HL Deb 16 November 1982 vol 436 cc425-513

2.58 p.m.

Baroness Seear rose to move, That this House takes note of the report of the Select Committee on Unemployment. [H.L. 142 (1981/82)].

The noble Baroness said: My Lords, I beg to move that this House takes note of the report. In moving the Motion I feel that I owe the House an apology for producing so mammoth a report following a truly elephantine gestation period. On behalf of all of the committee, I should like to thank your Lordships' House for giving us the opportunity to study this truly important and deeply interesting subject. The extent to which an all-party committee has reached agreement is a measure of what can be achieved when people who are deeply concerned with a question, though their political opinions may vary, tackle it together and sincerely to try to find at least some solutions to what is the major problem facing us today.

Of course, it was not possible for all of us totally to agree. It was not possible for any sincere monetarist to go the whole way in our conclusions, and I am very glad that the noble Lord, Lord Vaizey, is to put to the House the point of view of the monetarist—which I must confess has great academic support—which did not find favour with the committee but which undoubtedly ought to be heard.

I should also like to thank the Government for giving us the detailed reply that has been published and for sending it to every member of the committee in advance of today's debate. I should also like to add that I am very grateful to the noble Baroness the Leader of the House for the fact that she is taking part in the debate at what I know is very great personal inconvenience to her.

In tackling this problem, this charge that your Lordships gave us, we attempted first to look at the causes of unemployment, then at the nature of the unemployment that we have in this country today, before moving on to consider what kind of long-term remedies we could recommend to your Lordships' House.

The causes are multiple. It is of course true that demography is not on our side. We have, proportionately, a larger number of the population in the labour force than have most of our competitors. It is also true that we are suffering from a worldwide recession, fuelled by the oil crisis, which all countries are experiencing, though in many ways we are experiencing it to a more serious degree than most of our competitors. There is, too, the vexed question of the impact of information technology—of advanced technology in general. Here, I am going to say two things. Those of our competitors who have gone further than we have in the development and use of microtechnology have a smaller unemployment problem than we have in this country; so, whatever the major causes of our position, it cannot at the moment be attributed to that.

As to the future, the evidence that we received was so wide and varied that it was impossible to come to any conclusion as to what is likely to be the final impact—of course, there will be no "final" impact, but the impact over the next decade—of information technology on jobs in this country. It was perhaps fortunate that there was, however, agreement on one matter: that whatever high technology was going to do to the number of jobs in manufacturing industry, failure to take advantage of it would have a worse effect on employment prospects than would its introduction. So we recognised that, whatever the price, we had to go along that route.

But, when these other causes had been examined, we came back again and again to the hard fact that it is the non-competitiveness of British industry which is probably the central problem that we have to tackle, and is surely in any case the problem which it is most within our power to handle in comparison with the other causes that we were able to identify. The realisation that in the long term, whatever might happen in the short-term, a failure to increase that competitiveness could only increase the depth of unemployment was in the mind of all members of their Lordships' Committee throughout our deliberations.

Moving from causes to the nature of the unemployment problem that we face in this country today, I and I think other members of the Committee were very much educated by being introduced to the idea of the "stock" and the "flow" of unemployment as a method of analysing the unemployment situation. Of course, we had been aware that there was a difference to be made here; but I think that along with a great many people in this country we had not fully appreciated before the analysis was done how very large a number of people in fact obtain jobs by one route or another even at the very worst times of unemployment. For example, in the second quarter of 1982, when the unemployment figure in Great Britain excluding school-leavers reached a peak of 2,815,000, the outflow was no less than 1,159,000—and that is no mean figure in the depths of unemployment.

So we realised that the problem that we were up against was the problem of the people who do not join that outflow, the problem of the long-term unemployed; and, in attempting to look at remedies, it was of course essential that we should be able to identify the hard core of the problem so that we could direct our remedies to that part of the problem which was not going to cure itself and which was likely to get more severe.

We also realised that the hard core long-term unemployed consisted to a quite disproportionate extent of people who lacked marketable skills or competencies of any kind—the people who have nothing to offer in the labour market except time and physical strength. The people who comprise the long-term unemployed are, alas, now being joined by people who have some degree of skill or who have been in junior, lower level professional and executive jobs, but it is still overwhelmingly the unskilled who make up the great mass of the long-term unemployed who are at the centre of the unemployment problem.

With this brief analysis of both the causes and the nature of unemployment today, we turn to the remedies, such as they are, that we are able to suggest to your Lordships' House. From this analysis we drew the main themes which dominate the report. The first theme, as I have already implied, is the importance of restoring and maintaining the competitiveness of British industry. We all recognised that without this there was no future for employment in this country, that the decline would continue. We realised that any attempt to deal with the problem simply by spending money regardless of inflationary consequences was no answer at all in the longer-term, whatever it might do in the short-term. We realised that greater competitiveness was likely to mean—indeed, would mean—that there would be still further decline in the numbers employed in manufacturing industry, but we were determined to push ahead with increased competitiveness.

Up to this point it may sound as if I was speaking very much from a Government brief, but the point at which we begin to diverge is when we say that, if we are to go ahead with the inevitably painful changes which have to be made, then, simultaneously, steps must be taken to provide opportunities for employment for the increasing number of unemployed in the categories which I have already described. In our view—and this is where we differ from the pure monetarist point of view—it is leaving it too late to allow market forces (if this could ever in fact take place) to pick up the persons displaced from an increasingly efficient manufacturing industry, and only intervention now, and intervention quickly, will bring about a situation in which we can hope to get support from the great mass of people in this country for the drastic changes which still lie ahead. It is, I think, perhaps in the matter of timing more than anything else that we disagree with much that is being said from the Government Benches.

The second theme which runs through our deliberations is the realisation, from an examination of the condition and character of the long-term unemployed, of the tremendous importance of reducing the percentage of people in our labour force who are unskilled. When we came to examine our figures in comparison with those of other countries, it was alarming to find that at the end of the 1970s 44 per cent. of our school-leavers were going either into unemployment or into jobs in which they received no training at all. That figure has to be compared with 19 per cent. in France, 9 per cent. in Germany and 4 per cent. in Belgium.

We have to remember that it is not only that they fail to get training as they leave school: those school-leavers become the labour force in their twenties, thirties and forties. So, because of decades of neglect of training, we have piled up in our labour force an alarming percentage of people who in fact lack cerebral competences. I hesitate to use the word "skills" because I do not want to imply that we are talking only about manual skills. Therefore, the need to increase the number of people who have skills and competences of some kind or another is a dominant theme in our recommendations.

My Lords, we are very glad that, since the day long ago when we began our committee deliberations, the Government have moved very considerably in the direction of improving the opportunities for training for those aged 16 to 17. The importance of this training theme is threefold. It reduces the percentage of untrained in the labour force—and if we do not do this we shall not be in a competitive position in relation to our industrial competitors when the world recession passes—and also, to a small extent, it takes youngsters out of the labour market because, to the extent that they are in training although they are not in actual employment, that reduces the scale of youngsters unemployed. We are glad that the Government are moving along this line. We should like to see the ages 16 to 18 become a time when youngsters, voluntarily and not compulsorily, are essentially trainees rather than employees. We recognise that the cost of doing this will be considerable, but we hope that it will not be long delayed and we welcome the advance for the 16- to 17-year-olds.

May I make a point which is not in the report, because the developments of the Government's scheme had not fully taken place when we were drafting the report. Is it too much to suggest that the Government might already extend the training opportunities to all the 17- to 18-year-olds and not only to those who are out of work? If the seriousness is accepted of the degree that we lack trained people, and will lack them in the future, then we want to start quickly to reduce the numbers in that group. As I understand it, a fair number of 17- to 18-year-olds already are included because they are unemployed. Would it not be possible to say that this could be extended to all those under the age of 18 on a one-year basis? I am not suggesting that at this stage (although we hope it will be so before not too long) it will be possible for it to be a full two-year course for all the 16-to 18-year-olds. But that, we recognise, is for the future.

May I also say that because of the backlog of the untrained, we need more vigorous steps for the training and re-training of adults. Again, we are going to find it very difficult to reduce that large block of the long-term unemployed unless even more positive steps are taken than have been taken so far to cut down the numbers in that group. In particular, if I may say so, great attention needs to be paid to the position of girls and women. Your Lordships' House will not be surprised to hear me say this and neither will the noble Baroness fail to sympathise with me on this point. But it is a special position because the semi-skilled and unskilled jobs traditionally done by girls and women are particularly at risk; and, unless we take far more vigorous steps to use Section 47 of the Sex Discrimination Act in order to provide special training so that girls and women can get into non-traditonal jobs, then unemployment among women is going to get considerably worse over the next decade. What I have said about women applies with even greater force to the ethnic minorities, for which there is provision under Section 37 of the Race Relations Act, a provision which is very lightly used.

My Lords, in addition to training, we looked at other aspects, and particularly at the supply of labour and at the demand for labour. On labour supply, we do not accept the idea of a simple reduction of working hours. We believe that that would only lead to an increase in labour costs. However, we greatly support the job release scheme. We hope that the Government have no intention of removing this scheme. We would urge that, on the other hand, it should be extended even further down the age scale than has been the case so far. We are very glad that the Government have agreed that job pairing for the older age groups, for people of 60 and beyond, should be encouraged and we think that here is a real opportunity to reduce the number of people in the labour market without inflicting the hardship of full-time retirement.

While on the subject of job sharing, would it really not be possible at the other end of the age scale, for the youngsters, to introduce full pairing there, as is being done by the General Electric Company in their offices at Coventry, so that for every job taken by a youngster between 16 and 18 there would be two youngsters for each job? The whole pairing concept can be applied at both ends of the age scale and, to some extent, probably at other stages, too; but it is in these two places that we should like to see it pushed really vigorously.

In addition to the impact of the labour supply, there is, of course, the question of the increase in labour demand. In the paper that they have circulated, the Government have criticised our proposals for increase of demand of labour which we see as essential if the gap in employment, which is going to get worse as industry gets more efficient, is to be plugged. The Government have criticised the degree of expenditure and, in the annexe of the paper that they have put round, they have gone so far as to say that our figures are meaningless.

In the time at my disposal, I cannot argue the figures in detail. I will only say this. The raw material of the figures we obtained from Government departments; the calculation of the average cost of an unemployed person was worked out for us by the Institute of Fiscal Studies; we did not include in this figure any cost at all for the unquantifiable social costs which, although unquantifiable, are unquestionably real. We do not suggest that it is a precise figure. We do not suggest that it needs to be a precise figure. We would say that, even on the figure we have given, the additional expenditures that we have proposed amount to no more than the margin of error in the calculation of the PSBR which the Chancellor put forward in his Budget last year—and if he cannot get his sums more right than that, why should we?

The increase in demand that we propose falls under two main beliefs: on the one hand, capital expenditure on jobs of a labour-intensive kind, which will have to be done sooner or later and which, if delayed, will only cost more money when they have to be done. The list is already familiar. I will not go through it: improvement in the housing stocks, the sewers in Manchester (which seem to be called in evidence every time anybody talks about job creation), railway electrification, energy conservation—all these involve expenditure; but they are job-creating in an important way.

In terms of creating jobs most capital expenditure does not work through into the system for a considerable time. If the Government commit themselves to expenditure of this kind now, then the actual number of people in employment as a result of that decision will not be very considerable for months to come and, in some cases, even for years. We need some kind of job creation which will work quickly. The Government have admitted that the unemployment figures will continue to rise despite the improvements which they detect in the economy as a whole. Here we ask the Government to consider low-cost job creation, mainly but not exclusively of the social services kind, creation at a very painful rate, but jobs which are very much at the lower end of the pay scale in any case. We urge particularly that these should be not only in local authorities but by harnessing the voluntary organisations up and down the country which are now very much in a position to be able to collaborate in job creation. I leave that to the noble Lord, Lord McCarthy, who has done a particular amount of work on this subject and who will expand the matter considerably.

When I mentioned the voluntary bodies, I did so especially because we believed that it is very important that the development of new jobs should not be handled in a bureaucratic fashion with developments at the centre in an attempt to pass down to the grass roots what ought to be done. We believe that the whole burden of the new programme must be to find ways in which one can release energies, activities and ideas at the lowest possible level. This may mean looking at public expenditure in a rather different way, and at the controls over it in a rather different way. But it is our profound conviction that there is a great deal of energy, enterprise, skill and determination up and down the country to beat unemployment, if we can find the ways of releasing it.

I have spoken objectively, perhaps rather clinically, about the problem of unemployment. I do not think that anybody in your Lordships' House will forget for a moment that we are talking about at least 3,500,000 human beings and their families. We do not know what unemployment means to those people; we can only guess. To some it is a stressful, disagreeable experience, but it passes and when it has past perhaps it leaves no great scar. To others it is a catastrophe. In evidence given to the Manpower Services Commission one witness said: I get terribly depressed. Sometimes I think that I will finish it all, but I have not the nerve".

I do not know how many people reach that brink, but I do know that one is one too many. My Lords, I beg to move.

Moved, That this House takes note of the report of the Select Committee on Unemployment.—(Baroness Seear.)

3.22 p.m.

Baroness Young

My Lords, I am very pleased to speak for the Government this afternoon immediately after the noble Baroness, Lady Seear. I have to apologise to the House at the outset because, as I have already explained to the noble Baroness, I am commanded to be elsewhere later this evening and although I shall listen to as much of the debate as I can, I shall not, I fear, be present for the later stages of the debate nor for Lord Gowrie's concluding speech. I can, however, assure the House that I shall read the whole debate with great interest.

Let me say straight away that I regard this as a very important debate on an important Select Committee report. I doubt if any ad hoc Select Committee of your Lordships' House has ever sat for so long or produced so full and comprehensive a report. There are inevitably difficulties in producing an agreed report on such a wide-ranging and sensitive subject. But I should like, as Leader of the House, to thank the members of the committee and their supporting staff very much for their great industry and hard work over a period of nearly three years.

At the outset of my remarks, I should like to wish my noble friend Lady Carnegy of Lour, who will be speaking later in the debate, well in her maiden speech. She comes to us with great experience as chairman of the Manpower Services Committee for Scotland and we shall listen with interest to what she has to say.

By now, the House will have seen the Government's response to the committee's main recommendations, and I was grateful to the noble Baroness, Lady Seear, for what she said. I do not intend to go through this response in all its details. But at the start, I should like to say two things. First, although in a number of important respects I and other Government colleagues do not share all the conclusions arrived at by the committee, we welcome the report as a useful contribution to the problem of unemployment. Secondly, to say again that the Government are deeply concerned at present levels of unemployment and are determined to put matters right so that a permanent and sustainable improvement in the nation's employment is secured. As my right honourable friend the Prime Minister said in her speech at the Guildhall last night, "The schemes which we have initiated to minimise the impact of unemployment are as great as the effort devoted by any Government to any single social problem in this century".

I do not minimise the extent of the unemployment problem which we face. It is one which we share with the rest of the industrialised world. Thirty million people are unemployed in the OECD countries. In many of those countries, unemployment is now at post-war record levels; and has been rising more quickly over the past year than it has in the United Kingdom. I have recently returned from a visit to the USA and Canada. Both those countries have experienced very steep rises in unemployment recently. In the USA over 11 million people are now unemployed, an increase of 33 per cent. over the past 12 months. In Canada nearly 1½ million people are unemployed, 51 per cent. more than a year ago. In the United Kingdom, unemployment has increased by only 10 per cent. over the past year. But, of course, our level of unemployment is still among the highest.

The committee has recognised the many reasons for that; and I quote: To the extent that unemployment in Britain is more severe than in the rest of the western industrial world, the major cause lies in our lack of competitiveness and in the loss of our share of world markets, including home markets. The fact that the decline has continued over decades suggests that the causes are deep-rooted and consequently hard to eradicate". And the responsibility for this is shared not only by Governments—and I accept that Conservative Governments have their share as well as Labour ones—but also by management and the trade unions. All have failed in the past to come to grips with overmanning, restrictive practices and pay rises unmatched by productivity. I do not believe that any of this is a matter of dispute between the Government and the committee. Nor is there any question about the very serious effects which high levels of unemployment have: through wasted skills, and the cost to those in work of supporting those without jobs. They mean hardship, discouragement and loss of purpose for very many people, who rightly expected better things for themselves and for their families. The committee, in their very useful analysis of the problems caused by the present levels of unemployment, recognised that there is no easy way to solve them.

If I may say so, the good sense of the committee's observations on this point make a change from the reflationary proposals put up by other political parties: the proposals of the Labour Party, estimated at £8–9 billion; those of the SDP-Liberal Alliance at £3–4 billion. And the TUC has in the past mentioned a sum as much as £24 billion over a five-year period to buy our way out of unemployment. In fact, the committee has wisely and specifically ruled out general reflation as "a primrose way leading to destruction". We must therefore reject the dangerous notion that unemployment can be overcome simply by increasing monetary demand and that those who have a job need not moderate their expectations of increased pay for the sake of those without jobs. This is the kind of attitude that has created so many of our problems.

Let me therefore set out the Government's strategy. We believe there can be no prospect of lasting growth in output, and therefore employment, unless we manage to improve our industrial competitiveness. The central aim of our economic policy is, therefore, to reduce inflation and to create the conditions in which industry can achieve this much-needed improvement. That means the Government must keep to their policies of firm restraint in public borrowing and in public expenditure and the maintenance of sound monetary conditions.

We therefore endorse the committee's view that restoring competitiveness is the priority. The only way for a country so heavily involved in international trade to earn its living is to produce goods and services of such quality and at such prices that they are better value for money than those of our competitors.

So keeping costs down is vital. And pay forms the largest share of costs in the trading sector. As the committee has said, realistic pay settlements are crucial in improving our competitiveness and hence our prospects for faster growth and more employment. The fact that pay moderation is taken for granted by our most formidable competitors, Germany and Japan, has enabled them to achieve both higher living standards and lower unemployment than in Britain.

Thankfully, there is a growing sense of realism and commonsense about pay. CBI figures show that pay settlements in industry are now around 7 per cent. Inflationary expectations are down. Scottish and Newcastle Breweries and Caterpillar Tractors have concluded three-year pay deals with their unions. People know that unrealistic pay rises can mean the loss of jobs and it is unhelpful, I think, for anyone in a position of responsibility to suggest that pay has nothing to do with unemployment.

In the last 18 months or so we have begun the long haul back to restoring the competitiveness of our industry. Inflation was 15 per cent. when we entered office. It went to 22 per cent. but is now back to 6.8 per cent.—the lowest level for a decade. We expect it to fall to 5 per cent. early in 1983. The rate of increase in earnings is continuing to moderate. Productivity is rising—output per head has risen 13 per cent. in manufacturing industry since the end of 1980. As a result, our manufacturers' unit wage and salary costs rose only 4 per cent. over the last year—a figure below the average of our major competitors. Overall our cost competitiveness improved by 10 to 15 per cent. during 1981.

But much remains to be done. The world economy remains severely depressed; the expected upturn in world trade and output has been delayed. The fact is that despite recent improvements our competitive position is still a third worse than in 1975. But as the figures on inflation and productivity indicate, we can expect a modest recovery next year and a growth of around 2½ per cent. in world trade should provide new opportunities for industry. If we are to make the most of the opportunities thus afforded, and create real jobs for the future, there must be no let-up in our efforts to keep costs down. Furthermore, our task in tackling unemployment will be all the harder because in the next few years (as in the past) the numbers reaching retirement will be at a relatively low level, due to the low birth rate during the First World War; while the numbers leaving school will remain at near record levels, due to the very high birth rate of the early 1960s.

I now turn to the committee's wide range of proposals for helping to reduce unemployment. Taken together, they amount to a substantial increase in public expenditure—more spending on public sector capital projects, more current expenditure on low-skill jobs and more selective employment measures. The Government accept the committee's general view that it is right to supplement our essential economic measures with others designed to tackle the problems of large scale unemployment. The key questions are: first, how much can be afforded for such measures without putting the success of the Government's economic strategy at risk? Here, I do not believe that the amount the Government are already spending is fully appreciated. This year we are spending £1.5 billion on special employment measures; next year it will be nearly £2 billion. Secondly, how far can effective measures be devised which do not in one way or another cut across what our strategy is trying to achieve by bolstering inefficiency or blunting the pressures to improve competitiveness? It is at this point that the Government do not accept the proposals of the committee. For reasons that I have already indicated, we believe that to go as far as the aggregate of measures suggested by the committee would be to go too far, and would put the Government's economic strategy at risk. The result could well be more inflation and fewer real jobs in the long term.

We have considered seriously, and shall continue to do so, measures suggested by the committee. For example, the Youth Training Scheme and the new job splitting schemes in their final form follow in important respects suggestions put forward by the committee. The Government's initiatives in the field of employment and training measures play a key part in tackling the problem of unemployment, as the noble Baroness, Lady Seear, told us. My noble friend Lord Gowrie will be speaking about these in more detail later in this debate, including the important area of new technology to which the noble Baroness also referred.

I would like to say something about what we are doing in the area of employment for women, and I should make clear that my interest in this theme has not been aroused just by the latest episode of the television programme, "Yes Minister"! The committee suggest that women have fared worse than men in terms of unemployment during the last decade. This is not strictly true. Throughout the period 1971 to 1982, female unemployment rates have been consistently lower than male unemployment rates, even when estimates of unregistered unemployment are taken into account.

Up to 1980, women's unemployment rates did grow more quickly than male unemployment rates, but it needs to be remembered that the female labour force was expanding. There were not disproportionate losses in female employment—indeed, during the period 1971 to 1979 the number of women employees grew, while that of male employees decreased. Nevertheless, the Government recognise the need for special programmes to further their policy of equal employment opportunities for women. We are particularly keen to encourage women—especially younger women—to train for work in areas where employment is likely to expand in the future and where they are at present under-represented—a view with which I am sure the noble Baroness will agree. Our response to the committee's report describes the various provisions which the Manpower Services Commission is making here.

I would also like to mention the new initiative in technical education for 14- to 18-year-olds which my right honourable friend the Prime Minister announced on Friday. This programme will, of course, be open to girls on equal terms with boys and will provide a welcome additional opportunity for them to gain valuable work experience and recognised technical qualifications. I very much hope that girls will take this and other opportunities to train for jobs using the skills and technology of the future. This is not only important for them; it is important for this country's future.

The committee expressed particular concern about the problem of long-term unemployment, which was identified by the noble Baroness as one of the most important issues. We share that concern. But, sadly, the growth of long-term unemployment reflects the overall increase in our unemployment total. The principal remedy is the same for both—to get the economy right and create the conditions in which sustainable employment opportunities can be developed. But, again, it will be a long haul.

Nonetheless, things can be done to help—and they are being done. Since the committee completed its report we have introduced a new community programme, which will operate on a much larger scale than the Community Enterprise Programme which it replaces. We are prepared to finance up to 130,000 places on the new programme—or more if the demand is there. By 1984–85 this scheme will account for nearly one-quarter of total expenditure on special employment measures. It is early days to be sure about the likely take-up of the new programme. We believe, however, that it offers a real opportunity for those concerned about the long-term unemployed to come forward with really useful and productive projects. And it shows that the Government, like the committee, believe in the value of part-time work to assist unemployed people. The new Community Programme will, I think, offer much the sort of boost for temporary employment for the long-term unemployed that the committee wanted to see.

No doubt in the course of this debate we shall hear much about the committee's estimates of the cost of unemployment and of measures to remedy it, to which the noble Baroness referred. This is a very difficult subject. As the Government response makes clear, we do not believe it is sensible to talk about "the cost of unemployment" as if there were a single figure. The costs arising from unemployment will vary according to the causes of change, including movements in world trade, United Kingdom competitiveness and so on.

It is even less meaningful to talk, as the committee does in paragraph 6.34, of a total Exchequer cost of £15 billion. This is based on the unrealistic assumption that unemployment could be totally eliminated and that in the process of reducing unemployment there would be no consequent changes in earnings, prices, tax rates et cetera. In the same way, great caution has to be exercised in trying to assess the net costs of particular measures that may be put forward. There is virtually none which can be considered truly without cost.

For example, the committee suggested that the Community Enterprise Programme had no net cost. But experience with that scheme suggests that even its successor, the Community Programme, which is designed to be more cost-effective, will involve substantial net Exchequer costs, both in the payment of allowances above the average benefit level and in the cost of materials, supervision and administration. These are important points to bear in mind when assessing any proposals for new measures.

It is gratifying to see that the committee broadly supports those special measures which make up the remaining quarter of our programme. Since the committee reported, the Government have announced the introduction from next January of a new job-splitting scheme, which is broadly in line with what the committee terms "pairing". We are also maintaining the job release scheme with its extended age limit, and we are now evaluating the Enterprise Allowance pilot projects. We are encouraged by the take-up so far and have noted the committee's view that a scheme along these lines should continue, provided that it is properly evaluated.

As I said at the beginning of my remarks, the Government are putting more substantial resources than ever before into employment and training measures to help the unemployed. We are actively developing our programme with all the resources we think it appropriate to make available for the important task of helping those worst affected by the current high levels of unemployment. I can assure the House that we will continue to give this programme a very high priority. We recognise its importance, both for the country and in human terms.

In conclusion, I should like to thank again the noble Baroness, Lady Seear, and her committee on the contribution which they have made to the public discussion of this most important and serious issue of unemployment. I, and other Government representatives, will be listening with great interest to all that is said in today's debate in your Lordships' House.

3.42 p.m.

Lord McCarthy

My Lords, I have three tasks today. First, I should like, with great sincerity, to thank the House for allowing me to serve on this committee. I was never very clear by what process we were chosen, but I am glad that we were chosen, because I cannot think of any activity in which I have taken part in this House which I have found more enjoyable and more instructive. Secondly, I want to define the general view of the Labour Party members of the committee to this report; and, thirdly, I should like to explain the somewhat limited nature of my own contribution to this debate today. But, before I do any of those three things, I should like to say that, together with the noble Baroness, Lady Young, who has been commanded elsewhere—I have not been commanded elsewhere—I have a long-standing engagement which, unfortunately, means that if the 24 or so speakers that we have on the list today take their usual time, I must apologise for the fact that it is very unlikely that I shall be here at the end.

First, let me say something about the work of the committee. As I suggested to the House, this has been the most instructive and enjoyable activity that I have had since taking part in the business of this House. Secondly, I have no doubt whatever that it was very largely because of the personal qualities of our chairman, or perhaps I should say our chairperson—I am not quite certain what the noble Baroness's view is about the appellation.

I think I can say that, though we have a dissentient minority of one on our major conclusions, we have no dissent whatever—indeed, we have a unanimous conclusion—on the fact that we would never have completed this report without the highly individual mixture of charm, guile and obstinancy which the noble Baroness brought to her task. In passing, I should also like to thank the excellent staff that we were given by the House and, in particular, our Secretary, Mr Hayter. So on the work of the committee we have nothing but joy to report.

On the general view of the Labour Party members, I must say first that we are extremely sorry that my noble friend Lord Melchett is not here today. He has to apologise, and I have to apologise on his behalf, because he has been struck down by an attack of glandular fever which prevents him from being here today. That is a great pity, because there are many things which I do not have time to say and which he would have said. Therefore, I am afraid that, in broad terms, they will be left unsaid, unless they are to be said by our very welcome noble friend Lord Allen of Fallowfield, who will sum up the debate from this side of the House. But, on his behalf, I apologise for the absence of my noble friend Lord Melchett.

So, on the general view of my noble friend Lord Melchett and myself, we feel that we had to make compromises in order to achieve the virtual unanimity, with one exception, on the main recommendations in the chairman's report. We have no objection to that, because, if one wants to make progress, one makes compromises. Because I do not intend to deal with a very broad part of the report, I would not want anyone in the House to believe that we do not support it. I want to deal, as the noble Baroness said, with a very important section of the report on long-term, low-cost job creation. But because I do not intend to talk, and Members on this side of the House who were members of the committee do not intend to talk, on other parts of the report, I would not want anyone to think that, in general terms, we do not agree with the general thrust of that report, because we do. With what influence I might have on my party, I would recommend the general direction of this report to them.

Therefore, I come to what I want to say today and I want to focus on the recommendations on what we call long-term, low-cost, group-specific, net job creation. The noble Baroness, Lady Seear, always said that she disliked this phrase. Indeed, she almost invariably finds it impossible to spell it out in full terms. She tends to say "Low-cost, whatever". I must say that I accept a certain responsibility for this because, as she kindly said, I invented this phrase. But I have to say to the House that what it lacks in elegance and euphony it makes up in precision and comprehensiveness. I want to suggest to the House that it seems to be infelicitous only to those who look for what H. L. Mencken called simple, easy, attractive solutions which are almost always wrong.

This is a complicated phrase, but it deals with a complicated problem. Therefore, what I wish to do in the time available to me is very quickly to go through why we say, as a central thrust of our argument for dealing with the problem of unemployment, that what is needed is long-term, low-cost, group-specific, net job creation.

One might ask: why job creation in the first place? The answer is that the overwhelming majority of the committee took the view that, although we believe that there were all kinds of problems on the supply side and on the training side to match the supply of labour to the demand for labour, we could not believe that the problem of unemployment in this country was simply a supply-side problem. There is a deficiency of jobs and, therefore, jobs must be created. In effect, we are saying that jobs must be created as a deliberate and conscious act by Government. That is the central thrust of this part of the report.

We can give many reasons for this—some sophisticated, some simple. The simplest reason of all is that we have at the moment a job-applicant ratio of 30 to one; that, in broad terms, there are 30 applicants for every job in this country. In some areas, the job-applicant ratio is much worse than that. Whatever you do about getting on your bike, moving from place to place and getting yourself retrained and becoming more and better skilled, while there is a job-applicant ratio of 30 to one, we find it incredible to accept the argument that this is just a supply-side problem.

Secondly, there are no plans by this Government that I know of—if I am wrong about this I hope that the spokesman for the Government will get up and tell me I am wrong—to reverse this basic job-applicant ratio in the foreseeable future. The Government accept that unemployment is rising at 0.5 million a year, so that next year it will be something like 4 million or so, that unemployment now stands at 14 per cent. and that unemployment will be rising at something like the present rate for the foreseeable future. The Government accept that this is the case. Independent surveys—and not only independent surveys but the Government's own institution, the Manpower Services Commission—expect unemployment to go on rising at much this rate well into the end of 1984. Therefore, not only do we have this job-applicant ratio of 30 to 1 but there are no plans by the Government to reverse this basic ratio.

Thirdly, the process of securing competitiveness—which, as the noble Baroness quite rightly said, this committee put at the centre of its solution to the problem and which is so essential—is likely to destroy more jobs than it creates—at least, for the foreseeable future. There are many figures in the report which indicate this. Most recently, there was a most interesting report in the National Institute Economic Review last August by a Mr. Roy on labour productivity in the 1980s which I commend to the House. It is merely one figure of many figures which one could quote. It indicates, for example, that if we had the output per head of Germany, we should be producing our present level of output with something like 7.5 million less jobs in manufacturing industry than we have at the moment, and that if we had the output per head of America we should have something like 9.5 million less jobs than we have at the moment. We are not suggesting anywhere in our report that this process should be arrested. As the CBI says, if this process is arrested, then, for every 1 per cent. loss of our world trade, we shall lose a further 250,000 jobs. We are not suggesting that this process should be arrested, but we are saying that if this process goes forward, then no man can say that anything like the present policies will reabsorb the jobs which will be destroyed as a result of the search for competitiveness.

Fourthly, we would say that over a wide area of British manufacturing industry—and, I would say, distribution of wealth as well—there is what labour economists now call a negative employment multiplier: that as you raise the proportion of investment, the result, over foreseeable degrees of output increase, is a declining demand for labour; that the situation in manufacturing industry is that investment destroys more jobs than it creates. For all these reasons, therefore, we see no expectation at all that the Government's policies, or any alternative policies by any Government—of a general expansionary kind, for example—could create the jobs which will necessarily be displaced if this economy is to survive.

Indeed, I would say that the Government admit this. That is why, whatever the Government may have said when they came to office, we are moving, as the noble Baroness said, into the fourth year of the special programmes. Therefore, the Government plan this year to take half a million people off the register by means of their youth training scheme, their community programme and one device or another. In our report we say that the trouble with this expanded special programme is that, first, it is meeting increasing resistance in enrolment. Secondly, it is meeting increasing resistance in its ability to get sponsors to carry out this programme. Thirdly—and most important of all—it is a short-term programme. It plans to take young people or older people out of the unemployment situation and off the register for periods of up to 12 months. In 12 months' time it will throw them back into the labour market, unless it constantly recycles itself and we have the son of YOP, the son of YTS, the mother of CP—and on, and on, and on.

That brings me not just to job creation but to the long term. Why are we saying that this must be long term? Because it is a long-term problem, because you cannot solve this problem by a series of endless, short-term expedients. I should like to ask the member of the Government who is to reply for the Government to say what they propose to do with all those young people who go on to the youth training scheme in a year or 18 months' time when they come off the end of the assembly line. Do they seriously suggest to us that jobs will be available? Similarly, with the community programme, even if they get the numbers they anticipate, what are they going to do with these people when they come off the end of the assembly line?

What is happening already? In the October issue of its Special Programme News the Manpower Services Commission gave us some very interesting figures about the present placement ratios of young people on the old Youth Opportunities Programme. In 1978, when the level of unemployment was 5.1 per cent., 80 per cent. of those who came off the other end of the assembly line were reabsorbed in one way or another. They were placed. In 1981, when the level of unemployment was 11.7 per cent., only 50 per cent. found placement, and that placement included not just jobs but the recycling of those people into further education and training. So as the level of unemployment rises, the level of placement falls, and it falls faster than the level of unemployment rises.

If we assume an increase in unemployment of half a million or so in the next two years, what will be the level of placement from YOP and the community programme, on the Government's own assumptions, in 18 months to two years' time? I ask the Government whether they have made any estimates of this—not just of the overall level of placement, not placement assisted by recycling into further and further short-term programmes, but net placement: placement in terms of people finding jobs, My figures may be utterly wrong, but on the Government's existing trends I make the level of net placement in 18 months' time something below 20 per cent. This means that these quite expensive programmes are only producing jobs for something like one person in five of the people put on the programmes. Therefore we say that there has to be something more long term and more significant. Therefore, we put forward our proposals for low cost job creation.

I want to say something about the low cost element. Let me say that I agree entirely with, as I understand it, what the noble Baroness said. We are not suggesting that what we are putting forward is nil cost. There is no nil cost way of putting people back into jobs. Nevertheless, I should like to make several points against the Government's reply to our report, in particular what they say in paragraphs 12 to 15, in paragraphs 17 to 72 and in their Annex. First, we do not say that the gross costs of long-term job creation are approximately £5 billion above the present expenditure plans. To some extent, I feel that paragraph 14 of the Government's reply to our report suggests that that is the case. We do not say that it will cost £5 billion, because the £5 billion includes our version of the existing short-term job creation programmes of the Government—that is, YOP, CEP, pairing, job release and so on.

In the case of long-term job creation, our overall gross cost is something like £3,650 billion gross over a two-year period, or something like 3p or 4p on the standard rate of income tax, for which we offer to provide over a two-year period half a million jobs. I say that is low cost because, if one cut a similar amount off the standard rate of income tax, then the evidence we have from various surveys which we have looked at suggests that that would produce around 30,000 jobs; in other words, an annual job price of £38,000 per job rather than £2,000. I call that low-cost job creation. Certainly it is much cheaper than seeking to move back into full employment by cutting the standard rate of income tax.

The second point is that these are gross costs. The net cost of these 500,000 jobs is about £1 billion, we say, over a two-year period; something like half the overshoot of the PSBR in the average year, or one-seventh of the difference between the 1980 Treasury estimate of what the PSBR would be in 1983–84 and what the PSBR is likely to be in 1983–84—or, if you prefer, about one penny on the standard rate of income tax. Once again, £2,000 per person per job per year as against tax cuts, which would produce £38,000 per person per job year.

We are told in the Annex (and I want to say just a word about this) that this is an under-estimate. I have sought to understand as best I may the argument in the Annex as to why this is an under-estimate. In so far as I understand the argument, it seems to have three legs. First, we are told that some of those taken off the register will not be paying average rates of tax. That may be the case. Secondly, we are told that some of those taken off the register will not be receiving average social welfare benefits. That, too, may be the case. Thirdly, we are told that there must be something less than 100 per cent. additionality—in other words, even on our carefully designed proposals, there must be some substitution.

I have a number of points to make in reply to those arguments. First of all, the Government very carefully do not tell us in their Annex how far these three considerations actually raise our estimate. Do they raise it to £2 billion, or £3 billion, or £4 billion? They cannot raise it above £3.650 billion because that is the gross figure based on £5,000 per person and the Government do not quarrel with that. So how far do these three factors raise our net estimates? The Government do not tell us. I would suggest that even if it means a 50 per cent. under-estimate of our estimate, we are still talking of a figure of £1.5 billion over two years or l½p on the standard rate of income tax. I would suggest that that is low-cost job creation.

I would remind the House that we are talking here of Exchequer costs. As a committee, we were very careful not to mention the social cost even though we thought it was very important. We did not mention the fact that we established very substantial costs—although we could not quantify them—and substantial links between high levels of unemployment and ill health, suicide, self-harm, crime rates, the prison population and social unrest in general. On all these issues we found correlations (not only in this country but also in other countries) between high levels of unemployment and high social costs. We made no attempt to put figures to these because I believe it would have been unrealistic to do so. But, if one says that what we are suggesting is high cost rather than low cost, then it seems to me only fair to ask about the social costs as well.

Also, there will of course be a product. Again, we made no attempt to specify the value of that product but the kind of low-cost job creation we are specifying will provide better care for the elderly; better care for the disadvantaged; new capital investment in sewers, roads, and urban renewal; as well as in all other aspects of our social life. Therefore, we are saying that, whatever the cost may be, on the other side you have to set the social cost and the value of the product.

This brings me to the question of why it is group-specific. We argue for group-specific job creation for two reasons. First, we believe that unemployment itself is group-specific—especially is long-term unemployment group-specific. Long-term unemployment is concentrated among certain groups. It is concentrated in certain districts, in development districts, among the old, among the young, among the disadvantaged, and among ethnic minorities. Therefore, all forms of non-selective reflation or market-led growth are likely not to deal with the specific problems of the long-term unemployed. As far as we can, we want to create jobs which are directed in particular at the long-term unemployed. We want our job creation to be directed at those who are most in need of help. That is why it is group-specific.

It is group-specific in another sense because we wish to create specific categories of jobs. We wish to create jobs which are relatively low cost in themselves and which are likely to result in high community benefit in the short term. In broad terms, we direct our attention at two different groups: first, at essential investment occupations and trades in housing maintenance, sewer rebuilding, road building and maintenance, urban renewal and so on; and secondly, at certain essential services and occupations in the National Health Service, in local government, in other welfare and community services and in full-time posts for organisers in voluntary and charitable societies.

I realise that what we are suggesting here is among the most controversial parts of our report. Indeed, what we suggest for essential investment occupations—what we call investment-led job creation—may find some support outside our committee in all kinds of organisations and institutions. For example, the CBI in its recent publication on what we can do to solve the problem of unemployment suggested an increase in investment-led job creation. But when we talk about what we call service-led job creation in institutions such as the NHS, local government and welfare and community services generally—which for the most part must be in the public sector, which to us is an accidental fact and it is just that these services are in the public sector at the moment—we fully appreciate that we are going to be told that this is a very controversial aspect. Therefore, I want very briefly to mention the magnitude of what we are suggesting.

Let me first mention the National Health Service. We are suggesting something less than a 10 per cent. increase in the overall size of employment in the NHS. In certain areas—in ancillaries, for example—we are suggesting something near to a 30 per cent. increase. That is the major area of increase. For nurses, we are suggesting maybe something below a 5 per cent. increase, and for other groups in the National Health Service virtually no increase at all. This is the magnitude of what we are suggesting. If one contrasts this with the growth in the National Health Service in the past three or four years, as the Government have made out, one finds that the greater part of that increase has been the result of Government policy. It has been the result, for example, of the introduction of a shorter working week for nurses, or it has taken place among occupations in which we are not proposing that there should be any increase at all. The increases we are proposing are at what the noble Baroness calls the "sharp end".

What is the argument that the Government put against what we are suggesting? They put their argument in paragraph 72 of their reply to us, and I quote: The Government believes that any commitment to creating more jobs in the public sector, beyond those necessary' to provide a cost-effective service, would risk regenerating inflation. The outcome would be reduced efficiency in the public services, and upward pressure on pay, not just in the public sector but in the economy as a whole". I put it to the House that that is a statement of faith, a statement of belief; it is a statement without substantiation. Why should it be the case that £1,000 million spent on public sector pay should be more inflationary than £1,000 million spent on private sector pay or £1,000 million remitted in tax? Why should it be the case that, as we are told in the quotation, another 300,000 or so workers in the National Health Service and local government—that is all we are talking about in this area for workers in the public sector—should so transform the power of the unions in wage bargaining that all the efforts of the Government, much public- ised in the last two years, to bring the unions into line would be vitiated? Why should this modest increase in public sector employment create a reversal of the process of controlling public expenditure, begun with the efficiency fines and continued in the manpower watch, which makes it quite clear that there is no sense in which, as the Government repeatedly tell us, manpower in the public service sector is in any sense out of control. The fact is that this is an article of faith, this is a piece of religion. There is no reason whatever why the Government should ask us to believe this.

So we are saying that we are in favour of long-term, low-cost, group-specific, net job creation, net because we believe that we have proposed, in paragraphs 62 and 63, a complex set of checks on substitution. We do not deny that there may be some substitution, but the degree of substitution under this scheme is likely to be infinitely less than the degree of substitution on the existing short-term schemes. And in any case, with great respect, I would say that arguments about substitution come very ill from the Government which introduced the young workers' scheme, a scheme which will be totally alternative, in no sense additive, and in which there are no attempts to correct substitution in any sense.

So we have sought to put forward a modest policy which we believe is increasingly close to the views now taken by the TUC and the CBI, both of which are looking for specific proposals without general reflation to ease the problem of unemployment. We believe that this is a genuinely all-party set of proposals which could provide the basis for a very broad approach on a very real problem. We believe that only dogma, only a refusal to believe that previously adopted positions could conceivably be wrong, prevents the Government from coming to our position, and we beg them to change their mind.

4.13 p.m.

The Lord Bishop of Lincoln

My Lords, I should like to thank the noble Baroness the Leader of the House for having courteously sent me a copy of the Government's response to the report. It may be that she sent them to all Members of your Lordships' House, but I am grateful for having received it myself. I think one of the most important and impressive things about this report is that the members of the Select Committee, by virtue of being that, represented every party in your Lordships' House and independent and Church opinion, and I say that this concerted view which they have produced is important and impressive because it is in contrast to what one tends to hear. Party views on unemployment can be very divergent as to remedies; some of our most strongly felt political tensions are about this, and obviously so because we are here concerned with matters not only of crucial economic importance but also of deep human and social, and therefore moral, import. Because of this, because of the nature and the seriousness of the subject, I think that the tone of voice of the political debate that takes place about it matters a lot.

The report ends by saying: The transition to prosperity is painful. It cannot be made without popular consent". Because of this issue of consent, which I should like to return to in a moment, I have to say that I feel anxious at the tone of voice in the Department of Employment, which at the moment sometimes seems to me so explicitly confrontational, and this seems to me on the whole contrary to a general tradition in that department and not to promote consent.

Noble Lords and the noble Baroness have spoken about the detailed short-term and long-term recommendations of the report. I would want to put myself squarely with those who support the report's contention that we cannot wait for the turn-up in the economy before we act for the unemployed, and that we should do so not only in terms of education and training, which the Government are doing, but also in some measure of carefully selected job creation for the worst hit, as the report suggests and as the noble Lord, Lord McCarthy, has just been saying. I say this not from sentiment, but, though I realise it is a highly contentious matter, it does seem to me that there is a very great weight of authority on the side of the report as well as against it.

In this connection I want to say a brief word about the Church's involvement in this whole matter. I recognise that this may be thought of as just cosmetic, and in a sense it is, but most women and certainly most men agree that cosmetics have their place. All Churches in the United Kingdom are very much involved in projects with the Manpower Services Commission. There is an inter-denominational agency called Church Action with the Unemployed which has set up 50 consultants throughout the country to advise Church bodies on projects that they can get involved in. It has circulated 200,000 churches with a leaflet with the details about all this. Certainly two dioceses have appointed full-time industrial chaplains solely to work in the field of employment. I think I could give a picture of the sort of things that happen in my own diocese, where we have appointed a full-time consultant on management of our community enterprise projects and for our training workshop, which I think was one of the first to get under way in the country.

That is all part of the short-term picture. In the long term, I believe it is important to look further ahead than the report does. Many authoritative commentators and participants still are rather guarded in what they say about the really long-term scene of unemployment. I understand that, because we need to concentrate our minds and our work intensively on regenerating the economy. But in the really long term I believe that regeneration is still going to leave us with a very large number of unemployed people, and that as much economic, political and social energy needs to be given to that as to what is more immediately under our noses. Figures for the long-term unemployed are a good deal worse than they were when the report was produced. That means that hundreds of thousands of people are already in that longer long-term future now.

It is because of the implications of this that I believe that the report's emphasis on political consent is so important. All sorts of things can engender consent. I have in mind not so much exhortation as, for instance, hard facts. The hard facts of the present crisis seem to be engendering consent to more moderate wage settlements and less stomach for strikes. But the line between consent and constraint can be a very fine one. What we are beginning to see may be the result more of constraint than of consent. In the long term that will not provide an adequate motivation for our recovery, only a grudging one and not a ready and a creative one. In the old days of pre-war unemployment, the tactical power in industry lay with management and Government. With full employment between the last war and now the tactical power shifted to the shop floor. Now it may simply be shifting back to where it was before without—this seems to me to be crucial—our having learned in the two-and-a-half decades of full employ ment the lessons about consent that we needed to learn in the face of organised labour coming to power. We did not learn that we needed to consent to the fact that there was a new balance of power in our national industrial life, demanding new thoughts of management and new responsibilities for trade unions. If we had learned that, and consented to it we might not have been where we are now.

If we needed that sort of consent then, we certainly need it now, as this report makes clear—consent, for instance, for modest financial courses for great social gains. Constraint may bring us to our senses the hard way, but more is needed—a more positive motivation, real consent—if that is really going to be a way ahead.

4.20 p.m.

Baroness Carnegy of Lour

My Lords, your Lordships may feel that a debate on the much disputed subject of unemployment is an awkward occasion for a non-controversial maiden speech. I take heart from the fact that the authors of the report come from all parts of your Lordships' House and at the same time cowardice seems inapposite to a new Peer whose Letters Patent were sealed on 14th July this year—Bastille Day. I say to myself "courage, and advance".

In fact, it seems to me that, through the political "ding-dong", to which the right reverend Prelate the Bishop of Lincoln referred, people are more and more seeing for themselves the truth about unemployment. They are seeing that we are living through nothing less than a second industrial revolution. They are seeing that for all sorts of reasons we have allowed ourselves to grow weak in the face of our competitors. They are seeing that we have to make greater adjustments than most countries, and with little time in which to make them. They are seeing that in the process millions of people are vulnerable and that some groups are far more vulnerable than others. They are seeing that no simple panacea exists and they are very anxious that the action we take must be designed to have lasting effects.

Of the possible action suggested by the Select Committee, I should like to refer to one of the less controversial parts— Chapter 11—which refers to education and training. In so doing, according to your Lordships' Addison Rules, I must declare an interest as a commissioner for the last three-and-a-half years in the Manpower Services Commission, as the present chairman of its Committee for Scotland and as chairman of the Scottish Community Education Council.

The report says little about schools, rather more about training. It says that schools should include more preparation for work than is generally the case and makes the point that it is a moot point how early in the educational process foundation working skills are laid. Among the points the report makes on training is to welcome the Government's new training initiative. It welcomes the youth training scheme. The report would like to see greater coverage of this, but recognises that that will take time. It welcomes two other closely linked parts in that training initiative that we must not ignore—the introduction of skills training for standards and more and far wider opportunities for adults. I am delighted that the report takes that view. I believe that swift improvement in education and training are among the most urgent matters of all. It is so easy to say, "Why all this fuss about training? Training for what? What is the use of training if there are no jobs?". It is so easy to say that. We are faced with the chicken-and-egg situation. We must begin somewhere. There are a whole host of reasons why a massive effort now in relevant education and training is one crucial way to begin.

It is important from the point of view of our economic life that in the changing work scene we must have a young workforce with foundation skills on which to build, a chance to develop new skills and a chance for people to train and to retrain as adults. Competitiveness and the quality of the workforce are inseparable.

From the point of view of young people themselves, anyone who has lately been, as I have, a local government councillor and chairman of the education committee in an area such as Tayside region, where unemployment is high, will know just how anxious are young people, and their parents, about how they will get into the labour market and how they will stay in it. Their main concern is that schools should equip them properly and that training opportunities will exist so that they can earn a decent living and thus contribute to the common weal. From the point of view of society as a whole, it may well be that we shall come to accept, as time goes on, that spells between jobs are normal. But it is essential that it is not the same people who are always left out.

In spite of the figures given by the noble Lord, Lord McCarthy, the evidence is that this is happening. Last year over 5½ million jobs changed hands, yet at the same time over 1 million people were unemployed for over a year. Of those, 370,000 were unemployed for two years or more and 165,000 for three years or more. Once a person is out of the labour market it is very difficult indeed for him to get back. As the noble Baroness, Lady Seear, so rightly said, more than half the people who are long-term unemployed are unskilled or semi-skilled. We must avoid a situation in this country, in the long term, where some people are in better and better jobs and other people are permanently left out. That is inhuman; it is wasteful and highly dangerous.

So we have to proceed swiftly on three fronts. Two are mentioned in the report, and a third is not mentioned. Under the new training initiative as a country we have to make, all of us, a maximum effort in the youth training scheme which is beginning next September—the school-to-work bridge, the opportunity to turn what one learns at school into the skills for working life and for adult life, the broad-based foundation on which subsequent training can be built. To get this scheme off the ground will demand a great deal of many people, a lot of employers, a great deal of trades unions and a great deal of the teaching profession and the education authorities. If we succeed in this we will leap-frog the German scheme—a scheme which is now not meeting what that country needs—and we will be giving young people one of the best chances of any developed country.

Within industry and the MSC the beginning of training to standards which, with the youth training scheme will replace the now outdated apprenticeship, has to get going as quickly as possible. The open tech and other schemes are being worked at now for adults. We must proceed as quickly as we can with the new training initiatives. Good work is being done in secondary schools and right back into primary schools, for all those are important in this matter. However, I believe that change is far too slow. We are far too content in our education system to wait for the next report; to wait for the results of the next pilot scheme; to wait for the outcome of the next negotiation; and to say that we cannot change anything unless we have much more money.

Individual schools can, in my view, do a great deal now. They can do a lot towards helping young people relate what they learn to adult life and to work. Indeed, I heard one employer say at a conference last week that the right place really for the school-to-work bridge is in the schools. If schools could build the school-to-work bridge effectively there would be no need for another agency. I hope that my right honourable friends in another place, the Secretaries of State for Education and for Scotland, will give a strong steer on this. The youth training scheme will be a catalyst for schools, and so will the new technical education initiative just announced by the Prime Minister. New exam arrangements may help. But the education service does not have to wait for any of these.

Finally, and not mentioned in this report although in another two recently published reports, there needs to be a concerted efford by informal educators, voluntary organisations, youth and community workers, and self-help groups. Education and training is not just about skills, it is about the person behind the skills. Many new demands are being made on people today. The changing nature of work, the new ways one has to think, changing work patterns, more time to call one's own, far more time spent together at home, are not easy. Young people meet a thousand different points of view on television. Somehow they have to sort out what they think and believe. It is confusing; it is demanding. Modern life is an increasingly complicated maze through which one has to find the way. There is information available. There is help. But where to find it?

Too many, naturally full of youthful zest, find the maze impenetrable, stop trying, lose confidence, and become switched off. There is need for massive effort by all concerned. In Scotland we have had a pilot scheme, in conjunction with the European Community, on youth information. Every 16-year old school-leaver has a pocket book now with information about where you can go to find out this and that, who can help you, and so on. There are information points in many towns. There has been a tremendous response. Thousands of young people have been helped to help themselves. Denmark is now following suit, as, I believe, is the city of Rome.

A small shift in resources within local authorities by the Government towards a youth work community education approach could bring huge change, and huge savings, I believe, on other costs as it helps the person behind the skills. It seems to me that in these respects at least we are in exciting times. Unemployment, the subject of this debate, is the dreadful catalyst, but we are making great improvements in training, improvements that have been needed for a long time, and we could, through them, overtake our competitors. We have huge opportunities in schools if we can get up, get on and take them. We have great scope through informal education if we can rejig resources a little. It seems to me, my Lords, that the Select Committee report is a most useful tool in all this.

4.34 p.m.

Lord Kilmarnock

My Lords, it is my privilege to be the first to congratulate the noble Baroness, Lady Carnegy of Lour. I say "the first" because I am sure that she will receive many more congratulations during the course of this debate. She is the chairman of the Manpower Services Commission Committee for Scotland and is very active in Scottish affairs, both secular and, religious. Her knowledgeable and constructive contribution, particularly in relation to education and training, has given us a taste of something that I know that all of your Lordships will want to be able to repeat again, and I hope that the noble Baroness will frequently give us the opportunity in the future.

I am also sure that the whole House will be grateful to the noble Baroness, Lady Seear, not only for the way in which she introduced the report but for the firm yet patient and long-suffering—but not too long-suffering—way in which she chaired the committee. I am afraid that I was partly to blame for the burden which she accepted and carried so admirably. In a debate on 20th June 1979, on a Motion of the noble Lord, Lord Spens, to call attention to the then unacceptably high level of unemployment, I proposed to the Government that a Select Committee of this House should be set up with fairly wide terms of reference. The noble Earl, Lord Gowrie, replying to that debate—and I am delighted to see that he will be winding up this one—said that a Select Committee was not something that he could hand out from the Dispatch Box, but that he would bring the suggestion to the attention of the Leader of the House.

In the event, the Government had the courage to give us our committee, and we are all grateful for that. I say "courage" because the previous Labour Administration had been too embarrassed by the then figure of 1,300,000 to look at the idea. But I am afraid I cannot say that the Government have been equally courageous in their response to the report we are debating today—though of course I am grateful to them for sending an advance copy of that response to those of us who served on the committee.

When the committee was appointed in November 1979 unemployment stood at 1,355,000. During the course of our deliberations it passed the 2 million and 3 million marks, and is now practically 2 million higher than when we started work three years ago. But the curious thing about this is that alarm and despondency have not risen in step with the devastating advance of the official figure—not, at any rate, in establishment circles. What was unacceptably high to the noble Lord, Lord Spens, and many others when it stood at 1,300,000 has, by some strange shift of opinion, become more tolerable now that it stands at more than twice that number. There seems to be a new orthodoxy of acceptance and resignation and—dare I say it?—of relief that people are not making more of a fuss about it; are taking it lying down.

How on earth, my Lords, has this come about? Is it that the Government have sized with a sigh of relief on Milton Friedman's "natural" rate of unemployment, or on the variant advanced by Mr. Sam Brittan called the Non-Accelerating-Inflation-Rate-of-Unemployment (NAIRU, for short)? I am indebted, incidentally, to the noble Lord, Lord Harris of High Cross—I am sorry that he is not here—for sending me Hobart Paper No. 90 by Mr. Sam Brittan, in which I discovered on page 50 that NAIRU—that is the Non-Accelerating Inflation-Rate-of-Unemployment— is probably around 10 per cent. or 2 to 3 million seasonally adjusted, excluding school-leavers". Actually, I read the whole paper, which contains some very valuable suggestions, including electoral reform and other matters acceptable to the SDP and to the Alliance. But perhaps the Government's eye lit only on that page.

Is it perhaps the lack of social unrest on any widespread, co-ordinated or consistent scale that has lulled the Government into complacency? Our report does, I think, a useful job of analysis in Chapter 3 —the noble Baroness, Lady Seear, referred to this—on the "Pattern of UK Unemployment", where it distinguishes between "stock" and "flow". The stock is the monthly headline figure. The flow measures the throughput. The stock rises largely because the median time out of work is constantly rising and we now have more than 1 million long-term unemployed—that is, out of work for more than one year.

But even at high rates of unemployment with a rising median, some 300,000 people leave the register every month. This—I quote from Chapter 3 paragraph 25— puts into perspective suggestions that the unemployed should rebel, engage in retraining, move geographically, start their own businesses or behave in some other adventurous way. . . Those for whom unemployment lasts long enough to become a chronic Condition tend to be older workers, less than fully fit and the unskilled. In short, they belong to the groups least likely to engage in rebellion, retraining, geographical transfer or starting new businesses. In other words, the unemployed have no clout and pose, or seem to pose, no real threat. Is that what has lulled the Government, and what is in danger of perhaps lulling the rest of us, into weary acceptance of the figure published on the last Tuesday of every month?

Well, my Lords, before the Government or anyone else sink into resignation, let them read our Chapter 7 on "The Social Effects of Unemployment and their Costs". The noble Lord, Lord Melchett, was, I believe, going to address part of his speech to this chapter, in which he played a significant part. I shall do my best to make up for his absence. In a sense this condensed, laconic but quite pungent chapter was the hardest to write. It was not just slipped in as a sop to the sociologists. I think all of us felt it was at the core or heart of the matter, but feared it would necessarily become the poor relation dealing, as it does, with things that are not easily measurable.

Professor Brenner has attempted to measure the increase in ill health and the death rate due to unemployment and to cost the results. His methodology has been attacked, but he is clearly on to something real. Paragraphs 7.17 to 7.21 on crime and unemployment repay reading, in conjunction with Appendix 4 on pages 178 and 179 showing the incestuous relationship between unemployment and prison and borstal admissions. There is another curve not shown here, I think, in which the unemployment and indictable offences curves clamber happily entwined up the trellis we have constructed for them.

Inevitably, paragraph 7.21 comments on Brixton and Toxteth, but these were merely the causes celèbres, and it is worth looking at Appendix 5 on pages 180 to 196 entitled, Unemployment statistics in certain areas seriously affected by riots and civil disorder 1981", which show higher than average levels of unemployment among young males, black and white, in most of the affected areas, which include Ellesmere Port, Hull, Leeds, Huddersfield, Handsworth, Nottingham and Leicester. The Government should bear this chapter in mind when they call into question, as they do in the Annex to their response, our estimate of the Exchequer cost of unemployment. This subject was referred to also by the noble Baroness, Lady Seear, and the noble Lord, Lord McCarthy.

In our paragraph 7.23 we come to a very tentative estimate of an additional cost to the Exchequer from the social side-effects of "some hundreds of pounds" for every person unemployed. But we make no allowance for this whatever in our estimated Exchequer cost of £5,000 per person unemployed. Some of us wanted to, but the uncertainties were too great to permit the inclusion of an arbitrary figure in a respectable attempt at costing unemployment. All the same, I am convinced that our chapter on social costs reveals only the tip of the iceberg.

Why is that? It is simply because social costs are not static; like financial costs, they are cumulative. If you do not service them, they will accumulate at compound interest. Increasing numbers of people disaffected from the society in which they live will slash away at the fabric of that society and the cost of stitching and patching will grow and grow. Policing will become more expensive, the prison population will increase and even if people do not become violent but simply sink into apathy, the costs will go on going up. Not only physical but mental health will deteriorate. The health and social security bill, which the Government want at least to hold steady, will take off. I have spoken at some length on this short chapter, but that is to ensure it is not overlooked.

I turn briefly to the supply side. Britain has the largest workforce in relation to population in the Community, as the noble Baroness mentioned. The committee did not see any great possibility of redistributing work through the reduction of working time owing to the resulting increase in unit labour cost. We concentrated instead on the reduction of supply through later entry to the labour market and earlier, or phased, withdrawal from it. At the point of entry, some people ask, as I think the noble Baroness, Lady Carnegy, asked: Why more education and training? For what? A categorical answer is difficult at a time of changing technology and uncertain prospects for world trade. But it is certainly suggestive that our partners in the Community, who all retain their young in education or vocational training much longer than we do and release them with higher skills, are suffering lower rates of unemployment than we are. One can understand the Government's caution—in their response in paragraph 22—over committing a further £1 billion to extending the YTS to two years (that is, up to 18) but that is undoubtedly where we shall have to go, sooner rather than later.

Turning to the middle years, on a lighter note, I am afraid that the famous remedy of the noble Lord, Lord Spens—which consists (or consisted; he will correct me if I am wrong) of requiring the women of England to lay down their jobs for their males by committing a sort of mass labour market hara-kiri—is simply not on. At least, I have to tell him that my party would not support it. We believe in "Jobs for the Girls".

As we approach the end of working life, I am glad to see that the Government, for once, agree with us on what we call pairing, and what they call job splitting. Here I would ask the noble Earl a specific question; if he does not have the answer at his fingertips, I shall be happy if he will write to me. In our paragraph 10.26 advocating pairing for those over 60, we suggested a waiver of national insurance contributions for the two employee halves of the pair. We also suggested that the employer should be compensated for any additional costs incurred through employing two people for one job by a waiver of his national insurance contributions. In paragraph 50 of their response, the Government consider, direct payment to employers a more efficient way of providing an incentive to split jobs", and they go on: It is worth noting that in most cases where a job is split, the National Insurance contributions are also split, so there is no extra cost". Is that in fact the case? As legislation stands, or will shortly stand, surely any earnings over £32.50 a week will surfer a 9 per cent. national insurance deduction, whether it is the reward of half time or part-time or sharing or splitting or whatever. The Government have said they will help the employer. Will they not also help the employee? I hope the Minister will be able to clear up that point.

I said at the beginning that I thought the Government's overall response was disappointing, and I repeat that. They have said No to our proposed graduated allowance for trainees; they have recoiled from a second year of YTS, though I hope they have not rejected it out of hand; they have in effect left adult training to the lucky dip of voluntarism; they have refused even a modest expansion of Community Industry, which is a very effective and cost effective programme for disadvantaged 17- and 18-year-olds, who will not readily be catered for by the YTS. The Government have also stalled on the very reasonable suggestion of the extension of long-term supplementary benefit to the long-term unemployed over 55; they are cool on co-ops (I wish the noble Lord, Lord Melchett, were here take that one up, but I see the noble Lord, Lord Oram, in his place); they summarily dismiss our major proposal for long-term, low-cost, group specific net job creation in the public and voluntary services, so ably explained by the noble Lord, Lord McCarthy (I agree that is a handsome specimen of jargon, but it would provide 400,000 low-cost jobs in areas where they are desperately needed); and they have stalled on raising the earnings disregard for the unemployed, even though they have brought unemployment benefit into tax, and they have shown themselves much more timid incidentally on tax credits than have some of their supporters.

The Government have several packages on offer. There is the CBI's, there is my party's and there is this one, the one contained in the report. In fact, they are not really packages at all but open baskets, each containing one or more of the others' wares. That does not mean that the Government can simply saunter by, toying with one or other of the cheaper items of merchandise and dropping the more expensive in distaste because they do not conform with some tenet of neo-classical economic theory, or would not fit into some Treasury model simulation of the economy that is completely incomprehensible to the British public at large.

If the Government are even faintly serious in their protestations of distress over unemployment, they must set their sights on 1 million new jobs. Anything less, will make very little impression. Even that million, which is achievable, will not knock 1 million off the present figures because the structural sea-change—or should I say North Sea change?—in our economy is not yet completed and there will be other job losses on the way. I suspect that my noble friend Lord Roberthall—who, incidentally, made a notable contribution to Chapter 5 of the report—will have something to say about that when he speaks on the macro-economic side.

What it would do is knock 1 million off the grand total we shall otherwise have in two or three years' time, and that would be an important achievement; it would reverse the relentlessly upward thrust of the official figure and give the British public some hope, some smell of better things to keep them going, while the longer-term effects of education and training and other supply and demand side remedies are working through the system.

This is no matter for party political one-upmanship. I can see that the Government might be chary of the advice of a single pressure group or a single political party, but the outstandingly important thing about the proposals in this report is that they are all-party; every one in the committee had to put some cherished belief or bête noire on the shelf. The result is not a soft-centred consensus but an achievement in hard-headed, well-wranged compromise, and I saw it blow by blow. The Government would be extremely unwise to disregard it. We must put the urgency back into the attack on unemployment.

4.49 p.m.

Lord Kaldor

My Lords, like the noble Lord, Lord Kilmarnock, I wish to begin by congratulating our maiden speaker, the noble Baroness, Lady Carnegy of Lour, who made an extremely able and erudite contribution. She comes from a country where, in my view, education is much more sensible and well directed than in the rest of the British Isles, and therefore she is able to speak with special authority about the numerous ways in which we can improve vocational education and thereby improve the abilities and skills of people in industry.

The committee, too—and chiefly its chairman, the noble Baroness, Lady Seear—must be congratulated for producing in a short period a very solid piece of work, extending to a history of unemployment, a review of the theories of unemployment, and to assembling a vast amount of statistical material on the costs of unemployment, its social effects, as well as a detailed review of possible remedies. In my view it is all the more regrettable that the committee missed its target as regards the basic causes of unemployment, and the causes of its aggravation since 1973.

I think that it is true, as it is true in medicine and everything else, that one cannot find the right remedy without giving the right diagnosis; and the right diagnosis the committee certainly failed to give. Indeed, the noble Baroness the Leader of the House in her speech came rather nearer to it than did the report. The section of the report which comes near to it is that which discusses United Kingdom export performance, looked at from two different points of view: exports as a share of the national income, and exports as a share of world trade. These two measures of performance appear to yield widely divergent results.

I do not know how many of your Lordships took the trouble of bringing with you a copy of the report, but if you did I would ask you to turn to page 42 and Table 6, about which I have much to say. This is a very important table. Unfortunately, the table is marred by a bad misprint. On the very top row the year 1963 should read 1953. Until I discovered that it gave me quite a headache. Actually it is obvious that it refers to 1953, since 1963 appears again two lines lower down. Thus the table covers a period of 26 years up to 1979.

If your Lordships take the first of these two measures—exports as a share of national income—we seem to have done frightfully well. Comparing the initial year, 1953, with the final year, 1979, we see that the share of exports in our total national output has increased in a most remarkable fashion—from 24.3 per cent. to 33.4 per cent.; in other words, from less than a quarter to just over a third of total output. As your Lordships will see, most of the improvement occurred after 1973. The rise in share up to 1973 was only from 24.7 per cent. to 27 per cent. Whereas at the earlier date, one in four of everything produced in this country—and I think that, judging from their source, the figures relate to manufacturing industry only—was exported abroad, by 1979 one in three of everything produced was exported. That is a very significant difference.

But any glowing feeling of pride and satisfaction derived from these figures is badly shaken by a glance at the second column of the same table, which shows that over the same period we lost more than one-half of our share of world trade in manufactures. Whereas in 1953 we still accounted for 21.2 per cent. of the whole world trade, the share fell to less than 10 per cent.—to 9.7 per cent. to be exact—by 1979. The figures do not go much further, but I do not mind disclosing to your Lordships that since then the share has fallen by a further 20 per cent. and is now just over 8 per cent.

That Britain's share of world trade has a diminishing trend is a long-established fact. It was first noted in the 1880s—100 years ago. But then, and for many years afterwards, people took comfort from the fact that a fall in our share of trade was an inevitable consequence of the spread of industrialisation to other countries. There was a time when Britain was the only country to produce factory-made goods. Then our share was necessarily 100 per cent. of "manufactures", if we confine the term to factory-made goods and exclude hand-made goods.

We could not prevent other countries from following our example. Indeed, we actively assisted in the process by sending out our engineers, our skilled workmen, by establishing factories abroad, and sometimes by providing them also with the necessary funds through the City. Thus our share of world trade was bound to fall, but that was not regarded as a source of great worry, because it was thought—and, up to a point, rightly—that the size of the market is increased pari passu with the expansion of the number of producers.

But this kind of complacent attitude will not hold water if applied to the post-World War II period. For there it can be seen that all other industrial countries—with the sole exception of the United States—managed to keep their share, or even to increase it, during the same period in which our share of trade was halved. Thus between 1953 and 1979 France's share increased from 9 per cent. to 10.4 per cent., Germany's share increased from 13.3 per cent. to 20.7 per cent., Italy's from 3.3 per cent. to 8.4 per cent., and Japan's from 3.8 per cent. to 13.6 per cent.

Clearly, while Italy and Japan were exceptional in more than doubling or trebling their share of world trade, so were we exceptional. Nobody else in the world has diminished its share by one half, or anything like it, during these 26 years. Yet nobody else seems to have been as successful as Britain in increasing its share of exports in total output—not even Japan, I believe. We have increased it to 33 per cent. Ministers make speeches all over the country saying that there is no other middle-sized country—neither Germany, nor Italy, nor France—which exports such a high share of total manufacturing production as we do; and that is true. For Germany or France the figure is only 20 or 25 per cent.

How is this paradox to be resolved? It can be resolved, and can be resolved only—I am sorry that the noble Earl, Lord Gowrie, is not here, because I think that his intellectual powers are adequate to understand what I am going to say; I am not sure about everybody else—on the basis of Sir Roy Harrod's theory of how foreign trade is brought into balance. Put quite simply, the theory says that imports are brought into balance with exports through changes in the total effective demand; meaning by the term "total effective demand" the sum of home demand and foreign demand. This is not on account of deliberate policy measures, but because businesses naturally contract their operations whenever new orders fall short of current production; and, equally naturally, they expand their operations whenever the flow of new orders exceeds current production.

Harrod then shows that the first state of affairs—the tendency to contract operations—is a result of an excess of imports over exports; and the second state of affairs—the tendency to expand—is the result of the opposite. Harrod's contention was that it is through such movements in output that foreign trade is brought into, and kept in, equality. Since imports vary in direct proportion to home income (while exports vary with world income) these tendencies imply that a country's economic growth relative to other industrial countries—that is to say, its growth of capacity and its growth of productivity and of employment—will tend to diminish or increase accordingly as the yearly percentage rise in imports exceeds or falls short of the percentage rise in exports. That is the really fundamental point on which the whole question of unemployment hinges.

To resolve the paradox in Table 6, the left-hand side of which is good news and the right-hand side of which is bad news, we must ask what happened during these years to actual exports and imports. What do we find? We find that between 1953 and 1979 the volume of British manufactured exports increased threefold, which I think is quite a respectable figure. But the volume of manufactured imports increased 12.9 times; that is, four times as fast as the volume of exports. The result of this discrepancy was that the level of total manufacturing output over the whole period increased by only 85 per cent.—that is to say, production increased by less than a third of the annual rise in exports and by less than a sixth of the annual rise in imports.

What I am contending is that the shortfall in the growth of production over the growth of exports is nothing more than a mirror image of the shortfall in the growth of exports over the growth of imports. The two are connected; and if your Lordships were used to having a blackboard in this Chamber, as at a seminar, I could demonstrate it by means of simple equations.

The fact that imports expressed in terms of annual rates rose at just over 10 per cent. a year during the whole of that period was consistent with exports rising at only 4.7 per cent. a year, because, and only because, total income (or output) rose at only 1.9 per cent. a year. We had a very low growth rate of production because our growth rate of exports, although it was much higher than our growth rate of output, was so much less than our growth rate of imports. Every year more of the income generated by domestic production was expended on imports and less of it returned to the producers, who originally laid out the wages and salaries which provided the source of demand. Therefore, the producers naturally found that orders did not expand fast enough; on the contrary, they consistently fell short.

Whereas if, one way or another—there are many ways, but one way or another—we had had a situation in which imports had risen in proportion to the rise in total output and no more, total output would also have risen in proportion to exports and no less, which in our situation means that both exports and imports, and total production, would have risen around 5 per cent. a year instead of 1.9, 4.7 and 10 per cent. respectively. In that event our output between 1953 and 1979 would have increased by 255 per cent. instead of the 85 per cent. actually achieved. That is to say, we had it in our power to increase three times the rate of growth of total production, if only we had kept the growth of imports down to the requisite level and not allowed it to exceed it.

The fact that the United Kingdom's propensity to import foreign goods was so much higher than the world's propensity to buy British goods meant that our total output could rise at only a fraction of the rate of growth of our exports—a fraction which tended to diminish as the volume of imports took up a steadily rising part of total domestic demand.

Hence the rise in the export ratio from one-quarter to one-third of total output, which I referred to before, from 25 to 33 per cent., is a sign not of strength but of extraordinary weakness. The export ratio was rising not because exports were rising fast but because total production was rising so much more slowly. After all, a ratio is a ratio, and it depends on both the numerator and the denominator how it moves. Production rose far more slowly than exports, and a fortiori far more slowly than imports. In fact, it is interesting to note that the large improvement in the export ratio—again, please look at Table 6 on page 42—occurred in the six years from 1973 to 1979. That was a period during which the growth of manufacturing output was negative, being minus one-half per cent. a year, and the growth of exports was only half as large, at 2.8 per cent., as during the previous 20 years.

No doubt Sir Geoffrey Howe is formally correct in repeating on every possible occasion that both of these phenomena—fast growth of import penetration combined with the slow growth of export penetration—are manifestations of the same thing; that is, the fact that consumers, whether home consumers or foreign consumers, increasingly prefer foreign goods to British goods. We suffer from what the Government call "supply side difficulties". That is almost Her Majesty's Government's favourite expression; and by "supply side difficulties" they simply mean that British producers find it more difficult to sell, either in the home market or in foreign markets, than foreign producers, and therefore their share of the market is shrinking both abroad and at home.

No doubt this is true, but it is the duty of the Government to help British industry to get out of this situation, and this is what the present Government are manifestly not doing; or they are doing it on the theory that if you want to cure a man of pneumonia the best thing to do is to expose him half naked in the middle of a cold night to a rainstorm.

Owing to the importance of economies of large-scale production in manufacturing (which are very important but very little emphasised) both comparative success and comparative failure have cumulative effects. If we want to make British industry more successful we must begin by improving its market prospects, and this requires a limitation on the growth of imports, of the kind that we are already applying in connection with Japanese cars. Japanese cars are the one case where we operate a market penetration ceiling, at 10 per cent. We tell the Japanese that they must not sell more than 10 per cent. of the total car sales. They do it voluntarily, but obviously they do not do it because they like doing it.

We must improve the market prospects also by ensuring a competitive exchange rate; that is, we must ensure that British goods are not in general handicapped by high unit costs owing to the overvaluation of the pound. The best example of the artificially high value of the pound is that you can buy a motor-car, either a British or a foreign car, in any continental country at 20 per cent. or 25 per cent. cheaper than you can buy it in England.

The problem of unemployment appears insoluble so long as we are not prepared to tackle the problem at its source. Tackling the problem at its source means eliminating the disparities between the growth rates of imports and exports. Unlike many other speakers, I do not regard this as an insoluble problem; I do not regard it as a terribly difficult problem, and neither do I regard it as a problem for which you have to do hundreds of different things, as enumerated in a long list of things recommended for alleviating unemployment or its consequences. I think that once you solve the problem of keeping down the growth of imports to the growth of exports, then manufacturing production will pop up to equality with the two growth rates and you will find unemployment literally melting away. You do not have to do anything about it. It will just melt away of its own accord—without special skills or vocational schemes or job splitting or all the hundreds of other things that the Government have in contemplation. And you will be surprised at how quickly it happens.

I wish to end by giving just one example. At the end of the war, everybody—and I was one of them because I was there—was extremely pessimistic about the future of Western Germany. It was an over-populated country; how on earth was it going to live? Then it had to absorb 4 million expellees from East Prussia, Silesia and from the Sudetenland. Much to everyone's surprise, in a very few years in the 1950s it absorbed them, because its exports were growing faster than its imports and therefore domestic production had a double engine to enable it to go forward very fast. Then the expellees ran out and they came up against a labour shortage. What did they do? They lifted the barriers and let in, first, the Italians and then, when there were no more Italians, the Spaniards. When there were no more Spaniards, they let in the Greeks and, finally, the Turks. So with 4 million people in addition, 40 per cent. of the manufacturing labour force was comprised of expellees and the so-called guest workers. In other words they had over-full employment of 40 per cent. Nobody had planned it; it just happened by itself—and it happened because the exports grew faster than the imports.

My Lords, I submit that, if people want to solve the unemployment problem, then the remedy is in their hands. I can think of five different schemes by which the growth of imports can be kept down to the level which would enable unemployment to be absorbed.

5.13 p.m.

Lord Vaizey

My Lords, I should like to congratulate my noble friend Lady Carnegy of Lour on her maiden speech and I must also express my admiration for the noble Baroness, Lady Seear, for her chairing of the Committee. It was, indeed, a marathon. One remembers that the good Abbe Sieyès, when asked what he had done during the revolution, replied, "J'ai vécu"—"I survived". I cannot help thinking that that is the motto that is on the escutcheon of the noble Baroness. Rarely can a committee have been so subject to the infirmities of the flesh and of anno domini. The right reverend Prelate the Bishop of Worcester retired in good health; the noble Lord, Lord Spens, was severely ill twice; the noble Lord, Lord Drumalbyn, resigned; I had a heart operation which rendered my heart even more steely than it was before; the noble Lord, Lord McCarthy, presided over innumerable tribunals, giving more and more to more and more railwaymen and others. And so we went on and eventually it drew to a close.

Every shade of opinion was represented, from the ornithological far Left—who I regret is now ill—to the episcopal purple; and two disciples of the former Prime Minister, Mr. Heath. The only people not represented were Her Majesty's Government. I did not represent Her Majesty's Government. My noble friend on the Front Bench does so while his noble Leader wines and dines with two Queens; so we shall expect him to reply to the noble Lord, Lord Kaldor, since Lord Kaldor said, rightly, that the noble Earl is one of the few people with a powerful enough intellect to comprehend the argument.

I want first of all to concentrate on the areas of agreement on that committee. About the horror of unemployment, we are all united. I will not waste words on that because others have already said it better. I merely say, "Ditto, with knobs on", about what they have said. It is indisputable that unemployment is not what the headlines make it seem. In any period of time, large numbers of people are unemployed and large numbers of people return to work, as the noble Baroness said in her maiden speech. Much measured unemployment, therefore, is the gap between leaving one job and taking another and, for the majority of the unemployed, what is actually happening is that the gap between leaving one job and taking another is increasing.

It is not quite true that there are two nations, the employed, on the one hand, and the unemployed, on the other; because a lot of unemployed people become employed and a lot of employed people become unemployed. Nevertheless, as has been said, there are between 1 million and 1½ million long-term unemployed. These people are in the vulnerable group, as the noble Lord, Lord McCarthy, has correctly said, and I, personally, think that special measures to deal with the problems of these groups are worthwhile, desirable and possible.

There is, I must say, a distinction which was drawn in the report and in the evidence between "work" and "jobs". I think that people have a need both for jobs (because they give them income and because they give them a position in society) and for work, which is not quite the same thing; and there is scope for an increase in voluntary work. When we read about vandalism in tower blocks, I am struck by the fact that, after all, rich New Yorkers live in tower blocks. They do not suffer from vandalism in the tower blocks because they have porters and liftmen and so on. There really seems to me to be scope for more and more people who live in tower blocks and are unemployed to put themselves on a rota and do these kinds of jobs voluntarily. I give that as a particular example of an area where I myself think there is scope for voluntary work which, although it is not a job, would be beneficial to society in general and to the unemployed in particular.

I turn now to the crucial question which the noble Lord, Lord Kaldor, alone in the debate, has tackled—whether the long-term unemployment will endure and whether it will get worse. I think I should like to point out that the number of people seeking work has been increasing, notably with an increase in the proportion of married women; and there has been a very substantial immigration into the United Kingdom. This growth in the labour force is, I think, coming to an end through natural causes; it has a natural limit. The numbers in the age groups up to 16 are falling, although of course they will rise towards the end of the century.

The question I really want to address is whether or not the total number of jobs will decline in the longer term. I venture to disagree with the noble Lord, Lord Kaldor, although I would not dream of doing so in a seminar because he would probably annihilate me. So, let us thank goodness that there is not a blackboard in your Lordships' Chamber yet. I myself think that manufacturing industry in this country and in the rest of Western Europe is bound to decline. I think that heavy jobs in coal-mining and steel will diminish and I also think, and have long thought, that mass manufacturing has a declining future as a source of jobs in this country. I do not think that this is a new view; it has been a commonplace of long-term economic forecasting for many, many years. Mr. Colin Leicester produced a famous report for the old Post Office—now even worse under the name British Telecom—which forecast exactly what is now happening with these manufacturing jobs; and manufacturing industry is drifting to Brazil and other newly-industrialising countries. I cannot help feeling that, viewed analytically, Britain, like other Western European countries, is now a service economy of which for the greater part manufacturing industry is a subsidised appendage.

In my view, the argument turns on when will the service trades turn upwards. I think that the present slump has already bottomed out and that jobs will follow. But we all know that there is about a 21 -month time lag between the bottom of the slump and the period when you get to the bottom of the employment cycle.

I think that the question which I should like to address—after all, the committee was about long-term remedies for long-term unemployment, so the long term is the question that we were addressing—is whether the next boom at the end of the 'eighties, which will be a high consumption boom, will also be a high employment boom. That depends on the nature of the recovery. Perhaps the word "recovery" is wrong. Perhaps we ought to talk of transformation of the economy. Last week, in the economic debate, I argued that periodically the world economy goes through one of these troughs, which Schumpeter called a gale of creative destruction, and which were analysed in detail by Kondratieff, whose work has been revived by a young Irish economist, whose PhD I have just been examining. The point of this excursion into the realms of high theory—some might think dotty theory—is that each previous trough has been followed by a boom in capital investment. New trades, new areas, develop, and it saves brute labour, raises real wages and increases the number of jobs. That so far has been the general story. I do not think that joblessness is inevitable if you take the real long run, though it may well be—and this is very serious and worrying—for the next five or six years.

Supposing we look ahead towards the end of the decade. Where are these jobs and what are they likely to be? The short answer to this question is that we do not know. If we knew, we could buy shares in the firms concerned which are going to boom and we would all be incredibly rich. Obviously, nobody knows and we all have to guess. Businessmen have to gamble. I am agnostic about the exact nature of the jobs which will be coming at the end of the 'eighties but I will say this: I am convinced that they will be in the service trades rather than in manufacture. They will be in services which are internationally traded. There are certain to be jobs which are available for the more rather than the less skilled. The robots will take over the dull, repetitive work and leave the jobs where judgment and ingenuity are required.

If I am correct—and naturally I would not say it if I did not think I was—then that means that certain important aspects for long-term Government strategy must be thought about. I agree very much with my noble friend Lady Young and with my colleagues on the Committee about the importance of competitiveness. I am quite convinced—contrary to what the noble Lord, Lord McCarthy, appeared to be saying—that measures to improve the competitiveness of the labour market are absolutely at the heart of any long-term strategy for curing the problems of unemployment. But I do think that there are other factors. I think that the time has come to look long and hard at the array of subsidies for manufacturing, especially the so called regional policy. Firm after firm (subsidised to the hilt to go to the old declining areas) has gone "bust". Sixty years of regional policy have failed.

I agree with Professor Peter Hall of Reading University that we should back success as other Western European countries have done, and that means backing the service trades in the more prosperous areas and, if necessary, helping people to move out of declining areas. They have already left the declining areas in extremely large numbers—in their millions—and the proof of that, if people do not believe it, is the successive redrawing of boundaries for constituencies which has eliminated dozens of constituencies in the older industrial areas of the country over the past 30 years.

As many of us said in the economic debate, we need to keep international trade going. I am opposed to the imposition of tariffs by a country which is as weak in manufacturing as we appear to be. I reiterate the call that the noble Lord, Lord Soames, made last week for a new world agreement on exchange rates. It seems to me absolutely vital that if we are to make any effort substantially to increase output, young businessmen of all kinds need encouragement. The report goes into this and I find that its arguments are very convincing, and many of the measures which the Government have taken are well worthy of support.

I am on the panel of the Bowmaker awards for small business achievement and I think that if other noble Lords sat on that panel they would be as astonished as I am at the immense variety and inventiveness of a very large number of youngish people who set up business for themselves, and it is extremely important that we should encourage people to set up in business for themselves rather than to seek a steady career in some bureaucracy, whether that bureaucracy be private or public. For many years it has not been very respectable to do that. That has really been much of the source of our trouble.

I also agree very much with the Government and with the report that the important point is the shortage in this country of skills, and that training needs to be encouraged. The Government have already done much. I was one who favoured the merger of the further education and higher education branches of the Department of Education and Science and the training parts of the Department of Employment into a new Ministry of skills. On reflection, I think the Prime Minister was right in disapproving of playing around with the boundaries of Whitehall departments. She took a major step, however, in appointing my right honourable friend Sir Keith Joseph to the Department of Education straight from the Department of Industry, and in appointing Mr. Norman Tebbit at the Department of Employment. They have brought out the substance of the policy in this new training programme which, if fully implemented, could revolutionise education in this country. I only hope that the quasi -autonomous bodies which report to the two Secretaries of State—the Manpower Services Commission and the University Grants Committee—do not drag their feet in this area.

Last but not least, I must say that I do not share Lord McCarthy's enthusiasm for the long-term, low cost, group-selective job creation, about which he talked at some length. In my less charitable moments, I sometimes think of it as the "let's subsidise NUPE" scheme. The proposal comes down to giving non-jobs in the health service to thousands of people doing jobs which those people in the health service already do not do very well. What the National Health Service suffers from is appallingly bad management at all levels. It is grossly over-manned in consequence of this bad management and what it needs is far better management and, in my opinion, far fewer workers. Nobody, so far as I can see, has been all that badly affected by the strike.

It is really not desirable in my opinion in the interests of long-term productivity in this country, which depends upon good management, to spread bad management habits, to subsidise people to take on all and sundry on the grounds that it is cheaper than paying them unemployment benefit. That way lies the total demoralisation of all kinds of management, and to do it in a health service which has already been subjected to reform by the Government of Mr. Heath and bad management under the previous Government seems to me to be something that I could not conceivably support. That was why I fundamentally disagreed with the report of the Select Committee which the noble Baroness chaired. I did not disagree with the analysis or with many of the recommendations but I did specifically disagree with that, because I think that what is wrong with the country in this particular field lies much more in the hands of management than of any other single group in our country.

When this House is reformed, I suppose the select committee system will also be reformed. Obviously then the spurious search for unanimity will go by the board. I would have preferred to have set out my dissent far more lengthily and much more carefully argued than I have been able to do in what has proved to be the longest speech I have ever made in this Chamber—though it is the shortest speech that has been made so far in the debate. But, until that day when newly-elected people take our old seats and all the old bad habits are cast out, we have to do our best. I have tried to do my best by saying quite candidly where I disagreed with my colleagues in these three vast years of taking evidence and reflecting on the report.

I think the analysis is first class. When I first came to this Chamber seven years ago a friend of mine (whom I see in the Chamber) once said to me: "Don't say anything in the House of Lords you can sell to the newspapers for money." I think that was sound and wise advice and in line with the argument which, generally speaking, I have been presenting in my speech this afternoon, which is that we should be more businesslike. But I have chosen to ignore it both this afternoon and, as I hope the noble Baroness will agree, also in my contributions, such as they were—and I know they sometimes irritated her—in the Committee.

Lord Ardwick

My Lords, before the noble Lord sits down, may I ask him to extend his speech a little further? How does he reconcile his statement, if I heard it correctly, that he regards the future of industry not only in this country but also in Western Europe as a subsidised appendage of a service society with his desire for the continuance of world free trade?

Lord Vaizey

My Lords, I think it is a general truth that manufacturing industry in this country not only pays comparatively little corporation tax—of course I may be quite wrong in saying that, but that is my judgment—but also attracts very substantial subsidies of one kind or another. We also have a rather higher proportion of manufacturing industry than many of our richer neighbours, such as the United States, for example. So I do not see any contradiction in that, as a matter of fact.

5.33 p.m.

Lord Wolfenden

My Lords, let me first say what a very great privilege I think it was that the noble Baroness, Lady Carnegy, should make her maiden speech in this debate. We were all, I am sure, profoundly impressed by her knowledge and her concern, and I hope we shall hear her many times more. I was myself particularly rejoiced because she anticipated in what she said a good deal of what I was proposing to say—which means that my contribution this evening can be even shorter than it was going to be originally.

I am not an economist; I am not a technologist; I have never belonged to any political party. It may, therefore, well be wondered how I have the temerity to take part in this debate or indeed to have sat on the committee presided over with such distinction by the noble Baroness, Lady Seear. It was for one reason and one reason only. I have spent practically all my working life in education of one sort or another, and it is against that background that I venture to make just one point as briefly as I possibly can.

One chapter of our report (Chapter 11) deals with education and training, and, since the report is concerned with long-term remedies, I think it is reasonable that there should be some concentration on these facets of our problem. It is widely accepted that, in these fields, as they relate to work, we lag far behind our competitors both inside the EEC and outside it. I am not going to waste your Lordships' time on semantic controversies about the precise meaning of the words "education", "training", "vocational", "academic", and the differences between them. Far too much time has been spent in the past on these barren arguments—their barrenness proved by the simple fact that for some of us a thoroughly rigorous academic education turned out to be totally vocational.

A good deal has been written in recent years about education for life, education for leisure, education for a changing world and even, in one splendid book, education for "a world adrift". May I suggest that it is high time we began to think and write seriously about education for work? Chapter 11 sets out the frightening figures and refers sadly to the broken bridge between education and the world of work. I am not going into details about whether secondary schools, sixth form colleges, tertiary colleges, colleges of further education, universities or polytechnics, or even a combination of them would be the best institutions to provide what we need. My simple plea (simple-minded if you like) is that all those concerned—schools, local education authorities, employers, trade unions and even, if I may dare to say so, the multiplicity of government departments and agencies rather untidily involved—could collectively give their minds to framing a synthesis, a strategy, a policy, which will build bridges between education and training and between both of them and work, so that all the very praiseworthy initiatives which have already been undertaken—and I do not undervalue them at all—may be welded into a coherent scheme of education and training for work.

Obviously there are practical problems—educating the educators, training the trainers, learning each other's languages across the chasms where bridges do not at present exist—but the first essential, I suggest, is that all the parties concerned should clear their minds about the objective. The second essential is that they should all collaborate in a united strategy for relating education and training to work. Only so, I submit, shall we begin to be competitive in the world market and to provide work for those who are going to grow up over the years to come.

5.38 p.m.

Baroness Lockwood

My Lords, I, too, should like to congratulate the noble Baroness, Lady Carnegy, on her maiden speech. The constructive nature of the speech, I think, was much appreciated by the whole of the House and I certainly agree with the sentiments she expressed when she said that education and training represented one of the most important aspects of the subject we are discussing today.

I should like also to congratulate the noble Baroness, Lady Seear, and her committee on their very comprehensive and penetrating report. It brings out the dilemma facing us: first, the need to become competitive, which requires investment in capital-intensive industries and particularly in the new microtechnology field and, secondly, the need to bring down unemployment speedily, which requires investment in labour-intensive areas.

In the debate on economic and industrial affairs last week the Minister, the noble Earl, Lord Gowrie, who replied and who will be replying again today, said that, On the central issue of jobs, we must now get a debate going on the distinction between social and economic needs".—[Official Report, 10/11/82; col. 346.] I think the committee accepted that very real distinction, but they concluded that both needs must be tackled simultaneously; and the noble Baroness this afternoon underlined the need for simultaneous action. We just cannot afford for one to await the outcome of the other.

That conclusion is supported in another report which has been referred to in the course of the debate this afternoon; that is, the report of the CBI's steering group on unemployment. Perhaps all the particulars in that report are not the same, but the main thrust of the report is the same. Incidentally, I may add that it is backed by an excellent film which also brings out the social and practical implications of the problem. The need for simultaneous action was also supported in the debate last week by many noble Lords, including the noble Viscount, Lord Caldecote, and the signs are that the Government, too, are beginning to move.

In her introduction the noble Baroness, Lady Seear, commented that, perhaps, the point at which the committee diverged from the Government was on timing. I would say that this problem is one of the most urgent that the country has faced since the end of the war and that we must move quickly. But other noble Lords will be continuing this argument and I want to concentrate the remainder of my remarks on the supply of labour.

First, I want to welcome the recognition in the report of women as an essential part of the labour force, central to the problems of coping with unemployment and training for new skills, and not a peripheral sector to be dispensed with when unemployment among males grows. The noble Lord, Lord Kilmarnock, referred to some of the comments which have been made in this House in previous debates, and which were no doubt made during the discussions of the committee, because I note that the noble Lord, Lord Spens, was a member of the committee. I can only hope that, as a result of the deliberations of the committee, we shall not have from him some of the comments about the return of married women to the home that we have had on previous occasions.

As I say, the report, by its implications, rejects this; so does the CBI's report and so do the Government in their response. Therefore, we start from the premise that the economic activity rate among married women has risen very considerably, and that it will remain more or less as it is at the present time at around 50 per cent. Future projections indicate that it might vary slightly, but such variations will largely be concerned with demographic factors. If this is so, it seems to me that it is foolish for us to accept the fact that the numbers of unemployed among women are largely hidden.

The noble Baroness the Leader of the House quite fairly referred to the fact that the percentage of unemployed among male workers is higher than among female workers. She went on to say that the time when the rise in female unemployment was growing more rapidly than the rise in the rate of male unemployment coincided with the time when we were still getting an increase in the actual number of women in employment. Therefore, I suggest not only that we were getting an increase in the numbers of women in employment, but that there is also a hidden reserve among married women who have not yet come into employment and who have not been included among the registered unemployed.

The unemployment figures only partially reveal the position of women. The report points out that, from March 1980 to March 1981, the number of women in employment fell by some 445,000 but the female unemployment statistics rose by only 240,000, which means that 200,000 women were lost sight of in our economic activity rate in the course of a single year. That figure can be multiplied and has no doubt increased since that time.

I suggest that the new scheme of voluntary registration among the unemployed will not help the situation either. Indeed, it will probably accentuate this disappearance of women from official statistics. First, many women, because they have opted out of paying full national insurance contributions, will not be entitled to a benefit and therefore they will not register. Forty-three per cent. of women who are working are part-time workers, and if they become unemployed there is not much point in their registering. They will not be entitled to any benefit, because they will not be available for full-time employment, nor will they be included in the statistics, because the statistics deal only with full-time employment. Therefore, that is another area of women that we lose sight of once they become unemployed.

I feel that the committee's excellent suggestion of more in-depth counselling will not touch women either, because one of the groups that is most in need of such counselling is that of married women returning to the labour market, and, for the reasons I have explained, many of them will not be registered as unemployed and, therefore, they will not be taken into account for counselling.

I think we ought to recognise that the growth in the numbers of married women in the work force has brought greater flexibility into our employment patterns, and that that is something to be welcomed. They have broken the former rigidity of the five-day, 40-hour week, and this is surely something of which we need to take account in our planning for the future. Certainly, I suggest that the importance of this new flexibility is something which is recognised by employers, who are only too anxious to take avantage of part-time employees for crucial points in their daily and weekly work performance. It must be recognised by the Government, because we have had the introduction of the new job splitting scheme, and the whole question of more flexible patterns of working is something which is today being considered by the European Economic Community.

But our new scheme for job splitting will, I am afraid, again not be of much help to married women because the new scheme for job splitting is for the registered unemployed and for the full-time worker who may become redundant—two areas which will exclude most of the married women. I shall not go into that point this evening. Shortly there will be another occasion when we can discuss that kind of problem. It is a fact, however, that our manpower forecasting, our economic and social planning, must take much more account of this new element in the labour force than it has done in the past.

Secondly, and very briefly, I want to welcome the comments in the report and the emphasis that has been placed on the need to assist women to compete on equal terms for skilled and responsible jobs. Of all the schemes to withdraw numbers from the labour force, those concerned with educating and training are, I submit, the most important. They will be the most rewarding in the long term and they are essential if Britain is to become competitive with her European neighbours. The Government's response has quite rightly referred to the excellent initiatives of the Manpower Services Commission. All I would say about that to the noble Baroness, Lady Carnegy of Lour, as I have said to the chairman of the Manpower Services Commission, is that we need to move from the pilot stage towards full-scale schemes to cover more people.

Next may I refer to the youth training scheme which, despite all the shortcomings, is one of the most promising bases for future development in training. It has removed some of the elements from training which in the past have militated against women and girls. One example of this is the long-term continuous apprenticeship system which is now being replaced by the modular scheme. It is very much to be welcomed. However, it is no good just hoping that girls will take advantage of the scheme. We must ensure that the sponsors, the project managers and the careers service are conscious of the need positively to encourage girls into the skilled areas of the manufacturing sector and particularly into the new skills in computer and microtechnology. The YOP scheme tended to reinforce the traditional pattern of girls' employment and boys' employment. We must ensure that the youth training scheme does not do this—similarly, with the very important micro-electronic programme for schools.

This is a very exciting area. The fact that the United Kingdom has said that it will have a computer in every school puts us ahead of our European neighbours, but already we are seeing the need positively to encourage girls to use the computer as much as the boys are doing. If we are not careful, the girls will be crowded out. Perhaps I may give an example. One local education authority has decided that computers will be placed in the humanities department of schools and not in the science department, for the very reason that if it is in the humanities sector it is likely to be used more by the girls and to encourage women teachers to be trained in the use of the computer. Both of these factors are of extreme importance.

Similarly, in the information technology area we have evidence of the fact that fewer girls than boys have gone into the new information technology centres and that where girls have gone into these centres they have concentrated on the office skills section of information technology instead of moving around and getting a taste of all the training aspects which are available.

While, therefore, these new developments are both exciting and promising for the future they will not of themselves bring about the equal opportunities which the committee commented on. As I say, we shall have to be much more positive in our approach if girls are to take full advantage of the facilities. I hope that the Government will bear this in mind.

5.56 p.m.

Lord Carr of Hadley

My Lords, first may I ask for your Lordships' indulgence. I shall have to leave the House at about 7.15 to take the chair at a dinner which was fixed long before the date of this debate. I can only assure your Lordships that it is not a social occasion and that I shall make a point of coming back after the dinner in the hope that I may just be in time to hear the winding up speeches.

Secondly, may I also add to the praise and thanks which have been extended to the noble Baroness, Lady Seear, for her outstanding chairmanship of this very difficult committee—a difficult subject, though not, I hope, all that difficult in membership—and for the way in which she introduced our report. May I also include in that thanks and praise the great support which we received from the clerk. I should also like to congratulate, as have other noble Lords, my noble friend Lady Carnegy of Lour on an outstanding maiden speech. Obviously she spoke from great knowledge and experience. I can only say from my own experience that everything which she said was both valid and important.

May I say to her and to all noble Lords, as chairman of the CBI's special programme unit which was set up to try to stimulate industry to help in the training of young people, first in the YOP scheme and, secondly, in the future Youth Training Scheme, that we in industry are going about this with vigour and determination in order to try to make sure that the opportunities provided and the content of the new programme will lead to the success of the scheme. The difficulties are great, both in the quality of the scheme required and in the speed at which a vast number of places have to be found; but I am encouraged to find that a growing number of companies all over the country believe that this scheme is a very important development which deserves to be taken seriously.

What I want principally to say tonight revolves around two general but fundamental propositions which are contained in this report. First, the primary and only permanent remedy for our present deplorable state of high unemployment is to make British industry more competitive. Not only manufacturing industry, although principally that, but also our service industries and our financial industries—indeed, all our business activities—must become more competitive. The second general but fundamental proposition is that the present level of unemployment is intolerable. It is not just deplorable; it is intolerable. I was interested and glad that the noble Lord, Lord Kilmarnock, drew attention to the fact that in some strange way—rather as we have now ceased to be shocked as we once were by the terrible violence, terrorism and death in Northern Ireland—we are now in danger of becoming somewhat too tolerant of the present level of unemployment. It is intolerable.

Both of these propositions, in my view, are essential and inseparable. Therefore there is no easy remedy, and the road back towards full employment is bound to be a long—I fear a very long—and hard grind. But that seems to me to be all the more reason for the people of this country to see and to feel that their Government are absolutely committed to it. I do urge the Government to use this debate as an opportunity to make an unequivocal commitment to both of these propositions. There is no doubt about their commitment to the objective of competitiveness, but I am afraid to say that there is genuine doubt about their commitment to the proposition that the present level of unemployment is intolerable. Yes, of course they are deeply concerned about it and deplore it—but do they really mean that it is intolerable? It is against that that too many people put a question mark. I cannot help referring to a speech made by a leading member of the Cabinet back in the summer, when he used this phrase, and, to put it mildly, the cool reception which his description of unemployment as "intolerable" appeared to receive from some of his Cabinet colleagues and from many of his supporters in the House of Commons.

Then I must refer to the Prime Minister's speech at Guildhall last night, when she claimed, rightly, that no Government have ever done more in terms of effort or commitment of money than the present Government are doing to minimise the impact of unemployment. That is a true and very important claim and the Government deserve very high praise for it. Unfortunately, the Prime Minister made no mention of a commitment to reducing the total of unemployed. Of course we all believe that is what she wants to see, but I believe that the commitment has to be open, specific and repeated. Moreover, I could not help noticing, and I am afraid regretting, that the statement made by the Chancellor of the Exchequer in another place last week maintained a fiscal stance which, as he admitted, is bound to result in a further increase in unemployment next year.

Now I come to the Government's recently published reply to the Select Committee's report. That reply, I fear, seems to be equally equivocal on this point. Their reply contains a great deal of good, sensible stuff with which I am sure the whole House agrees and welcomes. Certainly, much of it is in line with the committee's report and recommendations. Yet when I came to the end of reading it, I felt desperately that there was something missing—something missing in substance of policy and in firmness of commitment to the necessity for reducing the total of unemployment. It seemed to me that in that reply there was almost a studied refusal on the Government's part to meet head-on—either in order to accept or to refute it—the committee's argument that the long-term remedy of improving competitiveness should be partnered with measures of more immediate effect. That was a point referred to by the right reverend Prelate the Bishop of Lincoln in his speech. It is not just of humanitarian necessity to do something more quickly, but it is, in view of this non-partisan, all-party committee, a necessity in order to win that measure of general consent and support that is necessary to carry through what is a long programme of recovery, which is bound to be painful and one in which many people are bound to suffer in the short run.

This proposal for partnering long-term remedy with shorter term measures seems to be the main argument and conclusion of the committee which the Government, at least by implication, reject. I believe they are wrong to reject it. I urge them to change their mind. I believe most strongly that it would be possible to take measures that would halt the upward surge of unemployment without endangering the absolutely vital need to go on winning the battle against inflation.

I would like to devote the last part of what I have to say to the question of the long-term remedy of restoring competitiveness. To an important extent competitiveness is a matter of quality, design, service and marketing. All these matters are clearly the responsibility—in my view the sole responsibility—of industrial managers and not of the Government. But costs, and therefore prices, are also an absolutely vital part of competitiveness. It is on costs that Government policy can and does have a critical impact. Let me mention now some of the main elements in costs and prices, over all of which the Government have either a major influence or actual control.

First, and most important is the rate of inflation. I am sure that the Government were absolutely right to make this a clear top priority in their first two or three years of office. Unless they have that under control, nothing else can be done with success. But their success, which is now apparent, now makes other actions both possible and necessary. Secondly, there are wage costs. It seems to me at least that the Government started life appearing strangely indifferent to this terrible engine of cost inflation. I am glad to say that they now take a rather different view, although I notice that the Government reject what the committee call an incomes policy for the indefinite future. Let me say that I myself am not asking them to embark on some statutory incomes policy, but I do hope that we can now depend on them to set an example and to communicate facts, and to urge on all the people of this country that the limiting of wage costs to increases based on productivity is a vital part of our national salvation so far as dealing with unemployment is concerned.

Then there are tax costs, over which the Government have complete control. We in industry welcome the recent further reduction in the national insurance surcharge, but this still has a long way to go. So too has the undemocratic imposition and unreasonable degree of rates on industry; undemocratic in the sense that industry has no means of making representation before taxation. Now I move to the costs of financing business. Manufacturing industry in particular has suffered long and cruelly from high interest rates. The recent very substantial reduction is a most important and valuable blessing and assistance for the future, but I beg the Government to believe that lower interest rates are not a self-starter for the engine of growth. Once growth has started they are very high octane fuel in the engine, but something else is needed to start the engine.

That brings me to the one element of costs which I believe is neglected by the Government and which is certain to be of very great importance in manufacturing industry. I refer to the effect on unit costs of fixed overheads; that is, the servicing costs wrapped up in machinery and buildings. In my view, we in manufacturing industry are now in danger of some of our most efficient and highly-capitalised plant being faced with closure. One can work for a short time at below break-even point, but with a typical highly-capitalised, efficient plant the break-even point is very high—and to work for a protracted period of years significantly below capacity is in the end literally killing. I really do not believe that the Government have paid enough attention to the need to achieve a higher throughput for many of our potentially most efficient factories as an essential part of this remedy of making British industry more competitive. I believe increasingly strongly, while rejecting massive reflation, that something must be done to get the level of demand in the economy moving upwards.

The PSBR is of course a very important matter, but it is a matter very difficult to predict. Whilst enormously increasing or enormously decreasing the PSBR has a quick and dramatic effect, I very much doubt the measurable effect of very small changes. Indeed, as successive Chancellors have discovered to their cost, it is a figure almost impossible to predict with accuracy within £1 billion or £2 billion one way or the other. I believe it would be madness, and I support the Government in saying it would be madness, to support the policy of a major increase in the borrowing requirement. But I simply do not see the rationale for the particular figure chosen by the Chancellor at the moment compared with one marginally higher. If I had to take my stance on what I would call Shore's madness, or what I heard somebody else describe as Howe's meanness, in relation to public sector borrowing requirement, I would take it very much nearer to the level of Howe's meanness than to that of Shore's madness. But I believe it ought to be somewhat marginally higher than it is at the moment, and I think it is extremely urgent that the Government should make that marginal adjustment. I stress that I am asking for a marginal increase in borrowing requirement, not a major one. A major one would be disastrous.

So, in conclusion, may I say this, my Lords. The battle against inflation had to be given clear priority. It was a necessary precondition of doing other things. It was unavoidable that giving it that priority would in the short run have painful and temporarily depressing effects on the levels of employment. But now both the opportunity and the necessity to begin to act directly against unemployment have come, as well as the opportunity and necessity of continuing to act against inflation. So I urge upon the Government that we must now start to plan and to act for economic expansion; not sudden, large expansion but slow, gradual and persistent expansion. And we must act not only nationally but we should also take the lead internationally in getting both monetary exchange reforms and also a more expansionary thinking into our Western international economy and arrangements. If we do not, we are handing on a plate, in the long run, the very victory to totalitarianism and communism which we are devoted to avoiding. Unemployment may no longer, thank goodness, produce the crude, harsh visible poverty and despair of 50 years ago, but it still is surely a deadly cancer in our society when large numbers of our fellow citizens find it impossible to find work for months and even for years on end. So we must attack unemployment itself now, with urgency and determination, and I beg the Government to make sure that all the people of this country see that they have that commitment.

6.13 p.m.

Lord Spens

My Lords, may I also offer my congratulations to our chairman, the noble Baroness, Lady Seear, and express my admiration of the way in which she managed to bring together an enormous variety of views and get them put into a document which I think is fairly readable. The noble Lord, Lord Kilmarnock, mentioned the fact that the idea of our Select Committee was probably started off in a debate which I had the honour to introduce in June 1979. I took the opportunity of re-reading the speech that I made then because I wanted to check to see how relevant it is today. It is gratifying to see that a lot of what I then said was looked at by the committee and even in some cases turned into recommendations, such as the need to change our educational systems, help for small businesses, earlier retirement and work sharing.

They did not, however, as the noble Lord, Lord Kilmarnock, said, agree with my view that married women should be positively encouraged not to take paid employment. The noble Baroness, Lady Lockwood, said that she hoped I would not talk about this, but I am afraid I will talk about it, if only very briefly. I am not contrite about having made that remark, and I still believe there are many married women who would prefer to be able to stay at home if there were a positive encouragement to them to do so, and that encouragement would almost certainly have to be a financial one.

I am sad that the matter which I thought was the most important in my speech was not considered in depth. I hasten to say that that was not the fault of the committee but of its terms of reference. To make recommendations on long-term remedies for unemployment implies that at some time full employment will return if the remedies are right. If I may just quote one sentence from that speech, I said, at col. 971 of Hansard of 20th June: I believe that we can resolve this problem once we have accepted the fact that huge job gaps are here to stay. The problem then becomes a question of how to deal with the fact of a permanent job gap". Unfortunately, I had to go out while the noble Lord, Lord Kaldor, was making his speech, but I believe he spoke about this to a certain extent. I am afraid I am going to disagree with some of the remarks that (I am going to call him) my noble friend Lord Vaizey made about it, because I am pessimistic; I believe that these job gaps are permanent.

I managed to get a reference put into the report, in Chapter 4.38, which argued that there is a ceiling now to the total number of jobs available in the labour market and it is now less than 22½ million, and that this ceiling will gradually descend as more and more jobs become automated, squeezing more jobs out of the market as time goes on than can be recovered through new industries. The trouble is that new industries will themselves be automated and that the whole objective of our inventive engineers is to invent machines which will work without the need of human help. I want to say straight away that there is obviously going to be some minimum to the number of jobs that will still remain available. And here I am talking of paid jobs, not work, because I believe that there is any amount of work that can be done by those who have the brilliance or the entrepreneurial spirit to look for it.

To beging with, we have seen large numbers of jobs being shed in a number of our old industries. They have been shed chiefly because of over-manning. Those jobs are never going to come back. Those industries may well increase their productivity, but they are going to be able to do it, now that they are slimmed down, without the need to increase their labour force. Therefore, we cannot look to the old industries to produce the new jobs that will be necessary if we are to try and stop this job gap from getting even larger than it is at the moment.

I want to quote a little from the CBI's recent report, from a committee of which the noble Lord, Lord Carr of Hadley, was a member, because I think that it very much supports what I want to say. It talks about constructing, for illustrative purposes, three scenarios for unemployment over the next 20 years. When I talk about permanent job gaps I am referring to 20 years because I do not believe anyone can go further ahead than that. The report makes the point that, assuming current policies remain unchanged, there could be a good scenario, a bad scenario and an ugly scenario. The good scenario is the only one of the three which shows any hope of achieving reductions in unemployment. This will happen provided the United Kingdom economy grows substantially faster than in recent years due to the expansion of world trade, reduced cost inflation"— which we may well be achieving at the moment— and a considerable improvement in the United Kingdom's international competitiveness, including the widespread adoption of new technologies". Even then, the report warns, spells of unemployment may be longer. It may take longer for people to adjust to new jobs and the creation of new jobs is, likely to attract more people back into the labour force, which will further slow down the decline in unemployment". That is the CBI's view of the good scenario. The bad scenario entails broadly a continuation of present trends—i.e. slow growth in world trade and creeping protectionism", which the noble Lord, Lord Kaldor, advocated. The report adds that under those conditions unemployment will continue to rise, but more slowly than at present. I do not think we want to contemplate the ugly scenario where unemployment would rise very much more quickly than in the others. So there we have a large body of industrialists considering that it is unlikely that we shall get unemployment down for a very long time.

I have another document which only came into my hands this morning. It is even more damaging. It is the report on a survey which appeared in the November issue of Chief Executive. It is a survey conducted by Chief Executive and Management Centre Europe carried out between the middle of August and the middle of September this year. A questionnaire was sent out and 985 replies were received from senior executives in nine countries. Seven of those countries, including the United Kingdom, sent in more than 100 replies each and only two—Sweden and Spain—sent in less. They sent in 80 and 82 respectively. It is a fascinating survey and I have not had time to absorb it, but its introduction is enough for our plans. It states that, three out of four senior executives unequivocally support a statement that…..Most Western countries will be forced to accept a higher level of unemployment in future". At least two-thirds of them are looking for their own business expansion during the next five years, but less than one-third think that their workforce will rise above its present size, and more than that foresee further cuts in their workforce. I think that that is a very good expression of what senior management today are considering.

Where do we go from there? I do not know. I had hoped that our committee would have been able to study this but, as I said, the terms of reference did not allow it so to do. If I may make some suggestions, I think that to consider occupation rather than employment might give a clue as to how we treat the future. It is possible we might have another look at something like conscription; not military conscription but conscription to help underdeveloped countries. I have a theory which I have been turning over in my mind for some time, but I cannot establish it. Why cannot we do something more to make labour acceptable to industry? At the moment we treat labour as an expense—in fact, we even tax it with the national insurance surcharge—whereas we encourage industry to invest in new machinery. Industry receives 100 per cent. capital allowances against tax for anything that it invests in. A switch in some way to encourage taking on more labour and, perhaps, restrict the amount of new investment might be a solution, but it is not going to be a very good one.

The fact that the whole of our industrial sphere is changing is getting very clear. We are just about at the beginning of an office revolution. It will not be long before we see most offices disappear centrally and people working from their homes. It is already happening in the United States. It will not be long before it comes here. In fact, I noticed on the tape today this interesting little item: Armchair banking. A scheme enabling bank and building society customers to operate their accounts from their own living rooms is to be unveiled later this week. The scheme, involving the Nottingham Building Society, which has 150,000 members, and the Bank of Scotland will allow customers to use their television set and an electronic push-button console to cable instructions to the bank and building society". These technological changes are coming very fast and they will all cause more people to lose their jobs. This office revolution, when it takes place, may cause the end of commuting as we know it. Think of the loss of jobs that will follow in the various transport sectors of industry.

I do not want to go on. I have spoken long enough. I leave it with your Lordships that we have not really tackled the job, and the job is that we shall be faced with at least 3½ million unemployed in the future and that that number will probably get bigger and bigger, instead of smaller and smaller.

6.30 p.m.

Lord Balogh

My Lords, I wish to join other noble Lords in congratulating our maiden speaker. We wish her well. We hope that she will let us see the fullness of her knowledge. I also want to express my gratitude to the members of the Committee. They have tried to tackle a job which is all-important yet which has not been really thoroughly investigated. Economists are still extremely divided about the causes and remedies of unemployment.

I do not believe that a Select Committee consisting of experts and politicians can really contribute very much, especially if they have honestly-held strong convictions. In this case differences of opinions are not always differences of knowledge—though it might be that they are from time to time—but of ethics. The only conclusion that can be made is a destructive criticism of their fundamental assumptions. The impact of their arguments is clearly visible. The main exercise is an application—which cannot be accepted—of the modified, neo-classical analysis of demand and supply of labour.

We are led through the various theories of demand, without analysing the problem whether such a system is feasible. The word oligopoly, which ought to have been a basic concept in this respect, does not get even a mention in the report. In the end there is produced a report in which business-cycle theories are briefly set out, and are mainly non-economic. They permit themselves some hints about remedial policies. But, as one would expect, specific measures to act directly, or indirectly, on unemployment pale into insignificance when they are really analysed.

There is insufficient analysis of the international aspects as the cause of deflation. There is no attempt to discuss in detail the problem of world liquidity and the possibility and limits of recycling. Bland statements are used to give a somewhat blurred impression that incomes policy has failed. But one has to ask in this respect: what would have happened if there had been no incomes policy? The fact that a year after an incomes policy was introduced it was repealed caused anticipations which made the system unworkable.

Austria and Sweden are eloquent examples of success which we ought to have developed further. There is only about a paragraph in the report on this problem. The committee maintains that the process of recovery hurts. It is surely a deflationary policy which hurts and degrades. The abolition of exchange restrictions has been the cause of recent troubles. It enforced a high rate of interest—additional to a cyclical disturbance—and the net outcome was that we have more or less eaten away our oil and gas finds.

Altogether this report is, interestingly enough, a repetition of much of Lord Beveridge's first plan which he eventually replaced with a further analysis based on Keynesian precepts. No doubt the situation has worsened since Beveridge's time. Britain was once the largest creditor country. It is now a net debtor country. The refusal to intervene when the massive hot money streamed in, indeed throttled our manufacturing output, an admirable way to increase our foreign exchange reserve, was totally missed. Yet anybody who was not blinded by Smith and Ricardo, Walrus and Marshall, would advocate purchasing in foreign exchange under these conditions. However, one can only hope that next time around will find the Government better prepared, both intellectually and materially, and better able to deal with a problem which is insistent and complicated.

6.37 p.m.

Earl De La Warr

My Lords, I should like to start by offering my warmest congratulations to the noble Baroness, Lady Carnegy, for her excellent maiden speech on a subject about which she quite clearly knew a lot. I go on immediately to pay the warmest tribute to the noble Baroness, Lady Seear, for the splendid way in which she led the committee through its long deliberations. It was in truth a great privilege to serve under her.

In the short time that I shall allot myself in this debate, I want to deal in the main with long-term unemployment—that is, those who have been unemployed for over 12 months. But I want to emphasise that I go along to exactly the same extent in my support with the whole of the rest of the report. I only choose this because one cannot do the whole thing. We are suffering, as we know, from a depression which is literally worldwide. Neither Government nor businesses had even three years ago begun to appreciate its depth or its duration, and we still know all too little about its duration.

Nor, I think, did we appreciate what it was going to do to this country's economy. Had we realised earlier that in the last decade we had paid ourselves 450 per cent. more in wages and salaries as against an increase in production of 17 per cent. we might, I suppose, have stopped pricing ourselves out of the market sooner. But, as it was, we lost our edge, and lost it very seriously, against every one of our international competitors. I wonder very much just how easy it is going to be to catch up the ground that we have lost. Never let us forget that we are not the only country at this moment trying desperately hard to increase its own efficiency—against us, if you like. That makes no difference, though, to the vital importance of doing everything we can here to increase our competitiveness.

We must continue our attack on inflation because it is only by a reduction in inflation that we can hope to keep wages under reasonable restraint. I, for one, applaud the Government's courage in refusing to contemplate any general reflation. Furthermore, there will be much investment to come in labour-saving plant, and, until the whole industrialised world gets back to a period of growth, the outlook for unemployment, I fear, looks very bleak indeed, and the Government have warned only recently that things may get worse. Among other things, I believe that de-manning by industry—by efficient industry—is not by any means finished, and I must say that that is right because it is one of the conditions of getting ourselves into a competitive stance.

The report is at pains—I am glad the noble Baroness, Lady Seear, referred to this—to give a picture of how unemployment works, because the figure we get every month gives only part of the story. It is, in a way, like a snapshot; it tells you what, at a particular moment, is the total stock, to use a jargon word. This can be broken down into categories (age group, sex, colour, location). But in one important way it gives an impression which is inclined to be false; namely, that the unemployed are a permanent, unmoving group. When it is announced each month that there is no change in the numbers unemployed, one tends to think it is the same people, when that is not so, for there is a tremendous flow of labour all the time, as the noble Baroness said. About 300,000 people flow on to the unemployment register every month, and about the same number leave it.

A closer study of the stock and flow figures, however, produces a formidable fact which may be obvious but I think it needs saying. It is that the longer someone has been without a job the smaller are his chances of finding one. I have with me a chart, part of a paper published last week by the Manpower Services Commission on long-term unemployment. It gives clear statistical evidence to the effect that 40 per cent. of those who have been unemployed for less than three months find a job within the next three months, whereas not 40 per cent. but only 14 per cent. of those who have been unemployed for over a year have the same success. The long-term unemployed are increasing, and they are increasing at a faster rate than the whole. I do not want to be a Cassandra, but I suspect that in the next two years the numbers in long-term unemployment will go up well in excess of 1 million, and possibly will get nearer to 1½ million.

What are we to do about the situation? Will we let this body of people rot?—because that is what will happen to them. These are people who in many cases have lost hope and feel themselves to be social outcasts. These are the people who, above all, in the view of the committee, are in need of help. We really are kidding ourselves if we think that an upturn in world trade, when it comes, will produce an immediate downturn in unemployment. Furthermore, we know that there is a preponderance of unskilled and semi-skilled among the long-term unemployed, and they will be the last to get jobs. So we have a problem which is growing very fast, and for sure it is a problem that will not go away by itself.

It is clear that the Government are deeply and increasingly concerned about the whole tragic situation and are doing a great deal to improve matters. Very large sums of money are being spent covering a wide field. The initiatives now being taken in the sphere of youth training are moving towards that most desirable of objectives, a training scheme which serves to keep the young in training and off the labour market until they reach 18. The community programme, which stemmed out of the community enterprise programme, is especially important and, while we have some reservations about it, the Government are to be congratulated on its new form.

However, when we take together all the remedies that exist or are on the way and consider the near certainty that, even so, long-term unemployment will rise, we must ask whether we really think we are doing enough. The answer is only too clear to me: Not by a long way. For that reason the committee has dwelt at some length on its recommendations for what I will briefly call long-term, low-cost job creation. This is not just another short-term response to what is thought of as a cyclical rise to unemployment; it is concerned with long-term job creation to counter long-term structural unemployment.

The schemes must fulfil certain criteria. There must be no displacement of existing workers; the jobs must not be high cost; and they must concentrate on the people with the least chance of getting work. The committee well recognises that the effect is expansionary, but, in that the scheme seeks out specific objects, we believe that it will avoid any general reflation—and that, as we have said, is absolutely essential, for general reflation would be wholly counter-productive in its effects, as we constantly point out in the report.

There is a great deal of work to be done to improve the infrastructure in this country. Much of it, though not all, is deferred maintenance. We cannot wait indefinitely for the electrification of the main line railways, we badly need much work done on maintaining roads and, in some cases, the construction of new ones, we could save a great deal in the cost of energy by large-scale house installations, and there is a crying demand for more low-cost housing and the renovation of millions of old houses that are crumbling for lack of maintenance. Note, my Lords, that much of this work, though very likely commissioned by the public sector, would in fact be done by private enterprise.

We also believe that there is significant scope for job creation in the field of what I would very broadly call community service—not only caring for the mentally sick, the elderly, and the disabled, but doing all kinds of other physical work, such as looking after streets and playgrounds, and working in community centres. I think that some of us had our doubts—I know that my noble friend Lord Vaizey had—that this would lead to a large increase in the staff of NUPE. We all have to compromise on these things, and most of us felt that, first, the work would cover a very wide range, secondly, much of it would be voluntary, and, thirdly, the priority meant that we must go for community service in the widest and most energetic way possible.

I am well aware that from these Benches I have been treading on ground that is somewhat more contentious than are other parts of the report. Some of your Lordships may have read the recent CBI document on unemployment, in which you will find much space devoted to its recommendations on deliberate long-term job creation—and many of the recommendations are exactly the same as ours. Other noble Lords may have seen a leading article in the Financial Times, which described the CBI report as taking a moderately interventionist line which has much in common with the ideas proposed earlier this year in a House of Lords' report". It is in that spirit that I finish by commending to your Lordships a report in which I had the honour to play a very small part.

6.53 p.m.

Lord Roberthall

My Lords, I must confess that when the committee whose report we are discussing was first established I was rather doubtful about the wisdom of your Lordships in setting up a committee to deal with such a complicated and such a political subject as unemployment, where there is a sharp division between the political parties. I thought there was a real danger that either the report would consist of a series of disagreed recommendations—which is the only way in which your Lordships can have a minority report—or would comprise a lot of unexceptionable platitudes. I must apologise for those sceptical or uncharitable thoughts because the report that we have before us is, I believe, a great credit to your Lordships' House, to the committee itself, and in particular to the noble Baroness. We all knew that she was a formidable character, but I think that we were underestimating her abilities. To produce a report that is agreed, which says so many good things and which covers the ground so well, is a great achievement, and I congratulate your Lordships, the committee, and the noble Baroness.

The report covers the subject very widely indeed, and one of its most useful aspects is in analysing the very complicated things that the Government are already doing, as well as discussing and extending them. It struck me, as an ex-teacher of economics, that if the Stationery Office could produce a cheap edition of at any rate the first volume of the report, it would be extremely useful for the educational world and might even turn out to be a best-seller.

I shall speak in a rather general way, and mainly about something that the committee did not deal with very fully—the macroeconomic aspects of the subject. In economics there are two causes of unemployment, which one can express in a very general way. One is structural, or transitional, unemployment, which requires adjustments in the community so as to make the community more flexible. That side is covered fairly well. When I use expressions such as that I am not criticising the report; as I have already said, it deals with an enormous subject. The other cause is what used to be called "conjunctural", or now perhaps cyclical, and it deals with the effect of demand on unemployment.

There is very little relating to the stance of the committee on the international aspects. Those of your Lordships who last week were present at a debate on economics must have been struck, as I was, by the support given to the thesis that, although we are in a world of recession, we cannot get out of the recession without collective action, without action that is taken in the different countries involved, in a spirit of co operation. There used to be that kind of co-operation. It has now broken down, and we shall never get any further without it. One can get out of a recession by oneself, when the rest of the world is in it, only by moving towards cutting off one's links with the rest of the world.

The other aspect of this point of view is that the committee seems to take the view—in fact it argues very strongly—that we must become more competitive. The difficulty about that is that it will take a very long time to get down unemployment if we are looking to growth in competitiveness and considering our costs in relation to those of the rest of the world. The committee—very admirably, I think—says that the tendency of costs to rise must be dealt with by means of an incomes policy, and not just by the use of unemployment, which is what the present Government are doing; and certainly on the Alliance Benches this will be a very welcome part of the report. We want to deal with this, but it will take a very long time, and, if we are to recover our competitiveness, we ought probably to let the exchange rate go. I think that the leaders of the CBI were much more sensible than their constituents on this question a week or two ago. This is something that ought to be considered. It is argued that, as a result of demand management, our exchange rate will move against us as imports flood in, which is a real difficulty about the present position. But if the result is that the exchange rate drops then that is something which we shall have to face if we hope to get out of this unemployment situation otherwise than by waiting a very long time.

On stimulation, the committee begin with a rather resounding statement against spending your way out of a recession—the passage about mangold-wurzels is quite striking in this context—and that, I think, is also the Government's view. No one thinks that we can spend our way quickly out of this recession, and we certainly are not flexible enough to do anything like that. But I was encouraged to see as I read on that the committee take a more moderate view on this matter, which is essentially that the present position is too serious for inaction and that we must make a start. I very much agree with what many of the speakers have said on this today, and that is that some stimulation of the economy is essential.

It ought to be as cost-effective as possible, and in this respect I think the most valuable of the suggestions from the point of view of efficiency is what they recommend; that is, a long-term project for doing useful work which will employ as many as possible of the long-term unemployed. There is no doubt at all that there are a great many things, to which a number of speakers have already referred—housing, roads, sewerage, water—badly calling out for work to be done on them; and they are all things which ought not to have much effect on inflation. Furthermore, the import content of them is rather small in two ways: the materials that would be used are mostly home-produced, and the employment will be in a field which, in the absence of an incomes policy, will not have much stimulation on cost inflation, which has been so much trouble.

There are several other recommendations of that kind of which I think the most sensible is the suggestion that elderly people should be encouraged to retire or to leave their employment. That will get people out, and if they want more leisure that is a good way of getting it.

Then we come to the training programmes. It is very important as a matter of flexibility that the workforce should be better trained, and I am very much in favour of that side. But I should like to end on a sombre note, and it is one with which the noble Lord, Lord McCarthy, dealt very well. The committee remark in several places that it is no good training people for jobs if the jobs are not going to be there, and elsewhere in their report they say that the real way to get people back to work is to ensure that there is something for them to do.

That again stresses the importance of finding every way we can to get back to some reasonable level of employment before too long, because although it is a good thing to train people and a good thing to give them variegated skills, there is no doubt that if at the end of that time there is no job waiting for them then people will be dispirited and discouraged, and the schemes, however good they are, will tend to get a bad name. Therefore, there must be a two-pronged attack: to try to make us more flexible and, at the same time, to do all we can to see that there is at least some stimulus to demand.

7.5 p.m.

Lord Campbell of Alloway

My Lords, it is always a pleasure to follow the noble Lord, Lord Roberthall. It is especially right that he, as an ex-teacher of economics, should be followed by an ex-student of the subject who gave it all up before the last world war. But may I at the outset offer my congratulations to my noble friend Lady Carnegy of Lour on the originality of her maiden speech, delivered with great authority and charm, with an instruction manual as to how to play leapfrog with some of our competitors.

At the outset of this speech, as with other speakers, I would wish to join in the general tribute to the noble Baroness, Lady Seear, and members of this Select Committee. It is not everyone who toils in a mine who is able to put on display nuggets of precious material such as are to be found in this report—and all this in the cause of our common concern, the relief of unemployment in our own country. As Lord Roberthall has just stated, we alone can cope with this problem, and we alone must seek our own salvation as best we may. The draft budget of the European Parliament for 1983 makes this all too plain.

The salient features of this report reflect the realistic approach of this Government in the measures which they have introduced and maintained. Indeed, the courage of this Government in this regard is expressly acknowledged: the major cause is want of competitiveness, both here and abroad; the imbalance between incomes and productivity must be corrected; we cannot spend our way out of inflation, this leads to destruction; and income restraint and long-term low-cost jobs which are not too expensive are the order of the day. The misconception of zero unemployment is exposed by acceptance of the concept of full employment at round about the million mark; and the value of small businesses, co-operatives, training in the new technologies and education are all emphasised.

As an objective assessment of economic policy this report—and I have been quoting some of the salient features of it—does a signal service. So also as to the implementation of policy. On this question of the implementation of policy—this for the future—the report makes some serious, crucial findings: that unemployment should not be treated as a single problem but as a series of disparate, related problems; that the short-term approach is not the same as the long-term solution; that human degradation may not be wholly assessed in terms of Treasury estimates; that there is a social significance which transcends additional statistical charges to the Exchequer as benefit payments; and that there is a relationship between endemic, long-term unemployment and the suicide rate; and also that this relationship exists with the increase in crime.

This, of course, brings in its wake so many unwelcome consequences such as, for example, the overcrowding of the prisons and the extra policing. And your Lordships will know that these unwelcome consequences also have their cost on the Exchequer which has to be thrown into the balance. This is why the arid approach of a Treasury estimate is not, in my submission, the right approach to deal with the degradation of man. In the manufacturing industries, we have to accept that, until we gain competitiveness, the demand for labour in this sphere will not rise. It is the expanding service industries and the oil industry which now hold the fort. But in the main this demand, when it comes, will be for a specialised type of skilled labour, skilled labour trained in the new technologies.

For the hard core of the unemployed technicians today, for the school-leavers in the years to come, there will be a benefit; and they will have had the benefit of these training schemes and of the educational facilities, but they will alone directly benefit. Even in the long term—as has been said by so many noble Lords and I choose but a few at random: the right reverend Prelate the Bishop of Lincoln, the noble Lord, Lord Spens, my noble friend Lord De La Warr—when we regain our markets for goods, there will still be residual unemployment.

My Lords, there is another aspect to the problem; that is, that the mass of the unskilled and untrainable, to whom so many of your Lordships have referred, will not benefit, at least not directly. There is what I may look at, if I may, as the short-term problem; that the transition, the gap before these people reach their retirement age, must be bridged. Hence the need to entertain works of construction such as those to which my noble friend Lord De La Warr and other noble Lords referred—public works to improve our sewers and means of communication and, indeed, increased staff in certain sectors of the health service to which other noble Lords have referred, so that work within their capacities—within what the noble Baroness, Lady Seear, stylised as within their time and physical strength—may be found for them, work which is of value to the community as a whole, work referred to by one noble Lord as being of high community benefit.

In this we have to recognise the need for the stimulus of generated demand beyond the ambit of aid to small businesses and training schemes. This need not be inflationary. On balance, the balance to which the noble Lord, Lord McCarthy, referred, this could operate as a saving to the Exchequer. But in any event, whether it does or whether it does not, it is a risk which must be taken if we are to live with our social conscience. I agree unreservedly with the noble Baroness, Lady Seear, that we cannot merely rely on the laws of supply and demand; we must generate employment. We require quick job creation, along the lines suggested by the noble Baroness and by other noble Lords, including Lord McCarthy; but I accept the assurances which have been given and that there are plans to reverse this, notwithstanding paragraph 72 of the White Paper—because I pin my hope upon the fact that the term in it, "cost-effective service", could mean anything or nothing, depending upon which way you look at it. Being a Conservative, I look at it in the light that it will be interpreted in the way in which I have suggested it should be, and I have faith in the Conservative Administration to do so. But as my noble friend Lord Carr of Hadley emphasised, the present level of unemployment is intolerable. Steps must be taken to halt the upward surge; the injection of this high octane fuel. My noble friend Lord De La Warr asked the question, "Are we doing enough?" The answer is, "No, not by a long chalk".

My Lords, the hope is expressed in this report at paragraph 14.16 that in the end the unemployed will price themselves into jobs and, in particular at para. 9.37, that long-term, low-cost job creation should be implemented. But—and I seek assistance from the noble Baroness in the winding up speeches—it is truly not understood by me how such concepts could marry with the recommendation that a flexible comprehensive incomes policy of indefinite duration should be introduced. Nor, with the utmost respect—and it is not a simulated misunderstanding—do I truly understand what is envisaged by the term, "flexible and comprehensive incomes policy of indefinite duration", any more than I really truly understand the term "cost effective service" on paragraph 72 of the White Paper. Nor is it understood how the introduction of an incomes policy in any form, whether short term or long term, could alleviate the problem of unemployment.

This report, which to some extent has been overtaken by events, identifies the cause, prescribes the cure and provides an analysis of acceptable options while rejecting others—this for the period of transition. Although reduction in inflation and the level of wages have put us on the road to recover our markets for manufactured goods—and I see the noble Lord, Lord Bruce of Donington, looking this way, and he stresses this aspect of the economic problem from time to time in your Lordships' House—the first steps along this road to recovery of these markets have not yet been taken. I refer to the figures which I saw printed in, I think, The Times about the 15-year survey for manufactured goods.

Is there a need for project financing? Is there a need for a relaxation of over-rigid Treasury rules and definitions, to which my noble friend Lord Caldecote has referred? Is there a need to amend the statutes which restrict building societies' investment so as to enable building societies to finance public works and industry with debentures on public works, redevelopment of the inner cities, mortgages on industrial property and a small percentage investment in equities? I realise that this last question could present problems of expertise.

Is there a case for a change in the tax structure which impedes the part-time earner, the part-time worker? Is there scope for the introduction of new measures? If there is. so be it. But is it not of vital consequence that in any process of change resort should never be had to quack panaceas, such as incomes policies or debasing the coinage, whether direct by devaluation by decree, as was apparently suggested by the noble Lord, Lord Roberthall, or indirect by the printing of false money? If, in the words of Dr. Johnson, we are to improve the golden opportunity and catch the good within our reach, let us never again suffer the abject humiliation of being seen at the IMF toting our begging bowls.

7.23 p.m.

Lord Molloy

My Lords, may I at the outset offer my apologies to the noble Lords on both sides of the House who will be winding up this debate? Because of the exigencies of political life, I shall not be able to have the privilege of listening to their speeches; but, being an avid reader of Hansard from both Houses, I can assure them that I shall certainly read, mark and digest what they have said. I should like immediately to congratulate the noble Baroness, Lady Carnegy, on her maiden speech. I mean that very sincerely because she has a capacity which I fail in considerably. I always admire those people who do something that I cannot do. How she skated so skilfully through her speech without being in the least controversial is certainly beyond me.

I think that it is right and proper for me to both thank and congratulate the noble Baroness, Lady Seear, for her most magnificient introduction to this debate. I have read the report of her Committee. If I had known that we were going to have such a full, exacting and examining report of the fundamentals and the quintessentials of what it contained, I might have saved myself a lot of time, because I am sure that I am going to read it all when I re-read her magnificent introduction when it appears in Hansard.

There has been one theme that has been running through this debate, particularly from the Benches opposite, which I find perplexing. Everybody runs down the reason that we have unemployment. They have watched it grow since this Government came into power year by year. Up and up it has gone. There have been fewer jobs; all deplore that but congratulate the Government on their efforts. I cannot understand that, and, if I may say to noble Lords and Baroneses opposite, neither can people outside understand that. They are not the fools that some people on the opposite side of this House and in the Government in the other place may think.

Ordinary people know full well that inflation had been brought down and was sent soaring by this current Administration, and then they claim credit for bringing it back down. Then they tell us how they hate and deplore unemployment. By the time they have finished their Conservative speeches, the probability is that unemployment has gone up again. I wondered when reading this remarkable document how many people who gave evidence before the committee are now themselves on the dole. I have had the remarkable experience of being on the dole, signing on in the labour exchanges, twice in my life: once in the 'thirties under a Conservative Government, and then in the 'eighties under a Conservative Government—and there must be a message there somewhere.

When I was listening to the maiden speech of the noble Baroness, I was reminded of the discussion that has been taking place in Scotland. That has been suffering abominably in the past three years, as the noble Baroness agrees. There, unemployment is savage. This is in a nation that produces so much of our steel and which is now being denuded,. Speaking parenthetically, I noticed that creeping into the debate is the slow acknowledgment of something that I have been saying ever since I have been in this House whenever we have had economic debates or discussions on unemployment: of course, you cannot buy your way out of it. To print money is an absurdity. But there has to be some level—if it only equates to the millions that we have poured out in dole money—at which to start to recreate building for the construction industry. We want new schools, new hospitals, and new homes. All this can be done and it will be worth-while instead of simply dishing out millions in dole money.

Let me give your Lordships this little example of what is going to happen in Scotland to our Scottish steelmakers. May I say that what hurts Scotsmen and Welshmen is that this Government turned to America to find someone—there were no Scotsmen, no Englishmen and no Welshmen—to try to save our steel industry. That gentleman was brought over here for an outstanding fee which makes the mind boggle. Ever since he has been in charge of our steel industry it has gone down and down. This is how it appears to the ordinary very skilled steelworkers. There are a variety of extraordinary skills when you see the tipping of a Bessemer and a hot catcher and how steel is made and transferred ultimately into all sorts of items upon which our industrial base depends. The lights in this Chamber depend on the contribution of Great Britain's mineworkers and Great Britain's steel-workers. It seems to me an appalling policy that we should do the sort of thing we are doing to these two great industries in running them down.

The example I was going to give of what will happen is already happening to Scottish steelworkers—and I beg your Lordships to listen to this, Because in addition to the thousands who have been made redundant there is now a scheme to render another 14,000 redundant before long. For these people who lose their jobs, to sweeten getting the sack, to sweeten not making any more steel for Great Britain, they are going to be paid 64 million a year. I would have thought that a non-precocious child would have said, "How daft can you get? You are going to spend more to put steelmen on the dole than to pay the wages for making steel, which is the base of all our industry". It was said in Scotland only yesterday that this is the economics of lunacy: and so it is. I hope others will not have the experience I went through. I have to say in this House that the man who put me back into a job was the late unlamented Adolf Hitler, and fascism. That is what did it when we started rearmament. Can you re-arm without coal? Can you re-arm without steel? Can you re-arm without converting great factories from making one thing into making bombs, bullets and shells? Of course you cannot. It does not matter what way you use them, you depend absolutely on the great energy industries and the great steel-producing industries. I would have thought that in this great Christian nation we could use them now to help the families who are suffering from the scourge of unemployment, and do two things at the same time.

In addition to the economic facts, there is the heartbreak and the anguish that goes on in a family. I ask each and every one of your Lordships just for a second of time to ask: "When did I last sign on the dole? When did I last stand in the dole queue? When did I then go home and have a row with my wife because the rates summons has come, or a notice from the town hall or the private landlord, to say that unless they got our rent or rates they would have to take further action?"—and there ain't no money to pay. How many of your Lordships have gone through that? I have gone through it. I know what it is. I am no economist or great academic—and after listening to the speech of the noble Lord, Lord Vaizey, I am glad I am not, because after he deplored unemployment and all that goes with it—and I would beg your Lordships to look in Hansard tomorrow—one of his suggestions was for us to cut down on the health service, to get rid of our doctors, midwives, consultants and ambulance men. That is a smashing way to reduce unemployment! According to the great academics the way to reduce unemployment is to stick another couple of thousand on the dole. I am glad I did not go to any university. Therefore, I say that these are not simply the arguments of myself, but the arguments of ordinary people outside. I would say to everyone within hearing of my voice: we should not be so bombastic or so supercilious.

Now may I make this point quickly because it is vitally important. When we were on the dole in the 'thirties I can remember the hunger marches from Jarrow—not a policeman was required. We came up here to Hyde Park and sang our hymns. I can remember "Cwm Rhondda" rolling down from Slough to London: hardly a police officer was required. But it is a different situation today. It is a different situation in Liverpool, in Glasgow and in Brixton, where the basic root cause is that young men and young women feel they have no right to be left to decay. When I hear people talk about new skills, of course we must have them, but let us in heaven's name use the very accomplished skills that we have today—those of a bricklayer, a quantity surveyor, a steelmaker. They are all there: they are just going rusty; they need to be used.

The only economist I have ever thought worth reading is Kenneth Galbraith, and while he, along with Keynes, gave this advice there were scores of economists from Oxford and Cambridge and lots of other places who produce horny-handed sons of toil who told them how hopeless and idiotic they were. Yet had it not been that their theories were applied we would have been an easy push-over for fascism. Let us declare war on the fact that we have not enough houses to house our folk decently. Although we have still got hospitals which used to be workhouses, we need to build new ones. Let us declare war on unemployment and mean it.

That is what I believe we have to do, because what gives me the greatest concern is that our youth today, and indeed some of their parents, are not going to take for every just an occasional burst of outrage at the way they are being treated. It could well be something very much more serious, as the noble Lord, Lord Carr, said. Indeed I thought his speech was so courageous that it tempts me almost to say to him: "Come and join us". He would be happier on this side. The important thing is to note the difference between what happened. I know the noble Earl, Lord Gowrie, will take this seriously because he has responsibility where people decide their arguments by blowing someone up or shooting someone. He more than anyone else will understand the seriousness of what I am saying when we look at what has been happening in parts of this island home of ours.

I am afraid we have lost that equilibrium, political, economic and social, which gives men that sense of ease and security and which gives them confidence in themselves and faith in the goodwill of their neighbours. I believe that if we do return to a careful, guided policy to get our industrial base created and get our great industrial wheels turning, and if we are prepared in a prudent manner to spend and prosper, we will gain the confidence of the ordinary folk of this country of ours which is the main and most mighty of all the desiderata that we can desire: that is the confidence of the British people that we are going to make a change in the economic life of this country which will allow them to have pride in themselves and encouragement for the future.

7.39 p.m.

Lord Rochester

My Lords, I count it a great privilege to have been a member of the Select Committee and I should like to join with others in the tributes that have been paid to my noble friend Lady Seear. From these Benches I should like also to join in congratulating the noble Baroness, Lady Carnegy, on her maiden speech. She is well qualified to talk in a debate of this kind, and we certainly look forward to hearing her on many more occasions. If there was a particular contribution that I was able to make to our discussions, other than that stemming from such practical industrial experience as I have acquired, I like to think that it was to seek as much common ground as possible. In that respect, may I say how very much I admired what I found a most moving speech by the right reverend Prelate the Bishop of Norwich.

In my own contribution to this debate, I should like to speak about training as a long-term remedy for unemployment to help balance labour supply and demand. It is a matter on which I can best speak from personal knowledge, I having at one time been responsible for training large numbers of people in industry, and being privileged now to speak as chairman of one of the district manpower committees set up by the Manpower Services Commission, to help in trying to solve employment and training problems in the localities.

With unskilled jobs disappearing, it is essential, as has been said by a number of speakers, to raise the level of skill in our workforce so as to make British industry more competitive and thus to improve long-term employment prospects. For that reason, the Select Committee are at one with the Government in supporting wholeheartedly the youth training scheme which is to be introduced in September 1983.

I welcome very much the first major step that has now been taken to provide during the year 1982–83 100,000 new training places offering young people 12 months high-quality training and work experience of the kind that will be standard under the new scheme. I am particularly glad that the training needs of the bulk of young people are to be catered for within the mainstream of industrial and commercial development. It is very much in accord with the Select Committee's recommendation that training should be work-based to the greatest possible degree so that it is both effective and relevant to market needs.

However, that is very much more easily said than done and I was therefore greatly encouraged to learn last week how one large company operating in Cheshire, where I live, has now actually begun to do it, by sponsoring no fewer than four separate pilot schemes for the Manpower Services Commission in preparation for next September. They cover scientific, commercial, clerical and other areas, and the work experience element in each programme concentrates on the need for skills to be learned that are transferable, in being of potential value to companies and organisations other than the particular firm concerned.

It is gratifying also that in his Statement in another place last June, the Secretary of State ultimately accepted the recommendations of both the Select Committee and the MSC's task group, that the youth training scheme should cater for employed as well as unemployed young people. The Government have also agreed that, for at least the first year of the scheme's operation, supplementary benefit should not be withdrawn from 16 year-olds. Welcome, too, is the requirement that, from next year, those taking part in the youth training scheme should spend at least 13 weeks off the job in training or relevant further education, and that is very much in line with the Select Committee's recommendation.

There is agreement, too, that the high level of wages paid to young people is a disincentive to employers to recruit school-leavers and, in my view, it is most important that in future pay negotiations the percentage of the adult rate that is payable to young people should gradually be reduced. While recognising that the costs and practical problems of changing to a new system would necessarily delay the introduction of a comprehensive scheme for all 16 and 17 year-olds, your Lordships committee were clear that a second year's training should be a long-term goal. The Government, in their response to our report, were more cautious in their approach to that objective, but at least they are keeping the matter open, as I understand it, for later consideration.

I am sorry that the Government cannot accept a system of graduated allowances for young people on the lines proposed by the committee, but I am not going to waste precious time in trying to persuade them to change their minds now. Although I do not think that the point has been mentioned specifically in the Government's response, I do not doubt that they, too, welcome another element of the youth training scheme, which is that there should be certified standards of achievement and of performance in replacement of time-serving and age-restricted training.

As regards the funding of the scheme, my understanding is that of the two modes that will be available the intention is, rightly, to allocate most resources to the one which will offer employers a block grant of £1,850 per trainee per year, provided that an agreed number of trainees are taken on additional to normal intake, with a further £100 for employers who act as managing agents rather than merely as sponsors. That compares with a current average labour cost of about £3,000 a year for a 16 year-old employee, and thus produces a shortfall of more than £1,000 per place.

In its report the Select Committee recommended that the cost of the trainee's wage should be shared between the employer and the Exchequer, according to the proportion of time spent at and away from the work place. The committee considered that training undertaken away from the work place should be a charge on the tax or rate payer. I understand that education authorities are to charge fees for further education under the youth training scheme, but I am not clear who is to foot the bill. I wonder, therefore, whether I may ask the noble Earl, Lord Gowrie, a question of which I have not given him notice and I shall quite understand if he is not able to respond tonight. The question is: is the recent announcement that the Government are to inject £7 million into schools and colleges to set up technical and vocational courses for 14 to 18 year-olds an indication that the full cost of further education under the scheme is not to be borne by employers? If they have to pay it all, that will surely run counter to existing practice and will place what I should have thought was a quite insupportable burden upon employers.

If I may turn to the question of delivery of the youth training scheme, and also to the administration of adult training, the Select Committee observed that in recent years the two main vehicles for training have been industrial training boards and the training services division of the MSC.

In noting the recent disappearance of many of the training boards the committee felt sure that there should continue to be some statutory framework for training, based still, maybe, on industrial sectors but, much more important in our view, geared to local needs. We therefore recommended a structure very similar to the 54 new area manpower boards which the commission aim to have in place by the beginning of January next year, together covering England, Scotland and Wales. That number takes account of the number and the size of local education authorities with which there is clearly a need to work very closely. Indeed, to judge from earlier debates on this subject in your Lordships' House there may well be a number of noble Lords who consider that control should be transferred from the Manpower Services Commission to local education authorities. I hope, however, that now that a decision has been taken they will acquiesce in it.

The essential thing, surely, is that at local level there should, as the Government acknowledge, be effective co-ordination of the activities of employers, educationalists and others concerned with training. Incidentally, I notice that in the Government's response to the Select Committee's report mention is made of the senior managers who are to be located in the new area offices of the commission in their reorganised training division. I very much hope that these people will prove to have not only experience of training but the ability to persuade people to take effective action.

The Select Committee further expressed the view that the bodies to be set up under an improved local structure should have their own budget within the MSC programme and should be vested with executive power. In that connection I welcome the recent announcement that the area manpower boards which are to operate from the beginning of 1983 are, among other things, to have power to approve training plans within guidelines established by the commission, to approve opportunities and projects in the areas within agreed targets, budgets and policy guidelines and to assist in monitoring and assessing them.

I have said little about adult training and nothing at all about technical training. Time does not allow. However, it should not be thought from that that the committee are unsympathetic, or that I am myself, to what, I understand, the Government have in view in this area. I am thinking particularly but not exclusively of the open tech. and the moves introduced by the Government last week in this connection. We certainly look forward to hearing any more that the noble Earl is able to tell us when he winds up about developments in that area.

May I simply say in conclusion that I believe that training is an investment which offers us hope. It also signifies faith, particularly in the young people of this country upon whom our future prosperity depends. I derive great satisfaction from the knowledge that in a committee consisting of members of all parties and of none in the House, we were, in this matter of training, unanimous in our conclusion. I am delighted to join in commending the report to your Lordships.

7.54 p.m.

Lord Pitt of Hampstead

My Lords, the hour is late and I do not intend to delay your Lordships for very long. May I begin by complimenting the noble Baroness, Lady Carnegy of Lour, on her maiden speech. While she was speaking I remembered that when I was a student in Edinburgh there was a chap called Alfred Carnegy who was extremely brilliant; he won all the medals that were going. It is nice to think that I am now being joined in this House by a female counterpart of Alfred. I look forward to hearing the noble Baroness again.

I want to congratulate the noble Baroness, Lady Seear, and her committee on their comprehensive and very good report. May I say at the outset that I am sad that the Government's response does not match the report. The report was a very thorough analysis of the problem and gave us certain remedies which could be used. I accept the full thrust of the report. Therefore I do not want to say any more about it, apart from the criticisms which I am about to make. I hope that the noble Baroness and the members of her committee will forgive me.

Before I launch into these criticisms, may I also say that I owe the noble Baroness an apology. I was unable to be here for her opening speech. The truth is that I did not expect even to hear half of the speech made by the noble Baroness, Lady Young, or the speech made by the noble Lord, Lord McCarthy. But my patients were reasonably kind to me today, so I missed only the speech of the noble Baroness, Lady Seear, and the first half of that made by the noble Baroness, Lady Young.

There are three points which disappoint me about the report. One may be small, the other two large. First, I thought that the report was over-cautious about capital investment. I believe that there is room for much more capital investment than the report suggests. For example, when I was in County Hall we intended that the Jubilee Line should go as far as Lewisham. It stops at Charing Cross. I give this only as an example. Many other capital investment programmes could be launched. I leave it there.

The second disappointment is the way in which the committee deals with the suggestion about shorter hours. Speaking personally, I regard this as of the utmost importance. I believe—I am not quite so pessimistic as the noble Lord, Lord Spens—that we shall have to cope with a certain amount of unemployment for a very long time; that one of the ways in which we could deal with it would be by part-time employment, shorter hours and flexi-time, and that the combination of the three would give us the opportunity to enable people to work shorter hours and have more leisure time. At the same time we should produce the goods which we need. The chapter dealing with the extent of robotics in Japan indicates what is likely to happen as technology increases. Therefore I am a little disappointed that the committee were not prepared to face in greater detail the question of shorter working hours.

My third disappointment over the committee's report was that it did not touch at all on the part which can be played by aid in the production of jobs in this country. I believe that aid is a subsidy of a kind for jobs in this country. I spoke in one of the debates which we had some time ago about cocoa and sugar. The noble Viscount, Lord Long, made a joke about it when I spoke to him subsequently. I indicated the extent of employment in this country as a result of our importation of cocoa and sugar. I was trying to demonstrate that there was a link between these things. I would have welcomed an analysis by this committee of the whole question of aid and its relationship to jobs. I would have welcomed an analysis of the whole question of the world situation. An analysis of aid in relation to jobs would have involved an analysis of the role of the IMF and of the World Bank as well as of the aid that we make to underdeveloped countries. I am very sorry that there was nothing in the report on this particular point.

The other point I want to make concerns the question of black unemployment. There was nothing which illustrated the attitude of the Government on this matter in the speech made by the noble Baroness the Lord Privy Seal. The noble Baroness felt it necessary to explain what the Government are doing about women's unemployment, but there was not a word about black unemployment. Yet all the statistics show that blacks and Asians are suffering a higher rate of unemployment than the indigenous population. That being so, the Government must have a policy for dealing with this problem. I do not intend to delay your Lordships by going over ground which I have already covered. I am not going to repeat myself by re-stating all the things I have said about this matter, but I do believe that it is necessary for the Government to recognise that they have an obligation to do something about bridging the gap between blacks and the indigenous population, and combatting the discrimination that is the basic fuel behind the high degree of black unemployment. The Government have it in their power to do so. By serving as an example to other employers they would go a long way towards battling against and tackling this problem.

There are two further small points which I wish to raise which come as a result of patients talking to me at my surgery. They both deal with supplementary benefits. The first concerns insurance. When people become unemployed and reach the stage where they require supplementary benefits, they are expected to surrender their insurance policies because the value of their insurance policies is one of the things that is taken into account before they get their supplementary benefits. I have been told that by more than one of my patients. That seems to me to be wrong. It seems to me that what is required is a form of accommodation under which, during a period of unemployment, a person does not meet the premium but the premiums are added together and then the person pays a little more when he is back at work. That is the kind of thing that would be done for people who owed rent. I cannot see that it is necessary for people to be made to surrender their insurance policies during a period of unemployment. I hope that point will be taken on board.

The other point I have to make is that in this age of equality, we rather take it for granted that because a woman is quite happy to live off her husband's wages a man should be happy to live off his wife's wages. In fact, that is not true. To some extent, a man feels frustrated if he is forced to live off his wife's wages. When it comes to the stage where he has to claim supplementary benefits he will not get such benefits if his wife is working. It seems to me that something could be done that does not have to be sexist at all; when people have been unemployed and have to claim supplementary benefit, if the partner—be it the wife or husband—is working, the unemployed person should still get a portion of the supplementary benefit. I do not think that it should be the full amount, but it should be something. I put that forward because I know of the effect this situation has on men but I do not see any reason why women should not receive the same consideration.

My Lords, I was disappointed with the Government's response to the report. I know the noble Earl, Lord Gowrie, to be an able, aggressive and liberal-minded Minister, and, whatever may be his brief, I hope that in his reply he will be able to lift some of my pessimism and gloom.

8.6 p.m.

Lord Oram

My Lords, in my judgment this report is one of the very few bright spots shining through the general gloom of the discussion on unemployment. For that reason, I believe that its authors—the committee, and particularly its chairman, the noble Baroness, Lady Seear—are to be congratulated for the constructive and hopeful report they have produced and which is in sharp contrast to the continual counsel of despair which is offered by the Government. Speech after speech by Ministers on this subject tell us that the unemployment problem is but part of the widespread world depression; that there is little we can do about creating long-term jobs. There is much they claim that they do in respect of what I would call palliatives, but little they think that they or anyone can do about long-term jobs; and they offer us the prospect of simply waiting for the upturn in the economy which we are constantly promised is around the corner.

This report does not take that negative line. It faces up to the difficulties but makes positive proposals, and therefore gives us and the country hope that something can be done in the face of this dreadful problem of unemployment. The report uses strong words in various places to condemn the present industrial climate. For example, I very much agree with a sentence from page 146: We regard the existence of over three million unemployed as an affront, a prodigal waste of human resources, the source of much personal misery and a stumbling-block in the way of prosperity. Unemployment is indeed a prodigal waste. It means lost output and lost revenue to the Treasury. On the other side, it means a vast public expenditure on those who are without jobs. It means the steady erosion of public services, which we are seeing, and, as the noble Baroness, Lady Seear, pointed out, there follows a whole catalogue of consequential social ills.

All this, it seems to me, is completely unnecessary. If we look around to our industrial areas there are machines lying idle. If we look to our financial institutions, there is money waiting for investment. It goes without saying that there are men and women available. Moreover, we have the need for the goods and services which those machines, that money and those people could produce. This is not only true in this country; it is glaringly obvious that the need is there if we look abroad, particularly to the third world, the theme that was taken up by my noble friend Lord Pitt, and about which I believe my noble friend Lord Hatch will have something to say when I sit down.

Surely it is madness not to bring together those machines, that money and those men and women in order to produce those goods and services which are so much needed. Of course, that need, that demand, is ineffective because it cannot be expressed through purchasing power, and that is the great problem.

In an earlier situation in the 'thirties of this century it was Keynes and it was Roosevelt who showed the way out of world depression, and I do not accept, as it is all too fashionable to suppose these days, that their basic concepts are not relevant to the present troubles. I believe they are still relevant and that what is necessary is that we should apply in this new situation of depression Keynesian principles but in an updated way. Of course, many economists and many commentators have been saying this for a long time, but with apparently no impact of significance on the Government's thinking.

It is a welcome feature of the report that we are discussing that its general proposition is in line, in my judgment, with general Keynesian principles, and that proposition is also implied in the proposals put forward by my own party as put before your Lordships by my noble friend Lord McCarthy, in the proposals put forward by the TUC, and, in principle, though to a much lesser degree, in the proposals put forward by the CBI. All in their various degrees are asking for expansion.

But it seems to me that there is something missing in all these sets of proposals, including the recommendations of this report and including the proposals of my own particular party. The various packages are in effect promises to embark upon the road to full employment. I recall a White Paper, issued now many years ago in the late 'forties, which committed the Government and all political parties to full employment. But, despite all those promises that have been made along the way, over the years, we are now approaching 4 million people unemployed. I should like to suggest that the vital element that has been missing, and indeed is missing in this report, is the political will to ensure full employment.

What we need is a Government which is prepared not only to put in its manifesto a promise of full employment but an undertaking to guarantee it. The noble Earl smiles, but his noble friend Lord Carr, in a notable speech, used a phrase "unequivocal commitment"; that is what he wanted. Unequivocal commitment or guarantee, whichever phrase is used, is what I want, and I believe the noble Lord, Lord Carr, was thinking similar thoughts to mine in that particular part of his speech. If we could get that political will and that determined Government, I believe we could generate a climate of economic confidence and expansion that could and would prove irreversible.

In order to do this, I believe we should begin our annual budgetary calculations not as this Government and indeed successive Governments have done with money: we should begin those calculations with men, and of course with women. Instead of starting at the Treasury, we should, I suggest, start at the Department of Employment. The Minister at the Department of Employment should tell the Government how many jobs are needed, what gaps there are and what categories of jobs are needed in the economy. It would then, in the second place, and only in the second place, be up to the Chancellor of the Exchequer to consider the financial implications. He would have to ensure that there was sufficient purchasing power in the economy to buy the products which the workforce estimated by the Department of Employment would be able to produce.

He would first of all assess what incomes were likely to be generated in the economy in the ordinary way and, if that estimate fell short of the purchasing power needed to provide the Department of Employment with the jobs it wanted, then—and this is the significance of this report we have before us today—at that point the whole package of job creation measures which this report proposes would come into operation, creating those long-term, low-cost jobs the case for which was spelled out so effectively and strikingly by my noble friend Lord McCarthy earlier this afternoon. But even then, if these proposals were fully implemented, there would possibly still be a shortfall below the "unequivocal commitment", to use Lord Carr's phrase, which the Government would have entered into, and it would be at that point that special fiscal measures, reductions in taxation perhaps, increases in social security benefits perhaps—that kind of measure—would be brought into play in order to increase the nation's purchasing power to the required level. As I have said, if we had a Government prepared to give that undertaking and to implement it in that kind of way, then I believe the morale and willpower of the nation could and would be uplifted and confidence would be restored in all parts of the economy.

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

I am much obliged to the noble Lord for allowing me to intervene. Can he elucidate a little bit further on this issue of the nation's purchasing power, which is bothering me? There is no evidence whatever that there is any great depression of the purchasing power of the nation. Purchasing is rather buoyant at the moment.

Lord Oram

My Lords, if you have 3 to 4 million people unemployed, their purchasing power is well below what it ought to be. I am suggesting that that gap should be filled by the method which I have suggested. I have suggested earlier that the weakness of the recommendations of Lady Seear's wise report and of others is that they make no proposals to ensure their implementation. On reflection, I do not think that is a valid criticism. It is not the committee's job to ensure that. That is the task of Government. It is a case of providing and generating the political will. What we need is that political will expressed through a Government. It is the sadness of our present situation, facing, as the country does, this great economic crisis, that the Government we have in power are not, unfortunately, the Government which can generate that political will.

8.20 p.m.

Lord Hatch of Lusby

My Lords, I must apologise to your Lordships for not having my name on the list. It was not until I arrived here this afternoon that, after some investigation, I discovered that the one point on which I want to comment in regard to the report was unlikely to be put by anyone else. However, the context has been set by my noble friends Lord Kaldor and Lord Pitt, and referred to by the noble Lord, Lord Oram.

It will not surprise the noble Earl who is to reply that the few words I have to say are a continuation of the speech I made last week during the debate on the economy, but I feel that the Government have not yet given me a rational answer to the submission that I have consistently made to them over the past three years. Like other noble Lords, I am grateful to the noble Baroness, Lady Seear, for her report and for her speech. Domestically I believe this to be a very fine report. But my single point is that on the international side this report is extremely weak. Indeed, it omits a very great deal of the substance that underlies the present day tragic unemployment figures in the United Kingdom.

May I say to my noble friend Lord Pitt, "Yes, aid does provide jobs". I gave the figures last week so far as I knew them when the Labour Party was in office. Aid was providing at least 40,000 British jobs a year. I have not had any updated figures given by the Government. What I want to concentrate on, and what seems to be missing from this report, is any connection between the trading relationships of this country with the developing world and employment in this country. As I said last week, it is a crying disgrace of our generation that, while there are well over 3 million unemployed in this country, there are also 700 million to 800 million people living in absolute poverty in the outside world. Surely the Government accept the responsibility of filling the breach between those two facts. I ask the noble Earl to address himself, on this single issue, to what the Government are doing to increase our export trade with the developing world, with the 700 million to 800 million potential customers in the outside world who are outside the market at present, and thereby increase employment in this country.

Let me briefly repeat some figures that I gave last week. At present 25 per cent. of our total exports go to the developing world. They provide 1 million British jobs. Of those exports to the developing world, 90 per cent. are manufactures. But that figure of 25 per cent., which is the last figure I was able to obtain, is pitiful compared with the 35 per cent. from the United States, 36 per cent. from the EEC and, above all, with the 41 per cent. from Japan. I again draw the noble Earl's attention to the example which has been set by Japan, and which is too little known. The Japanese recognise that if they are to be able to import the raw materials which they need from the developing world, they must invest in the developing world and they must export to the developing world. They are content to have an annual deficit of 10 billion dollars with the developing world because they recognise that only by keeping up this trade cycle can their own unemployment be kept down to between 2 or 3 per cent. and at the same time their industrial production go on increasing.

We have not been able to break this vicious circle despite all our advantages and our historical connections with the various parts of the developing world. The developing world cannot buy our goods because it does not have the purchasing power. Why does it not have the purchasing power? Look at the price of commodities. Look at the price of copper.

Copper is being sold at a price which is lower than the cost of production. Therefore, one is getting terrible problems of lack of foreign exchange which is leading, through high interest rates, to great debt problems and threatening the entire financial system. We have not been able to break that vicious circle. What are the Government doing in order to break it? Employment in this country depends far more, in the long run, on our trade with the developing world than it does on trade with the developed world, which consists of our competitors.

Finally, let me kill one myth which is common on this side of the House as well as on the Government side. There is a myth that a large number of jobs in this country are in danger as a result of imports of manufactures from the developing world. Only a quarter of the imports from the developing world are manufactures, and a half of our total imports from the developing world come from four countries alone—Hong Kong, India, South Korea and Taiwan. Let me take the central issue which is so often used—again, on this side of the House as well as on the Government side—as a reason for being extremely cautious and very conservative in our attitude towards imports from developing countries.

The issue of textiles is often used as an example of British people losing jobs as a result of the import of manufactures. Again, I have to apologise for not having the current figures. These are the latest figures I can obtain, but they show what is happening. In 1966, 66 per cent. of our textile imports came from other developed countries; our competitors. Only 33 per cent. came from the less-developed countries. By 1975, those figures had changed to 81 per cent. of textiles coming from the developed world and only 18 per cent. coming from the lesser-developed countries.

I suggest that here is a simple, straightforward and rational case. It will only help this country and the economy of this country; it will only allow us to get out of the depression into which we have sunk; it will only allow the objectives of this report on unemployment to be reached if we are able to break that vicious circle, if we are able to develop our trade as well as our aid with the 700 million to 800 million people in the developing world who are living in absolute poverty.

It is by encouraging particularly the manufactures of the developing world as imports into this country that we can assist in building up the purchasing power of the developing nations; a purchasing power which can be used to buy our more sophisticated production, the products of our new technological revolution. It is only by these means that the objectives of this report can be achieved.

8.32 p.m.

Lady Saltoun

My Lords, I too should like to apologise to your Lordships for not having given earlier notice of my wish to speak. I did not realise until the middle of the debate that the three points I should like to make were unlikely to be made. I should also like to add my congratulations to those of your Lordships to the noble Baroness, Lady Carnegy, on a most distinguished maiden speech, and to the noble Baroness, Lady Seear, on the report of her Select Committee.

First, I should like to urge the Government to consider building toll motorways. This would give a lot of employment, and we desperately need better roads. Other countries have them, and so why not Britain? Secondly, I would urge the Government to implement one particular recommendation in Chapter 14, paragraph 7, of the committee's report. That is to increase the number of home helps and people involved in day-to-day care of old people so that more of them can be cared for in their own or their families' homes which many, indeed I think most, of them would prefer instead of in residential homes and hospitals at far greater expense to the country.

Thirdly, in view of the fact that the cost to the country of unemployment is, I believe, over £4,000 a year per person unemployed, would it not be possible to set up some scheme by which rebates against employers' national insurance contributions, up to perhaps between £70 and £80 a week per extra person employed over and above the employers' normal workforce, could be given? Or, in the case of someone who does not employ anyone at present, could there not be a voucher for a similar sum? Safeguards would of course be necessary, but people employed under such a scheme would be paying PAYE and would be cheaper to employ than "moonlighters" and less likely to enter the black economy.

8.35 p.m.

Lord Allen of Fallowfield

My Lords, I rise to take part in this debate, and at the outset I obviously would want to join with those who have preceded me by saying how much I personally enjoyed reading the report of the noble Baroness, Lady Seear, and her colleagues. Certainly it is a great deal of food for thought. It avoids the ideological dogma that perhaps one is associated with in many other ways. I also enjoyed the supplementation of that report, which interested me considerably. The second point, on which I am sure again there will be no controversy, is to say, as others have done, how much I enjoyed the maiden speech of the noble Baroness, Lady Carnegy, with its depth of information and statistical detail born out of experience of dealing with manpower problems. I do not suppose there could have been a more fitting association of a maiden speech with the subject matter that has been under examination here this afternoon and this evening.

It is impossible at this time of the evening to attempt to make a contribution in this debate without at some point or another cutting across and repeating figures—particularly figures—that have been used by other speakers in this debate. But for a few moments I ask the House to examine the subject matter that has been under discussion against this backcloth. In January 1982 we had registered unemployed who exceeded 3 million. That was an increase of over 25 per cent. from January 1981, and more than double the level of unemployment two years ago. Now there are more people out of work than at any time since records began in 1886. I am reliably informed that that is statistically correct. The cost of unemployment to the Exchequer last year was over £12 billion. This year, with the average level of unemployment well above 3 million, the cost could be in excess of £14 billion. The Government attempts to cut public spending and reduce borrowing are in my considered opinion self-defeating against the background of the cost to the Exchequer that I have just referred to.

The tragedy of the present economic crisis is that it comes at a time when the United Kingdom is a net exporter of oil, unique among its partners, and is receiving large and rising revenues from North Sea oil. Indeed, one is reliably informed that the total current account surplus of possibly £6 billion or thereabouts in 1981 was unfortunately not due to a successful export drive. Without oil there would have been a deficit of over £7 billion. This reflects, in my view, the true state of the British economy.

The Government are estimated to have received over £8 billion in North Sea oil tax revenues in 1981, and they are expected to rise to £20 billion a year by 1986. However, these revenues have been used to finance the rising cost of unemployment—a product of the present administration despite all that has been said, part of which I accept, about the world recession. They have been used to finance the cost of unemployment, and not to ensure a massive increase in overseas investment and to regenerate the British industrial base. No new jobs—very few at least—are being created for the time when the existing oilfields become exhausted.

Output in Britain has fallen by over 7 per cent. since the present Government came to office in May 1979. Manufacturing output has fallen by over 16 per cent. As for long-term productivity, which we in this country have been talking about for as long as I can remember in my active public life—I can remember previous Administrations which set about doing all they could to murder it and the consideration being given to the case for it—it has been damaged, certainly not improved, during this recession. The level of training and investment has been sharply cut back and manufacturing investment is over 21 per cent. lower now than it was in 1979, and, as one who served on the Wilson Committee of Inquiry looking into finance for the City and industry generally, I find that very disturbing.

The Government's policies have been highly deflationary; they have reduced public expenditure, increased taxation, raised interest rates—thankfully, we see the opposite taking place, at the moment—and caused the exchange rate to trise to a highly uncompetitive level throughout the whole of 1980. Finally—because I hear quite a lot of talk about it—I ask the Government to give evidence to the House that there is indeed statistical and factual proof that workers have been pricing themselves out of jobs or that unemployment benefits are too generous. I do not believe that there is statistical evidence to justify that. I believe it is a fallacy and no more than an excuse, looking for issues which are well beyond those which everyone who has to deal with the problems of today knows to be genuine.

I listened intently to many of the remarks of previous speakers in the debate. I noticed, in particular, that the noble Lord, Lord Carr—I regret that he is not in his place at the moment—paid tribute to the extent of money allocated by the Government to deal with the problem of unemployment. A few seconds later he said—on this, I totally agreed with him—that something must be done to encourage demand in the United Kingdom. Then he asked the House to accept that the issue confronting us now was whether we accepted the meanness of the present Chancellor of the Exchequer or the madness, as he so described it, of what I believe is described as the Shadow Chancellor of the Exchequer. I am not sure whether the noble Lord is aware—he surely must be—that there are many people (human beings, men and women) in Britain today who believe they are experiencing a combination from the present Exchequer of both meanness and madness, so it is not a question of posing that distinction between one set of politics and another. That is how I see it and I am sure that many people who are the casualties of this system are also seeing it like that.

I have spoken about unemployment and its cost. I have also referred to the tragedy of the present economic crisis as we are seeing it unfold. In recent years it has become fashionable to talk about Britain's industrial decline. Indeed, if one is to accept the opinions of a number of pundits, just as Britain was the first country to experience the industrial revolution, so we are clearly on the verge of being the first country to experience the process which, rightly, has been given the name of de-industrialisation.

There is no question but that our manufacturing sector has performed badly in recent years. Figures show, for example, a consistent decline in manufacturing's percentage share of the total labour force. Of course, that fact in itself is not necessarily serious. But, when one combines it with statistics which demonstrate manufacturing industry's declining share of total United Kingdom investment and with the decline in the percentage contribution of manufacturing to gross domestic product, then one is forced to conclude that something is seriously wrong in Britain. I am sure that, in stating that, I am on uncontroversial ground, because there can be little, if any, disagreement over that inescapable fact. However, when it comes to analysing the causes of the decline, or even more so when remedies are called for, then, as we all know, there is an infinite variety of proposed correctives.

In the brief period during which I intend to speak tonight it would be impossible for me not to enter a particular minefield, and I begin by raising five points. First, two inseparable problems have faced our nation for all too long; namely, the twin problems of inflation and unemployment. Secondly, neither, it would seem, is capable of easy solution, but both, in the considered view of many—particularly those who support an alternative strategy to that being operated in Britain today—can be combated, and will be solved and their adverse effects minimised, only by a combination of political will, sound economic management and industrial common sense and effort. There is a tremendous void there, in terms of the practical world outside, as they see it.

Thirdly, the market in which we operate is not, as some would have us believe, a market of abstract theory, but is defined by what our competitors do and how they perform. Unfortunately, time, as many have said in the debate, is not on our side. North Sea oil revenues, the present bulwark of the British economy, are finite, and in the short term the rising tide of manufactured imports could become a flood which severely diminishes the options that we have. Finally, protection, in my view, is not a remedy, other than on a selective basis, for the causes that have brought us to this situation.

It must be made clear that only by harnessing more effectively than we are at present all the human and technological resources of the nation, and dealing with the many barriers to competitive performance, will we reverse the position. I should be remiss in my commentary about this if I failed to say that all the interests—not one or two but all of them—on a tripartite basis have a part to play if we are to see our way out of the problems which have been confronting us for so long.

I have never personally wavered in my conviction that if the achievements that we seek are to be sustained, all three parties must work in close and constructive partnership. That, I regret to say, is not happening at the present time; it is a matter of great regret that it is not. I am convinced—and I am sure that the view is shared elsewhere in this House—that such a partnership is essential to deal with the interrelated problems of international competitiveness, the effective use of capital, pay, prices, productivity, output, growth, public expenditure and employment, which are all central to our economic future.

It is a little aside to what I really want to say tonight, but there is in the report a sentence with which I totally concur. It is the sentence which refers to the question of incomes policy. I express a personal view and I give that my support because I genuinely believe that, until such time as we have a sensible basis on which to deal with wages, profits and dividends in this country, we shall continue in the morass that we have been in for so long.

Reliance on market forces is no solution to the problems of the new industrial revolution, which is based on North Sea oil and micro-electronic technology. The Government, business, yes, and financial institutions, and the trade union movement by their action help to decide how the economy works. This has fundamental implications for the proper handling of the relationship between these great interests. In particular, I believe that there must be closer working understanding involving the trade union movement and the TUC, with its broad and undisputed representative capacity, and there is a need for it to accept that its expanding role also carries with it wider responsibilities.

On the question of industrial and technological change, I first of all recognise and share the anxieties about employment prospects in the next few years. No one can be other than very concerned about the face of Britain at present and the manner in which our economic and social problems are unfolding before our eyes. Today, it is a matter of deep concern that it is far easier to identify areas where jobs will be lost than areas where new job opportunities will be created. However I firmly believe—and I am certainly most optimistic about this—in the adaptability and skills of our people, the skills of men and women at the bench and on the shop floor, the expertise and know-how of management. The process of adaptation and the matching of skills to the prospective changes in world demand must go ahead with all speed—and it is very tortoise-like in its movement at the present time.

Moreover, technological change must be seen to benefit the whole of society, and in my book among the benefits there certainly ought to be shorter hours, improved conditions of work, and, most definitely, improved education. The report before us today deals with those three issues, though it may not accept the view about shorter hours. Certainly the Government's view is contrary to that. I certainly consider that, if you are going to ask people to accept technological change and to work for it, people will be much more satisfied if they believe that they will be the beneficiaries of it, and if indeed they understand themselves as being the beneficiaries.

I believe, too, that the prospective developments in technology call for the closer relationships between the great savings institutions in Britain. Here I refer to pension funds and insurance companies, which collectively account for more than one half of the equity in the Stock Exchange in Great Britain at the present time. The challenge that we face is to provide additional resources through Government in a manner which helps to diversify and strengthen the forces for decision making, to fill the gaps in the market that our competitors are filling more successfully, to assist the taking of risk, and to be the midwife of corporate change. In my view that is by no means an impossible task if the will is there and the economic climate is right. Here the human relations side is fundamental, since the willingness to change, whether one is manager or managed, lies at the heart of our industrial problem?

As so many have said today, the current economic difficulties confronting the United Kingdom are related to long-term problems and of course to the world recession. But there are other factors which have had a profound and damaging influence, prolonging and deepening the recession. The two main factors are as follows. I shall refer first to Government monetary policy. It is argued that high public sector expenditure leads to a high public sector, that high public expenditure entails high taxes and consequent lack of incentive to create wealth. High PSBR reduces investment in industry and pushes up interest rates. Ask any entrepreneur in Britain whether that is not the case. Ask any of the management leadership of the great industries of Britain at present and they will tell you in no uncertain manner that that is the case. I speak as having done three terms of office as the chairman of the chemical EDC until my resignation from it in November of last year, and I must say that over the previous two years in particular I never witnessed a more depressing spectacle than that of the leadership of an industry of such standing feeling so depressed about its present and future under the existing policies to which it is asked to conform.

So, if attempts to control the money supply by reducing PSBR have been deflationary, intensifying the recession, capital expenditure has been cut, which in itself has a strong deflationary influence. But public expenditure has in fact been forced upwards to meet the costs of rising unemployment. So it appears to me that the Government seem to be caught within a vicious circle of deflation to contain the growing costs of unemployment within their own expenditure targets. High exchange rates and interest rates have been very much the subject of discussion. Attempts to control the money supply through high interest rates have strengthened the attractiveness of sterling. So, too, of course has the influence of North Sea oil. Increasing demand for sterling has led to high exchange rates. It is said that it is artifically over valued. This has made exports substantially more expensive and of course imports much cheaper. As a result, the competitive position of United Kingdom producers has deteriorated even further, while import penetration has increased.

I know that the Government's view, or so I have heard—and my discussions with many of their representatives and in public debate confirm this—is that industry will become more efficient and competitive, emerging leaner and fitter, and in a stronger position at the end of the recession. It is also argued that the recession has now bottomed out, and that recovery is beginning. Of course, there are many who dispute that particular view, and I am one of them. I see very little tangible evidence that the recession is now bottoming out and that recovery is beginning—that is, evidence of a tangible character.

Now, quickly, I turn to the current recession. That shows that the economic downturn of 1974 to 1975 (which, as everyone will accept, was precipitated by the oil crisis) was followed, not, as in the case of previous cycles, by full recovery and subsequent expansion, but by very sluggish and partial recovery. This lasted until the end of 1979, when the United Kingdom economy entered a deep depression, the severity of which has not been seen since the 'thirties. We know that the recession has produced a dramatic intensification of the present economic problems. It has caused a high and unacceptable increase in unemployment. As I said earlier, there are now in excess of 3 million registered unemployed, not counting those supported by MSC programmes, which I think are roughly about 350,000, and the unregistered unemployed, over 700,000, notably married women.

The national GDP has fallen 6 per cent. below the 1979 level, which represents a decline in output on a scale not witnessed since the early 'thirties—and this, again, despite increased oil production. Moreover, manufacturing output has fallen by 50 per cent. over the last two years; and manufacturing employment has declined by 1.3 million since 1979. Manufacturing investment has fallen by more than 20 per cent. since 1979. Furthermore, the service sector, previously providing a vital source of employment growth, is now also losing jobs. Between the end of 1979 and mid J 980 this sector of employment fell by over 400,000. These trends have been described as depressing. Surely a more descriptive term must be "disastrous".

It is clear that within a situation of world recession United Kingdom industry has had to face stronger competiton, not only in export markets but also at home, where an increasing market share is regrettably now being taken by imports. While it is clear that the recession is an international problem, it is also unmistakably clear that it is much more severe in the United Kingdom than it is in many other industrialised countries, although temporarily moderated for those in work by the contribution that North Sea oil makes to trade and tax revenue to support the unfortunate unemployed.

While total employment fell by 7 per cent. in the United Kingdom between 1979 and 1981—and I cannot quite understand why 1979 figures in this so much—it actually increased in Germany, Italy, Japan and the USA. Unemployment has also risen much faster in the United Kingdom than in the rest of the EEC. The current economic difficulties confronting the United Kingdom are undoubtedly related to long-term problems and the world recession, but there are other factors which have had a profound and damaging influence, prolonging the depression and the worrying recession, and devastating industry generally.

It is against that background that one is obliged to make the comments that I have made, and I see and recognise these comments, as I do much of what I read in the report, as an indictment of the situation confronting Britain at the present time. I do not believe, and nor does the great wide public believe, particularly those who have been casualties of this system, that it is good enough to say that it is all the fault of somebody else, that it is the fault of the world recession. I share the hope which has been expressed here today that there will be room in the Government's mind to give some deep consideration to the need for some expansion in the economy in an attempt to change a situation which is depressed to one which is more buoyant.

9.5 p.m.

The Earl of Gowrie

My Lords, I promised to try to exercise a self-denying ordinance and, in spite of the temptations put in my way by the noble Lords, Lord Kaldor and Lord Balogh, and now most recently by the noble Lord, Lord Allen, to resist engaging in a debate on macro-economic policy. We debated economic affairs on the Queen's speech and I had the privilege to wind-up last week's before your Lordships. In the spirit of this report we now look more closely at the effects of policies, and the effects of economic phenomena generally on individuals and their lives, and discuss how we can try to improve things.

Nevertheless, I must point out to the noble Lord, Lord Allen, that people do not deflate economies for fun. They deflate because they run out of money or they run out of credit. Their borrowing capacity is reduced; and if the Government are to borrow more, interest rates will go up, and even in conventional or Keynesian forms that will depress demand. If Governments tax more, that will also depress demand. If exchange rates fall, as I understand the noble Lord would want, then our imports of raw materials will go up. That, again, has a depressive effect on the economy. I must also say to the noble Lord, and indeed to many in the debate who referred to North Sea oil, that it is only a small part of the total economy. It is a very valuable part, valuable in easing us through painful transitions in our economy as we move from one kind of industrial society to another. Nevertheless, it is only a small part of the total economy.

I felt the presence of a ghost at the feast of the speech of the noble Lord, Lord Allen. The ghost was the noble Lord, Lord Lever. He not only disagrees with the present Government's policy but disagrees, and has done so publicly, with the policy of the Treasury of which he was a distinguished member. He said that if monetary policy is wrong—and, he said, he believed it was wrong—whether under Mr. Healey's Treasury or Sir Geoffrey Howe's, it can only account for about one quarter of a million unemployed. He said that he believed it was 100 per cent. wrong and therefore he blamed the Treasury for a quarter of a million unemployed. He said that the remainder were due to factors outside our control as which we must play our part with the international family of nations in trying to control. That seems to me to be a fair comment to make, although I do not accept that either the previous or the present Government were 100 per cent. wrong in their policies. I think both of us frequently face the same arithmetic.

To return to the debate, it is my pleasant task to start by congratulating my noble friend Lady Carnegy of Lour on a notable maiden speech. I am privileged to have a "mole" among her relations and my mole has informed me that she is a very successful business woman as well as a commissioner on the MSC. The MSC is a fine, upstanding body of people but it certainly needs more successful business men and business women among its numbers, I am delighted that she is there.

My own role, in terms of this debate and this Select Committee report, is to me at any rate an interesting one because I believe that I was a kind of godfather to the Select Committee when it was set up. There was some resistance from my noble and right honourable friends to the idea of the Select Committee. Unemployment is not a topic that a Government flushed with electoral success immediately want to contemplate. I remember being able to resist various intimations that we might not have such a body; that it would only create a stick with which to beat the back of the Government and others. I believe that my advice, which I am glad my colleagues accepted, has been vindicated by the report, which is an excellent one. Certainly, the Government have no quarrel with the analysis that has been made of the causes and problems of unemployment, although we do quarrel with some aspects of the suggested remedies to the problem. I am not going to spend much time on discussing the suggested remedies and our own conclusions about them because, as your Lordships will know, the Government took the report most seriously and issued a White Paper response to it. Our feelings are set out very clearly there and they were echoed today very cogently by my noble friend Lord Vaizey.

When I was preparing this speech, I looked back to the first contribution I made to your Lordships' House as an Employment Minister in the lifetime of this Government. I found that in June 1979 I said, if your Lordships will forgive me for quoting from myself: Southern Britain and pockets of the North adjacent to the richer agricultural areas remains a stable and prosperous country exporting services, especially financial ones. But crudely welded to southern Britain is the debris of a great manufacturing civilisation, our industrial Mezzogiorno, as I have always thought it. a kind of Italy in reverse. When one contemplates this the remarkable thing is how many people are still in work and not out of it. My own instinct is that real employment in the sense of value-adding Productive work is much less in our economy than appears. By inference, therefore, prospective unemployment is greater than it is at all pleasant to contemplate". I was very interested in the comment made by the noble Lord, Lord Kilmarnock, that we have the largest workforce in relation to population in the European Community. Although unemployment has doubled (as it doubled under the previous Government) since I uttered those words, I hope that your Lordships will not misinterpret me if I say that in my view events have shown me to have been rather too pessimistic. It has been remarkable, in my view, how much industrial and manufacturing employment has held given the situation inherited not just from the previous Government but from 20 or 30 years of national and international decline. This decline occurred in terms of our share of overseas markets, as was mentioned by the noble Lord, Lord Kaldor. I also see some encouraging signs that that manufacturing capacity—for I do not agree with my noble friend Lord Vaizey that we shall be able somehow to slide easily out of manufacturing and towards a predominantly service economy—is now starting to hold on to its markets. If it is successful in this present unpropitious climate in holding on to its markets, then it should be successful in being able to increase them as things improve.

May I, too, pay tribute to the noble Baroness who opened the debate. One of the factors which urged me to urge upon my colleagues that the Select Committee should go ahead was the fact that it would be chaired by the noble Baroness. I have always suspected the noble Baroness of being somewhat of a "dry" at heart. She pointed out that demography was not on our side. The 'sixties babies' bulge—to which I have to confess I contributed—is finding its way on to the labour market before the immediately post-First World War baby bulge comes off it. That makes a very bleak climate for our young people as they come on to the labour market in unprecedented numbers. So it was very welcome to the Government that the Select Committee gave so much attention to the stock and flow of unemployment, and also pinpointed the size and therefore the relative success of the labour market. We should not be too depressed about the labour market. It is remarkable how much it services the needs of what is a very large workforce, a workforce which, I am glad to be able to say to the noble Baroness and to the noble Baroness, Lady Lockwood, has a large number of women in it.

In the light of this, the report narrows the problem down, it seems to me very fairly, not as—with respect to him—the noble Lord, Lord Allen did, to general economic issues or economic policy of one kind or another, but to the permanent and underlying phenomenon of the long-term unemployed, and to those who have difficulties in making the transition from school to work. Our focus should be on them. If the Government's economic strategy is successful—and I am profoundly convinced that it will be—it will certainly make lives a great deal easier for those who have skills and who have opportunities. There are already sufficient signs of this to give one confidence. But no economic policy—successful or unsuccessful—is liables to make a very great dent in the present climate on the problem of the long-term unemployed. So I agree with the report that we may have to start thinking laterally about what happens where they are concerned. I find myself in considerable agreement here with my noble friend Lord De La Warr. When one is extolling the virtues of new technology, one does not find many possibilities in that field for redundant people who have worked in, say, steel foundries all their lives. The transitions are highly complicated and difficult to make.

Because of this, I welcome the way that the Select Committee report—and indeed all the speeches today—were at one in emphasising the need for training. By concentrating on the problem of the long-term unemployed, we concentrate on the problems of low skills and low possibilities. These can only be solved through training. I was glad last week to be able to record that even the noble Lord, Lord Scanlon, had a good word to say for the Government in respect of training. We must, as the noble Baroness said, reduce the numbers of unskilled workers in our labour market. If we could do that, I am quite convinced that we would halve our problem, if not numerically right away, at least in terms of the trends and patterns which are developing.

I also agree with the noble Baroness when she says that youngsters of 16 to 18 should be trainees rather than employees. If your Lordships think of yourselves—as I certainly do—as professional or middle class persons, you do not really long for your children to enter the labour market at the age of 16. You do not urge them to do so. I should have thought that with the blurring and abolition of class barriers in modern Britain, we should all wish those young people—voluntarily, of course—to seek later rather than earlier entry to the labour market.

The noble Lord, Lord Rochester, in this connection brought up the problems caused by the way our young people expect comparatively high levels of pay with older workers in their early years of employment. One of the difficulties I had as an employment Minister was to find jobs in and around the £40 mark rather than the £25 youth allowance mark or the ordinary clearing levels for labour which started at about £60 a week. If I had been able to locate a lot of £40 jobs, I could certainly have placed many young people in them. There is food for thought in that and in our Young Workers Scheme.

I also agree that training and retraining is not simply a matter for the young. It is very important in terms of adults, particularly married women who wish to re-enter the job market—and why should they not? Here again I have to repeat the original cause of my disagreement with the noble Lord, Lord Spens: were it not for the efforts of a particular married women—my wife—I should scarcely be able to afford to address your Lordships in this capacity.

The noble Lord, Lord McCarthy, gave us warning that he could not remain in his place to hear my reply. Equally well, he will not expect me to give as detailed a consideration to his remarks, as if he were here. The doubts I myself feel about the noble Lord's solutions were most cogently expressed by my noble friend Lord Vaizey. When you boil down the suggestions of the noble Lord, Lord McCarthy, and allow for his extreme skill and expertise in their presentation, they come to something like "let us subsidise more prospective members of NUPE", or more prospective members of something which seems remarkably like NUPE to us. The noble Lord asked rhetorically why public sector pay should be more inflationary than private sector pay. As chairman of the railway pay board, he certainly should know the answer to that. He doubted—and I welcome his doubt—whether general expansionary policies by any Government could create the jobs that were needed. He asked me what happened to trainees at the end of the special programmes assembly line and whether they would just be recycled into other special programmes. He noted the low level of placement, which is a level we would certainly like to see improve. I believe he was best answered by my noble friend when she said in her maiden speech: "We are in a chicken and egg situation. You have got to start somewhere, and it is very important to educate people in the workings of the labour market if they are to have a chance in bad times as well as in better times to compete successfully in it."

The noble Lord did not go into sufficient detail about the great problem over the numbers of lower paid public sector jobs which enjoy a union monopoly. When I was an employment Minister there were already movements to try to unionise those in the Youth Opportunities Programme. I have no objections, as the House will know from our debates on the Industrial Relations and Employment Bills, to trade union activities; but it is not really compatible with the point made by the noble Lord, Lord Rochester, in terms of young people pricing themselves out of jobs, for them to be encouraged to enter cartels which, fairly enough, exist largely for the purpose of raising levels of pay.

I said I would speak a little more specifically about training. I do not think the Government's priorities given to training can be much in doubt. We intend with the youth training scheme to take an opportunity to give the country and employers a better equipped and better qualified and better educated workforce. The new scheme will be fully in operation by September of next year and will provide school-leavers with a year's training as a foundation for work The House will note that the coverage of the scheme and the level of the allowance is very much in line with the committee's recommendations.

This scheme will be costly. By 1984–85, which will be the first full year, we expect to be spending over £1 billion a year on training young people. That will be over half our total expenditure on special employment measures, and I think it reflects our concern to give young people a good start in their working lives. It is also in line with the recommendations made by the Select Committee's report. We are trying to balance this with our provision for adults. We are doing a substantial amount of adult training. About 50,000 people a year, many of them unemployed, benefit from courses provided under the Training Opportunities Programme, largely in skill centres and colleges.

However, there are limits to the amount of training it is sensible to provide in this way when in many occupations placement rates for those competing for training have fallen substantially. It does not make sense, surely, at the taxpayers' expense to expand existing training provisions in such occupations. Indeed, we have to go on looking critically at the effectiveness of existing courses. In any case, improving training and increasing job opportunities is not just a matter of providing more training places and having a kind of "numbers game" in terms of the training places provided. There is a big job for industry to agree on training standards—I know that is close to the noble Baroness's heart—for all important occupations and removing restrictions on people's access to training. This job is not simply a question of resources. It is a question of industry's and trades unions' willingness to tackle outmoded attitudes and practices, and it is a vital part of the MSC's and Government's new training initiative. In the longer term, whatever system of organisation and funding we adopt, it will not give us the results that we need, unless it is flexible and adaptable enough to meet the constantly changing requirements for skills. Fast footwork is really the biggest essential in today's labour markets.

Many speakers reminded us that we have to make full use of the new technology and new methods for training, such as distance learning. I am glad that the noble Lord, Lord Rochester, mentioned the Open Tech, which was very dear to the heart of my Secretary of State when he was Secretary of State for Employment. We will be spending £4 million on that in the next financial year and it will give many, who would not otherwise have a chance of that kind, access to training in a new way to become technicians and supervisors.

If I may come to the question put to me by the noble Lord, Lord Kilmarnock, it was a somewhat technical one. I have an answer for it, but it might be better, since the details are complex and vary according to whether an employee is contracted in or out of the state scheme, if I were to write to the noble Lord. If he is not satisfied with my answer, perhaps he would like to put down a Starred Question on the subject.

The noble Lord, Lord Kaldor, and I have had many exchanges, both public and private, on economic affairs. As I said last week, I have never once heard him speak without learning something fresh. His is a remarkable mind and your Lordships' House is very fortunate to have him. This time I was surprised to find that in my official, as well as in my personal, capacity, I agreed with a lot of what he said. We certainly agree with his analysis on the loss of competitiveness and the effects of the loss of our share of world markets. We do not, of course, regrettably—however much we should like to do so—agree with his belief that we can shout, "Stop", to the world, "we want to get off for a time". I yield to no one, not even to the noble Lord, Lord Kaldor, in my admiration of the great Conservative Prime Minister, Mr. Stanley Baldwin, but our overall share of world trade was very large in his time. In putting the protective mechanisms around us we were then facing fewer competitors outside. We were generally in a better case in terms of our world share. I have to concede to him that the Japanese experience is a persuasive one, though, of course, we are all using might and main at the moment to try to get the Japanese to liberalise their own trading markets, and my noble friend Lord Cockfield had a lot to say about that last week. I am also worried about what would happen to our internationally and globally successful financial markets, where, on the whole, we are ahead of the Japanese, perhaps because they are less interested in them. What would happen if we retaliated over productive manufacturing and they were forced into the sectors like banking and insurance where we are still very successful.

I have already mentioned the speech of my noble friend Lord Vaizey. The nub of his difference from the rest of the committee is that he wanted demand-related or demand-encouraging activities to be done privately. He wanted people to set up in business for themselves. It certainly seems to me, as one who travels a great deal in my work by public transport and by rail, that there would be nothing against small businesses servicing one's needs in catering, rather than the bureaucracy of British rail. I am sure that many other noble Lords have had similar wishes from time to time.

The noble Lord, Lord Wolfenden, mentioned that married women have started to break down rigidities in the workforce—a point echoed by the noble Baroness, Lady Lockwood—and I certainly agree with that. I come quickly to a remarkable speech by my noble friend Lord Carr. It was, of course, critical of the Government and may get reported on that score alone, which would be a pity. My noble friend's speech should be reported in its entirety, because he was certainly supportive of our overriding need to reduce inflation and improve competitiveness. This need is the cornerstone of the Select Committee's report.

If I have a criticism of my noble friend it is that he seemed to be asking us to rob Peter to pay Paul. As the successful chairman of a great company he was stern about the need for lower levels of taxation and lower levels of interest rates. But he also wanted us to spend more money, despite that conflict of priorities. It is extremely difficult to know exactly how to set the public sector borrowing requirement, but the key factor in the short term is the judgment of the money markets as to what you are up to. The Government are such a big borrower that we could create havoc in the money markets. I am sure that the Prudential would not be very pleased if we did so.

The noble Lord, Lord Campbell of Alloway, made some very interesting suggestions about what practical legislative improvements we might make in order to increase employment. If I may, I shall take up the points which he made with my noble and learned friend the Lord Chancellor.

The noble Lord, Lord Oram, looked at me sternly across the Chamber and said that I had to give an unequivocal commitment to full employment. I do not see how any Government in the world can do that. We are competing very fiercely at the moment.

Lord Oram

My Lords, if the noble Earl would give way, in using that expression I was quoting his noble friend Lord Carr of Hadley.

The Earl of Gowrie

My Lords, my noble friend can answer for himself, but I do not think that he asked for such a commitment from me. He is far too experienced and knows the impossibility of delivering it and the terrible things one could do to people's rational expectations if one were so foolish as to do so. It would be quite extraordinary to ask the Government, as the noble Lord, Lord Oram, wished, to ask their Chancellor to decide how many jobs might exist in any given field. How would the Chancellor decide, for instance, the number of jobs that should exist in motor-car importation and distribution? It would be a totally impractical task.

I have, however—again somewhat to my surprise—some sympathy with the speech made by the noble Lord, Lord Hatch of Lusby. I certainly agree that third world and developing world markets are crucial to this country. But there is nothing whatever to stop our financial institutions or our manufacturers and exporters from developing trade links with third world countries—and many of them do. Where the noble Lord and I part company is that he feels that in some way the Government can take on this business exclusively.

Lord Hatch of Lusby

My Lords, I wonder whether the noble Earl would give way for a moment. What the noble Earl does not know is that in his absence from the House I specifically raised with one of his colleagues the use of the ECGD to assist British exporters to the third world. Each time I raised the question I had a negative answer from the Government.

The Earl of Gowrie

My Lords, the Export Credits Guarantee Department system exists exactly to do that—to protect and help exporters; but obviously it is a finite system since it is costly. The Government cannot finance exporters' activities indiscriminately, particularly in a world which, as the noble Lord himself was fair enough to admit, has great financial problems so far as the developing world is concerned. The noble Lord himself asked how the developing world gets the money to pay for our goods. The international banking and financial difficulties cannot be compounded. We dealt with some of those points in our debate last week, so I cannot go into them now.

May I say to the noble Lady, Lady Saltoun, that I, too, have a soft spot for toll motorways. It seems to me that a Government interested in trying to reduce public sector borrowing and get more private participation in the whole economy should be favourably disposed towards toll motorways. I have never quite understood the argument against them, and again I shall bring the point to the attention of my right honourable friend.

When I was employment Minister we tried to increase the number of home helps and I imagine that the Manpower Services Commission still does so. We had considerable problems with union resistance. My noble friend Lady Carnegy of Lour will know how difficult these can be, but I am glad to say that it was the case, at least in my experience, that in the end people were helpful. We did succeed in quite a few cases.

May I close by saying that the real service to the unemployed that we in this country have to provide is to break the vicious inflationary circle of high wages, high costs and the consequential need for expensive benefits for those out of work. While people are still young and before they take on major responsibilities, they can generally afford to take lower wages in return for experience or training. If they do so, the employer can afford to employ them. This is one lesson that our competitors—for instance, in Germany—have learned and one that we did not have to learn a generation or more ago. I very much agree with what was said by the right reverend Prelate the Bishop of Lincoln, that perhaps we did not learn sufficient lessons during the period when we enjoyed full employment. We need to provide more low-cost jobs for those people who can afford to take them and who otherwise, because of the disciplines of the market place, would have no jobs at all. We can do this through encouraging part-time work, through the job splitting scheme and through the young workers' scheme, and also through the part-time jobs provided under the community programme.

I have some sympathy nevertheless with those who are critical of the schemes that we provide. They are not the ideal answer; in the long run, the answer must be in general economic achievement and success. Lower inflation, which the Government can reasonably claim to be achieving, means that people no longer need ever-increasing money wages. Expectations are demonstrably adjusting and we are now returning to a realistic assessment of what people can expect to be paid at different stages in their working lives. The time lags are profound and no one knows entirely how long they take to work out in detail. But I am confident that many unemployed people will again be taken into employment, but only as this lesson is expensively and painfully learnt. I am also confident that, while we are learning our expensive and painful lessons, many of the suggestions in the Select Committee's report will be valuable to the Government and will be acted upon by them.

9.36 p.m.

Baroness Seear

My Lords, one thing of which I am certain is that at this late hour the House does not want another speech from me. I will make the customary winding up speech as briefly as I can and if I do not comment on some points which have been raised I hope it will be realised that this is out of consideration for the desire of the House to rise rather than out of any disrespect for the people who have spoken.

I should like first to congratulate the noble Baroness, Lady Carnegy of Lour, on her maiden speech. I suppose that somebody told her that the most successful speeches in this House come from specialists speaking from a highly expert point of view. That is what we had today from the noble Baroness. I cannot help but give what I suppose is the reverse of a chauvinist point in showing special delight in a speech of that kind coming from a fellow Baroness, even if she does sit on the wrong side of the House. I hope very much that she will give us in future a great deal of her wide experience in these very tricky questions; questions which often seem superficially to be easy but which prove to be extremely difficult when one knows something about them.

Of the main critics who spoke this evening, I believe that the noble Lord, Lord Balogh (who does not seem to be here now) was the most severe. He complained that we had not dealt, as professional economists would have dealt, with the macro-economic considerations because, I think I heard him say, we lacked the intellectual ability to do so—and I see the noble Lord, Lord Vaizey, retreating quite modestly on that point! We did not do so partly because most of us were not quite up to it, but also because, if we had attempted so to do, to be quite frank, we should never have had an agreed report. Secondly, it would not have helped us a great deal in our attempt to find practical solutions to the problems we are facing at the present time. Thirdly, if I may say so in the absence of the noble Lord, Lord Balogh, and after 30 years at the London School of Economics, I believe that, if the committee had been a team of economists, the disagreements would have been even greater than they were.

The second criticism came from two or three speakers—that we had neglected the international aspects of unemployment. I think there is some proof in this. It is a very wide subject that we were attempting to deal with, and I would not for one moment deny that there are certain facets which we did not deal with as fully as we should. We did not discuss sufficiently, in my view, relations with the EEC. We did not talk as much as I wish we had done about overseas trade. But I would say to the noble Lord, Lord Hatch, and to others who made this point that, after all, success in international trade is a function of our increased competitiveness. If we did not elaborate sufficiently, one can only say that, if our competitiveness increased as we hoped it would and as we planned that it should, then indeed the problems of international trade would be resolved.

The noble Lord, Lord Molloy, expressed a point of view which troubled me somewhat, it is so sincerely held. He so passionately believes that by spending more money, reviving the old industries, such as steel, the great old steel industry, we shall find our unemployment problems largely dealt with. The whole burden of our theme—and this is a tragedy, if you like, of the present situation—is that those old industries are not going to revive because the demand for what they make is no longer there. There is no point in reviving an industry, however magnificent it once was, however tremendous and skilled many of the people who worked in it, if what they are producing the world no longer wants. That is what the noble Lord, Lord Molloy, and the many people who think as he does have failed to face. Until this happens then the path to greater competitiveness remains blocked, because as long as we look back and not forward then indeed there is no hope.

I would say this to some of the other critics—I think this includes the noble Lord, Lord Allen—using the argument that we should be spending our way out and that the Government have been concentrating too much on pulling down inflation and have been too afraid of reversing the trend towards yet again greater inflation. The burden of the theme of this report is that in the longer run inflation is the enemy of employment. Those people who have protested this afternoon and this evening that you should not be afraid of inflation if by spending money you can get rid of unemployment are thinking short-term. We have said in this report that it would be easy to do all manner of things which would improve the employment position in the short run, but that is the enemy of long-run and sustained employment prospects. That is the burden of our theme. If that is what the noble Earl, Lord Gowrie, means by saying that I am a "dry" at heart, then I am a dry at heart, but if he puts any other interpretation on it he is totally wrong.

The noble Lord, Lord Campbell, asked me to explain what we meant by our references to incomes policy. I do not think we would all give precisely the same interpretation of that paragraph, but what I think we primarily mean is this: that we do not want rigid incomes policies; we fully understand the problems they have created in the past and would in the future create. But because we believe that some risks have to be taken with expanding employment at the present time, and because we fully accept that a return to inflation would defeat the object of affirmative action, then, if the lessons of the last three years have not been learned, if with improvement in the employment position and some improvement in trade there were a real upsurge in incomes, unjustified in terms of increased productivity, reluctantly we would take the steps necessary to control it, because we are so determined that improvement in the position of employment should not be accompanied by a return to inflation. That is the thinking behind that paragraph.

May I say, and I think this is in part true of some of the members of the committee as well as those who have spoken this evening, that when it is said that on the future employment prospects we must accept that there will be continuing large-scale unemployment, I find myself much more on the side of the noble Lord, Lord Vaizey. I am a guarded optimist. This is still an extremely poor world. If one turns to international trade and the demand for goods and services all over the world, we have a huge problem of distribution, but we do not have a problem of over-production. I do not see the slightest possibility of the chip meeting all the requirements of this very hungry and poor world for generations and generations to come. Even in this country there is still a very large range of unsatisfied needs for goods and services which we would satisfy if we were more successful. That is the prospective we have to have.

I accept that it is extremely difficult to get there, but it is extremely dangerous to allow ourselves to settle for the idea that there will always be unemployment. There will be some unemployment. I am not, of course, pretending that unemployment will disappear, but that is not to be based on the idea that the need for work will disappear. There is an idea that, somehow or other, one can cope with this by encouraging people to enjoy their leisure, but the people who are most likely to be out of work and who will continue to be out of work are, unfortunately, those least likely to be able to use leisure constructively. They are the very people who, through lack of education, lack of opportunity and for a whole variety of reasons, are the people who are the long-term unemployed, the unskilled, the people who have been the least successful in the education system. Those are not the people who will find it easy to make constructive use of leisure time.

I should like to thank the noble Earl, Lord Gowrie, for intervening to have the committee set up. I rather suspected that he had a finger in it. For me it has been an extremely enjoyable experience. I was, of course, interested in his reply this evening. The noble Earl, Lord Gowrie, is very persuasive, but he sidestepped the major burden of the criticism of his noble friend Lord Carr of Hadley, and the major burden of what we have been attempting to say, and of what the noble Lord, Lord McCarthy and the right reverend Prelate the Bishop of Lincoln said. We cannot wait. Unemployment is nearer 4 million than 3 million if the sums are done properly.

I return to the point on which I started this afternoon. If we are to make the drastic changes that have to be made, people have to see that the employment position is improving, not deteriorating, and that those changes will not lead to deterioration. We do not have the time to wait for the market to work. True, in the end there will be improvement, but the time lag is of the essence, and unless the Government take action now to see that jobs are created for the people who are not going to get jobs unless action is taken, I believe the objective that we all share of greater competitiveness, greater success in the economy and, through that, greater employment, will be frustrated, I beg the noble Earl to think again. We are not suggesting large sums of money. We are saying that action needs to be taken and taken quickly to gain the consent for the necessary painful action which will have to be taken.

It only remains for me to thank my fellow members of the committee. It was very much a joint affair. Everybody contributed. It could not have been as agreeable, and it could not have been as productive, as it was, if it had not been so much a co-operative, a partnership affair, in which our party differences seemed to slide away from us, enabling us, because of our genuine concern with this problem of such central importance, to work together—for far too long, admittedly—and to come to a report on which we had so much agreement. I am not supposed to say it, but without the help of Paul Hayter we would have been in terrible difficulty.

On Question, Motion agreed to.

House adjourned at nine minutes before ten o'clock.