Social and Economic Policies

HL Deb 09 March 1983 vol 440 cc236-313

2.57 p.m.

Lord Wells-Pestell rose to move, That this House deplores the consequences of the Governments's social and economic policies on an ever-increasing number of our citizens and calls upon Her Majesty's Government to initiate urgently steps to invigorate the economy and alleviate the hardships so widely suffered.

The noble Lord said: My Lords, this is the third or fourth time since May 1979 that I have initiated a debate on the effect of the Government's policies on the lives of ordinary people. I want to emphasise that this debate, so far as I am concerned, deals with the under-privileged, the less fortunate and what I term the ordinary people. It is perhaps appropriate that we should be considering this matter this afternoon because there is a possibility that in the not too distant future there will be a general election, and in my view it is of supreme importance that we concern ourselves with the lives of ordinary people and how Government policies affect them.

I shall try to be as agreeable as possible, but let me say that it will be extraordinarily difficult because I feel that certain things need to be said and have got to be said, and I propose to say them. I shall try not to do it with any sense of maliciousness because I realise that a simple comment can sometimes arouse people when it is never intended to do so. I and my friends—and I talk about my friends in the Labour Party; I do not know whether I can include my friends in the Liberal Party, but I would hope that I could do so—are of the opinion that this Government have been a disaster to the majority of people in this country and that the Prime Minister has shown a callous indifference and lack of understanding to the needs of ordinary people.

I find the task that I have set myself daunting because I am conscious—your Lordships may think that it is imagination—of the great divide that exists between our outlook on this side of the House and the outlook of noble Lords opposite. I am not saying that they are wrong, but I believe they are. Many, if not most, noble Lords opposite have very little in common with the people about whom I want to talk. One cannot be a Member of your Lordships' House, as I have been for some 18 or 19 years now, without having a deep regard (and I say this very sincerely) for many noble Lords opposite and for whom, if I may go so far as to say so, I have a very real affection.

But it does not alter the fact that in my view the philosophy of outlook of noble Lords opposite and the philosophy of our outlook on this side are really poles apart. I think it is necessary that one must have some close experience of deprived people—people who are living on the edge of poverty—before one can really begin to understand the nature of their everyday life. When I said this not so very long ago, the noble Lord, Lord Boyd-Carpenter, quite rightly, took me to task. He said, "But some of us have been Members of the House of Commons; we have had constituencies and there has been a poor element". Perhaps there are not many poor sections in the average Conservative-held constituency. In the vast majority of cases the members of committees doing all sorts of things—and I meet them in your Lordships' House—are not brought in touch with the actual people: they are committees.

Baroness Trumpington

Rubbish!

Lord Wells-Pestell

My Lords, the noble Baroness may say "Rubbish"; I heard her say so—I have good hearing, so do be careful. It may be rubbish, but I did say the "vast majority" of people. I, too, have sat on committees—any number of them—and committees do not always involve a home visit. I am saying that, by and large, a large number of Members on the other side of the House do not appreciate the level or, if you like, the depth at which some people live.

In May 1979 the Prime Minister promised to unite the nation, but I believe that statistics and experience have shown people that we are in fact, more divided in this country today than we have ever been. Let us make no mistake about it, we are two nations: one which has too much and the other which has too little. On the doorstep of No. 10 in 1979 the Prime Minister led us to believe that she was a disciple of St. Francis of Assisi with her plea that: Where there is discord, may we bring harmony; where there is doubt, may we bring faith; where there is despair, may we bring hope. Deeds speak much louder than words and, having regard to the fact that there is a great deal more discord, a great deal more doubt and a great deal more despair, that rather suggests that the Prime Minister has ceased to be a disciple of St. Francis and, I am almost tempted to say, has become the devil's disciple.

Almost the first, if not the first, action of the present Government in May or June 1979 was to reduce taxation. What did they do? The Chancellor of the Exchequer gave away £4,500 million in such a way that the poorest 10 per cent. of taxpayers in this country received 2 per cent. of that £4.5 billion while the richest 7 per cent. received no less than 34 per cent. of the £4,500 million. Is this the way in which a nation, or those acting for the nation, should distribute money if they are to reduce taxation by giving some of it back?

Since that time the Government's treatment of social security benefits has been deplorable. I want to quote from a debate in your Lordships' House on Wednesday, 24th November 1982, which was initiated by the noble Lord, Lord Banks. At column 893, when talking about social security benefits, he said: Those cuts have cut £1.5 billion from the social security budget each year"— not just one year, but each year. The noble Lord went on to draw your Lordships' attention to a report entitled Despite the Welfare State 1982—a report of a big DHSS-sponsored research project. It said this: It is impossible to resist a reiteration of the general conclusion from much of the work, that benefit rates, particularly of supple- mentary benefit and child benefit, are simply too low at present for some families to avoid real hardship and damaging consequences to the health and other life chances of their children. The Government's answer to that was an answer which had been made some time before. I gave notice to the noble Lord, Lord Trefgarne—I was going to say "my noble friend", because he is—who in the same debate in a sentence gave roughly the Government's attitude: We are determined to maintain the living standards of those most in need, but within a strategy to improve the prosperity of our economy as a whole". That was another way of saying that it does not matter what your income is, it does not matter what your position in society is, it does not matter what you have or what you do not have, you still have to contribute by way of taxation, or in some other way, to the income of the country.

It has been said time and time again by the Front Bench opposite that we cannot exclude any individual; that everybody has to be prepared to take his cut. We on this side say that that may be all right in principle, but it depends entirely on whether one is in a position to do so—whether one is already living either on the poverty line or below the poverty line, and whether in fact one can do it. Noble Lords will forgive me if I remind them that supplementary benefit is regarded as the Government's official poverty line, so people on supplementary benefit are being maintained on the poverty line. A short time ago, those people reached a record number of six and a half million, which is something like a 44 per cent. increase in the last four years.

A report published by Church Action on Poverty states that the number of poor children has increased by 90 per cent. under the present Government and that more than 9 million people are now probably living below the official poverty line. The disgraceful thing that we are going to witness in the next few weeks is a give-away Budget by a Chancellor who wants to prepare the minds of the people of this country for a general election. People have been, I was going to say almost starved, if I can use the word "starved" in inverted commas, of benefits which they have needed in order to build up some kind of surplus so that the Chancellor of the Exchequer can go to the people just before a general election and say, "Look what we have been able to do"—and, for a few, life will seem brighter. There is not a more dishonest action than that.

I want to say a word or two about the unemployed. It is difficult to know what the figures are. I think the official figure is 3,377,000, but there is every reason to believe that the figure is much nearer 4 million or more. If I am asked on what I base that, I base it on a number of things I have read which are far too numerous to quote to your Lordships. I am glad some noble Lords opposite find it amusing. I wish I did. The point is that a large number of unemployed, after they have had their unemployment benefit for 12 months, are cut off, and they do not bother to go to the labour exchange. We just do not know how many of the unemployed who are not receiving unemployment benefit today in point of fact no longer sign on. But what we do know is that is runs into something like six figures.

I wonder whether any of us here can visualise what it is like to be unemployed: to no longer be the breadwinner, and to have to depend on a handout each week. Your children cannot have the things they need. If they are going to school and are playing cricket or football, you cannot afford to buy them the jerseys, and so they are distinguished from the other children. It is very difficult for those of us who have never been unemployed to understand the impact of unemployment—and it is not just on the husband. He probably gets out of it much more lightly than his wife. What we know from medical evidence is that a large number of unemployed men have suddenly gone down with heart trouble and various other forms of heart disease which the medical profession attribute to unemployment. Of course, what do we find? We find that there are all sorts of other problems stemming from it.

The cut in unemployment benefit was the wickedest action that any Government could take. It surprised me that when the matter came before your Lordships' House, as when the Social Security (No. 1) Bill came before us and the Social Security (No. 2) Bill came before us, and when the question of the 5 per cent. cut in unemployment benefit, the unkindest cut of all, came before us, there was only one noble Lord opposite, if my memory serves me correctly, who spoke against it and, I think I am right in saying, who voted against it. I am glad to see him in the Chamber, albeit that he is on the wrong side. What sort of people are we when we can support a measure of that kind?

I was looking at the annual report of the Supplementary Benefits Commission, which says: There is ample evidence that unemployed families with children are more seriously affected by poverty than others living at, or close to, supplementary benefit levels. I wonder how many of us would like to keep a wife and two children on £59.20 a week—plus, I accept of course, an allowance for rent and rates? After rent and rates have been met, they have £59.20 a week for a husband, wife and two children. Dare I suggest that certain noble Lords in this House sometimes spend that on a dinner at night? Not in your Lordships' House, I agree; but in the big hotels, where you have to book a table—it does not matter where you go—they are not cheap, as I learned from the paper last week. You can spend £45. My Lords, it is immoral. If you do that sort of thing, then you ought not to be supporting cuts in social benefits.

I want finally to say something about the effects on the social services, which are unable to cope with the increasing demands for advice, help and assistance. I was going to read a statement made by the head of the Association of Directors of Social Services, but it is a long one and so I shall refrain other than to say that the report says: Spending cuts in Britain's social services have almost stopped, according to the latest annual survey of the Association of Directors of Social Services, which represents 104 directors in England and Wales. But dramatic increases in demand for help from the poor, unemployed, elderly and handicapped mean that spending needs to rise by between 4 and 6 per cent. a year to prevent reductions in standards of service. The head of the ADSS goes on to say: Some of the standards of care that we are able to offer are well below those which a rich civilised society should tolerate. We all know—it is a statistical fact—that there has been a serious increase in child abuse and in homelessness. Local authorities have been given to understand that they have to face the shedding of 28,000 social workers in the financial year, with Government cutbacks dramatically reducing the services. What is going to happen to the elderly and the disabled? Many of these local authority social service cuts will affect the elderly and the disabled, and they are really the people who should not only be engaging our attention but expecting us to do something for them.

I do not deny that, as a country, we have been through a difficult patch. But let us be quite honest about this—and noble Lords know that what I am going to say is true. There are a large number of people in this country who have not been affected, or, if they have been affected, they have been affected in such a way that what they have lost they do not miss. But if you are one of the 9 million on the poverty line, one of the 6.5 million on supplementary benefit, and somebody reduces your income by even only 20p, 30p or 40p a week, you know all about it.

People today have every right to work, and if, for whatever reason, that is not possible, they have a right from you and from me, from people who are legislating on their behalf, to have a fair standard of living, even if it means that those of us in the community who are much better placed financially have ourselves to suffer a reduction in our own standard of living. I beg to move.

Moved, that this House deplores the consequences of the Government's social and economic policies on an ever-increasing number of our citizens and calls upon Her Majesty's Government to initiate urgently steps to invigorate the economy and alleviate the hardships so widely suffered. [Lord Wells-Pestell.]

3.20 p.m.

The Secretary of State for Trade (Lord Cockfield)

My Lords, as we all know, the noble Lord, Lord Wells-Pestell, is a man of deep feelings who speaks with sincerity and conviction. Nobody would remotely accuse him of maliciousness, if I may refer to what he said at the beginning of his speech. But I would put the point to him that sincerity and conviction are not in themselves sufficient. One needs also to diagnose the situation correctly and prescribe the right remedy. That is where I part company with him. There is nothing easier than to point to the existence side by side of two phenomena, but it does not follow that one flows from the other. The reverse may be the case. Or there may be no connection between the two at all. Government policy does not create the maladies identified by the noble Lord. On the contrary, Government policy offers the only way of curing those ills.

Let me start with the Government's record in the social services. My noble friend Lord Trefgarne will be dealing with these matters in detail when he comes to wind up. In the meantime I will make a few simple points. On health, our expenditure this coming year will increase by 1½ per cent. in real terms. Since we came to office, health service provision has already increased by 7½ per cent.—again, in real terms. We have devoted more of the nation's resources to health than any previous Government. On the personal social services, expenditure has increased by 9 per cent. in real terms since we came to office. On education, we are spending more in our schools in real terms per head than at any time in our history.

On pensions, we promised that we would maintain the real value of pensions over the lifetime of this Parliament. That we have done. On training and special employment measures, this year we shall spend £1½ billion on special employment and training measures. Next year we shall spend £2 billion. Over the next three years we shall spend £4 billion to bring training arrangements up-to-date. Despite the great economic difficulties the country has had to face, we have made provision for the money needed to meet all of these commitments.

I will refer briefly to what the noble Lord said about taxation. He was talking about massive reductions in taxation. I only wish there had been. In fact, since 1979 the proportion of our national income which goes in taxation has increased, not diminished. I wish it were otherwise. In fact, we have taken more money in taxation, not less. I am not in any way trying to forecast what my right honourable friend the Chancellor of the Exchequer proposes to do next week, but if we take a longer-term view, this country would have been better off if the Government had taken less money in taxation, not more. We should have a more prosperous economy if the Government had taken less money in taxation, not more. Quite apart from that, the noble Lord starts from what in effect is a completely false premise. He speaks as though it were the Government's money which Chancellors of the Exchequer were giving away. It is nothing of the sort; it is the citizen's money which the Government are taking from the citizen, and there should be, and there must be, a limit on the extent to which the Government can plunge their hands in the citizens' pockets.

I return to the main theme of the noble Lord's speech. Compassion is of no avail unless you have the means to give effect to it. We have to earn our living. As a nation, we have to pay our way in the world. If any would not work, neither should he eat is no longer true of the individual. It has ceased to be true for a long time. But it is certainly true of the nation. In some of my earlier exchanges with the noble Lord, Lord Kaldor, who I am pleased to see is in his place, he pointed out—as indeed is the case—that there were many advanced countries where Government expenditure as a proportion of national income was as high as, or even higher than, it is in this country. That is true, but they are, for the most part, countries which are wealthier than we are. The more people have, the greater the margin there is to spend on the social services and the manifold services the nation provides. The tragedy of our nation is that over many years we have failed to produce in the abundance which other countries have achieved. We still harbour our ambitions, our sense of compassion, but we have lost the means fully to indulge them.

Since we came to office, there has been a single golden thread running through all our policies: we must lead the nation forward, not allow it to sink steadily into decline. No one who looks back now over the history of the 'sixties and 'seventies could doubt the reality of our economic misfortunes: increasing inflation, rising unemployment, sluggish output, deteriorating labour relations and the growth of militant trade unionism. It would have been hard enough to reverse these trends in times of prosperity, when material growth would have permitted change without undue hardship. But the blizzard struck shortly after we came to office; the worst recession since the 1930s, the worst in most people's lifetime. It was not just our recession but the world's recession. Not even in a sense was it our own fault.

It was a recession sparked off by a massive increase in oil prices, itself the result of the revolution in Iran. It was a recession fed by a failure of the industrial world as a whole to react promptly and appropriately to the new situation. In our own case the position was made worse by a long tradition of wage inflation. The sheer stupidity of the wage explosion of 1979–80 passes comprehension. The bitter harvest of that folly has been reaped in unemployment and deepening recession.

But slowly the lesson has been learned. Working people realise—even if their leaders do not—that excessive pay increases lead to loss of jobs. It gives me no satisfaction to remind your Lordships that I have been saying just that ever since we came to office. But by steadfast adherence to firm fiscal and monetary policies we have brought inflation down to its lowest level for 13 years, to 4.9 per cent. compared with 10.3 per cent. when we came to office. Inflation is the corruption of society, the enemy of economic progress. Now that we have the rate of inflation well down, we must not relax our efforts. We are now better than the OECD average; better than the average for the Economic Community. But the United States, Western Germany, and Japan are still doing better than we are. Therefore we cannot relax. There are uncertainties ahead. Some influences are favourable—the fall in the price of oil, and lower commodity prices. Others are unfavourable—higher import costs, due to the fall in the value of sterling. But we must not allow any temporary setback, should one occur, to deflect us from our path.

One needs a responsible monetary policy if inflation is to be curbed and reduced. One needs a responsible fiscal policy to avoid undue pressure on monetary policy and to hold down interest rates. One needs moderation in pay settlements to avoid excessive pressure falling on monetary and fiscal policy alike. All the three are linked together. They support one another; but, equally, weakness in one undermines the other. Therefore the art of successful economic management lies in getting all three factors moving in the right direction. If we can achieve that, we can get results without creating excessive pressures on any point of policy.

This—if I may make the point to my noble friend Lord Soames, who raised the matter in the debate on the Unstarred Question of the noble Lord, Lord Lever of Manchester—is the explanation of the apparent change (or perhaps "development" would be the better term) in American monetary policy. In fact what the Americans are doing is simply refining their techniques and recognising that changes in some of the relationships have occurred, in much the same way as we have recognised these changes in this country. There is no fundamental change in policy. It is simply a question of operating the policy more efficiently.

The main factors in the economy are now nearly all moving in the right direction: inflation down, interest rates down, pay settlements down, a big increase in productivity, and—helped by a lower exchange rate—improved international competitiveness. The exception is unemployment, which remains obstinately high. Movements in employment always lag behind movements in economic activity. We shall see a fall in unemployment only when we achieve a substantial rise in output. That is why we put so much emphasis on creating a sound basis on which that rise in output can occur. There are signs of it beginning. But to that point I shall return in a moment.

Just now I wish to comment on Britain's trade performance, partly because it is my own Ministerial responsibility—I am going to give the noble Lord, Lord Bruce of Donington, some good news in a moment; I hope that it does not upset him too much; I am going to comment on our trade performance—but primarily because of its importance in relation to output and employment. Last year the trade of the world as a whole fell by 2 per centage points in volume. Britain's exports, in real terms—that is, in volume—rose by 2 per cent. Now 2 per cent. may not sound very much, but against a background where the trade of the world as a whole was falling it is a considerable achievement, and it is one in which management and workers in the industries and the companies concerned can take justifiable pride. Nor—as it is so often claimed—is it "all oil". Last year our exports of manufactures also increased in real terms. We exported £2½ billion-worth of manufactured goods more than we imported.

There has been some comment about the poor January trade figures. I have always stressed that figures for individual months can be erratic and unrepresentative, and that too much weight should not be put on one month's figures looked at in isolation. That is why in speaking about last year's figures I took the year as a whole. In order to put January's results into perspective, if we take the three months ended in January, instead of the one month alone, we find that our exports showed an increase of 2 per cent. in real terms—in volume, that is—compared with the corresponding figures for the same period in the previous year. If one makes a comparison between the three months ended January and the immediately preceeding three months, one sees that the increase in volume is no less than 3½ per cent. I hope that looked at in that way it will dispose of the gloom associated with the January figures.

The prospects for 1983 are, by fairly universal consent, better than those for 1982. World trade is expected to increase, compared with the fall last year. The recovery of the United States economy will provide a powerful boost. There are, of course, great difficulties. The enormous debt burden carried by the developing world poses great problems. But so far, with active support from the IMF and other international agencies, the problems have been contained. With the lower exchange rate, increased competitiveness and better delivery, we should do significantly better in 1983 than we did in 1982. If we do, it will make a notable contribution to our recovery for the country as a whole.

It is vital, therefore, that we should spare no effort in fostering our export trade. Our exporters are well aware of this. We give them every support through the British Overseas Trade Board, through the commercial departments in our embassies abroad, through the Export Credits Guarantee Department and, where appropriate, by linking aid with trade.

I now wish to turn to the general prospects for recovery in 1983, looking at the economy as a whole. There was a false dawn in 1981. It was aborted by the steep rise in American interest rates in the autumn of that year. One is cautious, therefore, in forecasting recovery in 1983. But the break in oil prices is, I believe, of great significance. Just as the rise in oil prices ushered in the recession, the fall should usher in the recovery.

There are many other favourable signs, too. Expectations of a recovery in the United States have been revised sharply upwards. The leading indicators in January rose quite exceptionally. As a result, by the end of this year growth in the United States is expected to be running at a rate of about 5 per cent. per annum, and, taking the last quarter of 1983 as against the last quarter of 1982, that compares with earlier estimates of about half that figure. If one takes the year on year increase—that is, 1983 compared with 1982—one finds that in the United States the expectation is now an increase of about 2½ per cent. In this country total output has increased by some 1½ per cent. since the spring of 1981, with industrial output showing an increase of 2 per cent.

There are signs that output is beginning to pick up in some sectors—including some in manufacture. Housing starts and new construction work both show an increase. The long decline in profitability is slowly coming to an end. This is good news for both jobs and investment. The February CBI survey published last week shows improved manufacturing order books, improved export order books, greater business confidence and greater optimism about export prospects. My right honourable friend the Chancellor of the Exchequer will be dealing with the prospects for 1983 in some detail when he opens his Budget next week.

Inevitably the question is: what happens when the recession ends and recovery comes? The parties opposite, in greater or less degree, believe that we shall slip back into the old ways—excessive wage claims and inflation thus leading to a further round of falling output and unemployment. The remedies they propose are essentially the same—controls on pay, on prices, on imports, devaluation of the currency, exchange controls, and so on ad infinitum. The details, the mixture, differ from one party to another, from one faction in each party to another, but the essence of the proposals that emerge from the parties opposite are the same—more controls, more Government intervention. The noble Lord, Lord Wells-Pestell, talks about a divide. This is the ultimate divide between the parties, between us on this side and those who support us, and those who support the parties opposite.

It is not unnatural that in times of difficulty even people of goodwill should turn to the state as a protective mother figure. But this is a delusion; this is fantasy. The state is not a ministering angel; it is neither God nor Devil. It simply consists of a few hundred or, if you like, a few thousand politicians and officials. Why should these people be the repository of all wisdom? Why should they have the capacity—let alone the ability—to take the millions of judgments, decisions and actions which day by day constitute the fabric of our society, the stuff of our economy?

We believe that these millions of decisions ought to be taken by the people themselves. We believe that the people doing the job are best equipped to take the decisions and that they will be better decisions if they are taken by the people who are responsible, the people who reap the benefit of success and pay the penalty of failure. They will be much better decisions than if they are taken by politicians, by officials, or by trade union leaders. All the experience of this country and of other countries underlines this time and time again. Where is the wealth of the world produced? Overwhelmingly it is produced by those countries—the United States, West Germany and the countries of Western Europe—where Government intervention is at a minimum. Where in the industrial world is wealth conspicuously not produced? It is in those countries like Russia and Eastern Europe where government intervention is maximised.

We see it in our own country. It is in the private sector, where decisions are devolved to millions of individuals, that the wealth of the country is made. It is not made overwhelmingly in the state-managed, state-controlled sector. One sees it in the trade unions when decisions taken by the members—where they are allowed to take decisions—are almost invariably better than the decisions taken by the leaders. We are seeing this very fact today. We want less centralisation, not more; we want less state intervention, less state interference, not more; we want less controls, not more; we want less dictatorship by union leaders, not more.

We believe that a great change has occurred in the attitudes of our people. Such changes do occur. We can see them in this country; we can see them in other countries. It is never easy to diagnose them when they are in course of happening. It is only afterwards that one can see them with certainty. But my own belief is that history will look back on these years through which we are living and say that, in all of our troubles and our difficulties, this was the time when the British people came to grips with reality; this was the time when they cast off the illusions of the past; this was the time when they decided that they should shoulder their own responsibilities. Once realism dawns, it is a more potent force than illusion. It is more enduring because it brings reward, not disaster.

My Lords, we in Government will provide the framework, the right framework, in which a free, responsible and successful economy can operate. The success of that economy—and its ability out of the wealth it generates to support its weaker and more unfortunate members—depends upon the efforts and the sense of responsibility of the millions of individuals who make up our society. We put our trust in the people. That is what divides us from the party opposite.

3.47 p.m.

Lord Diamond

My Lords, under our new code of practice it is my privilege to thank the noble Lord, Lord Wells-Pestell, for having chosen such a worthy Motion and given us the opportunity of debating it at a time when it is absolutely necessary and appropriate. I want to offer him the thanks of your Lordships' House for so doing. I also want to tell him that I agree with every word of the Motion and that, if it is to be carried to a Division, then we on these Benches shall certainly be supporting him. As he did, I shall try to be as moderate in my expressions as the circumstances justify; but with 3½ million unemployed and with the base of our creation of wealth deteriorating at the pace that it has deteriorated during the last three years under the present Government, it is my duty to lay before your Lordships such experience as I have to endeavour, as the noble Lord, Lord Cockfield, has said, to diagnose correctly and to propose the right remedy.

I can assure your Lordships that any harsh words that I may use are less than I feel. I recognise the sincerity of everyone opposite in their views; I recognise that completely, I must do so if I expect any one of them to recognise, as I hope will be the case, the sincerity of my own views on these very important issues affecting our country.

The gravamen of our charges against the Government is not that in the search for curbing deflation they have chosen to have regard to monetary targets. It is not that during their period of office unemployment has risen and output has fallen. It is not that they have completely failed to protect us from the effects of world recession. It is that they have adopted a narrow monetary policy to the exclusion of all else. It is that during their period of Government unemployment has risen more and output has fallen more than in any similar country. It is that the policies which they have adopted, far from alleviating the impact of world recession, have exacerbated it. It is, above all, that they have been arrogant in the adoption of their policies and obstinate in the pursuit of them.

Let me now try to justify those two charges. First of all, as to obstinacy. We all recognise that we are suffering from the effects of a world depression. Figures have been quoted so often. I do not wish to bore your Lordships by repeating them, for they were last given fully by some five or six Members of the House on the debate on the Queen's Speech. The figures which have been so often quoted show that we have suffered more than other countries. It is very difficult to quantify what part of that suffering is due to world recession, and what part of it is due to the policies which the Government—with all sincerity, believing at the start, no doubt, that these were the policies which were right for our country—adopted.

Some have attempted to do this division. The London Business School, which are normally regarded as good friends of the Government, have recently attempted this division and they attribute approximately one half of the worsening of our position to the world recession, and accordingly the other half to Government policies. This conclusion is consistent with two further reports: one from the International Monetary Fund and one from the OECD, both of whom have recently reported that the policies pursued in this country have been twice as severe as the policies followed in any other developed country. Those are two authoritative attempts to do this difficult task, apportioning half the difficulties from which this country has been suffering to world recession—which I have to deal with because the Government always say, "All our troubles and problems stem from world recession which we are unable to resist"—and half to the policies of the Government opposite. That must be a conclusion which we must be prepared to accept. Certainly I do so.

I am not suggesting for one moment that the Government expected these results. They did not expect this worsening in the position. They thought no doubt that their restrictive monetary policies would be likely to contain prices and inflation without any serious effect on employment and output. Indeed, the Chancellor said as much before the last general election. He said that he had no intention of provoking, a dramatic short-term recession". But events have proved him disastrously wrong. It has long been evident that the primary effect of these policies has been more on output than on prices. It has certainly had some effect on prices but it has had the most massive effect on employment and on output.

Equally disastrous was the decision to leave exchange rates to market forces, as the noble Lord, Lord Cockfield, has frequently repeated from the Front Bench opposite. Moderating the exchange rate would, I recognise, have added to the growth of money supply, and that is why no doubt the Government jettisoned it. But, at what cost, my Lords? The combination of very severe monetary policies involving as they did record interest rates, together with a complete absence of any attempt to moderate movements in the exchange rate, meant that by 1981—two short years after the Government came to office—British goods were costing 40 per cent. more. They were 40 per cent. more expensive in relation to the goods of our competitors than they were in 1979. The result of that undoubtedly—it was without doubt the main contributing factor—was the loss of 1 million jobs in manufacturing industry alone.

Unemployment, as we know, has risen and is still rising. It will rise even further according to the Government's own forecast. The Government evidently would rather live with 3½ million people out of work than change their policies. The noble Lord, Lord Cockfield, repeated only today the determination of the Government to stick to their policies. Unemployment may rise, output may fall, but the policies which the Government adopted when they came to office must in their view be pursued relentlessly in spite of their unexpected results, and in spite of their condemning many thousands more to the living death of long-term unemployment. It is that attitude which I feel I am justified in calling obstinate.

I now turn to my second charge which is that of arrogance. When the Government came into office they inherited the accumulated wisdom of all Governments from the experience that they had gained in the management of the economy since the war. All this was rejected. Not for them the logic of counter-cyclical economic management. Those are long words which mean nothing more complicated than turning the heat up when the house is getting colder. Not for them that accepted policy; on the contrary, if the nation were found to be suffering from what I may call "world 'flu", then the remedy the Government had in mind was to remove blanket after blanket, to force the patient to stand up to the elements, and this, they said, would soon sort out the strong from the weak.

Indeed it did: one million additional workers failed to survive. This is what is called on the other side of the House "slimming the workforce". Also there was thrown to the winds the knowledge of the control of the exchange rate. No matter that it was accepted previously as part of the economic management because of the important role it played in maintaining the competitiveness of our manufacturers and exporters; no matter that a violently fluctuating pound would mean that commerce would be dominated by doubt and international investors deterred by uncertainty; no matter that that might lead to the loss of jobs which I have already described—only inflation and financial targets seemed to matter.

This new doctrine rejected the wisdom of devising policies which had regard to unemployment as well as inflation. All previous experience was ignored and, indeed, Keynes was kicked downstairs. It is that deliberate rejection of known experience and that risking of all on the unknown that I feel I am justified in calling arrogant. Equally arrogant is the habit that economic ministers have of describing any alternative approach which is different from their own as disastrous. The noble Lord, Lord Cockfield, came very near to saying that today, but it has been said in those terms on many occasions. They not only say it would be disastrous but they say that it would lead to uncontrollable inflation.

My Lords, there is an alternative. I should not be justified in making these strictures if I did not sincerely believe that there was, and has been, an alternative. There is an alternative propounded by my right honourable friend, the Leader of my party, which has been most carefully costed and most carefully tested against the Treasury model. It would provide a moderate stimulus and it has been described in detail many times. It would aim to reduce unemployment by one million in two years, at a cost in terms of net borrowing of three and half billion. But even with that additional net borrowing, the public sector borrowing requirement—what the nation needs to borrow—would still be low by international standards; that is, some 4 per cent. of gross domestic product. The proposals to which I refer include several measures to keep prices down.

The Government may say—and indeed the noble Lord opposite very nearly did say it—that anybody can make an assertion of this kind. As I will demonstrate, this is no empty assertion, my assertion of an adequate alternative. It is no empty assertion and I am not talking about anybody: nor, if I may quote for one moment, is it a case of "imperator nisi imperasset". It is a carefully compiled set of proposals put forward by the man who is generally known as the best Chancellor of the Exchequer we have had since the war. It is not a dash into the unknown. When he was Chancellor of the Exchequer, inflation was below 5 per cent., unemployment was one-sixth of the present figure; economic growth was six times as fast as it is at present; we had no oil surplus to back us and we were restricted in what we could do by very limited gold and dollar reserves. This was achieved by a moderate stimulation—what the motion rightly calls "invigoration"—of the economy, of a kind similar to the one which I have proposed.

Did that have a dreadful impact on our borrowing? Did it lead to inflation? I have given your Lordships the inflation figure and, as to borrowing, in our last year, far from borrowing, we repaid debt to the extent of half a billion pounds. So much for the allegation that any alternative would be bound to lead to massive inflation and an unbearable public sector borrowing requirement. There is clearly an alternative, based on experience and validated by achievement. In ignoring that experience and its consequences over four years, the Government have persisted in their blinkered prosecution of policies which do virtually nothing to promote employment and output, and they deserve full condemnation in the terms of this motion.

4.8 p.m.

Lord Bruce of Donington

My Lords, the House will be most indebted to my noble friend Lord Wells-Pestell for having introduced this Motion this afternoon. I am bound to say that I thought he moved it, if I may relieve his mind, in terms of excessive moderation, and the speech which fell from the lips of the noble Lord, Lord Diamond, fully reinforced the conclusions at which my noble friend arrived. We had a very interesting speech from the noble Lord, Lord Cockfield, as indeed we always do. The noble Lord is always very sure of himself; in fact, if one goes back through his speeches over the last five years one sees how little they vary in tone or in content, but they do express his ineffable confidence in his own implacable wisdom. I shall refer to the noble Lord's speech in greater detail as I proceed, but initially I should like to take him up on one point.

According to the noble Lord, all our troubles really stem from what he termed "the economic blizzard". He claims credit, his Government claim credit, for the reduction in the rate of inflation from a 10.3 per cent. increase on an annual basis when they took office to something like 4.5 per cent., or whatever it is now. He claims full credit for that, albeit each point of decline has been accompanied by an increase of 400,000 unemployed. And, of course, carrying the matter to its logical conclusion, if the noble Lord were prepared to have the registered unemployed at nearly 5 million, inflation could be zero. But the noble Lord claims credit for that.

All the rest that has happened to the economy—the decimation of industry, and the mass bankruptcies and closures all over the country, some of them of firms that have adhered firmly to the noble Lord's homilies—is an act of God, and the Government have nothing to do with it. All that is good has happened because of a far-seeing and all-wise Government: everything had that has happened—the various social evils to which my noble friend Lord Wells-Pestell referred, and the various other industrial factors to which I have referred—is nothing to do with the Government, according to the noble Lord, Lord Cockfield. Those matters are merely acts of God; they arise from what he terms the economic blizzard. The noble Lord, Lord Diamond, has exposed that myth very well indeed, and I would fain add to it a little.

There is, of course, no such thing as an economic blizzard. The economic affairs of the free world are the result of the activities and decisions made by the millions of people everywhere, in whom the noble Lord believes so firmly. This is what has happened. What has happened, in terms of the economies of the west, is precisely the result of the interplay of free enterprise forces and the actions of individuals, in whom the noble Lord has such touching faith.

But, of course, we in this country have done far worse than most, as indeed the figures show. Since May, 1979, including the production of oil (which is a bonus that very few other countries have had) our output has gone down by 5 per cent., while that of the USA has gone down by 0.1 per cent. In terms of industrial production, we have gone down by 11.9 per cent., while the USA has gone down by 7 per cent. As regards unemployment, our rate is 12.4 per cent.; next is Italy, with 9.1 per cent.; then come the Netherlands, with 8.9 per cent.; and then the USA, with 8.6 per cent. In terms of performance, we appear to be at the bottom of the league tables. We are not even in division four on our way up to the top of division one. It is high time, putting the matter in sporting terms, that we took a hard look at the management—and, indeed, at some of the active players operating under the management.

It is quite clear that the world recession itself has been powerfully aided by the policies pursued in the two countries, the United Kingdom and the United States, which have followed almost identical deflationary policies. These are the people who themselves started the world recession from which the noble Lord wishes to dissociate himself. There can be no mistake about that. Is it a coincidence that the performance of the countries which have followed these repressive, high interest rate and deflationary policies should have led the world into what the noble Lord has referred to as an economic blizzard? So let us lay that one to begin with.

It must, of course, be obvious to all noble Lords—and I trust that it is obvious to noble Lords in all parts of the House—that a situation in which there will be, more or less indefinitely into the future. 4 million or 5 million unemployed is a quite intolerable one from the point of view of a parliamentary democracy. I shall not expatiate upon the ills that arise from that—the stress on individual families, the extra strain on the social services, which is far in excess of any actual increases in money value which the Government have put into them, and, aside from all that, the extra needs that they have had to meet.

A free society, a free democracy, cannot exist and maintain its social cohesion under conditions where there are between 4 million and 5 million people out of work indefinitely with no prospects and with no future, and where the burdens of society are distributed so unfairly that, over the last four years, some 40 per cent. of the population, probably, have borne the total cost in this country of the depression itself. Surely, our attention has to be directed towards trying to solve this problem within a free democracy.

How can we obtain the conditions—and it will take some time—in which there is near full employment (which is unemployment down to about 3 per cent. of the population) and still keep our essential personal freedoms intact? This was the ideal that emerged, quite naturally, after the last great war. It was unthinkable that policies other than those involving full employment should be followed. Successive Governments followed such policies. Whether it was the first Labour Government under the then Mr. Attlee or whether it was one of the succeeding Governments, which were, alternately Conservative-led or Labour-led, the objective, and the freely appreciated and shared objective, was always the same—to try to achieve the highest possible standard of life with near full employment (which was put at some 3 per cent. unemployed) and, at the same time, to try to preserve the liberties for which the whole nation, and not merely the rich, fought in the course of the war itself.

We have had some experience of the complete reversal of those policies under the Government headed by Mrs. Thatcher, and it is inevitable that some thought has been given to alternative means. The terms of the Motion this afternoon call upon Her Majesty's Government, to initiate urgently steps to invigorate the economy and alleviate the hardships so widely suffered". The Motion is in very moderate terms. It calls for steps to be taken to vitalise the economy.

There are many of us who would wish to see quick steps taken towards a wider sharing in this country of the world's goods; a wider participation of the population as a whole in the country's economic future, with the ultimate aim of seeing man's promotion of the interests of society as a whole determining what he can get out of it, rather than battling competitively against his fellows to get a living. But this is a philosophical point: that man should be able to identify himself with society and see his welfare as emanating from the community to which he contributes.

This point is expressed more in terms of political extremes. The Motion is nothing of the kind. Essentially it postulates a Keynesian solution to our present problems. Various programmes have been put forward, including those of the noble Lord, Lord Diamond, the Trades Union Congress and the Labour Party, All have several features in common. They postulate that there should be increased public expenditure over a wide field, including investment in the country's infrastructure—roads, sewers and all the rest—and that there should be substantial investment in the various social services, all as a means of providing more consuming power for the public at large in order to help to revive our own domestic industries, to postulate investment in various state industries and to encourage it in private industries so that the wheels of industry may begin to turn again. These are not extreme policies. They have been put forward and discussed at length in the press.

The immediate response of the Government to proposals of this kind is to say derisively, "They have all been tried and they have failed". That is not so. The policies have been tried in part. Those who associate Keynes with the failure of certain aspects of his policy which have been carried out over the past few years forget that Keynes always stipulated that if his policies—essentially they are the same policies as were followed by President Roosevelt in the United States in the New Deal, which lifted misery from millions—were to be successful, where private investment failed the state must step in and invest. The noble Lord perhaps forgets that Keynes made this an integral part of his policy.

This has been tried only on a very small scale indeed. Where it has been tried it has been the party opposite and the financial and industrial interests which support and subscribe to that party which have opposed this particular portion of the Keynes doctrine—that in order to prevent inflation arising from deficit financing and as part of the package the state must step in and invest. Investment in private manufacturing industry in this country over the past 20 years has been running at 30 per cent below that in France, 40 per cent. below that in Germany and 60 per cent. below that in Japan. Therein lie many of our difficulties.

That brings me to a proposition which we all have to face: that in free democracies, retaining maximum personal freedom, there are two massive uncertainties which have to be taken into account in any endeavour to achieve overall planning on Keynesian lines. No computer can predict these two massive uncertainties, no matter what Government model there may be, no matter what university model there may be.

The first massive uncertainty is whether capital will provide the necessary investment. As the noble Lord has said many times, this is a matter of confidence. How do you feed confidence into a computer to find out whether, for any given plan or any given feed-in, there is going to be, on the basis of free choice, adequate investment? The second massive uncertainty is whether labour will take advantage of its organised strength in order to make extortionate wage claims. We on these Benches admit that this is a massive uncertainty, just as much as we admit the first. There is, therefore, no certainty.

The Conservative Party faces this dilemma in characteristic fashion. They acknowledge that the first factor—private investment—they can do nothing about whatsoever, so they do not bother. They ignore the uncertainty of private investment in industry and all the consequences which may arise from its shortfall. They offer incentives and inducements and hope that this will be successful. They know perfectly well what Mr. Heath found out and stated in August 1972. The noble Lord will remember it well. Speaking to the Institute of Directors Mr. Heath said, "We have given you every tax incentive that you need, and still you won't invest".

So the Conservative Party and the noble Lord opposite take for granted that private investment in industry will continue to be a matter of personal caprice and personal confidence. And they are content to leave it at that. At the same time they are endeavouring to add to it further by taking over the profitable portions of state enterprises so that investment decisions in those fields shall in future be a matter of private whim and private confidence. And they are content to leave it at that.

Not so when it comes to the second uncertain factor: whether labour will take advantage of its organised strength to make extortionate wage claims. The Tory Party are dealing with this possibility. They dare not and do not want to deal with the capital uncertainty but they are prepared to deal with the labour uncertainty. The way they are dealing with it is by deliberately creating unemployment in order to weaken the power of the trade unions and to make them as unpopular as they are themselves. They are also seeking to impose their own wages policy by the deliberate creation of unemployment.

It is perhaps the occasional slip of the tongue that reveals the true intention of Ministers. In an exchange which took place in the other place earlier this month, Mrs. Thatcher referred to the vexed question of the steel industry. This is what the Daily Telegraph reported her as saying: Mrs. Thatcher said in the Commons last Thursday that Mr. MacGregor had done a superlative job at the head of the state-owned steel industry. He has reduced the workforce by nearly a half, to 85,000, during his period of office". That is now reckoned by the Tory Party to be an achievement. Achievements are no longer to be measured by industrialists in terms of the employment they create. Their success is now to be measured by the employment that they destroy.

Lord Saint Oswald

My Lords, I do not think that these remarks should go unanswered, particularly from these Benches, when they are delivered by a noble Lord who might count as my friend. He cannot in fact say that he sincerely believes that the policy of this Government is to create unemployment. Unemployment may be one of the results of their policies but to say that it is the deliberate policy of this Government the noble Lord, Lord Bruce of Donington, knows to be untrue, and he should be reminded of the fact.

Lord Bruce of Donington

Well, my Lords, I was just quoting the Prime Minister. I will give a further quotation too. I will give a quotation from today's issue of The Times—a remark by Mr. Lamont: Mr. Lamont repeated the Government's view that the major sacrifices made by the steel industry in recent years had not been matched by other EEC countries. 'The Government is not prepared to see the sacrifices squandered by the failure of industries in other member states to restructure and cut capacity.' ". Yes, my Lords, and what has Mr. MacGregor been doing since his appointment in order to make representations and to insist that the British steel industry should make only those cuts that are proportionate to the EEC? The Government deliberately neglected to make representations at the EEC to get a fair distribution of the restructuring of steel in Europe.

Lord Trefgarne

Order!

Lord Bruce of Donington

Order? Indeed, order. I did not interrupt the noble Lord, Lord Cockfield, during the course of his speech, in spite of the many provocative remarks that he made. I trust that he will allow me to make my own speech, but I will allow the noble Lord to speak.

Lord Cockfield

My Lords, I am most grateful to the noble Lord for his courtesy, which never fails him. He was claiming that we did not support the interests of Britain in the European Community. That statement simply is not true. We have fought very hard for Britain's interests inside the Community. I do not want to go back over the history of the steel industry but one of the problems that arose—and the noble Lord must be aware of it—was that over-capacity existed for a long time and we were much too slow in dealing with it. When we did deal with over-capacity it meant that we were getting ahead of the rest of Europe in bringing our industry back onto a proper economic basis. The only point of the comment that the noble Lord has quoted from a remark made by my honourable friend Mr. Lamont is to illustrate that, having taken those measures, we were actively defending the interests of this country in the European Community.

Lord Bruce of Donington

No, my Lords, quite the reverse is true. If the noble Lord thinks that he can get away with that one then he had better re-examine what he has said, because of course it is not true in the slightest. All that happened was that, willingly and voluntarily, we made the cuts before anybody else did. That is exactly what happened, and the noble Lord knows it.

If I may continue, the rational solution to our problems—and it is one that need not raise any party hackles at all and ought to be agreeable to noble Lords in all parts of the House and, indeed, to people of all parties in the United Kingdom—is, first, where necessary to make deliberate state investment in this country in manufacturing industry; deliberate investment to make up for the failure, whether due to lack of confidence or whatever it may be, by the private investor. This can be done either alone or in collaboration with private industry. The next step should be a characteristic of any national policy. It is that the Government of the day should seek cooperation with trade unions and with the people at large and endeavour to relate wages to output and productivity, conditional upon the social wage being restored.

When trade unions negotiate wage settlements on behalf of their members, they do not merely take into account the money wages that are received in respect of the jobs which they perform; they also take into account the social wage in terms of educational facilities provided for children, in terms of the health service, and in terms of the full range of other services which our working population enjoys. Part of any collaboration with the trade unions and the people at large must take into account the level of the social services provided by the state.

I am quite sure that, although these are the imponderables which a free society must solve, they can be solved with co-operation between those who provide capital and those who use capital. This can be done. It can only be done in a different social climate. It can only be done with a drastic change in the media's presentation of the total problem. But it can be done, and it can be done with goodwill. One thing is certain, and that is that the problem of providing full employment within a free society cannot be dealt with on the basis of the antagonism which exists now in this country—which has been divided by this Government on a scale that has not existed since the 1930s. There has to be a rapprochement between the two.

I am well aware that this will immediately give rise to cries that the whole thing is quite impossible. We shall undoubtedly have statements or forecasts. Indeed, we have had many from the Conservative Party and its leaders, who have forecast that if we try a solution on Keynesian lines, even though a solution on Keynesian lines has never been attempted under conditions where we are independent for our oil supplies, it will produce hyper-inflation. That is their forecast. They have made it many times. They have pooh-poohed the whole idea of any kind of new deal economics, let alone socialist economics as they see them.

What about these forecasters? When the Government make a forecast of disaster on the basis of other people's plans, surely that should be subject to the Government's capability for forecasting. If the Government are incapable of forecasting, then their judgment of any plans put forward by those of us on this side of the House is worthless. Let us see what the Government have forecast in the past, and then we can form some judgment as to the value of the Government's forecast now.

On 28th November 1980, with unemployment having increased by 711,000 to 2,163,000 the Prime Minister announced very buoyantly: We are reaching the trough of the recession.". On 4th January 1981, with unemployment another 250,000 on top, and with industrial manufacturing production having declined by 15 per cent., the Prime Minister said as a prediction and a happy handout for the new year: 1981 will be the year when results begin to show". A year later, on 9th March 1982, with unemployment up a further 400,000 to a figure of 2,821,000, and with industrial production still 15 per cent. down, the Chancellor of the Exchequer said: The recovery that we foresaw and worked for is now taking place". On 15th May the theme was referred to by the Chief Secretary to the Treasury, who said: The evidence of the start of a recovery is all about us and not even the most blinkered pessimist could fail to see it". By that time manufacturing production had dropped by 16 per cent. In December unemployment reached 3,090,000 and has been recently forecast for 1983, by the Chancellor of the Exchequer himself, at 3,300,000.

That is what those forecasts are worth. Those forecasts were not made by individuals. They were forecasts made by people with all the administration of government behind them, and with all the facilities of government to make forecasts. Even their forecast of the money supply was way out. In 1980–81 it was forecast to be 9 per cent.—in fact, it was 19 per cent. In 1981–82 it was forecast to be 8 per cent. and turned out at 10 per cent. Well, what value have their forecast judgments now on the quite serious policies that have been put forward not only by the TUC and the Labour Party but also by the Liberal/Social Democrat Alliance? Is it not far better that they should pay serious regard to these matters rather than dismiss them with an arrogance which ill accords with their past performance?

We on these Benches believe that there is a way. We believe that the plans that have been put forward after very careful research, and which have been so arrogantly dismissed, do, however much they may perhaps have to be modified in part, constitute a way in which this country can progressively regain its production capacity, can increase its output and can increase its employment. We believe that they should be taken seriously and we believe that they should be done.

One thing that the country will not sustain and will not continue to support for long is a circumstance in which millions of our countrymen, including perhaps a million school-leavers, cannot see any future for themselves at all. I believe it was Galsworthy who said, in The Forsyte Saga: He that cannot plan for the future has no future". For millions in our country at the moment there is no means of planning for the future. There is a blight on families. We believe that with co-operation, with careful thinking and, indeed, with a rethink, and with a new spirit of trying to make the nation work together instead of dividing it so arrogantly, it can be done. We hope that your Lordships will support this Motion.

Viscount Massereene and Ferrard

My Lords, before the noble Lord sits down may I remind him that when he was speaking about the 80,000-odd steel workers who have been made redundant he forgot to mention the redundancy payments, many of them rising as high as £20,000 per man? Many of the redundancies were voluntary. I know one or two steel workers who have bought extremely nice villas in Spain on the strength of that. I am not complaining, but it was unfair of the noble Lord not to mention that.

Lord Bruce of Donington

My Lords, I am obliged to the noble Viscount. It is true that there were voluntary redundancies and it is quite true that for a large number of people the real uncertainties, the evil and immediate anxieties of unemployment, are alleviated by redundancy payments. Of that there can be no doubt. I am talking about those millions of people who have not yet even entered into a two-year period after which redundancy payments become available, for whom there is no relief and for whom there is no hope. But I am very glad to accept the noble Viscount's correction on that point.

4.45 p.m.

Lord Pennock

My Lords, in making this first contribution to an economic debate I rise to my feet with some diffidence, and this diffidence is deepened by the heightened indignation and passion which has been engendered in the debate so far. I recall in a previous incarnation, as a spokesman for the CBI, being invited to present an economic analysis to the union-sponsored Members who dwell in another place. At the end of a short peroration I concluded by recognising that some of my opinions were unlikely to be acceptable, and I asked (I now recall somewhat ruefully) whether there were any questions. A right honourable Member from north of the Border stood up and said, "Before we get to the questions, do you mind if I make a comment?" I leaned forward eagerly, awaiting a constructive dialogue. He continued, "I have seen you a few times on the box, and I have always wanted to throw the ruddy ashtray at you. Having listened to you for the last 10 or 15 minutes, I have nae changed my mind."

Undaunted by this experience, I hope for the next 10 or 15 minutes to present to noble Lords three main issues which are more concerned with the economic invigoration side of the debate than with the alleviation of social hardship, for the simple reason that as a businessman I feel genuinely that I am more qualified to make a contribution to the debate on the former issue although I respect the sincerity—indeed, I am moved by it—of the indignation at the social hardship shown by Members across the Chamber.

My three main issues are as follows. First, that the causes of our present economic malaise result not so much from the specific action of any one national Government, or steps taken internally by any one country. The causes are international in their origin, and are certainly widespread and international in their impact, and it is reasonable to deduce that solutions will only follow from an upward direction in international trends. Secondly, I seek to indicate that there are now positive signs of some upward direction in these international trends, and as a businessman I hope to illustrate that if this is the case the United Kingdom is well poised to benefit from them.

Finally, the invigoration of our economy and the alleviation of the hardship which the noble Lord, Lord Wells-Pestell, so rightly and earnestly seeks will not come from the pressures and actions of Governments of any persuasion, but will come primarily from the introduction of a process of improvement—a word which, regrettably, has not yet entered into our debate—in our competitiveness in the world situation. In an economy where we export approximately one-third of all we produce and, excluding oil, import almost as much as we export, it is only by the combined comprehension, resolution and action of management and employees within the business sector itself that such competitiveness will be achieved.

So, first, I refer to the widespread and international nature of our current economic situation. Just 12 months ago, as chairman of an international company earning almost 70 per cent. of its profits outside the United Kingdom, I stated at an annual general meeting that the strength of our international company lay in the width of its base and the international nature of its operations. I went on to describe how the United Kingdom may be in recession but we benefited from the economic improvement in Australia; the United States' growth may be flattened but there still remains strength in the Middle East; and if Canada suffers from adverse United States influence there is recovery in Malaysia, Indonesia and the Pacific zone. I can only report a year later, in retrospect, that I was wrong in my contention, in my forecast and in my judgment, because 1982 has been the first year in the post-war world where in every one of those countries, with the possible exception of Malaysia, they have experienced economic stagnation—even negative growth—and a wide-based economic depression.

If we turn to the more recent reports of the OECD, we find that in 1982 there was an overall decline in growth of about 0.5 per cent., which would have been considerably more but for the Japanese plus performance of 2½ per cent. In Germany, previously the proud protagonist of the economic miracle, there was a fall of 1.25 per cent.; in the United States a fall of 1.75 per cent.; and in Canada a fall of no less than 5 per cent. Even, as I stated, in Japan, accustomed to an annual growth of 6 or 7 per cent., there was a fall to 2.5 per cent. In the United Kingdom, with positively a growth estimated variously between 0.5 per cent. and 1.5 per cent., we seem in the last year to have stood up to the world recession not too badly, if not too well.

If we turn to hardship and unemployment, the picture again is a universal one. If our unemployment exceeds 3 million, there is a faster rising rate of unemployment in Germany today which passed 2½ million last week. For the United States, as noble Lords know, the figure is 12 million, and for France, in spite of reinvigoration from its new Government, the figure is also in excess of 2 million. In answering the charges of the noble Lord, Lord Diamond, on how much of this is our own responsibility, I, too, would quote the judgment of the independent OECD authority with no axe to grind. It stated that the reason for our higher rate of unemployment was that we were first into the recession, and that this was because we paid ourselves, as I well know, more and more wages for less and less production in the second half of the 1970s and rendered ourselves uncompetitive in the process. My first overall contention, my Lords, is that this recession is a world-wide one and recovery will follow only from an upward turn in growth, and not merely from the actions of any one country.

There are fortunately some tangible signs, albeit of an indicative rather than a strong positive nature, which suggest that this upward turn is now beginning to take place. In the United States, whose influence in the free world economy, for better or for worse, still predominates, there was before Christmas a significant growth in housing starts and in the production and sale of automobiles, which has been followed since Christmas into consumer durables; and in January there was an increase in overall industrial production of 1 per cent., while employment fell for the first time since 1981.

One of the problems with many Governments in our democratic society is that they promise a great deal in order to win elections, spend the early months of their office fulfilling to a greater or lesser degree these electoral promises, and then spend the rest of their time in office seeking to balance the books in order to pay for them. The United States is no exception. If the budget deficit, which has risen from $50 billion to approaching $200 billion in just over one year, is not contained and reduced, this recovery may be based on false foundations; but if the deficit can be reduced and interest rates follow down, there are strong reasons to believe that the recovery can be maintained. In Germany also, after a year of Teutonic self-flagellation and discontent, there has been a surge of activity and optimism, so that between December and January industrial production rose by no less than 4 per cent.

Within the United Kingdom itself, as the noble Lord, Lord Cockfield, has already said, there are positive indicators, and now we seek hungrily for positive improvement in performance. In my own company United Kingdom business remains currently flat, but I am happy to report that in the last month order books have significantly strengthened. In 1982 our exports, as has been mentioned, albeit with reduced or vanished margins, held up remarkably well, and accordingly in business we are already benefiting from the lower exchange rates.

There are those of us who believe that the quadrupling of oil prices in 1972 caused world growth rates in the 1970s of perhaps half of those in the 1960s and that a further trebling of oil prices in 1979–80 has already had similar effects in the 1980s. It is reasonable to argue that, provided that the fall is not too violent, cheaper oil prices will widen margins and create more confidence and profit where at present it hardly exists, and from that profit will come further investment and growth. But violence upwards or downward in economic trends, like violence in civil affairs, promotes reaction, and if pressed too far becomes unmanageable. It is crucial, therefore, that the fall in oil prices is kept in proportion and under some form of international control.

The CBI's industrial survey has been referred to. It is a regular report of 2,000 carefully selected companies who are asked specific questions month by month. Often its report has been maligned for its refusal to swerve from the facts as it finds them, but always it has retained its integrity. I am happy to report that in the last month it has shown export and output positive upward trends which are the best since March a year ago. So the portents and the omens are good, if we can now look forward to the follow-through in performance.

If there is a world upturn, business believes that the United Kingdom is well poised to benefit, and we also believe that Government can take credit for creating this condition: price inflation around 5 per cent., but please note still not less than our German and United States competitors and still about double that of Japan; interest rates, which have fallen significantly but which in real terms, expressed as the difference between the bank rate that we pay and the rate of inflation, still have some long way to go; a PSBR which in contrast to the United States deficit is now well under control; and, most important of all, a recognition of economic reality which has been seen in the majority of wage settlements in the public and private sector of late and which we hope will be evinced in the public industrial sector shortly—in the next 24 hours.

I would not accept the contention of the noble Lord, Lord Diamond, that this is entirely based on a fear of unemployment. I genuinely believe from personal experience that great progress has been made in the last three years in acquainting employees and managers at every level with the economic realities which face us and by their learning through economic discernment, and not solely through fear, the ways and means whereby we solve these problems. I believe that in the final issue economic recovery now will not arise from further Government action, either in the palliative field or even in setting further parameters for improved economic performance. I believe that this result can come only from improved competitiveness. It is only from improved competitiveness that we shall get growth, and it is only from growth that the results which we all seek in a fall of unemployment can follow.

There have been three times in our post-war history—1952 to 1956, 1959 to 1962 and 1963 to 1966—when in this country we had a GDP growth of 3 per cent. and we had a wage inflation of approximately 3 per cent., and on each occasion this period lasted for three years. Each time, I am happy to report, a million new jobs were created.

When we turn to the familiar quoted factors affecting competitiveness and therefore growth, I find an examination of my own company's finances to be interesting. Interest rates last year ran at £9 million, when we paid an average interest rate of 10 per cent. to 11 per cent. If they fall, therefore, at a rate of 1 per cent. or 2 per cent. the effect on our costs, and therefore our competitiveness, is £1 million or £2 million. We pay £4.5 million in local rates, so that the oft-pleaded-for industrial derating of 15 per cent. would save us about £0.6 million. The national insurance surcharge currently cost us £3 million, so the halving of that would result in a saving of half that figure.

But when we move to wages and salaries we come into another league. Our wage and salary bill is £240 million and our comparatively moderate wage settlement last year cost us no less than £18 million. A halving of that figure this year would save £9 million, which is twice all the other possible savings put together, and therefore twice the contribution to competitiveness which we are seeking.

Similarly, in the area of productivity there have been notable increases and improvements, but rarely at a rate which exceeds the improvements of our competitors. Here again, I believe that the result is not in the hands of government but is now in the hands of management being able to put forward the realities of economic competitiveness, and employees—as I know they are doing—beginning to comprehend them.

And so, my Lords, may I conclude as I began? Our problems are worldwide in their origins, in their impact and, I believe, in their solution. There are signs of worldwide improvement from which we are well poised to benefit. But the single most crucial factor in the improvement of performance lies in an improvement in our competitiveness. The most important factors affecting our competitiveness are moderate wage settlements and improved productivity, and perhaps I may safely add that there are clear signs that we are now beginning to achieve them.

5.2 p.m.

Baroness Ewart-Biggs

I should like to thank my noble friend Lord Wells-Pestell very much indeed for putting a Motion before the House which gives rise to such very wide-ranging discussions. I, for one, will not be examining the Government's economic policy but will be examining another aspect of the Motion— namely, how a certain section of the community is faring as a consequence of these policies.

So, without in any way wishing to bore your Lordships with a lecture about women's rights, I should like to point out some of the problems that the working mother is going through at present. I hope that that news will not bring on the departure of all of your Lordships, because it may well be a subject which is not discussed very often in your Lordships' House. I should like to point out that some of the policies at present used seem to be very seriously discriminating against her and deliberately trying to keep her out of the labour force in which she feels she has a rightful place.

First, it must be recognised that the participation of the wife and mother in the labour force has increased immeasurably in recent years. We have now reached the point where 26 per cent. of the entire labour force are married women, whereas only 14 per cent. of the working population are single women. This, of course, means that married women outnumber the unmarried women by nearly two to one. This shows a very great change in recent years.

We all know that recently there has been a lot of talk about the family—a lot of talk about what the role of the wife and mother should be in that family. She has been reminded of certain Victorian values and told in very categorical terms that her place has always been, and should continue to be, in the home. And in support of this injunction many Government policies are designed to reinforce the financial disincentive for her to go out and work.

Putting the actual rights and wrongs of this to one side, my contention is that this plea to working mothers to return to the sink has come too late, and the statistics which I have just given seem really to prove that. There seems little point in telling the married woman that there is no place for her in the labour market when it is quite evident that steadily and surely over recent years she has become an integral part of that labour force. Efforts to oust her from that position which she has, after all, fought for so hard and steadily over recent years, could only lead to great embitterment on her part and great detriment to the family as a whole. After all, it would seem entirely appropriate that married women should make a wider contribution to the running of society while, at the same time, in true and better partnership with her husband, bringing up her children and running the home.

It should be recognised that, through a variety of changes in social trends and living patterns, we have now reached the point where three very distinct categories of working mother have evolved. First, there is the mother in a two-parent family who goes out to work to supplement the family income—income which in many cases has been seriously eroded by the present economic policies. It is a fact, proved by a recently published report on the family, that without the earnings of these mothers there would be four times as many children living in poverty today. It is, indeed, thought that there are more than two million young who live in families struggling on incomes around or below the official breadline. If we need an example of the return to Victorian standards, then I fear that this would be a very real illustration.

The second category of working mother is the single parent mother who is the sole breadwinner for the family. The number of families now headed by a lone mother is approaching the million mark, and they represent the lowest-income families in the country.

Finally, the third type of working mother is the woman who, having benefited from fairer education opportunities for girls, has achieved a profession which she has pursued, either concurrently with her marriage or intermittently while having her children. There is no doubt that girls are really running more in parallel with boys as far as education opportunities go. I was reading in my paper the other day that last year there were actually more girls than boys sitting for A-levels. The year before there were just over 47,000 men admitted to university against just under 32,000 girls—meaning that 32,000 qualified young women with a conviction that they have earned a place in the labour market are pouring out from our universities (their only disadvantage being that a majority among them will have graduated with arts rather than science degrees and, therefore, will be more vulnerable to the recession in the employment field). There surely can be no doubt that we are now faced with the situation where there is an ever-increasing number of mothers who both have the financial need to work and feel that they have an equal claim to job opportunities.

Let me outline briefly some of the difficulties which confront these working mothers and how Government policies, instead of being designed to turn them out of the labour market, could actually accommodate them there to the benefit both of themselves and their surrounding families. First and foremost, it is of the greatest importance for the Government to take the lead in trying to change those firmly held attitudes about where the place of women should be. There is still the firmly held concept of the stereotype family where the man goes out to work and the woman stays in doing work at home. When these roles are either reversed or intermingled there are great howls of protest from many, many voices. Surely it should be accepted that this old family structure hardly exists any more, and efforts to restore it are simply trying to turn the clock back.

Indeed, other European countries are well ahead of us in their efforts to change attitudes and laws to move some of the weight of child-rearing from mothers to fathers. Some are moving towards the concept of parental leave being extended equally to fathers and mothers, but here in Britain it seems clear that any such proposals are still light years away from the thinking of the present British Government. So that is a question of attitudes.

But, from the point of view of Government policies mainly affecting working mothers, all the categories of women which I have enumerated suffer from the following. They suffer from shortage of child-care facilities, from discrimination in job opportunities, from discrimination in tax and maintenance policies, and from constituting three-quarters of the lowest paid in the country. Indeed, it would be true to say that in contrast to the expanding job opportunities of the 1960s and the 1970s and the protection provided for women by Labour's Equal Pay, Sex Discrimination and Employment Protection Acts, present policies have made the lives of women more and more difficult. Again, it cannot be denied that the shape of their working lives and their employment opportunities are very much dictated by the fact that they still bear the major responsibility for the home, the care of the children and infirm and elderly dependants, all of which are becoming more onerous for them.

This, indeed, drives 70 per cent. of mothers to take part-time work in low grade, low paid, relatively insecure jobs in catering, cleaning, clerical, health and welfare employment—indeed, the jobs which men, with their more traditional attitudes to jobs, would not take. Working mothers are, therefore, often the very first to lose their jobs as, with their broken career patterns, they are the most vulnerable to redundancy on a "last in, first out" basis. Indeed, since May 1979 female unemployment has, according to official statistics, increased by over half a million to 900,000. But even that disastrous figure understates the problem which is generally felt. The true figure is thought to be more like two million, because the Government's new method of counting, introduced to disguise the real level of unemployment, does not include the non-claimant unemployed, most of whom are married women. The new work availability test, which demands details of child-caring arrangements from people seeking jobs, will make it more difficult for mothers to claim unemployment benefit and to register on the unemployment lists.

Furthermore, the Employment Act 1980 attacked women's rights to paid maternity leave and to protection from dismissal because of pregnancy. The abolition of the Fair Wages Resolution, the weakening of wages council machinery, and the encouragement of cuts in real wages, will all lead to further pressure on the low paid woman.

Finally, perhaps I may put forward just one or two ideas as to methods of helping the working mother keep her hard-won place within the employment market and of replacing those at present devised to exclude her from that market. First, all working mothers share the same need for child-care facilities. Through cuts in local government expenditure, many child-care centres have indeed been closed. We would, of course, all like to see the budget for child-care centres increased again. But there is another way in which this situation could be improved. We could take advantage of the fall in school rolls which means that some of our school buildings are very much emptier now, and, in any case, schools are used less than any other public building. In this way, surely creches could be set up in unused parts of these schools. This could be organised under the management of parents and teachers, and would serve to employ some mothers and liberate others. I have always felt that the school is very central to the life of a community—as perhaps was the village church in bygone days—and that, therefore, it should attract more community activity, of which, to my mind, this is a very strong example.

Secondly, as I said, a very large proportion of mothers are forced, because of their household responsibilities, to take on part-time work. Yet the Government's job-splitting scheme does not apply to married women who are not registered for benefit. Indeed, does this not seem a monstrous injustice when it is so glaringly obvious that it is the working mother who would benefit easily the most from any such job-sharing or job-splitting scheme? Again, in relation to this, why have the Government not given any support to the EEC directive on part-time workers?

Lastly, there can be no doubt that parts of our tax and social security system discriminate against the working mother. If she is of a two-parent family, she suffers from the principle under which, for tax purposes, her income is considered to be her husband's, and there can be no doubt in this instance that she would benefit very much from the phased abolition of the married man's allowance and the introduction of a system of mandatory, independent taxation. Equally, there can be no doubt that the single parent working mother suffers from the system whereby she loses her supplementary benefit should she earn more than £12 a week. This would seem in direct conflict with the fact that, of all mothers, the single parent mother is most in need of both the therapeutic and economic effects of employment. Not only does she suffer the most from loneliness and anxiety, but her children are among the most deprived in the country. So, surely, in order to remove the disincentive to earn provided by supplementary benefit and in order to stabilise these family incomes a little, it should be recognised that all one-parent families have a special financial need and they should receive one-parent family benefits which are non-contributory, non-means tested and in line with those received by widowed mothers.

Therefore, those are just a few examples of how the working mother should be helped; a few ways of strengthening the principle that she does have a right to participate more widely in the life of the community, and not merely from behind the sink. It is all very well talking about Victorian values, but let us remember all the injustices which they contained. It is, indeed, a strange paradox that working women's opportunities are being so severely undermined at the time of the first ever Government to be led by a woman and, what is more, someone who is a working married woman herself. For it must be recognised that at no point does the Government's present record display any sympathy for the Prime Minister's peers and contemporaries who also happen to be working family women.

5.17 p.m.

Lord Harris of High Cross

My Lords, I join with others in congratulating the noble Lord, Lord Wells-Pestell, on his ingenious Motion which—and I think there would be general agreement on this—he introduced so appealingly. It is a Motion that is naturally drawn in order to maximise support by rolling up every conceivable economic and social discontent into a single catch-all effort, with some success so far in bringing the Social Democrats back, at any rate on this occasion, into the Labour lobby.

My brief contribution will reflect more on the central confusions which I think underlie the social policies of both the main parties. I largely agree with the broad approach on economic strategy of the noble Lord, Lord Cockfield, and even more enthusiastically do I agree with his eloquent declaration of the eventual intention to reduce personal taxation. If it comes to a vote, I would find it easier to support the first part of this Motion, the indictment, than the second half, the remedy, which does not amount to anything much more than going back to the bottle of Keynesian inflation, albeit with a small dose in the first place.

I certainly would not dispute that there is much to deplore in the effects of the Government's economic and social policies. In my view, a major tragedy is their uneven impact within the public sector itself. Every example of inadequate resources for deprived minorities can be matched by 10 cases of inefficient or frivolous squandering of public money in education, in health and, of course, in local government. Even more to be deplored is that the necessary squeeze on inflationary excess has borne disproportionately on private industry. There we have seen, as the noble Lord, Lord Pennock, hinted, hard-pressed managements making often heroic efforts to adapt to long-neglected reality, despite the appalling burden of high taxes and costs imposed from a relatively protected public sector.

Even where the Government have contained or cut spending they have not usually done so by improving management or reducing extravagance. The way of all bureaucracies is to preserve their own high-level jobs at the expense of the service delivered to the public. That would also be the temptation of private bureaucracies in large firms. The difference is that the only source of income for private enterprise is from satisfied customers, whereas the public bureaux can go on living well off the rising rates and taxes unrelated to their own performance.

We have had a depressing catalogue of grievances from the Opposition Benches, and we shall no doubt have more. It often seems like a rather dismal dirge unrelieved by any acknowledgement of the dramatic improvements in standards of living even over the last generation. And yet every case of genuine hardship raises a question both for the proponents of this Motion and for the Government. What must be wrong with a system of universal welfare that fails to satisfy so many when it is spending so much?

Among spendthrift politicians—which is a rather large party—I never tire of pointing out that the Government, in all their baffling manifestations, are now disposing of 54 per cent. of the national income, and more than half of that total goes on welfare. So I present your Lordships once again, I fear, with the basic economic truth that enough can never be spent on free services because demand will always rise to outstrip the available supply.

However, from the Cross-Benches I want to offer some comfort, if they need it, to hard-pressed Ministers. The failure of universal welfare to win Universal acclaim is no new phenomenon. Indeed, during the last Labour Government, when the noble Lord, Lord Wells-Pestell, was a conscientious Minister at the Department of Health and Social Security, he and his colleagues were constantly besieged by insatiable demands for more spending from what has recently been called the predatory poverty lobby. My informant in all this is Labour's Chief Secretary at the time, Mr. Joel Barnett, who shares with the noble Lord, Lord Bruce of Donington, the unusual distinction for a socialist of being a successful accountant, and therefore of being able to add up. Mr. Barnett's revealing memoir, Inside the Treasury, shows that the novel feature of socialism really amounts to a rejection of old fashioned arithmetic. He explains early in the book: The days had long passed when I naîvely thought it would be easy to persuade my colleagues that 2 plus 2 really did make 4. Problems with arithmetic are not confined to members of the Labour Party. But what I find difficult from the Opposition Benches is when what I believe sometimes amounts to a mathematical myopia gets elevated into a claim of moral superiority, with much boasting of compassion, which I have always regarded as a fine, noble virtue in the individual but as a politcal fraud in many cases where it is directed rather at the acquisition of votes. Against all those slings and arrows I offer a last inoculation from Mr. Joel Barnett's book. He wrote: … the question of priorities did not trouble my Cabinet colleagues … I suppose what really offended me was the implication that I was heartless, constantly saying 'No' to the most deserving cases, and that my critics were the only ones who cared. I know exactly how Mr. Barnett must have felt.

I think it was Pascal who said that the first requirement for moral conduct is to make the effort to think clearly. In that spirit I want to offer the following proposition. It is nothing more than the pressure on politicians to overspend which has been the root cause in so many countries of inflation and all its attendant economic, social and moral evils. Many families and old people would not now be reduced to dependence on social security if their savings and private insurance had not been shrunk by inflation to one-twentieth of their pre-war value. If that view has any truth, it is plainly unjust that the party most given to currency depreciation on the Opposition Benches should now devalue language by blaming the Government for all of the pains inevitably associated with bringing down rising prices. I must say that I think it is a bit of a cruel jest in this Motion to talk of invigorating the economy and alleviating hardships by methods which objective observers increasingly see as turning back from uncomfortable reality to relapse into the deceptive soft option of rising inflation.

On another occasion I hope that we might try to narrow the philosophic divide of which we have heard between the Labour diehards, who, I fear, are too complacent about the continual growth of government, and those of us who would prefer to enlarge voluntary action and to foster personal responsibility. But since all the speakers, whatever our differences, are well this side of the Iron Curtain, I would in conclusion ask your Lordships to ponder the question at which the noble Lord, Lord Cockfield, hinted. Why has the West, despite all its present disorders, elevated the human condition so far above that endured in Russia?

On the broadest view I would urge that the poor, the weak and the handicapped have benefited along with everyone else in this century more from the multiplication of capitalist production than from the marginal efforts of politicians to shuffle around part of the proceeds. Accordingly, I oppose this Motion for giving too little attention to the imperative of incentive and efficiency for future economic and social progress.

5.28 p.m.

Lord Beaumont of Whitley

My Lords, I should like to thank the noble Lord, Lord Wells-Pestell, for initiating this debate about poverty. I have a slight criticism of the way in which the debate has been framed. It is in fact some time, with the exception of one debate initiated by my noble friend Lord Banks, since we discussed what boils down to the fate of the poor. It is high time that we did it again. The noble Lord, Lord Wells-Pestell, in his introductory speech to this Motion concentrated very much on this side of the whole debate, but it is unfortunate that we are discussing at the same time all the efforts which are apparently needed to put the economy right in order to do this. That may seem a bit of a paradox, but I hope to defend my paradox in a moment or two.

We have been discussing what to do about the economy roughly once a quarter in your Lordships' House for the last three years. I am not in any way opposed to this. It is a good thing, because the more we discuss it the more a consensus will emerge as to what we ought to do, and maybe the likelier it is that we shall realise that none of the ideas we are at present peddling does much more than touch the fringe of the problem, and that we need something entirely different in kind.

Noble Lords can see how easy it is to get led on to that particular problem. If you start confusing the two problems—of poverty and the creation of riches—you will always muddle the issue, and I have sympathy with much of what the noble Lord, Lord Harris, said in this context. But I at least will be true to what I want to say and will show myself to be what I think he would consider to be the worst of the sentimental wets. At least I shall not muddle up the question of how we cope with dealing with the poor in our society with how our industry and prosperity should be restored.

The moment I say that, I am clear that a number of people—and not only on the Conservative and Cross-Benches—will say that the answer to poverty is, of course, riches, so we must therefore decide how society will get richer, and then poverty will disappear. We are afraid that if we start discussing poverty without discussing riches and wealth creation, people will leap in and say, "Just like the Left, discussing how to spend money they have not got".

Of course people will say that, and they always will, but they will be talking nonsense. The poor, we have it on good authority, are always with us, and it is true that if growing richer could have cured poverty, poverty would have vanished 80 years ago or 800 years ago. It is not society growing richer that cures poverty; it is the incorporation in society of what Professor Dahrendorf called, in a correctly repellent phrase, the underclass.

Poverty is comparative. This again is often sneered at by opponents of the Left in politics. They say, "You are always trying to have the best of both worlds. You are increasing riches. Look how much better off people are than they were 50 or 60 years ago. Look how much better off they are than 200 years ago". What really matters to human beings is not necessarily having enough food, firewood and clothes. It is not really how much money they have. It is whether they are incorporated in the society of their fellow human beings—whether they are part of society and can live life on equal terms with those fellow human beings.

When Professor Dahrendorf talked about the creation in our society of an underclass. I think he was talking about the creation of a stratum of our society which can—maybe not elegantly, but rightly—be compared with the underblanket on a bed. The underblanket, as noble Lords will know, is thin, threadbare and stained. It may be perfectly clean, but it is an old blanket which has been darned, is stained, is thin and is never willingly (or should I say consciously?) looked at by the person who makes the bed. And, if there are still households represented in this House where the man of the house does not share the chores and does not make the bed, he never sees it at all. I sometimes think one can make a comparison with the Government in this case. The Government, although led by a woman, is a rather masculine affair. I think it goes out to work and does not look at what is happening; it does not make its own bed, does not look at the underblanket and does not see the problem.

We like to forget about the underclass, but we must not do so. We must incorporate them in our society. They must truly be our neighbours, and we can make them that in a society which is rich or poor, and that is why I believe we should discuss these problems apart from the problem of making money. We must find answers about redistribution which will work even if we do not get richer; which will work even if we as a society get poorer. Of course, if we do not get richer, but get poorer, they will be far less attractive answers, but they will be necessary answers all the same if we are to look after the poor in our society; if we are to look after the underclass. To do that we must tackle the problems of poverty head on.

Fifteen years ago I initiated a debate in this House to call attention to the serious extent of poverty which still remained in Britain. It is seldom since then that that unmentionable seven-letter word has been in the title of a debate in your Lordships' House, and it has been avoided even today. Reading that debate again today, apart from two very good speeches—by the noble Lord, Lord Wells-Pestell, and Lord Mitchison—the impression I get is how easy we all thought it was then. In fact, we failed to do anything about it when we thought it was easy, and it sure is going to be a lot harder now.

Then, it seemed as if we only needed a modicum of goodwill. Today it will take a massive effort. But I think there are signs that we are waking up to the need for that effort. There are, of course, many who have never dozed. I see that in 1968, in my opening speech, I quoted Professors Townsend, Titmus and Abel-Smith. Some of that generation unfortunately are no longer with us, and it is sad that so few of them joined us in your Lordships' House. I do not know whether, like Tawney, they refused, or whether the sometimes tragically frivolous attitude of Sir Harold Wilson towards this House was to blame. Nevertheless, they were great pioneers. Today there is a new generation coming up, of whom Frank Field is probably the best known example, with his cohorts at the Child Poverty Action Group, headed by Ruth Lister.

On 5th July last year a new body was launched in this country called Church Action on Poverty, which I was delighted to hear being quoted by the noble Lord, Lord Wells-Pestell, in his opening speech. There are those who might think that Church Action on Poverty was a bit late in the day, but it has made up for its lateness by possessing a bite which, frankly, surprised me when I attended its first open conference at Swanwick in November. My generation in the ministry, both lay and ordained, threw up gadflies, but I suspect there is a new generation which more resemble bulldogs, or at least, and rather more appropriately, Jack Russell terriers.

Church Action on Poverty represents many Churches and Christian bodies. Roman Catholic, Church of England, Methodist, Baptist, United Reformed, Salvation Army and Quakers—all are represented. Its strength, I believe, lies in the fact that it is not, unlike other Church bodies, prepared to dodge political action. But, equally, it realises that the first task is not so much to arouse the politicians as to arouse the average Christian.

I should be misleading your Lordships if I led you to believe that a small group of determined people working, for the most part, in the inner cities presages a crusade from woody Wimbledon or even Hampstead Heath sweeping down upon Westminister, for the sad fact remains that the majority of the middle classes, smoothing down their comfortable duvets, prefer to ignore the fact of poverty and that there are 10 million people in this country living in poverty.

That figure of 10 million is virtually irrefutable. Frank Field, in the document which has already been quoted, refers to 9 million, but looking at his figures I think it is clear that he underestimates the numbers. There were 7.2 million people living on supplementary benefit last August, and there are at least that number now. There were 2.1 million people living below the supplementary benefit poverty line, but not claiming. That last figure was for 1979, but if, on the basis of only half the increase which we know has occurred, it is brought up to date with the other figures which I am quoting, it takes the total over 10 million; so that is 10 million people at supplementary benefit level or below. I hope that there is no one in this House who will tell me that that level is not an extreme poverty level. Short-term supplementary benefit is £8.50 less than the long-term benefit, and many are living on that.

How can 10 million people be so submerged that leafy Surrey is hardly aware of their existence? It is of course partly because we do not want to know; it is too uncomfortable a fact. It is partly due to the mechanisation of the dole queue. The only dole queue that most people have seen has been on the Tory election posters. It is partly because there is an underlying prosperity that means that in absolute terms even the poor are not as poor as they were. This is sometimes taken to mean that somehow it is not real poverty that we are dealing with. Of course, it is not poverty as it is known in parts of India and Africa—and thank God for that! Nonetheless, it is real poverty. It is a poverty which means—and I repeat—exclusion from society; not being able to afford to give your children Christmas presents; not being able to afford to feed and clothe your children adequately.

Another of the caches that hide poverty from us lies in that word "and". It is said, "Of course Mrs. Smith can afford to feed her children properly. Mrs. Jones does on the same income. It is just that Mrs. Smith is an inadequate manager". But at the same time we look at Mrs. Jones, and we say, "Of course she can afford to clothe her children. Look at Mrs. Smith's children; they are always well turned out. It is just that Mrs. Jones is a bad manager".

But different mothers have different strategies, and if the money just will not stretch, food goes short in one family and clothes go short in another. On the face of it there is always someone to whom one can point, and say, "They can cope in any given department". But the fact is—and I have not seen this denied by anyone who claims to have looked at the position—that the long-term situation of the poor in the welfare state means that there is not enough money at supplementary benefit level to cope. There is not enough to feed, clothe, house, warm, and keep in a decent way of life the children of the long-term unemployed.

Church Action on Poverty has chosen three short-term targets. The first is to raise child benefit to a more realistic figure. The current figure is £5.25, and it now costs about £8 a week to keep a child. I doubt whether any Government would raise the benefit overnight, but it must be done, and we can make a start on it in the forthcoming Budget. The second target is to increase benefits for the long-term unemployed, so that at the very least they are paid at the long-term rate of supplementary benefit. The third target is to press for a fairer system of housing finance and subsidy. Those are not excessive claims. Indeed, they are minima. The present Government do not believe in state intervention where it is not necessary. Perhaps that is good. But I think that there is a corollary here. If the Government are to cut intervention where it is unnecessary, they must interfere where it is necessary.

Quite clearly, there are one or two first priorities. One of them is the preservation of people in this country from real poverty. Another such priority is defence, which the Government do take seriously. I do not agree with their methods, but I acknowledge their seriousness as a Government. However, I do not think that the Government take at all seriously the preservation of people in this country from real poverty—the poverty that prevents adults from leading a full life and children from fulfilling their potential. The Government must take it seriously if they themselves are to be taken seriously. Whatever else they achieve, if they fail in this, they will have failed completely. There is no reason why they should fail. It needs only a moderate reordering of their priorities. Let them start now.

I ask the Government to make certain that, whether their industrial strategy succeeds or fails, they will turn their attention to the poor, so as to ensure that, whatever happens, it is not the poor who suffer, or that at least they suffer no more than do others. No longer must we have an underclass. It is a very unpleasant term, and it is a very unpleasant thing. Now above all we need—if I may use a Conservative phrase—not an underclass, but one nation.

5.45 p.m.

Baroness Gaitskell

My Lords, first, I must congratulate my noble friend Lord Wells-Pestell on the dignified way in which he moved his Motion, pressing the need to grapple with the growing number of unemployed. I should like to send copies of the speech of the noble Lord, Lord Cockfield, to every long-term unemployed man in this country and, if possible, I should like to see the replies that the noble Lord might receive.

We have not been specifically informed of the numbers of unemployed, but New Society carried out a survey which revealed that one in 16 households suffered from unemployment; that the real decline began during the first year of the Thatcher Government; and that unemployment in this country was worse than in most other major countries. But the survey also revealed—and I think that some of your Lordships will be more pleased with this—that only one quarter of the people consulted believed that Mrs. Thatcher was to blame, and nearly half of the total number of people in the sample thought that no one in particular was to blame.

All of that shows a considerable lack of knowledge about unemployment. Too many people still believe that unemployment is an act of God. Today people are becoming worried, and the press is alerted. Ironically, it is one of the Tory "wets", Sir Ian Gilmour, who has written a book in which he is Mrs. Thatcher's fiercest critic, and he is critical of the Tory philosophy, too. The book is perhaps too full of easy satire, the condemnation too widespread. In his book Sir Ian Gilmour presents a savage critique of the Prime Minister and her policies.

Most of the unemployed want jobs. There is some feeling in the country that the unemployed do not want to work. From politicians we receive responses of rhetoric, rather than of action. Time and again we slip back to the argument that unemployment is an act of God; that we can do nothing about it; because all countries suffer from it, like an infectious disease, we, too, have caught it.

Ironically, Sir Ian Gilmour is one of the Prime Minister's fiercest critics in the book that he has written, which is critical not only of our education. He tears up all of Mrs. Thatcher's arguments, and does not refrain from the most cruel satire. This is a revelation. He states that British economics, from defence to social security, is shrouded in an economic fog, which penetrates the brain. I do not quite know what that means, but perhaps some noble Lord might work it out. I have never read such a savage attack on a Prime Minister who was so revered when she took up office. It is all the more remarkable that the attack should come from one of the so-called "wet" members of her party. There has been much insensitivity and helplessness from many of our politicians. Most of the unemployed not only need jobs but want jobs; yet as I have said before, the response from political parties has been with rhetoric rather than with action and unemployment has been treated as an act of God.

5.50 p.m.

Baroness Lane-Fox

My Lords, the Motion in the name of the noble Lord, Lord Wells-Pestell, leaves very little doubt that the noble Lord regards the present scene as one shrouded in gloom, doom and despondency. He castigates the Government for failing to initiate the right steps to alleviate hardship. With all respect, I am very surprised that someone as accurate as the noble Lord should claim in his speech that none of us on this side of the House has had first-hand knowledge of the present-day conditions of ordinary people living in the community; that we only work in committees and do not know people as people. I am quite sure that I am not alone to prove that statement to be quite inaccurate. Alas! hardships, as we know, are ever present and always asking to be relieved. Surely nobody could deny that a vital factor to ease hardship and worry in many households is to preserve the value of money.

Let me take, for example, thrifty pensioners who managed to save money during their working lives in the past. They found that galloping inflation was eroding their often hard-earned and very precious nest eggs. For those people, the fact that the rate of inflation has fallen so dramatically to 4.9 per cent.—the lowest for 13 years—means that at last they know that someone is defending what remains of their savings. It seems very hard to realise now that the rate of inflation was 27 per cent. under the last Government in 1975. In the sad years from (I believe) 1973 to 1980 we could look abroad to other OECD countries to see that they had an average annual rate of inflation of 10.4 per cent. while ours galloped on at 16 per cent. at that time, bedevilled by the first oil shock and by the last Labour Government's attempts to spend their way out of recession. Retail prices rose at an average rate of 8.8 per cent. compared with 6.1 per cent. in those other OECD countries.

The turnaround that has happened here, and retirement pensions being at their highest ever level in real terms, are surely all important factors to stem worry and hardship in the sort of household I have mentioned. My reason for dwelling on this is to point out that to have halted inflation in this way is relieving a truly harassing hardship. It was because I found the tone of the Motion so depressing that I looked around at some of the moves that had been made in the Government's determined attempts to restore the economy, especially for the inner cities. Clearly the policy is to be to achieve an ever-closer partnership between the public and private sectors.

I have decided that one of the most important talents in life is to be able to adapt and to be flexible. In a few years one's existence can change enormously, and similarly conditions can change equally quickly. This has certainly happened, as we know, in the inner cities. When he was Secretary of State for the Environment, Mr. Heseltine showed great resource in making the move to reinvigorate the decaying economies of our inner cities and to attract the attention of today's wealth-creators and investors. In fact, he sought the partnership of private and public financing, with private financing providing the most. Public expenditure is used there as a magnet for other cash; and this is typical of the Government's determined but subtle attempts to restore the economy.

Certainly a healthier economy means more demand for jobs and for business premises. Very recently the present Secretary of State for the Environment has announced three new measures of this kind. He revealed the first batch of successful applicants under the urban development grant scheme and the first successes under the new derelict land grant scheme. He announced the addition of eight local authorities to the list of inner city programme authorities and the designation of three more authorities under the Inner Urban Areas Act. As I understand it, the urban development grant works as a signal to attract such private development as is in the interests of an inner city. It is used as a level to get major private investment into an inner city proposition.

How far this has succeeded can be measured by the Secretary of State's approval last month of 41 schemes with a total value of £50 million, all of which schemes are situated in inner city areas. The interesting point is that for every £1 put in by the public sector, £4 is placed there by private companies and private investors. The scheme will help with jobs, and clearly much more activity on these lines is under way.

As I said, I took a look at these schemes to see how closely they matched the Motion before us. The answer is that I can see that they do not recognise this constructive programme. Schemes operate in all the areas of local authorities designated under the Inner Urban Areas Act plus a few more. Local authorities are closely linked to the scheme and pay 25 per cent. of the public sector costs while central Government meet the rest. The derelict land, Category "A", scheme recently had 46 projects approved, and here the ratio of leverage through these schemes taken together is £1 of public money to £6 of private money. Just lately the Inner Urban Areas Act has been extended to include half a dozen more local authority areas. It is inspiring news. I went through the schemes and enterprise zones. The Government have pushed out this boat, filled it with private investors and are sailing ahead to improve the physical environment and to help clean up the debilitating and oppressing inner city landscapes.

It must be right to go for private capital, for this is cash which does not come out of the taxpayers' pocket. Private expenditure acts here as a healthy blood transfusion, while public sector money is blood sucked from the veins of the public purse. The same does not apply to the National Health Service in which expenditure has reached record proportions. Yesterday I asked a parliamentary Question in this House about the management inquiry team. Because of this, I fear that some of your Lordships jumped to the conclusion that I am against the National Health Service. As I am one who is ever thankful for its excellent attentions, I thought that I must correct this view. Yet I believe that a very large and very expensive service needs to have the closest care and attention in order to sustain its excellence.

I should like to make my position quite clear on that because, on reading Hansard this morning, it seemed that, for instance, the noble Baroness, Lady Gaitskell (who, I notice, is not in her place at the moment) did not quite understand what I was trying to say. With expenditure increased dramatically to a record £15.5 billion it is reassuring to know of the management team's programme. What is encouraging, too, is the increasing voluntary service involvement in the social services, another area where public and private sectors are working increasingly together. In the field of disablement, as some of your Lordships know, I have always worked with the Disablement Income Group. We still fight those battles in which we have been unsuccessful with successive Governments; for instance, for the extra-expenses allowance for severely disabled people based on extent of disability and not on the cause; for the married women's invalid care allowance, and against the married women's household duties test. Perhaps the most important of all the longed-for improvements is the partial incapacity to earn allowance. Without this the threat of losing invalidity benefit if one earns more than £20 a week is a real disincentive to work. I can assure your Lordships of that.

But we believe that all these cases should have high priority as soon as resources are available. Nevertheless, it is exciting that technological advance is used now towards solving problems of daily living for disabled people. Five new communications centres to help speech-impaired people, for instance, have been announced by the Minister for the disabled, Mr. Rossi. This means that Britain leads the world in that work. In addition, there are numbers of other such projects, the lists of which have been placed in the Library. From 14th to 18th March there is to be an exhibition in the Palace of Westminster which is backed by the BMA and the United Nations World Communications Year; it is to be in the Upper Waiting Hall, and other advances will be on show there.

In May drivers of special vehicles, including powered chairs, have the chance to attend a show of a wide range of vehicles, of hoists, et cetera, and to be able to take driving tests if they so wish. I am wondering whether your Lordships will send me to take such a test! These are some of the many schemes that include full-handicapped mobile people. Under this Government there has been a great increase in the number of district nurses, midwives and community nurses. When I say a "great increase" I mean at any rate it is a greater increase in proportion to hospital staff. But there also is this invaluable back-up support that is provided by the crossroad scheme, the family care schemes and other similar organisations.

The Manpower Services Commission community programme gives very many openings for unemployed people to get jobs on projects which are of benefit to the community. It is necessary that the sponsors have management skills and financial resources. To meet those expenses we have to be able to cover the extra contribution towards the MSC grant. I know something about this because we are considering just such a plan for a project with which I am connected. The whole scheme is a real attempt to give jobs on projects which need to be done.

One of today's worst tragedies, obviously, both here and overseas, is unemployment. Remembering the 1930s, I am bound to say that today's situation—thank the Lord!—is very different from the pittance of dole and/or pay that then was possibly the best on the horizon. Now, I suppose, redundancy payments and possible job schemes, possible rates of benefit, are at least something. Nevertheless, everyone must yearn for this problem to be eased.

In this technological age, as I have said before, to be flexible and adaptable is more than ever important. While we all know the sadness and disappointments that must abound through shortage of jobs, it is by being helped to be resilient, adaptable and flexible that one is most likely to be able to bounce back. I speak here with personal experience and having gone through just such a stage of life myself.

To return for one moment to the tone and wording of the Motion, I assume that this is a plea for raising public expenditure, spending more taxpayers' money and risking a swift return to the higher rates of inflation with another threat to every nest egg and successful enterprise. There is no need to look further than across the river to the GLC and its enormous increase in rates—a rise in the rates precept of 14 per cent.—to see a taste of how labour policies can clobber a community.

Most of us are born with a genuine wish to help our fellow men, especially those of us who are in trouble. I, for one, have been on the receiving end and am always grateful. However, some of us realise that there is no hidden gold mine to pay for our endowments. Once we forget this, we quickly increase the trouble. As I perceive it, the Government's plan is to get a healthier economy through private and public expenditure working in partnership. This is the best route towards achieving what is called for in the noble Lord's Motion. Because this line differs so much from the view expressed, I must oppose the Motion.

6.5 p.m.

Lord Briginshaw

My Lords, the first thing that I want to do is to thank my noble friend Lord Wells-Pestell for initiating a debate on the Motion in such a robust and moving fashion. The economic committee of the TUC met Sir Geoffrey Howe, the Chancellor of the Exchequer, in London on 28th February, to place before him a £50 billion package of proposals and to urge jobs aid as contained in their economic review. The TUC general secretary, Mr. Len Murray, was reported to have said afterwards: There is no hope of the Government doing anything that will ease unemployment or create more jobs". I think that the noble Lord, Lord Cockfield, in his contribution to our debate this evening, underlined the correctness of the reaction of the general secretary of the Trades Union Congress.

I want to commend to your Lordships some positive ideas and proposals which the Trades Union Congress has recently enunciated in their economic review for 1983, under the title The Battle for Jobs. I shall return to that title later on. I want to bring in the voice of over 10 million of our fellow citizens, and I shall develop that, too. It might seem a little discourteous if I left matters there and merely invited your Lordships to read the details set out in the booklet which the TUC have issued, price £3. I hope, however, to underline a timely indication which I think my noble friend Lord Gormley conveyed in his maiden speech in this Chamber recently. It was a polite warning to the Government, the media and some establishment figures that the sweeping and divisive mayhem of attacks on the trade union movement and its members in Britain was dangerous and, if continued to its apparently logical conclusion, would eventually lead to an unwanted civil conflict in the United Kingdom. There are undoubtedly some Government Ministers whose aims, in my view, are pursued in consciously provocative fashion.

If I am correct in my interpretation of what the noble Lord, Lord Gormley, was saying, in an almost affable presentation—as those noble Lords who were present will recall—I would join him in drawing attention to certain factors and people in our country who should know better. Not that there should never be any criticism of trade unions, but that certain "top people" are going over the top. There are a number of interpretations of how you go over the top. There is one in football in which one can break someone's leg. There are also professional fouls. But, I shall not dwell on these descriptions. However, the outcome could be disastrous for our country. I think that the noble Lord, Lord Bruce, was correct in pressing your Lordships for some details of value in this regard.

First, may I remind your Lordships, in polite fashion if you like, that the Conservative Party has no monopoly of patriotism or title to our national flag, the Union Jack, and that when we discuss British trade unionists we are concerned with those of our fellow countrymen and women whose record of fundamental patriotism over all the years, and particularly through two world wars, is equal to any. Secondly, I should like to define in this context how one sees patriotism, and in particular to declare my own view when referring to real patriotism. It must surely be desiring the greatest good for the greatest number, without reference to race or creed. So therefore let us throw out the simple, vulgar, jingoistic flag-waving as having any claim whatsoever to serious consideration in this connection.

It may be that I am among the dying breed of British nationalists. It is for these reasons that I have dwelt a little, though today I am inviting your Lordships to lift your sights above, the opportunist attacks on the working people and their defensive organisations. For this to be done, one must concede immediately that these organisations—made up, as they are, of our fellow countrymen and women—have all the strengths and weaknesses of mankind, so that among the millions of members of the largest democratic organisation in the United Kingdom (the trade unions and their members) the members do not always present themselves as the absolute acme of perfection. We are thinking of 10 million people who are our fellow countrymen and women.

Having said that, I would now draw your Lordships' attention to The Battle for Jobs which I see as the current "Battle for Britain". It is a supreme test of patriotism and it commits your Lordships and all our fellow countrymen and women of good will to rise to a platform above the narrow political party struggle and to break with the policies of negation and national division to which your Lordships have referred, which are being perpetuated by the Government of the day, certainly in my view. Above all, we have to direct our eves over the horizon.

When I mention civil conflict, I am addressing myself to the basic intelligence of the Members of this House. In this spirit, and in justification, I draw your Lordships' attention to some of the detail in the summarised presentation of the TUC review to which I referred in my opening remarks; and being so far down the batting list I am going to hurry this as much as I can. I have sought to extract a summary from each chapter of the review in the presentation without detracting from my main point, that is, the positive nature of the trade union efforts in their basic, patriotic, national interest. The objective approach is my main contention, and this is a side that we do not see sufficiently.

Under this Government there has been, they say—and I agree—an unprecedented economic collapse, and social inequalities have been widened. This is quite contrary to what was promised, as unemployment has grown and recovery, according to Ministers, has always been imminent but never quite arrives. The Government justify their performance by saying that the present hardship is a necessary price to pay for previous mistakes and that 1979 was the year in which decades of poor relative performance were turned into absolute decline. The Government's policies have been presented in a number of different guises, but the underlying philosophy has been consistent hostility to trade unionism, to social provision, and a willingness to exploit divisions throughout our society. Even the Government now admit that their policies are not going to produce a recovery; but the longer these are continued the more long-term damage will be done, so making the task of recovery more difficult.

It is not too late to repair the damage, but only a radical and far-reaching programme will do the job. The Government's new financial strategy has meant that output has stagnated, investment has fallen and bankruptcies have increased. Manufacturing trade is in deficit for the first time for a century. I think that is a point to emphasise: I repeat that manufacturing trade is in deficit for the first time for a century. The manufacturing and construction industries have been worst hit. Unemployment is expected to go on rising to 3.5 million on the old-count basis this year. Long-term unemployment is a major feature of the unemployment crisis, and over one million workers have been out of work for more than a year. These factors—and I am putting them in the smallest compass—are from the review itself and are the positive features that I wish to emphasise.

Unemployment has hit at all the workers, young people, women and ethnic minorities. In the worst-hit regions there are over 40 workers for every vacancy. The real job shortage is over four million and a registered unemployment total of three million costs the Government £15 billion a year. These factors that the TUC have presented publicly are not unknown factors, but it is most important that I present to your Lordships for your consideration and information the positive side of the work of the Trades Union Congress and its organisation as one of those important democratic bodies inside our country.

The foregoing shows that lower wages will not mean more jobs, because the workers' purchasing power will also be cut. Many of the unemployed had low pay in their last job. Britain's total labour costs are lower than most other countries, and I think that is important. The share of the national income taken by income from employment has not grown. New technology has not caused the present recession. Immigration and women going out to work have nothing to do with the level of unemployment. The unemployed are not better off being out of work: they just are not better off. Another year of this strategy—and this connects us with the current situation of the coming prospects of the Budget—and another year of the repetition of these factors and of worsened prospects is impossible.

The TUC's alternative budget strategy includes increased Government expenditure quite boldly, for reasons which I will explain, a lower exchange rate, reduced VAT and managed trade. The Budget package—this is the budget package the TUC has presented to Mr. Howe—will lead to economic expansion of 4 per cent. and give a major boost to employment. Co-ordinated expansion would not lead to runaway inflation, because of the balancing of the factors. But to tackle the underlying weaknesses of the economy, the first year's Budget needs to be followed up by a medium-term growth strategy, in order to reduce unemployment below 1 million. The starting point for a five-year plan must be the commitment to full employment and social progress, as shown in the period of post-war reconstruction. If I may remind your Lordships, my noble friend Lord Bruce dealt with this in considerable detail, and my noble friend Lord Wells-Pestell drew out some factors in support of the innovation of the social wage.

Planning must involve new institutions designed to tackle the structural weaknesses in the British economy. But it will work only if there is the maximum involvement of trade unionists at all levels in decision-making. This provides an essential political input. I am sure that your Lordships will assess the possible success of the political input in creating a sense of involvement.

The priority goal is to reduce unemployment to below 1 million over five years. This means economic growth of 4 per cent. sustained over that period. A major public investment programme is at the heart of the proposals which the TUC has in mind, but investment is needed throughout the economy. Investing for reconstruction on this scale will create jobs in all sectors. Only public spending can meet the basic needs of the worst-off. Only conscious public spending will provide a national network, such as transport or telecommunications. The planning system must be reformed and opened to public debate. It must concentrate on allocating real resources to meet real needs.

Public spending helps the rest of the economy by supplying a better infrastructure—this is one of the key factors in everything to which your Lordships are giving attention—a better labour force, and buying goods and services from it. The public sector can be used to restore economic growth. The public sector is not too big, but too small. De-industrialisation—a long run development—has accelerated rapidly in the last three years and it is of concern to all of us. An efficient and competitive industrial sector is crucial, if the return to full employment is to be sustained, with all that goes with it. A planned approach to industry involving those affected by the decisions is the key to industrial success. A new investment strategy based on the National Investment Bank and the NEB, and harnessing the pensions funds, is a top priority. I agree with the main thinking of the TUC in commending these factors to your Lordships.

Industrial policy must be flexible enough to have a strong input from regional and local interests. Public corporations can be used to create real jobs in the public and private sectors, and clear mechanisms are needed to manage the movement away from excessive defence expenditure. Powerful research, training and education strategies are needed to underpin industrial recovery. Given the high levels of imports, there is a clear case for the planning of trade, based on a managed exchange rate and import controls. Already, your Lordships will see that what attracted me to present this policy is the balanced, positive nature of the thinking of the General Council of the TUC.

The policies of the United Kingdom and United States Governments are a major cause of the problems, according to the TUC. The world economy is in crisis, and they say that the problems are getting worse. Expansion in one country can run into difficulties if the rest of the world stays in recession. But co-ordinated expansion would help the world economy as a whole, and each country would gain proportionately more than through isolated action. Positive policies are needed to secure development in the third world. I am sure that your Lordships will already have listened many times this week to what has been said about interesting ourselves in the well-being of the third world, in both their interests and our interests.

Inequality is a long-standing problem, but the massive rise in unemployment under the present Government has played a direct role in making inequality worse. Government cutbacks have resulted in a significant and sustained reduction in living standards for a major part of the working population. The TUC say—and I agree with them; it can be tested—that, in contrast to the unemployed and low-paid, the rich have been getting richer. This has already been mentioned in the debate today and I shall not press the point, except to say that disparities in incomes are reinforced by the extreme inequalities in the ownership of personal wealth.

The TUC's five-year programme for the economy is matched by a comprehensive package of measures to promote equality in terms of job creation, pay, the quality of working life and reductions in working time. It is all in one piece, as we go along. Priority must also be given to people who are unable to support themselves out of employment income, and this requires a renewed emphasis on improving the social wage. These factors may appear negative in the minds of noble Lords, but they test the positive nature of the proposals. The TUC recovery package is divided into two parts.Action Now is a one-year action plan that could be started now. The five-year expansion plan is the follow-up—a wide-ranging strategy designed to promote jobs, growth, democracy and more equality in Britain.

Taking the £10 billion budget package out of the £50 billion which the TUC presented to Sir Geoffery Howe for his consideration, it breaks down very quickly: the reconstruction of Britain programme—housing, education, hospitals, energy, roads, cities, water, sewers and telecommunications, £3,200 million; manpower, education and training measures, £1,800 million; aid to the regions, £850 million; local authorities, £250 million; state pensions increase—part of the political input to which I referred—£700 million; social benefits increase—and this, too, is part of the political input—£750 million, National Health Service extra spending, £175 million and a cut in VAT from 15 per cent. to 12½ per cent., £2,300 million.

Selective import controls on motors, machine tools, textiles, tyres and furniture are essential, if we are to be serious. The results have been tested—and this is what particularly attracted me to commending these factors to your Lordships. The TUC have tested the results of the package by the economic model used by the Treasury. It is not a secret; noble Lords on the other side know this. After one year, these are some of the results over and above the effect of current policies: unemployment down by 574,000; national output up 3.3 per cent. This is the way you will pay for it: prices up 0.9 per cent., and living standards up 3.2 per cent. The other part of the £50 billion package can be set out in full detail, but I shall not weary your Lordships by going through it.

The above factors are the broad guiding principles of an expansion plan. I have noted, during my part divorce from the TUC over a period of years as a result of retirement, that the TUC are not laying down a minutely detailed blueprint. A programme based on these principles will nevertheless lay the basis for a successful and growing economy. Furthermore, after five years unemployment will be below 1 million. It will also create a new, democratic way of planning how our industries and economy develop, instead of abandoning them to market forces. It will radically improve income and job opportunities for women, and it will tackle income inequalities and low pay. It covers the field to which your Lordships have given careful consideration this evening.

My conclusion, having studied all that the TUC have said and having taken the decision to commend their review to your Lordships this evening, is that the money we need for the infrastructure, which is the basis of everything else and which can move this country in a new direction, must come from the state. I end as I began, by commending to your Lordships the TUC review.

6.32 p.m.

Viscount Chandos

My Lords, to those of other noble Lords I should like to add my particular thanks to the noble Lord, Lord Wells-Pestell, for introducing the debate on this Motion. Since I last spoke in your Lordships' House about the Government's economic policies the noble Lord has been kind enough to come to my defence against the formidable attack of the noble Lord, Lord Boyd-Carpenter. Therefore, I regret all the more having arrived too late to hear the speech of the noble Lord, but I shall read it, and the speeches of the other noble Lords whose contributions I missed, with great interest. I hope that my own short speech does not suffer too much from my having missed some of the debate. I should also like to apologise to your Lordships for my very croaky delivery, due to a heavy cold. I shall inflict such a painful noise on your Lordships' House for only a very short time. I might ask the noble Lord for some of his water if my voice gives out during what I can assure your Lordships will be a rather shorter speech than it would otherwise have been.

The attack from which the noble Lord, Lord Wells-Pestell, defended me last year was based on the suggestion that the Social Democratic Party had no positive policy towards economic recovery. On this occasion, therefore, although the wording of the noble Lord's Motion is extremely tempting, I shall try to resist that temptation and will restrict the time I spend upon criticising the lamentable record of the current Government. The speech of my noble friend Lord Diamond has, I am sure, already demonstrated both the extent and the effectiveness of my party's policies. So I should like to concentrate on just one subject: the control of inflation in times of more rapidly increasing economic activity. I approach such an academic subject with some trepidation in the presence of an economist so distinguished as the noble Lord, Lord Harris of High Cross, but it seems to me to be the crux of the question raised by today's Motion.

First, I should like to try to summarise the case against the present Government and their social and economic policies. The level of inflation is now several per cent. lower than the rate inherited by the Government in 1979. There can be no denying, moreover, that in 1979 inflation was already moving on an upward trend, even before the first catastrophic Budget of the Chancellor. Equally, it is impossible to deny that from the middle of this year onwards there will also be a rising trend in the rate of inflation, so it would not seem to be an unfair comparison to look at the rate prevailing at the time of the General Election in 1979 and that expected to apply at the time of, say, a hypothetical general election in the autumn of this year. Such a comparison will show perhaps a three or four per cent. per annum difference in the level of inflation with, in both cases, a rising trend.

For this modest improvement in the level of inflation, ignoring for a moment the far higher rates that occurred in the interim, in some part due to the Government's own economic incompetence, a staggering cost has been incurred. As the noble Baroness, Lady Gaitskell, has already told your Lordships, many of the electorate, according to the opinion polls, do not attach all the blame for the rise in unemployment, the fall in real incomes and the devastation of manufacturing industry to this Government's policies. An election, however, like an execution, concentrates a man's mind wonderfully; so, if not now, then certainly in the months to come, I believe it will be generally seen that a very substantial part of these economic failures have been caused or exacerbated by the Government and not by extraneous factors, and that these can scarcely be justified by the modest economic success of the inflation rate which I have already mentioned. There have been gains in productivity, but only at massive financial and human cost, and the same gains could have been achieved, and will be achieved in the future, through the policies which we advocate, with nothing like the cost and sacrifice.

The prospects for economic growth of any significant level, certainly enough to restrain the apparently relentless rise of unemployment, are non-existent under the current Government's policies. I had thought that the Government themselves had realised this and no longer had the nerve to predict recovery. It was therefore a surprise, but in a way a familiar surprise, to read early in the new year, once more, a forecast by the Chancellor of the Exchequer, reported in The Times, that economic recovery was around the corner. I seem to remember that one of the most famous recurring letters on the correspondence page of that newspaper refers to the writer having heard the first cuckoo in spring. The Chancellor's forecast nearly prompted me to write a letter suggesting that I had just heard the first cuckoo in spring, but I thought, after all, that a cuckoo stands some chance of heralding the onset of better weather, while this Chancellor has no prospect of heralding any significant improvement in our economic climate.

I have promised your Lordships that I will not spend much time upon attacking the Government. Instead I will suggest what an Alliance Government could do to improve the position and why our policies could achieve a significant increase in the level of economic activity and a reduction in the level of unemployment without provoking a serious increase in the level of inflation. As my noble friend has already shown, increases in capital expenditure will have a cost effective impact on the level of unemployment, as will specific shorter-term measures to increase employment in the fields of environmental improvement, the training of young people, the labour intensive social services and subsidies for the hiring by the private sector of the long-term unemployed. These, in my view, could be introduced without having any significant effect on the rate of inflation, while other policies of the Alliance's alternative budget are designed to mitigate the rising trend of inflation which is expected from the late summer onwards.

The Government suggest, however, that only if their own rules continue will inflation remain under control. As I said earlier, there are already clear indications that the rate will begin to rise again in the summer. If this Government were to be returned and to use the same methods to hold down the level of inflation as they have used over the past four years, the consequences for employment and economic activity would continue to be disastrous.

Despite the hundreds of thousands of unemployed who have been sacrificed in battle, the dragon of inflation has not been slain. It will not be slain unless and until the fundamental and structural problems of our economy—such as the restrictive practices on every side of industry and commerce, the rigidities in the housing market, the immobility of the labour force, and so on—are tackled. To that end the SDP's proposals on industrial democracy, profit sharing and union reform in particular will go far further in tackling the long-term problem than anything that this Government have attempted. But for these measures to be introduced with a reasonable level of consultation will take time, and it is for that reason that we have not ruled out the introduction of some type of incomes policy. We do not envisage an incomes policy as being essential in all circumstances, and certainly not as a long-term solution—but it should be held as an option to ensure that, if a certain level of reflation does put up the pressure on the rate of inflation—and in my view our proposals will do that only to a very limited extent—we can avoid the uncontrollable upward spiral that has been seen in the past.

I repeat to your Lordships that we do not envisage our fight against inflation being led indefinitely by the imposition of an incomes policy. In the medium and long term, inflation will only be restrained at a low level, without unnecessarily and severely depressing the level of economic activity and employment, through an increase in productivity created by a new approach to industrial partnership combined with the selective and discriminating application of Government intervention over market forces.

The Government and their supporters are inclined to support not so much a mixed economy as a market economy—as pure and free in their eyes as possible. They do this because they claim that only the markets can allocate resources efficiently, and that every layer or level of interference in that process is by definition damaging to the efficiency of our economy. I believe in a mixed economy because I question not only the fairness of the allocation of resources achieved through unfettered market forces but also even the efficiency. It is customary for noble Lords on the Benches opposite to question the understanding of any noble Lord on this side of the House of the markets and the way in which they operate. I have spent all of my perhaps short working life closely involved in a variety of different markets. While there are certainly noble Lords with greater experience of the market place than mine, I suspect that there are a reasonable number, even on the Benches opposite, who have less. I hope that your Lordships will not find that claim immodest.

From my experience of markets, with all their imperfections and the fallibility of all the people who comprise the market, I have never seen how any market could be the supreme arbiter of resource allocation. The markets will be a valuable and essential guide to the allocation of resources, but Governments are abdicating their responsibilities if they leave the ultimate decision to the market alone without at least a continuing and critical monitoring of the market's influences. Indeed, it could be argued that to allow market forces to overwhelm Parliament's power to intervene and act erodes the democratic basis of our society. For these reasons, I believe that a stronger economy with reasonable economic growth and prospects for employment, combined with an acceptable rate of inflation, will now and in the future require a balanced partnership between the markets and Parliament which is deserving of the description "mixed economy".

The SDP are proposing policies which will make both Parliament (through electoral reform) and the market economy (through industrial and union reform) more responsive to the wishes of individuals, which is an essential precondition for economic growth combined with price stability. In parallel with the policies designed to create economic growth without a surge in inflation there are as my noble ally Lord Beaumont of Whitley, has said, desperately needed measures for the alleviation of poverty which must be introduced and which have been proposed by the SDP. I will not detail them here, nor rehearse the shaming evidence of their need, but rather will make just one point about the Government's ability to pay for the increased expenditure required.

My noble friend Lord Diamond has already told your Lordships that the PSBR implied by the Alliance's budget proposals will, at 4 per cent. of GDP, still be modest by the standards of international comparison. I should like to reiterate, drawing again on my experience as a banker operating in both the domestic and international capital markets, that a substantially larger borrowing requirement than that planned by this Government could be financed with no ill effect on the rate of inflation. The PSBR is a meaningless figure as defined or, should I say, fudged by the present Government, and by previous Governments for that matter. The pursuit of a PSBR target will be as damaging as was the Government's single-minded obsession with monetary targets.

I am in no way embarrassed by the jibe of the noble Lord, Lord Harris of High Cross, that our new party is on this occasion supporting a Motion proposed by a distinguished Member of the party from which so many of our members, both inside and outside Parliament, have come. The noble Lord, Lord Wells-Pestell, has proposed a Motion whose words and spirit I wholly support. I hope that the noble Lord will forgive me if I merely add that I believe the policies proposed by the SDP and our Liberal allies will achieve invigoration of the economy and the alleviation of hardship, where those of the Labour Party will not.

6.47 p.m.

Viscount Massereene and Ferrard

My Lords, it always used to be the custom in your Lordships' House—and I have been in this House a very long time—that Back-Benchers were not supposed to read speeches, but in the past few years that custom has rather gone by the board. However, I should just like to make that observation.

If I understood the noble Viscount, Lord Chandos, correctly, one of his points of blame for our present position—which I personally do not consider to be nearly so bad as people make out—was the restrictive practices of commercialism. Perhaps I am wrong about that, but I believe he spoke about restrictive practices in business. It is a freely known fact that the restrictive practices practised by the trade unions are responsible for about 1 million of our unemployed.

I was also astounded to hear the noble Lord, Lord Briginshaw, speak about the great democratic tradition of the trade unions. I have heard some amazing things said in this House but I have never heard more amazing speeches than those which I have heard in this House today. To speak about the democratic principles of trade unions is really going over the top. When they elect their own executives, there is no democracy at all, and they are above the law to a great extent. Although we have clipped their wings slightly, they can freely break contracts freely embarked upon by employers and employees. I could go on, but I do not wish to do so.

I should like instead to refer for a moment to the speech of the noble Lord, Lord Wells-Pestell. He said, so far as I remember, that we had now sunk to two nations—although that, of course, is nonsense. He also said that too many people have too little and too many have too much. That is hardly worth answering. The other thing that he said which rather interested me was that he thought that the number of people unemployed was about 4 million. He was not referring to the registered number of unemployed but to the corrected truth. I disagree. I believe the actual number of registered unemployed people is about 3,200,000, but that varies with school-leavers by 100,000 or 200,000 either way. But those are not the true unemployed. We all know about moonlighters. I know several of them. There are plenty of men here—not in the Chamber, although there may be, but in the country—who, we all know, are enjoying all the benefits or, at any rate, the dole and who are doing work on the side.

I asked a question in this House, I believe three times and it is such a bore having to repeat it! A few years ago an inspector went to Southend employment exchange and found over 100 men who had been drawing the dole for over a year. If he had found the same condition throughout the labour exchanges in this country at that time, which was about six or seven years ago, there would have been hardly any unemployment in the country at all. Therefore, these figures for registered unemployed are not the true figures. I know several women who are now on the dole who have rich husbands. They had jobs but they have no right to be drawing the dole. There have always been 400,000 or 500,000 people who are unemployable but I reckon that the true figure of unemployment is certainly not much more than 2 million. I agree of course, that that is a very serious figure.

However, I should like to ask the noble Lords opposite how many of them have ever paid wages out of their own pockets. Very few, I imagine, from the speeches they have made. Unfortunately, I have to pay wages out of my own pocket, but luckily, owing to the tremendous rise in wages, I do not now have to pay so many as I once did. But I deplore that because one cause of our recession, leaving out oil—I have said this before, as have, I believe, other noble Lords—is that between about 1970 and 1979, eight or ten years, wages rose by 400 per cent. while productivity increased by only 9½ per cent. That is one of the chief causes of our recession.

I feel very much for the unemployed who do want to find jobs. If the noble Lord who introduced this Motion, in speaking of hardship, is referring to mental hardship I agree with him, although I should have preferred the word "frustration". It is very frustrating for men, especially married men, if they cannot find employment. That is a very serious matter. But we must be thankful that, as regards physical hardship, with the welfare state that no longer exists. It may exist if a man drinks all his benefit and his family has to go without something, but it does not exist in general. I have no objection to being taxed so that everyone has reasonable housing, warmth, good food, their children educated free, and a good health service. I have no objection to being taxed for that, but I do object to being taxed to provide for scroungers.

What is the cause of unemloyment today? We have had many reasons put forward but one reason that we have not heard is automation. Although I have always been chiefly concerned with agriculture, but only in a small way now, I once had a factory which I started after the war. I have often said this before. I ordered machinery and I put in automatic machines. Of course, some of the labour force had to go. The result, however, was that we did produce more wealth.

If anyone has learned anything about economics, as I presume one or two of your Lordships have—I have learned a little but I am more on the practical side—he will know that one of the first things one learns is that the object of production, from the point of view of economics, is to produce wealth, not necessarily jobs. That sounds hard, but the theory is that if one produces that wealth it is then divided out, through taxation, so that everyone can have housing, good food, and so on. However, if one believes that the object of production is merely to employ people, production will go right down.

One thing that the Government have done, and I am pleased that they have, is to get rid of a lot of over-manning. That has streamlined much of our industry and has been a great help. For instance, our export trade for 1982 was extremely good. In the past two years, 1981–82, our balance of payments has broken all records. I think in 1981 the surplus was £6,000 million; in 1982 it was £4,636 million. It is not all due to the oil, and the Government must be congratulated on that.

As regards curing unemployment, I do not believe that any Government that follows the present Government, will ever be able to cure unemployment. One can, of course, for a short time spend, spend and spend, as, apparently, Peter Shore, would like to do, by employing people in artificial jobs—digging holes in the ground and filling them up again, if you like. But one would soon have the International Monetary Fund intervening.

There are one or two things that we can do, particularly as regards youth employment. The Government are to be congratulated on the various schemes that they have for youth employment because that is extremely important. As we all know, it is very bad for young people to leave school and not be able to find a job. It is right that the Government are reflating for that purpose. They may perhaps be able to reflate a little more to cure some adult unemployment. But they cannot overdo it, as I said, because then we should have the International Monetary Fund after us.

Another thing that we could do regarding imports and especially regarding Japan—but it has to be done in a rather gentle way—is that where a country like Japan sells to us far, far more than they buy from us, we ought to put a bit of pressure there and we ought to have import duties on certain Japanese goods. There may be other countries where we should do that, too, but we have to do it extremely gently and cleverly. It has been tried before here in a big way by former Governments—by a Labour Government, actually—but, of course, it proved rather disastrous in the end.

I do not really see that we can do much more than we are doing already. We have to hope that the recession recedes—and there are signs throughout the world that it is receding. But to blame this Government, as several noble Lords opposite have, for the amount of unemployment and the recession generally is quite absurd.

I think I have said enough. I have been 13 minutes. That is not as long as a lot of the noble Lords opposite, but I think that 13 minutes is quite fair enough, so I shall sit down.

7.1 p.m.

Lord Stewart of Fulham

My Lords, I hope that the noble Viscount will allow me to say how much I always enjoy his speeches. I think that we all do. He brings into this House a breath from the wide and varied world outside as he tells us of his wide and varied acquaintance. We have just learned of his acquaintance with moonlighting unemployed and with unemployed women with very wealthy husbands. In an earlier intervention today he told us about the unemployed using their redundancy pay to buy villas in Spain. The last time we had a debate of this sort they were having holidays in Corfu. If only we can go on at this rate, the standard of life of the unemployed, and therefore. Presumably, a fortiori, of the rest of the population, ought to top all expectations.

The Motion speaks of the injury done to various sections of the population by Government policies. It is significant that they have managed to hit those parts of the population who will suffer most. There are, first of all, those on whom they have inflicted the dreadful frustration and indignity of unemployment. One wonders who deserves one's sympathy most: the man in his middle fifties who loses his job and faces the fact that he will probably never get another, or the school-leaver who wonders whether he will ever get a job in his whole life. That is the trouble with unemployment: it is not merely the suffering now; it is the injury it does to the future—devastated industries and young people getting no experience of work. All those things are losses far greater than the immediate loss of wealth arising from 3½ million people out of work.

The noble Lord, Lord Cockfield, rejected any of the various proposals made for Government action to deal with unemployment by saying that they would involve something in the nature of an incomes policy, something about foreign trade, exchanges and so on, and that all that would be the end of freedom. When he said that, I am hound to say that I shared the view later expressed by my noble friend Lady Gaitskell: I could hear him expounding those views to an audience of unemployed. If the noble Lord would go down to one of the parts of the country (they are not hard to find) where unemployment is extensive, he could then explain to those people that they were not serfs, to have their wages determined by an incomes policy, because the Government's wisdom in allowing for the play of market forces had ensured that they should not have any wages at all; that they were not going to be troubled by Governments who tried to regulate the exchanges or to regulate foreign trade, because, again, everything would be left to the working of those market forces that had produced the results with which they were so familiar. I cannot help feeling that before he had gone very far in his speech many of them would have decided to go off on their holidays to Corfu or to their villas in Spain, and leave him preaching to empty air.

But it is not only the unemployed who have been hit. There are the sick. I notice that there have been eulogies of the National Health Service from the Benches opposite. I think it will now be the fifth time that the Government have raised prescription charges—and they have not been in office four years yet. The raising of prescription charges, at least with that degree of persistence, is peculiarly contrary to the whole nature of the health service, because it creates the situation that the worse off a person is in health the more he will have to pay. There will, of course, be the usual ambulance wagons—the elderly, and possibly those subject to chronic illnesses. Concessions will be made to them. But we know perfectly well that the object of the increase in prescription charges is to raise money for the Government and to enable them to make tax concessions that on the whole will benefit people decidedly better off than those who are troubled by the prescription charges, because that has been the tendency of Government policy all along.

Then we come to the old. We are told that the Government will keep up the value of their pensions; but it used to be the policy of this country that the pension should be maintained not only at its actual real value but in proportion to the wealth of the rest of the community. It is that which the Government have definitely decided to abandon, although if, of course, the wealth of the whole community is going to go on moving, as it has under this Government, in the wrong direction, that possibly is not so much to be deplored.

Another person they have hit is the less well off taxpayer. The noble Lord, Lord Cockfield, deplored the fact that the total volume of taxation had gone up; but, of course, the Government began by making substantial reductions in taxation to the wealthiest—those who needed it least. Having done that, they then increased the total volume of taxation, which meant that the burden was all the heavier on the less well off taxpayer. That is particularly true if one takes into account not only direct but indirect taxation. One may add that that was flatly contrary to the Government's promise. One thing that they promised over and over again was that they would reduce taxation.

I never think it is sense for Governments to prophesy that kind of thing, because if the country grows more prosperous it can and ought to spend more on its social services. Just as our private expenditure will go up if the country gets richer, so ought our public expenditure to go up, unless the people who especially need public expenditure—the old, the sick, those in need of education and so on—are to be made continually worse off. I never pay much attention to promises to reduce taxation, but the Government of course insisted that that was what they were going to do; but it is what they most emphatically have not done.

There is the other form of getting revenue from the public—the rates. The Government have told us that they want people to be free; but, of course, they have practically destroyed the freedom of local authorities with regard to the amount of money that they can raise in rates and, increasingly, what they can spend it on. The effect of this has been—and complaints have not come only from Labour local authorities by a long chalk—that local authorities have been constantly cramped in the money that they can spend on necessary social services.

If we look at education, health and so on, I think we shall find that the economies have usually fallen on the most vulnerable groups—on those children who are in need of special education, on children in need of nursery education, the health service, home helps and generally in a way that makes the public services meaner and less satisfactory than they were before. There have been all those injuries all along the line, and the Government's reply always is that the only remedy is—using the words of the Motion—"to invigorate the economy", and that means the loss of our freedom and disasters of all kinds.

The case for invigorating the economy in one way or another has been put very persuasively by several speakers on these Benches. Although he is, alas! no longer of my own party, I thought that the most powerful and persuasive presentation was made by the noble Lord, Lord Diamond. It simply will not be possible for the Government to brush that aside by saying that Milton Friedman or someone of that kind said that it would not work. There is a dreadful doctrinaire approach about the Government's constant recurrence to the fact that we cannot increase public expenditure. Yet every now and again they do so. There was a statement from the noble Lord, Lord Bellwin, not so long ago involving the pouring out of public money for very useful and sensible purposes. He said that that was all right and that it was not inflationary because it was going to be done concurrently with expenditure of private money. It does not make sense.

If one sets to work on a useful necessary project like the modernising of our roads or railways, whether that is inflationary or not is not determined by whether it is done by public expenditure or by private expenditure; its value is determined by its usefulness and by the efficiency with which it is carried out. The Government always feel that they can never engage in any activity unless they can show that there is a private profit in it for somebody. That greatly limits their power to do anything to help the economy.

Finally, we see also the growth of what is called "the new Conservative philosophy", which is all about the values of private enterprise, private this, private that and so on. The interesting point about all these proposals is that they are all going to result in a shift in the distribution of wealth in the interests of the wealthier section of the community. Education vouchers are urged on the ground that they will give greater freedom of choice to parents. They will probably do that for parents who have substantially above the average income already; they will improve the position of those already well up the ladder and leave less to be scrambled for by the rest. The same is true about the sale of council houses. The same will be true about the various tinkerings with the health service which are proposed in the name of freedom of choice and Conservative philosophy.

So in this debate the noble Lord, Lord Wells-Pestell, has very rightly drawn our attention to the injuries done to the population by the Government's policy and to the need for a reconsideration of ways of invigorating the economy. It also helps us to notice the alternative: a continuance of Tory philosophy, first, in its persistence in refusing to invigorate the economy and going on and on with 3 million or 4 million unemployed; and secondly, in trying to elaborate on that situation by thrusting a deeper and deeper wedge between the richer and the poorer sections of society—a divisive and bitter policy of no use to this country.

7.13 p.m.

Baroness Seear

My Lords, I must first apologise to your Lordships' House that I had to leave the debate earlier this evening because I was attending a Committee of your Lordships' House. It is particularly unfortunate from my point of view because I missed the speech of my noble ally, Lord Diamond, which I am sure would have been extremely beneficial for me to hear, not least in order that I can be sure that I agree and do not in any way contradict anything that he said.

It is very easy to become acclimatised to other people's sufferings. We must be grateful to the noble Lord, Lord Wells-Pestell, for initiating this debate this evening and for reminding us—if we needed reminding—of the problems and the horrors of long-term unemployment, with an unemployment figure somewhere not much short of 4 million if we do the calculations correctly. The noble Lord has also reminded us of the plight—many other noble Lords have mentioned this and so I do not intend to dwell on it, not because I do not think it is important, but because I do not think, especially at this time of night, that repetition helps very much—of a married man in his forties (and that is what it has come to) with children, who loses his job at all levels and knows perfectly well that he is not likely to get another. That is something which should be thought about and it should be realised how hideous it is. The noble Lord has also reminded us of the plight of the school leaver who is unable to get work and who sinks into a kind of apathy from which it will be very difficult to arouse him if opportunities come later. All this is horrible, and I agree with what the noble Lord, Lord Wells-Pestell, said.

I also agree with the noble Lord's criticism of the Government in that there has been surely excessive concentration on one approach to the problems of unemployment and consequent poverty in this country. There has been the almost obsessional concentration on the problems of monetary supply—not that the Government have always succeeded (far from it) in controlling the monetary supply. There is also, I was about to say, the simple-minded belief, but it is really the almost obsessional belief, that if you pursue this one doctrine, then at the end of the day all will become well. Surely it must be true that to so complex a problem there are no simple solutions. There is no single way in which to approach it. There has to be a multi-pronged approach with appreciation of the complexities and difficulties of the problems that confront us.

Having said that I agree with the noble Lord, Lord Wells-Pestell, and other Labour speakers up to this point, I must say that I am deeply disturbed at the tone of the debate and at the attitude that seems to be coming from the Labour Benches, that these problems are all the fault of a wrong-headed Government and that if they were in power the situation could so easily be put right. I know that noble Lords will say that it is easy for us from these Benches to criticise what has been done by both the Conservative and the Labour parties because we have not had the opportunity to make mistakes. I fully agree that if we had had the opportunity we, too, would have made a good share of mistakes. But so far as I have attended this debate I have heard not a whisper from the Labour Benches that in all the years they were in power they took the steps to see that the economic problems of this country were tackled—and if they had been tackled our plight today would have been far, far less serious.

What did they do for the restructuring of industry, to get away from the supporting of industries which patently did not have a future and move into the high technology industries—the industries where new markets were opening up? What did they do to get rid of this appalling concentration of unskilled people in our labour force?—the highest among all our industrial competitors. We know perfectly well that it is among the unskilled that there is the great concentration of the long-term unemployed. We know, too, that when recovery comes it will be the unskilled who will not be able to share in that recovery because they do not have the knowledge and the trained abilities which will be called for to meet those opportunities when they come. Above all, what did they do to change the attitude among their supporters—and we have heard it reflected again and again this evening in your Lordships' House—that private profit is wicked and has to be discouraged? What did they do about the condemnation and denigration of the wealth-creating activities without which you cannot get the investment on which the future development of the economy depends? And without that development there is nothing that can be done for the social services, which we all want so very much. They had it in their power when they were in government to do so much to change those attitudes, and what have they done? Listening tonight, I believe that they themselves still believe in the doctrines which, to the disaster of this country, they for so long have preached.

However, having said that, it is my deep belief that the position is serious and will not be changed by a change of Government. Of course, we would want to see a great many things done differently from the way they are being done at the present time. But what we need now is to get on with a broad base of agreement across the country for the changes that need to be made. I do not want to take part in the kind of party one-upmanship—no, indeed I do not—that has been going on.

It is far more important that we should look to the future and the things that can be done, because the Government have at last given us a chance. The one thing they have done—and this is of prime importance—is that they have got down inflation. Everybody in this House must realise that, unless we keep inflation down, the future of employment in this country is dim in the extreme, and that it is necessary to start by getting inflation down and to continue to hold it down. But it is also necessary to build, and to start building now, on the basis that is being created by the reduction in inflation. Surely this is where the Government can show that they recognise the need for change and take advantage quickly of the opportunity that the fall in inflation has given us.

There is to be a Budget next week. Of course, it is too late for anybody to influence now what will go into the Budget—that is obvious. But at least let us hope that in that Budget we shall see the kind of changes which really will make it possible for industry to get ahead again now that the inflation position enables us to do so. Surely we can get rid of the national insurance surcharge, which is so seriously handicapping industry; surely it is possible to move towards getting interest rates still lower, which would make a very great difference to a great deal of industry in this country and stop a great many companies going out of business over the next six or nine months if interest rates continue at the present level. Above all, we must take action to ensure that, as recovery begins—and there are good signs in the world economy that there are the slow beginnings of economic recovery—we do not move back to the position in which we get pay increases which once again will simply lead to inflation.

The noble Lord, Lord Cockfield, seemed to be totally confident that as recovery takes place, everybody will have learned their lesson about the dangers of wage inflation and that there will not be the big wage claims and the inflationary consequences of those claims which we have experienced again and again in the past. He believes that the good sense of ordinary people up and down the country will ensure that this does not happen. I do not believe it. I recognise that there have been changes. I recognise that pay claims in the private sector have been very reasonable in many cases. But, in the face of difficulties of an unprecedented nature and of a realisation that the choice is between the shutting down of the organisation and the control of pay, what is there in the past or in the present to lead us to believe that, when that restraint no longer continues, we shall not return to the experience we have had again and again? If we do, all the long pain and travail of getting inflation down will have been to no effect and it will, as night follows day, mean that we shall be back with unemployment and back with all the consequences of unemployment that we have so often experienced in the past.

I do not deny the problems and the difficulties of getting a national incomes policy of some kind to work. I believe that we have to start particularly at the level of the company, though not exclusively. But there are advantages of which we can be seized. The negotiation of pay has moved to a very considerable extent from the national to the company level, and this gives an opportunity for the kind of understanding of what pay settlements mean in terms of the well-being of the organisation that was never there when pay settlements were at national level.

The suggestion is being put forward in some quarters—and I believe it is one that it is well worth while following up and developing—of the negotiation of development contracts at the level of the plant, by which I mean a far greater extension of the range of questions that have settled at company level, including questions of investment, of the extension of markets and of pay in relation to the opportunities that that investment and those new markets give, and also of what such developments mean in terms of security of employment.

If we get to a position in which all those factors are taken into account, with the cards put on the table as to when pay negotiations are entered into—not imposed from the top but springing from negotiations at the level of the organisation—I believe that we can have a hope of getting some sensible control over the level of pay within a framework of a general national policy. I do not believe that anything except developments of that kind will stop a return to the inflationary wage pressures that we have known in the past.

This means that the success of the organisation must be of far more direct benefit to the ordinary employee. It means an extension on a much larger scale of profit-sharing and share ownership schemes. The Government have given some encouragement to this in the past. Is it too much to hope that there will be a really substantial extension of encouragement for schemes of this kind—so that people can really see directly the consequences of sensible settlements in terms of the benefits to themselves in pay—not only in wages but in the money that comes as a result of the success of the organisation? I do not believe that there is any other way ahead, and it is that danger which the noble Lord, Lord Cockfield, ducked when he was talking this evening.

I also believe that there is room for much greater development on the lines of co-operative development. We have the Co-operative Development Agency. Is it really not possible for us to expand that so that, once again, the opportunities for ordinary people to benefit from the success of the organisation which they themselves are helping to run will bring a sense of realism and the relationship between investment, pay and employment to ordinary people up and down the country? Unless this is done, the pain that we have gone through over recent years may all have been in vain.

Baroness Gaitskell

My Lords, before the noble Baroness sits down, as she has made this great indictment against the Labour Party, may I ask her why she did it at this point, suggesting that bringing down inflation one point will enable the economy to recover completely? To ordinary people like myself it does not mean a thing. Nothing that she has said this afternoon in her speech means anything. If she knew all these things, we might have heard something about them before today.

Baroness Seear

My Lords, inflation has come down more than 1 per cent. If the noble Baroness does not recognise that when inflation comes down it is advantageous I personally do, especially when prices do not rise as fast as they have.

7.29 p.m.

Baroness Faithfull

My Lords, I should like to pay tribute to the speech that we have just heard. Whether or not we agreed with it all, it was a splendid speech and I for one am grateful to have heard it. In introducing this debate today, for which we are all very grateful, the noble Lord, Lord Wells-Pestell, said that Members on these Benches did not understand ordinary people and knew little about the vulnerable. I really must dispute that statement of the noble Lord. At the risk of appearing personal, perhaps I may say that for nearly a year I worked in the worst slums in Paris, running nursery schools and living there. I worked for five years living in the worst area of Birmingham in the back-to-back houses, and worked with both the unemployed and all others who lived in the district.

Furthermore, again at the expense of being personal, I worked my way in the evenings in order to pay for my university education during the day. Therefore, I should like the noble Lord, Lord Wells-Pestell, to know that there are those of us on these Benches who know the ordinary people and those who are vulnerable. I am sure I am right in saying that the noble Lord, Lord Pennock, must know all kinds of people as a result of the works he has done, not to speak of the noble Lord, Lord Trefgarne, who, when flying, must have come across people of all sorts and conditions. May I, therefore, nail this myth, and say that we on these Benches do understand ordinary people.

Lord Wells-Pestell

My Lords, I am grateful to the noble Baroness for giving way. Let me make it clear that I do not think she is typical of the Members on her side of the House. I wonder how many Members on her side of the House—take any big city—have spent days going into homes in Limehouse, Pennyfields, Isle of Dogs, Shadwell, St. Georges, and places like that, where one had to visit people every day and see the conditions under which they lived. I do not think that the noble Baroness is typical, and I suspect that very few Members on her side of the House have been so identified with the poor as many of us in the field of social work.

Baroness Faithfull

My Lords, I must again refute this. There are many people who employ labour, like the noble Baroness, Lady Elliot, who knows all about farms and the people on farms, and the noble Viscount here has employed people. I am sure that the noble Lord, Lord Pennock, knows about people. Visiting them in Limehouse does not necessarily give you the ticket for knowing ordinary people. However, I leave this point, but I should like to nail that flag down once and for all.

I am quite frightened because there are so many economists who have spoken so well in this debate, and although I read economics at university I am certainly not going to stray into that field because such very good speeches have been made, some of which one agreed with and many of which one did not. I wish to speak on social policies, which are part of the Motion for today's debate. I wish to concentrate on the greatest investment that a country can make, and that is in their children.

Before doing so I would, with diffidence, like to make two points in the arena of both statutory and voluntary social services. I wish to pay tribute to the good work being carried out by social workers in the fields of child care and related social services. They are committed to their task; they are skilled; and they are professional in outlook. Sadly, good work seems not to be good news in the media, and only tragic mistakes are highlighted. Of course, they should be known, but they should be set against much sound work carried on unobtrusively and with integrity. Secondly, as social workers and as citizens, social workers must of course be concerned with the structure of society.

However, I regret that in the day-to-day work in the health service, in education and in social services, often the professional side of our work is marred by party politics, whichever party is in power. I would hope that in the future we would concentrate more on the professionalism of our work and on the skill of our work rather than on the party politics involved. As a children's officer from 1958 to 1970 I found that the children's committee that I served was considered to be a committee which did not further the political aspirations of councillors. Consequently, no party politics entered into that committee, and I would suggest that extraordinarily good work was done.

The noble Lord, Lord Wells-Pestell, would have us believe from his speech that the social policies of Her Majesty's Government at the moment are deteriorating and that the personal social services are not being properly administered. The noble Lord talked about the creation of nations. I come back to the greatest investment we can make, and that is in our children. I would draw your Lordships' attention to the evidence given to the Social Services Committee by both the Department of Health and Social Security and by the directors of social services.

In this connection I would point out to the noble Lord, Lord Wells-Pestell, a cutting from the Guardian dated 15th January 1983, which said: Spending cuts in Britain's social services have stopped". It is perfectly true that there were for a while cuts which were necessary, and that there had to be a realignment of the services. It was a painful and difficult time. I believe that that realignment of the services has now settled down, and that we are on a much better course than perhaps we were before.

May I refer to some of the policies which have been developed by Her Majesty's Government. First, may I support the noble Baroness, Lady Lane-Fox, over the growing partnership with industry and between the statutory and voluntary sectors. In 1981 to 1982 Barnardo's received revenue grants from the Department of Health and Social Security of £77,000. In 1982 to 1983 the figure was £209,000. In 1981 capital grants were made of £658,000, and in 1983 £93,000, and I know that there is more to come. I support this partnership between the voluntary and the statutory sectors. It is an enriching policy both for those working in the field of social work and for those who are vulnerable.

During the last four years there has been a growth in the fostering and boarding out of children. Many of us believe that this is good practice, and that a child who has a substitute home is far better off than a child permanently brought up in residential care. I must also pay tribute to those who work in residential care, because they have moved with the times and they have recognised, as the noble Lord, Lord Beaumont of Whitley, said, that we want to weave the children and adults into the society in which they live. Hence, the residential care workers are now running children's homes but they are being a resource for those in the community as well as those in the homes. Some of the children go by week, or by day, or just by term, and in this way they are offering a service to the community which has never occurred before.

I have to point out from the point of view of social policy that the 1978 Act recommended intermediate treatment—an extraordinary term—which meant helping children who were delinquent to adapt to a different way of life, at the same time living at home and in the community, instead of being removed from home. It is only in the last four or five years—perhaps five; the last year of the last Government and subsequently—that this policy has been developed. It is an excellent policy. It is effective where children and young persons are concerned, and it is economic.

With those few examples—including perhaps adoption and the fostering of handicapped children and many other new ways of helping and caring for children—I submit that there has been a forward-looking policy. I would like to think that, as a tribute to my colleague social workers, the growth, innovation and improved practices in child care would have come about whichever Government were in power. But I am bound to tell the noble Lord, Lord Wells-Pestell, that while much remains to be done, in the four years through which we have just been, against all the difficulties and very great problems, it is my view that in the greatest investment we have, our children, great strides have been made, and I am sure that the social work world will continue to make them.

7.42 p.m.

Lord Hatch of Lusby

My Lords, one of the greatest difficulties with which we have been living in the last four years—to which the noble Baroness, Lady Faithfull, referred—has been the impact of the policy of this Government. When they were elected four years ago they were clearly an ideological and forthright Government, and I publicly welcomed that fact at the time. Now that they have had four years in which to prove themselves the verdict on their record over those four years must be that they were elected on a false prospectus, and I wish briefly to point out why.

The present Government were elected on four main policy issues. The first was to cut taxes. They did that immediately—23 per cent. off the top incomes. At the same time they raised VAT to 15 per cent., that being a tax on the commodities which the majority of the people use. As the noble Lord, Lord Cockfield, admitted, taxation is today higher than it was at the time of the last general election—and that should be known by the country. Secondly, the Government were elected to reduce public expenditure. According to a Select Committee of the other House—chaired, incidentally, by a Member of the party opposite—public expenditure has gone up by 6.2 per cent. in the last four years, and if their public expenditure plans are carried out it will go up by another 2 per cent. in the intervening period up to 1986. At the time of the election, public expenditure was 40½ per cent. of the gross national product. Now it is 44½ per cent. Again, these are matters which the electorate have a right to know because it was on that prospectus that the party opposite were elected. Taxation and public expenditure have both gone up.

Thirdly, they ware elected to increase production. What has happened to production? Manufacturing production is 20 per cent. lower than at the time of the 1979 election; its lowest point since 1963. Fourthly, the Government were elected to cure unemployment. Do noble Lords remember the posters? "Labour does not work", they said, with, I believe, conscripted members of Conservative Central Office forming a queue behind the leader at the front. Remember the words of the Prime Minister during the election? "There is nothing inevitable about rising unemployment", she said. If there is nothing inevitable about it, what has happened to it in the last four years? Surely the party which was elected to cut unemployment—and which made a great play throughout the country about the Labour Party bringing unemployment, while the Conservatives would cure it—must accept responsibility for what it told the electorate in 1979.

There is also a meanness in it all—a meanness which, as the noble Lord, Lord Trefgarne, knows, I have tried to bring out at Question Time on numerous occasions. Not only has the number of unemployed been doubled since the election, but over the past nine months they have been paying double tax. I would like the Minister to tell us when this double taxation of the unemployed will cease. The unemployed were told when the 5 per cent. decrease was imposed that it was until they came into taxation. They came into taxation last July, since when they have been paying double taxation.

Let me give a comparison to show the way in which the unemployed are treated. If you omit child benefit from both figures, average male earnings in Britain today are about £160 a week. What do the unemployed get? Unemployment benefit for a family with two children is £41.5 a week. That is the contrast between those who are in employment and those who are not. I should like to examine in some detail what I thought was the election speech—or perhaps I should call it the election apologia—of the noble lord, Lord Cockfield, but I do not have time tonight to do that.

We know that any Government must pay increasing sums in financing the social services, simply because there are more people with more needs; more old people and greater demands on the social services. We know that, but the noble Lord did not mention the pensioners, so let us look at what has happened to them. The pensioners have been changed over from receiving what was an earnings-related pension to an inflation-related pension. It does not seem to be recognised by sufficient people—at least those in the political life of the country—that the pension paid to the old-age pensioner is a right. It is not a handout or charity. Most pensioners were paying into the pension fund for most of their lives. But even if they were not, they were contributing to the growth of the wealth of the country, and they have a right in their old age to draw from the accumulated wealth of Britain to which they have contributed.

Nor did the Minister mention housing. The figures show that the number of houses finished last year was the lowest since 1947. Thus, we have discrimination against the unemployed and against the pensioners, and a rundown of our housing provision for the people of the country. Noble Lords may fairly expect me to suggest some remedies, but I shall not do so tonight because I have done that so often from this Bench, though my suggestions have obviously had no impact on the Government. I would simply mention that that half of the world's market to which I have referred so often still remains closed, and it does not seem that the Government have seen that by opening it they could take some action to bring this country out of the depression, instead of continually bleating about being part of a world depression over which they have no influence.

Furthermore, this afternoon while the debate was proceeding it was announced from the EEC that the prospect for growth next year in the Community is put at 0.4 per cent. It has been brought down from the previous figure of over 1 per cent. I wonder whether the Government yet know sufficient about this to say whether they will be able to come up to that figure; whether their prospect is to achieve 0.4 per cent. growth, or whether they have plans to exceed that average.

The noble Lord, Lord Wells-Pestell, who opened the debate, and to whom we are all indebted, spoke of the danger of the creation of two nations. I fear—I desperately fear—that if the Conservative Party is elected to a second term of government, we shall see three, not two, nations emerge in this country. Indeed, I believe that they are already emerging. First, there is the nation of the super-millionaires; and in today's papers we have seen that the electricity industry chiefs are to have a pay increase of 12½ per cent. We have seen thrown around astronomical figures relating to people such as Mr. MacGregor. That group of people is really out of the ken of even the wealthy of this country. Secondly, there are those in reasonably well paid employment, but they are living under constant fear of losing that employment.

Finally, at the bottom and forming by far the majority, are the unemployed, the low-paid, and—may I remind noble Lords on the other side of the House—those erstwhile middle-class friends of theirs who have now gone bankrupt. There has been a record number of bankruptcies in every single quarter since the Government took office. That has been happening among the Government's friends, among the middle-class. When a middle-class executive becomes unemployed, the shock and the effect on his health an on his family is just as bad as it is in other cases; but among these people unemployment is occurring in increaseng numbers every quarter.

Down at the bottom we have the mass of the poor and the people who are rapidly becoming poor. The situation is endangering race relations in inner cities, because proportionately many more blacks than whites are unemployed. There is the social disruption which comes from unemployment. There is, too, the increasing sickness, which will be a growing burden on the health services; and, as I have already pointed out, there is the increasingly poor housing provision for the third section of the British nation. That is truly returning to the Victorian values at the time of Dickens. The speech of the noble Lord who spoke for the Government at the beginning of the debate reminded me very forcefully of the way in which Jeremy Bentham described jurisprudence. He described it as the art of being methodically ignorant of what everybody knows, and to me that seems to be a very apt description of the Government's apologia for their period in office of almost four years.

7.54 p.m.

Lord Banks

My Lords, I should like to join with other speakers in thanking the noble Lord, Lord Wells-Pestell, for introducing the Motion this afternoon. Clearly it is concerned with a subject on which he feels very strongly, and during the course of our debate a good deal of strong feeling has been expressed in all parts of the House on this question. We have had an interesting debate. At the outset the noble Lord, Lord Cockfield, in his peroration, attacked demand management and incomes policy rather as though they represented totalitarian tyranny. I think that that was a rather extravagant view, and I reject it. My noble friend Lord Diamond summed up the main theme that we have been discussing today in the economic side of the debate when he said that it was a question of whether or not to turn up the gas when the house is cold; and I think that much of our discussion has been about which way to turn the tap, and how far to turn it.

The noble Lord, Lord Cockfield, said that in this country we had suffered from the world-wide recession. We on these Benches would accept that; it is so. But, as my noble friend Lord Diamond said, we believe that the impact of the world-wide recession on our economy has been greatly accentuated by Government policies. We believe that over the years during which the present Government have been in power the high interest rates, the over-valued pound, the deflatinary policies associated with the medium economic strategy, have accentuated the impact of the world recession and have made conditions here worse than they would otherwise have been.

While it is true that the rate of inflation has been reduced, nevertheless, as many noble Lords have said, it has been achieved at a very considerable cost. As my noble friend Lady Seear said, we of course welcome the fact that the rate of inflation has been reduced, but we deplore the cost that has been found necessary in order to achieve it. Production is 13 per cent. down over the period of office of the Government, profits are down 60 per cent. There has been a considerable loss of competitiveness, though to some extent that has been retrieved by the recent fall in the value of the pound. As the noble Lord, Lord Hatch of Lusby, said a minute or two ago, manufacturing output has been reduced by nearly 20 per cent. There has been a lack of investment, especially in public services. In 1982 central and local government investment was running at less than one third of the 1970 level; and that is a very considerable reduction.

Then of course there are the 3 million unemployed, to whom, naturally and rightly, reference after reference has been made this afternoon. Unemployment—and here I pick up a phrase used a few moments ago by the noble Lord, Lord Hatch, and earlier by other noble Lords—has consequently had the effect of creating two nations within the country: those with work, and those without work. The noble Lord, Lord Wells-Pestell, has reminded us how difficult it is for those of us who have not experienced unemloyment, or who are not now experiencing it, to put ourselves in the position of those who have or who are.

It is in that situation that we have found that taxation, far from decreasing, has been increased, as the noble Lord, Lord Cockfield, himself said in justification of Government policies against another charge; and the noble Lord, Lord Stewart of Fulham, emphasised that fact. A married couple with two children, earning three-quarters of average earnings, have had a real increase in taxation since 1978–79 of 17 per cent. The same size of family on average earnings have had an increase in taxation of 14½ per cent. A family on twice average earnings has had an increase of 9½ per cent. Your Lordships will see how the higher one goes, the lower is the increase in taxation. All of those groups have had an increase in taxation—but not the next one that I shall mention. A married couple with two children, earning five times average earnings, has had a cut—I repeat, a cut—in taxation of 6½ per cent.

Social security benefits—and I think that this is undeniable—are in the main lower than they would have been but for the Government cuts. About £2,000 million has been deducted from the annual budget for social security by the cuts which the Government have introduced, with the result that almost every group of claimants is worse off than it was three years ago, in spite of the 2 per cent. over-estimate of inflation which the Government made in fixing the rate of benefits for last November. Nine million pensioners are worse off because of the break of the link with earnings; invalidity pensioners for the same reason, because of the 5 per cent. abatement, are worse off. The unemployed are worse off than they would have been because of the 5 per cent. abatement. There have been cuts in children's additions for the unemployed and the sick, and no increase in child benefit to compensate; and child benefit itself is below its 1979 level.

The numbers on supplementary benefit, now something like 6–1 million, a record level, show an increase of 1¾ million since 1979—the biggest rise since the welfare state began. And there are 1¾ million children living in families where the breadwinner claims supplementary benefit. Then, there is the question of the personal social services—and the noble Baroness, Lady Ewart-Biggs, referred to this and in particular to the position of married women. There is the position of the elderly and the need for an increase in domiciliary services because of the increase in the number of very elderly people. There is no doubt that that provision is not keeping pace with the need at the present time.

Finally, there is a decline in the relative position of families with children. The percentage increase in the proportion of income paid in tax and national insurance between 1978–79 and 1982–83 has been, for the single person, 4.5 per cent.; for the married couple with two children, 11.3 per cent. That is continuing a trend which was going on before.

The position of families with children has been deteriorating relatively to the rest of the community. I think it is clear from what I have said that, whatever we may think about Government economic policies, they are pressing very harshly on some. Owing to wages outstripping inflation, there is a tendency for living standards for many people to rise at the present time; but not for the unemployed, not for the poorest. And I think that there is a danger of our developing what my noble friend Lord Beaumont described as an under-class. He borrowed that phrase earlier on in our debate from Professor Dahrendorf. What he said was echoed in what the noble Lord, Lord Hatch of Lusby, was saying and echoed also in an article in the Guardian this morning by Peter Jenkins, who said: If things go on as they are, the problem will arise of how to govern a society which banishes a substantial minority of its citizens into a sub-society of the useless and the poor, inhabiting the derelict areas of the old cities and the centres of industrial decline, poorly housed and inadequately looked after, without economic prospect, social future or political hope". I think that what he said there is something that we ought to ponder very seriously.

My noble friend Lord Diamond explained at the beginning of our debate what the alternative would be that his party and my party together would seek to put forward. He made clear it would involve a stimulation of the economy—a controlled, collective stimulation. This would be linked with an incomes policy to which my noble friend Lady Seear was referring when she spoke; and we would have, within that incomes policy, a substantial element of profit sharing and industrial partnership. And if there is to be tax cutting, then it would be in the sphere of VAT and national insurance surcharge that we would seek to see that take place. Within the package there would be certain measures designed to deal with this problem of poverty—an increase in child benefit, the removal of the 5 per cent. abatement and the payment of the long-term supplementary benefit to the unemployed.

These would be some of the things in that package, as my noble friend Lord Beaumont made clear in his speech. We would regard those as just the first steps that have got to be taken because in the long term we want to see a complete reform of the tax and social security system, indeed the merging of those two; and, through that merged system, to secure that measure of redistribution which the facts that I outlined earlier demand.

We agree with the terms of the Motion before the House, hut we differ from the official Opposition over some of the ways in which we would seek to tackle the present situation. We agree with them that there is a need for a stimulation of the economy, and a need to turn up the tap. We fear that they would turn the tap too far, and we think that if they were to turn the tap too far and they do not have an incomes policy, it would land us back (as my noble friend Lady Seear said) in inflation, the inflation we want to avoid. We do not want—and I believe they would—more nationalisation. We would not seek import controls which is no policy for a country so dependent upon world trade; and we would not want withdrawal from the EEC, which we believe would put a barrier between ourselves and our largest market, to our disadvantage. To conclude, while we do not agree with all the solutions put forward by the Labour Opposition and while we have our own carefully worked out alternative, we fully support the terms of this Motion which has been proposed from the Labour Benches today.

8.8 p.m.

Baroness Jeger

My Lords, I think we would all agree that the noble Lord, Lord Wells-Pestell, has put the whole House in his debt today. He speaks not only with compassion and sympathy, but with a practical knowledge of the subjects which we have been talking about today. I am sure that, whatever opinions noble Lords hold about these problems, they will agree that it has been a very useful exercise and that we are grateful to my noble friend for giving us this opportunity. The terms of the Motion are drawn so widely that I was reminded of what Ernie Bevin used to say in another place, "Coo! We've 'ad a bit of a tour dorizon". We certainly have—from the economic situation of the world to the individual problems of many of the disadvantaged in our society. It would be intruding on your Lordships' sleeping time if I were to go into detail on every point that has been raised.

There are one or two themes that I should like to draw together. It seemed to me that from various sides of the House there has been an emphasis on the accidental circumstances in which we find ourselves. The noble Lord, Lord Cockfield, very eloquently referred to the world situation and to the problems of which we have to be a part. But what we were trying to say from this side of the House—and I thought my noble friend Lord Wells-Pestell made it clear—is that, while we accept the problems that come to us from international sources, we must not use them as an alibi for every mistake we make in our economic and social policies. We must establish our priorities within the room for manoeuvre which we certainly have in our free democracy and in an economy, may I say, blessed with the bonanza of North Sea oil and with rich reserves of human and material talent, including—and I was glad that my noble friend Lady Ewart-Biggs referred to this particularly—the under-use of the resources of women's contributions to society.

Our problem seems to me to be more one of redistribution, as the noble Lord, Lord Beaumont, said, and of the need for us to decide—as any housewife has to decide within the money in her purse—what should be done with our resources. Our criticism of the Government to a large extent tonight is that we do not feel that they are making the best use of what there is so far as many of the under-privileged people in our country are concerned. We all agree that the Government, contrary to their election promises, have taken more from the people in the way of taxation, and it may seem strange for someone from this side to be complaining about that. But our query is: From whom have they taken it? We feel that the proportions of taxation have been totally wrong.

I must also comment on something else that the noble Lord, Lord Cockfield, said: he said that the state does not consist of a few hundred politicians. Of course, it does not. The state consists of the whole community. Decisions, he said, would be better if made by the people most concerned. So I wonder what this Government are doing to local government and the decision-making powers of people who they apparently regard as not part of the state. He also said, "We want less controls". That is what Rachman said to the sanitary inspector. That is what Victorian factory owners used to say to the factory inspector: "We want less controls". In this very complicated situation in our country, with a large population, with all kinds of environmental pressures and technological developments, we have to live closer together and we cannot get a decent environment unless we are prepared as individuals to say sometimes that there are controls which are needed. Therefore, the whole community and the whole environment can be improved for the rest of our people.

I must refer to the question of the tax revenue, again briefly, because I do not understand much about it and my noble friend has spoken so eloquently—and he can count! I have some figures from the OECD which said that in 1978–79 the tax revenue in this country was 34 per cent. of our gross national product. By 1981 it had gone up to 39.8 per cent. That is bad enough in itself because it is contrary to the Conservative promises; but we have to add that VAT has more than doubled, and that a married couple now begin paying tax on a gross income nearly £5 a week lower in real terms than they would have done in 1979. This is our criticism, not against public expenditure as such or the raising of taxation, which every Government have to do, but against the way that the burden has been shared. We have to add to this that national insurance has increased by 40 per cent. National insurance is a form of direct taxation, and when we are talking about the tax burdens on our people we should surely add the national insurance increases to them. The Tory manifesto, on page 8—I give the page for ease of reference—says: The State takes too much of the nation's income; its share must be steadily reduced". That is a broken promise which I hope Darlington will notice. There has been a 4.5 per cent. increase in public spending since 1979, although we were told it was going to be reduced—a reduction which we did not support—and we have to ask: Where has the increased public expenditure gone?

I am informed that £5,000 million of it has gone in keeping the unemployed idle instead of investing in necessary work. I was very glad to hear that the sewers had collapsed in Oxford and in Cambridge, because nobody cared when they collapsed in Manchester and Liverpool. I hope that now there are holes in the roads and broken sewers in Oxford and Cambridge a number of noble Lords will be so inconvenienced that they will think it better to pay people to repair the sewers rather than give them money to stay at home doing nothing.

In the Chancellor's autumn statement he confirmed that the total taxation as a proportion of national income rose to 40 per cent. in 1982. So we now have the situation—and the noble Lord, Lord Banks, who knows so much about these matters made the point—that a single person with three-quarters of average earnings has had his tax increased by 7.5 per cent.; but as for the richer person, the bigger his income the less is the proportion of tax increase. This is our criticism: the way in which this burden has been so unfairly shared.

I must emphasise that the Government have had choices, even though under all the restrictions of outside influences. What have they done? I shall not run through the whole list, otherwise noble Lords may think that we are all at Darlington. The Government abolished the earnings-related benefit for the unemployed, which was a serious blow. They kept unemployment benefit 5 per cent. below the payments needed to keep pace with inflation, and that has been going on for three years. They brought benefits into tax. They have invented this grotesque statutory sick pay system which means that a worker for the first eight weeks of illness is supposed to collect his sick pay from his employer, and nobody has made clear to any of the workers with whom I have discussed this matter what happens if someone has a rotten employer and is sick for eight weeks. The man is supposed to go to court. He is supposed to take his employer to court to claim the eight weeks' sick pay which in previous times he received through his national insurance contributions. We are not talking about fancy money; we are talking about the insurance money for which this man has paid his contributions.

This is nothing to do with a world recession. This has nothing to do with unemployment in Timbuktu, or even with the price of oil. It is just a part of the Government's theology: the harder one can make it for people to get their rightful benefits, the better. In this connection, I must say that I have seen several letters from employers who do not like it, either. They do not like the interference with their cash flow and they do not like the paperwork. Several firms are advertising to help other firms to get the system right because it is so complicated.

I also very much regret that the link with earnings was broken in assessing pensions. We have promised to restore that. At present-day prices a married couple on their old-age pension would be getting about £2.25 a week more if the link with earnings had been kept. I know that the Government insist that they are at least keeping the value of pensions because they have linked it to the retail price index. But any of us who have studied this question at all know that there is a serious imbalance between pensioner household expenditure and the retail price index. The retail price index includes many items that old people never buy. Most of them have not benefited from the reduction in mortgage rates. They do not spend a lot of money on petrol, or fur coats. or many of the elements in the retail price index. Many of them do not feel that their old-age pension is keeping pace with expenditure because the things that they spend their money on—their rent, heating and food—are not properly reflected in that index.

I want to be fair to everybody. I could not help but look again at the Conservative Manifesto. I was very interested in a paragraph at the beginning which was signed by the present Prime Minister, in which she says: For me, the heart of politics is not political theory, it is people and how they want to live their lives". That is a very fine statement. I can tell the Prime Minister how they want to live their lives. First of all, they want a home in which to live their lives; and the housing programme of this Government has been a disaster, as my noble friend Lord Hatch pointed out. Their housing programme has been the lowest since 1947. They want enough money to live on if they are out of work or ill, and several speakers have shown that the benefits have not been keeping pace with rising costs; otherwise we should not have a record number of people on supplementary benefit. Supplementary benefit was supposed to be the safety net and not the automatic topping-up which it has become for thousands of our people.

I calculate, subject to correction, that child benefit would need to be raised by at least 60p a week to stand still at 1979 values. Also, I must say to the noble Baroness opposite, whom I much admire for so many reasons, that when she was talking about investing in our children, I wish that she would try to use a little of her charm and persuasion on her noble friends to do something about raising child benefit, because an increase in child benefit would be the best investment in our children—

Baroness Faithfull

My Lords, may I just make a comment? It is true that child benefit was not raised as much as we all wanted last year, but it was raised last year.

Baroness Jeger

My Lords, I will just repeat what my noble friend behind me has commented: "Not enough". Having decided that the Prime Minister wants people to live their lives as they want to live them, with enough money, with a home and a job and with care for their children, I think that the Government opposite have fallen far short of what was promised.

But I do not want to end on a grumbling note—I cannot think why, but I will not do so—because I believe that what we are all seeking is some way of working things out together. What we certainly cannot do is to return to the sort of Victorian stratified society of "Upstairs, Downstairs"—of class, privilege and all the terrible problems which existed in those days. We all know about Forster's Education Act and that Shaftesbury did much good work, and of course we know that the Prime Minister did not mean that she wants young boys to go up chimneys or women to go down the pits; but there is really rather an abrasive undertone to some of her statements on this matter.

Poverty—and let us all try to do something about it—is comparative. It is no good comparing people today with the unemployed in Victorian times and telling them that they are a lot better off than they would have been in the 1880s. It is no good thinking that children, because they do not have to go without shoes or are not actually starving, do not feel poor. Poverty is how people feel, and a child feels poor if in its classroom at school it has to live differently from other children. The same goes for adults, and there is a human pride about this which I am sure we should all recognise and not run down. Now we have everybody surrounded with an atmosphere saturated with advertising, with people demanding higher standards and feeling poor if they are not able to share comparably in the good things of life with those around them.

We ought to be able to work these things out together. We have a natural sense of social responsibility in this country and we are very lucky that that is so. But we have to keep the social wage high enough for people to feel no sense of deprivation; we have to stop telling a man with one leg to stand on his own two feet. We must somehow stop going further along this divisive path of two nations. We are a decent people and a socially responsible people, and we must all concentrate on trying to get rid of those things which disfigure our society. Many of the things that have been mentioned in our debate today are unnecessary and are not the fault of external affairs: they are the fault of a philosophy which I do not think all of us in this House can support.

I mentioned housing, but I forgot to say one thing which I should like to add. Much has been said on the theme of people being independent and not depending on the State. I looked up some figures and found that the average subsidy for home-owners with a mortgage is £417 per household per year. The average subsidy for public sector tenants is 184 per year. So people may well ask, "Who is subsidising whom?" I mentioned that only to show how we have got to progress as an integrated society and that the jealousies and the bullyings which seem to come from some quarters are not helpful because they do not take us forward into a better, a more egalitarian and a more friendly society.

8.27 p.m.

The Parliamentary Under-Secretary of State, Department of Health and Social Security (Lord Trefgarne)

My Lords, during the course of this debate many noble Lords on the Benches opposite have spoken with eloquence and compassion on the plight of the poor, the unemployed and the most vulnerable groups in our society. As a Minister directly responsible for the conduct of policy in the Department of Health and Social Security, I share that feeling of compassion. I, too, consider our current unemployment figures tragically high and I, too, wish to see greater provision made for the sick and the elderly. However, I cannot share—indeed I wholeheartedly reject—the old and tired conviction that excessive and unwarranted public spending is a route appropriate to the desired objective. Indeed, the short-term boost to output and employment which can be obtained by this process would only be dissipated into higher inflation and the loss of jobs. Ultimately, the quality and the quantity of social provision that our society can make depends on what we, a trading nation, can earn in competition with our industrial neighbours in the rest of the world. In other words, the growth in domestic resources depends on how much more we can profitably sell in markets at home and overseas.

Some noble Lords are once again advocating reflation as the key to higher levels of output and employment. Once again, short-term expediency dominates their thinking on economic policy. Have they already forgotten where such policy led in the past? Between 1970 and 1980 real output grew by only one-twentieth of the growth in money GDP. Have they forgotten that in the post-war period resorting to the printing press to finance public expenditure drove average inflation ever upwards with each successive Government: 3¼ per cent.; 4¾ per cent.; 9½ per cent.; 15½ per cent. Your Lordships will not have forgotten that the total lack of fiscal prudence displayed by the last Labour Government drove this country cap in hand to the IMF.

But these policies did not provide a lasting solution to unemployment. Instead it too, crept insidiously upwards,: one third of a million, half a million, three-quarters of a million, one and a quarter million. It is hardly surprising that in the 46 months this Government has been in office it has not as yet been possible to repair the damage done by 30 years of excessive wage increases, rising prices and the rising unemployment which followed in its train.

Even as our policies are beginning to establish the conditions for a sustained improvement in output and employment, we have heard again the cry for a return to the bad old ways. Noble Lords opposite do themselves as disservice, if I may say so, and practise a cruel deception on those who are currently unemployed, when they claim that they can reduce unemployment below 1 million over one Parliament. The means by which they can achieve this is the national economic assesment, which we have seen. Let me offer your Lordships an independent assessment of these policies—the London Business School's asessment, of which the noble Lord, Lord Diamond, spoke with approbation. They said: if unions and financial markets act to support these policies, then unemployment falls by about one-third million and inflation reaches only 11 to 12 per cent. If not, then unemployment rises slightly as inflation accelerates to around 17 per cent. Undoubtedly, on past experience, the latter result is far more likely than the former.

The noble Lord, Lord Diamond, supported by his noble friend Lord Chandos, claimed, unwisely I think, that he and his colleagues in the SDP offered some credible alternative. I fear not. The SDP document Budget for Jobs and Industry is claimed to be, as the noble Lord said, "moderately expansionary", and designed to, create up to a half-million new jobs in its first year". On closer examination, however, we find that not only does the Alliance's latest document lack consistency with earlier pronouncements, but it blurs the difficult decisions.

Earlier pronouncements by the Alliance on incomes policy receive no mention. They were just touched on by the noble Viscount today. Monetary and exchange rate policies are only vague aspirations. The full-year cost of its proposals—perhaps, £6 billion or £7 billion—are now nearly twice what was previously claimed to be sufficient to achieve a similar reduction in unemployment.

The weaknesses of the Opposition's proposals are that it is wrongly assumed that our economic problems stem from a shortage of demand; but the real difficulty lies with supply. Consider the period since the second quarter of 1981. Real domestic demand has increased by around 3½ per cent., but real output by nearer 1 per cent. This poor performance is the result of our lack of competitiveness occasioned by earlier excessive wage increases—and by the weakness of overseas demand, for which higher spending and borrowing at home can hardly be expected to compensate—

Lord Beswick

My Lords, would the noble Lord allow me to intervene? If we were as uncompetitive as that in 1981, how does the noble Lord account for that remarkable export record which his noble friend was talking about at the beginning of the debate?

Lord Trefgarne

My Lords, that is what makes it so remarkable that we have been able to achieve that performance, in spite of the difficulties that I have described. We need a framework which provides room for growth in real demand, while establishing conditions which allow inflation to fall. That framework is provided by the medium-term financial strategy, and by the detailed measures that we are taking to improve incentives and make markets work more effectively.

It has been claimed—and the noble Lord, Lord Wells-Pestell, referred to this—that the "true" level of unemployment is much greater than the official figures, and that the Government are somehow fiddling the statistics. Various figures have been quoted, claiming that unemployment is over 4 million and, according to some, even over 5 million. But I wonder who really is fiddling the statistics. Those claims are considerable exaggerations, relying heavily on an assumed 1 million fall in the labour force between 1979 and 1982. They include, too, those benefiting from special employment measures, who are most certainly not unemployed. This latter, so-called "adjustment" to the official statistics is clearly inappropriate; while the former simply is not corroborated by the most recent statistics. Between 1979 and 1982 there was, indeed, a small reduction in the labour force, due to lower "activity rates", but this was insufficient to offset increases in population. In consequence, the labour force actually grew by about a quarter of a million.

The real issue, however, is what policies are likely to improve our national prospects. We must wait until next week for the statement on the economic outlook, which accompanies the Budget statement. But I can assure your Lordships of one thing. The unswerving objectives of this Government, since first we came to office, have been to achieve a sustained improvement in the economy through lower inflation and the promotion of initiative and enterprise, and that will continue to be so. Our medium-term objectives are to keep United Kingdom monetary and financial conditions sound, and to maintain lower inflation. Low inflation and improved employment prospects go together. They are not alternatives, as some still insist. The essential preconditions for sustainable improvements in employment prospects are a balanced approach to fiscal and monetary policies, along with lower pay settlements.

But we fully recognise that we are in a period of transition. That is why we have substantially increased spending, to alleviate the impact of unemployment on especially vulnerable groups. As my noble friend said in his opening remarks, we plan to spend £1½ billion on special employment and training measures in 1982–83, and £2 billion in 1983–84. But, in the last analysis, an improvement in our employment prospects depends on sustaining higher levels of economic activity. This can be achieved only by the sustained application of policies to create lower inflation and lower interest rates, both now and in the longer term.

Looking at our economic prospects this year, we must, of course, await the Chancellor's Budget forecast. But following the disappointments in 1982—particularly in world output and trade—we can reasonably expect a modest improvement in both output and demand. Manufacturing output levels last year were, undoubtedly, disappointing, but output in the consumer goods industries has recently been holding up well. This reflects higher levels of consumer expenditure, which in turn, in part, reflect the substantial progress made on inflation during last year. Inflation and interest rates are now substantially lower than they were a year ago, and this, coupled with the expected higher world output and a lower effective exchange rate, should encourage a further modest recovery in 1983. Furthermore, these factors, coupled with improved productivity and competitiveness, are providing a sounder base for expansion in the medium term.

May I now turn to just a few of the points that have been raised during the course of the debate tonight? I would not wish to detain your Lordships unduly at this late hour. The noble Lord, Lord Wells-Pestell, referred to the report of the Association of Directors of Social Services. He suggested that, even though social services departments were not, in general, reporting cuts, standards of care were below what a civilised state should tolerate. But Ministers have consistently urged local authorities to concentrate the resources available to them on the primary services, notably the personal social services for vulnerable groups. Over the past four years, since 1978–79, total local authority spending on the personal social services has increased by 9 per cent. in real terms.

The noble Lord, Lord Beaumont of Whitley, referred to the question of long-term supplementary benefit for the long-term unemployed. Since November, 1981, the long-term scale rate has indeed been payable to unemployed men aged 60 and over who have been unemployed for 12 months. This is considerably more than was done by the previous Government. The Government are, of course, aware of the arguments for extending the long-term scale rate to unemployed people more generally. Any extension of eligibility must, however, compete with other claims on the additional resources which would be needed, and no commitment, I fear, could be given at the present time.

The noble Lord, Lord Harris of High Cross, referred to efficiency in the provision of public services. I take that stricture to heart, but this is a field in which the Government have indeed made some progress, particularly, for example, in the National Health Service; and I answered a Question from my noble friend Lady Lane-Fox about that the other day. My noble friend Lady Lane-Fox herself raised the question of help to inner cities. Again, my noble friend Lord Bellwin answered a Question from another of my noble friends, Lord Gainford, on 8th February, and any noble Lord who is particularly interested in that matter might address himself to that Answer.

The noble Lord, Lord Stewart of Fulham, referred to the increase in prescription charges from 1st April 1983. What I think was not apparent from what the noble Lord said was just how wide are the existing exemptions from these charges. Some 70 per cent. of prescriptions are dispensed free of charge. Exemptions include the elderly, those on low incomes and, of course, children. Over and above that there are the facilities for season tickets. The Government believe that, where the user can afford it, then he or she should bear a reasonable amount of the cost.

The noble Baroness, Lady Jeger, referred in her closing remarks to the preferred option, as she saw it, of the link with earnings rather than the link with prices with regard to pensions. The noble Baroness indicated that that would allow pensioners another £2.25 in their weekly pension. That may be so, but I would remind your Lordships that that increased pension would have to be paid for. I cannot off the top of my head calculate what that would cost in total terms, but it would be a very substantial amount indeed which would have to come from those presently in work and from their employers. The noble Baroness also said that she would have preferred the pensioners' price index to be used rather than the retail price index. Over recent years, pensioners would have been less well off had we used the pensioners' price index instead, so from their point of view I am not sure that that would have been a wise procedure.

I said at the outset that I, too, deplore the present level of unemployment which is of course a tragedy for those concerned, but in the context of the rising inflation which we inherited and the subsequent decline in world trade we could have averted this only by reverting to the failed policies of past years. For example, we might conceivably have achieved some very short-term relief by even more massive support and subsidy of the public sector and of declining industries, but the long-term result of such folly would have been a swift return to the old spiral of inflation and unemployment rising hand in hand. Instead, we chose the path of sound financial and fiscal management which is now just beginning to bear fruit.

In the meantime, we have been concerned to ensure that the most vulnerable groups in our society are protected. As my noble friend said, we have honoured our pledge to maintain the real value of pensions. Supplementary benefit, which provides the basic income for our very poorest, has been raised fully in line with prices in the four years up to November 1982. The Christmas bonus, which the Labour Government did not pay in 1975 and 1976, has been paid every year since we came into office and has now been enshrined in statute. Help with heating costs has been extended and increased and we are now spending £325 million in this area—vastly more than our predecessors did. Disabled people, too, have been helped. For instance, the mobility allowance has been increased by no less than 83 per cent. and has been made non-taxable. The attendance allowance has been fully protected against prices. In total, social security expenditure on the long-term sick and disabled has increased by 5 per cent. in real terms and now amounts to no less than £3.4 billion.

Turning to the National Health Service, we have increased expenditure from £7¾billion in 1978–79 to a planned level of £15½ billion in 1983–84. Spending is now at a record level, having increased 16 per cent. faster than inflation. The growth in services for the National Health Service as a whole is about 7½ per cent. for the same years.

The Motion before your Lordships is proposed by noble Lords whose record, by contrast, is one of ignominious failure. Now they come before your Lordships offering another dose of the same useless medicine and presuming to criticise this Government for turning away from the old, disastrous policies to a new era of sound finance, lower inflation and increasing prosperity. We can justly claim that after the worst world recession in half a century the sky is beginning to lighten and that the future is bright. Inflation is down, interest rates are down, productivity is up and there are even some straws in the wind on unemployment. If your Lordships will forgive another metaphor, we are passing through the last reef into the lagoon beyond. What folly it would be to let go of the tiller now. I ask your Lordships to reject this ill-conceived Motion.

8.45 p.m.

Lord Wells-Pestell

My Lords, I am glad that it has been possible on this very serious issue to have what I think might be described as an agreeable debate. In saying that, none of us has lost sight of the fact, whether or not we are in favour of the Motion, that it is a matter which needs to be aired from time to time. I have no desire to exercise my right to address your Lordships at any great length, but there are three or four small points I should like to clear up.

The first I direct to the noble Lord, Lord Cockfield. The noble Lord perhaps misunderstood me when at the very beginning I complained bitterly about the way in which the £4½ billion was distributed to taxpayers. I believe the noble Lord said that it was not the Government who did this—that it was the citizens' money. The point I wanted to make was that, whether or not it was the citizens' money—and obviously it was the citizens' money—the Government decided how that money was to be spent. In that sense I hold the Government responsible. The point which I tried to make, although probably I did not make it very clearly, was that I believed it should have been incumbent upon the Government at that particular time to direct their refund or their reduction in tax in a different way, so that poorer people would obtain greater benefit.

Secondly, the noble Baroness, Lady Lane-Fox, referred to the fact that the Government have brought down the rate of inflation. That is perfectly true. However, the thought I want to leave with her is that when we went out of office in 1979 the rate of inflation was 10.3 per cent., but withing two years that figure had gone up to about 20 per cent. Since then it has come down very substantially, but the point I want to make is that although when we left office the rate of inflation was 10.3 per cent., unemployment in this country was far less than half what it is now. If I had to choose between a reasonably high inflation rate of 10.3 per cent. and only half the unemployment which we have now, and our present situation, I should opt for the higher inflation rate.

The noble Baroness, Lady Faithfull, questioned something I had said by mentioning that she had a copy of a cutting from the Guardian. What the noble Baroness ought to have done was to have continued reading it. She ended by saying that the spending cuts in Britain's social services "have stopped." If the noble Baroness had read the cutting a little more carefully she would have seen that it says, "have almost stopped". That is not quite the same thing. And had the noble Baroness continued—we must have the same cutting—she would have read: Some of the standards of care that we are able to offer are well below those which a rich, civilised society should tolerate. Many of our old, mentally ill and handicapped people live in local authority accommodation which is sub-standard or inadequately staffed. Many parts of the country have such scarce domiciliary services that people are admitted to institutions or hospitals or stay in these places purely on the ground of economics". My final comment is directed to the noble Lord, Lord Trefgarne. I do not believe that I said (though I shall check it tomorrow in Hansard) that the Government had fiddled the unemployment figures. I said that the real figure, I believe, is 4 million. I did not use the word "fiddled". Although I can check that point tomorrow, I am not terribly worried about it.

I want to thank all Members of the House who have taken part in this excellent debate. We finish where we started: with profound disagreement on both sides and with no ground gained—or lost, for that matter. I thank your Lordships for the agreeable debate that we have had, and beg to move the Motion standing in my name.

8.50 p.m.

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

Their Lordships divided: Contents, 51; Not-Contents, 82.

DIVISION NO. 1
CONTENTS
Airedale, L.	Kilmarnock, L.
Bacon, B.	Kirkhill, L.
Banks, L.	Llewelyn-Davies of Hastoe, B.
Beaumont of Whitley, L.	Longford, E.
Beswick, L.	Lovell-Davis, L.
Birk, B.	McGregor of Durris, L.
Bishopston, L.	Milford, L.
Blease, L.	Milner of Leeds, L.
Boston of Faversham, L.	Ogmore, L.
Briginshaw, L.	Oram, L.
Bruce of Donington, L.	Peart, L.
Chandos, V.	Pitt of Hampstead, L.
Chitnis, L.	Ponsonby of Shulbrede, L. [Teller.]
Cledwyn of Penrhos, L.
Collison, L.	Seear, B.
David, B. [Teller.]	Simon, V.
Diamond, L.	Stewart of Alvechurch, B.
Evans of Claughton, L.	Stewart of Fulham, L.
Ewart-Biggs, B.	Stone, L.
Fisher of Rednal, B.	Strabolgi, L.
Gaitskell, B.	Tordoff, L.
Hatch of Lusby, L.	Underhill, L.
Houghton of Sowerby, L.	Wade, L.
Jeger, B.	Wallace of Coslany, L.
John-Mackie, L.	Wells-Pestell, L.
Kilbracken, L.	Winstanley, L.

NOT-CONTENTS
Abinger, L.	Coleraine, L.
Airey of Abingdon, B.	Cork and Orrery, E.
Auckland, L.	Croft, L.
Avon, E.	Cullen of Ashbourne, L.
Belhaven and Stenton, L.	Davidson, V.
Bellwin, L.	De La Warr, E.
Belstead, L.	Denham, L. [Teller.]
Boardman, L.	Dilhorne, V.
Brougham and Vaux, L.	Drumalbyn, L.
Campbell of Alloway, L.	Elliot of Harwood, B.
Carthcart, E.	Elton, L.
Cockfield, L.	Energlyn, L.

Faithfull, B.	Marshall of Leeds, L.
Ferrers, E.	Massereene and Ferrard, V.
Fortescue, E.	Merrivale, L.
Gainford, L.	Mersey, V.
Gisborough, L.	Mottistone, L.
Glanusk, L.	Newall, L.
Glenarthur, L.	Orkney, E.
Gridley, L.	Pender, L.
Hailsham of Saint Marlyebone, L.	Pennock, L.
	Plan of Writtle, B.
Harris of High Cross, L.	Rankeillour, L.
Henley, L.	Renton, L.
Hives, L.	Rochdale, V.
Home of the Hirsel, L.	St. Aldwyn, E.
Hylton-Foster, B.	St. John of Bletso, L.
Ingrow, L.	Sandford, L.
Kilmany, L.	Sandys, L.
Kinloss, Ly.	Skelmersdale, L.
Kintore, E.	Stamp, L.
Lane-Fox, B.	Stodart of Leaston, L.
Lindsey and Abingdon, E.	Strathcarron, L.
Long, V.	Swinton, E. [Teller.]
Loudoun, C.	Trefgarne, L.
Lucas of Chilworth, L.	Vaux of Harrowden, L.
Lyell, L.	Vivian, L.
Mackay of Clashfern, L.	Wakefield of Kendal, L.
Mansfield, E.	Windlesham, L.
Margadale, L.	Wynford, L.
Marley, L.	Young, B.
Marsh, L.

Resolved in the negative, and Motion disagreed to accordingly.