ADDRESS IN REPLY TO HER MAJESTY'S MOST GRACIOUS SPEECH

HL Deb 10 November 1982 vol 436 cc254-349

4.22 p.m.

Debate resumed.

Lord Byers

My Lords, I think it is the sense of the House that we should stop pouring Britoil on troubled waters and get back to the debate on the gracious Speech. I was particularly interested in the contribution from the noble Lord, Lord Scanlon. The House listens to him with great interest whenever he speaks, and I was particularly interested in what a far cry his speech was from the various policies which have been adopted by Labour conferences in the last year or two. It was very refreshing indeed. I shall be very interested, too, to listen to the noble Lord, Lord Gormley, making his maiden speech and to hear his version of official Labour Party policies.

The gracious Speech and Government pronouncements do not give much hope for those of us who are deeply concerned and preoccupied with the mass unemployment which has risen during the Government's three and a half years in office, and which shows no signs of diminishing through any effort of the Government themselves. For this, and other reasons, we have tabled a Liberal/SDP Alliance amendment which, at an appropriate moment, will be moved by my noble friend Lord Diamond.

Of course, we recognise and give credit for the importance of the reduction in the rate of inflation. This is vital and it can only be in the national interest that a low rate should be maintained, and that pay demands by union leaders asking for double-figure rises should be resisted in the interests of all of us. But the reduction in the rate of inflation does not, in my view, exonerate the Government from adopting policies which could contribute to a reduction in unemployment. I can only repeat what I have said many times before in this House; namely, that this country is suffering basically from a lack of effective demand. This was the theme of the speech that I made on the loyal Address in November 1980, and my colleagues and I have repeated this view ever since then.

A number of factories got rid of their overmanning early on in the piece, but now they are at risk because their order books are far too slim. The demand for their products is not there in sufficient volume to avoid redundancies. In other words, ineffective demand for the product means ineffective demand for labour. I do not think it is any use the Prime Minister denying that there is a shortage of demand, particularly for British goods, while castigating local authorities and nationalised industries for underspending and causing a shortage of demand.

I do not support the view that it is the duty of the Government to spend their way indiscriminately out of the recession—far from it. That would certainly put at risk much that has been gained by reducing inflation. On the other hand, I believe that something must be done immediately to stimulate demand. I believe, as I have said before, that selective investment to create new assets or to undertake maintenance and repair work, which simply cannot be put off indefinitely, would do a great deal to stimulate demand in the right direction.

We have, apparently, seriously underspent our projected public borrowing requirement target. I know that we are approaching a general election, and that in these circumstances Governments are often tempted to attract votes by reducing personal taxation. But I believe that if we were to use the whole, or a very substantial part, of whatever surplus is thought to be available by reducing personal taxation it would result only in the substantial purchasing of imports which we simply cannot afford. This is the real weakness of the official Labour case, which is based on the principle of spending up to the hilt in the hope that it will result in more jobs. It is much more likely to result in more foreign jobs.

But selective public or private investment, designed to create more wealth in the United Kingdom, would be of lasting benefit, especially if the emphasis is placed on insisting that, wherever possible, the products used to create the new assets are made in Britain and on selecting projects where the British-made content is likely to be high. For instance, it must be clear that if we were to mount a substantial long-term programme of constructing new housing units and refurbishing others, particularly in run-down areas, the result must be an increase in the effective demand for British bricks, steel, textiles, tubing, electrical and other domestic appliances and fittings.

The Times on Tuesday of last week, 2nd November, reported that private builders saw little or no chance that councils would spend the £1,000 million by which they are undershooting the Government's expenditure targets. Once again that points to a reduction in what should have been an important weapon in the armoury of effective demand management. What I believe is needed is a continuous programme of refurbishing and home improvements over a number of years, if demand in this field is to be maintained at an effective level.

It is no use having capital investment programmes which are on a year-by-year basis, with insufficient confidence for the people who are carrying them out. I believe that the repair of our town and city roads and the replacement of sewers and drains, for instance, cannot be put off much longer. Why not commission this work now? The electrification of the railways must come sooner or later. Let it be sooner. This is what I pleaded for on 27th November, 1980. I pointed, also, to the indiscriminate nature of the public expenditure cuts which I said, and still believe, had become the enemy of private sector viability and private sector order books. Only now, after two years, does the penny seem to have dropped—two years and over 1 million extra unemployed later.

The Prime Minister made a speech last Thursday and took this as her text. She pleaded with people to spend money in this way, having vetoed it exactly two years ago. We all admire her iron nerve, but this indeed is nerve. If she can complain about underspending creating unemployment, then she confirms the case for higher sustained selective spending to create wealth and lasting assets as a reasonable way to diminish unemployment. What we are suffering from at the moment is a mini "stop-go" and whenever we have had this policy it has always been detrimental to the national interest. The truth is that the Government have wasted two years by being blinded by monetarism as a solution, and by a refusal to create jobs by encouraging the creation of wealth and stimulating demand for British goods.

Indeed, I believe that we need a new approach to buying British. Exhortation is not enough. If we are to increase the consumption of home-produced goods, we shall not do it by imposing import controls or non-tariff barriers. I cannot tell the noble Lord, Lord Scanlon, too sincerely how much I disagree, even though he puts the word "selective" into his argument. That is not Labour Party policy, as I understand it, which is import controls and not selective import controls—

Lord Scanlon

No.

Lord Byers

Yes, my Lords. Perhaps my recollection of the resolutions is wrong. But there is not much doubt about it that if we follow the line of import controls we will do grave damage to our own exports and we will certainly do damage to our own productivity in this country. I believe that we have to identify what are the various responsibilities for getting a Buy British movement really under way. The first responsibility, I believe, lies with the British manufacturer to produce something which is at least as good value for money as can be obtained abroad, and preferably better, delivered on time and of equal or better design and durability. The most stringent test of this is to try to market the British goods in the overseas countries from which the goods of our competitors emanate, and this is being done in certain sectors.

The second responsibility lies again with British industry, with manufacturers, to examine their own purchasing policies in detail to see how far they can go in buying or commissioning basic materials and components from British sources in substitution for those items which are now imported. There are in a number of companies people who simply do not understand that they could in fact, if they made sufficient investigation, get small and medium-sized British companies to make the components which they are now buying from abroad. There was an excellent exhibition put on by the London Enterprise Agency and the CBI recently—it was called "Can You Make It?"—and 49 large firms put on the table the things they were buying from abroad and challenged 3,000 small businesses to see which of these things they could tender for on a value-for-money basis. All that is now being progressed and it looks as if it is going to be an interesting development. These are the initiatives, I believe, that we need.

The third responsibility lies with those who sell directly to the public through retail channels to buy British wherever they can, and to demand from their suppliers standards as high as those of imported goods, which they can then market with confidence. The final responsibility, I think, lies with those in the public and private sector to review their own purchasing policies, to insist that wherever possible they buy British when they place the contracts for which they are responsible.

Today references have been made to competitiveness. I think it is absolutely right, but I think that Governments should study the costs on business which are of Government making, or costs which are made by local authorities. There is some recognition of this in the announcement that the National Insurance surcharge will be reduced; but why not get rid of it now? Why cannot we afford to do it? It is a burden on British industry.

I hear complaints on all sides that our energy costs to industry are much higher than those suffered by our competitors. I know it is difficult to measure the exact amount by which this may be so but surely when the energy industries are making profits of hundreds of millions of pounds there must be some scope for reducing the burden on British industry. Local authority rates are another imposition which adversely affects the prices of industry and commerce. One must ask whether over the past two decades the increase in jobs in local authorities by 78 per cent. and in central Government by 45 per cent. can all be really justified. These are the burdens which are having to be borne partly, largely, by British industry. I have only mentioned a few of them. I would like to see the Government make an inventory of the Government-made or local authority-made impositions and review them to see to what extent they can reduce these burdens so that we have a better chance of being competitive.

I hope that we shall do something to increase the chances of British business becoming more competitive, because our competitors are really competitive, and if we do not do that we are going to be landed with something like 4 million unemployed.

4.36 p.m.

Lord Boyd-Carpenter

My Lords, from its beginning this House has always included among its membership representatives of the great centres of power in this country, and it is in accordance with that longstanding and, I think, very salutary tradition that this afternoon we have the amendment put forward by the Official Opposition moved by a very eminent trade unionist, and also that I am to be followed by the eagerly awaited speech of the noble Lord, Lord Gormley, another major figure in the trade union movement. To those of us who believe in the future of this House it is encouraging that the trade unions—one of the great centres of power in this country today, whether their power be well or ill used—should be here and taking an active part

It is also a particularly good occasion for us to be debating the general problems of the national economy, because it is really the first debate in this House since it has become clear that the Government's policy of giving priority to combating inflation has proved successful. Many of us on both sides of the House had hoped that inflation would have been checked earlier, but there is now the clearest evidence that the priority which, with great courage and determination, the Government have given to combating inflation is really producing results. I hope I shall not offend any of your Lordships when I say that to me that seems to be an enormous achievement. Those of us who have seen what inflation can do in eroding the whole fabric of a society, whether it be in Weimar Germany or in contemporary Argentina, and how it can destroy the standards, destroy the values, destroy the savings of a whole people, cannot be sufficiently thankful, having seen inflation in this country rise to dangerously high figures, that that tendency has now been reversed and the figures are going down.

I thought that the noble Lord, Lord Scanlon, was less than generous to the Government when he referred to the fact that inflation today was only 2 per cent. below the level that it was in 1979. No doubt for the moment the noble Lord forgot the situation in 1979, when not only was there a powerful underlying inflationary trend, but, in the first 18 months of its period of office, the Government of my right honourable friends were left to inherit the mass of post-dated cheques for wage settlements, at high and indeed excessive rates, which had been left behind by the Government presided over by Mr. Callaghan. When due allowance is made for that, I think the achievement of my right honourable friends in dealing with the problem of inflation is perhaps set in a fairer context, and I for one would wish to congratulate my noble friend on the Front Bench and his colleagues on having achieved this.

It has not been easy. They have been subjected to every sort of pressure, not only from outside their own party but from many people who, frankly, should know better, including some people who should know better from their own experience in Government. They have been subjected to every sort of pressure to relax on the hard, unpopular, difficult, arduous steps that had to be taken to achieve this. Now that it has been achieved and is showing every sign of being held and improved, I think it is appropriate that we should acknowledge this.

In saying that, I know that your Lordships will not think for a moment that I am underrating in any degree whatever the concern which we all feel for the other and unsolved evil of our economic situation, the problem of unemployment. I was very glad to see that the amendment which the noble Lord, Lord Scanlon, moved refers to what is, of course, the key to this, the revitalising of the economy. That is quite a different, and, if he will allow me to say so, a very much more respectable approach than that adopted by the Labour Party at its conference, because I do not think there are any of your Lordships who would quarrel with that phrase.

I was a little disappointed that the noble Lord, with his immense trade union experience and his immense prestige in the trade union movement, did not find time in the course of his very interesting speech to give any indication as to what the trade union movement might do to help. I think a fair judgment of the situation is that there is a good deal that the Government can do, and if I have time I shall say a word about that. There is quite a lot that employers and industrialists can do, and I shall also say a word about that. But there is also a contribution which the trade union movement can make. I find it very disappointing that the noble Lord, Lord Scanlon, did not offer, to the best of my recollection, any contribution of that kind.

I do not want to seem offensive to the noble Lord—that is the last thing I want to do—and I do not want to weary your Lordships with examples, but there are so many cases in which the unemployment situation has been made worse by the action of trade unions. There was the appalling and unnecessary steel strike of two years ago, which was the direct cause of the unemployment today of thousands of steel workers following on the loss, permanent in some cases, of markets because customers had to go elsewhere to get their steel at that time. There has been the infinite damage done to our motorcar industry. Many of your Lordships are old enough to remember the days when the motorcar industry was our star export performer, dominating the export markets of the world. But successive strikes, successive interruptions of supplies, successive unreliability, therefore, of delivery and higher costs have turned us, for the first time, into a country which imports more motorcars than it exports.

There are so many ways in which a very powerful trade union movement can help, rather than hinder, and help enormously in improving the competitiveness of British industry, by not again and again adopting the attitude and practices which were perfectly sensible at one time; for example in the railways, Fleet Street printers, and the London docks. They have not only outlived their usefulness, but are a positive handicap to the efficiency on which competitiveness depends. One needs, above all, a recognition of the truth of a little poster—I apologise for repeating this, because I said something about this to your Lordships a few months ago—that I saw in a factory a year ago in the United States. It was put up by those who worked there, and said: Customers make pay day possible. A little more realisation of that by the trade unions and their very able and distinguished leaders would help very much to improve the supply of jobs.

Of course, the Government must make contributions. It seems to me that one of the reasons for the lack of competitiveness of much of British industry is our high energy costs. The noble Lord, Lord Scanlon, referred to this. This takes one on to a very important point. Although our general rate of inflation has fallen very satisfactorily and price increases over most of the economy are very slow, that is not true in the public sector. For the 12 months ending September of this year, the price of products in public sector industries increased by 13.2 per cent., thereby tending towards the average of 6 or 7 per cent. produced by the very low level of increase in the private sector. Some of that responsibility, notably for gas, rests on the Government. Their decision on gas prices has been wrong.

It is over the nationalised sector as a whole, as the noble Lord, Lord Scanlon, pointed out in a very moving passage on the problems of pensioners, that prices are still continuing to rise. Why is that? Is it inefficiency? Is it the knowledge of those who work in the public sector that however much they may disrupt production by industrial action, they cannot bankrupt their employers and it is therefore safe to take such action? Is it the lack of competition? Is it some inherent old-fashioned inefficiency? I do not know. But it is a very significant fact, and ironic, that that very sector of our economy which is owned by our people is the very sector which is not contributing to the reduction in prices and to the countering of inflation. The situation, therefore, again lies little with the Government. Privatisation on the lines of the Statement we heard earlier this afternoon looks more and more sensible in the light of that significant fact.

Coming back to unemployment, I agree very much with the noble Lord, Lord Byers, that some controlled development in public spending on the infrastructure of our society makes sense at this stage. I am debarred a little in earrying forward that argument about the need for further investment in construction because I happen to be chairman of a company which would benefit greatly from such a programme. I therefore declare that interest, and in delicacy must forbear from pressing the argument further. Perhaps for that reason I found the argument of the noble Lord, Lord Byers, most attractive.

There are other actions the Government could take. One of them is to tackle the stranglehold of bureaucracy on new development. We had a Statement yesterday about the development of Gatwick airport which will bring thousands of good jobs to that area. But did your Lordships notice that it is three and a half years since the decision was taken to set up a public inquiry? Even today, although planning permission has been given by the Secretary of State, your Lordships who read the decision will have seen that the promoters still cannot go ahead with building because they have to seek the permission of some local planning committee on certain details before they can actually put a spade into the ground.

One sees in the bureaucracy of the local authorities the delay in granting planning permission which holds up building just at the time, as the noble Lord, Lord Byers, said so well, when building is one of the opportunity targets for a reinvigoration of the economy. There was a very good advertisement in the Financial Times recently by a private company, headed by a slightly offensive reference to the CBI. It made the point that several vastly interesting new developments, such as cable television and cellular radio, were being held up because Government bureaucracy will not come forward with a decision.

It is no use Whitehall saying that it has to take a long time over this because it has to make sure that everything is right. That is exactly the process which some years ago was applied to the decision to provide £80 million for a man called De Lorean to build a factory in Belfast, without apparently discovering that the man was a rogue. Therefore, I find that argument singularly unconvincing. I hope that we shall hear from the noble Earl who is to reply that the Government are to streamline these procedures. As the noble Lord said, with the burden of rates and taxation, industry carries a considerable burden which the Government could alleviate, and if it is alleviated industry will become more competitive.

I was glad indeed that the noble Lord, Lord Scanlon, did not pretend that there was any across-the-board drastic, simple, straightforward cure for unemployment. I am sure that the House respected him for taking that proper and realistic view. It is not, of course, the view that is expressed by many of his right honourable friends outside. But it is true, and the noble Lord knows it, and that is why he said it. I had, in case the noble Lord felt like taking that line, armed myself with what could be regarded as an awful warning, not to the noble Lord but to those outside who seemed to think that it is possible suddenly to conjure up a change and a reduction in unemployment. The Labour Party's election manifesto at the beginning of the last great world slump in 1929 said that once the country could be freed from the blight of Tory misrule, the number of unemployed would rapidly recede. At that time the unemployed were 9.8 per cent. of the registered workforce. The Labour Party came to power and the next year the unemployed were 17.3 per cent. The following year they were 22.3 per cent. That is a lesson to all of us not to pretend that there is any wonderful cure, any wonderful specific.

The truth is that it is necessary—to quote the words of the noble Lord's amendment—"to revitalise" our economy by becoming more competitive. It is, I suggest, no use, as the noble Lord, Lord Scanlon, was trying to suggest at one stage in his speech, simply to put more purchasing power into people's hands. There is no guarantee that if we do that a good deal of it will not be spent on sucking in even more imports. We have, first, to get British industry so competitive that there is no temptation, when people have more purchasing power, to spend much of it on imports, but to purchase goods made in this country because on quality, price and delivery date they are right.

This debate was extremely well opened by my noble friend Lord Cockfield and by the noble Lord, Lord Scanlon, because we are starting it on the basis that what we are talking about are not great sweeping and dramatic changes which can improve the situation overnight; we are discussing the matter on the basis that some of us put more emphasis than others on exactly the measures which will help a bit, and particularly on the measures which will make our economy tougher, more vigorous and more competitive. I am sure that that is the right spirit in which this House should debate the matter because, even in the period of an approaching election, I would venture to say that the people of this country would neither forgive nor forget those who cynically suggested that they had a remedy for this great evil and sought to obtain votes by that calculated deception.

4.53 p.m.

Lord Gormley

My Lords, the appeal was made earlier that we should try to modify our speeches in order that sometime tonight the Divisions could take place. I must admit that your Lordships have not been very successful up to now. It would seem that the average speech is about 20 or 25 minutes. I do not think that I shall take that long because much of what I wanted to say has already been said by my noble friend Lord Scanlon.

When I rose I had a little apprehension because I asked myself: How do I address these people? I come from another environment in which I have deliberately created over the years the feeling that people should know one another by their first names. I understand that that is a little taboo here. However, I am lucky enough to be following only four speakers up to now and there is a possibility that I might remember them. If I do not do so, I can only apologise and say that I will learn as I go along in the House. My second feeling of apprehension was because I was told that a maiden speech should always be non-controversial, non-party political and non-anything like that. I am going to find it slightly difficult if I have to stick to those kind of terms. It is not impossible; it is difficult; but we shall see what goes on as we carry through.

When I read the Queen's Speech—and, as I have said, I am a new boy here—I read it with great interest because I thought that we were in a crisis in Britain. I thought that we had an emergency that had to be dealt with. I was appalled by the seeming lack of sincerity that came through the document. There were no real valid arguments as to how we are going to get out of the pit that we are in. Let us forget who is calling it a "pit" at this moment, because we are in it. To keep looking back over history will not solve the problem. I look at this and ask myself: Why are we in this position in Britain? We have two of the greatest national assets in the world: a self-sufficiency for energy, and people. If we deal with those two matters on their own basis we can, at the end of the exercise, ask ourselves: Why?

Let us take ourselves back to 1973. The year 1973 was when the crisis seemed to hit us harder than it had been hitting us previously, and that was because of the stupid political decisions that had been made in 1959 and the early 1960s on energy policy. I thought that the debate earlier on Britoil was fantastic, and we might comment on it a little later. In 1973 we were reliant and the whole of the Western World, even America, was reliant, on the fact that we ought to be able to purchase cheap oil in inexhaustible supplies from countries which were not within our own political control. Those political decisions had been taken not only by one party, but by other parties as well. Although the union in which I was involved kept warning people, in 1973 when those countries decided for economic reasons that they had to increase the price of their oil five times and cut the supply because of the political situation against Israel, the whole world was floundering. We did not need to be floundering, but we were doing so because we had made those decisions to import our energy. That is why import control is so important. We can look back on history and see how it has knocked hell out of a lot of the history of Britain and the collective economic history of Britain.

Therefore, along with the Government at that time, we set off in the 1970s to get a plan at least for the coal side of the energy field. We realised that it was important in discussing energy that we should have a plan for Britain that would make us self-sufficient. We decided that we would have a plan for coal, and I am pleased to say that that plan for coal was accepted by all the political parties. There should be no question at all of any change in that position just because there has been a change in Government. All the political parties saw the wisdom of that fight.

At that time we started producing gas and oil from the North Sea, something which had been forecast and presumed for so many years. It came on tap at that time and has grown ever since. We have oil and gas and we have a nuclear programme for electricity production which needs a lot of bugs knocking out before it will be accepted by the public. But it is still there. We have energy from other sources. Therefore, since we are all involved in the use of energy, the price of energy, the position of energy and the supply of energy are important. Yet, it is not even mentioned in the Queen's Speech. The whole of the energy scene is completely ignored, and yet it is so vital to the economy not only of this country, but of the whole of the Western World.

We glibly ignore it because some part of it says that we would have to deal with the Britoil situation. It has come out anyway. We spent a lot of time discussing it today, and no wonder! I read in the paper at the weekend that it is the "oil sale of the century". It is better than picking money off the streets. They say that there is a great feeling of euphoria among the establishments. No wonder! They are going to find a lot of money available to them which should be available to Britain. We should sit down and forget the political divisions among us and say that we need an energy policy which can be accepted by all parties, and not be destroyed because of the whims and fancies of the British public. We cannot afford it as a country and we should not allow it to happen any longer.

Therefore, as I say, the privatisation of our national assets does not create, and never will create, one extra job. It is only political dogma sometimes that determines how we are going to deal with our whole economy. The energy situation is so important that we cannot afford to ignore it. I would hope that the Minister, in view of the statement that was made in Europe yesterday about the bigger need for coal, will at least emphasise the need for full support for the coal plan which was accepted by us all. Then we could have some peace in those places in Britain where there is a great deal of worry at the moment because of the statements made by different people. So I would urge noble Lords to say to their Government colleagues, "Come out in the open as early as possible to try to make sure that we have this plan, at least on one side of the energy industry, which cannot be nullified by other people."

Then, of course, we come to the second asset about which I spoke. In Britain, we have some of the most sophisticated people in the world. We have a far longer history than many other countries in the world. Among the older people there are the highly skilled; we have the greatest technicians, not only on the shop floor, because many of these lads have gone through the field to become managers and even top employers in their own right.

The big tragedy, of course, is what has been happening over this last few years. We are not just talking about big firms shedding thousands at a time; we are talking about thousands of smaller firms that have had to go into liquidation. I shall be speaking to a group of these tonight to try to shed some light on their future. I hope that I shall be able to convince them that there is something for them to struggle for. I saw a man last night who said that he had suffered an injury towards the end of last year; he is the owner of a business. He returned to work in February after an operation and the people in the canteen made a path for him and cheered him the length of the canteen. A few months ago he had the difficult task of having to sack 1,000 of those same people. He said, "How can I expect loyalty from any of my workers when I have to treat them in this way?

This is what is wrong with Britain. We are eating the seed corn which we should be looking after. We are losing skilled people who we shall need to fulfil the training programmes about which my noble friend Lord Scanlon spoke. We are losing those people because they think there is no future for them and they feel so battered, so full of bitterness and betrayed that we shall never again get the expertise of which we used to be proud in Britain, because people will say, "Why should we keep doing this when we are only putting ourselves out of work?"

How do you expect to get increased production or increased productivity if the only thing the workers can see is that they will be the next on the dole queue? You cannot expect it, and you will not get it. As a trade union leader, I have been arguing for the need for increased production time and time again. I still believe in it, as most trade unionists do. I say to the noble Lord, Lord Boyd-Carpenter, "To keep deriding the trade union movement does not solve any problems. To keep picking out one section of the workers and paying special attention to them is criminal to Britain". Ninety per cent. of those lads all realise that they are not an oasis in the middle of a desert. They are all proud of British society and have to be proud of a good society if they are to prosper too. So do not keep deriding them and deriding their efforts.

When we come to party policy, I hope that we are not sent here just to express party policy now and again. I am afraid that I shall not be here very long if that is the only condition on which I am to be allowed to be here. We have been breeding this for the last few years. I have hardly mentioned the younger people. The biggest crime against any state is how many young people have to go on the dole when they have finished their education. There are not only the 16-year-olds but there are lads who go to university, come out with high degrees and then have to be thown on the scrapheap because there is nothing for them. The Queen's Speech refers to the training programme, but that is just a sop. What is 12 months' training? What will a lad do if, at the end of the training period, there is no regular work for him to go to? We need the jobs and we need the training. We need them together, we cannot have them in isolation.

Therefore, I come to the crux of what I believe we should be doing. I believe that we can buy jobs. I believe that we can buy jobs as easily as we can buy unemployment. That is what we are doing at the moment. All the money that we are producing from our wealth in the North Sea and elsewhere is being dissipated by people having to take dole money instead of earned money. They are not making a contribution to their own upkeep because of the enforcement of the dole.

I spoke to five Ministers two years ago on exactly the same matters as I shall speak of here. There are jobs that need doing for Britain and for Britain's future. The electrification of the railways is a must. This is not saying that tomorrow we shall spend £600 million or £700 million. It is a gradual process, but the very fact of saying that it has to be done creates another situation, and brings endless surges from other industries which will be supply industries in the future when we have the jobs. We need the fulfilment of the whole roadway programme, especially now that we are to have heavier lorries. We shall need a bigger roadway programme than we have at the moment. I admit that I spend a great deal of time on it, but it is a must because no one can say that it is something that is not necessary. We need a big house-building programme, particularly in the inner cities. These, to me, will build for Britain's future. I think that they will create an urge for people in private industries to invest, who at the moment cannot see any future and who are not willing to borrow money at the lower interest rates to invest in new equipment for their industries. I believe that we would create a different atmosphere among the people of Britain, and we would help to create more wealth and vigour in the energy markets to which I have referred.

In my opinion, this is something which we should be determined to do; we should be determined to give a lead. We are the only country in this situation which has self-sufficiency in energy. If Germany was in this position, she would not be waiting for America; she would be leading Europe, and so would France and the other European countries. We should be seen to be leading Europe, because we are starting to climb out of the crisis rather than wallowing in it. I think that this would give us a chance to give greater help to the undeveloped countries of the world, who need all the help we can give them, and create again a bigger market for exports. This would also give us a better chance to lead the world—a position in which we used to be—in the fight for a peaceful world.

In short, because of our assets let us be more positive. Let us ask the Government to accept the motto, "Get Britain back to work". That should be as good a motto as the one that used to be thrown out by some of our colleagues in years gone by, "I'm all right, Jack." I think that it is as important today to say, "Get Britain back to work", as it was to paraphrase that a few years ago. Let us lead Europe and the rest of the world in the recovery. I believe that if we are competent we can do it. We can get back our respectability and be regarded as "Great" Britain once again.

5.8 p.m.

Lord Taylor of Gryfe

My Lords, it falls to me to congratulate the noble Lord, Lord Gormley, on his excellent speech and to welcome him to the House of Lords and make him feel that he should not be apprehensive about intervening in subsequent debates. We have heard a speech this afternoon not only from a great and distinguished trade union leader, but also from a great patriot. The important message, which he has brought to us, is one which commends itself to these Benches in so far as he has urged us not to be a divided community and to think in terms of national welfare. The noble Lord, Lord Gormley, brought great wisdom and wise judgment to the National Union of Mineworkers, and I am sure that we are all delighted that the legacy he has left with the NUM has not been totally forgotten. He may, in fact, find the atmosphere in this House a little more pleasant than it was in the latter days during his presidency of that great trade union, so we welcome him here.

I rise to support the amendment proposed by the noble Lord, Lord Byers, in the name of the Liberal-Social Democratic Alliance, and to echo what has been said by the noble Lords, Lord Scanlon and Lord Gormley, in saying that the Speech with which we are concerned was disappointing and even irrelevant. There is no sense of the urgency of the situation and the challenge which it presents.

If you read the CBI survey of a few weeks ago which was featured in an article in the Economist, it was headed, "Help! Has anyone seen our recovery?" The CBI survey, which is frequently more accurate than the Treasury forecasts or the Government projections, indicated that there is a general collapse in business confidence, an unexpected fall in output over the first four months, with perhaps a further modest fall expected in the coming months, a similarly unexpected fall in recent orders, and maybe a further modest fall to come due to continued de-stocking, continued redundancies, and so on.

This is not the projection of an enemy of the Government. It is based on an assessment covering the whole of industry, and does not encourage us to believe that there is going to be any substantial improvement, at least in the near future. Indeed, in an article in the Financial Times yesterday it was pointed out that in the projections which the Government are now making in their expenditure plans for the next year they are assuming an increase of 300,000 adult unemployed, and a further increase on top of the existing figures of 60,000 school-leavers in the next six to eight months.

These are terrible and tragic statistics. We are talking about 3½ million of our fellow citizens. I recall after the last war the great Victor Gollancz, when he was raising money to relieve suffering in Europe among refugees, used to say that he spent an hour in quiet meditation before he made any appeal to try to get the feeling and the sense of suffering on the part of these people. In looking at this great problem of unemployment, and the dejection and humiliation which it means to millions of our fellow citizens, I wish occasionally that we would just try to put ourselves into the situation of an unemployed man who comes home with a redundancy slip, or a man in his fifties who sees no immediate prospect of any further employment. What that means in terms of poverty and rejection is extremely serious.

Keep in mind—and I say this to the Government with all respect—that one of the things on which they based their last election appeal, and for which they employed Messrs. Saatchi and Saatchi, was a great billboard showing people standing at the unemployed queue under Labour under the slogan. "The Conservatives will get you back to work". This kind of politics, and this kind of false promise, can do nothing for the good of democracy. I was interested recently in the Peckham and Northfield by-elections. All parties claimed success at these elections incidentally, including our own. But the frightening thing about both of these elections was that only 38 per cent. of the people in Peckham, and only 58 per cent. in a highly-publicised election in Northfield voted. What is happening in our country? Because of these kinds of false election promises people are losing faith in the democratic process. They are losing faith in the system.

The noble Lord, Lord Boyd-Carpenter, referred to the consequences of inflation on the Weimar Republic and the demise of democracy in Germans. As a very young man I lived in Germany at that time. What brought about the Nazi victory was not simply the inflation, which was in 1923–24, but the fact that there were 8 million unemployed in Germany in 1930 and 1931. They said, "If this is what democracy means, then we are not interested in the retention of that kind of system." I say to the Government that, while they may think that the people are passive and complacent, a stage is reached when they begin to question the democratic process which is so inequitable and so unfair.

I believe that democracy survives on participation and involvement of people, but it will not survive in the kind of passivity that was shown in these two by-elections. People cannot understand the system that condemns hundreds of thousands of people in the construction industry to unemployment at the same time as people are needing houses, roads and sewers. People cannot understand the system that takes all the benefits of North Sea oil, with a contribution to the Treasury of about £7 billion per annum, and transfers it to paying social security and unemployment benefit which is totally unproductive. It is difficult to understand or defend the logic of that kind of system.

The noble Lord, Lord Byers, has indicated some of the steps which a Social Democratic Liberal Alliance Government would take. These will be expanded further by the noble Lord, Lord Diamond. There is a new mood around, as the noble Lord, Lord Gormley, indicated, among the workers of this country. There has been in the past few years a great educative process—and this has been accepted by the railwaymen with 6 per cent. and the miners in their recent settlement, and so on—that jobs depend on investment. There is a growing awareness that jobs depend on investment and we must get investment going if we are to create more jobs. The Social Democrats say that now is the moment for a national forum for the development of a consensus economic policy embracing the employers and the unions and the Government, so that we can establish some national objective and national norm around which we would build the new economic revival.

Reference was made to the state sector. Perhaps it is in that sector that the prejudices of British politics are most evident. In that area, "Doctrine rules, OK!" We have seen some evidence of it in the debate here. The Social Democrats do not believe that everything in sight should be nationalised. The Social Democrats do not believe that it is wise to have the state involved in all aspects of our national life. That is the way to Eastern Europe, and Eastern Europe is a bad example in terms of the suppression of democracy and the failure to generate any economic growth.

We believe that the public sector should be looked at quite pragmatically in the best interest of the nation on the same basis as any other industry. The size of the state sector is important for the total economy. You have 2 million employees in the public sector and you have responsbility for more than 11 per cent. of the total GDP. There is no point in trying to solve the problems of the public sector by slogans and doctrine. The favourite doctrine from the Government is, "Let us wind back all activities in the public sector", and that is designated as "rolling back the frontiers of Socialism". On the other hand, my old colleagues in the Labour Party are similarly obsessed wth the question of ownership, when we should not be discussing ownership but discussing structure, efficiency and the good management of the assets for which we have responsibility. I suggest to the Government that what they are doing by their obsession with rolling back the frontiers of Socialism are several things which can hardly be justified in terms of the national interest.

Reference is made in the gracious Speech to the fact that private capital will be attracted to the shipbuilding industry. That industry has just been rescued from private enterprise, and presumably if private capital is to be injected into it. it will be only in those profitable sections of the shipbuilding industry, and I suspect that candidates for denationalisation might be Yarrows and Vospers, who are entirely dependent on defence contracts. I do not think the City investor will be attracted to yards such as Scott Lithgow and any of the other ailing parts of the industry.

That is what is wrong with the situation; in looking at the state sector, the Government are saying, "Let us hive off what is profitable but let us leave a rump of bankrupt industries to be carried by the taxpayer". By so doing, they are encouraging the anti-nationalisation prejudice in our society. That is not good government and I look forward to the Government commenting on this issue. British Airways is another industry that seems scheduled for privatisation, but I notice—the Financial Times and other financial papers suggest this—that only after a massive capital restructuring of the company will it come to the market, which of course means the injection of very large sums of taxpayers' money so as to make it more attractive to those who might be willing to invest.

Unfortunately, there is little reference in the gracious Speech to the international situation, though as a trading nation we depend on a revival of international trade. The Government assume this year only a 2 per cent. increase in international trade. I agree with the noble Lord, Lord Byers, that it will be difficult to adjust exchange rates upwards against the Deutschmark and the Yen and still retain the current exchange rate between an over-valued dollar and a devalued pound. There are great dangers in running immediately to import controls as a means of solving our economic problems. The consumer suffers, we retreat into Little Englandism and we induce retaliation, and that destroys the prospect of developing international trade. Of course we must protect ourselves from unfair dumping and other unfair practices, but let us be careful that we do not rush into import controls, which I believe would be a cul-de-sac.

I note with pleasure that the noble Lord, Lord Cobbold, will speak later, and I expect that he will comment on the international banking crisis, an issue which affects the whole flow of world trade. I will not quote the astronomical debts that have been accumulated by countries who are finding difficulty borrowing to pay the interest, apart from the original principal, but it is causing great nervousness to exist in international banking centres as they try to get some kind of agreement on international lending policies.

In The Times today it is stated that there is a new institute in Washington where information will be compared as to the risk element in international lending. It may be that in order to get world trade going, we shall require to look at new instruments for the stabilisation of exchange rates and for some guidance for international banking. Immediately we should increase our quotas to the IMF, which would enable them to have more freedom in their lending, without conditionally, to some of the third world countries.

It is a great world tragedy—this also affects our domestic scene—that two major companies, International Harvester and Massey Ferguson, should be in trouble. They make the great equipment designed for food production, yet the third world is crying out for that kind of equipment. International Harvester has three factories in England. We must try to revive the purchasing power of the third world countries because if the international bankers become excessively nervous about lending to the third world, that will mean a further contraction in their buying power and further poverty. On the other hand, if you have a blanket imposition of IMF solutions—of cutting back on their own domestic consumption and restricting further imports—that in turn will contribute to a general contraction in world trade. I want to see the Government being a little more imaginative and positive in dealing with these issues.

Reference is made in the gracious Speech to helping the poorest countries, but I notice that in the financial projections published by the Chancellor yesterday there is no substantial increase in the aid programme. I would have expected greater support for and greater use of the Bank for International Settlement, more aid and increased quotas for the IMF.

When the SDP was formed, it was to break the mould of British politics. That did not mean simply changing the voting pattern of the people of this country. It meant also that we were trying to establish in British politics the idea of a national consensus aimed at taking away all confrontation and bitterness, thus securing some kind of national adherence to agreed objectives. It meant, too, creating in our society a greater sense of caring, compassion and responsibility for the Third World. I sincerely believe that only by the injection of some moral principles—taking it away from the party conflict and injecting an ethical dimension into the conduct of our national affairs—will people begin to have faith in democracy; and we may save it yet.

5.27 p.m.

Viscount Eccles

My Lords, when people tell me that the House of Lords is useless and might just as well be abolished—because we make no contribution to national affairs—I always think of those debates in which some noble Lords bring experience that the rest of us do not have. When that is allied to, if I may say so, great actors' skill—a real performance, such as we had from the noble Lord, Lord Gormley; I am sorry he is not in his place because I should have liked him to hear my sincere compliments—then, when those two attributes are added together, that is a reason by this House should be better known. The media do not report our debates as they should be reported; they make them far too much a pale copy of the debates in another place, when they should single out two or three of the best speeches and put those before the public. I hope we hear Lord Gormley many times in the future because he obviously possesses, from dealing with a great industry from the trade union point of view, experience which we need very badly.

That said, I have come to the conclusion, from listening to speeches from the Benches opposite—both here and elsewhere—that the Opposition are now saying that the Government are winning the battle against inflation at the cost of losing the battle against the recession. That is a most unfair way of putting the present situation. The two animals—recession and inflation—are very different. We are defeating inflation by our own efforts; no one else can do it for us. But the recession darkens almost the entire globe. It is not our doing that it has become very much worse throughout this year. By no stretch of the imagination could Britain alone reverse the collapse in world demand. It requires international action of a type that we have not yet thought of. I propose to come back to that in a minute, but first I want to say one or two things about the points raised by the noble Lord, Lord Scanlon.

It is said that if more money were put into the hands of British consumers by either tax cuts or Government borrowing and spending, it would make a sizeable impression on the total of unemployed. I very much doubt it, partly because if it were done by borrowing on any scale, we should have to look to see the effect on the interest rate. The money would percolate through to consumers, and we should have to look to see the effect on prices. But more than that; as has already been mentioned by more than one noble Lord, there is a very serious risk that a large proportion of the new money would be spent on imports.

In September I was in France and Italy, and, no doubt like other noble Lords, I had to hang about outside shops while my daughter went inside and checked the prices, and was moved to buy such things as clothes, shoes, kitchen and garden equipment. We all know that motor-cars are cheaper on the continent of Europe. Here at home, in our shops in London there are more foreign goods for sale. On our motorways there are tearing along many more foreign lorries than there were a year ago. Therefore, adding to consumer demand is something that one must look at very carefully, and it must be very much a second best to getting down our costs, as the Chancellor of the Exchequer is trying to do, and selling more exports abroad. That said, I still think that international reflation, if it could be carefully arranged, would be a different matter, and probably it is really the only way to tackle the world recession.

I thought that the noble Lord, Lord Byers, dealt very well with the question of import controls. I introduced our anti-dumping legislation years and years ago in another place, and I believe that it should be used to the full. If it is possible to stretch the meaning of "antidumping" to cover not only unfair pricing between the exporting company and ourselves here, but also huge differences in tariffs, then I think I should be in favour of looking at that very carefully.

However, if general protection is out—it must be for a country such as Britain—should the pound be devalued? The CBI conference said, No, and it was right. Devaluation means a loss of wealth, it invites retaliation, it does great damage to our reputation as a world financial centre. We should be accused of exporting our unemployment to friendly countries which do not have the luck to be self-sufficient in oil. Those who have recently devalued, France and Sweden—and Spain will soon follow—first elected socialist Governments. Well, of course, any country that does that will find that confidence in its money and in its economic policy melts away. It has no option; it must devalue. We do not want to follow that example.

I saw that Sir Michael Edwardes thinks that we could devalue bit by bit, presumably by lowering our interest rates faster than the rates in other countries. Except against the dollar, we have had no success at that game. Our interest rates come down and the pound stays up against the European currencies; and it is from Europe that the great bulk of our manufactured imports are coming. We have the oil, and we have a sound political background. We cannot expect investors to hold their money in currencies which are intrinsically weaker than sterling, especially when in many of the countries in Europe and elsewhere the budgetary situation is nothing like as satisfactory as is ours.

It is the mention of budgets that brings me to the fundamental cause of the recession. The appalling common tragedy has a common cause. Government after Government have been overspending and over-borrowing, creating financial crises, which spread like a plague across the world. Finance Ministers are not the only ones responsible. As the noble Lord, Lord Taylor of Gryfe, said, the banks, often prodded by foolish Governments, have over-lent, and now must go on lending just to keep their loans alive. The air is full of the smell of default, and that is a disastrous situation in which to find the immense sums that are called for to begin the reversal of the collapse in world demand.

One thing I think is clear. The rescue, if it is to come, can be carried out only by international agreement and action. Surely the underlying priority, the one which should engage the Americans right now, is to reestablish a sound world currency in which everyone can have confidence. As long as all rates of exchange are floating, bobbing about in a sea of speculation, the attention that must be paid day by day to small financial and political events is absurd. It takes away from doing the real job of putting people to work. I know it will be objected that to establish a sound world currency would require sacrifices in the freedom to manage individual currencies. Indeed, it would; but what is the alternative? Is it better to allow exchange rates to be pushed up and down by windy dealers, who have no interest in the volume of unemployment here, or anywhere else?

It would be a mistake to wait for the Americans to pull everybody's chestnuts out of the fire. They are coping with a huge deficit, and though the United States' economy is still the strongest, the dollar is not as powerful as it was. The rich countries will have to give each other firm undertakings both to keep their budgets in order and to support a world currency, on the basis of which action can be taken to reverse the recession.

Keeping budgets in order—and of course I include the EEC budget, which is in disorder—will be much more difficult than it was in the 1950s and 1960s. I want to give from our own experience one or two reasons why the pressures to overspend are so enormous here and throughout the whole world. Take, for example, health and education. The public in this country are very reluctant to believe that the present Government are spending more than any Government have ever spent before on these two services. Now, why is that? Well, they are dazzled by the new discoveries—scanners, heart transplants, the Interferion drug, and so on. Why cannot every citizen, young and old, rich and poor, white and black, be offered all these wonders of science?

Politicians out of office tell their listeners they could have all these things if only there was a more compassionate Government. But, my Lords, it has never been possible to provide every patient with the best treatment known to the medical profession. It has never been possible to provide all the growing number of old people with the highest standards of care. It has never been possible to provide every child with the quality of education to be had in our best schools and universities. It never has been, and at no moment will it ever be.

There is nothing new in that; but what is new is the rate at which knowledge is outstripping resources, and the extent to which the public is informed, by the media and others, of the fruits of science and technology. The resulting increase in expectations will not disappear. It will continue to build up pressures on over-spending. As in health and education, so in defence—think of the cost of the new weapons systems—so in research, in transport, in care for the environment and in aid to the Third World. Every department of government in every country is in agony at the cost of the new developments which their experts tell them they cannot afford not to have.

This is a new situation, and it is very relevant to how we solve the recession. Where are the resources to come from? At any given time there is a limit to the proportion of their incomes which those in work are prepared to see transferred to those not in work—to the sick, to the children, to pensioners, to the unemployed, to poorer countries. If that limit is overstepped—and it has been in country after country—inflation is generated and disorder and unemployment follow as day follows night. Only the sternest measures of international discipline will bring back steady growth and the re-employment of the millions who are now without a job. Only the most imaginative international co-operation will enable the world to increase and make the best use of the maximum available resources.

So I hope your Lordships will agree that the recession and the pressure to overspend are international in extent and demand international action. The Americans have the greatest power and responsibility, but the lead has not yet come from Washington. They want us to stop exporting to Russia when they ought to be leading us to frame the right financial system which would enable us to export more to each other all over the world. Could Her Majesty's Ministers make the first move? I know from my visits abroad that they have earned a reputation for taking and sticking to unpopular measures to combat inflation. If they called for international commitments to combat the recession, they would be listened to.

One wishes that Britain could speak to the world with an all-party voice, but it is not possible because the Labour Party do not like sharing financial policy with non-socialist Governments. They stand for the maximum political control of our island economy, for getting out of Europe and for loosening our ties with the United States. Mr. Foot and Mr. Shore tell us that unemployment could be halved, and swiftly, by domestic reflation alone. That is untrue, and it is very dangerous because it invites the public to disregard what is happening in the rest of the world. Even to see the figure of unemployment remain at 3 million—and, God knows, that is far too high—we have to export one-third of all our manufactures.

Fortunately—and this is my last word; I apologise for keeping the House so long—a sense of reality is growing in this country, and for that we have to thank the Prime Minister and her colleagues. I took a very different view of the by-election in the Midlands than did the noble Lord, Lord Taylor of Gryfe. It appeared to me that the most interesting thing about that by-election was that so many of the electors do not believe that unemployment is all home-made. They have come to that conclusion, and how right they are.

The Government will gather further support if they place before us the sort of international policy now essential to begin to reverse the collapse in world demand. Finally, the Prime Minister is right to want to strengthen her staff at No. 10, because without it she will not be able to conduct the battle against the recession, which so clearly involves financial, foreign and economic policies.

5.47 p.m.

Baroness Wootton of Abinger

My Lords, I have something of a sense of unreality about this debate; but my first and most pleasant task is to add my congratulations and welcome to those expressed to the noble Lord, Lord Gormley. I think that perhaps I should append to that a little warning, and that is that we may be extremely self-indulgent in trying to draw upon his remarkable store of wisdom and experience, and I hope we shall not try his patience too much. I hope we shall hear him very often. My less pleasant task is to confess that I cannot stay to the end of this debate. In fact, I shall have to leave these premises in a little more than an hour's time.

My sense of unreality I think is that I feel there is a fundamental principle which has not come out and which lies at the core of this whole discussion. I see it best by going back, if I may, 65 years. Sixty-five years ago I found myself, very flatteringly, in the list of first-class candidates with a special mark of distinction in the final examinations which led to an honours degree in economics in the University of Cambridge. Of course, I had to wait another 30 years to get that degree because I was a woman, and women were not then permitted to be members of the university; but that is neither here nor there. I got it in the end, and I had the pleasure of having had those examination results.

At that time I thought that persons trained in the study of economics (which we have been discussing, whether we are trained in the study of them or not, at great length tonight) would devote themselves to analysing and applying logic and common sense to the complex economic phenomena which we find around us in this world, with a view to formulating theories which would enable us to understand those phenomena better and, in the end, to control them more effectively in the public good.

Looking back on those days, I still think that that was our objective and that it still is the objective of a good many of us who are interested in the questions that are under discussion tonight and in the fundamental principle which underlies this debate. I think that, my Lords, but 65 years later, what do I find? I find that a number of my colleagues, and I myself in particular, are totally unable to find any trace ! of logic or common sense in the policy which has been pursued by this Government for so long, apparently on the presumption that the closing of innumerable factories and the withdrawal of millions of persons from productive work would, if it did not facilitate, at any rate smooth the path to the restoration of this country's prosperity.

Shattered by that, I felt that we were moving into a quite unreal world, talking about all the things that we might do, but apparently do not do, so long as this kind of doctrine prevails; although I did hear tonight one small hint perhaps of a little unacknowledged and limited U-turn in Government policy. It seems to me that this is the crux of the matter. Where, in a world in which we are still closing factories and still putting people out of work, is logic or common sense? Shall we all be millionaires when the GNP is reduced to nothing and nobody works at all? That seems to be the logical conclusion of this. So, my Lords, I can only leave it there: it is time that we turned again and thought on entirely different lines by reintroducing logic and common sense—and more particularly common sense.

5.51 p.m.

Lord Soames

My Lords, I should first like to say with every other speaker since we heard the maiden speech of the noble Lord, Lord Gormley, what a great addition he will evidently be to this old-established House. He showed great wisdom when he held the highest office in his own Union of Mineworkers, and after he had given it up; and I hope that wisdom is going often to be of benefit to your Lordships' House.

Where the noble Baroness, Lady Wootton of Abinger, who has just sat down is concerned, I must say that I thought that the burden of her speech was that she was totally at a loss to understand how any Government could pursue policies which resulted in a level of unemployment which is totally unacceptable to us all on both sides of the House. But I should like to ask her which Government in which country has pursued policies that she approves of; because I furnished myself with some official figures before I came here, thinking that this point might be made from the Opposition Benches. I found as follows. I asked, what has been the percentage of increase in unemployment in the bigger industrialised countries over the last 12 months? I find that in Britain it has been all too high at 10 per cent. In France, it has again been all too high at 10 per cent.—and this was when the Socialist Government in France had been following policies that were not far distant (if I understand it aright) from those which the noble Baroness would like to see pursued in this country.

Indeed, I found myself dining the other night with a senior French Minister and was provoked to say to him that they were trying to do all the things that we were busily trying to undo and they have had to change course very considerably in recent months because they saw where that was leading them. But then I see that in the United States unemployment has increased by no less than 33 per cent. in the last 12 months; and in Germany, granted off a lower base, it has increased by no less than 45 per cent. in the last 12 months. I would hope that in this House noble Lords would be careful before inferring that these unacceptably high levels of unemployment have flowed from the policy of any one particular Government, for we all know that we are in the midst of an international recession.

Baroness Wootton of Abinger

My Lords, if the noble Lord wishes to criticise my comments, I would point out that it is no answer, if we are pursuing the wrong policy, to say that a lot of other people have been pursuing the same or even worse with similar and, in some cases, notably worse results. In no degree does it lighten the burden that the only thing we can do in this House and in the other place is to change our methods here.

Lord Soames

My Lords, well, of course, the House will judge whether it is possible to find policies that are going to result, in a fairly quick time, in the unacceptable degree of unemployment becoming acceptable in any way except by international action throughout the whole industrialised world. I think that anybody who infers otherwise must be wrong.

I wanted to concentrate on one comparatively small but, I think, highly important factor: to suggest to the Government, and indeed to the Governments of other industrialised countries, that in these extremely difficult circumstances in which the world finds itself today we all have to be extremely wary of moving into a more protectionist stance. I say this for two reasons: first—I say it as a Briton—the United Kingdom of all countries profits from a liberal trading system. As my noble friend Lord Cockfield said in his speech today, exports represent about one-third of our gross domestic product and there is probably no country in the world which depends more upon trade being as free as possible than our own. Secondly, it is by no means certain that we are going to see the end of the world recession (with all the horror that that brings to both rich and poor nations) in a short period of time. But if the industrialised countries choose to retire into a protectionist shell then, at best, that recovery is going to be put off further and, at worst, it would be aborted.

I am one of those who believe that there were two factors which played an important part in the 1950s and 1960s—those golden years of growth, looking back on them now. One was the existence of the Bretton Woods Agreement and the fact that every nation had to pursue disciplined fiscal and economic policies. It was around a central currency, the pivotal currency of the dollar, and we all had to pursue highly disciplined policies to sustain our parties.

Secondly, within the GATT there was a constant thrust to the gradual freeing of trade. The ending of the Bretton Woods Agreement in 1972 and, instead of having the disciplines which were demanded by that system, the substituting for it of a sort of economic and financial equivalent of the permissive society, with interest rates (as my noble friend Lord Eccles has said) going up and down like a yo-yo has, I think, had a profound effect and proven to be a motor towards world recession. For instance, why is it that the pound in relationship to the dollar should have moved in a matter of months from 2.40 dollars to the pound to 1.65 dollars? As the noble Lord, Lord Scanlon, said, one finds some who think that that is good news and others who think it is bad news. But what must be bad is the speed of the changes. That is what we have been seeing consistently since the ending of Bretton Woods, a degree of changes of parity which was never envisaged at the time when we moved over to a floating rate system.

I believe that that has done a lot of harm, and I believe that it is important to get some degree of discipline back into the exchange rate system. That is imperative and can only be achieved by international agreement. My noble friend Lord Cockfield has heard me say this before, but I do not apologise to him for this fact. It needs to be agreed between the Europeans, the Americans and the Japanese. It is not a question of returning to totally fixed parities again, but it is a question of implanting a certain degree of discipline so that when there are movements of parties it can be seen that they are evident reasons for them.

So much for Bretton Woods; now what about the GATT? I was a little worried by Lord Cockfield's remarks that the GATT was all right 30 years ago but times have changed. I think that people have heard this before. But have times changed that much? There was the Dillon round, then the Kennedy round and then the Tokyo round, all of which succeeded in breaking down barriers, both tariff and non-tariff. This has been a considerable success. It is very dangerous to use these somewhat specious arguments in favour of protection and to refer to examples which any country can provide. For we all have skeletons in our cupboards, as I saw clearly when I had to negotiate on behalf of Europe with the Governments concerned in the Tokyo round. One hears a good deal about seeking to move towards a more protectionist system which would be very dangerous for every country within the Community.

Here I will interrupt myself to say that I believe that the existence of the Community over the past 10 or 15 years has been an important motor in reducing barriers to trade, both among ourselves and also between Europe and the outside world.

I now see a number of danger signals as the recession continues and as Ministers not only in our Government but in all Governments have made statements in the past that they can see the light at the end of the tunnel and that recovery is at hand. As recovery docs not come and as unemployment continues to rise not only in this country but in all industrialised countries, and at a faster pace, the temptations arc going to grow to move towards a greater degree of protection. There will be very specious arguments which in themselves are not all that easy to refute such as the case which the noble Lord, Lord Scanlon, mentioned of cars from Spain and the difference in tariff, 4 per cent. to 36 per cent. However, if we get into this frame of mind of thinking that we can get out of our troubles by protecting our industries from foreigners other than by becoming more competitive, then the whole world will suffer—us more than anyone else.

I think it is dangerous to generalise too much. I have been generalising because I find it difficult not to. But there are risks in generalisations. There are risks because I think that there was substance in some things that have been aid lately, notably by the noble Lord, Lord Cockfield, in regard to what is in common jargon now known as the NICs—the newly industrialised countries. An example I choose to pick—and there are a number of others—is South Korea. It has been a non-playing and non-paying member of GATT for some time but whose degree of industrialisation has now reached a point where they should become playing members and paying members. We should be persuading them to open their markets to us rather than our closing our markets to them. Again, I agree with the noble Lord over Japan because I spent weeks and months arguing with the Japanese, when I was working in the Community, that they should open their markets. Because they have not done so and continue not to do so, we have for a long time had restrictions on Japanese imports not only into this country but into all countries of Europe and into the United States. I pray that they will come to see that the far better solution to this problem is for them genuinely to open their markets to us rather than for us to have to continue to put quotas on some of their exports to us.

Another example of the danger of generalisation was a phrase—which was almost repeated today—by my noble friend Lord Cockfield, who said in an earlier debate in this House that the philosophy of the Government in this matter is: If my home market is open to you your home market ought to be open to me on equal terms". That all sounds very fine, but when I was in Hong Kong last week and talking to a number of businessmen there they had read this statement and they "pointed out that there is no market anywhere in the world which is more open to British exports than Hong Kong". We export more to Hong Kong than we do to Japan or to all the countries of ASEAN, of South-East Asia, put together. And yet we turn upon Hong Kong and insist that they have to reduce their exports to us in certain types of textiles. So that was a dangerous generalisation.

My Lords, it is in the British interest that our Government be on the side of the angels. I was a little worried when I read the other day that Mr. Peter Rees had said—if I understood him aright—that the Government were going to set up some organisation to which any industry could lodge complaints about difficulties that they were experiencing in particular because of imports. This seems to me to be a dangerous invitation to industry as a whole to make complaints and gives the impression, both here and abroad, that the British Government, because of the difficulties in which we all find ourselves, are intending to tread a more protectionist path. I hope I am wrong and I hope that the Government will continue, as their predecessor Conservative Governments have always done, and hitherto indeed Labour Governments as well, to be on the side of the angels and trying to win the maximum of free trade for a more competitive industry. For it is only thus that we will get out of our troubles eventually, hard though the road may be. If we take a protectionist course, I think we are condemmed to a much longer recession.

Lord Kaldor

My Lords, before the noble Lord sits down, permit me—

Lord Soames

My Lords, I have sat down but I shall be delighted to hear the noble Lord.

Lord Kaldor

My Lords, would the noble Lord say that Conservative Governments in this country were always against protectionism, as I think he said? Would he not agree that between 1902 and certainly 1939 Conservative policy was almost invariably in favour of protectionism and it was as a result of Conservative policies that protectionism was generally introduced into this country in 1932, with phenomenal results?

Lord Soames

My Lords, I did not want to go back too far into history, but if I had I would have said how awful it was in 1929 when the Americans imposed 60 per cent. tariffs because they had very high unemployment, which was emulated by all too many countries, including our own, with the result that world trade was reduced by 25 per cent. and it took 10 years to recover from that. But really I am not here to argue about what happened between 1902 and 1942. All I know is that from 1951, when I have been involved one way or another in public affairs, the Conservative Party has consistently taken a free trading line and I hope it will continue to do so.

6.12 p.m.

Lord Ardwick

My Lords, towards the end of my speech I shall be following the noble Lord, Lord Soames, and the noble Viscount, Lord Eccles, rather closely in regard to an international solution of the problems that confront us. But first I should like to congratulate my noble friend Lord Gormley on a most remarkable and refreshing maiden speech. May I express the hope that his other duties will permit him to come here regularly and to speak frequently.

In his autumnal statement, the right honourable gentleman the Chancellor of the Exchequer was able to claim some genuine improvements such as the reduction in interest rates and in the rate of inflation. And he was able to predict further improvement in both these departments. He is entitled to his satisfaction, but it has been made possible only by the most narrow pursuit of one objective: a reduction in the rate of inflation. He has had, as Matthew Arnold put it, One aim, one purpose, one desire". But when he came to look at the rest of the economy, at economic growth and the rate of unemployment, the Chancellor was not reaping a harvest: he was sweeping up the dead autumnal leaves. And the wildest hope he would permit himself is that there might be a vestige of growth in the year to come, though not enough to reduce unemployment, not even enough to prevent it from increasing. Yet he is going to stick to his one objective: to get inflation down and to keep it down.

Like some other Chancellors—most of them on our side of the House—he has fallen in love with his own austerities. And like them he may be accused in time of contributing to his party's defeat at the next election, even after dribbling out a few election taxation bribes. The electoral consequences of the Chancellor I find highly desirable, but the consequences for British industry, its employees and its growing number of ex-employees, are frightening. We are in the midst of a recession which the Government have endeavoured to make less bad only by a reduction in interest rates and in the national insurance surcharge.

But what of unemployment? The Chancellor did say a word for it. It remains, he said, the nation's most distressing problem. So it is. But what is he going to do about it! All that the noble Lord, Lord Cockfield, could claim was that the Government are introducing certain palliatives. The Times newspaper, under its new editor, seems to be a lot closer to the Government than the paper has been for some time and on Monday, in a leader which will haunt it for years to come, it said: The British economy, along with the world's other industrial economies, and marginally worse, will be suffering from this under-use of its labour force for as far as the eye can see, when only 85 to 90 people in every hundred are likely to find permanent work". The Times is predicting, in its ancient, oblique fashion, that we may expect an unemployment rate of 10 to 15 per cent. not just in the immediate future but as far as the eye can see". They go on to say that they can see no alternative political programme, very much as the noble Lord was saying earlier; and nothing that the Labour Party can devise for the economy can offer a serious reduction in our chronic unemployment.

Is this really what the Government believe? Do they share the despair of The Times on the following day? The Times returned with more advice to the right honourable gentleman the Chancellor and suggested that even a 5 per cent. inflation rate, when it is achieved, is still too high. Is our industry to be crucified on a new cross of gold—a nil inflation rate? Apparently one's fears are not quite so extreme as they were after reading this article, because the noble Lord, Lord Cockfield, this afternoon spoke of the "sweet simplicity" of a 3 per cent. inflation rate. But even the sweet simplicity will mean sweet Fanny Adam as far as the reduction of unemployment is concerned, or so far as economic growth is concerned if it is pursued too directly, too swiftly and without regard for other matters.

Almost 40 years ago towards the end of the Second World War, the Tory Party, joined with Labour and Liberals in the Coalition, made a declaration on employment which was to herald 30 years of continuing economic and social progress and full employment. The declaration in the White Paper did not use the term "full employment" because of the influence of the noble Lord, Lord Robbins. We all, I am sure, very much regret his inability to be here today. I understand that he is not well but he has taken part in every economic debate that I can remember over the last 12 years and furthermore he has always been the most patient and assiduous listener to others in the Chamber. The late Lord Woolton decided to fortify himself against the seductive persuasiveness of Lord Keynes by taking the noble Lord, Lord Robbins, and Professor Jewkes into his department. Perhaps that is why the words "full employment" were avoided. The declaration said in the famous White Paper: '"The Government accept as one of their primary aims"— and I repeat, "one of their primary aims"— and responsibilities the maintenance of a high and stable level of employment after the war". That pledge was repeated by Sir Winston Churchill in the 1950 election and was maintained and indeed honoured by Harold Macmillan. It was to be the basis of the long post-war consensus.

Where to the Tory Party stand today? Nobody-wants to go back to the days of overfull employment when there were too many jobs seeking too few workers, but perhaps the noble Earl will tell us when he winds up whether today they regard the pursuit of a high and stable level of employment as a primary aim and responsibility of government. This was not, when it was made, just a political commitment; it was a moral commitment, and was felt very strongly by Conservatives such as Henry Brooke and others. This Government say they have broken the mould of postwar politics, or of the postwar consensus. In fact, the noble Lord, Lord Cockfield, said that it was a sterile mould—

The Minister of State, Northern Ireland Office (The Earl of Gowrie)

My Lords, I am most grateful to the noble Lord for giving way. Did the party which he supports break the mould of politics when they doubled unemployment? Is not this some indication that levels of unemployment are beyond the control of individual Governments, whatever their policy?

Lord Ardwick

My Lord, I was going to say that it was not the mould which was sterile; it was the situation, or the climate, or the environment in which the mould existed. As the noble Lord said, it was the inflation generated by the Vietnamese war, and later on by the fantastic increase in Arab oil prices, that brought about the sterility.

But is the mould irreparably damaged? Is The Times' despairing message giving counsel to the Government or is it merely echoing the Government? Is it proferring the advice that the Government themselves solicit? Of course, everybody recognises that the road back to a high level of employment will not be short or easy. But, surely, we can make a braver start than the right honourable gentleman the Chancellor has done this week.

I hope that the Chancellor will listen to the wise advice of the Financial Times. Their leader was headed "A missed opportunity" and they would have had the Chancellor abolish the national insurance surcharge completely. Mr. Samuel Brittan's commentary was headed "From monetarism to immobilism". The headline, like the one on the leader, is a little bolder than the copy below it. But Mr. Brittan, too, cannot believe that any Treasury economist could have supported the retention of the NIS, even in its attenuated form. He also adds that, nor could the Treasury accept that nothing should be done about the effective exchange rate which has, against all fundamentals, appreciated by a further 4 or 5 per cent. in the past year. His words will be echoed by those great exporting industries which failed to convince the small fry of the CBI the other day. It is surely the Government's total obsession with the inflationary target which is responsible for the acceptance of an economically unrealistic exchange rate.

But all this is to look at the problem within the national confines. Of course, we have all learned that no nation may safely expand beyond certain limits in a world recession. The question is—and this was raised by the noble Lord, Lord Soames, and the noble Viscount, Lord Eccles—what are this Government doing to persuade their trading partners to lay the foundations for a concerted, co-ordinated expansion, which could begin in the European Community and then the Governments could bring its strong influence to bear on other members of the OECD?

The preliminary conditions for such a move have been persuasively outlined by my noble friend Lord Lever of Manchester, and I hope that he will give us the benefit of his latest thinking on this subject, which this House always hears with respect and pleasure, once his responsibilities to Lord Franks' Commission on the Falklands have been discharged. One of those conditions is an international solution of the grave disorder in the world's banking system and the suffering of weak Third World countries who are heavily over-indebted. The other condition is the reduction of the extreme fluctuation of currencies, starting off with a broad understanding among the nations which provide the key exchange rates about a co-ordinated intervention, based on the appraisal of fundamental economic factors. I hope that we can have a broader debate later on the world economic situation than is justified by one on the Address and on the autumn statement.

6.25 p.m.

The Earl of Onslow

My Lords, it may appear impertinent of me to congratulate the noble Lord, Lord Gormley, but I hope that he will excuse that impertinence. We have just heard a speech from a great Englishman, which exemplarised the best part of the trade union tradition which, at its highest, has given a great deal to a great people.

The gracious Speech states My Government are deeply aware of the anxieties and distress caused by unemployment. I shall attempt to show that a reform of the tax and benefit system would help considerably to alleviate that distress. My right honourable friend's Government came to power pledged to encourage incentives and to reduce taxation, proclaiming, rightly, that this encouragement would provide the foundation for future growth and a reduction of unemployment. Our present system of taxes and benefits discourages employment, because, as supplementary benefit acts as a minimum wage and as tax reduces net earnings below, or only marginally above, living standards at supplementary benefit level, the effect on unemployment is indirect as well as direct. The direct effect is that it extends the period of job search, and the indirect effect is that it reduces job opportunities as employers react to wage inflation.

Recently, the IEA has published a fascinating monograph called The Moral Hazards of Social Benefit. I hope that the Treasury, the Department of Health and Social Security and the Department of Employment all study Mrs. Hermione Parker's work. It shows that this country spends—I like this in round figures—£69,000 million in income redistribution; that is, 28 per cent. of our gross national product. These distributions consist of social security payments and housing subsidies, together with income tax allowances, reliefs and exemptions, but there is no one Government department which is responsible for this transfer. So far as can be seen there is no logic.

Why, otherwise, would a pensioned couple have an income of £205 per week before the amount that the Government take away in tax exceeds the amount given in benefit? Why, therefore, should a married couple with two children have more taken away in tax than they receive in benefit, with an income of £74 a week? It is shown, quite conclusively, that it is not worth people's while to work at the lower wage scale. This is not because of social security, but because of the structure, or rather lack of it, in the British system.

I will give your Lordships some examples. A family of four living in cheap local authority housing has £75 per week spending power, if the father earns £120 a week in full-time work. A similar family, where the father earns £45 a week in part-time work, is only £10 per week worse off. In other words, the implied tax on that extra £75 is £65. Quite rightly, the level of tax has been reduced on higher incomes, but surely to have allowed that implied tax rate is crazy.

I will give your Lordships another dotty example. A single woman, earning £1.75 per hour part-time for 20 hours a week, has a net weekly spending power of £33.32, whereas a woman earning £70 a week full-time has a net weekly spending power of £29.92 a week. This is an implied tax of over 100 per cent. on the top 60 per cent. of that woman's earnings. The chairman of Shell or BOAC does not pay that rate. It has been assumed that £10 a week over the benefit level is the incentive level for people to work, and I will take that figure. But on a "Panorama" programme, it was taken as £20 a week and it has also been stated by certain people in Glasgow that it is £20 a week. For a school-leaver of 16 this represents a wage of £46 a week. I suppose that is not too bad, £10 up on £46 is quite a reasonable amount. For a married man with a non-earning wife and two small children the figure is £132 a week, or just over £4 above the average male wage in this country. The worst and silliest example is this: a lone woman with two children, assuming £20 a week work expenses, cheap local authority housing, no entitlement to free school meals above the family income supplement ceilings; there is no spending power difference between part-time work for £20 a week and full-time work for £120 a week. She needs £140 a week to make that £10 difference. That £140 is over 170 per cent. of the average woman's wage. My Lords, this is a system of sheer and utter chaos.

Please can this Government, which is a Government who do care, despite some of the things people may have said about them, who on the whole recognise essentials, give an undertaking that they will urgently try to reform the tax system so that those who can pay pay, and reform the benefit system so that those in need receive the benefits. The most sensible method I have seen suggested, is that of Sir Brandon Rhys-Williams, which is called the "basic income guarantee scheme".

That is, I think, too complicated for me to go into now, but it is a sensible scheme; it makes absolutely certain that levels of support are in some ways higher than they are now; it is cash neutral—in other words, it is going to cost £69,000 million, the same as the other one does; anybody can earn as much or as little as they like, but every time they earn they are always better off. It helps the disabled because they can do a little work and not lose benefits; it helps the married woman with children; it helps everybody, and it costs no more. The present unjust and immensely complicated muddle must stop. It has been described as coals from Newcastle to Newcastle paying freight to a subsidised loss-making railway company on the way. Provided we stop this muddle, and I hope that we will, I am sure that one of the people who will be most pleased will be my noble friend Lord Gowrie, because the examples of where it must hurt most will be in Ulster, and we know what state Ulster is in now.

6.33 p.m.

Lord Rochester

My Lords, I would like from these Benches to join in congratulating the noble Lord, Lord Gormley, on his maiden speech. I much admired the predictably forthright way in which he spoke, and greatly look forward to his taking part in many other industrial and economic debates.

I would like to take the opportunity afforded by this general debate on economic and industrial affairs to speak on two matters concerning industrial relations. If that seems to run somewhat counter to the theme of the debate so far, I hope at least that it may have the merit of introducing some variety into our proceedings. In the first case, I have noted the absence from the gracious Speech of any reference to further measures to reform the law relating to trade unions. I do not say that in criticism; rather I think the Government are to be congratulated on the omission, although I realise it is still possible for them to introduce legislation in this Session of Parliament after the promised consultation on matters such as secret ballots for the election of union officers and before strike action.

In last year's gracious Speech we were told that a second Bill was to be introduced on employment and industrial relations, and speaking for my noble friends at that time I expressed the view that legislation in this field should continue to aim at eliminating identified abuses in the existing law, and that it should proceed at a pace which gave reasonable assurance of consent on the part of the general body of trade unionists. That was the approach we endeavoured to make to the Bill that has just become the 1982 Employment Act, and it remains our view.

In debating the specific question of secret ballots being made mandatory before certain strikes could legitimately be undertaken, I expressed a number of reservations, not on grounds of principle but of practicality, fearing that any attempts to force ballots of that kind on unwilling unions might prove counterproductive and might encourage even more unofficial action than there is at present. I have no more to say on that matter now, but I am sure the Government are right to carry out extensive consultations and consider the outcome very carefully before deciding whether, and if so precisely how, to legislate on this question before the next general election.

The second matter on which I would like to speak, at rather greater length, if I may, is that of pay determination. Let me start from the position that at the very least there is a crucial need, after consultation between Government, employers and trade unions, and maybe other relevant interests, to gain the widest possible understanding and acceptance of the overall increase in incomes which at periodic intervals the country can afford. That is perhaps the least contentious definition of an incomes policy that could possibly be framed. As a privileged observer at the CBI conference at Eastbourne the other day, I was, therefore, very disappointed when even the concept of a national economic forum to provide background information for the determination of pay levels was rejected. What a contrast with the time only a few years ago when the late Sir John Methven, as Director General of the CBI, was first brave enough to advocate that idea! I remain convinced that our basic economic and industrial problems, unemployment, inflation, pay determination, will not be solved until there is a wider understanding of the relationship between them, and sufficient agreement among us as to how they should be tackled. To that end joint educative endeavours should, in my view, be encouraged at every level.

Next I should like to revert to the debate we had, at the Report stage of the Employment Bill, on an amendment advocating that industrial action likely to result in the endangering of life or limb should no longer enjoy legal immunity. While deploring such action, I said at that time that it was not, in my view, feasible to seek to limit the freedom of the individuals concerned to withdraw their labour, without at the same time providing means whereby their pay and employment conditions could be determined in such a way that there would be no longer cause for them to take industrial action. There was not time to outline the form that such a procedure might take, although I offered to do so if challenged. This is the first opportunity there has really been for me to explain what I then had in mind, and I would like to take it. From this point on I think I should say that I shall be speaking only for myself, although a number of knowledgeable people have certainly contributed to my thinking.

In addition to the police, firemen, trained members of the medical profession, and those serving in the armed forces, there are other people employed in certain key occupations that are vital to the immediate support of life or to the stability of the state. In my view, the great majority of such people do not want to engage in industrial action, and normally will do so only if they feel that they are being exploited or treated unfairly. Recent events have shown that among them are health service employees. For obvious reasons I do not want to comment, at this delicate stage in the negotiations, on the short term aspects of the current pay dispute in that service. But surely in the longer term there is a strong case for treating employees in these key occupations as being above the battle. Has not the time come, if negotiations affecting their pay and employment conditions result in a failure to agree, when disputes should be referred to a single third party? I put it that way because all past experience seems to show that when matters relating to the pay of a particular group are examined in isolation attention is concentrated on the problem from the viewpoint of the group concerned rather than others affected by it.

Such a referee might take the form of an independent standing commission. It would be distinguished from a mere arbitrating body by being empowered to call for evidence other than that of the parties themselves. It could also be required to give reasons for the awards it made. Because the Government would themselves be one of the parties to disputes of the kind I have in mind, might not members of the commission be chosen not by the Government of the day but by an electoral college established by statute? I do not presume to suggest precisely how such an electoral college might be set up, but if it could once be done that would ensure that it was independent, that there was continuity of office for its members and that it was acceptable to the Government, the main Opposition parties and to organisations representing both employers and trade unions. Only thus would it be reasonable to expect people in these key occupations to repose sufficient confidence in such a body to give the necessary prior undertakings that its findings would be observed.

The right of such people to withdraw their labour would not thus be outlawed; rather they would voluntarily surrender that right in return for the privilege conferred on them. If subsequently they failed to honour the undertaking the privilege would be withdrawn. As I see it, there would be the need for a corresponding commitment on the part of the Government to accept the findings of the commission, withdrawal by the Government being possible only after the passing of a resolution to that effect by both Houses of Parliament, who must remain the sovereign authority.

I anticipate two possible criticisms of this suggestion. An obvious one is that the Government, where it is both paymaster and employer, would alone continue to decide such matters. In reply I would say, first, that in that case it looks as if the community will have to face the prospect of continuing disruption as the only form of protest available to people who feel themselves to be unfairly treated. Secondly, the parlia- mentary override incorporated in my proposal would have the effect that in the case, for example, of an overall pay freeze the Government would anyway continue to be the ultimate arbiter.

A further possible criticism is that arbitration of this kind would result in inflationary settlements. It arises, I believe, from a failure to distinguish adequately between arbitration, on the one hand, and conciliation or mediation on the other. The objective in this case would not be to seek a compromise to bring the parties closer together, to split the difference between them, or any other such mishmash. Nor would it necessarily be to determine the pay of the people concerned by reference to average levels elsewhere, for that might introduce an undesirable inflexibility into the procedure. Rather the aim would be to reach a decision which would generally be regarded as reasonable because it would be made by a body whose members would be acknowledged to be independent. The alternative, it seems to me, is for pay in the centralised public services to continue to be determined to a significant degree by the ability to disrupt by monopolistic muscle and the crudities of what Mr. Sid Weighell once aptly called "snouts in the pig trough".

I see no reason to suppose that this problem will disappear. Indeed, it may well return shortly in the case of the Civil Service. I accept that the question of where the line should be drawn is a difficult one. What, for example, of the water workers? But with points such as these in mind I, for one, regret that in their statement yesterday the Government confined their proposals to the establishment of a pay review body in the health service to trained members of the medical profession, and appeared to rule out an extension of the principle to other groups in that service. However, I notice that in response to a question in another place on what offer he would make to such people in return for a no strike pledge, the Secretary of State said: if the unions wish to give that pledge, we are willing to talk on the point".—[Official Report, Commons, 9/1 1/82; col. 433.] In this particular dispute I do not know what is going on behind the scenes. It is always dangerous to venture opinions without knowledge of all the facts, and I am not prepared to take that risk. But I sincerely hope that the Government will seize the earliest opportunity to get us all out of the miserable chicken and egg situation that we are in, by showing themselves willing to involve the health service as a whole in seeking to improve long term pay determination arrangementś, even if they feel unable to make progress immediately towards the more comprehensive procedure I have endeavoured to outline. Of course, the unions might resist any such move. At worst it would then be plain where responsibility for continuing disagreement lay and, at best, surely a significant break-through would be achieved for the benefit of the whole community.

I hope that the House will forgive me for saying no more about the specific terms of the amendment that is to be moved by the noble Lord, Lord Diamond, except to say that I want strongly to support it.

6.48 p.m.

Lord Kaldor

My Lords, I should also like to begin by congratulating most warmly the noble Lord, Lord Gormley, on his wonderful maiden speech. I am sorry that he is not here at the moment. It was one of the most moving speeches that I have heard in this Chamber. I feel that this is probably a true reflection of the feelings of many other of your Lordships.

This is the fourth debate on the Address in this Parliament and it is very likely to be the last. It provides a suitable occasion, therefore, to look back and review the economic consequences of the Government's policies in the light of their original aims and aspirations. It is natural for any Government to try to put their actions in as favourable a light as possible. However, they face on this occasion a far more difficult task than they could possibly have foreseen. This is because, unlike traditional Conservative Governments which were essentially pragmatists, this Government had a strong ideological commitment. They believed with an almost messianic fervour that they had an answer to all the country's major ills and that they had a policy which could put everything right provided that they stuck to it. No one has expressed this more eloquently and more often than the noble Lord, Lord Cockfield, in the early years of this Government. I am sorry he is not here.

This last proviso, that the Government stuck to their policy, was important for it meant that as the economic situation worsened, as production fell and as unemployment rose, they were not prepared to use the rudder and not prepared in any way to adjust their policies in the light of developing circumstances, as previous Governments have done. Their reaction was to do nothing—to ignore what was happening and to go on as before, gazing at the gathering clouds with folded arms, in the firm belief that provided they did nothing everything would come right in the end.

All that may be fine, indeed admirable, if the basic premises upon which the policy is founded are right. But it is absolutely fatal if the basic premises are wrong. The Government's basic philosophy was essentially a simple one. According to their creed inflation is the source of all evil, and inflation is simply a consequence of increases in the money supply. So control of the money supply became the central objective of policy. However, to control the money supply one has to do more than just turn off a tap—although Ministers, especially at the beginning, often talked as if it was as simple as all that; one must deal with the basic cause of having "to print money" (to use the Prime Minister's favourite expression), which, in their view, is too much public spending. One must roll back the frontiers of the state, economise on everything except on law and order and the police and possibly defence. However, as events have shown after the dramatic turnround over the Falkland Islands, even defence did not escape the slimming process. And one must also raise money under this simple philosophy, as much as one can and as fast as one can, by selling all the assets one can lay one's hands on—hence privatise, privatise and privatise, and never mind how much this lines the pockets of the share-owning community. The extraordinary haste to make this process of privatisation speed up so much in the final year of this Parliament makes one doubt their confidence in being returned at the next election.

The other part of the policy is to improve productivity by improving incentives, and this means lowering taxation, particulary at the top end where tax is supposed to act as a disincentive. There is quite a different type of incentive for bottom people—they are meant to work harder in response to the threat of unemployment and poverty.

From the very beginning everything went wrong that possibly could go wrong. The Chancellor's first Budget, a few weeks after taking office, was the major cause, not of alleviating, but of aggravating inflation. From the 10 per cent. rate in May 1979 it rose within 12 months, by May 1980, to 22 per cent. And the money supply, which was scheduled to rise between 7 per cent. and 11 per cent. per year, again announced in the budget speech, rose by no less than 22 per cent. in the course of the following year. In the year after that it rose by 13 per cent. instead of between 6 per cent. and 10 per cent., as envisaged in the Medium Term Economic Strategy, and in the current year it is still around 13 per cent., although according to the original strategy it should be down by now to between 5 per cent. and 9 per cent. Government expenditure, which was meant to be reduced, kept going up as a percentage of the national income despite all ecomony drives which have been religiously repeated year after year. That was because national income, the denominator of this ratio, fell steadily and also because Government expenditure in connection with unemployment steadily rose.

However, with the unexpected explosion of prices and wages in 1980–81, and the impossibility of preventing the money supply from rising in line with prices, strict monetarism—meaning Friedmanism—was quietly dropped because it did not work. Indeed, one Cabinet Minister declared in Cambridge last week that he always knew that Friedmanite policies were, "a lot of bloody nonsense". Luckily, perhaps, for him this was only reported in the local paper and it may not have reached the London area.

In place of Friedman the Government regressed to an inverted Keynesian policy. I call it an inverted policy because the Keynesian instruments were used in reverse—for example, the budget was tightened in the face of growing unemployment, instead of loosened. The money supply as the main instrument of policy was abandoned and it was replaced by a rigid incomes policy—they call it "pay policy"—in the public sector, which was carried out very firmly against considerable resistance. This was combined with an over-valuation of the exchange rate achieved by high interest rates and the creation of mass unemployment in the private sector both through high exchange rates and even more through very tight fiscal policies which were concealed by the fact that revenues were low on account of unemployment and low output. On a full employment basis the PSBR was transformed into a surplus.

All of these things which the Government have done are anathema to the pure Friedmanite creed. The Government have kept up the pretence that they are fighting an inflation caused by excessive demand long after they have adopted policies that are appropriate only to an inflation caused by a rise in costs—whether labour costs or raw material costs—a type of inflation which has no validity and which is not supposed to exist in the pure monetarist philosophy. And in this, at the price of ruining British industry, of reducing the standard of public services and camera, hand calculators, electronic yed, they have been reasonably successful. Inflation has indeed come down, as we heard today, to the rate of 7.3 per cent. and the Chancellor has before him the glamorous prospect of 5 per cent. by next spring.

But no one has explained, nor has ever attempted to explain, what the great benefit of the low inflation rate is, if its achievement and continuance involve falling or stagnating output, falling or stagnating living standards, the disappearance of whole industries and the general smell of poverty and decay. When the Chancellor was asked some weeks ago, with the prospect of 5 per cent. inflation, "Is it not time to lift the ban on reflation and allow the economy to expand?" he said, No, that would not do; it would merely endanger the hardly won gains on the inflation front. His Statement on Monday, despite making some concessions to industry, really confirmed this attitude in view of the reactions that have already been quoted from the newspapers.

But what are these gains on the inflation front for, if they are not meant to improve our economic performance? Monetary stability seems to be regarded not as an instrument, but as an ultimate end of policy. It is no longer even claimed that it is a necessary prelude to economic recovery. Indeed, Ministers after years of burgeoning optimism have ceased to proclaim that prosperity is round the corner. Instead, as Sir Geoffrey Howe said two days ago, one cannot opt out of the world recession. He ignored the fact that Britain is an oil producer and indeed an important net exporter of oil. Therefore, Britain is not hampered by a balance-of-payments constraint which prevents other countries, such as Germany and France, from having expansionary economic policies. We are by no means compelled to fall in line with deflationary policies pursued either on ideological grounds, as in the case of the United States of Mr. Reagan, or on grounds of necessity as in the case of the oil consumers of continental Europe.

One must contrast this vague fatalism with the admirable speech made last week to the CBI by Sir Kenneth Corfield, who is chairman and chief executive of Standard Telephones and Cables. It was a speech which, unfortunately, was not reported in its interesting parts in any of our serious newspapers. I think that I should remark here that there is a kind of privatised press censorship in this country which is not directed by the Government in any way—there are no D notices behind it—but is a spontaneous consequence of the kind of people who own our newspapers. Something of this existed for a long time, but in the last two years they seem to have abandoned all restraint, and newspapers which prided themselves on being newspapers of record, are ready to suppress very important information if it does not fit in with the line they are taking in their leaders.

Therefore, I beg the indulgence of your Lordships if I quote from the suppressed passages of Sir Kenneth Corfield's speech. He said: Designing and marketing the right product is not only the key to successful wealth creation, but it is one of the very few actions which are entirely in the hands of management. For many years research and innovation has been one of Britain's success stories. But the product of research and innovation, which is technology, has been neglected by far too many British firms". I am very glad that one of our most important industrialists happens to be here to listen to Sir Kenneth Corfield's words.

Lord Weinstock

My Lords, if the noble Lord will allow me, I did read it all in the newspaper.

Lord Kaldor

Sir Kenneth goes on: Just think of the things that are not made in Britain—binoculars, typewriters, video recorders, cassette recorders, tape recorders, transistor radios, cameras and cine camera, hand calculators, electronic games—need I go on? He went on to say that when it comes to industrial investment, not to goods for consumption, nothing is produced here except bricks and mortar. All the plant and equipment which was needed for the semiconductor plant which he wanted to install in Scotland had to be imported. We have known for many years—long before the present Government came to power—that British industrialists abandoned the production of the kind of machine tools which other British industrialists saw fit to install in their factories. So, one had to go abroad for the quality of plant and machinery which was necessary for investment. Sir Kenneth went on to say: Britain, with its long industrial experience, its liberal traditions and its unexcelled academic prowess is a wasteland of obsolescent industry with a few oases of technical excellence. All this is not new—our decline, relative to newer industrial powers, has been going on for 100 years or more, though luckily it was reversed—and this is a very controversial statement although not as to facts—for 25 years during which time we protected our industries. That is to say, between 1932 and 1957, and especially during the five years preceding World War II, for the first time since the middle of the 19th century we were at the top of the league of countries in the rate of economic growth and not at the bottom of the league.

But when that ceased our relative decline was resumed. We fell again to the bottom of the league and, after entry into the Common Market, our decline much accelerated—as, indeed, I made every effort to convince people that it would be—until we have now reached the point at which there is a danger of collapse of, if not the whole, at least the greater part of our manufacturing industry. Doubtless, as The Times says, we are very good at retailing, but what is the point of that if our manufacturing industry disappears? How do you make the money to spend in the shops?

Clearly, Mrs. Thatcher's Government cannot be held responsible for all this. She is responsible only for telescoping into a few years what otherwise might have taken some decades. By being ruthless in the belief that she is applying a genuine remedy, she has made things very much worse than they need have been, and has brought us no compensating benefit. For despite what Ministers say and what the noble Lord, Lord Cockfield, said this afternoon, we are no better off from the point of view of industrial efficiency, of productivity, or in the range of products that we are producing. We have in no way eased the problems on the supply side, on which Sir Geofffrey Howe is so fond of concentrating. The weaknesses on the supply side have become very much greater, and not less, under this Government. So, we suffer all this with nothing to set against it on the other side. One is reminded of Tacitus who, when writing about the devastation of the outlying parts of Britain by the Romans, said: "Ubi solitudinem faciunt, pacem appellant ". which is usually translated as: They create a desert and call it stability". I think that this is an apt epitaph for Her Majesty's present Government.

7.8 p.m.

Lord Vaizey

My Lords, I should like to join with other Members of your Lordships' House in congratulating the noble Lord, Lord Gormley, on his maiden speech. If that was an example of his non-controversial speeches, I am very much looking forward to his controversial ones. The noble Lord, Lord Kaldor, has made a most powerful case, a case which underlies much of the Opposition's thinking, and one which deserves a serious answer. Following as I am, it is difficult to give such a serious answer immediately without replying in detail point by point. But I am rather surprised at his reference to informal self-censorship by the press, since I have certainly read Sir Kenneth Corfield's speech in The Financial Times.

Lord Kaldor

My Lords, not the part which I quoted; that was left out.

Lord Vaizey

My Lords, perhaps the simple solution would be for the noble Lord, Lord Kaldor, to set up his own newspaper in which he could print the censored parts of Sir Kenneth Corfield's speeches. That might well be a very good remedy for censorship and perhaps earn him a substantial profit.

It always seems to me that we ought to be very cautious indeed in diagnosing the ills of the economy and in prescribing for those ills. The great boom from 1948 to the early 1970s certainly happened, and it was certainly not due to any particular economic policy adopted by any particular Government. The best performing economies over that period were those of Western Germany, Yugoslavia and Spain, all of which had completely different political forms and completely different economic policies.

Therefore, I think it is difficult to assign the boom to a particular kind of policy, and it seems to me that the fashionable nostrums of the late 1940s, had they been adopted, mght very successfully have aborted the entire boom. My own modest hunch is that the boom was due partly to a stable international monetary order—and here I very much agree with my noble friend Lord Soames in what he said about Bretton Woods—but mainly due to a working through the world economy of a large number of new trades and industries: cars, consumer durables, television, artificial fibres, modern housing, tourism, all of which boomed during those years.

The present world-wide slump is probably due—and again I think one can barely go beyond a modest hunch in these enormous questions—to the relative breakdown of the international monetary order which began with our devaluation in 1967 and when the United States went off gold, and clearly too the world is adjusting to a major series of technological innovations like the computer, which may well bear fruit later in this decade and in the 1990s. That seems to me to be the most probable explanation of the slump when our successors come to look back on it from the end of this century.

I agree with the noble Viscount, Lord Eccles, in arguing that the fundamental solution must be some kind of international agreement on the international economic order. I would very much hope that Her Majesty's Government would take seriously the message which the noble Viscount, Lord Eccles, gave to them. That being so, that kind of long-term view seems to me to give little comfort to the unemployed, but we shall be talking in detail about the Select Committee's report on unemployment next Tuesday, and rather than reiterate here my comments on unemployment and the causes and cures of unemployment, I would much prefer to keep them for the debate to be opened then by the noble Baroness, Lady Seear. I would much rather try to answer the basic question which the noble Lord, Lord Kaldor, posed, as to how the United Kingdom should adapt to the present world-wide malaise.

I am far less depressed than many other noble Lords who have spoken in this debate. The reason for my modified optimism is, first, because we have abandoned policies which so evidently have not worked. Inebriation with the opium of easy expansion is over, and what we are now experiencing is something like withdrawal symptoms, or the hangover. If we want to refute the easy solution, the solution of having a hair of the dog that bit you, or going back to the bottle to cure the hangover, we need look no further than to our neighbour, the Republic of Ireland.

In one of the bits that got through the informal censorship there was an article in yesterday's Financial Times, called "The Gathering Debt Crisis", about the Republic of Ireland, a country which I happen to know very well indeed, as does my noble friend on the Front Bench. The Irish Government devalued the pound, it boosted public expenditure, and the result, which is spelt out in great detail in Mr. Brendan Keenan's article, is the threatened collapse of the economy, like that of Mexico, a galloping inflation rate, mass unemployment, a wage explosion, fear of repudiation of debt, a growing political instability and a threat to the constitutional and democratic structure of that republic.

That followed a substantial boom in Ireland which was brought about by the late Mr. Sean Lemass by means of a process of extreme fiscal and monetary conservatism. It only requires a simple flight to Dublin to see that the easy solution is not as easy as people think. I would counsel the Government not to go back to that previous policy which has failed here twice: once under the noble Lord, Lord Barber, and once under Mr. Healey.

What we are seeing as a result of the depression is a reawakening of British management. In those businesses, both small and large, with which I am directly connected, I have a sense of Augean stables being cleared; of idle and slovenly management being given the push, either by the shareholders or, in more brutal circumstances, by bankruptcy, and new men and women seem to be taking their place. This is a very unpleasant process, but even in British Airways, which for over a decade has been a byword for slovenly inefficiency, they are now making an operating profit. If more and more British industry is responding to the challenge like that, then the longer run is more optimistic, and probably closer than many people have suggested.

I must say in passing that I would not pay too much attention to what the CBI says. First, as the noble Lord, Lord Cockfield, said in opening the debate, it represents quite disproportionately manufacturing industry which is a declining part of the total economy, and moreover the people who have time to go to the CBI conferences are not necessarily those people clearing the Augean stables of British business. One of the more crass managerial heresies has also been attacked, and has had its day, and that is the view that the bigger the firm, the bigger the organisation, the better. Those huge, unwieldy giants, nationalised and non-nationalised, seem to prove to be largely unmanageable and certainly inefficient.

British Rail, British Telecom, large private quasi-monopolies as well, all seem to have been very much at the heart of the explanation of the malaise of British management. I would very much like to encourage the Government, in the person of my noble friend Lord Gowrie, to try to dismantle some of these huge enterprises into more manageable units where productivity can be attended to. My first major reason for being optimistic is because I know from personal experience that there is a radical change in the attitudes and efficiency of younger men and women in British business organisations, and that has to be good for us.

What underlies this shift has been the breaking of inflationary expectations. For the first time for over 35 years inflation is now widely expected to go down rather than up. It is going down. The siren voices which are counselling devaluation, depreciation, and so on ought to be resisted. There is no doubt the pound will go down as we approach the election, for the reasons given by the noble Viscount, Lord Eccles. People will begin to take their money out of the country in case the present Government lose the election, and then we shall perhaps see the proof of the pudding. It may well be true that that is the right answer, but it is far too simple and easy a solution, because it has not worked in the past.

If we assume that the inflationary tide is receding throughout the industrialised world, and that the expectations of price rises are going down, then the consequences are truly revolutionary. In the first place, the day of easy paper profits is over. We all know that business after business has in fact not adopted so-called inflation-proof accounting but has declared paper profits year in and year out. The consequence at the end of that is, first, that some firms are at last making genuine profits—and there is an interesting graph on page 9 of the autumn Statement which repays study, about the level of profitability in British industry in real terms—and, secondly, those firms which are making paper profits but not real profits go bankrupt. Again, a very powerful, unpleasant, appalling dose of medicine but one which is, I am afraid, having its consequences and its effects.

The other consequence of declining inflationary expectations is the coming demise of the annual wage round. Trade union leaders now for 30-odd years have thought that they were in the business of getting an annual money wage rise for their members, and that money wage rise, as we all know—it has been told to us by Prime Minister after Prime Minister in Government after Government of different political complexions—is almost immediately eroded by a price rise. Trade union leaders should have more serious things to do looking after—

Lord Molloy

Would the noble Lord give way?

Lord Vaizey

The noble Lord has his name down to speak in this very long debate, my Lords. Perhaps he will allow me to finish my argument and then I will sit down. Trade union leaders are, after all, in business to protect their individual members and, I should have thought, to help raise the productivity of the industries and firms in which their members work. That way lies real wage rises. So long as the inflationary expectations are there, they are bound to be in the business of getting annual wage rises, because that is the only way they can keep up with other groups in the labour force. But if inflation is over, I think we can reasonably expect the trade unions to take a positive and constructive role in the reconstruction of the British economy, which I submit is, very painfully and slowly, what we are now about. It will be a very painful and slow process and it will go on for quite a long time.

7.12 p.m.

Lord Roberthall

My Lords, I must begin, as other speakers have, by congratulating the noble Lord, Lord Gormley, on his magnificent maiden speech. I hope we shall hear from him again shortly. Your Lordships are probably sorry at having to listen to three economists in succession. I will not follow—I cannot call them my noble friends but they are certainly my old friends—the noble Lords, Lord Kaldor, and Lord Vaizey, in their interesting contributions. I have always felt on hearing an economic argument that I would rather read it before saying much about it.

The debate is mostly about unemployment. The gracious Speech refers to the subject in only one paragraph, and that a very gloomy one; as I read it, it seems to mean that the Government expect unemployment to go on very long and to be cured very slowly. The wording is rather chosen to convey that; it is not in plain terms.

When the Government came to power I said that although I had, for most of my professional life, been an advocate of incomes policy, I had to admit that it had not been very successful and I thought the Government were entitled to try something else, which was, of course, the monetarist policy. After three-and-a-half years I am a much more confirmed believer in incomes policy as the only possible solution for our difficulties than I had been before, and it is encouraging to see that the Government are moving in that direction and they practically have an incomes policy now.

There are three main aspects of any incomes policy; a norm, some flexibility and sanctions. The Government practically have a norm which they hope the private sector will follow, and they hope they can impose it on the public sector, mainly by cash limits. There is also some flexibility; those with more muscle, like the miners, can do better than the average, and those who have some public sympathy, like the nurses, can also, and those in a less happy position will get rather less. The Government have very strong sanctions, and that is the great difficulty about the policy because their sanctions take the form of unemployment. That is our great problem, the one which can be settled only by getting some agreement on some form of incomes policy of the kind which the noble Lord, Lord Rochester, was explaining. Otherwise, as I follow the Government's policy, if one must use unemployment as the sanction for one's incomes policy—that is, to cure inflation—one produces all the great difficulties that have been stressed, and will be stressed more, in this debate.

Leaving the internal side, I want to speak mainly about the Government's external policy. I had intended to read a quotation from the speech of the noble Lord, Lord Cockfield, in our debate on 26th July, but as he practically repeated the same points today, perhaps I need not do that. The gist of his position is, "There have always been recessions and always will be. Though the length of the cycle may vary, good times and bad times follow one another with monotonous regularity".

That is, at most, a half-truth and it is not altogether accurate. Between the end of the last war and about 1973 there were no serious recessions in the world at all. The foundations for that can be found in the postwar settlements, where, following the pledges which all the countries concerned took in the United Nations Charter—which everybody has completely forgotten about now—they pledged themselves to aim, all of them, at a high and stable level of employment, and they set up three institutions for doing that. The International Monetary Fund was to monitor and facilitate a stable currency system; everybody had to commit themselves to a fixed rate, which was to be moved only in certain circumstances, and that was to be watched and helped by the IMF.

Then there was GATT, to which several noble Lords have referred. The gist of that was that people would eschew tariffs and quotas in order to maintain their own employment and would move towards lower tariffs which, as the noble Lord, Lord Soames, told us, resulted in the successful growth and stability of world trade. The third—the maintenance of high and stable levels of employment—was supposed to be monitored by ECOSOC, but a body as large as that was hopeless to monitor or control anything, and it gradually developed that the OEEC, the precursor of the present OECD, turned out to be the place where, for many years, that was done, where the different Governments of developed countries met together, discussed the economic situation, discussed the pressures that might arise either from inflationary or deflationary actions by particular Governments, and there was a sort of collective opinion—to which even the Japanese were somewhat susceptible—that one should not get too much out of line. Those were largely the common objectives and very successful ones.

All that has more or less gone to the winds, just as at home high and stable employment as the first objective of policy has gone. The developed world has moved towards giving a higher priority to the cure of inflation than to the maintenance of employment. I had intended to say rather more about this subject, but I have been anticipated by the noble Viscount, Lord Eccles, and the noble Lord, Lord Soames, who both stressed a doctrine which I should have thought the noble Lord, Lord Cockfield, would not enjoin because he thought recessions were acts of God. The two noble Lords whom I mentioned both said—this is what I feel so strongly—that the only way in which there is any hope of getting out of the recession is by trying to get back to collective action in the world economic scene.

Is it not a half truth to say, as Ministers say, that the present unemployment situation is their fault only to a small extent, and is mostly the fault of the world recession? Presumably based on that theory, it is mostly the fault of God, and so they cannot help it. That is a half truth because we ourselves in the rush for salvation as the house burns down have been the ones who have pushed the hardest. We have the highest level of unemployment in the developed world. As several speakers have stressed, we have a favourable balance of payments. But we are now in no position to go to other countries and say, "Let's get together". I must try to make my speech short, and so I hope the noble Lord will forgive me if I do not give way. At present we are not in a position to go to other countries and say, "Let's get together, let's see how we can get out of this terrible recession, which is damaging all the institutions which were set up and which for such a long time have given us prosperity and stability".

Several speakers, including my noble friend Lord Taylor of Gryfe, referred to the great strains which the international monetary system is suffering. The strains that are arising to the open trading system are obvious, and here at least I must give a good mark to the Government. The right honourable lady the Prime Minister has said plainly that the Government do not intend to depart from that system. But we have a favourable balance of payments, we have a very high degree of unemployment, and what is now needed is to change the stance. It is certainly not possible to go back to a very quick programme of spending, hoping that we shall get rid of unemployment quickly. But in our fairly favourable circumstances with the oil and the large reserves, there is room to make a move to bring down unemployment along the lines explained to us this afternoon by the noble Lord, Lord Byers.

What the world needs so much is that there should be something to hope for. There is nothing to hope for at present, with the prospect of a long period of unemployment ahead and the world recession continuing. What we want to change is the stance of policy. We want to get the thing moving in the other direction to some extent, and if on the international side Her Majesty's Government could at least make some noises about the need to get together to find out how we can collectively get out of the recession, there would be something to hope for.

There was vision in the postwar economic arrangements. I think that there is now no vision. Several speakers have quoted Shakespeare, and I shall end with that horrible passage from King Lear about vision all dark and cheerless.

Lord Monson

My Lords, before the noble Lord sits down, I should like to ask him whether it is not a fact that Belgium has a higher level of unemployment than we do?

Lord Roberthall

My Lords, I think that that is right, and if I said that we have the highest level, I stand corrected.

7.34 p.m.

The Countess of Mar

My Lords, in following so many experienced and knowledgeable speakers, I feel very conscious of my own limitations. Therefore, I shall be specific, and very brief. The Queen's Speech contained reference to a number of measures to be taken to allow for the privatisation of some of the services of British Telecommunications. I must declare an interest, but I hasten to say that I speak entirely for myself, and not on behalf of the corporation. For some 12 years I was employed by the Post Office, latterly British Telecom. I joined it a few weeks before it became a public corporation in 1969. At that time I found an air of optimism. There was among my colleagues a firm belief that, once freed from the Treasury and the Civil Service, the business would advance with vigour into the technology of the coming decades. I also found an immense fund of expertise, inventiveness, and innovation among the staff, and their ability to withstand all manner of frustration, together with their comradeship, will remain with me.

Traditionally the nationalised industries have appeared to present an impenetrable front to their customers. Is it surprising that consumers lack confidence in them? But British Telecom has made great efforts to develop and improve its efficiency and public image. This can be seen in shorter waiting lists.

Public opinion would appear to show that there is growing concern for the future of this great corporation. In particular, the provision of telephone services in rural parts, public call offices, and the replacement of obsolete equipment and cable seem to be spheres in which private businessmen are unlikely profitably to invest. I should be very grateful to the noble Earl who is to wind up if he would clarify the financing arrangements. Is British Telecom still to be subject to limiting Treasury controls, or will it be as free as its competitors to seek outside finance? It has been suggested that steel, mines, the railways, and even British Leyland were nationalised because they were operating with obsolete plant and were unprofitable. Can it be that with their programme of privatisation the Government are invoking the reverse of that procedure?

Competition is held to be the sovereign remedy for all the ills of the nationalised industries. I can see no reason why British Telecom should monopolise the communications market if the alternative is wider consumer choice, greater efficiency and innovation. However, the competition must be fair, and there must be sufficient support for British Telecom to compete on the same basis as its rivals. Will the noble Earl kindly confirm that that will be so?

There are a great many people concerned with the decisions to be taken in the coming months. British Telecom employs in the region of 200,000 men and women, and there are several million telephone users who will be affected. It would indeed be a sad day if so much of the expertise and inventiveness to be found in British Telecom, and respected throughout the world, were to be sacrificed for political expediency.

7.38 p.m.

Lord Underhill

My Lords, in following the last speaker, I would say that I hope the Government will take serious note of what the noble Countess said about their plans for British Telecom. I should like to congratulate my noble friend Lord Gormley on what I thought was a notable speech, which brought a breath of fresh air into your Lordships' House. With that speech I should like to link the speech of my noble friend Lord Scanlon in moving the Opposition amendment. I believe that in those two speeches your Lordships heard what I regard as the true voice of the British trade union movement, of which I hope the Secretary of State for Employment will take note.

Time will not permit me to go over the serious position of British industry and our employment situation; but my noble friend Lord Scanlon covered that fairly fully in his speech. Therefore, on that issue I shall content myself with just two quotations taken from the Sunday Times. On 18th July (in the summer) referring to Government policy, the Sunday Times stated: Yet there is a failure of imagination and endeavour in its immobility."— it was referring to Government policy— Economic policy is not just about output and inflation: it is, or should be, about unemployment". The same article urged that there was room for a well-directed boost to public borrowing and job creating construction projects. That course has been pressed upon the Government by many bodies—the TUC, the Labour Party, the CBI, the Liberal Party (today), the Social Democratic Party (today). Everybody accepts the need for public borrowing and constructive efforts—except the Government.

The other quotation is also from the Sunday Times. It appeared on 31st October, and commented on the CBI survey. I cannot go along with the noble Lord, Lord Vaizey—I am sorry he has left the Chamber—who thinks that the views of the CBI are of no importance. This was a very important survey carried out over a wide industrial base, and the Sunday Times comments: It masks an immense amount of damage which industry is experiencing. When it says that confidence is low-to-zero, redundancies are rising, investment is declining for the fourth consecutive year, and 94 per cent. of its members complain about an absence of demand, these are not the ravings of ideologists but the sum of nearly 2,000 enterprises which supply the bulk of our productive employment in this country". The same article went on—and I quote: Zero inflation is not an economic policy. The question is how far to encourage expansion, and in what direction"— again echoing the views which many noble Lords have expressed in this debate today. Other recent surveys have given similar warnings, that demand must be stimulated. The Government seem to ignore this.

My noble friend Lord Scanlon referred to the proposals for (I use the word) interference with the nation's public industries—British Telecom, the electricity industry and British Shipbuilders. It seems that the Government are pressing on with damaging our national industries irrespective of whether or not they are efficient, and we have had examples in previous debates of the efficient nature of our great national industries. Time and time again the Government have ignored arguments that private investment will naturally go only to the profitable parts of any of our national industries. It is obvious; and that real national outlook has been ignored by the Government.

I should like to ask the Minister some questions which I have put before and to which I have received no answers. How will these privatisation proposals help British industry? How will they help to cope with the problem of unemployment? What are the parameters of Government policy on public industry? Do they really believe in the mixed economy, as the Labour Opposition does, or do they just mouth this statement about the mixed economy? Why are the Government so doctrinaire about not only public industries but public service, which seems to be reflected not only in their attitude to nationalised industries but also to local government and the public service in general?

It seems that the Government have found at least one scapegoat on which to fasten some blame—and I am surprised that the noble Lord, Lord Cockfield, in his opening speech made no reference to this. The Secretary of State for the Environment has railed against local government for underspending its capital allocation and is urging local councils to set in motion such schemes by 31st March next year. This was further orchestrated by the Prime Minister, who complained that last year local authority capital expenditure and nationalised industry investment fell short by what the right honourable Lady said was a "staggering £1,600 million". In the other place on 3rd November, in col. 21, the Prime Minister said: We need more capital spending by local government and in the public sector generally. I agree that it is vital to maintain the nation's infrastructure, its roads, its buildings, its water supply and its drains". The right honourable Lady added: What a difference it would have made if those capital expenditure plans had been fulfilled". How encouraging! This is what many of us have been saying for a long time. I hope that this is recognition at long last by the Government that industrial recovery needs public spending on constructive projects. If the Prime Minister's statement does not mean that, then it may be that the Minister will tell us just what it does mean.

The Earl of Gowrie

My Lords, while the point is fresh in the mind of the public and of your Lordships, perhaps I could say exactly what it means. The Prime Minister was quite firmly saying to local authorities that a certain proportion of their budget had been allocated to them in forward planning for capital projects. There was no excuse for them not to take up this money in terms of capital projects rather than in terms of maintaining different kinds of services with that particular part of the budget, or of keeping up high levels of pay.

Lord Underhill

My Lords, I am grateful to the noble Earl for mentioning that, because I shall come to that in a moment. But is it, I wonder, that the Government have realised something, not as the Labour Opposition said but as the economic correspondent of The Times wrote on 6th November. I quote: Ministers have become increasingly alarmed that their tough economic policies, designed to squeeze out inflation, are in danger of throttling the economy altogether". If the Prime Minister considers that certain capital expenditure is vital to the recovery of our industry, why not go further on railway electrification, as the noble Lord, Lord Byers, said, and similar projects?

Local government is being criticised unfairly, and the noble Earl, Lord Gowrie, has told us of the Government's view on this. The Association of Metropolitan Authorities has reminded the Prime Minister that for some time the Association have been urging that more public investment is needed. The Prime Minister is wrong to say that capital expenditure plans have not been fulfilled, because my information is that local government is spending up to its capital allocations. But these relate to what a local council may spend in one year, whereas previously approval was given to a complete project even though borrowing was spread over a number of years. Under the present procedure there is no certainty whatever for the future.

It would seem that the real complaint of the Government is that local councils are not using their capital receipts from the sale of assets to supplement the capital allocation. On this, because of the uncertainty for the future, the chairman of the AMA has told the Prime Minister—and I quote: Is it not surprising that local authorities are reluctant to undertake projects or that they store up capital receipts against future shortfalls in capital allocations". That is the answer to what has been said by the noble Earl.

The Earl of Gowrie

My Lords, I am very sorry—the noble Lord has been most tolerant—but I must come back on that. I think the point there is that it is no use local authorities complaining that they do not have a sufficient allocation for capital expenditure when they refuse to realise the assets that they have.

Lord Underhill

My Lords, let us see what the view of the AMA is on that, because the AMA has first of all stressed that few projects could be completed by 31st March, as the Secretary of State has requested; also, that very few capital projects do not also involve revenue expenditure. Most capital projects, says the AMA, affect staffing, maintenance and similar items for the future. We must bear in mind, too, that there is the Government squeeze on non-capital expenditure by local councils. Therefore, this has to be kept in mind when we are talking about what local councils are not doing.

I say this—and I hope the noble Earl will take this up. If the Government really want increased capital expenditure by local government, I would urge that the Secretary of State should meet the representatives of the three local authority associations as quickly as possible and discuss practical plans for capital expenditure, including the capital assets. But this will mean giving some guarantees for the future that there will not be a squeeze within a few months which would interfere completely with a local authority's plans.

There is one particular proposal in the gracious Speech on which I wish to conclude. It is stated: .… to improve the control of subsidies to public transport in the conurbations". The Bill and the White Paper have now been issued, and I must say that it is clear that the word "improve" is a travesty of the meaning of that word. First of all, the proposal is directed only at the six metropolitan counties and the Greater London Council. We will deal with the complete details when the Bill comes before your Lordships' House, but I believe that the proposed legislation reflects once again the Government's sorry attitude towards public transport, which is essential to British industry and also to local govern- ment. It is a further instance of central Government, through the Secretary of State, taking decision-making away from local councils. It ignores completely endeavours to introduce local policies which seek to implement election manifesto commitments. It also ignores the accountability of local councillors to those responsible for their election.

Following the legal judgment on the GLC's "Fares fair" policy the Government were asked time and time again for the law to be clarified, that the criteria as to when subsidies become lawful should be set out. We asked that the GLC should be restored to the position of the PTAs and PTEs in the metropolitan counties under the Transport Act 1968. What the Government have done is to respond by seeking to control not only the GLC and London Transport but also to take away the 1968 position from the metropolitan counties.

The White Paper gives a great deal of attention to the details of the GLC legal case; but it dismisses in just one sentence two other actions in the High Court. I should like to ask why there are not details given in the White Paper of the judgment in dismissing the application brought by Great Universal Stores against the policies being followed by the Merseyside Metropolitan Council. That was a completely opposite judgment from that given in the case of the GLC. Under the Government proposals—and these are in the White Paper—the Secretary of State will determine the transport plan for a local authority and will decide the amount of the subsidy. Although there is generous use of the word "advise", there appears to me to be encouragement to ratepayers to take legal action and for the possible surcharge on local councils. So that we have yet another important local issue to be taken away from the elected representatives of these seven important local authorities which, the White Paper stresses, hold more than one-third of the population of England.

My Lords, furthermore, there had been no real consultation with the AMA and these local authorities before the Government decided upon this particular proposed legislation. The various authorities concerned have stressed that if the Government proposals are carried through and the Bill is passed, then the subsidy guidelines will inevitably mean increases in fares and/or cuts in services; and the Association of Metropolitan Authorities (the AMA) have made it quite clear that they and the metropolitan counties will strongly resist these proposals by the Government, not only because of interference in local council matters but also because of the strong and bad effect that the Government's proposal would have on public transport, which is so vital for the communities in these areas.

The Earl of Gowrie

My Lords, before the noble Lord sits down, it might be for the convenience of the House if I made a short point. It is in no way a criticism of the noble Lord, who is admirably succinct; but the House might be interested to know that we are not yet, in numbers terms, halfway through this debate. I would therefore concentrate your Lordships' minds on the advice given by my noble friend the Chief Whip a little earlier, to see whether we could exercise stringent verbal cuts, if not public expenditure cuts, on our speeches from now until the end.

7.55 p.m.

Lord Campbell of Alloway

My Lords, I shall bear in mind, I hope, what has just been said but, in accordance with the traditions of this House—and not only that but with all the sincerity that I, personally, can muster—I would wish to join in the tributes to the noble Lord, Lord Gormley, on his vigorous and most instructive maiden speech. If consideration is to be given to "other measures" to be laid (referred to in the gracious Speech) in the field of industrial relations, may I ask my noble friend the Minister four questions arising outside the ambit of the existing legal framework, rather in the vein proposed by my noble friend Lord Cockfield in the pursuit of new ideas. The first is this. Should there be mandatory negotiations before any recommendation for collective industrial action qualifies for statutory immunity? Should employees in the public sector with pensionable employment be required to accept a no-strike clause in exchange for arbitral machinery? And, if so, should this concept be extended to other categories of employees in the public sector? Should we have a safeguard to prevent misuse of trade union funds to subvent industrial action, either proposed or taken, contrary to the wishes of the majority of the members? Furthermore—and I am afraid that this is one of my old chestnuts, but it will take only one second to say it—should we set up machinery for the resolution of inter-union disputes?

My Lords, it was right when this Government were returned to seek to reintroduce the rule of law. That, we should have built on familiar foundations—foundations that were laid down at the turn of this century. But as we approach the end of this century, with all the changes that have ensued and shall ensue, is this not a time for reappraisal or for adaptation so that some durable thread may be woven into the texture of this ancient fabric in order that we may achieve continuity through change, that prophetic paradox coined by Edmund Burke—and if any noble Lord would like the reference, I will give it to him.

I wonder whether the noble Lord, Lord Underhill, whom I have had the privilege to follow, would agree that the quest for continuity through change imposes its own disciplines, especially so in this field of industrial relations. As to continuity, if the touchstone for continuity is the realism of the man in the street, then must we not eschew theoretical abstractions? As to change, if existing institutions are to have an especial virtue—and I include among such institutions the trade unions and the trade union movement—then ought we not to recognise that change should never be abrupt or radical? As to implementation, if this process is to be achieved under the rule of law, then is it not right that the rule of law must be intelligent?

On this question of intelligibility, last week in the Court of Appeal, the Master of the Rolls, Sir John Donaldson, in one of these International Transport Workers Federation cases—if noble Lords want to look it up it is called the Merkur Island Shipping Corporation case—held that the law on secondary-action—this is Section 17 of the Employment Act 1980—was now tolerably plain in view of the interpretive string of decisions of the courts. But he went on to say—in my submission, it is worthy of your Lordships' attention—that in his view where possible statutes should not be amended but re-enacted in amended form. He said further that Ministers and Parliamentary Counsel should ask themselves this question: Is this a concept that is too refined to be capable of expression in basic English?

In this sphere of industrial relations, the maintenance of the rule of law demands that its price should be paid in the coinage of its own currency: intelligibility. For if the law is not understood, how can it serve its prime purpose of securing order by consensus? How can it achieve that degree of acceptance requisite for its enforcement? If and when any of the questions that I have raised should ever receive consideration, is there not a case for reappraisal—a case for a new approach in terms of intelligibility?

8.2 p.m.

Lord Molloy

My Lords, like the noble Lord, Lord Campbell of Alloway, I should also like to pay my appreciation to the maiden speech that we heard from my noble friend Lord Gormley. I should also like to express my appreciation for the manner in which the noble Lord, Lord Cockfield, introduced this debate. It was an extremely gallant effort. Never have I heard a Minister have to bat—and bat so well—on such a "bum" wicket that this Government have left him. At one time I felt the pathos of his speech ought to have been put to the tune of "Hearts and Flowers". The sadness he felt for the 3 million unemployed and for the old-age pensioners who are going to be fiddled and cheated by this Government next year. That is a terrible thing to have to say in this House—and no one will contradict me because that is what is going to happen.

The Earl of Gowrie

My Lords, I shall contradict the noble Lord. There is no question of pensioners being cheated or fiddled. This Government have done a great deal more for pensioners than the Government which the noble Lord supported by maintaining all their allowances in real terms.

Lord Molloy

My Lords, that shows what a forthcoming young man the noble Earl is because he is out for promotion. After that brave effort I think he deserves it because when one looks at the facts he will be very embarrassed indeed. We shall check that very carefully and we shall watch it. I shall remind him of what he said today in this House and I suppose that that will mean his banishment from the Front Bench for ever for being so silly as to have interrupted me.

However, the fact of the matter is that when the noble Lord, Lord Cockfield, spoke of what the Government had achieved, that it had broken the sterile mould, let us have a look at what breaks the sterile mould. There has been the highest degree of lawlessness in this land of ours in the past couple of years, under a Tory Government, since records were first kept. That is helping to break the mould all right! We are now approaching the figure of 4 million of our fellow Britons on the dole. What Ministers and members opposite do not realise is this: the breadwinner being on the dole does not mean that only their living standards have died. It means that after months and months of unemployment bitterness is created within a home, quarrelling within a home and there is frustration within a family. That causes that family to break up. That is what Conservatives have to understand. They have very little experience of the dole. They have to try and understand what is meant by having nearly 4 million of our fellow countrymen unemployed and wasting their time when we need them so urgently.

I suggest that the British public and much of industry are perplexed and anxious about the present and have an increasing sense of foreboding about the future. It is true that the reduction of the bank base lending rate to nearly 9 per cent. is the lowest for four years, and that must be welcome. I almost coin the phrase "We are back to Callaghan". So let us welcome it. But, regrettably, the publication recently of the index of industrial production has shown that our country's production is also the worst for four years and that must be very, very bad for anyone interested in this nation of ours.

What has hardly been mentioned in the debate today is that what we are suffering from is what other countries have suffered from: the disaster of monetarism. Since 1979 our national output has declined as much as at the height of the great depression of the 1930s. I beg of you to consider what the phrase, "our national output has declined as much as at the height of the great depression of the 1930s", means. Bankruptcies are 80 per cent. higher than they were three years ago. Last year they were even higher than that. This I find is very distressing.

I also have to say this. Up to 1982 bankruptcies have been the highest since the war. This is bankruptcies. There is not only an unemployment problem but businessmen are losing their businesses. May I say to Ministers and members opposite that when you talk to a person who has devoted his life to building up a little industry—perhaps he has only employed 20 or 30 people—and who has lost that when he is approaching 60 or 65 years of age—that little factory or little business, has gone—you realise that such people are smote mightily with terror, bitterness and anguish. That is the feeling among businessmen today as well as among our fellow countrymen who are on the dole. The waste and misery of unemployment is increasing year by year. With all these things together, increasing unemployment, the decrease in production, and massive bankruptcies, Great Britain is in danger of an industrial cardiac arrest which could prove fatal if we are not careful.

With the economic stagnation the Government will claim that they have to impose certain squeezes, and those squeezes have come particularly heavily in the education system. Time will not allow me to go into detail. However, I say this: any Government that squeezes in these modern times and reduces the ability of our young people to learn, to go to colleges of technology and universities, must be stark, raving mad. Their crime is this—they are plundering the seed corn, and they may well force a growing number of highly skilled and qualified young men and women to leave this country, as indeed so many did in the 1930s. We have to understand that this new term, knowledge-intensive industries, will require very bright, able young men and women, and we are threatening them with no prospects and they are leaving this country. This is also very dangerous. Here we are saddled with a Government that is marching up the "down" elevator to the cost of the nation.

I think, too, that we should take much more cognisance of the growing competition from developing countries as well as from the advanced countries. This has been neglected to a degree by all Governments. We have aided many of our former colonies, some of which are now progressing very favourably, and we have left it at that. This has been, in my view, a crime of all Governments. I believe there are great markets available in the British Commonwealth as well as in the Americas and in Japan. Furthermore, I believe that those United Kingdom sectors involved in international trade should be assisted and encouraged to invest in new products and production methods. But they, like the rest of industry, depend on our energy and particularly on our steel—and it is not available for them.

It is to me a fairly dreadful situation. The steel industry has hardly been mentioned during the debate, and we all know that it is vital, along with the energy industries, to the recovery of our industry. The steel industry needs economic growth to produce demand. I believe that immediate action—I know this is going to be unpopular—should be taken on import controls of steel coming into this country because if we make the steel and our industries need it we will start off a great rotation which I believe can contribute to our eonomic recovery. I firmly believe that if there was anyone who really hated Great Britain, what they would do would be to run down British Steel and our coal and energy industries. That is what we are doing voluntarily. It seems to me like a bout of dreadful insanity, and something should be done about it because this great steel industry faces a massive crisis as a result of the decline in Britain's industrial base. That is what has caused the decline in steel. Steel was not required because our industrial base over the last few years has been rotting away. In consequence, naturally there has been a decline in home demand and an increase of up to 30 per cent. in steel imports. Indeed, in some steel products it is as high as 80 per cent.; and these facts together are damaging both the British Steel Corporation and the private sector of the steel industry.

A great deal has been leaked or talked about recently regarding the Trojan horse, as I would call it, known as the Think Tank, which is going to propose all sorts of fearful measures such as having to pay for unemployment and for all forms of illness. If that is a reality—and I hope it is not—I do beg the more experienced Members of this House, Members on the Front Bench opposite and Members on the Back-Benches, to make their voices heard in the Cabinet and in other places and do their best to see that this terrible affliction does not become a reality. I am dreadfully afraid that if that should happen we shall see massive unrest in this island of ours.

I should like very briefly, if I may, to refer to the clawback which is proposed with regard to certain people in our island next year. I would say straightaway that no doubt the Government have looked at all the sources of where they can do some clawing back. They have had a look at the comfortably off: they cannot touch them because they are very important people. They probably have had a look at the judges and generals, and so on, but they cannot claw back anything from them. They are very important people. They have had a look at the bulls and bears in the Stock Exchange: they are very important too. They have looked at all the consultants in the health service, and they cannot be touched. So there is only one section of people left which this courageous Government can have a go at to claw back; and they have made their choice—20 million old-age pensioners, children and the poorest in our country. What a magnificent Government!

These are the ones who will suffer. These are the ones who will be bitter; and what the Government do not realise is that their children and grandchildren will be bitter too and they might like to wreak some form of revenge for this unutterably fearful crime which is being contemplated. When the Prime Minister tells us that these ordinary folk are going to be a pound a week better off, a visit to any high street in our island would show her how absolutely wrong she is. Therefore, I hope that this, too, will be abolished.

I should like to close by talking very briefly about the economic field, as this is an economic debate. We have heard from many eminent speakers. I have listened very carefully to speakers from both sides of the Chamber and I have learned some very interesting economic facts; but they have not completely changed my mind as to what I believe we ought to do. It is not my economic theory—I am not clever enough and I do not understand it—but what I am going to suggest has been tried. It has been put to the acid test and has proved successful. It saved the Western World from Nazi tyranny. That was the Franklin D. Roosevelt New Deal of the 'thirties which saved America and it saved us and helped us to prepare to meet the onslaught of Fascism. That was evolved by a Canadian economist, but primarily by Keynes. It was accepted in the face of fierce opposition by American and British economists, who said it would not work. Keynesism and Galbraithism did work. They saved the Western World, and I believe they could save us as well. I am convinced that if we provide work and follow the principle of spend and prosper, there are tens—nay, hundreds—of thousands of building workers without work and we could build better hospitals and better schools, which we need. We are building less homes now this year than we did in 1925 and the list of people who have no proper house to live is reaching into millions. Is this not a form of lunacy? Let us spend to build houses, spend to build schools, spend to build hospitals and universities. The great industries which can do this want to do it and they want to do the same in many other great industries as well.

In conclusion, I believe that if we were to adopt this policy—it has been proven in the face of opposition and was adopted by the Americans under Roosevelt, and we, thank God!, followed suit—and get back to this great philosophy, proved and tested, of "spend and prosper", we would get a response from the British people at all levels—from industry and commerce to the working man and the skilled artisan. It could be so great that it would not only put this country back on its feet but, when we have done that job, we could make our contribution to help other countries which are not so fortunate to get on to their feet. It will, I believe, make a contribution to world stability and ultimately to world peace. That is the great challenge before us and I hope that this Government will have the courage to tackle it. If this Government do not have the courage, then let them leave it to some other Government to take over which is pledged broadly to follow what I have been suggesting. It is not just a theory or a hare-brained idea. It is something which was attempted and proved successful in the 'thirties. I believe it would also be successful in the 'eighties. What is more, I think it will lift up the courage, status and determination of the British people to pull us out of this mire and put the word "Great" back into Britain.

8.20 p.m.

Viscount Massereene and Ferrard

My Lords, I shall be only six minutes. I shall return in a moment to the speech of the noble Lord, Lord Molloy, but I should first like to congratulate the noble Lord, Lord Gormley, on his extremely robust speech. He complained that in the gracious Speech there was no mention of energy, but certainly the noble Lord put plenty of energy into his own speech.

To return to the noble Lord, Lord Molloy, with due respect to him, I think that he has been speaking a certain amount of nonsense. He said that production in the United Kingdom over the last four years has been the worst in living memory. But I would remind the noble Lord that during the term of the last Socialist Government and the first few months of the Conservative Government—in other words, between 1970 and 1979—productivity in this country rose by only 9½ or 10 per cent., but wages rose by 400 per cent. To a certain extent, that is the cause of the recession, though I realise that there are other causes, too.

The noble Lord, Lord Scanlon, whose speech I enjoyed, admitted in so many words at the end that he really did not know how to cure unemployment. He is a fair-minded man and I am sure he will also agree that a large part of the cause of our unemployment is due to costs. What is the main cost? If you have an account today from a plumber, a builder, a carpenter or any source that employs labour, you will find that 75 or 80 per cent. of your bill is for labour and the rest for materials. I remember the days, not so long ago, when the reverse was the case. Therefore, the cost of labour has been one of the causes of our recession.

The unions must take a certain amount of responsibility for this. As I have said before, by their restrictive practices and by forcing up wages they have destroyed what an economist would call our corporate profitability; in other words, they have destroyed our competitiveness. If you cannot compete in the world, and if your corporate profitability is destroyed, you will not get people to invest, so your economy is in a bad way.

The House has not been very generous to the Government. In reducing inflation from its former very high level to 6½ or 7 per cent. the Government have been marvellous, and my noble friend Lord Cockfield said that the Government hope to reduce inflation to 5 per cent. by the spring. Inflation is the real killer, the real evil. I was very pleased to see that the Government have invested £1,000 million in helping the unemployed, and I understand that that figure has now been increased by £500 million. But what really pleased me in the gracious Speech was the reference to the Government's help for youth, especially the new vocational training scheme for next year. I have had a lot to do with youth, because for over 20 years I have been concerned with the National Association of Boys Clubs, in Kent. There is no doubt at all that unemployment is a very serious matter for youth. If they come out of school and are unemployed for six months, many of them lose heart. If a young person is unemployed for six months, it may become a habit and then some of them are not so keen to accept or to find jobs.

The noble Lord, Lord Molloy, spoke about crime. I have not studied the figures, but it is interesting that, if young people have a lot of time on their hands, quite a lot of cash and are unemployed, that probably causes some crime. In the early 1930s, it was a real hardship to be unemployed, but, so far as I am aware, there was no increase in crime then because of unemployment. The unemployed in those days were perhaps made of sterner stuff and were more self-disciplined. It is an interesting point.

I should like to be a little constructive. We hear a lot about the microchip and micro-technology, which has now been in existence for about 10 years. Many people are extremely scared that it will mean the loss of more jobs, but I do not think that that is necessarily so. When steam was invented, our heavy industries came into being and created vast employment. It is true that through the invention of the steam engine the crews on the sailing ships lost their jobs and were badly affected, but, on the whole, it was good for the country. It is the same with cars. Cars displaced horses and carriages, but on the other hand they created vast employment through garages, petrol, oil and manufacturing industries.

I should like to add one point about unemployment. If you want to create employment—this could not be done here; it could be done only in an autocratic state, which I would not like—you could stop using automatic petrol pumps on forecourts and have the pumps manually operated. That would be crazy in our country where one has to be efficient, but you would probably create 300,000 or 400,000 extra jobs, although that is the wrong way of creating employment.

I hope that the Government, in their vocational training for the young, will concentrate on micro-technology, because many young people seem to understand, far better than I do, the electronics and the amazing machines which we have now. So I hope that the Government will concentrate on that for the future, because I firmly believe that our future lies in micro-technology. Finally, in order to create some employment, I wonder whether it would be possible for employers with 10 people to take on two unemployed people, and for employers with 20 people to take on four unemployed people and so on with the Government still paying them the dole and the employer making up the wages to the proper level. That is only an amateur idea, and I mention it just in order to try to be constructive.

8.30 p.m.

Lord Cobbold

My Lords, I must apologise for having unavoidably missed the opening speeches. which I will read with care tomorrow. The general position has been well covered by noble Lords. I find myself in agreement, on the one side, with those who welcome the recent improvement in regard to inflation and the reduction in interest rates, and also with those who see very rough water ahead, particularly in unemployment, in industrial competitiveness and, which is perhaps of particular interest to me, in world finance and banking. On the last question, very important and very difficult, Lord Taylor of Gryfe made some very wise comments. I only want to make a few comments, and to emphasise one point about the foreign exchanges which seems to me extremely important. On top of the volume of international lending, the dangerous volume I think, the extreme volatility of exchange rates has seemed to me to be one of the most damaging factors, and return to a measure of exchange stability is one of the main desiderata in the present situation. I am to some extent following the noble Viscount, Lord Eccles, and the noble Lord, Lord Soames.

Looking back 30 years or so, when I had some responsibilities in these matters, it is true that from time to time we had our exchange crises. For some reason they always seemed to come in the uneven years, 1949, 1951, 1953, 1957. But we did not then suffer, as we do now, from the general and almost daily uncertainties and fluctuations. I believe that the main reason for this change is the vast increase in mobile funds floating around the world. During the 1950s, except when we had these biennial crises, the major central, banks—I say "central banks" though, of course, it applies to Governments as well—worked in sufficient harmony and had sufficient funds to deal with daily movements. What is more important, the markets knew that they had sufficient funds to prevent the sort of volatility we are seeing today.

As the noble Lord, Lord Soames, said, Governments were in those years working within the Bretton Woods rules. This is no longer the situation. With the disappearance of Bretton Woods, with the great mass of mobile funds, it is essential to build some machinery to deal with this new position. In my view, the best hope of achieving this seems to me to build heavily on the International Monetary Fund and to work for a position—in some ways similar to Bretton Woods, but not exactly so—where the International Monetary-Fund, in consort with the major central banks has, and is known by the market to have, sufficient funds and sufficient influence to discourage the present very damaging volatility of exchange rates, and to restore a régime of reasonable stability.

8.34 p.m.

Baroness Seear

My Lords, I must begin with no fewer than three apologies: apologies because I was unable to be here at the beginning of the debate, being engaged on a matter connected with the business of this House; an apology because I cannot stay till the end, in that I have to catch the 11.30 p.m. train to Glasgow, and at our present rate of progress it does not look as though we shall have completed the debate in time; and thirdly—and this, of course, is very much my own loss—I did not hear the maiden speech of the noble Lord, Lord Gormley. I greatly regret that I did not. I would have enjoyed hearing it; I would have learned a great deal from it, and I would have been particularly glad to have been able to join my congrat- ulations to those offered all around this House for that maiden speech.

My Lords, we on these Benches have always believed that the Government were right to do everything in their power to bring down the rate of inflation. There can be no doubt that there can be no lasting recovery in this country—and temporary recoveries are little use to anyone, they are just false dawns—unless inflation falls and stays down. We are not convinced that the Government have the answer on how to keep it down, but that is a matter for another debate at another time. So we would congratulate the Government on the very successful reduction, the satisfactory reduction, of inflation to its present rate, and we look forward with them to a further reduction.

My Lords, that is the silver lining, but the silver lining of what remains a very dark cloud indeed, and from those speeches I have heard this evening I have gathered the feeling that not sufficient emphasis is being put on the degree to which industry in this country is still not prospering to anything like the extent to which it needs to prosper if we are to have a decent future and there is to be any hope for a permanent sustained recovery from the present level of unemployment.

It is not only the enemies of the Government, or shall I say the critics of the Government, who are making this point, outside this Chamber, if not within it. Only last Wednesday the Treasury, shooting in their own goal as you might say, produced a report which referred to exports running 4 per cent. below the level forecast in Budget time; the volume of exports is probably now some 4 per cent. below the second half of 1981. Import volumes this year have continued at close to the high levels reached in the second half of 1981. The continued rise in domestic demand and the recovery forecast in exports is expected to lead to a renewed rise in imports in 1983. The report goes on: On current account the balance of payments has moved from an exceptionally large surplus in 1981 to a smaller but still very substantial surplus so far in 1982. With the UK economy expanding in 1983 nearly in line with the world economy, and with the UK's tendency to lose share in domestic and overseas markets continuing, a further deterioration in the volume of net trade is forecast. Moreover, the gains in the terms of trade in the last few years will probably not be repeated and may even be partially reversed. These factors may outweigh some rise of the balance in invisibles helped by increased earnings from overseas assets acquired as a result of recent current account surpluses and leave the current account not far from balance in 1983. My Lords, that is not a favourable prospectus, and until we reverse that trend, until we can see a real hope for advance in British industry, then all the other things we have talked about are of no avail. So I would urge that the Government should use all the resources they can muster—and we know that there are increased resources at the command of Government because of the successes that are being achieved—to help industry in every possible way.

Of course, to some people the answer will be to block imports, to introduce strict import control. We on these Benches absolutely repudiate that as a solution. It might temporarily make things better, but only at the expense in the long run of making them far worse. As other speakers have said far better than I can, and I cannot but applaud every line in the speech of the noble Lord, Lord Soames, we are a trading nation or we are nothing; if we exclude imports we lose our markets, and what is perhaps even more important, it gives us a false sense of security for a short period of time, and we can believe that the changes that need to be made inside industry need not be made because temporarily we can avoid imports competing with our industries here at home. Surely the only possible answer is that those industries have to compete. If we cannot compete with imports we must use our resources in other ways in which we can compete. This may be a tough doctrine, but it is the only long-term answer. So whatever additional resources the Government have should be concentrated on doing their utmost to relieve the pressures on industry.

It will be very tempting in election year to use some of the additional Government resources to give benefits to individual citizens in terms of tax reductions. We do not believe that that is the right thing to do. If there is any money to spare, to assist in any area, it should go into assisting industry and not into tax reductions for individuals. Maybe the Government will not get so many votes, but in the longer run it would make far more difference. We know that in terms of the relief of unemployment the relief of taxation does very little to create additional jobs. What does create additional jobs is to make industry more successful and, therefore, more able to absorb people into employment.

However, I make one exception to this use of the extra resources that the Government have. They should not use it for general tax relief to individuals; but—and here I go along very much with the noble Earl, Lord Onslow—our present level and system of taxation, especially at the lowest levels, is chaotic. It is an absolute nonsense that as a man moves into employment he is virtually paying 40p in the pound taxation on what he earns. When one adds the 30 per cent. income tax, plus national insurance contribution, that is an absurd and ridiculous marginal rate of tax. People complain about the hidden economy. I prefer to call it the hidden economy, rather than the black economy, because in many ways there is a great deal to be said for it. Of course, we have a hidden economy when people with non-hidden earnings are taxed at such a high rate and when we have VAT at 15 per cent. which gives inducements for the man selling a service and the buyer to have their operations on the black economy.

Is it not possible to consider reverting to the position that we had and which we changed, for some reason I have never been able to understand, of a lower level of tax when people first move into employment, for the lowest earners? If we could push the starting rate of tax even higher than that required by the Rooker-Wise amendment, so that people started paying tax at a higher real rate—and not merely as a result of adjustment for inflation—that would do something to give a bigger gap between what people get when they are on benefit and what they get when they finally take home their earnings.

Is it really so difficult not to start tax at 30 per cent? I believe I am right in saying that there is no other country which starts its level of tax at so high a rate. It was alleged that the Inland Revenue did not like having a lower starting rate. I have reason to believe that that is something of a myth, and that the objection did not in fact come from the Civil Service but was for some reason conceived by the Government. That is the one area in which I suggest that individuals rather than industry should benefit from whatever additional resources the Government have.

The main focus must be on doing everything possible to make industry more competitive. Why cannot the Government have gone the whole hog on the national insurance surcharge? That very simple thing by itself would have given tremendous encouragement to industry and would have made it more competitive. Making industry more competitive is the only way in which to fight imports. Cannot the Government find ways in which to bring interest rates down still further? It is alleged to be a great triumph that the interest rate has gone down to 9 per cent., but the time was when 9 per cent. would have been seen as a fantastically high rate. A drop in the interest rates combined with the abolition of the National Insurance surcharge would give industry a tremendous fillip and enable it to take off quicker than any other way. If we could reduce the interest rate below 9 per cent., that would be the way in which to work on the exchange rate. The CBI, as we know, was somewhat ambivalent on the question of the exchange rate. For my part, I am not advocating devaluation as such. I believe that the losses would be greater than the gains. But if it flowed as a consequence of the reduction in the interest rate, that would be a different matter.

Finally, if there are some additional resources to be devoted to helping in the great competitiveness of industry and, through that, the reduction of unemployment, is there no way in which we can make a substantial difference in the energy charges, which are such a heavy burden on so many of our most important industries? My Lords, I have spoken for 12 minutes and that is far too long at this time of night.

8.47 p.m.

Lord Balogh

My Lords, last year the right honourable Lady the Prime Minister declared that she was "not for turning". One can now agree with her; because her call for increased investment is no mere U-turn; it is a somersault. But the direction of the somersault is still on the whole unchanging and disastrous. The policy of the Government, far from creating a solid base for subsequent expansion, has not even succeeded in stopping the deflationary spiral. Unemployment is still rising and if it is not soon arrested will weaken our potential expansion possibilities, because we shall not have the skilled labour necessary. The vast increases in real income for the British Shelf have been absorbed by our non-oil deficit. Our productive investment is still shrinking. If employment does not soon return, the availability of skill will also weaken. Instead of reconsidering the effect of their policy—namely, the classical monetary and fiscal weapon armoury—they blame the previous Government.

They make efforts to win popular acceptance for their legislation. Mr. Tebbit's address to the conference is typical and very successful. He argued that it was not the present Government's choice of policies that was responsible for our malaise; it was the reckless inflationary spending of previous Socialist Governments and that it was the excessive demands of trade unions and the laxity of accounting practices by nationalised industries. To recover prosperity, in their view, was a hard way. The way was based prominently on rolling back the state sector and keeping, indeed forcing, down public expenditure. Only if the public sector borrowing requirement was kept firmly in hand could there be any prosperity.

On a psuedo-heroic impulse the Government restrained monetary expansion. The consequent loss and social tension can be mitigated only if a majority of the countries involved would also change their present policy. Then, and only then, could the economy sustain a combined expansion which would avoid the menace of deficits in the balance of payments by a reciprocal increase in demand. This alternative common-sense approach to the balance of payments problem was repudiated.

Mrs. Thatcher has, moreover, reverted to the type of monetary and fiscal outlay of the pre-1945 position. For her Keynes has really died twice. She was willing, indeed eager, to reverse the trend to social reform. The latest moves in this respect were the accelerated reprivatisation or denationalisation of the public sector on a vast scale. If they follow present patterns, the Government seem to be drifting towards the loss of profits and taxes.

Moreover, this social and economic counter-reform was based on a rather simple view of the working of a modern, industrialised economy. They claimed that the Government were able to dominate the complex forces, and to manage them entirely through the money supply, albeit that Mrs. Thatcher's closest admirers were completely unable to define satisfactorily that slippery concept. The fact was ignored that the economy in the main industrial countries had altered; that pure competition no longer dominated an increasing sector of the economy—more especially in the case of manufacture. In fact, Conservative policies in all affected countries from America to Germany were based on a model of the economy developed originally by the Swiss economist, Walras, and revived by Von Hayek and Friedman. They have nothing to do with reality. They do not recognise the fact of all but continuous unemployment can exist. They assumed that the market was balanced and automatically cleared. They asserted that management would not be able to influence the basic harmony. They denied that the systematic pressure on the unions, fought with bitterness, would make a negotiated easement of the tension impossible.

All indications point to the conclusion that a free-for-all in the labour market, organised oligopolistically on the side of both employers and employees, is no longer compatible with the maintenance of full employment, if it ever was, if we ever had a continuous full employment, except in the immediate post-war period. The unions will resist any threat to their status and wages. The spiral of wage inflation also militates against the attainment of greater equality in the distribution of non-profit income. Unions are not equally well organised, nor are all occupations of equal importance strategically for the country as a whole, with the result that the lowest paid, the weakest, fare progressively worse in relation to the rich.

The leapfrogging of wage demands is an inherent characteristic of the present phase, where wages, and especially wage rates, differentials, are not centrally negotiated on the basis of an incomes policy. I believe that such a policy is workable if there is a strategy for all incomes and not only an attempt at restricting wages. Mrs. Thatcher's policies in the new stages of oligopoly in the market are dangerous, as was demonstrated more recently by both the crude oil and the refined product prices.

The liberal Tories seem to believe that the union solidarity can be smashed, and the stabilisation of prices carried through without having discussions with the unions. Ministers always talk of the need to establish a solid basis for expansion without inflation, and they appeal to the common sense of the unions. It is more likely, however, that any increase in employment will result in the necessary increase in the bargaining strength of the unions and that they will exhaust it completely.

The consequent vast losses of production and incomes have been shrugged off. The need for some permanent organ to help in this phase was rejected. Reference was made, over and over again, to the fact that incomes policies invariably failed, leaving behind an increasing ill-will. The fact was ignored that the National Board for Prices and Incomes of Aubrey Jones was a solid success because he did not rest on hearsay, but employed modern, analytical methods to find satisfactory solutions. Its existence was increasingly accepted as an important contribution to decision-making in the sphere of industrial policy.

There has, however, lately been a drift towards using incomes policies for wage dictation. In my opinion in the end we shall only be successful if wage relations are negotiated by annual meetings sponsored by an independent board, comprised of Government, employer and employee representatives. In Western Germany this solution, though informal, had an important influence on decision-making and it was a success. It was also successful when it was tried in earnest in places like Malta, Austria and Sweden. Once the opportunity to establish such a permanent institution failed, the yearly wage round was inescapable, without a sharply deflationary policy.

Nor must it be forgotten that the trade unions are of different strengths and militancy. Thus, the market based on "free collective bargaining"—the means to achieve a satisfactory solution. Still some advance has been made towards a viable system—a system which does not repudiate orderly solutions for dogmatic reasons. The most important condition remains a thorough re-examination of the failed methods—including instrumentation—which led to the disastrous decline of British manufacture. The suspicion which must not be allowed to linger on is that a wage policy is legitimate so long as it is the result of struggles. The Government would do well to crush this as soon as possible. It was the combined opposition of both sides of industry against incomes policy which led to our present mess. Unfortunately both sides of industry and the Government still put forward policies which they know are not viable because they will not in the end harmonise full employment and stability. The outlook for stability and progress is therefore uncertain.

I shall turn to the one important new feature of the economy, and that is the denationalisation of the oil and gas production. The argument in favour of this is based on the theory that the private sector is more efficient than any alternative. The answer is that a large and growing part of private industry is headed by civil servants, constituting a new problem in their relations with Ministers and the public. Moreover, most recently firms were nationalised because they had gone bust and had to be saved from bankruptcy in order to avoid a cumulative crisis which might have ensued if a large company or a bank had been allowed to fail. It has been subsequently alleged that this would open the way for a substantial increase in the availability of capital for essential purposes. In fact, the way in which money is raised has little influence on how it is spent. Moreover, if speculators know that a gigantic issue is coming, they will hold back purchases. We have already seen that the first estimate of over £1,000 million for the denationalisation of oil and gas has shrunk to £550 million. It will shrink further. These purchasers are not a limitless number of small investors, as assumed in orthodox economics; they are pension fund managers, insurance companies and investment trusts, which control a large majority of the important accounts.

The state deliberately adopts a policy which will diminish its share of the take from the Shelf. In the latest version, much of this money will accrue to underwriters and advisers, who will appropriate a large part of the surplus of the rent. The process is more like highway robbery than a reticent transaction.

It is, further, maintained that in this way the managerial representatives would be available for contract by small shareholders. The truth is that the more widely scattered the ownership, the greater will be the power of management. It seems to me that the advisers of the honourable Lady, academic and otherwise, have never heard of Burnham, Berle or Means.

Last but not least of the problems is that of taxation policy of oil and gas on the British Shelf. With extremely varied costs. the Government's take of the crude production will be maximised by a tax which is highly progressive; otherwise the "bad" costly fields would not be exploited at all, while the "rich" fields would reap massive benefits.

If such a solution were adopted, care would have to be taken over handling the problem of risk without reducing the take. The last Labour Government acted on the principle of allowing free depreciation. Unfortunately, the Inland Revenue, backed by the Treasury officials, refused to accept a simple, progressive tax system, arguing that a double or treble rate of tax would burden the administration of taxation with an impossible task. The extemely favourable conditions laid down in the licensing system on which the oil industry is based, very much enhanced the need for an exact ascertainment of costs and prices.

However, the break-up and curtailment of the original BNOC and the annulment of its powers to participate in the operations and supervision of prices and costs will undoubtedly lead to a relative diminution of the Government's take. As I have already pointed out, neither costs nor prices can be securely ascertained if the Government do not participate in the exploration, development and production process itself. Expertise in this field is a costly business and it is highly improbable that the Inland Revenue and the BNOC (in its diminished state) can effectively pursue a policy of strict supervision. The outlook for the moment is still very pessimistic.

9.4 p.m.

Lord Boardman

My Lords, if I understood the noble Lord, Lord Balogh, correctly, he said that there was no evidence that the private sector was any more efficient than the public sector. In that case, I would urge him to look at a clear example in today's press at the effectiveness of the introduction of the private sector in the refuse cleaning operations in Birmingham. But time prevents me from following the noble Lord further in his speech, which I shall look at again with interest tomorrow.

I should like to join other noble Lords in congratulating the noble Lord, Lord Gormley, on his maiden speech. Some years ago in different capacities he and I spent a great deal of time negotiating and having discussions together. From my experience of him I am sure that if he serves this House as well as he served his union—and I am sure he will—we shall be very fortunate to have him here.

I should also like to congratulate the Government on the form of presentation of their autumn Statement which puts to Parliament and, indeed, outside Parliament the economic facts with a clarity which has never previously been produced. It also includes—and this is a matter of some interest to many of us—a sort of "do-it-yourself" or ready reckoner for calculating what we all think next year's budget should be. I congratulate the Government not only on the form but on the content.

Perhaps it is somewhat disappointing that with exceptions such as the noble Baroness, Lady Seear, few noble lords opposite have felt it right to pay tribute to the achievements of the Government in the economic field. Of course, the greatest of those achievements is in the field of inflation. When inflation was at high levels, it was accepted by all of us that it was a tremendous, terrifying scourge for society, that it destroys political and social stability, that it can ruin the thrifty, impoverish the pensioners and that the only beneficiaries of it—and not always them—are speculators.

Now that it is forecast to be 6 per cent. by the end of the year and 5 per cent. by next year, it is a matter on which I had hoped the whole House could have united in congratulating the Government on their achievement. Although it is being conquered, we must not forget what a vicious enemy inflation is and that it is always poised ready to counter-attack. Nor do I believe that we should in any way be complacent about the forecast achievement of a 5 per cent. rate next year. The target must be nil inflation and, indeed, if only that could be achieved, the question of the annual wage round and all that sort of thing would vanish. Awards will then be made relative to merits, experience and skills; and what a prize to our industrial society that would be!

It has been suggested that the cost of defeating inflation, or at any rate tackling it in the way which has been done by this Government, has been the high level of unemployment. I certainly do not agree, and I think that if the trend of inflation that was left by the previous Labour Administration in 1979 had been continued, there would be many millions more unemployed today, and those that were employed would have been working on a poverty line.

In view of the terms of the amendment, and prompted by my noble friend Lord Boyd-Carpenter's reference to party manifestoes—I think he went back to 1929—I was tempted to see what had been put in the party manifestoes in 1979. May I read one: We must keep a curb on inflation and prices. Inflation is our enemy because rising prices hit most hard at the pensioner, the low paid, and the housewife and inflation causes losses of jobs". I read the sentence next but one after that: Now we set ourselves the task of bringing inflation down to 5 per cent. in three years. It is an ambitious target. We need the assistance of everyone, and everyone will be better off if we succeed". If I turn on I see that we have a further paragraph saying: Nothing so undermines a nation as inflation. Not only does it make a family's task of budgeting more difficult, it is a threat to jobs"— I repeat, "a threat to jobs"— and a standing invitation to our overseas competitors to invade our markets. Your Lordships may wonder the source of that manifesto. The next paragraph I quote will give it to you: In contrast to a savage Tory free-for-all, which would lead to soaring inflation and industrial chaos, the Labour Government will work with the TUC to achieve our agreed inflation target of 5 per cent. in 1982. Those are the views expressed in 1979. I would have hoped it would not be unreasonable for the Labour Opposition to have accepted that the achievement by this Government in getting that target down to 5 per cent.—admittedly it looks like being four years instead of their target of three, but they did it in a way not to cause a free-for-all or chaos, but in a responsible way—is something to be praised.

I was tempted also to look at the Liberal Party Manifesto at the same time. Their remedy for the inflation trend was a statutory prices and incomes policy. Despite what the noble Lord, Lord Balogh, has just said, it seems that that ignores all the lessons of the past 20 years. I was faced with something of a problem with the Social Democratic Party. My problem was whether to associate them with the Labour Manifesto of which many of them had been supporters in 1979, or to associate them with the Liberal Manifesto with their prices and incomes in the new partnership that they have formed. Perhaps my dilemma there is one which is shared by some of the members of that party at the present time.

Having praised the Government's policies, as indeed I do, may I make some, I hope, constructive criticisms or suggestions. First, as the noble Lord, Lord Byers, rightly said, there is the problem and criticism of our energy pricing policy. I welcome the announcement by the Gas Corporation of the freeze on gas prices for a further 12 months, and I wait hopefully for a similar announcement coming from the Electricity Council, but frankly it is too little and it is very late.

The impact of energy prices hits most severely the heavy energy users, but those who are also by definition the large employers. The costs of those heavy energy users go right through the whole structure of our industrial society and right into the final costs. They are industries where their competitiveness is essential, and the cost of energy is often greater than the total cost of wages, and yet we have consistently charged ourselves in this country more for our energy than has been charged by comparable competitors overseas.

Lord Bruce of Donington

My Lords, I am grateful to the noble Lord for giving way. Will he indicate to the House whether he supported the Government when they themselves deliberately ordered the gas and the electricity industries to put their prices up to a level 10 per cent. above that of inflation? Will he say whether he supported the Government intervention to do that?

Lord Boardman

My Lords, perhaps the noble Lord will allow me to continue. It is not the total raised by the prices I am concerned with, but it is the apportionment of it between the domestic and industrial user. Historically, we in this country have charged our domestic consumer far too little and our industrial consumer far too much, and there are political problems in remedying that. So it is not the total overall recovery, but the apportionment of it which, I believe, has been unfortunate.

It is said in relation to electricity that we must keep a certain price level because of our commitments elsewhere. But even if our energy were somewhat cheaper than that of our overseas competitors, I wonder whether it would be wrong? We are, after all, self-sufficient in energy and I cannot believe that the French, who take the benefit of their cheap hydroelectric energy, would consider it wrong and would consider it necessary for them to charge themselves the same level of energy prices as is charged by countries which have to import high-cost oil. I urge my noble friends to keep that point very much in mind because the industries most severely affected are, as I say, largely heavy industries and they are largely in the North, and it is the North which perhaps is feeling the impact of the recession more severely than anywhere else.

Another plea I would make to the Government is on the question of enterprise zones. I believe that as operated, they are in many cases counter-productive, and many instances could be given to illustrate—I am sure my noble friend will have heard of them—where the enterprise zone has enabled an importer employing a few men to have the benefits of being inside a zone and to put out of production a manufacturer making a similar product in some other area. On those two points I hope the Government will look carefully at the problems, which are real problems to industry, and which could have a marked effect on the employment level.

With those small but important qualifications, I congratulate the Government and particularly the Chancellor of the Exchequer who, as my noble friend Lord Boyd-Carpenter said, has been subjected to fairly persistent criticism for a long time from all quarters, on maintaining policies which are clearly now the right policies to restore our economy.

9.16 p.m.

Baroness Burton of Coventry

My Lords, on Wednesday last in another place, the Prime Minister was asked why a certain item had not been included in the Queen's Speech. Mrs. Thatcher replied: There is plenty of time yet, plenty of time". I found it difficult to understand why the position of our national airline, British Airways, was not mentioned. Hence, I take comfort from the Prime Minister's remarks about there being plenty of time for omissions to be rectified, and I wish to comment tonight about the matter in the hope of elucidating some remarks from the Government.

Last month I noted three headlines in the Financial Times; namely, "British Airways losses go supersonic", "British Airways £1 billion debt prompts call for capital reconstruction" and, "British Airways seeks way through turbulence". I suggest that all three are correct, but I wish at the outset to say that British Airways is seeking a way through this turbulence and that this is being a combined effort from top to bottom. Having said that, let us look for a moment at the losses, which have indeed gone supersonic. In my opinion, Sir John King had no option but to do what he has done. We have had years of mismanagement based on nil or inadequate action by Government, going back at least to the wrong basic decision to form one airline out of BOAC and BEA. The merger is now admitted generally to have been a fundamental error. Three comments from Sir John are worth repeating to your Lordships: The deficit was the price of past wrong decisions going back for years". With overmanning on a prodigious scale". The airline was being conducted as though money grew on trees". Those were suscinet, realistic and comprehensive words and they described the position as a whole.

What about the actual losses? As I understand it, the Government have given an assurance to the airline's board that they will ensure the availability of adequate financial resources to meet the board's obligations as they fall due. In other words, the Government will be responsible for keeping British Airways in the air until some final financial reconstruction is worked out; and I shall return to that aspect when I come to my third headline of British Airways seeking a way through turbulence.

What about the losses, making the total indeed supersonic? This is stated as a deficit of £544 million, plus the writing-off by the management of what have been described as "extraordinary items" amounting to another £426 million.

Let us take first the question of overmanning. My Lords, £100.4 million was necessary to persuade 9,000 employees to leave the airline last year, and a further £98.4 million will be required for the additional 7,000 who will have left by March 1983. Secondly, let us take aircrew. This problem is not aired too much in public, but there are too many aircrew with salaries above the average, and I think that I am correct in saying that so far they have not been affected by the lay-offs. At the beginning of the recession British Airways hoped, understandably, to be able to reemploy its aircrew. Now that is not so, and it has to face the problem of who is to go, the younger pilots, or the older ones?

Thirdly, I turn to the question of discounted tickets and bucket shops, and I think that nobody will deny my right—if that is the correct word—to say something about this. In the debate on the Queen's Speech last year I said that some 500 million dollars per annum is lost by IATA members because of operations conducted by bucket shop travel agents and the airlines which supply them. Going back to 18th February last year, when the House discussed the civil aviation industry, I was given the opportunity to speak on the marketing policy of British Airways in relation to bucket shops and discounted air fares. Certainly, as I then said, British Airways was only one villain among 40 others. But it was, and continued to be, a large-sized one. Sir John has said: It is our intention to reduce discounting, if not to eliminate it altogether". As I understand it, the loss incurred by the discounted ticket-bucket shop operation was between £20 million and £30 million. I was told that British Airways' "special promotional costs" were on their way to reaching some £125 million in 1982–83, and that that figure so startled Sir John that he ordered I drastic action. Perhaps it might be relevant to explain that the so-called "special promotional costs" are chiefly made up of rebates to travel agents on discounted ticket sales. Indeed, the scale of British Airways' activities in this field so alarmed the accountants called in to look at the financial position that acute concern was expressed.

I have tried to outline briefly three aspects, among many; namely, overmanning, aircrew, discounted tickets. I come now to the third headline that I mentioned at the beginning of my speech. British Airways seeks way through turbulence". Here I should like to repeat what I said earlier. I do not believe that British Airways is the prime villain in this piece. I blame government (with a small "g") for approving the ill-fated merger of BOAC and BEA—two excellent airlines, as many of us would testify. I blame government also for resolutely—and I mean resolutely—refusing to take any steps to deal with the position over the past decade, despite the fact that so many people in this House, and elsewhere, tried to put matters before them. To so many of us it was so obvious that something was going gravely wrong in the way that the airline was performing and in its attitude to customers. But nobody would listen. They did not want to know. It was all too difficult. The relationship between the national airline and government was too "cosy" for any real remedial action to be taken. Anyway, who were these critics? And I think that one thing should be said. I do not believe that we should have got anywhere now had it not been for the Prime Minister.

Perhaps I may offer to the House some seven simple facts according to my reckoning. First, any private concern or airline would be insolvent, given the position of British Airways—a state airline. Second, as it is still flying (for which I am glad) the Government obviously are bailing it out. Third, British Airways has abandoned certain loss-making routes and closed certain overseas offices. Fourth, the airline believes it will end up with a good route structure and with a workforce down from 59,000 to 35,000. Fifth, questions and problems remain, such as the index-linked pension scheme and the financial difficulty of some public service routes for social rather than commercial reasons. Sixth, the realisation that they, British Airways, aimed at growth and volume at the expense of profitability. Seventh, if a big chunk of the airline's £1 billion debt is to be written off with taxpayers' money, will other industries and other airlines not have legitimate complaint? Indeed, might we not find ourselves in trouble with our EEC partners, who could claim unfair subsidisation?

All this brings me to the question of privatisation. To my mind the first priority is that British Airways should become solvent and pay its way; and I believe that this is what the airline itself would wish and is trying to bring about. But if this can only be done, quite apart from any effort by the airline itself, by underwriting the prospectus with taxpayers' money, then we have a problem. Certainly having British Airways on our backs financially in the future as we have had in the past is not acceptable. So what?

I feel, as I said earlier, that this affair had to be sorted out whatever the cost. Should the airline then be floated off? For my part, I should like to see British Airways put on its feet again, given adequate safeguards. As this could be accomplished only by the taxpayer once more footing the bill, would it not be better for the airline to repay some of its debts by, say, three or four years of profit before any question of privatisation arises? It will take a great deal of taxpayers' money to write off a debt of £1 billion.

In conclusion, I wish British Airways well. I do not believe the fault was theirs in the first place: subsequently, they must take some share of the blame. But I believe that they can pull through. There is a quite different feeling today: a feeling that at last something is being done, however disagreeable.

I should like to add a pleasant note. The House will doubtless be aware that recently British Airways was a clear overall leader as Airline of the Year 82. Runners up were Swissair and Lufthansa. The survey was conducted by the magazine Executive Travel, whose readers collectively make some 500,000 business trips and spend some £100 million on travel a year. I think we might all note that during the year British Airways carried a total of 15.2 million passengers worldwide, of whom some 9.6 million were short-haul passengers. What pleased me particularly about this Airline of the Year award was that those in charge at Executive Travel told me that airlines had been most generous in congratulating British Airways on their success; and I know what all this meant to the airline itself at this most difficult time.

We would all agree that the right solution must be found—for the sake of the taxpayer, the passengers, the airline itself and the jobs at stake. In another place on Monday the Under-Secretary of State for Trade, Mr. Ian Sproat, said that when British Airways published its accounts for the first six months of this financial year it would be seen that the airline was in true profit of about £100 million after payment of taxation and repayment of debt interest. As no mention was made in the Queen's speech, could the Government tonight inform the House about the timescale and type of action they have in mind? This would be most helpful to all concerned.

9.30 p.m.

Lord Sandford

My Lords, may I invite your Lordships to switch your attention from airports to town halls, and may I, as president of the Association of District Councils, start by welcoming the noble Lord, Lord Underhill, in his new capacity as president of the Association of Metropolitan Authorities, to debates on local government. This, of course, is a debate on the economy, but local government expenditure is 25 per cent. of all public expenditure and it is perhaps worth spending a moment or two thinking about things from the point of view of local government. I want to argue that from the point of view of local government each of these amendments should be resisted—the first one by the noble Lord, Lord Scanlon, because it is at least a a year late. I would say that local government does not now require additional measures with which to help revitalise the nation's economy because we got those, after a bit of a struggle, at the end of the last Session.

I would say that local government is now equipped with a goodly range of measures and powers which are available to them, and over the coming months they will be increasingly used by local government, with increasing skill and sophistication, to do what almost all of them wish to do, namely, to revitalise and to regenerate the economies in their own local areas. For instance, we have from the Manpower Services Commission the Youth Training Scheme and the community programme, each of which is a very substantial advance on the Youth Opportunities Programme and the job creation programme with which all local authorities were able to do something positive to mitigate the effects of unemployment in their areas. The district councils, for instance, were able to provide about 30 per cent. of all the places under these schemes and will hope to do the same with the next schemes when they come into force in September. We have available to us a very substantial range of new measures, new incentives, with which to assist firms, and especially small businesses, which are there for local authorities to use.

Of course, I would want to go on and say immediately that the role of local government in regenerating the local economy must be complementary to the role of the private sector. We are not there to act as bankers, solicitors and accountants, but we are to complement their activities and to concentrate on one of the most important jobs which we can do, namely, to keep the rates down. This is not to say that no authority should ever engage in any commercial activity and can ever do so profitably. I am not wearing today—but I sometimes do wear, with pride—the tie of Luton Airport which, by operating profitably, confers anything up to £1 million for the benefit for its ratepayers. The docks at Boston operate profitably, the buses of Plymouth operate profitably—not perhaps quite as profitably as do some parts of the private sector but, certainly, a good deal more profitably than most of the nationalised sector.

The point that I want to make is that neither the range of powers available to local government for the regeneration of the local economy, nor the great range of new services, new incentives, to stimulate the growth of small businesses, nor the imaginative schemes of the MSC for mitigating the plight of the unemployed—none of these is designed to be run independently of each other, and the important skill is to blend all these together in the correct mixture according to the problems and resources of each particular area. That is why it is so important to get this right at the local level.

My Lords, my reason for inviting the House to resist the amendment by the noble Lord, Lord Byers, is that I think that in tabling it he does himself less than justice because, as your Lordships will know, he plays a significant personal part in the organisation, Business in the Community, which is responsible for fostering and spawning the local enterprise trusts, 80 or so now, operating in different parts of the country, and whose job it is to do specifically what I have just been saying—to blend together the activities and efforts of the private sector, local government and central Government, in a sensible mixture of schemes, programmes and so on, for regenerating the local economy in each area. I cannot conceive of any single constructive programme such as the amendment talks about which could possibly do this as effectively as a whole set of separate local programmes which the noble Lord is so active in fostering.

The only other point that I want to make at this time of night is, in that context, the importance of conferring on local government a proper autonomy. Her Majesty's Government have, looking back over the past three years, been particularly successful in disengaging themselves from pay bargaining and from interference in that particular activity in both nationalised and private industries. They have abandoned any of the kinds of interference which we have associated in the past with an incomes policy. They must now seek to do the same in the area of local government and the finance of local government, and provide each separate tier of local government with its own separate source of finance. This will give local government the freedom to choose and the freedom to make and live by their own mistakes.

The debate since the Green Paper on local government finance—and we had a general debate, and also a specific debate introduced by my noble friend Lord Boyd-Carpenter—revealed virtually unanimous support for the reformed system of the existing rating of property, provided that it is not overloaded as it is today. The existing rating system, with a few reforms and revisions, is entirely suitable for the sustenance of the low spending English and Welsh district local authorities—the great majority, 80 per cent., of all the authorities. Rates of the same type as today, but at a much lower level, would on their own meet all the requirements of these authorities and make them virtually independent of central Government and accountable wholly and solely to their own electorate.

I put it to the House that if we can achieve that, we will achieve a major constitutional advance. Local income tax—advocated long ago by the Layfield Committee on which my noble friend Lord Ridley served—expensive as it may be to administer, difficult as it may be to introduce, has emerged as far and away the most acceptable and appropriate way of financing the smaller number—80 or so—of the high spending authorities which are responsible for expensive services like education, highways and the social services.

With these two separate sources of revenue, these two separate tiers of local authorities could both become independent of central Government and accountable to their own electorates for their stewardship. That seems to me the single most important change that local government next needs. I do not regret the absence of these matters from the Queen's Speech. It is not the appropriate kind of legislation to introduce at this stage in the life of a Parliament; but I hope that I carry the House with me in expressing the view that a serious malaise, both in constitution and in the economy, will continue to fester until this nettle is grasped, as I hope it will be in the next manifesto.

9.39 p.m.

Lord Davies of Leek

My Lords, this is a long debate and even if I were a Pericles after many, many years on political Benches I hope that I have enough sense to know that no matter how brilliant my speech is, the shorter it is the more it will be enjoyed.

Several noble Lords

Hear, hear!

Lord Davies of Leek

My Lords, at this time of night I am sure that the House and those who arrange our debates—and, whichever stand one takes there have been some excellent speeches, but unfortunately I have missed about nine, from both sides of the House—feel that with an important debate like this with over 40 speakers taking part we should have a two-day session instead of some people having to rush their speeches.

Having said that, I want to put forward a few pregnant questions. The noble Lord, Lord Boyd-Carpenter, is an excellent advocate and a brilliant Minister—an enormous success—but he is denying all that the Labour Government has done and praising private enterprise to the skies. My 64,000-dollar question is: If private enterprise is so wonderful why is it that the acme of capitalism, the forum of private enterprise, the United States of America, has 11 million unemployed? Why is it that there, where they pride themselves on the liberty of private enterprise, they have those problems? The truth is that the old system of economics does not answer. We are moving into a completely new society as envisaged by Adam Smith, who was not so "private enterprise" as people may think, because he accused people of greed and usury in his book. Many people may have forgotten the days when they had to read it: nevertheless it is true.

I should like to bring up the fact which was mentioned by the noble Lord, Lord Scanlon, who made a brilliant speech from our side of the House, that it is absolutely necessary, if you are to have a good engineering industry, not to cut down on opportunities in the technical colleges and universities. If we want to be in the forefront in this world of computerisation, robotics and so on in which we are living, we must have the kind of labour which can handle that. I think it is foolhardy to move into a system of society when, all the time we are talking of a sophisticated future, we cut down educational opportunities for the sons and daughters of the mass of the people, whatever their politics may be. The gateways to greater opportunities in education should be open right away because unless we have the sophisticated machines, the electronic devices and so on that we shall be using in the future, including computerisation, these things will not be understood. You can see it in the schools. There is a little boy of eight who is now learning the binary system. His mother is now doing odd jobs in my own house, and he wants to know what the binary system is; he is learning it at that age. This new type of education is now coming, and the Minister of Education does not have the vision: he is no missionary for the children of the future, the present Minister of Education. It is a case of cut, cut, cut.

Then again, I do not want to say beastly phrases about the Prime Minister, but the lady is dangerous. She is moving into a presidential system of society. Let me put it interrogatively; is the lady moving into a presidential system of society? I see a boffin on the other Benches shaking his head. He is very knowledgeable and he might answer me later. That is one of the things some of us are now questioning. It is such a pity, the things I wanted to bring out. It is fortunate that we have this most intelligent audience listening, and if noble Lords could go into the Printed Paper Office there is a document—I could talk about it for a couple of hours—which deals with the departments of trade, balance of payments, the economy and the current account of the United Kingdom balance of payments. As the noble Lord, Lord Balogh, and others who are knowledgeable have said, what stands out a mile is that were it not for the oil this country would be in a parlous position, without exaggeration, at the present moment. This is the thing which is keeping our nose just above water. I would love to go into it. It would bore the House, but most people would agree, whatever party they support, that it is one of the saviours of our economy at the present moment. Much as I would like to develop that, I shall have have to leave it there.

I now come to the 64,000-dollar lesson. If you are building up small firms and thinking that the future destiny of Britain lies in masses of small firms, you may as well say "Let's go back to cottage industry." My warning is that there are no more gladiators, no more Falkland Islands battles and no more stories of imperialism. The small enterprise, little business system is Poujadist to the core, and, unfortunately, there is a rhythm of Poujadism running through the philosophy of the Prime Minister. Poujade was never in the French Parliament, but he got a strike of about 8,000 shopkeepers going quite well. His motto was J'ai choisi le combat—I have chosen to fight. I admire the lady. She has chosen to fight. But it is time she trimmed her sails and I am glad that there is some influence in the Cabinet that is making her trim her sails, because monetarism as a solution of the economic problem has failed.

I now raise the issue of fair wages and the abolition of Convention 94 of the International Labour Office. I have had a letter from the dental assistants. All of us owe a lot to our dental surgeons and they are proud of their work, but the dental surgeons and their assistants—there are 25,000 or more of them in hospitals and in practice—require fair wage deals. Their local repesentatives and their national paper are begging for a fair wages clause, because some of their salaries are below the levels that should exist. So I hope that the Government will attend to their plea, because these people, like our agricultural workers, are essential in our community.

I was delighted that the machine tool industry was mentioned. I should have liked to give figures, but the sad thing we see today, when great factories close down, is the sale of machine tools which are snapped up and taken overseas. Whichever party wins the next election—there are no silly promises made by sensible politicians—it will be an uphill struggle. To meet that struggle, we need educational opportunities and a sensible system of government which knows how to build up our industrial relations. The excellent maiden speech of my noble friend Lord Gormley put up some signposts that are worth listening to. I have been nine minutes and that is enough on such a late night.

9.48 p.m.

Viscount Ridley

My Lords, my purpose in speaking tonight, as has been the case with some other noble Lords, is warmly to welcome the Government's moves to increase capital spending in the public sector, as was mentioned by the Prime Minister in another place in the debates on the gracious Speech. I do not go so far as the Liberal Party and regard that as a sudden conversion to the Keynesian theory of economics. I do not see us on the road to Damascus. But I believe it is absolutely right to stimulate economic activity in this field, and I am quite certain that most local authorities would be only too glad to do so and to spend more of their money—not, I should add, the Government's money—in the process. But—and this is the purpose of my speech—I must say that there will be difficulties in achieving the £1,000 million which the Government wish.

First, for over three and a half years, local authorities have been castigated and accused of overspending and of reckless profligacy. They may find if difficult suddenly to trust the carrot which appears in front of them at the same time as the stick is being applied to their backsides by the Secretary of State for the Environment. Many authorities, if not all, have genuinely tried to reduce their current expenditure and in many cases, perhaps unavoidably, this has had to be done at the expense of badly needed capital projects which have had to be postponed. Indeed, I should add that many Conservative local authorities lost control to the party opposite in the process. So there is a major drawback, that capital spending now on such projects will have inevitable revenue consequences later. If you build old persons' homes you have to find people to staff them, and indeed every debt has to be serviced, although one immediately must admit that the fall in interest rates eases that burden very greatly. Authorities will be fearful of falling foul of the new GREAs targets limits, et cetera which make the whole system an even worse minefield than it used to be, much more complicated, and to turn on the tap now may involve fearful penalties in future years.

If capital receipts should be used for these new projects, and the Government very rightly point out that they should be. therefore, no interest charges being payable, I think it must not be forgotten that such receipts in the past have usually been very wisely invested and the interest therefrom applied to the relief of rates. So that there may well be a similar effect on the future rating system as well. And, of course, capital receipts also formed a very valuable part of the reserve balances which prudent local authorities have always found it wise to keep.

Even more serious than all this is the difficulty which I believe local authorities in particular will find themselves in, in that the Government wish this money to be spent during the current financial year. It may be very difficult to do this so quickly, however great the will to do it. I believe that this constraint should and can be eased. The need to complete things by 31st March in any one year has often been a most wasteful and an absolutely absurd system of running public finance. I quote the masses and masses of salt ordered by highways departments to be left in the open and washed away by summer thunderstorms because they had to be paid for before 31st March. There are other examples which, had I more time, I would welcome the opportunity to develop.

A lot of things, of course, cannot be done. It is difficult to improve roads when we are about to enter what may be an unknown winter with difficult weather. Indeed, the Government quite rightly have demanded that the construction of major road schemes should be put out to tender. This is a laudable object, but it will take time, and it is not possible that much can be done before 31 st March. So I believe that a major contribution to the saving of public money in many fields would be an end to this deadline. Local authorities must have the opportunity to make a multi-year programme, and furthermore to carry forward from one year to the other more than the 10 per cent. carry-over that they are now allowed under present legislation.

There is another possibility to which I would ask the Government to give serious consideration. A great deal of deferred maintenance on public buildings, which has had to be deferred as a result of the cutbacks and squeezes of the last few years, could perhaps be regarded as capital and immediately be instigated as a way of producing employment and indeed using up the sums which are available. Things like the repainting of the outside of schools, repairing potholes in roads and so on, are all things that could be done quite quickly, which have had to be deferred, and, being labour intensive, would perhaps make some contribution towards relieving unemployment in some numbers. This could be done by 31st March, I hope. Of course, it means stretching the definition of the word "capital", but to be technical for a moment I believe this to be possible. Under the Local Government Act 1980, which we debated in this House for so many hours, paragraphs 4 and 5 of Schedule 12 give the Secretary of State power to redefine capital to this very effect. I believe this is what he should do as an immediate contribution on the problem.

I see I have taken only two minutes, so I shall have another one. I want to ask the Government to look at another aspect of this matter. It concerns the European Regional Development Fund, the ERDF. I believe it would be possible to achieve an immediate injection of capital, and that indeed from Europe and not from the ratepayers or the taxpayers, if there could be some relaxation in the principle of additionality. This is a nasty word that has slipped into our language. It means that where the EEC makes an offer of a grant to a public body that authority's own capital allocation is reduced by that same amount, and the grant in effect ends up in Whitehall. The incentive, therefore, is not all that great to put forward schemes for this purpose, and I doubt whether we are getting all that we are entitled to under the European Regional Development Fund. The principle of this, in case noble Lords in the Opposition should start saying "Hear, hear", was in fact invented by the Labour Government in 1976 and carried on by the present Government without alteration in 1979.

There is another drawback. Before submitting schemes to Whitehall for onward transmission to Brussels the authority concerned, whether local or a public body, has to be totally committed to starting work. It ought to be the other way around so that work can start only if a grant is available. Schemes are not coming forward in case the commitment may prove too heavy and the authority is unable to complete it. The commitment could be relaxed. In other words, it could be said that if a grant is obtained, work can start. The present commitment is one imposed by our Government and not by Europe. It is an important distinction.

I believe that we could reduce the principle of this additionality, partly if not wholly, and it would selectively help the less favoured areas where I come from, where unemployment is so serious. Therefore, I think it would be the cheapest and quickest way of stimulating economic activity, creating jobs and resulting in worthwhile improvements to our infrastructure. Moreover, ERDF grants are not tied to the financial year. Although we may not be alone in this matter, and the only offenders in the Common Market, we are at least among the worst and possibly the most blatant. In brief, I hope that the matter could at least be looked at.

I have tried to make constructive suggestions for this important problem, not going so far as to reflate but to restimulate parts of the economy. I believe that the intention to do this and to reverse the under-spending comes at a very wise and opportune moment. Some may say that it is overdue. Never mind, it is an overall welcome change in direction. It could also be said that we warned the House during the debates on the 1980 Act. Indeed, Ministers were warned by the local authority associations that the ultracomplicated system which that Act brought in was bound to result in under-spending, as, in fact, actually happened. No, we do not wish to say, "We told you so". Let us now look forward, not backwards. I therefore repeat the request of the noble Lord, Lord Underhill, that the Government should, as a matter of urgency, discuss with the local authority associations what might be done to implement the programme.

9.58 p.m.

Viscount Caldecote

My Lords, in October of this year, I had the good fortune to travel round the world and was able to talk to manufacturers and financial institutions in the United States of America, Australia, Singapore and Rome. I was tremendously impressed by the extent and depth of the world recession and by the downward spiral effect of one country's difficulties increasing those of their trading partners and of the terrifying and increasing trends towards protectionism in various forms. I had not appreciated the great severity of those factors in the world. Certainly, we need to tackle them on a world co-operative basis.

But to argue that because the recession is world wide and until the United States' ecomony recovers we cannot do anything here seems to me to be hopelessly defeatist and wrong. If we all take that view, nothing will ever happen and we shall never get out of this recession.

I shall make one or two suggestions at this very late hour on what we can and should do towards solving today's overriding problem of achieving growth and more jobs without inflation. I join with other noble Lords in congratulating the noble Lord, Lord Gormley, on his dynamic and sincere maiden speech. I agree with many of the things he said, particularly about the tragic waste of creative resources arising from unemployment I believe that we now have the opportunity of stealing a march on our competitors because of the resolute way in which the Government have tackled our problems over the past three years. This gives us a lead over our competitors who have lagged behind, as I saw when I went round the world, in tackling their problems.

We have achieved a major reduction in inflation, interest rates and manufacturing costs, although more needs to be done in that respect, as the noble Lord, Lord Boyd-Carpenter, said. But there is no future in fewer and fewer companies becoming more competitive while creating even higher unemployment. Now is the time to exploit the real achievements that result from the Government's policy. As with most major initiatives, of course, there are risks involved, but they are not nearly as big as we readily accepted in the recent Falkland Islands campaign.

Happily, the Government have declared their policy of maintaining a prosperous manufacturing base in Britain. That is good, for manufacturing is the source of all real wealth—we cannot live by service industries alone. It was encouraging and very welcome to industry that in the Chancellor's mini budget he gave us some further help towards reducing costs. But I thought that it was an error of judgment not to go the whole hog and abandon the NIS altogether. For, as he said himself, it is a bad and stupid tax.

However, in the industrial scene there is now another factor that is assuming ever greater importance, and that is the need for a much bigger volume of orders. Over vast areas of our manufacturing industry there have been huge reductions in numbers employed—typically some 30 to 40 per cent. of the workforce. Factories have closed, production has been concentrated, in many areas orders are still falling faster than costs, the cash flows out and further closures become inevitable. In the bigger multi-product companies you can concentrate resources on a few businesses and you can go out of the others. But there comes a limit to the strain of closure costs, and the smaller, single-product companies have nowhere to go but the receiver.

I wonder whether it is fully realised what the enormous average cost is of redundancy? It costs, net to the company, after Government contributions, an average of at least £2,500 per redundant employee—say, £1 million for every 400 people made redundant. Often companies simply have not the cash resources to enable them to make those payments. So the bankruptcy toll is mounting and the sick lists of financial institutions are lengthening. Above all, industry now needs an increased volume of orders, to exploit the cost cutting that has been achieved, to return to adequate profits, to provide cash for investment and to achieve lower unit costs. The capacity is there in machines and in labour. So increased orders ought not to be inflationary for, as Sir Stafford Cripps used to warn us years ago, inflation is caused by too much money chasing too few goods. In my opinion it is time we gave greater emphasis to creating more goods in that equation, compared to reducing money supply on which we have rightly concentrated over the past three years.

How then can increased volume of manufacturing be encouraged?—not primarily, I believe, by personal tax cuts, although there is need for some adjustment of allowances, as other noble Lords have mentioned, to deal with the problem of the poverty trap. But I am sure that the main impact as regards increased manufacturing orders will not be achieved through personal tax cuts, for there is a grave risk of increased purchasing power going largely into imports until industry's unit costs can be further reduced, not least by an increased volume of orders.

Therefore, the only other way in which we can increase orders to manufacturing industry is through investment. Private sector investment is not likely to rise until the volume of orders and profits increase. So we must look to the public sector, as other noble Lords have already said, where there are many profitable opportunities for investment which have been held back over the past three years to control the level of Government borrowing. But we now have the absurd paradox of many important tasks to be done, of surplus labour to do them and savings to finance them, which are being exported at the rate of about £2 billion a year. We cannot accept any longer—although it has been necessary in the past—that those three things cannot be brought together. In the trading part of the public sector—steel, Telecom, railways and energy—much investment in specific projects would be profitable, reduce costs or bring in new business. But investment has too often been prevented because of the pressure to keep within the external financial limits. Surely this must be wrong, though I accept the need to keep a strict control over Government borrowing.

The way through the dilemma is, I submit, by "project financing", using private sector finance. For the present, this is prevented by over-rigid Treasury rules and definitions. Those discourage financial institutions to devise suitable schemes based on the principle that the return on investment will depend on the success of the project. Such investments in the public sector cannot be inflationary any more than investments of the same type in the private sector. But a new co-operative attitude by the Treasury is essential if progress is to be made in that direction.

In the non-trading public sector—in education, in health, in housing, and in services like sewage disposal—it is seldom possible to find profit-earning investments. So we have to look to another argument. But the investment there is no less urgent. The infrastructure is running down, the housing stock is deteriorating, many old people are living in disgraceful conditions, and hospital facilities urgently need improvement. Such investment cannot be indefinitely postponed; it must come some time. If it has to be done when the demand for labour is increasing, as it will be one day, that will simply add to the difficulties of expansion without inflation. So let us make a start now when there is plenty of labour, plenty of capacity and plenty of savings with which to do it, while spare capacity is available.

Therefore, my plea to the Government is let us seek out ways to stimulate profitable investment in the public sector, as well as in the private sector, by using private sector finance, and make a start on increasing essential investments in the infrastructure by using spare capacity while it is still available. It has the great advantage compared to consumer expediture: all such expenditure will be spent in the private sector; the volume of orders will increase; unit costs will fall; profits and private sector investment will rise. In short, there will be a virtual spiral of wealth creation, more jobs will be started with rising confidence and hope for the unemployed.

The Government have done a wonderful job and now is the time to cash in on it, to exploit their achievements. Of course, everything must be done to stimulate world trade with maximum freedom from protection, but that will take time to have effect. In the meantime, we must start to help ourselves, for if we do not manufacturing industry will be so damaged that it will not be able to meet the demands on it when the world recession ends.

10.8 p.m.

Lord Hatch of Lusby

My Lords, in speaking to this amendment, I am happy to follow the noble Viscount, Lord Caldecote, in almost all he said, particularly in his criticism of the Government's continual bleating about their helplessness to do anything until the world recession is reversed. I should like to add to what he has said, and make a plea to the Government to take some responsibility for their part in the world recession and to do something about it. I did not recognise some of what he said, particularly when he was talking about what many of us think of as the industrial desert that has been left by this Government, or about the degree of productivity in manufacturing industry which, according to the national institute, would have to be raised by 50 per cent. to compete with our major competitors in Europe.

However, I should like to start my remarks tonight with a particularly warm welcome and congratulations to the noble Lord, Lord Gormley, on his maiden speech this afternoon. I say particularly warm, because the noble Lord was chairman of the Commonwealth Committee when I was in Transport House 25 years ago. I was delighted to hear him refer in the latter part of his speech to the British responsibility to the poor of the world. In fact, I was tempted into this debate by the knowledge that it was to be wound up by the noble Earl, Lord Gowrie. I have missed him on the Government Front Bench; we have had some very pleasant jousts in the past.

I will assure him that I will not again taunt him with la belle dame. I sometimes wonder whether he wakes up in the middle of the night and is quite as sure today as he was when he first entered office that she is belle. I have no doubt that he is in no question that she has no mercy. The last time that he and I spoke on the issue we are debating tonight was immediately after the general election in 1979. I want to remind him of our exchanges on that occassion because they are pertinent both to the amendment and to the Motion we are debating.

On that occasion I put this question to the noble Earl: Between 1970 and 1972 under the Heath Government, before the U-turn, British manufacturing industry declined; the number of British manufacturers declined and investment went abroad. What reason has he to think that the same policies followed this time will not have the same consequences? [Official Report, 19/6/1979, col. 954] This was his answer from column 955 of the Official Report: The short answer is that we know a bit more now, on all sides, and we are going to follow the same essential policies, the same thrust, but with greater knowledge and greater caution. I wonder whether tonight the noble Earl can assert the same kind of confidence that the policies which he then proclaimed were going to be followed by the Government were going to have different consequences from those which had befallen the previous Conservative Government under Mr. Heath?

In particular, we were discussing then the policy of the Government in tax cuts at the top amongst the rich and the belief of the Government that this would bring increased investment, particularly in manufacturing industry, and the dropping of exchange controls. I suggested at that time that this had been done by the Heath Government and that the result had been a massive outflow of British capital, a lack of investment in industry in this country, and that that outflow had been going to our major competitors; it had been going to other developed countries.

Tonight we can see from the official figures just where three and a half years following that policy has led this country. In 1981, last year, there was an outward flow of direct investment of £5 billion. The inward flow was under £1 billion. I have not got the figures for last year as to the exact places in which this investment found itself. I have to go back to 1980. In 1980 £3 billion of investment from this country went to West Europe, North America, and other developed countries. Only £570 million went to the rest of the world, and half of this went to the Caribbean, Central and South America, which is mainly the middle income developing countries like Brazil, Mexico, and so on, leaving less than £235 million for the rest of the world.

What has this to do with employment? There is a direct link here. Last night I asked the Minister of State at the Foreign Office to tell me the latest figures for employment engendered by British overseas aid. I told him that when we were in Government we reckoned that the aid programme provided at least 40,000 jobs in Britain. Aid has been cut since then. It has been cut by 11 per cent. I was not given an answer. I would still like an answer as to what British jobs are being provided by the aid programme.

Apart from the aid programme, what about our export performance? About 25 per cent. of our exports go to third world countries. They are calculated to provide 1 million jobs for British workers. But, despite our long historical connection with the Commonwealth, the ex-colonies, Africa, Asia and the Caribbean, while 25 per cent. of our exports go to the developing countries, 35 per cent. of United States exports go to developing countries, 36 per cent. of EEC exports go to them and, for Japan, the figure is 41 per cent.

I suggest, in direct relation to the amendment, that while the gracious Speech omits any measures to tackle the question of unemployment and the economy, there are alternatives in front of us. The alternatives are being shown to us, in particular by the Japanese, something which is not generally known, so I will briefly summarise the Japanese position. Last year Japan's exports to third world countries increased by over 15 per cent., to about £40 billion a year. Ten years ago that figure was £6 billion. Of course, the Japanese do not have the raw materials we have, but we import a lot of raw materials, too. The Japanese, however, recognise that because they must import those raw materials, they must give the developing countries the means to supply them; they must give them the purchasing power to buy Japanese goods and, as a consequence, the Japanese have a deficit of £10 billion a year with the developing countries.

I am suggesting that there is a field of commercial activity which we have sadly neglected, particularly since the end of the Colonial Empire, and that it is the kind of activity which could revive our economy—despite what happens in the United States and despite what happens to interest rates—if we will see the opportunity and so direct our policies as to allow the people who need and want our goods to have them and thereby to put our unemployed back in work. The Japanese have shown that, both in their trade and aid policy. Many people believe that the Japanese have lagged far behind in aid. They have, until recently, but, for example, last year the Japanese invested £12 billion in the third world and, in addition, they gave £4 billion in aid, one-half of it official aid, making them fourth in the table of Western nations from the point of view of overseas aid, and above us.

All I want to submit to this House is that there is an alternative. Of course, this is only one part, but it is an important part—that a quarter of the human race is outside the market; they are waiting to be brought in. We have the historic links. We have the initiative, if it can be energised, as the noble Viscount was suggesting a few minutes ago, with public money and private money. There is the opportunity to reverse the decline of Britain as an industrial nation. There is a need to be met, and there is the opportunity for the future generations of British workers.

10.21 p.m.

Lord Diamond

My Lords, like the noble Lord, Lord Hatch of Lusby, first I want, on behalf of my party, warmly to congratulate the noble Lord, Lord Gormley, on his maiden speech. It was an excellent speech, and as I listened to it I felt bound to consider that there could not have been a stronger argument against the policy of his party to destroy the House of Lords. I am glad to say that I was happy with many of the things that we heard at the start of the debate from the noble Lord, Lord Cockfield. I agreed very much with his very kind reference to breaking the mould. I thought it an extremely diplomatic reference, and I agreed with everything that he had to say about import controls.

However, I fear that I must go on to say that I have to criticise the Government severely for not taking seriously enough the numbers of jobless and the plight of industry. By now the facts are well-known, but I shall summarise them. Unemployment is higher here, and has risen faster, than in any major developed country. Even worse, the number of long-term unemployed has trebled in the last three years. When we look at current living standards, we find that real disposable incomes—what people have to live on—last year had their sharpest fall since the war. When we consider future incomes and industry, which is the method by which future incomes are provided, we come across a set of figures which is truly terrifying.

In the 16 years since 1966 there has been a decline in industrial jobs of no less than 4½ million—some 38 per cent. of the workforce. Even more terrifying is the fact that though industrial employment seemed to stabilise in 1978–79, in the last three years, under the present Administration, the loss of industrial jobs has amounted to more than 1¾ million, or nearly 20 per cent. That is to say, half of the total percentage drop to which I previously referred as having occurred over 16 years was in the last three years. That is a truly catastrophic fall. In no OECD country has the decline been so pronounced as it has been in the United Kingdom.

So, following what the noble Viscount, Lord Caldecote, had to say, I must examine the industrial scene a little more closely, though of course very briefly. Not only is industry a provider of jobs, of goods, and of exports; it is also an indicator of the health of the economy. There is a strong association across countries between the growth of manufacturing output and the growth of gross domestic product, and we know that in June of this year gross manufacturing output fell to its lowest point since 1967.

What then is the main cause of this deindustrialisation? It is certainly not technological change. Technical progress is itself the progenitor of industrialisation and so of the growth of industrial employment. The facts of the last few years can be explained only by severe demand restriction relative to potential output and the slow growth of exports relative to other countries—exports which, incidentally, import controls can obviously do nothing to foster directly. And when you look at the differences between countries, you see that it is not the United Kingdom's propensity to import which is so alarming, but the abysmally slow comparative growth of exports, which in turn, in my view, is not in the main due so much to price differences as to quality, design, reliability, delivery, marketing and servicing.

So that is the distressing picture of our employment and industrial decline to which the Government's policy of concentrating on deflation at all costs has largely contributed, I would certainly not wish to overlook their measure of success in reducing inflation—some 2 to 3 per centage points since they took office. But at what cost in unemployment, bankruptcies and the rest? I feel bound to ask: What shall it profit a man if he shall gain a small reduction in his mortgage repayment and lose his whole livelihood? And what shall it profit a business man if he shall gain a few pounds in overdraft interest and lose his whole business?

I am afraid the gracious Speech gives very little encouragement for the future. Indeed, the clear indication is that the Government will continue the same policies as those that have largely led to the distressing facts I have described. So I must appeal to them to look afresh and to listen afresh. I want them to look afresh at the acres of empty industrial buildings, with some owners frantically removing the roof so as to avoid liability for rates. I want them—I do not know whether anybody wanted to interrupt.

The Earl of Gowrie

My Lords, I certainly should not have interrupted from a sitting position, but my emotions overtook me. Having to remove a roof in order to avoid rates is hardly the fault of the Government; it is the fault of the local authority.

Several noble Lords

Oh!

Lord Diamond

My Lords, if the noble Earl thinks that is a very great argument, I will give it to him. Of course, some local authorities have the power to relieve rates, some local authorities do not relieve rates, and, of course, that is under the legislation which this and the other House have passed. But I repeat: that is the situation I want the Government to look at, and I am delighted that the noble Earl was so shocked that he had to do the unusual thing of interrupting me from a sitting position, so much were his emotions moved.

That is what I want to happen. I want the Government to look afresh and see what the situation really is. I want them to look at the large packing cases containing efficient plant sold so cheaply under the liquidator's hammer that the buyer can afford to transport it to his own country and reassemble it there so as to make the same articles abroad and possibly export them back to this country. I want them to look afresh at the fast-growing queues of hopeless, dispirited, rejected jobless who have not worked for over a year. I want them to look afresh at the grumbling gangs of teenagers, with idle hands, ready to give heed to the Devil.

I want them to listen afresh to the growing volume of voices asking for a change in emphasis in economic policy and for some measured increase in economic demand—weighty and well-informed voices, like that of the noble Viscount, Lord Caldecote, which was the last one we heard; other voices, like those of Edward Heath, Geoffrey Rippon and Sir Ian Gilmour; voices like those that were heard at the recent CBI conference of discontent. I hope, too, that they will study carefully the proposals made in the recently published interim report of the Alliance Commission on Unemployment and Industrial Recovery which shows how unemployment can be reduced by 1 million in two to three years at a net cost of little more than what has proved to be the margin of error in the estimates of the public sector borrowing requirement.

Alas, my Lords, I have little reason to believe that the Government will listen. So far, they have shown themselves to be stiff-necked and obdurate and the recently announced concessions, welcome as far as they go, are quite inadequate to meet our desperate situation and show no real change on that attitude. I hope that they are not going to compound that obduracy by maintaining that any proposals different from their own are bound to lead us into a worse economic situation in the long run and that they alone can speak with authority as to this.

The sorry fact is that the Government have lost all authority and credibility in forecasting the results of their economic policies. If that is challenged, let us go back to the general election and consider what their forecasts were then. Did they then seek support promising a fall in living standards? Did they then ask the business community to vote them into power on their guarantee that the number of bankruptcies would be the greatest ever? Did they secure a considerable trade union vote by promising to raise unemployment to a minimum of 3 million? Of course not! Of course, this was not their intention. But it has all happened; and it has all happened because they have lost control of the economy. It has all happened because they have carried a narrowly defined policy to excess. I appeal to them to think again. And if they will not take advice from me, then perhaps they will take the advice which has stood the test of ages and which is to be found on the walls of the temple in Delphi and which Plato recommended to us: "Meden agan"—"Nothing in excess".

10.34 p.m.

Lord Bruce of Donington

My Lords, in winding up for the Opposition in this debate, which has been a very long debate, it is my first and very pleasant duty to congratulate my noble friend Lord Gormley on a most notable speech; indeed, one which, with its directness, spoke absolutely straightly to the House. The noble Lord did not talk with a forked tongue; he talked exactly as he felt and, in a way, in my opinion he set the tone for this debate in declaring boldly that what we want is earned money instead of dole money. I hope the noble Lord takes part in our debates again very soon. I hope that he will favour us with many more direct observations, some of which may not command universal approval—but which will, at any rate, enhance the value of this House and the esteem in which this House is held—by coming directly to the points at issue and approaching them on a basis which, in his case, rests on almost unrivalled experience.

The noble Lord, Lord Cockfield, in opening the debate, with his usual modesty said that the role of his Government was principally to create the environment within which industry and commerce can prosper and in which people can be free. These are very worthy and completely acceptable aims. I observed that the noble Lord and his Government were congratulated by numerous noble Lords on the other side of the House on the Government's achievements. There seemed to be almost universal satisfaction with the steps that they had taken. True enough, some noble Lords—I mention in particular the noble Viscount, Lord Caldecote—seemed to detail a number of steps which they thought ought to be taken which found favour on this side of the House. Indeed, I wondered whether the noble Viscount, aside from his initial remarks of congratulation—I suppose the election is approaching and political pressures grow hard—supported the Government at all. Nevertheless, other noble Lords did so. I therefore want to put it to noble Lords—

Viscount Caldecote

My Lords, may I put the noble Lord right? I support the Government wholeheartedly. The point I was making was that the Government have been entirely and wholly successful in the policy that they followed, and now it was time to proceed and to exploit the success of that policy.

Lord Bruce of Donington

My Lords, I am most grateful to the noble Viscount. I hoped that I would be able to secure a united front on the other side by that very timely intervention. So much for success. Is it a success for the Government to create the environment within which total output has declined by 6 per cent. in the past three and a half years? Is that claimed as a success? Is it a triumph to create the climate—I am using the noble Lord's words—the environment within which industry functions, during which industrial output has declined by 12.3 per cent.? Is that an achievement? Does anybody boast of the achievement?

Is it an achievement that manufacturing output should have gone down by over 17 per cent. in three and a half years? If so, let the achievement be acclaimed. Is it an achievement for investment in manufacturing industry?—and I emphasise "manufacturing industry" for the noble Lord, Lord Cockfield, in case he confuses it with gross investment; in case he confuses it with investment in the oil industry; and in case he confuses it with investment in the service industries. Is it an achievement for those who seek to create a climate or an environment within which industry can succeed, for them to have presided over a state of affairs in which manufacturing investment has decreased by 33⅓ per cent. over the past three and a half years?

Congratulations for success abound. Do the Government claim it as a success that unemployment has gone up by 2,200,000? Is that a triumph? So, where is the success? Something that they have claimed is that the inflation rate is now running at a level which is approximately 3 per cent. below that at which it was running in May 1979. The noble Lord, Lord Boyd-Carpenter, was careful to point out that the trend was upwards. And if the trend was upwards so mightily, was it accelerated by the measures the Government immediately took which put in a matter of months 8½ points on the increase to a level of some 22 per cent. by their own action?

Lord Boyd-Carpenter

My Lords, would the noble Lord allow me? As he is quoting me, would he carry on by reminding the House that I pointed out that one of the reasons why inflation rose sharply after 1979 was the enormous number of post-dated cheques for post-dated wage settlements which the Callaghan Government deliberately left behind them?

Lord Bruce of Donington

My Lords, I am grateful to the noble Lord for his intervention. I was under the impression that the noble Lord's party many times before the last election emphasised its devotion to free collective bargaining and the repudiation of all incomes policies. Is he now complaining that before the election the rights he wanted to give to the trade unions, and upon which he bribed them, were exercised and they obtained wage settlements? Where is the noble Lord's blank cheque?

Lord Boyd-Carpenter

My Lords, if the noble Lord persists in challenging me, I must persist in interrupting him. These were agreements mostly made by the Labour Government themselves with the unions concerned, apparently of their own free will, knowing that they would not be there to honour them.

Lord Bruce of Donington

If that were so, why then did the noble Lord's own party deliberately add another 8½ per cent. to the inflation rate, which it most certainly did, by its raising of VAT, increases in rents and interest charges and so on? But I do not want to take away the credit for this 3 per cent. at all. Prices are still rising, but they are rising at 7 per cent. instead of ten, although that does not apply to old age pensioners, who have a different spectrum of expenditure from the Members on the other side of the House. For them, the inflation remains substantially what it was. The noble Lord's own figures show that the standard of living has gone down during that period by almost the exact amount that the rate of inflation has been decreased. So this is the achievement which they claim—or do they claim the achievement of 433 liquidations and bankruptcies a week? Do they claim that as a success? I rather wonder where the claims for success come from. Of course, the noble Lord, Lord Soames, has a complete alibi for that, because he said: "That is all due to the recession; it is not due to the Government at all." In order to prove his point he made the same selective quotations from statistics as were made by his right honourable friend the Prime Minister the other day, which related only to 12 months.

I will give the noble Lord the figures for the three years since they have been in Office. During that period in seven countries—the United States, Japan, Germany, France, Italy, Britain and Canada—in the years 1978–81 taken together production went up by 5.5 per cent. In the United Kingdom it fell by 2.2 per cent. So far as unemployment is concerned in those years, the average unemployment in the seven, including Great Britain, in 1979 was 5.0; in the United Kingdom it was 5.7. But by 1982 the big seven had unemployment of 7.4 taken together, whereas the United Kingdom has now 12.4. This disposes of the argument that the recession is something which is essentially world-wide and we are caught up in it.

Lord Soames

My Lords, would the noble Lord allow me? I was quoting figures of what had been the increase in unemployment over the last 12 months in a number of countries. The noble Lord rightly points out that some years back the figure in this country for unemployment was higher than in a number of other industrialised countries. We all know that we started off this recession less competitive than any of our trading partners and were in a less competitive position; and, indeed, a less kind of impartial person than myself might have pointed out that it was after five years of Socialist Government.

Lord Bruce of Donington

My Lords, I trust that the noble Lord will read the figures tomorrow, when he will regret what he has just said, because they show that, in comparison with the seven, our position has deteriorated in all respects in the last three years more than the rest combined. But I do not want to be too unkind to the party opposite, because they know all this. They know it all, really. They are putting on a very brave face, which they have to do when elections come around, and they think that by the sheer power of the media, which they always have largely at their disposal, the big lie can, in fact, be sold. It is too late an hour to go into the very great detail which answering every speech would, of necessity, require and I am anxious not to detain the House—

Several noble Lords

Hear, Hear!

Lord Bruce of Donington

My Lords, you must have a little more of it yet. But I observe that one of the irrelevancies, which were referred to in the gracious Speech as being part of Government policy, relates to the continuation of the policy of privatisation; and, indeed, my noble friend Lord Scanlon referred to the same point. I am a little amazed at this. How can it be imagined that the change of ownership of particular sections of industry—usually the profitable parts—will add one extra person to those numbers employed?

What relevance does it have? It does not even have an intellectual relevance, because, on the one hand, we are assured by the Government, and by noble Lords opposite from time to time, that one of the reasons for the decline in British industry is its lack of competitiveness and its inefficiency. Indeed, it has been said many times that the decline in industry over the last three years—and it clearly dates the decline in output and the increase in unemployment from the advent of this Government—has been largely due to the inefficiencies of private industry. So for one purpose the Government claim that private industry is decrepit, it needs to be thinner, leaner and fitter and, on the other hand, we have the virtues of private enterprise claimed, in order that state enterprises that are working very profitably can become more profitable. There is a little contradiction there and the Government should make up their minds, because it is completely irrelevant as an argument to bring forward for privatisation.

I was particularly glad that my noble friend Lord Underhill dealt with the question of local authority expenditure—a point that was enlarged upon very effectively, if I may say so without embarrassing him in any way, by the noble Viscount, Lord Ridley—and the sheer idiocy and, indeed, the political unscrupulousness of the Minister for the Environment, who has been busily clobbering local authorities for many years, and who has the audacity to tell them to try to incur an extra £1,600 million of expenditure before 31st March next, which he knows is quite impossible. I thought that my noble friend Lord Underhill made that point very well, and that he was very considerably assisted by the noble Viscount, Lord Ridley.

I did not see the noble Lord, Lord Cockfield, wince at this projected increased expenditure, which he must know involves the expenditure of revenue items just as much as capital, for the reasons which were explained by the noble Viscount. The reason why the noble Lord did not exhibit any worry was because, of course, he knew it could not happen anyway, and that the attitude of the Secretary of State for the Environment was itself expressed in terms almost identical with those expressed in last week's Economist but expressed loosely by me as sheer humbug.

The Government's policies put forward in the gracious Speech have very little relevance whatever to the problems facing the nation. It is indeed a problem, and most sensible people know it, to maintain near full employment and at the same time to maintain those ancient individual liberties for which we have all fought; it requires the co-operation of everybody. None of us would wish to have full employment accomplished, as it is of course in the eastern states, by reason of sheer state control and dictation. We prize our liberty too much for that. But it is a problem which can be solved.

Nobody can say that it makes any sense to spend £15,000 million, which is what unemployment is costing us per annum at the moment, to keep people idle when the needs of people are so clamant at this time. There is a way in which the two can be brought together, in which the means of production and the individual working population can be brought together to produce useful things for one another. We may not have the way yet, and there is no monopoly of wisdom. There are in fact alternatives. But practically any alternative is better than the complete inertia and dogma of the worst Government this country has had in centuries.

10.52 p.m.

The Earl of Gowrie

My Lords, I am grateful to my noble Leader, Lady Young, for allowing me a half holiday, so to say, from the endless fascination and frustration of Irish politics, and a return to my first interest in economic affairs. Those of us who work on the Danube are always grateful for a day or two in Rome, if that is not a tactless phrase to use in connection with Northern Ireland. I am also grateful because, in spite of its length, this has been an extremely absorbing debate and I have learned a lot from it. It has been, I believe the longest debate on the Queen's Speech for more than 10 years. I will do my best, but I am not sure if, like the Dodo, I shall be able to hand everyone prizes, if only the dubious prize of a mention.

It is, of course, a very pleasant convention to begin by mentioning the maiden speech of the noble Lord, Lord Gormley. My own first political job was working in the Department of Employment under the then Secretary of State, who was Mr. Willie Whitelaw, and how well I remember those inimitable tones ringing down the passage saying that their owner might be thought not to know anything about anything but in his view Joe was right and the miners were not getting paid enough. Little did we think then that 10 years later we would be debating with the noble Lord in your Lordships' House. I also congratulate the noble Lord, Lord Gormley, on managing in a non-controversial maiden speech to make the news wires, which read, "Gormley raps Britoil sale".

I would prefer the more elegant and poetic language of my noble friend, Lord Cockfield: Gormley raps the liberation of the North Sea. My Lords, if I go on to praise the speech of my noble friend you will probably taunt me with the immortal phrase which earned Miss Rice Davies a place in the dictionary of quotations: Well, he would, wouldn't he? But I have to say that it seems to me that the weakness of the intellectual case against the Government's overall economic strategy is that none of the alternatives on offer—I shall try to deal with some that have been raised today—have really faced those essential truths from which my noble friend and the Government refuse to flinch. They are central and they are simple, and we should all be able to agree on them. They are as follows. Britain has to compete in the world as we find it, not as we wish it to be. We have to compete fiercely to maintain our standards of living, whether as individuals or in terms of our social and welfare policies, let alone to improve them. We cannot compete by means of outmoded or overmanned industries, or by paying ourselves wages and benefits on credit. We cannot compete in world markets unless our home base operates within a stable financial climate. It is not just the rate of inflation that matters but the rate in comparison with our competitors and our trading partners. We cannot compete if our political system launches periodic assaults on the econonic system.

How, for example, would the Labour Party, in Government, be able to pay for improved social services or greater benefits for lower income groups by attacking the sharp end of our economy—the financial services: the City and its occupants for short. These, after all, earn so much overseas and provide such a healthy share of our tax revenue. We cannot achieve the financial and political stability which allows our companies to make sensible forward provision for their trading and borrowing needs if the biggest company of all—the British Government—plays havoc in the financial market by spending faster than our rate of economic growth can sustain.

In all his eloquent criticisms of the Government I do not think the noble Lord, Lord Diamond, met any of those points, although as former Chief Secretary to the Treasury he did, of course, meet them in Government. We remember how well he met them in Government. It would do an enormous amount for the financial and political stability of this country, and thus for our ability to earn our living and perhaps improve it a little, if political parties would not renege in Opposition on the problems and truths they had to face in Government. Very few Conservative Ministers—except, of course, my noble friend—have put the position with such succinctness as another former Chief Secretary to the Treasury in a Labour Government, Mr. Joel Barnett. Almost six years ago, in November 1976, he said: Our public expenditure has grown faster than our rate of economic growth could sustain. I also believe that this has been an important reason for our generally poor industrial performance, for it has meant that the public sector—that is, both central and local government—has pre-empted financial and manpower resources at the expense of manufacturing industries. That position has to be reversed. It will be both painful and difficult". I quarrel with only two things in that statement. Successful modern manufacturing industries do not need anything like the manpower resources of an earlier stage of industrial development. I do not think we should regret this. Of course, the transitions from one type of industrial economy to another are painful. Yet only just over a year ago, when an employment Minister, I often used to reflect that if we were still enjoying the full employment of the 1950s and 1960s I should probably be stumping the country talking about how on earth we might be able to liberate more human lives from the repetitive and tedious tasks of the average manufacturing plant.

To Mr. Barnett's statement, I would also add the word, "exporting" to manufacturing industries. That is because it is just as respectable in terms of earning the country's living, to manufacture financial services, as it is to manufacture cars. That is true even if you do not go as far as my noble friend Lord Vaizey, who took the view that manufacturing industry will continue to be a declining part of the total economy, and if you take the view of my noble friend Lord Caldecote that we cannot live by services alone.

In general, nevertheless, I find the former Chief Secretary's statement impeccable and while Mr. Barnett is a less than fashionable figure today, the simple arithmetic he chose to confront has not, alas! gone out of style. The Government's response to this simple arithmetic has had to be equally simple and coherent. In our review of public expenditure for 1983–84, we have kept the planning total within the figure of the 1982 White Paper as modified in the last Budget. The figure is £120.7 billion. That is a fact of enormous significance, dry as it sounds—and I do not mean simply as opposed to "wet". It is the first time since 1977—the days when Labour lost control of our destiny and had to hand it over to the IMF—that the annual review has not led to an increase in planned expenditure. It has been, to adapt Mr. Barnett's words, both painful and difficult. But that is the necessary framework for financial stability at home and international confidence abroad, and on these two things our competitive improvement has to depend. We are not like the airline described by the noble Baroness, Lady Burton of Coventry—the airline being conducted, she said, as if money grew on trees. It is also the framework within which any alternatives on offer, any differences in policy emphasis or policy aim, have to take place. Surely the measure of sincerity involved in offering different policies, the measure of sincerity even towards the great social evil of unemployment, lies in facing up to that arithmetic and accepting the necessity of operating within it. I cannot agree with the noble Lord, Lord Kaldor, from whom I have learnt so much in economic debates over the years, that this is a matter of ideology rather than of arithmetic. If we could only agree on that, the debate would be profitable as well as interesting.

Let me now turn to some of the advice which has been given today and some of the criticisms—most, I think, constructive—which have been made. As we may be about to vote on two of these, let me first consider the points raised by the amendments. It was a pleasure to welcome to the Front Bench the noble Lord, Lord Scanlon, who was extremely kind to me when I was a very fledgling employment Minister. I was involved in training affairs and I am glad that in his otherwise trenchant speech he said that in terms of training this Government's record had been good. I am grateful for that. However, his castigations on inflation and the cost of reducing it, which were echoed even more trenchantly as we would expect of him by his noble friend Lord Bruce of Donington, could not have better been answered than by my noble friend Lord Boyd-Carpenter. I refer to my noble friend's references to Clegg, to the doubling of PSBR shortly before the last general election and after oil liberated Labour from the IMF tie. When the noble Lord, Lord Bruce of Donington, castigates the Government for adding percentage points to inflation by VAT increases, I would point out that these were broadly neutral, in that the Government had campaigned on shifting the emphasis of taxation from direct to indirect taxation—a measure which I for one believe was right.

In terms of the Government's treatment of pensioners, as I said in an intervention, we have nothing to be ashamed of whatsoever. After all, we started off by restoring the shortfall, achieved by the Labour Government. Full protection has been given and will continue; pensioners are better off in real terms under this Government and our commitment to maintain the real value of pensions and associated benefits from year to year is firm.

The noble Lord, Lord Scanlon, attacked our denationalisation or privatisation policies or, as my noble friend would say, our liberating policies. He said that industries belong to the people of this country, and that is why presumably he does not want them to be able to participate in their ownership. I agree with him, as I said, in achieving parity of tariffs, but otherwise I am afraid to say that his policies came down to the simple advice that we should borrow more money and abandon the nuclear aspects of defence. There was nothing in his speech about the ratio between pay and jobs and he knows a very great deal about that—and I think we were all aware of that deficit.

The amendment in the name of the noble Lord, Lord Byers, is certainly welcome in its recognition of the perils of inflation and the perils of any breakdown in free trade. Nevertheless, it calls for additional expenditure, however selectively used, without any indication of how this additional expenditure could be raised. It is a kind of respectable version of Lord Molloy's "spend and prosper" advice. If only we could. It is surely right of the noble Lord, Lord Byers, to urge manufacturers to compete abroad, but, again, additional Government expenditure means high rates of interest for industry and additional cost laid upon industry. As my noble friend Lord Sandford reminded us, additional local authority expenditure means increased rates, which cost jobs. But I certainly endorse what the noble Lord, Lord Byers, said, in that we should buy British wherever we can, though it was curious to hear a Liberal urging us firmly to break the rules of the Treaty of Rome.

Several noble Lords

No!

The Earl of Gowrie

My Lords, I may have misinterpreted the noble Lord, but he seemed to be going pretty far in that direction to me, and my noble friend the Secretaty of State for Trade was muttering this in my ear at the time.

Lord Byers

My Lords, there was nothing that I suggested which incurred any form of protectionism. lt was merely that we ought to shop at home when we can.

The Earl of Gowrie

My Lords, in that case I am very happy to withdraw my allegations and agree absolutely with the noble Lord. I think that we should do that. I was interested that my noble friend Lord Caldecote, in a remarkable speech, agreed with the noble Lord, Lord Byers, that some upturn in demand would not be inflationary now in view of the relative success that the Government have had in bringing down the overall rates.

Many of your Lordships dealt with the world economy, and I am glad that most people did not blame everything on the Government. Even the noble Lord, Lord Hatch, urged us to participate more in third world economies in order that demand might be increased here. I thought that the speech of the day came from my noble friend Lord Eccles. He said that international reflation is the only way; that inflation is a domestic problem but unemployment is an international problem; and he seemed to be saying, with the noble Lord, Lord Cobbold, "Bring back Bretton Woods". I would point out to the noble Lord, Lord Cobbold, that, of course, when Bretton Woods was formed there was not a Eurodollar market and no petrodollar surplus.

My noble friend Lord Soames, in another remarkable speech, drew our attention to how important it is to protect our purity as a trading nation. He said that we export 30 per cent. of GDP so the liberal system of trade is to our advantage above all others. We need parity of opportunity. He said that the industrial countries must not retreat into a protectionist shell. Where free trade is concerned, I want to be on the side of the angels, to borrow my noble friend's phrase—but angels surely must not be so blinded by their own light that they fail to discern the presence of devils here and there.

On pay issues my noble friend Lord Vaizey rejoiced in the demise of the annual wage round, which he saw coming. The noble Lord, Lord Rochester, wanted a very watered down form of incomes policy, as did the noble Lord, Lord Roberthall. I know which I prefer. I would prefer the demise of the annual wage round. The noble Lord, Lord Balogh, was saying: "Come back, Aubrey Jones", and made the interesting observation, which I had not thought of before, that both sides of industry are prone to combine against any incomes policies.

What was really interesting to me was that it was not until fairly late on in the debate, when we came to the speech of my noble friend Lord Massereene and Ferrard, that very much connection was made between the annual pay round and job losses. I am also glad that my noble friend mentioned the importance of educating young people in the new technologies. I recommend to him a number of our projects, notably the scheme of getting computers into schools. The noble Lord, Lord Underhill, and I have already had a little passage of arms about local authorites. I thought my noble friend Lord Ridley, with all his knowledge, would probably come to my rescue on that, but all he said was that it was difficult to believe in the carrot when you are used to the stick. So maybe I shall have to remain corrected by my noble friend.

I was sorry to miss the speech of the noble Countess, Lady Mar. I had the impertinence to urge your Lordships to be fairly brief in view of the number of speakers, and Lady Mar took three and a half minutes when I was anticipating eight from her, and that was why I was caught napping. A number of noble Lords—notably, my noble friend Lord Boyd-Carpenter—mentioned the neccesity of getting rid of bureaucratic delays, and he talked about planning problems at Gatwick. I would point out to my noble friend that delays often are in the interests of democratic procedures and objections. Sometimes, I am afraid, they even occur in the Tory heartlands.

Trade union reform was mentioned by the noble Lords, Lord Rochester and Lord Campbell. In respect of my noble friend Lord Campbell, may I say that we shall be debating this in the form of the Green Paper shortly and I would prefer to wait until then to answer him. I very much welcome the fact that my noble friend Lord Boardman spotted that the autumn statement was a radical innovation and that people now can make their Budget representations with a great deal more knowledge than they have ever had before.

I take the points put to me by the noble Earl, Lord Onslow. We have to work away at this poverty trap difficulty. It is of course extremely expensive. The best answer is to get a more competitive economy and get the overall level of wages up. The noble Lord, Lord Kaldor, told us that a Cabinet Minister made an anti-Government speech in Cambridge last weekend. He did not mention who that was. I am glad to say that I think my own Secretary of State was safely tucked up in Ulster last weekend. The noble Baroness, Lady Burton, asked me for a timetable for the sale of British Airways. I am afraid that has to be put down to being a nice try as my brief tells me to say, "The Government intend to sell British Airways as soon as is practical".

Having spent so long on other men's flowers may I end by offering a brief wayside dandelion of my own. On the central issue of jobs, we must now get a debate going on the distinction between social and economic needs. For example, in Northern Ireland, as Finance Minister there, I believe I could get more jobs out of £25 million spent on, say, sport, than from £100 million spent in an industry such as shipbuilding, and regrettably I do not see any very great future for shipbuilding in the Province in the long term. We shall return to this and other themes next week when we debate the report of the Select Committee of your Lordships' House on unemployment. Until then, and in view of the fact that most of the support has, I think, been on the Government's side in our setting of priorities for recovery, I hope your Lordships will now reject the amendments, if they are pressed.

Lord Scanlon

My Lords, I wish to have the amendment standing in my name put to the vote.

11.16 p.m.

On Question, Whether the amendment (moved by the Lord Scanlon) shall be agreed to?

Their Lordships divided: Contents, 44; Not-Contents, 120.

DIVISION NO. 1
CONTENTS
Ardwick, L.	Galpern, L.
Bacon, B.	Gormley, L.
Bishopston, L.	Hatch of Lusby, L.
Blease, L.	Irving of Dartford, L.
Boston of Faversham, L.	Jeger, B.
Briginshaw, L.	Jenkins of Putney, L.
Bruce of Donington, L.	John Mackie, L.
Caradon, L.	Kaldor, L.
Cledwyn of Penrhos, L.	Kirkhill, L.
Collison, L.	Llewelyn-Davies of Hastoe, B.
David, B. [Teller.]	Lockwood, B.
Davies of Leek, L.	Longford, E.
Elwyn-Jones, L.	Lovell-Davis, L.
Elystan-Morgan, L.	McCluskey, L.
Ewart-Biggs, B.	Molloy, L.

Oram, L.	Stewart of Alvechurch, B.
Peart, L.	Stewart of Fulham, L.
Pitt of Hampstead, L.	Stone, L.
Ponsonby of Shulbrede, L. [Teller.]	Strabolgi, L.
	Underhill, L.
Rea, L.	Wedderburn of Charlton, L.
Ross of Marnock, L.	White, B.
Scanlon, L.

NOT-CONTENTS
Abinger, L.	Ironside, L.
Ailsa, M.	Kemsley, V.
Alexander of Tunis, E.	Kilmany, L.
Avon, E.	Kinloss, Ly.
Balfour of Inchrye, L.	Kinnaird, L.
Bath and Wells, Bp.	Kinnoull, E.
Bathurst, E.	Kintore, E.
Belhaven and Stenton, L.	Kitchener, E.
Bellwin, L.	Lauderdale, E.
Belstead, L.	Lawrence, L.
Bessborough, E.	Lindsey and Abingdon, E.
Bethell, L.	Long, V.
Boardman, L.	Lucas of Chilworth, L.
Boyd-Carpenter, L.	Lyell, L.
Brabazon of Tara, L.	McFadzean, L.
Brougham and Vaux, L.	Macleod of Borve, B.
Caldecote, V.	Mansfield, E.
Campbell of Alloway, L.	Mar, C.
Campbell of Croy, L.	Margadale, L.
Cathcart, E.	Marshall of Leeds, L.
Chelmer, L.	Masham of Ilton, B.
Chelwood, L.	Merrivale, L.
Cockfield, L.	Mersey, V.
Coleraine, L.	Monk Bretton, L.
Colwyn, L.	Murton of Lindisfarne, L.
Cork and Orrery, E.	Newall, L.
Craigavon, V.	Onslow, E.
Crathorne, L.	Orkney, E.
Croft, L.	Penrhyn, L.
Cullen of Ashbourne, L.	Platt of Writtle, B.
Davidson, V.	Radnor, E.
De La Warr, E.	Rankeillour, L.
De L'Isle, V.	Rawlinson of Ewell, L.
Denham, L. [Teller.]	Redesdale, L.
Digby, L.	Reigate, L.
Donegall, M.	Renton, L.
Drumalbyn, L.	Ridley, V.
Dudley, E.	Romney, E.
Dulverton, L.	St. Aldwyn, E.
Eccles, V.	Saltoun, Ly.
Ellenborough, L.	Sandford, L.
Elliot of Harwood, B.	Savile, L.
Elton, L.	Selkirk, E.
Faithfull, B.	Sharples, B.
Ferrers, E.	Skelmersdale, L.
Forbes, L.	Soames, L.
Fortescue, E.	Strathclyde, L.
Gainford, L.	Swinton, E. [Teller.]
Gisborough, L.	Thomas of Swynnerton, L.
Glanusk, L.	Trefgarne, L.
Glenarthur, L.	Trenchard, V.
Gowrie, E.	Trumpington, B.
Gray, L.	Vaizey, L.
Greenway, L.	Vaux of Harrowden, L.
Gridley, L.	Vickers, B.
Hailsham of Saint Marylebone, L.	Vivian, L.
	Waldegrave, E.
Harmar-Nicholls, L.	Westbury, L.
Hemphill, L.	Windlesham, L.
Home of the Hirsel, L.	Wynford, L.
Hylton-Foster, B.

Resolved in the negative, and amendment disagreed to accordingly.

11.25 p.m.

Lord Diamond

My Lords, I beg to move the amendment in the name of my noble ally Lord Byers.

Moved, At the end of the address to insert:

"but regret the absence of any constructive programme to encourage public and private enterprise and to stimulate employment, without endangering the control of inflation or imposing counter-productive import controls".—(Lord Diamond.)

The Lord Chancellor

My Lords, the original Question was, That an humble Address be presented to Her Majesty, since when an amendment has been moved by the noble Lord, Lord Diamond, on behalf of the noble Lord, Lord Byers: at the end to insert the words set out in his name on the Order Paper.

The Question is that this amendment be agreed to. As many as are of that opinion will say, "Content"? To the contrary, "Not-Content"?

11.26 p.m.

On Question, Whether the said amendment shall be agreed to?

Their Lordships divided: Contents, 44; Not-Contents, 117.

DIVISION NO. 2
CONTENTS
Airedale, L.	Mayhew, L.
Aylestone, L.	Morris of Kenwood, L.
Barrington, V.	Ogmore, L.
Bath and Wells, Bp.	Perry of Walton, L.
Beaumont of Whitley, L.	Pitt of Hampstead, L.
Burton of Coventry, B.	Roberthall, L.
Byers, L.	Robson of Kiddington, B.
Chichester, Bp.	Rochester, Bp.
Diamond, L.	Rochester, L.
Donaldson of Kingsbridge, L.	Sainsbury, L.
Flowers, L.	Simon, V.
Gladwyn, L.	Stedman, B.
Hampton, L.	Taylor of Gryfe, L.
Hanworth, V.	Tordoff, L.
Harris of Greenwich, L.	Vernon, L.
Hooson, L.	Wade, L.
Kennet, L. [Teller]	Walston, L.
Kilmarnock, L.	Whaddon, L.
Lloyd of Kilgerran, L.	Wigoder, L. [Teller]
McGregor of Durris, L.	Wilson of Langside, L.
Mackie of Benshie, L.	Winchilsea and Nottingham, E.
McNair, L.	Winstanley, L.

NOT-CONTENTS
Abinger, L.	Craigavon, V.
Ailsa, M.	Crathorne, L.
Alexander of Tunis, E.	Croft, L.
Avon, E.	Cullen of Asbourne, L.
Balfour of Inchrye, L.	Davidson, V.
Bathurst, E.	De La Warr, E.
Belhaven and Stenton, L.	De L'Isle, V.
Bellwin, L.	Denham, L. [Teller]
Belstead, L.	Digby, L.
Bessborough, E.	Donegall, M.
Bethell, L.	Drumalbyn, L.
Boardman, L.	Dudley, E.
Boyd-Carpenter, L.	Dulverton, L.
Brabazon of Tara, L.	Eccles, V.
Brougham and Vaux, L.	Ellenborough, L.
Caldecote, V.	Elliot of Harwood, B.
Campbell of Alloway, L.	Elton, L.
Campbell of Croy, L.	Faithfull, B.
Cathcart, E.	Ferrers, E.
Chelmer, L.	Forbes, L.
Chelwood, L.	Fortescue, E.
Cockfield, L.	Gainford, L.
Coleraine, L.	Gisborough, L.
Colwyn, L.	Glanusk, L.
Cork and Orrery, E.	Glenarthur, L.

Gowrie, E.	Orkney, E.
Gray, L.	Penrhyn, L.
Greenway, L.	Platt of Writtle, B.
Gridley, L.	Radnor, E.
Hailsham of Saint Marylebone, L.	Rankeillour, L.
Harmar-Nicholls, L.	Rawlinson of Ewell, L.
Hemphill, L.	Redesdale, L.
Home of the Hirsel, L.	Reigate, L.
Hornsby-Smith, B.	Renton, L.
Hylton-Foster B.	Ridley, V.
Kemsley, V.	Romney, E.
Kilmany, L.	St. Aldwyn, E.
Kinloss, Ly.	Saltoun, Ly.
Kinnaird, L.	Sandford, L.
Kintore, E.	Savile, L.
Kitchener, E.	Selkirk, E.
Lauderdale, E.	Sharples, B.
Lawrence, L.	Skelmersdale, L.
Long, V.	Soames, L.
Lucas of Chilworth, L.	Strathclyde, L.
Lyell, L.	Swinton, E. [Teller]
McFadzean, L.	Thomas of Swynnerton, L.
Macleod of Borve, B	Trefgarne, L.
Mansfield, E.	Trenchard, V.
Mar, C.	Trumpington, B.
Margadale, L.	Vaizey, L.
Marshall of Leeds, L.	Vaux of Harrowden, L.
Masham of Ilton, B.	Vickers, B.
Merrivale, L.	Vivian, L.
Mersey, V.	Waldegrave, E.
Monk Bretton, L.	Westbury, L.
Murton of Lindisfarne, L.	Windlesham, L.
Newall, L.	Wynford, L.
Onslow, E.

Resolved in the negative, and amendment disagreed to accordingly.

On Question, Motion agreed to: the said Address to be presented to Her Majesty by the Lords with White Staves.