and leader of Oxford City Council. I understand the frustrations and feelings of the workforce who so nearly took British Leyland over the precipice on which it has teetered. But I know, too, that if at the time of the Ryder plan the changes now so painfully and expensively being brought about had been seriously tackled then, the position would not have become so desperate.

Nor I believe can the trade union movement escape some responsibility. In the present situation the main reason why unit labour costs have risen so fast, pricing our goods out of markets and our workforce out of jobs has been the pursuit of wage claims which neither the nation's resources nor individual companies' profits could meet. Over the two years to last winter we lost 50 per cent. of our competitiveness in manufacturing. That is what we are now beginning to claw back—10 per cent., or one fifth of what we lost—and we have recovered that since end of 1980.

This unhappy inheritance occurred against an even gloomier world picture. OECD calculations suggest that industrial countries' output would be 6.5 per cent. less in 1981 than it would otherwise have been as a result of the second oil shock. If we had failed to adjust as a Government to changed circumstances, we would stand rightly accused of inflexibility. But we have maintained the thrust of our policies, but shown flexibility in the tactics we have adopted. This has resulted in a great paradox. For we are at the same time accused by our critics of rigid monetarism yet teased about the failure to meet monetary targets. We are accused of an obsessive concern with the public sector borrowing requirement—at the same time as our critics point out that we have re-adjusted our borrowing targets in the light of the recession.

We are accused of starving the nationalised industries of investment—when the latest public expenditure White Paper shows that they are to invest some 15 per cent. more this year than last year in real terms. We are told that we have a prejudice against public sector firms and industries and their workforces. The vast sums poured into British Steel and British Leyland for new investment and to make them slimmer and more profitable should, I hope, dispense with that.

Above all, we are said to be callously ignoring the plight of the unemployed. No government has a monopoly of either patriotism or humanity. And the facts show that this year we will spend over £1,000 million on special employment measures and next year around £1,500 million. At the end of September about 700,000 people were covered by these schemes. And as my right honourable friend the Secretary of State for Employment said earlier this week in another place, by the turn of the year we shall be bringing forward proposals for a comprehensive training scheme for young people, thus, I hope, remedying what many have seen as a long-standing weakness in our education and training system. We have rightly focused heavily on the young unemployed—though it is for trade unions, too, to see what they can do to help price young people into, rather than out of, jobs. None of these proposals at a time when Government are seeking to control spending and having to increase the burden of taxation betokens either indifference or inflexibility.

Finally, on public expenditure, I must reiterate what my colleagues in the Treasury have stated; that it is not proposed to reduce the level of planned public spending next year but to increase it—how much, is the subject of the discussions which are now taking place. The establishment of an overall framework of financial discipline is not something new. Responsible Governments throughout the free world are broadly pursuing the same approach to their problems. In the current year 13 out of the OECD's 22 members cut spending plans. There was widespread agreement at the Ottawa Summit and at IMF meetings that curbing public spending and borrowing form an important element in the campaign to reduce monetary growth without putting excessive burden on interest rates.

As the Socialist President Mitterrand said, We must take strong action to drain the poison of inflationary habits from the body of France". If I may say so, our own Prime Minister could not have put it better. Because we did not and do not believe that Governments themselves can, in the long run, generate higher growth and full employment, we have concentrated our efforts on creating the right climate in which individuals and firms can do these things. It is for that reason that we have removed or abolished disincentives and controls. Exchange controls, price controls, dividend controls and wage controls have been swept away. We have made significant changes in the tax system to encourage effort and reward endeavour. Marginal income tax rates for most taxpayers are lower than when the Government came into power. We have also sought to create a better framework for industry, upon whose success so many of our hopes ultimately depend. Office Development Permits have been abolished and Industrial Development Certificate thresholds cut. Industry is better able to make its own decisions, free of bureaucratic controls and interference. Even more important, we have been reversing the trend towards greater state control and state ownership in industry. That is why we have denationalised British Aerospace and successfully floated Cable and Wireless. The new Secretary of State for Energy is now planning to allow real public ownership—that is, ownership by the public, not the state or its agencies—of more of our North Sea wealth.

We have tackled the great public monopolies. For example, areas of the business of British Telecommunications are being opened up to private competition under the British Telecommunications Act. We have also sought to create a better balance, not just between the state and the private sector, but between unions and their members and unions and management. We made some steps in that direction under the Employment Act. The gracious Speech announced that we will be going further down the road of making the labour market work more in favour of the nation, and more in favour of the workers and, above all, of the unemployed. Perhaps the most important area in which we have set about creating the conditions for enterprise is in that directed towards encouraging small business. We have introduced a range of new schemes and incentives—over 60 measures in all. Our latest innovation—the Loan Guarantee Scheme—whereby the Government will guarantee bank lending to certain small and new businesses, has proved such a success that we have decided to double their year's lending limit under the scheme to £100 million.

There is now evidence that we are at last pulling our way out of our deep economic difficulties. Since the turn of the year industrial output has stablised. Manufacturing output was nearly 2 per cent. higher in the three months to August than in the previous three months. Engineering and cosntruction orders have increased. Short-time working has fallen rapidly and overtime working in manufacturing increased by 10 per cent. in the three months to August over the previous three.

That does not mean that we can predict any early improvement in unemployment, though the rate of increase in unemployment in the three months to October was less than half that of the last quarter of 1980. But it does mean that economic activitity is picking up and that sensible, responsible pay bargaining offers the prospect of more new jobs and real jobs in the future. Above all, a new mood of realism and responsibility has gripped the country—and it is now beginning to show through in our economic performance. The average rises in earnings and settlements in the 1980–81 pay round were about half those in the previous one.

The rate of inflation has roughly halved since the second quarter of last year. Increases in productivity and improvements in work practices are helping to recover our lost competitiveness and the pressure on profit margins is easing. Industrial stoppages since July 1980 stand at the lowest level in any comparable period since the 1940s. We are learning slowly that jobs and living standards flow from satisfying the customer and from nowhere else. Our exporters are achieving considerable successes in world markets and their profits have been improved by the easing of sterling's level against other currencies, especially the dollar.

What we are seeing is that the British people, not the British Government, have the skills and determination to win through when they are given the chance. That is why, in expressing confidence in the approach we have pursued, your Lordships will be placing your trust in nothing less than the nation itself.

3.15 p.m.

Baroness Birk

My Lords, I should like to start by congratulating the noble Baroness the Leader of the House on the clarity of her exposition and on the fact that she told us that it was the first time she had spoken on the gracious Address as Leader of the House. I wish I could say that the picture she painted, the policies that she described and what has been announced in the Queen's Speech equalled the clarity of her exposition and the way in which she put it across. In fact, I have the feeling that she and I are talking about or seeing two entirely different countries, with entirely different people with entirely different reactions. The Queen's Speech contains a prescription for our economic and industrial ill-health which is largely the same as before. The primary emphasis is on inflation and the reduction of public expenditure through a rigid and illusory monetarist fetish. Privatisation—and here I think that the word is as ugly as the dogma—of oil and gas, and a further legislative attack on the trade unions are thrown in for bad measure.

This seems to me to be quite a different picture from the one that the noble Baroness painted so eloquently. The immediate reference to unemployment in the gracious Speech is as interesting to psychology students of Government policy as to economists. I quote: My Government share the nation's concern at the growth of unemployment". Thus it seems to me that the Government distance themselves from their own creation, following this by promises of help to those most hard-pressed by the recession.

Tomorrow an amendment will be moved from this side of the House by my noble friend Lord Scanlon, which sets out in brief the views of the Opposition. Unemployment—(which I think the noble Baroness slightly underestimates, for I think she said it was 2,750,000) all but nudging three million and many economists would argue that it is over three million—is now at the highest level ever recorded in this country. Far from levelling out, the increase in the numbers of adults without work is, in fact, accelerating. The rise in youth unemployment to a level where half our school-leavers are condemned to the dole queue is a scandal for which there is no viable excuse.

In spite of what the noble Baroness said, industry has suffered its fastest contraction—greater even than the Great Depression of the 1930s. Output has been cut by one-sixth; investment is falling steadily; profits are at an all-time low; and each week brings new announcements of closures of plants by major companies. We only have to look at the television news at night to see the numbers who are being put off by many of our major companies in this country. There is now a record level of liquidation of companies. These are records which this country could well do without.

It is against all common sense to suppose that a policy which repeatedly closes factories and so diminishes production can enable us to get richer. Except for a privileged minority—and the noble Baroness will remember than in June 1979 the Government budget gave back £1,560 million to people with incomes over £10,000—the standard of living is being cut by increases in taxation, reductions in social security benefits and cuts in real wages forced on workers by redundancy threats. Public services are under severe, increasing strain as the Government starve our public sector of resources—health, education and housing; the list is endless—and it is not going to be very easy to get any of these back on the road, even if and when things improve.

Compared with when the Tories took office we are now producing less, investing less, employing fewer people—and that, I point out, is a different point from the number of unemployed—and paying more taxes. At the same time, prices are rising faster and interest rates are higher. There has been, it is true, a small improvement in productivity, but this unfortunately is statistically unsound since the upswing is from an appallingly low base—much lower than the base of 2½ years ago. Even then, I do not think any of us were satisfied that productivity in this country was high enough.

In short, the Government's economic record since the election has been one of unparalleled failure. I cannot understand how the noble Baroness can say that this record has not slithered down since 1979, and in fact all this was going on before. In fact, the slide, as I shall show later, has been enormous. The Leader of the House referred to the effects of world trade. It is perfectly true that world recession has played its part. But may I paraphrase what Sir Ian Gilmour said in another place in the debate on employment on 9th November. He pointed out that recession was occurring all over the world, but that what was not justified was the fact that it was much worse here than anywhere else. He further pointed out that the fact that we were self-sufficient in oil ought to have made things better in this country and not worse. Although he has left the Cabinet, he is still not a member of the Opposition.

The Government have two lines of defence against the criticism which is aimed at them: First, that what is happening to the economy is beyond their control. This is nonsense, as was candidly admitted by the newly-appointed Treasury spokesman, Nicholas Ridley, who said on 21st January 1981: Bringing down the rate of inflation can only be done by restricting the money supply; and doing that inevitably causes difficulties for business and rising unemployment. The high level of unemployment is evidence of the progress we are making". When lie said that, Mr. Ridley was a Foreign Office Minister. I bet he would not say that now!

The Government's second defence is to admit that the present policies do entail short-term costs but say they are essential in tackling the deep-rooted problems of the economy and laying the basis for future prosperity. For over a year now the Government have been telling us "the worst is over" and "the upturn is in sight". They produce words of optimism, but the policies are deeply pessimistic. The economic forecasts envisage a small increase in output next year. The National Institute say less than 1 per cent., and the OECD only a quarter of 1 per cent. Others, like the London Business School, are slightly more optimistic, forecasting growth of nearly 2 per cent. next year, but it must have caused some concern to the Government that their most recent forecast was much more on the pessimistic side.

But every time a forecast is published the end of the recession is postponed. Even the optimists do not expect us to recover our former levels of production in the next five years, even if then. The most recent survey of industry by the CBI, which came out only the other day confirmed that industrialists see no prospect of an upturn in demand or output. Industry expects to have to make further cuts in capacity and employment, and everywhere confidence is falling. In order to save time I shall not read out a whole sheaf of quotations from speakers at the recent CBI conference, which I should have thought would have given the Government pause to think about the effects of their policy.

Future prosperity depends on the skills of our workforce and industrial investment in advanced technology. But what in fact have the Government achieved in these areas? The number of apprentices, which represent our precious future supply of skilled labour, has fallen to less than half the level of the late 'sixties. Investment in manufacturing industry has fallen by nearly a quarter. The financial institutions are channelling huge volumes of funds overseas rather than into industry at home. Last year more was spent on company shares abroad than at home. And we have now, as we know, no more exchange control.

Therefore, as long as current policies continue we see no hope for the future. Again, Sir Ian Gilmour, in that same debate on 9th November 1981, referred to the Prime Minister saying that she thought that the Government were right to be flexible within the limits of prudence, which he welcomed and which we would all welcome; but I think we would agree with him when he said that it was important to be flexible and prudent out of a conscious choice and a deliberate policy. For objectives to be brushed aside by the force of events, and then to label the difference between what was meant to happen and what actually did happen as "flexibility", might be politically astute but it is not economically prudent. This is what concerns a great many of us.

The Government claim that the benefits of their policies will soon show through. We have been living with this situation for quite a long time. It would have more credibility if we chould see a coherent strategy based on convincing theories. In fact, the underlying monetarist theories are in tatters, and the practical application of those theories unfortunately reduced to a charade.

In his evidence to the Treasury and Civil Service Committee of the House of Commons my noble friend Lord Kaldor, who is speaking tomorrow in this debate demonstrated convincingly that the central tenets of monetarism are uniformly bogus. There is no straightforward, causal relation between the money supply and prices. There is no correlation between public borrowing and the money supply. There are no grounds for believing that public borrowing can be simply reduced by cutting public spending. His evidence on these points has not yet been answered by the Government. Perhaps the noble Lord, Lord Cockfield, will answer him when he replies tomorrow.

One of the clearest illustrations of the tragic absurdity of this strategy is the cost of unemployment. Here I am dealing with the economic cost and not the social costs, which I shall come to in a moment. The Manpower Services Commission estimates that keeping 3 million people out of work now costs the Exchequer over £4,380 a year for every extra person unemployed, which totals £12½ billion per annum—more than the cost of the health service.

The Government launched their strategy with the promise that: it is concerned with only those things—very few of them—which the Government does actually have within its power to control". This was the Chancellor of the Exchequer on 26th March 1980. In fact, the central instrument of the strategy—sterling M3—has consistently outgrown the targets laid down. In the first seven months of this year the money supply grew by 19 per cent. compared with a target range of 6 per cent. to 10 per cent.

Last week the Financial Times reported that: The Government is preparing to concede failure in its efforts to hold the money supply within the target for this year". The Government came in professing that their main objective economic strategy was to cut inflation. I think I am right in saying that the noble Baroness referred to the legacy that the Government had inherited of inflation from the last Government. I must remind her that after 2½ years the rate of inflation at 11.4 per cent. is higher than the 10.3 per cent. when the Government took office—and this is the centrifugal force of Government policy, my Lords.

The sooner the Government abandon their obsession with meaningless financial targets the sooner we can begin sensible discussion of alternative policies. The clutch of critics of Government economic policies is now so numerous and influential (and includes, apart from the remaining dissidents in the Cabinet, leading Conservative politicians like Sir Ian Gilmour, Norman St. John Stevas, Geoffrey Rippon, Edward Heath, as well as droves of distinguished economists, the CBI, industralists, small and large businessmen, and professional people) that it is almost unnecessary for the Opposition to do more than join this mighty chorus.

This is no longer a party political matter; this is affecting the whole country. I could not possibly go through the stack of cuttings I have from newspapers and periodicals which generally support the Government but which have come out in strong criticism; and the headline "The Thatcher disaster", in an issue of Financial Weekly last month, and the article beneath that headline were far stronger and more aggressive than I am being against the Government's policies.

There is no question that our problems have been made so severe that only a radically different approach can offer hope for the future. Our current position bears many similarities to the situation which faced the incoming Labour Government after the war. That Government successfully confronted the challenge of rapidly increasing employment—4 million Service men and women had to be absorbed into the economy—and rebuild industry by using expansionist policies, planning and public ownership. I agree that we were not able at that time—it has never since been caught up with—to restructure industry in the way that should have been done, so that we are left with great parts of industry which have not been modernised. The same ingredients, although not necessarily the same mixture, are urgently needed today.

At the heart of Labour's alternative is our commitment to reduce unemployment; we put that as No. I priority. We believe it is a fatal folly that skilled people should be without work while so many needs go unmet, and public expenditure has risen to keep people in idleness. Indeed, that is what so much of the increased public expenditure is going on, namely, to pay people not to work, not to produce; and so we get the whole chain of despair and human misery.

We see the need for an interlocking set of measures: to expand the economy by increasing public spending and promoting investment; to allow expansion to be sustained by measures to overcome obstacles posed by the balance of payments, inflation and skill shortages, with an agreed incomes policy accompanied by price controls; and to change the structure of industry and give workers a greater say in how their industries are run. Unless somehow we get that co-operation and partnership we shall never be industrially healthy.

The concept that what is basically wrong with the country is the trade unions is misconceived. I am not for a moment saying—I do not think anybody would—that everything is always perfect, but the weakness of management is scarcely acknowledged. The Minister referred to it, but one does not often hear it mentioned. Yet in many instances while it is not just a question of the weakness of management affecting the productivity, production and administration of a firm, it also has a great influence on the relationship between the workers and management.

To give a small illustration: just after the BL strike was settled—and we were all delighted about that—the Secretary of State for Industry immediately threatened to sell off BL to private enterprise as soon as possible. If private enterprise does so well, why did he not give it to them right away? Secondly, how stupid, just after a strike had been settled—with great difficulties for some of the trade union leaders, Terry Duffy in particular—to come out with a statement like that which upset everybody, including the unions. That sort of basic psychology is wrong, which is why the Government's plans (although they have not yet been spelt out) on legislation against trade unions will mean confrontation with the trade unions when the only thing that could be of help is conciliation; and conciliation must be the economic order of the day.

At present resources are unemployed simply because the goods they could be employed to produce cannot be sold. Policies of expansion through increased public spending, lower taxes, a cut in the National Insurance surcharge—which the Chancellor of the Exchequer has been besieged on all sides to implement; maybe after this debate he will change his mind—are essential, and lower interest rates are designed to provide people with the spending power to buy the goods and thus make it worth while for resources to be employed.

It is well known that public investment is desperately needed for schools, hospitals and roads. Indeed, our whole infrastructure is in danger of disrepair. Assets created by public expenditure are national assets, not part of current spending, and it seems incomprehensible that the Government do not seem to grasp that. Deferment of essential public expenditure—for example, on sewers—will only make the problem very much worse. The idea that public capital expenditure denudes the private sector of money required for development is simply not true. Professor Matthews, Chairman of the Clare Group of Economists, whose criticisms, according to the Financial Times, find an attentive ear at the Treasury, pointed out: The Government are obsessed with a hatred of the public sector that astonishes me. They almost seem to think that crowding out—if taken literally—prevents any recovery at all. If Government expenditure crowds out recovery, then why doesn't private spending?…". An increase in public expenditure will not bring any automatic increase in inflation, as some have alleged, because we have such vast unused resources; an increase in spending could, if used correctly, bring an increase in production and not in prices. Indeed, companies would be encouraged to reduce their prices as increased production brought greater efficiency and lower costs.

As for new technology, that will greatly increase productive power, more in some industries (for example, car manufacture) than in others (for example, building) but, as my noble friend Lady Wootton has recently written: Large sums of public money are already being spent on research programmes into the possible use of leisure. Meanwhile, the relevant problems of using new technology to raise living standards in general remain comparatively neglected". There is a whole area here for expansion. Our alternative is based on simple common sense: that it is better to put people back to work than spend over £12½ billion a year of public money to keep them in enforced idleness. The Government's persistence in their present policies will have, and is, I am afraid, having, profoundly damaging social as well as economic effects on our society, and although we are sitting at opposite sides of the House and are in opposite parties, this is not something that can bring joy to anybody's heart.

The opportunity to use our short-lived North Sea oil wealth is being wickedly wasted; the fabric of industry, transport, communications, housing, education and the Welfare State is being destroyed; many skills will have gone for ever—such skills cannot just be recalled once they have been completely eroded; and many essential businesses will never recover. The shakeout on which the Prime Minister puts so much faith will result in the irrevocable destruction of parts of our national assets. A whole generation of young people are condemned to long-term unemployment. I appreciate that the noble Baroness pointed out the help for the young, and I know that her feeling for young people is one of great sincerity, but I must put it to her that short-term spurts of training, ending with a return to the workless pool, is a dead-end palliative. Future careers are what young people want and need. When young people come before me in the court where I sit as a magistrate and are asked when they were last in work, and reply that they have been out of work ever since they left school, it is little wonder that some of them get into trouble. Indeed, it is fortunate that more of them have not got into trouble, when some of them have now been unemployed for over two years.

When speaking of the unemployed, let us not forget the older unemployed, by which term I am referring to people not in their fifties and sixties but in their thirties and forties, who I am afraid will have reached the point of no return so far as employment is concerned unless things are altered. Even generous unemployment pay cannot compensate for the awful sense of futility of not working; and the talk of cuts in benefits is ominous. The most important asset in our society is our people, and when the greatest increase in productivity is in the areas of conflict and inequality, the effects on society are devastating. What we expect from the Government is not an avalanche of reflation, but an abandonment of the harsh rhetoric that makes the Government appear to take a sadistic delight in restraint.

Of course public expenditure has increased, but much of it at the moment is economically and socially counter-productive. What we want to see is a more flexible stance, a really flexible stance, not in the terms described by the noble Baroness. The display of a comprehension of the vast human problems and miseries involved and the intention to depart from the economics of "there is no alternative" are essential. Even so, the scale of what the Government propose to do will still be far from what is required, but at least it would be a start.

3.40 p.m.

Lord Rochester

My Lords, in the gracious Speech and again in the words of the noble Baroness, Lady Young, this afternoon the utmost importance is attached to the maintenance of progress in reducing inflation by the pursuit of firm monetary and fiscal policies, and the hope is expressed that this will be assisted by further reductions in the level of wage settlements. That goes to the heart of the matter, and I accept that a reduction in the rate of inflation should have the highest priority. On these Benches our disagreement with the Government concerns the means adopted to achieve that objective.

I am not one who believes that the Government have deliberately set out to increase unemployment as a weapon with which to control inflation, but there is no doubt in my mind that higher unemployment has been the inevitable effect of their policies. Moreover, in my view, reliance on monetary constraint will not bring about that lasting change in the attitude of people to the way in which they use their bargaining power that is the necessary condition for ending cost inflation.

Even if in another year or so the industrial revival, long heralded by the Government, actually occurs, what reason is there to suppose that pent-up pay claims will not then be reasserted with all the more force because it will be felt that the recession has been made worse by the Government's policies?

If pay restraint is not to be enforced indefinitely by unemployment, it must come to be accepted voluntarily through understanding, and one good reason for a renewed attempt to develop an income policy is that, in contrast to the increasing divisiveness and even violence that have now been shown to accompany rising unemployment, it would be an educative process that would rely for its inception on an appeal to reason and for its maintenance on public understanding.

The Liberal Party believes that there is an urgent need to establish long-term arrangements for pay determination covering both the public and private sectors of the economy. The aim should be, after open consultation between representatives of the Government, employers, trade unions and other relevant interests, to secure the widest possible understanding and acceptance of the overall increase in incomes which at periodic intervals the country can afford.

Tomorrow my noble friend Lord Banks will be moving from these Benches an amendment to the gracious Speech. It will be to indicate our displeasure that in the amendment to be moved by the official Opposition no constructive or convincing alternative policies are proposed. Putting it at its most charitable, on this question of pay determination, the Labour Party at its recent conference faced both ways, and I think that we are entitled to know what their policy on it really is. I suggest that ambiguity on this and other matters concerning, for example, Europe and nationalisation, is the reason why a number of those noble Lords who are to speak in this debate will now be doing so not as members of the Labour Party, but as Social Democrats. We on these Benches welcome them as allies who have shown the courage of their convictions.

In saying that, I do not wish to disparage those Labour Peers who cannot bring themselves to make the break, but who have made it plain that they favour consultation and agreement between the Labour Party and trade unions on this vital issue of pay determination. I trust that, if it is the Liberal/Social Democratic Alliance which will form the next Government, for the sake of the country they will not withold their support from the endeavour that the alliance will then make to see that a similar understanding is reached with representatives of trade unions, among others.

If they respond by saying that a Labour Government would wish any discussions of that kind to cover the whole field of economic policy, I for my part would acknowledge that, because questions of pay, prices, investment, employment and productivity are inextricably bound up together, that is exactly what they should cover. But I suggest that such noble Lords should in turn recognise that if in the end there is not full agreement on all these interlocking matters, it is the democratically elected Government of the day who should make the decisions and be allowed to implement them.

Now it is claimed by the present Government, and was claimed again this afternoon by the noble Baroness, that incomes policies have been tried before and have failed. That is true. One response to be made to that is that in opposition the Conservative Party in their document The Right Approach, and the CBI, under the late Sir John Methven, both advocated the need for some understanding on pay determination. Indeed, I pay tribute to Mr. Edward Heath, who as Prime Minister towards the end of 1973, very nearly brought it off. The difficulty is to get all concerned to face up to the problem at the same time.

It was almost exactly eight years ago when the noble Lord, Lord Diamond, in a debate somewhat similar to this one, suggested that representatives of the three main political parties should come together to see whether agreement could be reached on what might be recommended first to Parliament and then to the nation. At the time his initiative was welcomed in all parts of the House, but nothing more came of it. In a further debate 12 months afterwards the late and much-lamented Lord Amory gave it as his opinion that our situation would continue to deteriorate until the political parties reached at least a measure of agreement on how inflation could be cured. I am sure that he was right—he usually was—and therefore I do not presume to assert that the Liberal and Social Democratic Parties can solve the problem on their own. But at least the formation of an alliance between us represents a significant step in the right direction, and that is certainly how it is being seen by the electorate.

In the gracious Speech we are also told that a Bill is to be introduced on employment and labour relations. In discussions in this House last year on the Employment Bill, and in debates six months ago on the closed shop and trade union immunities, we on these Benches gave general support to the Government's view that legislation in this field should aim at eliminating identified abuses of the existing law and should proceed at a pace which gave reasonable assurance of consent on the part of the general body of trade unionists. I continue to feel that that approach was wise.

But now it is rumoured that the Government intend to make trade unions financially responsible for the actions of their officials and members. I think I should warn the Government that in my view they would be most imprudent at this moment to mount any general attack on the immunities that trade unions have from being sued for damages. The reasons are clearly set out in the Government's Green Paper on Trade Union Immunities which was published at the beginning of this year. More than 90 per cent. of strikes are now unofficial. Recently, trade union power has been shown to reside increasingly, not at the centre but in the localities. This shift in the balance of power within unions cannot in my view be reversed overnight simply by making a change in the law.

If the law were to be changed, the question would then arise whether the courts would be willing to treat unauthorised industrial action as the responsibility of trade unions. So far from the authority of national union leaders being strengthened by such legislation, it might well be weakened still further. There could be a splintering of trade unions so that just at the time when we should be encouraging a reduction in their number there would be proliferation. In any case, operation of the 1971 Act showed that it is highly doubtful whether employers would in practice exercise a right to claim damages from trade unions. Lastly on this point, should a Labour Government be returned to power, would not the law then be changed once more?, and back we would go to squabbling among ourselves instead of working together to improve our competitiveness.

There is then the further question whether industrial action should continue to have legal immunity when it is taken in breach if a collective agreement. It is difficult to see how this immunity could be removed without at the same time making collective agreements legally enforceable contracts. With that objective I have considerable sympathy, but if it is to be achieved in this country it seems to me that it would be best to approach it gradually. The 1971 Act made collective agreements legally binding unless they included a specific provision to the contrary, but before this legal presumption was reversed three years later, what actually happened was that practically every agreement that was made provided that it should not be regarded as legally enforceable.

In all this surely the overriding consideration is that if our industrial relations and performance are to be improved it will only be with the co-operation rather than the concerted opposition of trade unions and their members. Here I take leave to make one further observation. Co-operation involved responsible action on the part of trade union leaders as well as management. Let those whom the cap fits take note that the British people will not tolerate action that purports to be industrial but in its real purpose is perceived to be political.

Finally, I feel obliged to respond to some of the criticisms which have recently been levelled at the Liberal/Social Democrat Alliance. It has variously been said by the Prime Minister and, indeed, by the noble and learned Lord who sits on the Woolsack that the alliance lacks leadership, that it lacks policies and that it lacks a coherent political philosophy; that it is a soft centre option, admirably adapted to be all things to all men, and no doubt much else. Let me assure your Lordships that if at the next general election the people of this country vote for the alliance in sufficient numbers they will have a leader to follow. The only thing that might prevent our policies being worked out in time would be the premature collapse of the present Government through internal contradictions.

The Earl of Longford

My Lords, may I interupt the noble Lord? Would the noble Lord say, though, that at the present time the alliance has any policy whatever?

Lord Rochester

My Lords, we have a number of policies, to one of which I was about to refer. On others we are working, and I can assure the noble Earl that when the time comes there will be a full programme of policies set before him and the electorate at large. Prominent among the policies of the alliance, indeed, will be a more representative electoral system. It will be aimed at bringing to a halt at last the unending shifts in economic and industrial policy which in recent years have done so much damage to our country. It is not a soft centre option but our greatest national need that ground should be marked out on which people of any political persuasion and of none can come together in a common endeavour to solve our problems. We on these Benches rejoice that throughout the land so many electors are embracing with enthusiasm this positive and unifying philosophy.

3.56 p.m.

Lord Constantine of Stanmore

My Lords, in making my first speech in your Lordships' House I ask your indulgence for what I shall endeavour to make a brief and relevant contribution to the economic side of this debate. Although dealing with a relatively narrow aspect of economics, which I hope your Lordships will feel is sensible, what I shall say has a basis affecting the lives of a great many citizens of the United Kingdom.

My Lords, the most gracious Speech from the Throne stated: Plans for public expenditure will reflect the importance of restricting the claims of the public sector on the nation's resources". There is a wide expression of concern at the burden placed on domestic consumers by the constantly-rising cost of gas and electricity, and I ask your Lordships and the Government to consider how practical reductions in price might be effected. The financing of new capital equipment requirements from sources other than revenue could produce a measure of aid in reducing the burden on consumers, and particularly on domestic consumers.

In the year 1979–80, the report of the British Gas Corporation showed that a sum equal to 11.6 per cent. of gas sales, some £343 million, was allocated for new capital equipment; and the Electricity Council report for 1981 showed a requirement for a sum equal to 18.225 per cent. of electricity sales, some £1,284 million, for capital equipment during that year. Should it be possible to finance capital projects at acceptable interest rates from a substantial source other than revenue or Government loans, it would lighten the load on domestic consumers, who at present are partly financing the purchase of capital equipment, some of it with a life of 20 years or more, in paying for the day-to-day use of the product. This places a particularly heavy burden on the older consumer at the domestic level.

As your Lordships are aware, British Gas has increased its charges by some 63 per cent. above those paid at March 1980; and an all-party committee in another place has recommended that nationalised industries should be allowed more scope for financing capital projects. It should therefore seem desirable that urgent consideration should be given to the financing of capital equipment from sources other than revenue arising from sales, and to making possible some relief from the inequitable burden of capital expenditure falling upon the domestic consumer of increasing age and diminishing financial means, while at the same time fulfilling the proposal in the gracious Speech to reduce the claims of the public sector on the nation' resources.

4 p.m.

Lord Robbins

My Lords, it is a very great privilege for anyone in this House to follow a maiden speech, especially a maiden speech such as we have just listened to, with its concrete terms of reference and wide ranging implications. I am sure that your Lordships will agree with me that we look forward to hearing interventions on many future occasions by the noble Lord who has just sat down.

The noble and learned Lord who sits on the Woolsack in my opinion hit the nail on the head when in his opening speech on the gracious Speech last week he queried the attitude of those who accuse the Government of reducing the volume of aggregate expenditure when the plain fact is that they are attempting, with very great difficulty, to diminish the continuing excess. For, if inflation consists of an excess of expenditure impinging on the volume of goods and services at constant prices, then I am sorry to say that we are still inflating at a rate which, if it continues, will diminish the value of money by half in a very few years. This, surely, is the way to pose one of the main economic problems which confront us: how to reduce the excess of private and public expenditure over production, whatever it may be.

The concern of the so-called monetarists, of whom I am not one, arises from the fact that, passively or actively, increases in the supply of money tend to increase the rate of expenditure; and, since the rate of expenditure depends on all sorts of factors difficult to control, they seize on the supply of money—which, surely, in our time, at any rate, is the responsibility of Government—as the appropriate instrument. In my judgment, they are not wrong in this. All the great historical inflations, from the inflation of the Assignats in the French Revolution to the inflations of Central Europe and elsewhere in our own time, have been accompanied, even facilitated, by increases in the supply of money, whether arising from excessive government expenditure or from borrowing at interest rates low in proportion to the prospects of profits.

So far, so good. And it is wrong to argue, as the anti-monetarists often do—and I have heard the contention in this House—either that the supply of money does not matter (which really flies in the face of history) or, alternatively, that it is uncontrollable, which certainly raises problems not yet completely solved. But, considering the amount of dispute about the various methods of control, it does not seem to me very convincing. Where some people go wrong is in supposing that in an economy such as ours the excess of expenditure can be cured suddenly overnight.

Of course, where galloping inflation has developed and nobody wants to keep the local money any longer than an hour, or, at most, a day, the only thing to do is to have a new money. This involves very rough justice and great difficulties for many private persons, but it can be done very quickly and its effects show themselves very quickly; whereas with a smaller inflation such as ours—where, I am glad to say, contracts are still being made in the local money—matters are much more difficult. This is a very good example of the wisecrack of Maynard Keynes that lesser evils are more socially intractable than large ones. He said that if rats and wasps were wolves and hornets they would have been exterminated long ago.

Most monetarists avoid this position. In technical terms, they tend to be gradualists. Where, in my opinion, they go wrong is in over-simplification of the problem as it arises in our society. Of course, if all workers were self-employed and living as peasants do, on the proceeds of their sales, downward adjustments of the excess aggregate public and private expenditure would be relatively simple. In various ways, the peasants would find their incomes to be less but there would not be mass unemployment. In advanced societies, however, there is not this flexibility of income and the labour market is, over a wide stretch, monopolistic or at best oligopolistic; and diminutions of aggregate expenditure in the absence of flexibility of wages are accompanied by unemployment, often very grevious, expecially, as has been said by most speakers already, in the case of the young. Moreover, the operations of such monopolistic associations often have the effect of raising real wages above any rise in productivity per head; and that too has the effect of being damaging to employment.

That is why earlier on I was careful to say that I am not a monetarist. The view expressed by my friend Milton Friedman, that inflation is always "caused" by excess of money supply, seems to me to be over-simple. Of course, one can see what he means. If rises in costs occur due to increases in the price of oil or labour, then, if the aggregate money supply is held constant, there must be compensatory movements elsewhere. But these movements create difficulties for bankers and for Governments, especially where unemployment is concerned. In any case, the denial by the monetarists of the role of cost inflation seems to me to be an undue limitation of the conception of the word "cause".

I can understand the trade unions jumping at Professor Friedman's denial that their policy is not responsible for inflation. But I think that many of the rest of us may find that rather difficult to swallow. But these are perhaps esoteric points. The main point is, as I indicated at the beginning, that we are still suffering from an excess of expenditure over the value of production at constant prices which is highly dangerous. I submit in all friendliness from the Cross-Benches that the onus of proof lies with members of both parties if they argue that increasing Government expenditure will not increase the excess. Would the noble Baroness, Lady Birk, deny that under former Labour Governments, particularly when we were seeking advice from the International Monetary Fund, attempts were made to arrest the increase of Government spending?

So, what should we do? I freely admit that if there now were to exist a freeze affecting all earnings which postponed any rises until the value of aggregate production was covered by non-inflationary public and private expenditure, we should be in a position to face the immediate future with greater equanimity than we do at present. But is there the remotest chance of such a state of affairs coming about? From the outset it would face the disadvantage that it would discourage movement and change, and so be no inconsiderable obstacle to the recovery of production.

In any case—to come down to mother earth—have not a considerable number of the most powerful union leaders set their faces against anything but a free-for-all in the labour market? In such circumstances, without supporting every detail of the Government's policy, what can one do but have general sympathy with their aims? This is both direct, in a gradual reduction of the excess expenditure which is the proximate cause of inflation; and indirect in working towards a less restrictive, more flexible, economic structure in which the achievement of stable money is more practicable.

These are sobering thoughts and are not very cheerful in our present position. But I am convinced that the sooner the situation is realised by the public in general for what it essentially is—a situation of continuing inflation with real earnings out of line with productivity—the sooner will the good sense of the people, as demonstrated recently by the vote at BL, support what has to be done in order to get things right.

4.18 p.m.

Lord Roberthall

My Lords, I too should like to congratulate the noble Lord, Lord Constantine of Stanmore, on his maiden speech. It ought to be a lesson to us all, although I am afraid it will not be followed. To be able to make a real point in a three-minute speech seems to me a magnificent performance. I feel a little like a maiden speaker myself at the moment because this is the first time that I have addressed your Lordships' House as a member of a political party.

It may seem strange at my very advanced time of life to leave those quiet waters of the Cross-Benches and plunge into the turbulent ones in which I now find myself. This will serve as an introduction to my speech: The last Budget was the reason why I could not resist changing my mind. Although I agree with many of the things that the noble Lord, Lord Robbins, said, especially in the latter part of his speech, I will not go into them, as a technical speech like that needs to be read before one says much about it.

However, coming back to the Budget, it seemed to me an example of the worst form of monetary dogmatism, looking only at a particular set of indicators, which, as we know, are extremely uncertain both in their content and in their interpretation, and not looking at all the other things. It would have been much better if the Chancellor of the Exchequer, instead of trying to make out the monetary figures, had gone to the nearest employment exchange and looked at that as an indicator. A feeling, was created that we are going to persist in a course which has already taken us a long way. I am not a monetarist, though I agree—and I think the party to which I now belong would certainly agree—that money is important. But it is not the only thing, and neither are our monetary indicators the only indicators.

I do not think that the Conservative Party ought to apologise for the figures not agreeing with their targets. The first half of monetary policy has been a brilliant success, because it is supposed to work on inflation by throwing people out of work and closing down industries until people accept a more moderate rate. Nobody could complain that we have not had a serious recession and a lot of unemployment. I do not think one should apologise at all for that half of the policy.

The difficulty is that the object to be achieved is to reduce the rate of inflation, as has already been pointed out and will, no doubt, be reiterated over the next two days, but the inflation rate is still approximately what it was at the time when the Government came to power. What have we got for all this waste of resources —for it is a tremendous waste—with not very much reduction in the inflation rate? One could say: Where such a great affliction has gained so small a prize.

I shall not go on in this strain. I feel that one ought to say a little about what one would do and I would speak from the macro-economic point of view. I should like to speak about three subjects: first, international relations; secondly, employment and output and, thirdly, price stability. On international relations, the noble Lord, Lord Cockfield, claimed in a speech on economics in the summer that a great part of our unemployment was due to the international recession. I think that he gave a Figure of something like three to one.

I do not know how one can demonstrate it one way or the other, but I do not think that it sits at all well on the present Government to put the unemployment down to the world recession. It is true that there is a world recession and that the continual rise in oil prices exercises a continual deflationary effect. But we are insulated from that. We have our own oil. We cannot really complain about the behaviour of other countries, when everything that we do seems to be designed to exacerbate the world position.

We ought to try to get back to what obtained until a very few years ago, which was mentioned in the original White Paper on employment policy. A world recession is everybody's business and everybody ought to try to get together. Until a few years ago, this was done by concerted discussions among the main countries of the western world, but I think that that has all been abandoned. The motto of a lot of my speech is not that there are great things to be done, but that we ought to change our stance, and in the international field we ought to try to get discussions moving again about some concerted action to moderate the world recession. I am sure that the new French Government would welcome an approach of that kind.

May I now turn to the next subject, which is employment and output? Here, as I indicated a little earlier, it was the determination of the Government to pursue a restrictive policy that so much upset me, and I do not think there is anything in the gracious Speech, or in what the noble Baroness the Leader of the House said, that gives one much indication of change. She is always a model of sweet reasonableness, but this time the velvet glove concealed an iron hand from somewhere else.

The way to change the stance is, clearly, to move towards some stimulation of the economy. It is very easy to do. It means spending more or taxing less and, of course, it is very agreeable for a Chancellor to do that. For once, all the other members of the Cabinet are on his side. I am sure that that is what we ought to do and I agree with the estimates that have been put forward by, for example, Professor Matthews' group which has already been referred to.

But we ought to recognise that recovery of output from this recession will not be as easy as it was after all the previous recessions. They were all short recessions and the available resources of the country had not been damaged. We have now had a very deep recession, as was pointed out by the noble Baroness, Lady Birk. It has done some good things, of course, and I agree entirely that it has given employers an opportunity to get improved work practices and so on. But it has also done considerable damage in two ways.

Manufacturing and investment generally have been contracted and the very large number of unemployed creates a real problem, because, while the recession has been going on, the redundancies and so on have taken skilled workers out of the whole structure. They have not been replaced by young people, as they used to be, because most of the young people have gone straight into unemployment. So there will be a problem in recovering to anything like the situation before the lost years. Manufacturing output is now 25 per cent. or so below what it was in 1973 and even if we have had an improvement in productivity, the trend line must now be well above that. But we must not make the mistake of thinking that we can get back too quickly. The Government's training programmes for young people are a good thing, as far as they go, but they will not turn them in a short time into the skilled people that will be required.

The next Government, which I hope will be an Alliance Government, will have to go carefully and play it as it goes along, keeping a very careful watch on the dangers of overheating. That is what went wrong after all the previous recessions. When we went out of the Stop phase into the Go phase, we always went a bit too far. One can take some comfort from the fact that one of the leaders of the Social Democratic Party, Mr. Roy Jenkins, is the only postwar Chancellor who managed to level out the recovery. In fact, if the Prime Minister of the time had not called an election so soon, we might have had an interesting experiment as to just where it was safe to level out. I thought that he had got to the point where he ought to have done it. It is going to be a difficult task. Caution is needed. The new Government must concentrate on looking out for bottlenecks, trying to stimulate the new investment which will be required and in particular upon trying to provide the kind of training which young people will want.

I come to my third point. To some extent I shall go over the same ground as has already been covered by the noble Lord, Lord Rochester. I refer to the problem of price stability. There has been a long period of failure. Some incomes policies worked for a little time but all of them broke down eventually. If one looks at each incomes policy, it came in at a higher level of inflation than the one before. If you wanted to argue that an incomes policy made matters worse, statistically you could put up a very good case.

Now we can see that monetary policy has not worked, either. It is clear that the cost of bringing down the rate of inflation, even if you take the last half of the period, has been very much greater than was expected. It has been a success in a way that one could have predicted: people who are on the verge of losing their jobs moderate their wage claims. That has happened recently at British Leyland. The expectation theory behind monetary policy, so far as I can understand it, was that other people would notice what was going on and would moderate their own claims. I do not think that those people who are not expecting to lose their jobs are in the least affected, even if they understand the argument, by the thought that they might be putting somebody else out of work.

I have always been an advocate of an incomes policy, although I thought that as it had been such a failure this Government were perfectly right to try the other experiment. But they have pushed it too far. Therefore we must face the fact that we have got to have an incomes policy. The reason for it is that a monetary policy uses unemployment as an instrument of policy. The suffering therefore falls on the unemployed who are the least in a position either to have caused it or to be able to do anything about it. It is making a scapegoat of the unemployed. It is a vicarious sacrifice. That is the difficulty.

I should speak all night if I were to go into all the problems of an incomes policy. I shall not do that. There is a very great body of literature about it. A number of suggestions have been made. One was made by Mr. Roy Jenkins in his speech to the SDP conference. It was a variant on using taxes as an instrument of policy. Another suggestion by which I am somewhat attracted has recently been put forward by Sir Henry Phelps Brown, He proposes a national board which will state the average rate of increase that is consistent with productivity. There would be opportunities to bring a dispute to ACAS and then to arbitration. He stops at that point. However, it is an interesting suggestion and would certainly help the public climate.

As Mr. Jenkins said, all the problems connected with an incomes policy and how to enforce it will have to be studied urgently. However, as in so many cases in the field of political economy, although it is very easy to get academics or people who have studied the problem to suggest solutions, what is wanting is the political will to carry them out. I believe, and I think that my party will believe, that we must have a policy that works—a voluntary one if we possibly can, which would involve discussions. But it is very hard now to have discussions because labour has to be represented. They are represented by the TUC and the TUC cannot speak for its members. That is the difficulty about a voluntary policy. It should be a voluntary incomes policy, if possible, but even if there have to be sanctions there should be an incomes policy. There are great difficulties about sanctions and they have been referred to in the literature I have mentioned.

The object of combining high employment and stable prices, which was the object of the original incomes policy, has eluded us completely and now we have the worst of both worlds. We have an unconscionably high rate of unemployment and still a rate of inflation which, as the noble Lord, Lord Robbins, said, will double prices in a very short period of time. Over the last 10 or 12 years they have already quadrupled. But we owe it to the unemployed to do better than we are doing now. Why should we go on sacrificing them? The object of high employment and reasonably stable prices was a fine object. I still believe in it. I think it is worth fighting for.

4.36 p.m.

Lord Jacques

My Lords, first I should like to congratulate the noble Lord, Lord Constantine of Stanmore. It was a breath of fresh air to have a concise and incisive speech supporting the nationalised industries and also the consumer. I hope we shall hear him often and, from time to time, on the same topics.

Before turning to my speech I am going to take the risk of a layman by commenting on some of the issues which have been raised by my noble friend Lord Robbins. As he is aware, I have always taken an interest in his speeches. I should like to pick three points out of this one, merely for emphasis. First, would he agree that in modern times money is such a complicated matter that modern governments seek to control the demand for it rather than the supply of it and that they have three instruments? First, they can control their own expenditure. Secondly, they seek to control other people's expenditure by the rate of interest and by other, similar, instruments. Thirdly, they seek to control the demand for money by an incomes policy. I suggest that that is the position in modern times, regardless of the textbooks. The textbooks are out of date on this particular issue. I would also submit that a legitimate criticism of this Government is that they did not fully examine and have not, or could not, use all the instruments available to them.

Secondly, Friedman. In effect, the noble Lord suggested that if we had completely free competition, Friedman would be a prophet. But since we have monopolies and semi-monopolies in almost all our markets, including OPEC, nationalised industries, trade unions and large companies which can pass on increases which they have negotiated with the trade unions to the consumer, his policy is bound to fail and becomes in effect merely a design for combining inflation with depression.

The third point I should like to raise with the noble Lord is that today he came as near to advocating an incomes policy as I have ever heard him come. I was delighted to hear it. I felt that in effect he was advocating an incomes policy on these lines: all right, let the trade unions negotiate; have free collective bargaining, but if it involves an increase in prices then both sides must go to the Price Commission and justify it. I felt that he was in effect arguing for an incomes policy on those lines; but, of course, if it included wages it would also have to include dividends and other forms of income. If he was so arguing, then I want to say that I have always been with him and will continue to be with him; and at the same time I will reply to the noble Lord, Lord Rochester, and say that I do not face two ways on an incomes policy: I have always faced one way and one way only.

I believe that a permanent, flexible incomes policy is absolutely essential and without it we shall either have rabid inflation or the kind of disaster that we have now, with great unemployment. That is the choice we have. I shall continue to advocate incomes policy regardless of what Government are in power. I shall likewise continue to argue for arbitration before strike, regardless of what Government are in power—and if I am thrown out of my party, well, that is just too bad. But I will remain in it so long as I feel that I am sufficiently in line with it, and I feel that I am at the moment.

Now I will come to what I intended to say, having lost five minutes! In the debate in the other place the Prime Minister was quite optimistic, to the great surprise of her Back-Benchers and, I suspect, perhaps to the surprise of some of her Front-Benchers—to their surprise because they have seen, as we all have seen, what the professional forecasters have to say. Almost unanimously, the professional forecasters say that any upturn in the next year will be minor and that we shall continue to have 3 million or more unemployed for the foreseeable future. Let us make no mistake about it, so far as the public are concerned and so far as this party is concerned, that is the yardstick which we use.

My Lords, the time has come when we should say, "Enough is enough". It is now time to start repairing the damage that has been done. Let there be no doubt that there has been damage. Investment, research and development have been slashed; marketing is being curtailed and some markets abandoned. These are the seedcorn of any upturn, any future development that we could look forward to, and the sooner we step in and stop the rot, the better.

My greatest complaint against this Government—and it has been for almost the whole of the time that they have been in office—is their dogmatism, which is portrayed in the sentence, "There is no alternative". We live in a parliamentary democracy, and in a parliamentary democracy it is sound practice for the Government of the day, no matter to which party they belong, to consult with those institutions within the state which are likely to be affected by the policies they intend to invoke: to listen to their point of view, not necessarily seeking complete agreement but to listen to what they have to say, and to take it into account and to seek their co-operation.

But this Government have kept the institutions which are representative of those interests at arm's length. That is my greatest criticism. Instead we have from time to time had tactless statements by Ministers. For example, Mr. Tebbit said that the unemployed should get on their bikes to seek jobs. He said they should get on their bikes to look for employment, which everybody except the Secretary of State for Employment knew was not there.

More recently, as my noble friend pointed out, we have had the tactless statement by Mr. Jenkin. Let there be no mistake, a few days ago we had a strike in British Leyland. The management was threatening to liquidate the company. It was a serious position, affecting the employment of hundreds of thousands of workers. It was settled, to the very great relief of the public as well as the Government. But why was it settled? It was settled for one reason only, because the engineering workers' national leaders had both the realism and the courage to go over the heads of the shop stewards and say to the workers, "You should go back". Without that recommendation from the national leaders of the engineering union there is a very great likelihood that that strike would still have been on.

Then, a few days afterwards, we had Mr. Jenkin telling a meeting of Conservative trade unionists that as soon as parts of BL were made profitable they would be sold. It was a tactless statement, even if he thought it, and even if he means to do it, but to say that immediately after the BL strike and its settlement was inexcusable. That is the kind of thing that ought to be avoided.

The time has come when I think the Government should go to both sides of industry and take to them a programme for fighting unemployment, because that is now our main problem; to hear what they have to say about the programme and to take into account their views, and also to seek the help of both sides of industry to prevent cost inflation while the programme is being carried out, because in such a programme the Government would need their help.

My Lords, we are an industrial nation, depending on exports. Therefore two things are necessary. The first is that we should use all our power to keep the exchange rate at such a level that it reflects national prices. That is the main function of the exchange rate, to reflect the prices in the different countries and, as a first strand in our policy, we should try to keep prices as nearly as possible reflecting the prices in different countries, and in so far as other factors make a move away from that situation we will do everything in our power to move them back.

The second instrument of policy should be to try to get confidence. Let us restore the confidence not merely of the entrepreneurs but of the workers and of the general public. I believe that one of the best ways in which to do that would be to say that North Sea oil is not going to be used for the payment of unemployment benefit or in any other way to save short-term debt. We should say that North Sea oil tax receipts are going to be used for making Britain more efficient and that we are going to put them into a fund, a fund which is going to be on cycle, a fund which will lend at comparatively low rates of interest to both public and private enterprise—both, not just one or the other—on reasonable terms, to be paid back. The consideration would be how far what they were going to do was in the long-term interest of this country. If it was in the long-term interest of this country, then it would rank for investment from the fund. And the fund could go on in perpetuity; as money was paid back, it would be lent out again. That is the way in which we should build up the confidence of our people and let them see that North Sea oil receipts are going to be of some benefit to the community as investment in Britain's future.

Thirdly, it is time we looked at our taxes on employment. We have the same taxes on employment as we had when we had full employment. Now we have not got full employment, we have unemployment. It is time we looked at our taxes to see whether we are preventing people from being employed because we are taxing the employer too heavily when he engages somebody. The first thing we should do in that respect is to do away with the surcharge immediately. Scrap the surcharge, and set up a review committee to look at what changes are needed in the changed circumstances.

Next, we should take a look at the long list of public investment which is needed and select those projects which have a low import input, so that we do not threaten the balance of payments. At the very least, we would get those assets which are needed at a discount, because, instead of paying the men unemployment benefit, we would be employing them to create the assets. Also, we should stop selling long-term profitable investments in order to meet short-term debts. This is completely wrong; it is commercially wrong, and it is a wrong action by Governments.

If we are going to have an upward turn, we need a psychological change. We need a buoyant policy which would cause the economy to recover to the point when ultimately the revenue to reduce Government borrowing would be self-generating. The risks of reflation are slight compared with the perils of large-scale unemployment. It embitters our people, it demoralises them, it costs us great sums in unproductive expenditure. That is the case for change.

4.54 p.m.

Lord Mottistone

My Lords, I, too, should like to add my congratulations to my noble friend Lord Constantine on his maiden speech. Its brevity was an example to us all, and I think that the succinctness of its contents would show that he can probably contribute better to our affairs than many of the rest of us.

My Lords, I have listened with great care to the opening speakers for the three-four main parties, and it strikes me as being somewhat depressing to find that the main Opposition's contribution, by the noble Baroness, Lady Birk, though it was strong in criticism of the Government, was really rather weak in making suggestions for what might be done. Indeed, the noble Lord, Lord Jacques, was much more imaginative than his own Front Bench speaker. It was because I feared that this might be the situation that I took the precaution of buying in the bookshop, published by Pan Books, a document called Manifesto which was written by four of Mr. Benn's closest adherants, to see whether we could get an alternative policy, something which would be at least credible, even if unwelcome. Though it is extremely unwelcome, most arbitrarily and somewhat surprisingly based on an assumption that centralisation of control is a good thing, I must confess that I found it at least more positive than the contributions that have been made by any of the parties opposite today. So I would recommend that book to your Lordships, if only as a warning. Perhaps it might be thought of as Mr. Benn's Mein Kampf.

Turning now to the gracious Speech, I should like to concentrate, as we all will, on the items that are listed on page 3, and I will concentrate particularly on the words that we would hope to make further reductions in the level of wage settlements. In the comments I have to make I shall be referring in part to what previous speakers have mentioned. I think there is an enormous amount of myth about what one can do about wages and persuading people what to do, and on the whole I think we ought to see whether we cannot do better than the various methods of dealing with this problem that have been tried and have failed. Every time I hear mentioned incomes policy I think back to the last three or four times it has been positively tried, and it really has not worked, or, if it has, it has worked only temporarily and then has been overtaken by the great upsurge of resentment at whst has happened. This is what happens when an incomes policy is applied from the centre. So the question is, Why is that?

I think one wants to look at the matter more from a company point of view, as I am sure the noble Lord, Lord Jacques, would understand. I think one can say that wages are now the key factor in balancing the books. Perhaps it was not so 75 years ago, when the theories of the Opposition were being formulated and confirmed, theories which they have not really changed too much. To take a relatively recent example, with a real sample company in productive industry, approximately two-thirds of the gross earnings of the company were paid for goods and services bought from outside the company. That left one-third as earned by the value added to the products. The question at issue is, what about that one-third? Twenty per cent. of that one-third, of those earnings from added value, were allocated to taxes and to reinvestment, and 80 per cent. to wages, salaries and dividends. Of that 80 per cent. 2 per cent. went to pay dividends and 1 per cent. went to paying senior managers and directors; leaving 77 per cent. of the value added going to pay the rest of the employees.

Taxes cannot be controlled by the company, and most people—including the TUC and noble Lords opposite; indeed we have heard it today, I think from the noble Baroness, Lady Birk—agree that reinvestment should be increased rather than reduced to safeguard the company and its employees for the future.

Lord Kaldor

My Lords, will the noble Lord give way?

Lord Mottistone

Even relatively major alterations to the allocation for dividends and senior salaries throw up very little to benefit the bulk of wages and salaries. So extra money can only come from increasing sales relative to the costs of bought-in goods and services—that is, to increased productivity.

Lord Kaldor

My Lords, will the noble Lord mind giving way for a moment? The percentages which he has quoted are rather worse than the average. It very much depends on the efficiency with which a particular business is conducted how much of the value added goes in wages and salaries and how much is left for profits out of which taxes, dividends and reinvestment are made. The average company in manufacturing industry—

Lord Mottistone

My Lords, would the noble Lord care to ask me a question?

Lord Kaldor

My Lords, is the noble Lord aware that the figures that he has quoted may not be typical?

Lord Mottistone

My Lords, I think that the noble Lord should ask me a direct question rather than using his intervention as a technique for giving a little extra speech. That technique is fine when it is Question Time, but on this occasion he is intervening in somebody else's speech. I think that the noble Lord is down to speak later, is he not?—that would be an occasion for him to speak or even at the end of the day he can make a speech.

Reverting to what I was trying to say, the point is that the solution to the problem of what there is to spend on wages and salaries is increased productivity. Whatever the noble Lord has just said, it is a question of relation but that is the answer and I think that he agrees. There is no other way.

I have been talking about a free enterprise company but the principle applies to all sorts of enterprise—public sector as much as private. My right honourable friend the Prime Minister told another place last Wednesday that the positive earnings of the British Gas Corporation of about £400 million were more than swallowed up by the subsidy to the National Coal Board of £1,100 million. This is an example of how the message about the need to balance books and to cease thinking that certain types of people deserve a continuing special hand-out from the rest of us is so hard for some people to grasp. The more hand-outs, the more inflation.

However, there are silver linings. People are grasping these hard facts, especially those who suffer directly from inflation and redundancies, and that is heartening. The recent wise acceptance of their limited non-productivity-related pay rise by British Leyland workers, to which earlier speakers referred, was one such splendid example, although one has to wonder whether the message is as deeply-rooted as it should be.

The fact of the matter is that there is a much better picture in this area than there was, say, five years ago. The key to this problem seems to me to be a realisation that, for an enterprise to be successful, all employees have to see that their prime loyalty is to their company, as used to be the case. Only in that way can managers at all levels be free to manage effectively. There have been many complaints by all of us on all sides over the last five to 10 years about the ineffectiveness of management. I would suggest to your Lordships that one of the key reasons for that has been that the managers have not been free to manage because they have never known when their decisions would be overridden either by some Government policy from outside or by some agreement between the board of directors and the shop stewards. That has been the key factor which has made companies inefficient over the past few years and it has been encouraged by the noble Lords opposite when they have been in power.

However, I would suggest that that prime loyalty can only be expected if individual companies make their own decisions about wage increases based on the success of their business, based on productivity. The reason why I think that the national incomes policy, as postulated, and as always postulated, by the noble Lord, Lord Rochester, as encouraged greatly by the noble Lord, Lord Jacques, and, indeed, as supported by most noble Lords opposite except the main Opposition—and it is significant that they did not—is not effective because it is general and not particular. If one wants to see how much a company can afford to pay, one must go to the company itself and it must see what it can do with its own resources and with the enthusiasm of its own staff, its own employees, working in that company to that company's ends and only paying secondary attention to other types of loyalties that may be demanded from the workforce.

If that loyalty can be achieved, then one by one the companies can once again achieve the efficiencies necessary to compete in world markets—and compete they must since we depend so utterly on exports if we are not to starve, and I mean starve, because we have to import about half the food that we eat, or near enough half. Recently, my right honourable friend the Minister for Agriculture, Fisheries and Food put the figure at around 40 per cent.

Another consequence of a greater assurance of primary loyalty to the company will be the encouragement that this will give to the enterprising persons willing to chance their arm and to start new businesses. It is from that source as well as from improved efficiency in existing enterprises that our main opportunity exists to turn back the hideous rising tide of unemployment. I agree with every noble Lord that unemployment is something that must be reversed, but that must be done in a practical and long-lasting way and not by the chimera of trying the old, old practice which has not worked.

So, as my right honourable friend the Prime Minister has said, there is no alternative to the policies set out in the gracious Speech, and although that sounds like a voice of doom to some people, what I think my right honourable friend is saying is that there is no alternative that anybody else has put up which is credible. If we can hear a credible alternative—and we certainly have not from the opening speakers of today's debate—then perhaps it will be a bit better. I say, let us maintain our resolution in this country, led from these Benches, to carry out the policies which are set out in the gracious Speech.

5.9 p.m.

Lord Boothby

My Lords, my first speech in my parliamentary career nearly 55 years ago was an attack in another place upon the Treasury and the Bank of England, and the Treasury and the Federal Reserve Board of the United States. Therefore, I think that it is fitting that I should close my parliamentary career, in a few words, with an attack upon the Treasury and the Bank of England and the Treasury of the United States and the Federal Reserve Board, who do not seem at present to have a clue as to what they are doing in any field, or why they are doing it. We have the most genial and well-intentioned statements at frequent intervals from the President of the United States; but it is quite clear that he has no idea what, if any, economic policy he has got or what, if any, foreign policy he has got.

I wish that you could go back to 1922 for a moment, because since the First World War the economic decline of the world has, on the whole—with sporadic intervals like that provided by Marshall Aid—been continuous. However, in 1922 a conference was held at Genoa which was dominated by perhaps the greatest Prime Minister that we have ever had, Mr. Lloyd George. That conference produced a series of currency resolutions once described to me by Sir Laming Worthington Evans, who was present at the conference and not a stupid man, as a financial code worthy to rank with the legal code of Justinian. With all due deference to our present economists, the general resolutions which were drafted by Sir Basil Blackett and Sir Ralph Hawtrey are certainly the finest piece of economic thinking we have had since the war. I think that the Treasury would be well-advised to have a look at them. They must he in some cellar; but if the Treasury does not have them, I can give them to them, because Sir Ralph Hawtrey was kind enough to give me the original draft, which is one of my most precious possessions.

Among other things, they recommended a gold exchange standard, continuous co-operation between central banks of issue, and the price of gold to be fixed by an international authority at a realistic rate, varying from time to time, but not too often; and, on the other hand, exchange rates to be flexible. I believe that they would have worked; I believe that they would have given the world the best international monetary system that it has ever had. But, alas! the Genoa conference crashed, destroyed by Poincaré; Rathenau, the German Foreign Secretary went home to be assassinated, and Lloyd George to be overthrown. When Mr. Lloyd George walked out of Downing Street, courage and vision walked out beside him; and as a result within a very few years this country was brought to the brink of total defeat, and the British Empire to an end.

The only people since the war who seem to me to have continuously seen sense are the French. I think that M. Rueff was very good and very right in all he said, and he was strongly backed throughout by General de Gaulle. I noticed with fascinated interest last week that M. Paul Bareau gave a lecture in which he said that: Gold should be returned to its former position as a reserve asset to underpin the world's currencies—but at a more realistic price". It is, I think, to be remembered that the world was hauled out of the Great Depression of the 1930s by Roosevelt raising the price of gold; and temporarily, just before the war, had a hit of an economic recovery. It was not very much in this country, but it was very considerable in the United States. I think that we could have a comparable recovery now if we were to concentrate on the thing that matters most, which is money.

There is no viable international monetary system in the world today—none. It is meaningless. We talk about this and that, about unemployment, about rich countries helping the poor, about the trade unions and whether or not they should be curbed, who should do it and who should do everything else; but we forget that unless we have a reliable means of exchange, we can never expect a world recovery.

I do not agree with everything he says, but I think that the best economist we have in this country today is the noble Lord, Lord Kaldor. The other day I said to him "I am very poor. Is there any way in which I can make a little money"? He said "I must confess that at the moment I see none, except possibly one. We have made money worthless all over the world by the demonetisation of gold. It is worth only paper. What about buying shares in a company that makes the paper"? I can only tell your Lordships that if I had taken the advice of the noble Lord, I would be rather well off today in terms of paper, but only in terms of paper. As it is, I did not take his advice and like all your Lordships—with one or two remarkable exceptions—I find it very difficult to get by.

So long as money all over the world is valueless, there is no possibility of stopping inflation. No single country can do so. The Prime Minister has her priorities right when she says that inflation and the unemployment that it causes are the major problems confronting the Government today. The question is, how are we going to tackle it? I say that once again money must be given value. The noble Lord, Lord Kaldor, agrees with me. He thinks that it should be based on a list of commodities—for example, coal, bread, iron, and I do not know what. I think that the simplest way is to rely on gold. It is easy to handle; it is easy to transfer, and everybody values it, whatever anyone may say. You may laugh, but the fact is that the world likes gold and has liked it for 2,000 years, and will always be ready to receive it. So I say that gold should be made the basis of money, and it should be handled internationally. There is an international monetary system to which we do not belong. I think that, as a first small step, it would be a good idea if we joined the European monetary system. But that is not going to solve the problem. The problem is only going to be solved at the top level, and primarily by the United States and ourselves: by the Treasuries of the United States and of the United Kingdom.

When I look at them, my Lords, I feel the deepest dismay, because they do not seem to improve at all. They never learn. I moved the rejection of the Bretton Woods agreement and the American Loan Agreement in another place. It was considered a dreadful thing to do. However, I got a few Labour Members, including the present Leader of the Opposition, and over 90 Conservative Members to vote with me. The Government were much upset, and Mr. Churchill, who had advised the Conservative Party to abstain, was much upset and said, "You have done great damage to this country" I said, "No, I have just tried to save it, as usual" What happened? Within three months the American loan was washed away. And Bretton Woods, where is it now? In ashes.

So, my Lords, I say that what we have to concentrate on is getting an international monetary system based on gold, with flexible exchange rates, and the price of gold fixed by an international authority, which is clearly the IMF, at a realistic level from time to time as and when it seems necessary. The late Lord Monckton of Brenchley, when he was chairman of the Midland Bank, said that the IMF should really he made the central bank for central banks, with similar powers of credit contraction and expansion. I think that is very desirable.

The Prime Minister is quite right when she says that inflation is due to the flow in the supply of money. Let us face it, she has tried, but she has not succeeded in curing inflation, and she has certainly not succeeded in curing unemployment, which is worse than it has ever been. She cannot. No single nation can do it, because everyone knows that, unless it is done internationally, it involves inflicting intolerable suffering—not willingly—on the poor and the sick, and the old and the unemployed. More and more unemployed.

So I say that we should have an international monetary system with flexible exchange rates, and the price of gold fixed at intervals by the IMF, which would be the central bank for central banks all over the world. Meanwhile, so far as money is concerned wherever you go in any country now, when the United States made the final fatal step of demonetising it they not only refused to raise the price of gold but they demonetised it altogether. They demonetised the dollar. That made money everywhere worthless. The money in your pockets, I am sorry to have to tell you, is worth jolly little.

We all have to face it, and the main problem we have to face is an international problem. I do not expect the British Government to solve it by themselves, but it far transcends the puny little debates we have here in Parliament and in the country from time to time about busmen, trams, and railway fares, tube tickets, and the rates. That is not going to solve it. This is an international problem. The world must solve it on an international scale and under the leadership of ourselves and the United States, or face a steady decline which might end in a disaster comparable to the use of the nuclear bomb.

Before I sit down, my Lords, I should just like to say that it has given me enormous pleasure to conclude my political career with an attack upon the Treasury, the Bank of England, the Federal Reserve Board, and the Treasury of the United States, because for over 50 years I have been right and they have been wrong.

5.26 p.m.

The Earl of Lauderdale

My Lords, we all listened with our customary fascination to the gold charter proclaimed once again by the noble Lord, Lord Boothby. The only part of his speech that I did not like was when he said he was closing his parliamentary career. None of us wants to see that happen. We look forward to more speeches of the kind we have just had. The very thought of the noble Lord, Lord Boothby, being eventually removed from our scene is not one that brightens one's vision.

It would be in accordance with precedent, and it comes in my case readily from the heart, to join in congratulations to the noble Lord, Lord Constantine, for a remarkable maiden speech; crisp, concrete, direct, constructive, and referring to a matter to which I shall refer later on, namely, the finance of capital expenditure from current account. I must crave the indulgence of your Lordships and of my noble friend Lord Cockfield on the Front Bench because I put my name down to speak tomorrow knowing that I had a long-standing engagement tonight. I have been moved forward to today and, as a consequence, I cannot listen to the later stages of the debate, and I ask your Lordships to be indulgent in that I did try to do the right thing.

It would be churlish on an occasion like this not to shed a gentle tear for the public grief of those in the party opposite who must be smarting today under an embarrassment that has seldom befallen any party in our parliamentary history. There was last night a remarkable speech about flaring from Mr. Tony Benn, who did not only flare. He bubbled and boiled like a volcano only to be repudiated today by his Leader and indeed by his party's official energy spokesman.

But as I wish to turn to problems of energy for a moment or two it is perhaps worth correcting one or two of the misunderstandings that have cropped up since the gracious Speech was first read last week. There is no proposal to sell oil and gas "reserves" These were nationalised in 1964. They remain nationalised, and they are at the disposal of the Government using their statutory powers. The projected sale of British National Oil Corporation exploration interests is a question of selling shares, as I understand it from my inquiries, in a company enjoying exploration rights under licence. Those licences will not be interfered with.

The suggestion that it is in some way wicked to sell Government shares, or Government assets, was surely answered in 1967–68 by Mr. Healey. He then proposed the sale of £500 million worth of BP shares to reduce the PSBR and satisfy the International Monetary Fund. We have been told that British National Oil Corporation controls—the word "controls" is what was used—some two-thirds of the disposal of North Sea oil. In fact, it is the trading company which does the controlling that will stay nationalised, and what we are talking about in regard to exploration is one-half of a mere 17 per cent. stake in the commercially licensed areas and of a mere 7 per cent. of the equity in United Kingdom continental shelf production.

We are told that our oil would be "bought by American multinationals" or, in a later phrase, not by them at all but by the Common Market countries. In fact, participation agreements would stay intact. The Government's royalty rights would stay intact. The Government's statutory powers would remain unimpaired. And the Government's flaring controls would be as severe as ever.

We are told that the real price of oil has risen more than 600 per cent. in 11 years. Yes indeed it has, but not the return to the companies getting it, which has hardly moved at all in real terms during that period. Mr. Benn's promises of renationalisation, not only of BNOC assets but also of all North Sea assets, remind me of those who rise from a banquet loquacious before the hungry about the good times to come. The fact is that the chairman of BNOC is delighted at the Government's proposals. He has many times made it clear that he would be happy to see exploration budgets freed from Government influence.

I have an interest to declare in this area because I am a director of an oil company which has been engaged in producing gas, but my company has not in any way briefed me for this speech, so what I am saying is entirely my own homework. But it must be said that the end of the British Gas Corporation's "monopsony"—that is the in-word now apparently, not "monopoly"—of buying gas would be an enormous encouragement both to exploration for gas and for its in-gathering. The BGC has, I understand, been offering less than half the world price to those who try to sell to it; BGC missed the opportunity of getting Ekofisk gas to Teeside for the petrochemical industry simply by being stingy and offering too low a price.

BGC's pricing has stalled exploration developments in the southern North Sea, despite lively work in the Dutch sector, which is geologically continuous and where the prices are good. There could be another 6 trillion cubic feet of gas in the southern areas of the North Sea, and now that explorers will be able to sell their gas freely, there is reason to believe that they would take up acreage if it is offered in the eighth round, as one hopes it will.

But the critical facts about gas are surely these: the British sector of the continental shelf has about 26 trillion cubic feet which will run out on present form in 20 years. Western Europe is so hungry for natural gas that it is tempted to turn to the Soviet Union to get it. But at least 75 trillion cubic feet—that is, three times what we have got—has already been found in one block of the Norwegian sector, the famous Block 31/2, and there is every reason to suppose there is much more to come in the northern areas of the North Sea.

Thus, the critical question in the gas area is how to uplift and ingather the West's enormous gas harvest and do so most economically. One thing is quite clear; namely, that two rival pipelines on the seabed either side of an invisible median line would not make sense. Nor does it make sense to pipe gas on the seabed if it can be taken part of the way overland. Finally, it does not appear likely to make sense to try to do it through virtual monopolies, such as BGC or Statoil. The best is for private enterprise, freed of shackles on their sales, to come together in a new energy market dialogue about the North Sea for swap supply arrangements; these will now be possible once British sector producers are freed of an outdated buying monopoly.

Such indeed is the case for a Euro-gas system straddling the median line. But the key to turn the lock on that energy dialogue is not only to free British producers from BGC but also—and no word has come about this from the Government—to allow them to sell abroad, as the oil companies are free to do. Here is the base in principle for Britain, Norway and Holland and their producers to come together.

In referring to the energy aspect of the Queen's Speech it is of course natural to spare a word of welcome to the new Secretary of State for Energy. This is my first chance to congratulate him, but I hope it is not my last because, though a swarthy man, he has accepted a bed of nails. The gracious Speech promises to "facilitate" private enterprise investment in the North Sea, principally BNOC and BGC. But the context of Mr. Lawson's first public speech as Secretary of State, to a CBI audience in September, set the context. He said it would be "disastrous" for economic and energy policy to be at odds. Quite so. Next, he said that economic objectives "included" energy objectives. So now we know who is on top. The energy objectives, he said, included "the efficiency of the supply side." But finally there came a real punchline: North Sea producers must accept their share of the necessary development of the tax base". I would add: To tax and to please, No more than to love and to be wise, Is not given to man. Here is the new Secretary of State's dilemma: to distinguish between current spending and capital account and to reconcile Treasury greed with the need for thousands of millions of pounds of investment if the riches of the North Sea are yet to be harvested. I have to say that investment has been wantonly inhibited by the current tax regime. This has been altered more than six times in two years and the last budget reduced the continental shelf to the status of whisky and tobacco, a sort of endless soft touch for more revenue, so that one can almost hear the chant of the Treasury mandarins: "The greater the mischief the better the sport."

See what damage the current fiscal régime has done. First is the gas gathering pipeline. This Government's darling until a month or two back, it collapsed because industry, invited to take sides against arithmetic, would not put up 70 per cent. of the equity unless they could offset it against tax. Natural enough. Then, consequentially, several companies are now planning their own pipe system within the tax ring fence, and of course that is exactly what is happening at present in Norway; private enterprise there, from within the tax ring fence, is prepared to put up some 40 per cent. of the equity of their line.

What about lost oil developments, thanks to the tax régime? BP put off some £675 million worth of developments in the Andrew Field because of the tax burden; Occidental did the same for £250 million worth of developments in North Claymore and they have done the same, or have apparently stopped preparing developments, for South Claymore; BNOC, the darling of almost everybody, has stopped pushing ahead with the development of Thistle Area 6; Phillips have stopped pushing ahead with the development of the Thelma Field; and Chevron are rumoured to be deferring their proposals for developing South Ninian—a mere 100 million barrels of oil not yet to be brought to market. Finally, the number of exploration wells drilled this year is down to 40, the lowest level for some while.

Of course, my right honourable friend, and my personal friend, Mr. Hamish Gray, is apt to brush all this aside and say, "Ah, well, but the companies are still looking for more acreage". Not now, they are not. With a unanimity that a year ago would have been thought unbelievable the oil companies have submitted to the Government a request: "For heaven's sake! do not produce your eighth round of licensing until after the Budget. We can see what the ground rules are before we plunge in".

I think perhaps a text that Mr. Nigel Lawson might well take to heart, on entering upon his new dominion, would be the words of the Emperor Tiberius: The shepherd's task is to fleece his sheep, not to flay them". I sincerely wish him the best of British luck, now that he is, I hope, a gamekeeper turned poacher. But I remind him on the subject of investment, which lies at the heart of the whole economic programme of the gracious Speech: You cannot just exorcise arithmetic by shouting at it to go away.

5.41 p.m.

Lord Wynne-Jones

My Lords, it has been a delight to listen to the noble Earl indulging in one of his initial knockabout introductions and going on and sparing no one, sparing not his own Government, sparing no one at all. He said that BNOC had friends everywhere. He did not perhaps mention that Elf Aquitaine was one of its chief friends. The noble Earl went on to describe all the ways in which one Government after another—he spares no Government at all—have restricted the development of the North Sea. Apparently we are not getting any oil out of the North Sea; or did he say we are not going to get any oil out of the North Sea? Apparently gas is unobtainable by us but there are trillions of cubic gas available over in the Norwegian part. Yes, my Lords, there are. There is an enormous amount available, and it was the fact that it was the present Government who inhibited the building of a gas line, which made it impossible for any continuation of negotiations at all with the Norwegians.

Admittedly, the Norwegians had already very largely succumbed to the blandishments of the EEC. Surprisingly enough, we—and by "we" I mean of course our revered present Government—are great admirers of the EEC and keep on explaining what wonderful things accrue to us as a result of belonging to the EEC. It is a little surprising that when negotiations were taking place between Norway and ourselves, the chief members concerned of the EEC—that is to say, Germany, Belgium, Holland and France—all persuaded Norway, not a member of the EEC, to come along and supply the gas to them, and not to come to any agreement with this country. That is a remarkable way for the EEC to show how well disposed it is economically to this country.

It is astonishing how whenever there happens to be, say, a question about herring an enormous fuss is made. The noble Lord, Lord Boothby, quite rightly, will come in, make a fuss about it, and try to persuade the EEC to do something. There is no attempt to persuade the EEC to be reasonable and sensible about doing what the noble Earl himself just suggested. That was to have one pipeline in order to bring down all the gas from both the Norwegian Statfiord sector and the United Kingdom sector, then split it, and let it go to both Europe and this country. No such—

The Earl of Lauderdale

My Lords, will the noble Lord give way? Will he not agree that the essence of the row between Britain and Norway was the question of price? The BGC was offering a very low price, while the Europeans were quite prepared to pay a realistic price to the Norwegians.

Lord Wynne-Jones

My Lords, I am afraid the noble Earl needs to get his figures right. The fact was that the BGC (the British Gas Corporation) offered a better price—oh yes, it did—and it was turned down for political reasons, because there was a determination on the part of the countries that I have mentioned to try to get the gas for themselves and not let it come to this country. I know that it is fashionable to say that the British Gas Corporation has let down this country. In what way has it let down the country? By buying its gas too cheaply? Really that is a very interesting point. Usually on a free market, to which I assume the noble Earl contributes intellectually, the lowest bidder is entitled to get it, and that is exactly what the BGC did. It—I am sorry, but the noble Earl cannot go on interrupting while still sitting down.

The Earl of Lauderdale

The BGC was a monopoly bidder; that is the difference.

Lord Wynne-Jones

I do not want to bandy figures, but the noble Earl cannot have it both ways. Either British Gas did a very good deal in buying its gas cheaply, or it was swindled and did not buy it cheaply. Which does the noble Earl say it did? Did it buy it cheaply, or not?

The Earl of Lauderdale

My Lords, the noble Lord is so kind. You see, my Lords, the fact is that the gas was bought from the southern North Sea very cheaply. As a result southern North Sea exploitation has not gone further. The northern gas was bought more expensively but, as we know, in the pipeline negotiations, the BGC would not come up with a price, and we are now quite certain that the kind of price that it was thinking about was way below what is economic.

Lord Wynne-Jones

My Lords, if the noble Earl will look at the figures, he will see perfectly clearly that the price of gas in this country has gone up less than it has in any other country in the western world, and to say anything else is simply to fly in the face of all the figures. I know that the oil companies have their own mysterious ways of doing calculations, but do not let us have them trotted out in this House as though they were true and honest figures, because those figures of the oil companies are always manipulated. I think it is important to realise this. It is extremely important because the problem of energy policy is utterly vital to the future of this country, and indeed the future of the world, and at the present time the Government are busy dismantling any energy policy that there is.

Under the much attacked Mr. Benn we happened to have probably the most coherent and sensible energy policy in the western world. I happen to know a little about it because I have been chairman of the Energy Sub-Committee of the North Atlantic Assembly for the last four years. I have been around the western world looking at the various energy programmes, and I can say quite emphatically that for a short period the United States tried to have an energy programme. That was under President Carter. He was trying to get it going. It was not highly successful, but at least it was making some progress. It has now been entirely dismantled by President Reagan—entirely dismantled. There is now no energy body in Washington; they have just closed it down.

In Canada they have had an extremely successful energy programme—probably, if anything, more successful than ours—and it has been a deliberately organised programme. They have looked at every feature of it. In Germany they boast that they have no real programme but that they rely on the market—a very peculiar statement for them to make, because they subsidise all their energy very highly indeed. In fact, if one takes the one major natural asset that they have in the energy line, coal, the subsidy that is paid in Germany for coal is £12 per metric tonne. The actual cost of coal in Germany is £44 a metric tonne, so they are subsidising it to the extent of about one-third. In this country we have the lowest price per metric tonne of coal in the whole of Europe. It is £35 per metric tonne, and our subsidy is £1.40 per tonne. There is no comparison at all.

The Germans, as I say, pretend that they rely on the market. It is purely lip-service. In actual fact they do not. They put far more money into research work in respect of all forms of energy than we do—very much more—and none of that is debited at all to the energy industry. That is direct subsidy; and to say that that is leaving it to the market is, I maintain, absolutely absurd. It is true that they have not got a sensible central organisation. For example, Germany has no grid system, no unified grid system, for the distribution of electricity, which is an astonishing thing. We have probably the best grid system. If one goes to a country like Belgium, one finds that the price of coal there is, I think, the highest in Europe. It is £61 per metric tonne; and the subsidy on that is £27. If we had subsidies like these in this country there would be an outcry.

A statement was made by the noble Lord opposite to the effect that the Minister in the other place, I think it was, referred only a week ago to the fact that whereas the gas industry made £400 million profit, this was far outweighed by the £1,100 million investment in the coal industry. My Lords, the difference between an annual profit and an investment is so enormous that it is fantastic to compare the two. A person who makes a comparison like that, it seems to me, does not understand one little bit what the whole thing is about—and that is why I criticise the present Government. They do not know what they are playing with. They are playing with the most important thing in this country, energy, and they are treating it as something trivial. They say, "Ah!, some money is being made here; sell it off and we can pay for something else in that way". This is fantasy.

We are closing down some of our nuclear research at the very time when the Government are maintaining that we ought to go on building new stations. I learned just the other day that they have closed down the fusion research work—the noble Earl rightly looks surprised—subsidised by this country in Culham. They cannot, of course, close down the JET programme; the JET programme is an international one. We won the JET programme for Culham—and your Lordships may remember that it was debated at great length in this House—in the face of strong competition from Germany, France and Italy because of the good work that was being done at Culham. Now, having got that programme, we are closing down the work which was subsidised by this country directly, which, frankly, I think is a piece of sheer political dishonestly. We would never have had that JET programme if our continental colleagues had thought that we were going to give up the very programme which justified its being moved here.

It is this sort of thing which makes one despair of what happening in this country at the present time. There is no attempt on the part of this Government to face up to the realities of the energy situation. They are wanting to treat it simply as though some old master was lying about in their house, they are stony broke and want to sell it on the market, obtain the best price for it and get rid of the damned thing. This is not the way in which our energy policy ought to be carried out; and I would say that when this Government fall, as fall they will, the most disastrous thing they will have done, apart from the appalling employment record, will be what they have done to the energy industry.

5.57 p.m.

Lord Taylor of Gryfe

My Lords, I, too, should like to congratulate the noble Lord, Lord Constantine of Stanmore, on his maiden speech, and welcome his wise comment on the nationalised industries. Indeed, his speech was the kind of speech that will be made, I suspect, from these Benches on occasion. I welcome the opportunity of this debate on the gracious Speech because it enables us to do two things. It enables us to state our policy, the policy of the Social Democratic/Liberal Alliance, on major issues of the day; and it enables us to take stock of the performance of Her Majesty's Government. The noble Earl, Lord Longford, asked a question of the noble Lord, Lord Rochester, as to whether we had a policy. It will be interesting to hear the noble Earl, Lord Longford, it a later stage telling us which particular policy of has party he subscribes to, because obviously, on this matter of energy policy that we have just been discussing and on nationalisation in general, there is a sharp division of opinion.

Let me assure the noble Earl, Lord Longford, that it is not our immediate intention to produce a manifesto, not because of the strictures on manifestoes of the noble and learned Lord, Lord Denning, but simply because this alliance will not be prisoners to a shopping list. But we will present to the electorate a statement of our general philosophy and basic principles which will guide us in facing the problems which our Government will have to face.

I said that this debate enables us to take stock of the Government, and in doing so I am aided by The Economist, which the other day produced a mid-term report. This is what it said: When Mrs. Thatcher became prime minister in May, 1979, year-on-year inflation stood at 10% now it is 11½%. Banks' base lending rates were 12%; today, 16%. Mortgage rates were 11¾%; this Friday they will be raised to possibly 15%, probably more. The pound's trade-weighted exchange rate stands almost exactly where it was when she acceded, having risen and fallen by a bankruptcy-creating 20% in the meanwhile. In the last days of Mr. Jim Callaghan's government, investment was higher, profits were higher, real personal disposable incomes were higher. The two biggest changes between end-Callaghan and mid-Thatcher are both catastrophic: manufacturing production is 16% lower and an extra 1.4m people are out of work". Albeit, and in fairness, the Economist went on to say that there were certain productivity gains. If one looks at that mid-term report, it does not encourage the kind of optimism expressed in the opening speech this afternoon. I hope that this optimism will be justified, but on the basis of performance so far and the record it does not seem likely.

When we look at these figures, we must then ask ourselves how these problems are to be tackled and how we are going to get unemployment down. It looks as though this Parliament in the next two years will spend its time in an arid, irrelevant debate on privatisation versus nationalisation. I doubt if this debate can contribute anything to the solution of the basic problems that this country faces. The trouble is that these issues are clouded by the dogma of the two leading parties. The Labour Party is still a prisoner of Clause 4. The Labour Party seems to assume that if you increase the number of nationalised industries by some device you increase the socialist state. I joined the socialist party a long time ago and for me it did not mean that you nationalised everything in sight in order to achieve socialism; it meant that we induced into our society a happier and better social relationship between human beings. I do not believe that that relationship is being induced or encouraged by the confrontation politics of both parties at the present time.

By the same token the Government seem to assume that the solution of our economic problems will be arrived at by a greater degree of privatisation. I think it is right that nationalised industries should be examined critically, pragmatically and undogmatically from time to time. They are very major sectors of our economy. Sometimes they have monopoly power which is abused as are all monopolies abused from time to time. Sometimes, they are bureaucratic and sometimes heavily centralised.

I think it right for any sensible Government to have a look at them in the same way and on the same terms as any boardroom of any private industry would look at the structure, conduct and performance of its companies. They would not come up with any blanket solutions like privatisation. Even in the last Session the poor Forestry Commission could not escape the dogma of privatisation. This is the trouble, that we are trying to apply blanket solutions.

A great variety of things can be done. I am in favour of the device of the National Freight Corporation where the management decided on a buy-out. The employees put their money in and the managers did so too. They bought it out and are running it now, owned by the employees and the management. There is no good reason why that should not be done and there is no violation of any basic socialist principle or Conservative principle in that practice. Similarly, in relation to the distribution of BNOC shares, it would have been wiser of the Government and more acceptable if that part of BNOC shares which are now to be placed on the market if these shares had been vested in the British public and every citizen of this country had a share in BNOC—everyone! This was the solution applied in British Columbia with their energy based companies. In this way everyone felt that they had a part of the ownership of this great national industry and would have a real feeling for ownership because they would have had shareholders' rights and presumably they would have dividends.

All that I am trying to say is that the Social Democratic/Liberal Alliance is not against examining nationalised industry. There is a great variety of devices which can be applied which are socially responsible and which might be looked at. We accept what was said by the noble Baroness the Leader of the House this afternoon: that we must accept certain disciplines of a sound financial framework. I agree with that. No responsible Government can accept the duties of government without facing these problems. I do not think we can buy our way out of recession simply by increasing the volume of spending power.

But if the Government accept the disciplines of a sound financial framework, let us see what happens, how it is applied. At the present time, the Government pay out between £10 billion and £12 billion a year in direct payments and in loss of revenue from taxation to the three million unemployed. That is rather more than the total North Sea oil revenues simply floating from the North Sea into the pockets of the unemployed who are producing nothing. If ever there was a recipe for inflation it is putting £12 billion in the hands of people to spend with no equivalent production of wealth on the other side.

If the Government are going to accept the disciplines of a sound financial framework, then they must first distinguish between capital expenditure and revenue expenditure. The Government turned down the guarantees which were essential for the financing of the gas pipeline to which the noble Earl, Lord Lauderdale, referred to. Let us look at that as a proposition. It was not bankable without Government guarantees; because you had only one buyer for the product and therefore you had to know what kind of price would be paid to the company for the product in order to estimate whether profits could be earned. But it was bankable with Government guarantees. But to the extent that the Government give guarantees to anything it comes within the purview of the PSBR; and it was consequently rejected. The total investment was something like 2.7 billion pounds.

Professor Martin Ryle in a letter to The Times said: a scheme which would save the £1m of gas at present being 'flared-off" each day, energy which is lost forever. The cost of the pipeline is given as £2.7bn and the estimated value of the gas saved as £25bn". In addition to saving these resources which are being flared off, you have a spin-off effect in the investment in British Steel Corporation for pipelines and all the job creation activity which that capital project would ensured. Professor Ryle goes on to say: Seen as an energy investment the gas pipeline is thus eight to 12 times more cost-effective than the proposed nuclear programme". We could have been financing this on a more cost-effective basis and saving resources which are now being flared off.

So, when we talk about accepting the disciplines of a sound financial framework, I think we should analyse what we mean. The effect on Europe is another aspect of it to which the noble Earl, Lord Lauderdale, referred. The fact is that the Germans and the others are now having to draw supplies from the Soviet Union, whereas an effective gas pipeline into Europe could have made them less vulnerable.

May I say, too, that although we did not finance our own gas pipeline we made substantial credits available to British exporters at subsidised rates in ECGD finance in order to supply the Russian gas pipeline. I do not object to that and I am delighted that John Brown Engineering on the Clydeside has had substantial orders in that direction. I am all in favour of ECGD financing. However, at the same time as we are not financing our own gas pipeline, we are subsidising the provision of gas pipeline facilities to the Soviet Union. I suggest that we should therefore look at this matter again.

In the nationalised sector we are continually up against the problem of PSBR. We will solve that problem if we distinguish between capital and current expenditure. The Government are quite right to say to British Rail, "Yes, we will subsidise; yes, we will finance the electrification up to Bedford on condition that there is a degree of de-manning in the overmanned sectors". It would be wrong of the Government to make funds available to British Rail on an investment programme that would find its way out of the door in far too high wages settlements. I am with the Government in that regard. They should apply that right through and try to induce further investment.

I am always surprised by the fact that the French seem to run their nationalised industries rather better, and perhaps the Government could be encouraged to look at how they run the financing of the nationalised industries. They are not crucified by a PSBR. France has the biggest nuclear programme in the world at the moment. That is a public sector investment. France recently, I regret to say, outshone British Rail by producing a high-speed train that ran between Paris and Lyon—a direct straight line of newly-laid track. That was all achieved out of public financing without the constraints placed on British Rail's board for electrification and improvement of their service. I suggest to the Government that they look at that example.

Finally, having been a member of a board of a nationalised industry, I should like to say that we will never run our nationalised industries—important to the economy as they are—if the have one Government with a five-year term saying, "Yes, we will privatise you", and another group of politicians sitting on this side of the House saying, "Yes, just for five years and then we will nationalise you again". We are destroying the economy of this country by this kind of confrontationalist politics. It is because of that that the Social Democratic Party and the Liberal Party are combined to try to take this debate out of that kind of scene and into a new arena.

We would go further: we would take the present structure of NEDO, in which the trade unions and the Government sit together with the employers, and try to devise some kind of reasonable forward planning for this country. We would embrace the Opposition in NEDO to make sure that the economic strategy developed would have general acceptance and would not change with the next government at the next election. It is that kind of move towards establishing a basic national strategy in a powerful national forum, establishing some kind of norms for wage increases and establishing some kind of targets for productivity which is the kind of programme that the SDP/Liberal Alliance believes in and commends to the electors.

6.14 p.m.

Lord Ferrier

My Lords, I came to London this week to raise a couple of matters on the economy which I believe to be of importance. But, however, as amendments have been tabled, it is necessary to speak to them briefly as I could not get my name down for tomorrow's debate. It is not my intention, nevertheless, to be deterred from the points that I have in mind about the gracious Speech.

My reaction when I was confronted with the amendment, which I first saw yesterday, was one of great regret. It seems to me to be an omnium gatherum of socialist dogma which is likely to turn your Lordships' House into a political cockpit instead of the deliberative Chamber which is its real function and which has occupied most of your Lordships' time this afternoon. The amendment I feel would be ludicrous it it was not so deadly serious. Recent events have made the public more than ever fed up with the trade unions. The recent BL strike has proved that some leaders are out of touch with the shop floor and they are consequently seriously divided among themselves—and BL are out on strike again about a tea break. The grim situation today of course stems from years of socialism and their bad housekeeping. I look forward very much to Lord Cockfield's analysis tomorrow.

Do the trade unions realise that one of the public reactions to what is happening at the moment is a cry of "A plague on the lot of you?" Do they know how dismayed the ordinary viewer feels which when he sees desperately important decisions decided by the phrase "Those in favour, show" from grown up men and women? Really! It is no surprise that it looks to the ordinary observer as if the present trade union system is now entirely out of date.

Of course, we need trade unions. I have been greatly impressed by the speech of the noble Lord, Lord Taylor of Gryfe. It is an essential part of industrial life. But not craft unions—horizontal ones. They should obviously be industry-wise—they are in other countries—and vertical. Another feeling I have is that the remuneration, the pension, et cetera, of officials should be devised so that their livelihood, the livelihood of the individuals, does not depend upon the extent to which they can screw increases out of employers. One might go so far as to say that in a scheme such as the noble Lord, Lord Taylor of Gryfe, has in mind the trade union officials might well be public servants. Why not, my Lords?

However, whatever happens, I shall vote against the amendment. Before leaving the subject, I draw attention to the tendency among some leaders and the media of every description to refer to the Government in the name of the Prime Minister. On behalf of myself and of the millions—I say again" the millions"—of people who support her policies, the fact is that the Government are Her Majesty's Government.

Baroness Birk

My Lords, I wonder whether the noble Lord will give way. If he is referring to the amendment, the amendment specifically refers to the … continuing reliance of Your Majesty's Government". I did not want to interrupt the noble Lord before but I noted at the beginning he talked about how unhappy he was about the amendment. But is he really saying that on the Queen's speech, which lays forth the programme of the Government for the Session, the Opposition or anybody else in any other party should not have the right to discuss this? This is not against the function of this House. We are not supposed to be revising it. At the moment we are discussing the policies. This is what has been going on during the debate. I can see why he disagrees with it, but I fail to understand why he should be so upset that it is on the Order Paper.

Lord Ferrier

My Lords, I fail to understand what the noble Baroness has in mind. I was not referring to the amendment when I said that people are using the Prime Minister's name in connection with the Government. I was referring to the fact that many leaders and the media are always talking about "Mrs. Thatcher's Government". I myself am not a little concerned. I am one of her millions of supporters. But that is what I feel and Mrs. Thatcher is the Prime Minister. I say, More strength to her elbow. I am confident that she will win through. I was heartened by the speech of our noble Leader this afternoon and, as I said, I look forward to the contributions of my noble friend Lord Cockfield tomorrow. One must bear in mind that the public have been pressurised by biased reporting on the television, particularly by the BBC. I think especially of the reporting of the Conservative Party conference, which seemed to be one continual plug of those people who are doubters. I think that the ITV was more balanced in its reporting.

However, to return to my comparatively minor points, the gracious Speech states: State involvement in transport will be further reduced". Since I prepared my speech, we have had a very interesting speech by the noble Lord, Lord Taylor of Gryfe. I assume—though it is a fairly vague statement—that the reference in the gracious Speech is to the reduction of further financial involvement in transport. That would be quite right, but I believe that the state must retain its overriding duty, in the public interest, to control the overall transport policy. Lest anybody wonders what I mean, may I say that I was a partner in a firm in India that had five railways for which we arranged the finance, and we operated for years perfectly well under agreements which gave actual control of the traffic to the Government.

In the present case, I am alarmed because I feel that the major strategic problem at the moment is the Channel Tunnel. If financial interests feel like financing it, well and good. But is it in the national interest to channel the main artery with Europe through one vulnerable route, which concentrates traffic in South-East England by rail and by road? In a way, the trade unions come in here. Strategically, our links with the Continent should be diversified. I am absolutely committed to our membership of the EEC, just as I am opposed to the Channel Tunnel as a contribution to it. As it is, diversification exists—by air, by hovercraft and by existing roll-on/roll-off Channel services.

But why has the modern concept of water transport so far failed? It is because the dockers' unions may refuse to collaborate with modern barge carrying ships—BCVs as they call them now. The only Humber/Rhine connection failed and its withdrawal was caused by industrial relations problems with the dockworkers at Hull and not by inherent defects in itself. Nevertheless, I was interested to find that there are already two BCVs trading out of London to Rotterdam and the Gulf of Mexico, with the co-operation of the London dockworkers and with the approval of the trade unions. By the way, the Russians already have an atomically powered BCV at work.

Our waterways system is due for renovation and my information is that the Rhine and the Danube will soon be connected by a viable canal. As a Scot, the idea of merchandise going from Glasgow to Frankfurt and having to pass through a "chunnel" does not make sense to me. So I should like to ask my noble friend who is to reply to say that the Government will retain firm powers concerning the overall policy of the railways. I grudge every pound that is spent on Channel Tunnel planning or, for that matter, on the high-speed inter-City trains, though I shall take the first chance I have of travelling by one.

What I am perfectly certain about is that, in the interests of the nation as a whole, in the interests of unemployment and in the interests of rural areas, the money would be much better spent in electrifying and modernising our existing system. The same applies to the waterways. If the barge carrying vessels make sense, then we shall need to have improved waterways and there is a lot of capital which can be spent in the interests of the public.

My second point concerns the telecommunications system which arises under the overall cover of Other measures will be laid before you". This has already been mentioned in the debate today, and there is no time to be lost. In terms of telegrams and special overnight letters, the present service is very bad. The telephone seems to work very well in Scotland, though I draw a veil over what happened yesterday. I do not know how many of your Lordships tried to telephone Scotland yesterday, but Western Scotland was completely cut-off for the whole day.

I am glad to say that the Telecom people are introducing a development of the overnight letter telegram service and calling it Telemessage. So far so good, but it must be properly staffed. The other evening, I sent an overnight message apologising for my inability to attend an important function the next day, but it took two days to deliver. What is more, it took me endless time to get through to the telegram service in Scotland and I have asked for the return of my £8.65. I tried the next day to send a cable to my son in Hong Kong.

The other night, which was a cold and windy one, I sat waiting for five minutes watching the second hand go round before finally ringing off. Eventually, the supervisor got through for me. I can look after myself and my study was warm, but I thought about some poor old thing waiting in a telephone box beside the road on a night like that, counting the minutes before she had an answer from the telecommunications people. Subject to reception difficulties being ironed out, the Telemessage system is well worth developing and Telecom are now deciding what is the best price to attract custom. But after my experience the other day, I dare not repeat what I thought of that wretched bird, Buzby.

6.28 p.m.

Lord Winstanley

My Lords, I must clearly begin, like other noble Lords, by joining in the congratulations which have been offered to the noble Lord, Lord Constantine, on his maiden speech. From the noble Lord we had a maiden speech of quite remarkable brevity and, in addition, of unusual clarity. I hope the noble Lord will not misunderstand if I say that perhaps those two things, brevity and clarity, are not altogether unconnected. Indeed, the noble Lord will find—perhaps he has found as he has listened to the debate today—that, quite frequently, noble Lords in your Lordships' House say some very wise things, but occasionally they are a little difficult to find when they are smothered under 25 minutes of things which are not quite so wide. Therefore, the kind of clarity which we had from the noble Lord, Lord Constantine, came partly from his brevity and it is an example which I should like to follow. I could not possibly rival the noble Lord in brevity, though, at least, I can try. But I can certainly aim to equal him in clarity.

I could do neither of those things if I rose to the bait dangled by the noble Earl, Lord Longford, who I now see has left us, who challenged us to say what our policies happen to be. There are many things which the noble Earl, Lord Longford, does not know. It is possible that he has reached an age at which he no longer greatly desires to improve his knowledge, but I am sure he will realise that I have been listening to the old parrot cry, "The Liberals have no policy", from the Conservative Party and the Labour Party for years and years—alternating every time we have had some minor success at the polls with a mad stampede by those parties to pinch the policies which they said we had not got.

The noble Earl knows perfectly well that a party manifesto is not necessarily a statement of everything that it is going to do. It is a list of the things that a Government would quite like to do if it had the chance. The noble Earl, Lord Longford, was a member of a Labour Government. I cannot quite remember when it was exactly that he cried that he had had enough. However, I think that a Labour Government was elected in 1966 and had a large majority and that the noble Earl was a member of that Government. My recollection of that Government is that they spent much of their time dealing with the consequences of the closure of the Suez Canal and the very serious consequences of the seamen's strike, matters which were never dreamed of in the manifesto, and that they then spent two or three years trying to put right the disastrous effects of the Selective Employment Tax, a measure which had been unearthed somewhere in the Treasury by the noble Lord, Lord Kaldor, and which had a catastrophic effect on our economy in many ways—again matters which were not dreamed of in the manifesto. All I would have to say to the noble Earl, were he still here to listen, is that he will just have to wait and see. As he will have gathered from the truly excellent speech of the noble Lord, Lord Taylor of Gryfe, in general the aim of the Liberals and the Social Democrats, in a short phrase, is to try to achieve efficiency and social justice without authoritarianism, without centralisation and without unnecessary bureaucracy and state control. For the rest, the noble Earl will have to wait.

For this debate I wish to focus my words on two specific aspects of the unemployment problem: first, the level of unemployment itself. In mentioning that, I have no intention of endeavouring to follow the example of others and pluck at the heartstrings of noble Lords about the catastrophic and disastrous effects on the individual of unemployment. We all know about that. For goodness sake! Let each and every one of us in all parts of your Lordships' House accept that unemployment is a disaster for the individual affected and for his family, and that we are all bent upon reversing this trend and putting an end to it. If we accept that, let us go further.

Having accepted it, I am bound to say—it is something I have said in your Lordships' House before—that we also have to accept, however reluctantly, that some kinds of work are now obsolete, that some kinds of work have become superseded and that there are forms of employment which are not going to return, at least to the extent to which we depended upon them in the past. I do not greatly regret that. The noble Baroness, Lady Young, referred to new jobs being created in new technology and by the new science-based industries. That is right. But some of the old jobs will not come back. If we accept that some of those jobs were dull, monotonous and repetitive, were not fulfilling in any realistic way and were sometimes, frankly, dangerous,—if we can lift the burden of that kind of work from the shoulders of humanity, then so be it.

So be it, if we take the consequential steps. I have referred in previous debates to one consequential step which we must undoubtedly take: We must solve the problem of providing opportunities for the constructive use of leisure in ways which are fulfilling without being consumptive of scarce resources or destructive of a fragile environment. The other consequential step which we must surely take, if we once accept that the total global amount of work has diminished or at least has changed in volume, is to start trying to divide what work there is a little more fairly and a little more equitably than we now do. As has already been said, it cannot be sensible to be spending upwards of £1,000 million a year on paying 3 million people to do nothing while many of the rest are working Sundays and overtime and are moonlighting into the bargain.

I do not want to enter the very difficult field of shortening the working week, which must inevitably be related to serious matters regarding productivity. These are matters about which my noble friend Lord Rochester can speak with very great and lengthy personal professional experience. They are complicated matters. But there is one aspect of that equation about which I can say something. If there is to be all this additional enforced leisure for some of our people, though not all, is it not better that it should come at the end of the working life rather than at the beginning?

The question of the retirement age was raised, and I think raised fairly vividly, at the CBI conference. It has been raised in your Lordships' House not once but over and over again. I think we have got to start looking again at the question of the retirement age for men. The noble Baroness, Lady Lockwood, who is with us and who is the Chairman of the Equal Opportunities Commission, has done wonders to equalise all sorts of things as between the sexes, but we still have this extraordinary disparity whereby men become entitled to draw their national insurance retirement pensions at the age of 65, whereas women, who on average live some 10 years longer, can draw their national insurance retirement pensions at the age of 60 and thus on average will draw retirement pension for perhaps 15 years longer than do men. This is the kind of inequality which the Equal Opportunities Commission ought to look at.

It is also a matter which Her Majesty's Government should look at again. I know that it is a matter which has been raised in another place and also in your Lordships' House. We are always given the sums which are produced by the Treasury. Government Ministers rise to their feet and brandish them as the absolute answer to this question. "We cannot afford the cost!" I genuinely believe that the answers to those sums which have been given to the Government over and over again are very often wrong. I do not think that they pay adequate regard to the additional earnings the Government will have from income tax, from people being employed. I do not think that they take properly into consideration the savings in unemployment pay for people who will take up the jobs of people who have retired and of other forms of relief which at the moment are paid to the families of the unemployed.

With the present numbers of unemployed and with the tendency for unemployment to be concentrated at the most devastating time—that is, at the beginning of the working life when people leave school or university —it is much better to extend the years of idleness at the end of the working life by bringing the retirement age for men down by a year, or by two years, or even by three. I hope the Government will insist that these sums are done again, and done openly and clearly so that we can all study them and so that we can all be satisfied that the answers which the Government have given are either right or wrong. I suspect that many of them are wrong.

There is one other matter which I want to raise regarding unemployment. It has to do with the help which we provide for people who are unemployed— unemployment pay and sometimes supplementary benefit. Many noble Lords are aware of the fact that for some 12 years now I have presented in the North-West, in the Granada area, a television programme. It is not so much a programme as an information service. It has stayed on the air for three days a week for 12 years only because I have steadfastly resisted attempts to improve it and to turn it into a programme. It is an information service which gives advice to citizens—in a very complex, bureaucratic world—about their rights in relation to social security, education, landlord and tenant problems, transport and so on. It is backed up by an advice bureau staffed by very able professionals who answer questions on these various subjects. We deal with between 500 and 1,000 letters a week. Therefore, some elderly person can write in with a multiplicity of problems and at the end of the day get very valuable advice from the programme's professional advisers. That is quite apart from the more general advice which we give on the air.

I mention this because recently we have conducted a fairly detailed analysis of the nature of the letters we are now receiving. An increasingly high proportion of those letters are coming from one specific class of person, the so-called long-term unemployed. I am sure that most noble Lords are fully aware of the rule that an unemployed person, provided that his national insurance contribution record is adequate, draws unemployment pay, and whatever goes with it, for a period of 12 months. At the end of 12 months his entitlement to national insurance unemployment pay ceases and he then must fall back on supplementary benefit. We then have the operation of the capital savings cut-off rule—and it is perfectly proper that there should be a rule that persons in possession of savings in excess of £2,000, accessible savings, are automatically debarred from the receipt of supplementary benefit. In that calculation noble Lords will know that a family's house —its home—is excluded, perhaps rightly, perhaps wrongly. I have known a couple in receipt of supplementary benefit who owned and occupied a house certainly worth £150,000. No bar there, so far as the savings rule is concerned, because the house and its contents do not count, whereas I have known another couple in a council house who happen to have an insurance policy with quite a high surrender value assessed at more than £2,000 who do not qualify for a penny.

We have the situation now where the long-term unemployed person finds that suddenly the national insurance unemployment pay ceases at the end of 12 months and then he can only get supplementary benefit if he can somehow reduce his total savings to less than £2,000. Very often he does not have to take any steps at all to do that, my Lords; very often he has no savings. But since November 1980, when the regulations changed, officers in the local offices of the DHSS have been required to take note of the surrender value of insurance policies in calculating savings for the purpose of the cut-off rule.

It really does seem to me a little odd that a Government that is wedded to thrift—and perhaps rightly wedded to thrift—should appear to be offering a direct incentive, or even applying an order, to individuals to surrender an insurance policy, sometimes for a purely nominal surrender value in order to reduce their savings below a certain level. There are cases when sometimes a young couple are buying a house and the insurance policy may indeed be collateral for a loan on the purchase of the house. If the house is disregarded, I really do think it is time that the Government thought again about the requirement to take into regard the surrender value of an insurance policy in calculating the £2,000 so far as the savings rule is concerned.

The other class of person in a similar position is the self-employed person who has had a small business and, because of economic or other pressures, his business suddenly collapses and he gives up work. As noble Lords will know, the self-employed pay their national insurance in a slightly different way and their national insurance benefits are somewhat different. The self-employed, as a result of their adequate contributions—if their contributions are adequate—are fully entitled to retirement pensions and also to sick pay if they are unable to work owing to ill-health. Also at the end of the day they are entitled to the death grant. But they are not entitled to unemployment pay. Therefore, we have the situation where, unlike that of the worker who suddenly becomes redundant or loses his job or the teenager who can never get a job, the person who has struggled to run a small business, and has finally to give up the uneven struggle because the business is no longer viable, is totally dependent upon supplementary benefit. Because he may have been the kind of person who has had to have some sort of resources, he may be forced to realise the surrender value of an insurance policy before he is entitled to any supplementary benefit, since he is not entitled to any national insurance unemployment pay.

One final anomaly which has emerged in all this mass of correspondence which I have had to study, with some considerable sadness, is that so far as the long-term pensioners in receipt of supplementary benefit are concerned, there is of course an increase after 12 months in the supplementary benefit received, with the exception of the long-term unemployed. People who are receiving supplementary benefit because they are unemployed do not benefit from the higher rate. They merely continue to receive supplementary benefit at the lower rate.

I have gone on longer than I had intended but I have tried to focus my argument as narrowly as I could, and finally I ask the Government to direct their attention to these separate points. Please will they look again at the question of the anomaly between the national insurance retirement age for men and that for women, and will they insist upon getting new calculations on the possible cost (or otherwise) of reducing the retirement age for men to a more realistic age, so that the extra leisure will come at the end of the working life rather than disastrously, as it does now, at the beginning?

Secondly, in the gracious Speech it is said that steps are being taken to do everything possible for those most disadvantaged. Will the Government please look again at the savings rule in relation to the long-term unemployed, because I regret that more and more of our fellow citizens are now coming into that melancholy category of the long-term unemployed?

6.46 p.m.

Viscount Massereene and Ferrard

My Lords, I should like to start by making an apology to the noble Lord, Lord Constantine of Stanmore. I had to leave the Chamber just before he started his speech but if I had known that it was going to be so brief—which of course is an admirable trait in a maiden speech—I could have stayed. Anyway, I congratulate him because although I did not hear it I have heard that it was an admirable maiden speech. The longest maiden speech I have heard lasted for just under an hour and it was on rabbits, but I will not say who delivered it. It was on the subject of myxomatosis.

I will follow the noble Lord, Lord Winstanley, for a moment because unemployment has always been a subject in which I am extremely interested as I am an employer, although in a much smaller way now and I have also been associated with boys' clubs for a long time. I agree with what the noble Lord has said. With regard to training people for leisure, that takes a very long time and I think it would be a difficult process but it is certainly an excellent idea if it can be accomplished. It is a fact that where there is a high level of unemployment the betting shops have the highest turnover and profit, which is a thoroughly undesirable thing. So I hope that some means can be devised of training people in arts and crafts or some other way in which they can use their leisure that the welfare state now enables them to have, and to use it to good purpose.

The right honourable lady the Prime Minister has been the butt of some very harsh criticism—not in this House, but generally, and also from some of whom I had always presumed were her supporters. The right honourable lady has been accused of being inflexible and hardhearted but that is complete and utter nonsense. In some respects she has been a Lady Bountiful. After all, she has reflated the economy to a certain extent by helping British Leyland, by helping the miners, by helping British Steel, to which the Government gave a lot of money and of course under the new youth employment scheme to which I think my noble Leader referred. That is going to require quite a lot of money. I cannot remember the exact sum that she said and I may have got it wrong, but I thought she said that next year it was going to be £1.5 billion. Any criticism of the Government—and I shall not make it and I will tell your Lordships why, but any criticism should be that the Government have not adhered to their original intention of cutting down public expenditure. But the difficulties of doing so are so immense that I do not think any Government, apart from an autocratic government, could do that. I do not think it is possible.

One must remember that when the present Government came into office they inherited—I must get my figures right—I think it was £10,000 million in postdated cheques from the previous Administration. Of course, I do not want to make a party speech, but these immense difficulties have been building up for 25 years. You cannot blame the Government. It is the fault of all Governments over the past 25 years. Though we have had ever-increasing public expenditure we have also had, I believe, the lowest productivity of all the western industrialised nations.

The interesting point is that those people who ask for more public expenditure to reflate the economy should understand that we have been increasing public expenditure every year for the past 20 years, and we have had falling productivity. So if you look at it logically public expenditure in the long-term does not increase productivity. Certainly I think private expenditure, investment, does increase productivity, because you have got to increase productivity or go broke. With public expenditure you cannot go broke. Anybody who was in the Forces or even in the Forestry Commission or the Department of Agriculture knows the way government bodies throw money about. Take the Highland Development Board, the waste has been astounding. In the Army, look at the way we used to use the transport. In any private firm you would never be allowed to use the transport like that, literally to wreck it. Public expenditure, from my experience, is not the real answer to increased productivity. I think the Prime Minister is quite right: if you encourage the private sector you will then increase your productivity. I do not think it can be done by ad lib public expenditure. I am not against all public expenditure, as a temporary measure, but you cannot go on doing it year after year ad lib.

I should like to point out, in relation to productivity, that between 1970 and 1980, in those 10 years, wages increased by 400 per cent. In the same period productivity increased by about 15 or 16 per cent. As an employer I know this only too well. Twenty years ago I used to employ a lot of people, but today I only employ 10 per cent. of that number, because I cannot pay the wages. If you cannot pay the wages you have to cut down on your staff. It is extremely disagreeable. If ever I have to get rid of somebody for that reason I have to get roaring drunk and stick pins in myself; I have not got the courage otherwise. It is true. Those politicians, to whatever party they belong, who ask for massive reflation through public expenditure I do not think realise the serious economic trouble that we are in; I often feel—perhaps I ought not to say this— that some of them are more concerned to protect their parliamentary majorities than they are with the economic health of the nation. There are people like that in both parties. As I said, I am not making a party speech.

Here is another fantastic statistic I have found. Do people realise that between 1974 and 1980 British Governments borrowed—and I am not counting IMF loans—more in cash terms than Britain borrowed in the previous 200 years? That makes you think, does it not? If you take this year alone the Government will probably have to borrow up to three times as much as was borrowed or printed in the 10 years between 1965 and 1975. It absolutely terrifies me; I have nightmares about it. We have arrived at the position—and we are not alone in this, but we are in a worse position than the other western nations; America is in this position, too, but not nearly as bad as us, with its vast resources —where Governments have so expended the resources of the nation, they have so taxed the nation and they have so given out money on the soft option to featherbed the population, the voter, and I suppose it is all a question of buying votes, that the whole system will collapse if we are not very careful. I remember the days when Budgets were only a few hundred million pounds; now they are £70,000 or £80,000 million.

Why did this Government come into power? They came into power on a taxpayers' revolt. But we are soon going to have a lenders' revolt. So many of the nationalised industry wage increases are being paid out of borrowed money. It is the most appalling state of affairs. I have been saying in this House for years that the chickens would come home to roost, and my God they have, and they are not only going to break the perch but they will bring down the whole hen house. If we are not careful, I know it may sound funny, but it is the truth. Even in the worst days of ancient Rome you never had such profligacy.

I must not go on too long, but I should like to say this. We have this great talk of recession, and of course we have recession. The high price of world oil has upset the economic stability of the world to a certain extent, but we are one of the oil producers and quite a big oil producer; we should be at the top of the league; we should not be at the bottom. The greatest part of our recession, I think, is due, as I have pointed out before, to the fact that our productivity is absolutely deplorable, and we have been paying these enormous wages that have been instrumental in causing this recession. If we go on like this I do not know what the answer is. I suppose that we shall go bankrupt. We shall not be able to import much and we shall have a very low standard of living. Moreover, the Welfare State will be affected without a doubt. I do not know the answer.

Unemployment is extremely high at present. There have been various suggestions put forward as regards unemployment which is costing the country £12 billion a year. I think that the noble Lord, Lord Jacques, showed some imagination in his speech especially as regards the proceeds of North Sea oil. The revenue from North Sea oil just about pays the interest on the national debt. The noble Lord made an extremely good suggestion. I made a suggestion, not quite the same, a few years ago before we had the oil in production that the proceeds ought to be put into a special fund to retool our factories and it ought not to be squandered on the Welfare State but, of course, it has been squandered.

I shall draw to a conclusion but before I do so I should like to say that I support my right honourable friend Mr. Heseltine in his proposals for rate reform. Some councils, borough councils and local authorities generally are appallingly extravagant. Often you do find men in those authorities—it is not their fault—who have had no experience of administering large sums of money. Of course, if someone has no experience of such matters there can be some very unpleasant side effects.

However, I understand that quite a few members of my party do not agree with the Minister on that particular matter. It is supposed to be undemocratic, but I cannot understand that. In the average local government elections, as far as I am aware only one in 10 of the voters is a ratepayer. I should have thought that it would be far more democratic if the ratepayers could have a referendum and could be asked whether they want higher benefits or higher rates. After all, they are the ones who pay. From 1835 there have been various Acts of Parliament which have given the Government and Parliament power to control, to a certain extent, the money spent by local authorities. I shall not say any more; I think that I have said enough. In my view the Government are on the right track but for any Government the position is becoming well nigh impossible.

7.4 p.m.

Lord Walston

My Lords, I am sure that all of us in this House have the greatest affection for the noble Viscount who has just sat down, so we can at least rejoice that the cost of whisky has not increased commensurately with the cost of labour, otherwise he would find himself in the very awkward position of having many people whom he would have to sack but not having sufficient whisky with which to get himself drunk. So there is at least some bright lining to this sombre cloud.

One of the problems of speaking relatively late in a debate of this importance and complexity is that so many points have been raised that one is tempted to digress and to answer them and to do one's best to refute them or to agree with them. But that, I feel, would not be very productive, especially in view of the fact that this debate is to continue tomorrow. I shall, as many of your Lordships have done, confine myself solely to what I believe to be the most important problem that is facing this country at present—both human problem and economic problem—and that is the scale of unemployment and the future likelihood of unemployment. However, I shall not deal with the immediate future; I shall ask your Lordships to look with me rather further ahead because I believe that the problem of unemployment is not one which will disappear, regardless of which Government are in power, within the next few years. It is something which is, as things are at present, built into our economy and built into our present way of life.

In glossing over our present unemployment it does not mean that I am in any way oblivious to the real human hardship and economic waste that has taken place. We are all aware of that as the noble Lord on the Liberal Benches so rightly pointed out and it is something which we can take as accepted by all of us.

Unemployment is caused by a whole variety of factors. It is caused at present in part by high interest rates and by lack of investment. But, above all, I suggest that it is caused by lack of demand. No matter how generous the Government may be in investment incentives, no matter how low interest rates may fall no prudent businessman will invest in new plant or increase his output by taking on more people or by working more overtime, unless he is satisfied that the demand is there for whatever it is that he produces.

Undoubtedly as we reflate—and sooner or later we must reflate—there will be an increase in demand. But we are, after all, only a small country. We have a population of 55 million people. Even increased demand from our own population cannot in any way provide enough to bring back our highly technological factories and industries, our highly capital-intensive and diminishingly labour-intensive industries, to anything like full production so as to absorb these 3 million people. We cannot look to our own markets to do this.

We are, fortunately, members of the European Economic Community and that gives us an additional market totalling altogether approximately 250 million people. So we are in a stronger position than we would have been had we not been members of the Community. I hope that those on the Opposition Benches, the Labour Benches, who are supporting the party's desire and policy to come out of the Community are bearing this very much in mind. However, we must accept the fact that within the Community itself we are facing very severe competition, and we shall face increasingly severe competition because, after all, their economies are not going through the traumatic experiences that our own economy is going through, and when the recession ends they will be in a better position than we are to take advantage of the increased demand coming from within the Community. We can take advantage of it, but it will not solve our problems. Therefore, we must look further than that.

We must look to the third world, to the 3,000 million people who are already there and who want the things that we can produce. The desire to buy them is there; the desire to put corrugated iron on their roofs instead of thatch is there; the desire to have a bicycle instead of walking, or a motor-car instead of their bicycle, to have a tractor instead of a mattock; to have fertilisers, shoes and transistors—all the things which we in this country can produce and, if we set about it properly, can produce in competition with anyone.

The desire for those things is there; what is lacking is the money. They do not have the money to pay for it. I enter here on grounds upon which I am not properly qualified to enter, especially in the presence of distinguished economists who are here and who have spoken, particularly my noble friend Lord Roberthall. But I cannot help feeling that we are somewhat over-obsessed by money. After all, what is money? Money is the symbol of wealth. It is a method of evaluating wealth as between different commodities. It is a method of exchanging wealth; but by itself it is not wealth at all.

Wealth comes from the marriage of natural resources, fertile soil, minerals and oil beneath the surface and on the surface—the marriage of those natural resources with the knowledge, the skills and the muscle of human beings. We must take steps to bring about the marriage so that the wealth which is inherent in the world is once more created and increases the standard of living of those 3,000 million people whose conditions are so lamentably inferior to our own.

During the Recess I visited, among other countries, Indonesia. It covers a vast area. It is a country which stretches, as it were, if it was put on the map of Europe, from the west coast of Ireland to Istanbul. It is a country of 160 million people, some small number of whom are very rich, the vast majority being very poor. In another 10 years' time those 160 million people will be 190 million people; another 30 million people will have appeared during the next 10 years. And so it is throughout the third world as a whole, and it is there that we must look for a long-term solution to the unemployment problem of our country as well as their countries.

How should this be done? We could do it on our own. It would be difficult and it would be slow. But, as I have said, we are fortunately a member of the European Economic Community and, in far too modest a way, they have at least already taken steps to look at this problem. Largely due to that great man Commissioner, as he then was, Claud Cheysson, now the French Foreign Minister, the Lomé Convention has come into being and, with it, the very valuable system known as Stabex, bringing some small amount of stability to the commodity markets of the third world.

We must build on that. I believe that the first thing we must do is ensure that the major commodities produced throughout the world—whether they be copper, tin, rubber, cocoa or cotton—are assured of a certain amount of stability in their markets: assured markets at assured prices, taking into account inflation. After all, the Community is one of the largest, if not the largest, purchaser of most of these commodities. Having done that, we can then build upon it and private investment will follow. Some Government investment will also be needed. The infrastructure is essential for the development of third world countries and for that Government funds and Community funds, in greater degree than at the present time, will be needed, as also will expertise.

That is developing in increasing quantities in the third world, thanks very largely to the education that the people there have received in our own places of learning, education which, alas! we are now, in the interests of economy, making it more difficult for them to acquire—a very short-sighted and self-defeating operation—and also thanks to expertise from the western world and, above all, from this country. Those things are available. They are there.

We must achieve this marriage between the capital resources and the know-how of the western world, and the raw materials and the population of the third world. In this way, over the decades ahead—because this is a long-term project and we must look at long-term projects, and not merely concern ourselves with the next one, two or three years—the demand for all the things which those people want, which we can produce and which they will increasingly produce for themselves, but not in sufficient quantities, will grow, and I believe that our unemployment problem will disappear.

However, if we fail to effect this marriage, if we are concerned solely with the immediate problems of how to bring the 3 million down to 2.7 million, to 2.4 million in time for the election, if it is possible—which we all agree it is not—the problem will never be solved and unemployment will never be banished from this land.

7.18 p.m.

Lord Allen of Fallowfield

My Lords, I wish to make two comments as a preface to my remarks in this contribution to the debate, comments based on what I have heard from those who have previously taken part. First, I totally share the views expressed by the noble Baroness, Lady Birk, speaking from the Front Bench on this side of the House, and her condemnation of the way in which the British economy is being managed at the present time. Secondly, I listened with great interest to the noble Viscount, Lord Massereene. I was interested to hear him say—and I hope that I heard him aright—that this Government came into power because the taxpayer rebelled. I think that many of those taxpayers now recognise how badly they have been bitten and, having been bitten badly, I think that they are now about to take the advice of Confucius; that being that, if the dog bites you once, it is the dog's fault; if it bites you twice, it is your fault. I believe that many of the electors in this country are taking that point of view, particularly those who, it is alleged, rebelled as taxpayers.

It gives me very little pleasure to enter this debate in the knowledge that all is not well in the British economy. I think that it is understandable to accept it from those who are looking on at the British economy when they say, "Today we are living in a maladjusted society, a society which, among many other things, has developed advanced computers enabling travel to the moon, which has created the hydrogen bomb, which has built nuclear power reactors, the supersonic plane and the advanced submarine. Yet, despite all those scientific achievements, in this country we are unable to find answers to our social and economic problems." We are unable to find solutions to what I can only describe as our economic mismanagement; to remove from our midst the burden of widespread poverty still existing in a highly industrialised society like ours; to deal with the lowly paid, the old, the under-privileged, and in the process successfully to attempt to correct the obvious injustice in our wage and salary system. Let me say right away that I am not an advocate of what is termed in the economy today "free and unfettered collective bargaining". I believe that we have to find a much more sophisticated way of dealing with our industrial problems than a manifestation of," those who have the strength win all; those who have little, go to the wall".

Superimposed against the backcloth of all those injustices, we are faced, in my view, with not the nearly 3 million unemployed of which the official statistics tell us, but with close on four million. Why do I say that? I say it because the real shortage of jobs in the economy, including the unregistered unemployed, short-time working and the effect of the special employment measures is in my arithmetic nearly four million in British society today. That, my Lords—and I make no apology for dealing other than with a statistic of the unemployed problem in this country—is a terrifying indictment of the Government's policies which no amount of conference stage management can hide. To deny that there is an alternative to mass unemployment is in my view to deny any hope for the British people.

Whilst these injustices to which I have referred exist and persist it should be no surprise if we find, as we have done recently in certain of our cities, demonstrations of what can truly be described as mass disobedience. Of course, my Lords, all these malpractices offend against the social conscience of the nation. I submit that what is now needed—and this is not the first time it has been heard in this House—in our society is a positive and fundamental shift in the direction of running the economy. It is a matter of regret to me that there is little, if any, evidence in the gracious Speech that the signposts are pointing in the direction of a change—that, despite the disastrous results of the Government's policies that we have witnessed to date.

But I am bound to ask what has made the present economic position much worse. I submit that it has been the reaction of the leading industrial nations, the United Kingdom included, to the oil crisis and to the concomitant problem of accelerated inflation. At all the recent summits that have been held over the years—and I had the privilege a few years ago of attending one on behalf of an international trade union movement—the almost unanimous view has been expressed by government representatives that inflation was by far the major problem of the world economy and that deflationary, monetarist policies were the only means to control it. It was consciously agreed that growth worldwide needed to be pruned back. What this Government have done is to accentuate many times over the deflationary impact of the oil price rises by deliberately pursuing deflationary policies of their own.

I consider, like a growing number of people in our community today, that this approach is entirely mistaken. There is no evidence to suggest that policies of this kind will solve the underlying problems of the world economy, to say nothing of the problems of the third world. There is, however, an abundance of evidence which points clearly to the fact that these policies being pursued by the United Kingdom Government threaten to break up the social consensus upon which our society is based. All that is happening is that unemployment is forced up still further and living standards are unnecessarily slashed. This is a deadly, dangerous game, the rules of which are designed, it seems to me, to frighten and to threaten a large part of the workforce of this nation, and in turn to create instability in the family unit.

We already see the ludicrous side-effects of these mistaken deflationary policies. Throughout the world—and I speak from some international experience—countries appear to be competing with one another in deflating their economies the furthest and the fastest. It is true that we are witnessing an interest rate war worldwide. These tight monetarist policies which are said to control inflation are in fact, in my judgment, leading to the very opposite; for as the cost of money increases so will prices in general rise and inflationary pressures will obviously increase. In this climate it is hardly surprising that the foreign exchange markets have been in complete disarray.

It is against that background that I make my appeal, along with many others, for a change in direction. The claim for a change in direction is manifest today in this House, in another place, in the Confederation of British Industry, in the TUC, and in the community generally, and how much longer can the Government turn their back on those appeals for sensible management of the British economy? Unless these dangerous policies are reversed before greater damage is done, then I believe all opportunities to correct our problems will be lost. We shall run the risk, among many other risks, of making moderate men and women in our society revolutionaries; people who so easily and so quickly will be provoked to take part in the mass disobedience that I am sure we all condemn.

First and foremost I am convinced, like many others in this House and no doubt elsewhere, that this Government must return to a more sensible policy of co-ordinating expansion rather than orchestrating inflation. Increasingly it has to be spelt out to those responsible for running the economy that growth and inflation control are not incompatible objectives. I say more power to the elbow of those in Her Majesty's Government at the present time who see this problem in the manner in which increasing numbers of people in the community see it. I accept that the structural problems which bring about inflation can only be dealt with in a climate of expansion in which alternative job opportunities in new industries can be found.

No society can be acceptable in which three million-plus men and women, willing and able to work, are denied the opportunity because of the policies of the present Administration. It goes without emphasising that in a highly industrialised society such as ours, unemployment is seen as economically, socially, morally and ethically wrong and it is intolerable to ask the public generally to accept that as a standard for the present and the future.

It is necessary to make sure there is greater equality than we have demonstrated in our society to date. It seems to me clear that two inseparable problems have faced our nation for all too long. It is trite but nevertheless true that they are the twin problems of unemployment and inflation, and we cannot treat this statistically or attempt, by what we say or do, to brush it under the carpet. It is a problem which will not go away, except by positive direction in the opposite way to which the economy is moving at the present time. Neither is capable of easy solution, though both must, as I am sure we all agree, be combated, but they will be solved and their gross effects minimised only by a change of policy, political will, sound economic management and industrial common sense in effort. All those, I regret to say, are at present honoured in the breach.

I have never wavered, in my long industrial experience, from the view that if the achievements we seek are to be obtained and sustained, all three parties—Government, employers and the organised trade union movement—must work in close and constructive partnership. At present it is the language of the deaf. All of us know that the partnership which is so necessary for this economy is not evident. I am convinced that such a partnership is essential to deal with the interrelated problems of international competitiveness, for the effective use of capital, pay, prices, productivity, output, growth, public expenditure and employment problems, all of which are central to our economic future.

I have for long been persuaded that reliance on market forces is no solution to the problems of the new industrial revolution based on North Sea oil and microelectronic technology. I recognise, like other noble Lords, and share the anxieties about employment prospects now and in the next few years. Regrettably today it is far easier to identify areas where jobs have been lost than where new opportunities will be created. Under the present Administration, Britain's economy has been subject to the stresses of change, but as a community we have as yet been denied the compensating benefits of that change. To suggest, as the present Government do, that the best way to promote change is by retreating from intervention in the economy, except in the most general way, leaving market forces to assert themselves, is to follow a course which has been tried and has failed, in the same way as confrontational policies to deal with our industrial problems will also be doomed to failure. You cannot talk to millions of working men and women about the very necessary need to improve productivity against the backcloth of their belief that you are pursuing confrontational policies so far as they are concerned.

I know—my experience tells me—that the solutions to our problems must be found in agreement. I know, too, from experience that that will not be easy. Indeed, these objectives bristle with difficulties, as many Governments in the past have discovered, and I speak from knowledge of having attempted to make representations to six previous Prime Ministers on this subject matter. I accept that there are problems there, but I do not accept the alibi for doing nothing, which is what we are confronted with today. The slavish adherence of the Government to a discarded ideology has, in my view, gone far enough, and in the past two and a half years it has been responsible for irreparable damage to the British economy. I say enough is enough.

Viscount Massereene and Ferrard

My Lords, the noble Lord began his speech by saying there were, in his opinion, four million unemployed in this country, but he never attempted to prove that. May I ask what he thinks about the tens of thousands of unemployed who do other jobs at the same time, the moonlighters? I could introduce him to several in my area. He also said there was dire poverty among the unemployed. I agree that if you are unemployed it is very frustrating, but I would not call it dire poverty to have £50 or £60 a week. I could take the noble Lord round council housing estates at 2 or 3 o'clock in the morning and show him all the expensive cars, far better than I have. I have never heard such nonsense spoken in all my life.

Lord Allen of Fallowfield

I submit, my Lords, that if the noble Viscount believes that what I said is nonsense, he is living in an entirely different world from the one I live in.

Viscount Massereene and Ferrard

Thank God!

Lord Allen of Fallowfield

I do not defend moonlighting, my Lords, and I do not know anyone here who would, and therefore to submit that moonlighting is responsible for the ills of the British economy is equally nonsense.

7.38 p.m.

Lord Campbell of Alloway

My Lords, I wish to detain the House, even at this late hour, to touch on the passage in the gracious Speech which is concerned with the introduction of legislation in the sphere of industrial relations. This perhaps envisages that by such legislation the balance will be re-set between the legitimate interests of the trade unions, on the one hand, and the interests of society as a whole, on the other.

The need to introduce such legislation arises not—and I stress not—out of any desire to confront the trade unions, to confront the officials of the trade unions or to confront the rank and file of the trade unions. It arises solely because there is a powerful minority in this land who misuse the statutory immunities available to trade unions and their officers in order to subvert society and to bid for direct political control. This new phenomenon in British politics has evolved over only the past decade. It is relatively new. It toppled the Heath Administration, it debilitated Wilson, it crippled Callaghan, and now at this very moment it infects the body politic, inducing a very sizeable fragmentation. It is not supported by the vast majority of trade union officials, it is not supported by the vast majority of the rank and file, and it is not supported by the vast majority of the electorate.

I say that because these men of whom I speak—and I speak not of their motives, but of their policies; speak without intended discourtesy, without hint of malice, or whiff of acrimony—are dedicated to setting up their new concept of the worker state. In this concept they reject the traditions of the great trade union movement, of influencing political affairs indirectly through parliamentary representations. These men also reject any system of bicameral government under a constitutional monarchy, and they also reject our established order of society in which all your Lordships, more or less, would agree.

If the door to these full statutory immunities was left ajar by the Act of 1974, it was thanks to your Lordships' House that it was so left and was not then closed. I advert in particular to the speeches which your Lordships will remember, but which I could only read, as I had not the privilege to be here, of my noble and learned friend the Lord Chancellor, and the noble and learned Lord, Lord Salmon. But whereas the door was left ajar in 1974, by the Act of 1976 it was flung wide open. Such was the intention, such was the stated intention: to emasculate the rule of law in the sphere of industrial relations. So be it. Such was the intention. But it could never have been the intention of those who did that to open the door to serve as a vehicle for the type of misuse and abuse which has since ensued. That they could not have foreseen, but that is what has happened.

Without some measure of redefinition, without some protection for trade union authority, without some protection for the rank and file membership against intimidation, vote manipulation, enforced loss of livelihood, and without some discipline to secure some sanctity of commercial contract, the interests of society cannot be served in any way relevant to your Lordships' debate tonight on industrial and economic affairs.

I shall be brief. Your Lordships might think it preferable that any measures taken should seek to set and re-set the balance within a framework of law that is acceptable as well as enforceable. Your Lordships might think it is right that one should seek to curtail the area of these immunities without also exposing the trade unions or their funds to the full rigours of litigation, since it is not the power of the trade unions that is called in question. A strong, powerful, responsible trade union movement is not only welcome; it is wholly requisite in the national interest. It is the abuse, the misuse, of power by those who espouse no legitimate trade union interest and who misuse these amenitites for their own selfish and destructive ends, contrary to the wellbeing of society as a whole, that is called in question.

In case some of your Lordships might have been thinking that my respectful observations have been little more than a mere rhetorical statement of the obvious, may I be allowed to say this. Is it not obvious that this is one of the key issues in the gracious Speech and one of the key issues that face us in the survival of this country? If there are rare occasions when Her Majesty's Government may seek, and indeed derive, support from all sides of your Lordships' House, surely this must be such an occasion, for the great cacophony of the vandals is to be heard at the very gate of the citadel.

7.48 p.m.

Lord Alport

My Lords, it is a great pleasure to follow my noble friend Lord Campbell of Alloway, who speaks with all the skill of a distinguished lawyer. I also wish to say how much I admired the maiden speech of my noble friend Lord Constantine of Stanmore. It seemed to me to have all the attributes of a speech which commends itself to your Lordships. It was short, authoritative, and clear, and I have no doubt that my noble friend's speeches in the future will be listened to with great interest in this House.

To me the most agreeable feature of the gracious Speech is the relatively small number of Bills which appear likely to be introduced by the Government during this Session of Parliament. However I confess I am less happy at the indication in it that there will be no, or very little, change in the general policies and political attitudes which the Government have followed since they came into office a couple of years ago. It seems to me that, like the forwards of a rugby team, Ministers appear intent on putting the boot in, putting their heads down, and using the weight of their parliamentary muscle to force their way through the serried ranks of their critics, past industrial managers and the CBI, past the leaders of organised labour, past Nobel prize-winning economists, past critics within the ranks of the Tory Party, and past the voters at by-elections, to reach a goal line which seems a good deal further away than when this Parliament started—the goal line of national recovery.

As perhaps one or two of your Lordships may guess, the present policies of Her Majesty's Government place some of those who, like myself, have been lifelong Conservatives in a painful dilemma. Our political attitudes were formed, for the most part, by the memories of 1926, when, as a starting point, all the factors of anxiety and subversion were just as present as, according to my noble friend Lord Campbell, they are in certain sections of our community at the present time. They were formed by the memories of 1931, of the slump; of the great mass of unemployment; of the poverty of those years. They were formed by the ideas of Lord Keynes, and by the memories of Roosevelt's New Deal, trying to get over the economic crisis in the United States.

They were formed by the memories of the sense of national unity which came to this country during the years 1939–1945. They were formed by the successful Governments of 1951 to 1964; and, so far as I am concerned, by the inherited political values of our party from, say, 1840 to 1914. I was glad, incidentally, to hear my noble and learned friend the Lord Chancellor, in his opening speech in this debate, stick up for the record of the Conservative Governments during what the Labour Party regard as the 13 wasted years and Conservative Ministers today—the Young Turks and Amazons—seem to regard as the years of failure and decline.

Your Lordships will perhaps have noted I have been talking about political attitudes and values, not economic theories or policies. I say with great respect to my noble friend on the Cross-Benches that I regard the economists of the 20th century as performing the same function in a modern society as witch-doctors perform, sometimes with remarkable results, in an African tribe, or as astrologers carry out today in many Asian countries. They should not be ignored. They should be paid their fees and, when the bones have been thrown and the horoscopes cast, they should be sent back to what I assume are the comfortable academic cells in which they normally dwell.

My Lords, you cannot govern a great country by some measure of M3, for most people confuse it with the motorway between Bagshot and Basingstoke. You cannot inspire a sophisticated labour force to work harder by telling them to get on their bicycles when a large number of them go to work by car and all the others want to do the same. As I have understood it, the whole psychology of the trade union movement—and here I would say that I was very interested in the speech of the noble Lord, Lord Allen, who will perhaps bear me out when I say this—has been conditioned, over those years before and after 1930, by the fear and memories of unemployment; and, therefore, you cannot ensure their co-operation by the threat that any failure on their part will put their members on the dole.

So we come back to the dilemma which faces Conservatives of my generation and point of view. We see many of the objectives which the Government have set themselves to be admirable. They are certainly the thing for which the majority of the electorate voted at the last election. What seems to me to be lacking is the political judgment as to how, in a modern parliamentary democracy, better educated than ever before, these goals can be attained. Take, for instance, what appears to be Mr. Tebbit's decision to make trade union funds liable to civil damages in the courts by employers in case of strikes that are unlawful—and my noble friend has referred to this. Significant, perhaps—and the Government should certainly take notice of it—is the comment, which appeared in the Observer, by a leading official in the Conservative Central Office with regard to this particular matter. She said: This is dynamite. We warned the Heath government not to go down that road in the 1971 Industrial Relations Act, but they took no notice. The party has no election mandate to take such a step. It would damage the Conservatives on the shopfloor and lead to confrontation with the unions", and we know that that is exactly what would happen.

Again, my Lords, take Mr. Heseltine's local government legislation, in earlier Sessions as well as in this, as he proposes it to be. We—I speak for myself, at any rate, and I believe for my party—have always favoured administrative decentralisation leaving local folk to do their own thing. But the constant theme of all this local government legislation seems to have been that the men in Whitehall know best. The Secretary of State has in fact taken greater powers over the local authorities, and intends to increase them, than any of his predecessors, and seems to be preparing the ground which will make it easy for some authoritarian Left-Wing Government of the future to destroy the whole tradition of local responsibility and representation in this country.

Then, again, take the field of employment. With the constant harping on the theme of over-manning, with the measures abruptly taken to reduce the public service, and with what appears to the public to be an almost callous attitude to the existence of 3 million unemployed, the Government have conjured up a spectre of fear which it will be very difficult to allay. My right honourable friend the Prime Minister reinforced this impression by removing Mr. Prior from his previous post and replacing him by Mr. Tebbit. Unemployment being at its present height, it was of course possible to prevent the recent BL strike, But, frankly, I preferred the attitude of the distinguished trade union leader who advised his members to go back to work "for England's sake".

My Lords, when the present Government were elected the men and women who voted for them did not vote for any particular financial policy, or for the sale of the retail shops of the Gas Corporation, or for the sort of Slater Walker asset-stripping operation which the Government appear to be undertaking at the present time. The men and women who form the electorate and who watch anxiously and critically the performance of successive Governments—Conservative, Labour, or what you will—do not expect them to solve all their problems, or even to guarantee that their policies will be successful. They have a properly cynical attitude to the efficacy of their panaceas and their electoral promises. But they do expect the Government to intervene when problems arise, to manage, to consult and to seek a consensus; and, even if their policies do not succeed after all that has been done, much will be forgiven if those who are affected are in some way or another associated with the processes whereby those policies are implemented. This was, to me, rightly or wrongly, the style of the Governments of Baldwin before the war, Churchill and Macmillan; and again, to me, rightly or wrongly, it has its origins in the political philosophy and practice of the old Tory Party of the second half of the 19th century.

I was interested to read an article in the Daily Telegraph last week by Mr. Paul Johnson, who is, I believe, a comparatively recent defector from the Socialist party. He advised Tories to look to Sir Robert Peel as their example in place of Disraeli, who he dismissed as "a reckless financial adventurer" and "a frivolous politician". "That", he added, "is, I suspect, why he appeals so strongly to the Tory 'wets'". It was Disraeli, certainly, who inspired the ideas of the generation of Conservatives who emerged from the last war and its aftermath and who tried to shape its social policies and style of government. It is exactly a century ago this year that Disraeli died. Among his legacies was the idea that Britain should be one nation, not two. Our experience in the war led us to believe that as "One Nation"—and here I come back in a rather roundabout way to the theme of the noble Lord, Lord Allen—our country could overcome any economic, political or military challenge with which it might be confronted in the future. What I find almost unbelievable is that those words "One Nation" should now be regarded in the highest quarters of the Tory Party as an indication of political disaffection—the codeword of the "wets", a label of contempt.

I would remind Mr. Paul Johnson and others who may think like him that, when the vote was taken which destroyed Sir Robert Peel, the names of the Tory establishment who supported the "frivolous politician" and the "reckless financial adventurer" in the Division Lobbies should be read, according to my noble friend Lord Blake, with the sound of a roll of drums.

I would remind my right honourable friend the Prime Minister that it was Sir Robert Peel whose "greatest and most gifted disciple" was, according to Mr. Paul Johnson, Gladstone, who destroyed the Tory Party o his day as certainly as the present Conservative ministry will be destroyed if it insists upon continuing its present style of Government and its present financial and economic policies. Successful government in a great country depends not on the ability to control statistics or to divide and confront the deep-seated social, regional and class movements in the nation. It will only be successful if it can, by its policies, unite them in a common effort to fight and to overcome internal and external dangers.

My Lords, I shall have great pleasure in voting against the egregious amendment of the noble Lord, Lord Scanlon, but I must add that for the rest of this Session I shall cast my vote as an Independent Unionist Peer, as a latter-day disciple of Benjamin Disraeli and as a lifelong Tory committed to the principles of social reform and national unity which I believe to be the historic objectives of my party. I only hope that the policies of the Prime Minister and her Government will enable me to do so with a good conscience in their support and with the knowledge that they share as our objective the ideal of Britain as "One Nation".

8.3 p.m.

Baroness Burton of Coventry

My Lords, in common with most speakers I wanted to thank the noble Lord, Lord Constantine, for his speech and I wanted to do so for a particular reason. That was because he talked about the consumer and I think that the consumer has been rather absent from today's debate. I want to talk about consumer affairs and the nationalised industries and to say a few words about one nationalised industry in particular. On consumer affairs in general I should like to discover what attitude, if any, the Government take towards the position of the consumer; and obviously this topic could have fallen within the ambit of home affairs or economic and industrial affairs. Perhaps I might explain why I chose the second grouping.

The position of the consumer vis-à-vis the nationalised industries is an area on which I have done work for a good many years in both Houses. Just over one year ago, on 22nd October 1980, I asked the Government when they expected to complete their review on the position of consumers and the nationalised industries. The noble Viscount, Lord Trenchard, replied to the effect that he could not give me a definite answer then and did not expect to be able to do so before the end of that Session which was about to end. By a strange coincidence, on exactly the same day, on Thursday, 22nd October, but one year later in 1981, I asked the Government the same Question again and I got exactly the same answer. We have made no progress at all. Even the noble Lord, Lord Trefgarne, on 22nd July said that his best expectations had not been realised. Well, my worst ones had been.

In those intervening months in that year, as the House well knows, I pursued this matter and tried to find out when we might expect that something actually was going to happen. Even if a Government had not the slightest idea of their attitude towards the consumer, I should have thought that some 55 weeks was a long enough period to produce something—especially with a report in their possession. We all know that a prolonged series of exchanges can be amusing at times and can enliven the House. But it can become boring and it can become frustrating. If the subject is thought to have some importance and the Question is a matter of general interest, then I would submit that it can also become alarming. I have now become alarmed because I would ask the noble Lord, Lord Cockfield, if eventually he is going to be able to give me an answer, have the Government any policy at all?

Recently I was told by an outside source that the publication of this report that I have been talking about and have pursued for 55 weeks was about to surface and that it would be published last week. I actually believed that; and left my remarks until today because obviously the position of consumers and the nationalised industries is an economic and industrial matter.

I should have known better. I gather that no date is even in the mind of the relevant Ministry. I am now wondering whether the report will ever see the light of day. I should like to ask the Minister whether the Government are aware of the very real feeling among consumers and consumer organisations that they count for little in the estimation of officials and that what they see as a constant struggle against bureaucracy is reducing them to despair. There is no need for me to enlarge on that aspect to the House; it is the one area on which I consider myself to be expert. But if we, with our advantages of Question Time and debate, find that this is a difficult struggle, how much more so is it for people who have not those opportunities?

I want to say that I think that to make any impression at all upon bureaucracy once a decision has been made and without consultation requires endless persistence—which should not be necessary. The burden of my complaint today to the noble Lord, Lord Cockfield, is, I think, a justified one. I had hoped that this report would make matters clear. Where do consumers and their representatives, the actual users, stand on the nationalised industries? Must it take the Government all this time to decide or, alternatively, are they nervous of making public that decision?

Let us take one example, one mentioned in the gracious Speech. I come to the gas showrooms. I am on neither the financial nor the political aspect here but simply on the fact that services rendered by the gas showrooms to their customers are highly valued. It would not be an overstatement to say that they provide a wide range of additional services which are greatly valued by householders and consumers in general. I do not know whether the noble Lord will be able to tell us if any adequate consultation was sought about this particular suggestion. What is the use of having consumer organisations attached to the nationalised industries if no notice is taken of them? It may be perhaps that this missing report is about to suggest that such consumer organisations should be removed.

If we go back to 7th April last when the Report stage of the Companies (No. 2) Bill was before this House, and objections were raised to the Government's suggestion that the register of business names should be abolished, I remember that the noble Baroness, Lady Elliot, and myself, in common with others, spoke against this objective of the Government. We both said that the consumer organisations to whom we had talked had asked for its retention. As I understand it, that register operated at a loss simply because the fees had not been changed since they were instituted in 1916, which is quite a long time ago. Concerning its efficiency, I remember the noble Lord, Lord Robbins, argued that if we discover that a register, which all commonsense suggests should be efficient, is inefficient, then the right way to proceed, surely, is to make it efficient?

The noble Baroness, Lady Elliot, quoted at that time a letter which Mr. Jeremy Mitchell, the director of the National Consumer Council, had sent to The Times. I should like to repeat a paragraph from it. He said: Consumers, creditors, enforcement officials, other businesses and journalists, all for differing reasons, share the need to be guaranteed access to adequate information about the true identity of traders. Anyone who sets himself up in public as a trader should say who he is". As the House knows, we did not get very far on that one.

I believe that public services should be made much more accountable to the public whom they serve. I should like to know where the Government stand on that. People want to be consulted. It is not a case of wanting to complain. Anybody with any sense must know that users of services or equipment have the opportunity to discover the good points and the bad points about services and equipment. I would have thought surely this should be welcomed. I am going to re-phrase my question, and at least the noble Lord will know that I have been talking about a report when I sit down. Will this report, if it ever surfaces, show that users are wanted or will it slam the door and just let the manufacturers and the bureaucrats decide what we want in this particular area?

Leaving aside the nationalised industries, I think that we need a different and a better approach towards the whole subject of consumer affairs. I am sure that we have had enough legislation. If more has to come, then I suggest that certainly it must be mixed with self-regulation and it must be much less complex. If I may take an actual example, and a personal one, I am chairman of the Mail Order Publishers' Authority. For many years we have operated our code approved by the Office of Fair Trading. It is good a code I think. Certainly it demands high standards. But at least it was one drawn up by the people to whom it applies and it is written in simple language. I should like to see as many such codes as possible. So on this point I should like to press for a mixture of legislation and self-regulation in the future with the former playing a minor part.

The other matter that I want to touch on is certainly economic and it is part-nationalisation. It is the financial plight in which the airlines find themselves today. This is not the occasion for inflicting detail on the House, but, as with the missing report that we have just been discussing, I think that it is something on which we should have an answer from the Government. In this case, and in line with what I was saying a moment ago, I do not want more legislation, but I do want something doing away with.

My Lords, time and time again with the help of this House I have pursued the Government on the matter of bucket shops. It is said today (and I would not dispute the figure) that some 500 million dollars per annum is lost by the IATA members because of the operations conducted by bucket shop travel agents and those airlines which supply them. This practice of course is illegal.

In the past it has not seemed much use giving the Government some facts but one lives in hope. I should just like to say that at the moment we have a great deal of surplus capacity in the air. The financial losses suffered by airlines (including of course our own and the nationalised British Airways) mean that this surplus capacity will have to be disposed of at almost any cost. We have not yet reached the point at which the matter really would be dealt with—in other words, that we should reduce the capacity, although that has surfaced—but the airlines are going to dispose of those seats wherever they can. Quite simply, they have to if they are going to survive. We are told of tough measures to be taken on this matter of bucket shops supply. But hidden in this tough talk is the realisation that Government support is essential. It is not only the airlines and it is not only IATA.

We can go into all these developments some other time, but I want to ask the Government once more to withdraw this legislation which they have not the slightest intention of implementing. Today, as I am sure the Minister knows, discounting is regarded as an acceptable method of bringing down the cost of air travel. The harmful and ridiculous part is that the Government connive at all this, know all that is going on, but refuse to accept the fact legally.

I realise that repetition is tedious, but the fault lies with the Government and not with me. So I am asking at this time of acute financial crisis for the airlines to realise that they have got to get rid of their tickets; and could the Government not help them to do so legally? I believe that discounted air tickets should be available openly at all retail outlets so that everyone may benefit. And I suggest once more that legislation which prevents the general sale and availability of discounted air tickets should be withdrawn, and that this Government, in co-operation with other countries and any other organisations that may be necessary, should take the lead and do so now.

My Lords, I am relatively fortunate in that a good deal of information comes my way and I have told the Government of certain developments that will arise and the consequent taking up of positions that will follow and make their legal stance impossible if they refuse to take action on this matter. So I would hope that at last in this economic recession they will help our airlines, in company with others, to recoup at least some of the losses and some of the money now lost to them by this stupid and ignorant legislation.

Really I have only raised two points tonight. One is whether we could be told when this report on the consumer and the nationalised industries will see the light of day. Secondly, whether in this economic recession for the airlines the Government are disposed to see that all airlines—and in particular our own nationalised one—shall have the opportunity legally to recoup the losses they are now making.

8.19 p.m.

The Earl of Dudley

My Lords, I should like to add my congratulations on the maiden speech of the noble Lord, Lord Constantine of Stanmore, which was delivered with such charm and confidence. I do so with a special relish as at least one of the points which he made on public sector prices reinforces a point which I hope to make to your Lordships on the public sector in the course of the next few minutes.

I also hope that the noble Baroness will forgive me if I do not follow her down the path of consumer affairs, about whose micro-economic aspects she has so much greater knowledge than I do. In fact, I should like to start by making a point which I think has not yet been made from this side of the House. I am sure that all of us on these Benches welcome firm leadership in these troubled times, especially with our matriarchal society, our matriarchal Government and now our matriarchal House, and share Ministers' concern for firm policies, outlined in the gracious Speech, to reduce inflation and restore industrial competitiveness and prosperity—policies formulated, no doubt, by Ministers with experience of previous failures.

I have studied some of the Chancellor's earlier speeches made in Opposition, when he was no doubt laying the groundwork for the policies for which he is now responsible. I should like to draw your Lordships' attention especially to a speech which he made in the debate on the Address in another place—some of your Lordships may even have heard it—in November 1976 in which he said: —if we are to make a success of the mixed economy—the Government cannot look for help in that respect to the public sector…There is no prospect in the public sector of the creation or establishment of jobs that will survive. There is no prospect in the public sector of any creation of wealth. It is to the private sector that we have to look for the restoration of health. The real threat to the health of the private sector comes from the very size of the public sector. That is where the importance of the size of the public borrowing requirement lies".—[Official Report, Commons, 30/11/76; col. 697.] With the Chancellor holding such views, it is only to be expected that the gracious Speech contains a declaration of intent that, Plans for public expenditure will reflect the importance of restricting the claims of the public sector on the nation's resources". Holding these views, it is quite natural that the Chancellor would turn a deaf ear to the pleas for extra Government spending to create jobs. Job creation is the function of private industry. The Government cannot look for help to the public sector". Many may quarrel with that, and I am sure that the noble Baroness, Lady Birk, would quarrel with it. But I will not, provided that the Chancellor follows his own logic and gives the private sector such help as it seeks to restore competitiveness and prosperity. If the Chancellor rejects extra public sector spending—

Baroness Birk

My Lords, is the noble Earl really suggesting that the private sector should take over responsibility for all the infrastructure, for schools, for hospitals, for roads and for sewers? Is that what he is saying, because, otherwise, what he is saying about the public sector not creating wealth does not seem to make sense?

The Earl of Dudley

My Lords, perhaps the noble Baroness, if she will let me pursue my argument, will in the course of the next few minutes get an answer to her question. If not, may she please ask me again before I sit down? If the Chancellor rejects extra public sector spending as a means to stimulate demand, then he should see to it that he responds with help for the private sector of industry. If he will not, I feel that he ought to be reminded by noble Lords on this side of the House of his own past undertakings. For I read that of all the conflicting claims upon the Exchequer, there is only one thing that industry asks of the Chancellor—passed as a resolution at Eastbourne to be referred to the Chancellor by the CBI's president—and that is to cut business costs, even at the expense of an increase in the PSBR.

It is common knowledge, I think, that in making this generalised statement the CBI have in mind the removal of the National Insurance surcharge. Industry judges this the best way to achieve a quick return in lowering costs and to remove a disincentive to job creation. The proposal would save £1½billion to industry. I also read that it has had an unfavourable reception, although the Chancellor himself attacked the tax when introduced by the Labour Government. So I urge my noble friend Lord Cockfield to consult his colleagues and agree on, at least, a hint of a "Yes". Could my noble friend say something in his winding-up speech which would give industry some hope, without pre-empting the Budget? That is my first point.

Secondly, given the Chancellor's views on the unprofitability of public sector employment, it is surprising to learn that there is a premium this year on public sector jobs. Despite the outcome of the Civil Service and BL negotiations, it is reported that public sector wage settlements are running at 18 per cent. above last year—nearly double the private sector increase. Could my noble friend confirm or deny that figure? And can Ministers concerned suggest how they could avoid leaving so much to chance in this vital area of wage settlements?

I share the Government's dislike of a permanent incomes policy, but the benefit of freely negotiated wage settlements not tied to productivity agreements is being dreadfully abused. I do not know whether at BL they were playing roulette, or Russian roulette, with the company's future. But I am from the Black Country, and spent 20 years of my life supplying capital equipment to the automobile industry, including BL, so I know personally how much hung on that spin of the wheel.

The gracious Speech expresses Ministers' hope of further reductions in the level of wage settlements. I give them and their policies credit as other noble Lords have already done, for the more realistic outlook that prevails at BL and for the lower level of wage settlements reached in the private sector this year. But I urge the Government—and this is my second point—to be sensitive to the mood of change, and to the opportunity that might offer to cash in on this mood and build an agreed and lasting framework for negotiated settlements, as part of their economic policy and strategy, especially with regard to public sector wage settlements. In this respect, I agree with the noble Lord, Lord Rochester, that something needs to be done to try to create the framework for something better than the very chancy situation which we have at the moment.

Thirdly, I should like to stress the influence of public sector prices—or public sector costs, where they are charged as rates and taxes—on private sector costs. I understand that a deputation from industry is meeting the Chancellor at Neddy to make representations about the level of electricity and, perhaps, other energy prices. I accept that it is not in line with Government policy to increase the taxpayers' burden of subsidies to public sector industry, tempting though the thought is—which was, to some extent, developed by the noble Lord, Lord Wynne-Jones—of subsidising the private sector via the nationalised industries, electricity, transport, steel or gas.

But what I, and I am sure all of us on this side of the House, deplore—and I use the word "deplore" advisedly—about the general history and background of the public sector is the difficulty of appraising the value of its output, whether product or service is charged or free. These are monopolies, able to charge monopoly prices, which may be cushioned or controlled by Government, dependent, perhaps, on the views of the Secretary of State and the extent to which he can influence his colleagues.

Improved productivity has been much more difficult to measure and achieve in the public sector than in the private sector. This matters very much in an age when growth and living standards depend on productivity—here, in the Soviet Union, or anywhere else. However, there is another aspect to this wide question of public sector finance. Though we may not see the public sector as a source of wealth, we need every ounce of industrial muscle we can get from it at the lowest possible cost. This means that whatever the Chancellor's views on Government spending, the public sector should have its fair share of investment, and if public money has been wastefully or unproductively invested in the past then write-offs should be accepted. There is need for further investments—this point has been referred to by many noble Lords during the debate—in nuclear energy, transport, steel, utilities and so on. Therefore, my third point is that the claims of the public sector on the nation's resources must he related to the sector's needs. I hope that I am answering the question put by the noble Baroness. The Government must keep these and their cost effectiveness constantly under review.

Fourthly, brought up as I was—and, indeed, as most noble Lords were—in the thirties, or earlier, I should like to add a few words to all those spoken in the debate regarding the passage on unemployment in the gracious Speech. I do not think anyone in this House can contemplate the present level of unemployment except with determination that something must be done about it. Not only that; whether or not international conditions are responsible, we must act and not wait on the success of President Reagan's policies or a recovery in world trade. The difficulty is that I agree with those who take the view that any conventional Keynesian policy would be counterproductive and would lead to renewed inflation. I would say to the noble Lord who mentioned Keynesian policies—I do not know whether the noble Lord, Lord Robbins, would agree—that it seems to me that Keynes was writing his theory in very different conditions: at a time when there was no inflation, when income tax was about four shillings in the pound and when, if I remember rightly, our productive resources were under-utilised.

Lord Robbins

My Lords, might I remind the noble Earl that in addition to writing the general theory, which was written at the depths of the depression in the 1930s, the last monograph which Keynes produced, entitled How to Pay for the War, was anti-inflationary.

The Earl of Dudley

My Lords, I thank the noble Lord for perhaps reinforcing my argument. I agree with all those who say that the best hope for the unemployed lies in the long-term recovery of British industry. But that is not enough in the short term. Though we do not debate tax in this House, I hope I may be allowed to express the hope that the Chancellor, to help the unemployed, at worst will not increase the overall level of taxation next year and at best might manage a reduction. Any expectation that this might be in his mind could help to moderate next year's wage round this winter and keep industrial costs down. Perhaps I could remind noble Lords that in the same speech, which I have already quoted, the Chancellor said: Surely it must now be well understood throughout the House that higher taxes are as sure a method of destroying jobs as any reduction in public expenditure". Finally, as a staunch and unswerving European I should like to welcome those passages in the gracious Speech which refer to the Government's strong commitment to Europe and to the fact that the United Kingdom will play its full part in that development. I note the word "full" and hope that it extends towards joining the snake in the basket of European currencies. I assure noble Lords that it has nothing to do with the one which destroyed Cleopatra or tempted Eve. It is not the same species. It is as beneficial as the snake on Mercury's wand.

Now that sterling has been recently devalued against other European currencies by about 7 to 9 per cent., depending on the currency, it seems to me to be a favourable opportunity to take a step towards European unity, which can only have the effect of stabilising exchange rates and thus helping industry. It would be a great pity if this opportunity were missed again. I urge the Chancellor, through my noble friend, to grasp it. What, really, have we to fear with sterling under-pinned by our miraculous gas and oil industries, our people's skills and energies? We must not sell them down the river.

One or two comments which have been made this evening were, I thought, selling our great people, its history and its abilities, short—and also our great and improving industries. We have nothing to fear but fear—the fears of those who are too insular and narrow minded to see how small is the sacrifice and how great the prize.

The Minister of State, Treasury (Lord Cockfield)

My Lords, I beg to move that the debate be adjourned until tomorrow.

On Question, Motion agreed to, and debate adjourned accordingly.