The Economy and Industry

HL Deb 01 August 1984 vol 455 cc797-862

3.7 p.m.

Lord Diamond

rose to call attention to the lack of confidence in sterling, to levels of industrial production, to the state of the nation's infrastructure and to the measures required to improve living standards and restore a stable society in the United Kingdom; and to move for Papers.

The noble Lord said: My Lords, on behalf of the Alliance, I beg to move the Motion standing in my name on the Order Paper. It is our hope that we are in this way providing an opportunity for a wide-ranging debate—an end of term debate—that we hope is felt to be timely. Although I myself will certainly not attempt to cover the whole ground, I am sure that we on these Benches shall between us make a number of important points and suggestions, with perhaps a modicum of criticism. But before making any criticism, may I say to the Government a warm "Thank you" for providing the time, and express our great appreciation to them for providing two such eminent Ministers to share in our debate.

As there is so much ground to cover I will, if I may, rely in part on previous speeches. Only last week the noble Lord, Lord Bruce of Donington, set out a number of salient statistics—and I am very grateful to him for having done so—which show that by comparison with 1979 (that is, covering the present Government's continuous five-year period of office) inflation was down, but so too was the value of sterling, the rate of saving, the output of our manufacturing industries and investment in them—all after five long years.

The noble Lord could have added that from 1950 until the start of this year there was no improvement in the average standard of living. But as we all know, the outstanding difference is the two million rise in unemployment, with more than one million long-term unemployed and approximately one million people under the age of 25 unemployed. The figures are still rising and so is crime. There is increasing evidence that the two are connected, as one would expect, especially among the young. This is a most serious development which we ignore at our peril.

In a speech last year I explained that we were not blaming the Government for the whole of the 2 million increase. I suggested that it would be fair to apportion one-half to the Government's policies and the other half to the effect of the world recession. I gave chapter and verse for that view, and I prayed in support three international committee reports. In a speech this year, in March, I set out all the figures to show that we were not maintaining the nation's infrastructure and still less providing for enormous accruing liabilities. Therefore, in short, apart from the fall in inflation, we have had five wasted years; and on unemployment we are confronted with a tragedy of huge dimensions. That is the intolerable cost the nation has suffered from the manner in which the Government have tackled inflation. For inflation still means too much money chasing too few goods and the remedy is to reduce the supply of money and increase the supply of goods—to do both.

However, the Government have concentrated exclusively on reducing the supply of money and that is why I claim justification in calling it "narrow monetarism". That is why the noble Lord, Lord Bruce of Donington, was moved last week to say that any fool could halve inflation at that cost. In this situation it is not surprising that the outside world's confidence in us is at a low ebb. The evidence for this is to be found in the continuing slide in the value of the pound, in the big drop in the stock markets, in the price that foreigners are prepared to pay for British Government bonds—I believe that the dollar price at the moment is the lowest for eight years—and, above all, in the two successive rises in interest rates.

We now have a real rate of interest—I am sure we all understand that—namely, the difference between the nominal rate of interest and the rate of inflation: what a borrower really gets back, not in money terms but in real terms, out of his loan. We now have a real level of interest which is higher I understand than it has been for centuries. I believe we have to go back to the Middle Ages to find a parallel.

However, we on these Benches must not underrate the inventiveness of this Government. They have invented a new alibi. As it has become impossible after this length of time to continue to maintain that everything that is good is due to the Government's monetary policy and everything that is bad is due to outside influences—the world recession—the Chancellor of the Duchy of Lancaster has now put out a new line. Everything, he said, was going well until we were caught up in the wash of the American speed boat and had, as a result, to put up interest rates twice in seven days.

That excuse will just not wash. The fact is that we have lost the outside world's confidence in sterling. The double rise in interest rates was merely the outward sign of the inner weakness and had little to do with the United States. What it had to do with was the worrying trend in the money supply figures. It had to do with the situation in the mines and the docks; it had to do with fears about oil prices; it had to do with daily lawlessness, and of course no other currency was similarly affected as would obviously have been the case if this was due to the United States.

It was important for the Government that the alibi should be invented because otherwise their policy is seen to have failed—as indeed it has. This is no hiccup in an orderly ascent to higher living standards. It is, I fear, the beginning of the end of the cyclical movement away from recession, an automatic movement which has been hampered by the dead weight of narrow monetarism. The prospect now is for a lower rate of economic growth and a higher rate of inflation, especially with the increase in mortgage rates. I imagine that investment will be heavily discouraged and competitiveness undoubtedly will be damaged. Most of the cyclical factors now point downwards, and with the long-term effects of the coal strike still to be felt we can expect a continuation of the present high interest rates and some increase in the public sector borrowing requirement. Above all, unemployment is likely to rise even further.

As a result of Government policies, the world recession has bitten deeper in the United Kingdom than elsewhere and recovery has been less marked. It is indeed a dreary prospect, for confidence, which has been slow to crumble, is even slower to rebuild. I ask myself: what is the Government's response to this great challenge? The answer I find is that they think it right to turn their back on all those problems and to concentrate on selling off the family silver. It is difficult to think of anything more irrelevant. Not only that, they use the proceeds from selling the family silver for the weekly housekeeping. It is difficult to think of anything more irresponsible.

The Government pursue privatisation with ever-increasing abandon. Not for them the discipline accepted by all other governments that if you want great change you have the responsibility of proving the need for it and to justify it. No, you avoid all that by producing the myth that there is a presumption that denationalisation works wonders. If a nationalised industry performs better after denationalisation, you must not inquire whether that was likely to have happened in any event. You do not have to show that the improvement was due to the fact of denationalisation, you simply presume that it was.

That may satisfy a Government desperately trying to clothe a naked dogmatism with the outward appearance of respectability, but it does not satisfy the rest of us. We see how good management introduced into a business in the public sector produces identifiable good results in exactly the same way as good management does in the private sector. I take two examples which will be familiar to your Lordships —Jaguar and British Airways—both still in the public sector. Four Nears ago, a new manager arrived at Jaguar. The figures speak for themselves: in year one, a large loss; in year two, a small loss; in year three, a small profit; and in year four, a large profit. The key is an increase in output per employee of two and a half times—not 2½ per cent.—and all due to everything that we include in the phrase "enlightened management".

The other example, which is equally impressive and equally attributable to the introduction of enlightened management, is British Airways. No one who had the pleasure of listening to the excellent maiden speech of the noble Lord, Lord King of Wartnaby, and his plea for joint participation can fail to be impressed by his humanity and enlightened approach.

It is quite clear that it is nonsense to pretend that you can get good results only in the private sector. It may be right to nationalise in a particular case, as it certainly was in the case of Rolls-Royce—although, as far as I recollect, there was no mention in the Conservative Party manifesto at the time of the intention to do that. It may be right to denationalise in a particular case for compelling reasons. But what cannot be right is to sell national assets wherever you can lay your hands on them in the mad scramble to find the cash to make ends meet.

It cannot be right where there is no possibility of selling off a whole business to pluck out the saleable part, irrespective of the havoc caused to what is left behind. It cannot be right to split an effective undertaking, after 400 years, into four separate, less effective parts and in the process put at risk an important part of the country's defences. It cannot be right to be panicked into selling at what is, I hope, the bottom of the market, no matter how poor the price.

One example of selling irrespective of the damage to what is left, irrespective of the low price and indeed irrespective of the private shareholders' protests, is the decision to sell the family Jaguar, again just to get at the cash. That brings us straight back to the American scene, for Jaguars have been selling very well in the States, and so have many other British products, so much so that we are running a substantial surplus in trade with the United States. Looked at from the point of view of the United States, that is part of the large deficit which it is deliberately running, which the Chancellor is criticising and which is the latest and easiest alibi available to the Government. Nothing could be easier than to say, "Let's blame it all onto the Yanks".

The first obvious point is that far from criticising the Americans, the Government should be thanking their lucky stars that the United States Treasury is happy to be running a large deficit which enables Jaguar cars and other goods to be sold there at a handsome profit. Indeed, those who are clamouring for the United States to put its house in order, as the saying goes, are in fact asking for a reduction in American purchases from ourselves and the rest of the world of some £60 billion a year at present. Whenever that huge deficit is reduced, as it undoubtedly will be, we shall inevitably find exporting to North America more difficult; and no doubt the Government will then claim that the reason for any new economic difficulties is again a factor outside their control—namely, the running down of the United States deficit.

There is much more that I should like to say in support of the Motion, but time will not permit. Perhaps I might have your Lordships' indulgence to say just two other things. The first is to read to you a letter from a friend in Moscow. He writes: I recently went to the cinema to see the film they're all talking about here. It's called 'Freedom in the Capitalist West' and is simply a series of shots of the miners' strike, the picket lines, the bloody clashes with the police, including mounted police, and of course the deaths. I cannot tell you how ashamed I felt at the scenes depicted and the reaction of the Russian audience. It is proving the greatest propaganda victory ever for the Kremlin and has put us back years in the fight for Western ideas. Do the Government understand the enormous damage being done to the reputation of the United Kingdom? If so, how can they continue to turn their back on it? I confess that that was an imagined letter, but it could well have been written, and the conclusion drawn is a true one. In a matter of such importance to Britain and of such immense cost—we know that the cost has been estimated by a firm of well-known City brokers at between £2½ billion and £3 billion per year—no Government can pretend to turn their back or evade their responsibilities.

Finally, I turn once more to the American economic scene, where the combination of monetarism and Keynesian policies—that is to say, both a measure of control of money supply and a measure of boosting the supply of goods—is proving highly successful. With the help of an expansionary fiscal policy and a large budget deficit, there has been a huge fall in unemployment, a great growth in the economy—incomparably greater than our own—a strong dollar, and, in spite of all this and of higher interest rates, no damaging increase whatever in the rate of inflation, which is currently below ours.

I do not claim that the parallel with the United Kingdom is absolutely complete, but what I do say is that we can no longer deny the power of budget deficits, properly handled, to boost economies without giving rise to unacceptable inflationary consequences. That is what the Alliance has argued for so long, and we now see it happening; that is what a number of highly respected Tories have pleaded for; that is what the CBI has required; that is what the Government, in their blind, know-all pursuit of extreme monetarism have spurned, at the cost of so much waste of idle resources, at the cost of so much human misery, at the cost of so many fissures in our society and at the cost of one million rotting lives. My Lords, I beg to move for Papers.

3.28 p.m.

The Chancellor of the Duchy of Lancaster (Lord Cockfield)

My Lords, the noble Lord, Lord Diamond, in the Motion that he moves has set out matters of concern as seen by the SDP. It is important that I should deal with these matters even though I could not always agree with the noble Lord's concerns, with his diagnosis, or with his remedies.

As the Alliance well knows, the course of true love rarely runs smoothly, but neither does the course of economic recovery. There are bound to be cross currents, patches of choppy water and the occasional squall, but no storm is imminent. There are no storm clouds on the horizon. There is no need to change course. It would be wrong to change course. We do not propose to change course.

The miners' strike is a cause for concern, but coal continues to be mined. A third of the miners continue to work. No steel works have been closed. No power stations have been closed. Industry is not short of coal. Stock piles remain very large. The true cause for concern is the damage being inflicted on the mining industry: the violence and intimidation; the denial of democratic rights. These are all causes for concern. But what they call for is reinforcement of our existing policies, not a change in them and still less an abandonment.

The pound was the next subject raised by the noble Lord, Lord Diamond. The pound has fallen in value, particularly against the dollar. Is that a cause for concern? In some respects most certainly yes. But even here we must be careful not to exaggerate what has happened. While the pound has fallen against the dollar it has actually risen against the Deutschmark and has held steady against the European currencies.

The effective value of the pound yesterday stood at 78.5. In March 1983 it stood at 79.1. There has been virtually no change over this period. If we look at the pound in terms of the EMS currencies the position is that the pound in March 1983 stood at 91.8. By the time of the Budget this year it had risen from 91.8 to 99.4 and yesterday it stood at 99.4. So while there has been a depreciation compared with the dollar, against other currencies the pound has held remarkably steady. But of course, as the noble Lord, Lord Diamond, himself says, the weakness of the pound, even where it has occurred, is not an unalloyed misfortune. It is also an opportunity—an opportunity for our manufacturers in export markets and a better opportunity to compete against imports. We must take advantage of our opportunities, not be obsessed by our problems.

May I turn to interest rates? Of course we deplore the recent sharp rise in interest rates. Our domestic policies have been tailored to keeping interest rates down. That is why the PSBR has been set on a downward course. This year it is planned to come down to 2¼ per cent. of gross domestic product. Under Labour it reached nearly 10 per cent. I am not trying to make your Lordships' flesh creep but the noble Lord, Lord Diamond, referred to the record of the Labour Party and I think this is one particular record which is not one to be altogether proud of.

In part, the rise in interest rates is due to irresponsible industrial action in this country which illustrates the damage strikes can do to the strikers themselves, to their people and to the community as a whole. But in large measure the increase is due to the rise in American interest rates. We are responsible for our own domestic policies and we must get those policies right. But we cannot insulate ourselves from the world outside. If interest rates in America soar we cannot entirely prevent interest rates here rising as well. Until recently our interest rates were well below comparable American rates—nearly three percentage points lower for most of this year. But the combination of industrial troubles in this country and further sharp increases in American interest rates have forced our own interest rates up as well. But as Francis Bacon said: Adversity is not without comforts and hopes".

The rise in American interest rates reflects their enormous budget deficit. That budget deficit in turn is reflected in an enormous deficit on their balance of payments. America is offering the finest export market in the world, wide open to all the other countries in the world. It is up to us to take advantage of it. Our exporters are already doing so. Exports to the United States in the first six months of this year were up by 22 per cent.; non-oil exports were up by 31 per cent. That is the way you turn your problems into successes. Let us for a moment forget our penchant for criticising America and turn instead to congratulating our exporters, the companies, the managements and the workers who have contributed to these export successes.

But what about the effect on industrial investment? Of course we should like to see lower interest rates. But what generates investment is the prospect of profit. Profits are rising—up 25 per cent. on a year ago; no less than 40 per cent. up compared with two years ago. Industry is now earning 8 per cent. in real terms on its capital employed—the highest figure for many years. My right honourable friend the Chancellor of the Exchequer's Budget means that the rate of corporation tax—that is the tax on profits—will be cut drastically. The main rate will be cut down to 35 per cent. by 1986, the small company rate down to 30 per cent. right away. This is how you set the stage for profitable, well directed investment; how you ensure that investment decisions are soundly based on economic considerations—not on tax considerations—and how you achieve a proper balance between man and machine. And investment is rising—up 10 per cent. over the past 12 months. In their survey published today the CBI forecast a further increase of 12 per cent. this year and another 7 per cent. next year.

Is our rate of growth in output a cause for concern? It was up 2 per cent. in 1982; it was up 3 per cent. in 1983: the same again, we expect, in 1984. Last year it was the highest in the European Community; this year it is still one of the highest. Total output is now at its highest level ever and higher than in 1979 despite the fact of the recession. This may well be a disappointment for the Labour Party and for the Alliance but it is a source of satisfaction for the rest of us. We have weathered the storm of the recession. We are safely out on the other side.

The noble Lord, Lord Diamond, said that the average standard of living has not increased in this country since 1950. I find it difficult to believe what has led him to that dramatic conclusion. In fact real disposable income has increased by 127 per cent. since 1950. This is of course in real terms. Since the beginning of 1983 it has risen by 3 per cent. The most remarkable thing about the present recession is that real disposable personal income, which is the best overall measurement of the standard of living, has increased steadily over the years.

May I now turn to the question of the infrastructure?

Lord Diamond

My Lords, may I interrupt the noble Lord, if he would be kind enough to give way, as he has referred to me?

Lord Cockfield

My Lords, yes of course.

Lord Diamond

My Lords, I am grateful to him for telling me that I apparently said 1950. Of course the year to which I was referring was 1980. I apologise for the fact. My eyes will be better after the Recess, after a certain amount of surgery. I merely read the wrong figure. I apologise.

Lord Cockfield

My Lords, I am most grateful to the noble Lord. I thought I had heard him correctly and this is why I was so surprised at the figure. The fact is that although there have been year to year fluctuations, the total of personal disposable income today is significantly higher than it was on average during the 1970s. You can always pick out one or two odd years when the figures may have gone up or may have gone down, but the total of real personal disposable income over the years has increased at a significant rate.

May I now come back to the question of the infrastructure. It is a matter on which the noble Lord, Lord Diamond, has expressed considerable concern. It is, of course, a favourite topic of the Alliance. It was raised in the debate on 18th January initiated by the noble Lord, Lord Ezra, and again in the debate on 7th March initiated by the noble Lord, Lord Diamond, himself. There is little I can add to what was said on those occasions. But following suggestions made by the noble Lord, Lord Diamond, and others, we have now included in this year's public expenditure White Paper a special table—this is Table 1.13—showing capital expenditure by the public sector over a period of years. As that table shows, capital expenditure in real terms has not varied very much over this period. It is not very different today in real terms from what it was in 1978–79.

One cannot make a simple distinction and say that capital expenditure is necessarily good and revenue expenditure necessarily bad. There are many examples of capital expenditure which has been misdirected and effectively the money lost. What really matters is that capital expenditure should be cost-effective, and this is the basis on which we take our decisions. Very often, what is needed is not so much capital expenditure as better utilisation of existing capital resources or expenditure on repairs and maintenance. Repairs and maintenance represent additional expenditure by the public sector to the value of about 50 per cent. of the capital contracts.

If we look at the picture as a whole, the broad canvas of our economic affairs, the true picture is one of temporary difficulties and a number of important problems still remaining to he solved, but also one of real progress, real success and real hope for the future. There is nothing here to indicate the need for any change in course; nothing here to indicate any gain from a change in course. On the contrary, it is consistency of policy that is the bedrock of confidence; and it is confidence that is the foundation on which the future is built. As anyone who has run a business knows, success lies in building on success. That is what we are doing, what we propose doing and what we shall continue doing.

Our hope for the future rests upon our fundamental belief in the dignity, in the energy, in the resourcefulness of free men. There is a creative urge in man—to plough the field, to reach for the stars. Man is master of his own destiny. He can provide himself and his family with food and shelter and with the amenities of life by the work of his hand and of his brain, by his intellectual prowess and creative ability. What we have to do is to release that creative ability to establish a society which makes it possible for man to exercise his talents to the full and to develop them for the benefit of himself and of the society in which he lives and of which he is a member.

The reason why we criticise the way our society and our economy developed in the years up to 1979 was because inflation, state intervention, the growth of the nationalised industries and the public sector and misguided attempts to control and direct all conspired together to destroy the freedom of ordinary men, their independence, their initiative, the cardinal virtues of self-reliance, the striving for a better today and faith in the future. It was these qualities which were sapped by the growth of big government.

It needs a very great transformation in our society, a great change in outlook and in our institutions, if we are to re-create the spirit of enterprise and progress, if we are to generate the wealth we need to support a growing standard of living, to provide for those who cannot provide for themselves, and to supply the funds for investment for the future.

Very great changes we have made. They are crucially important. We must keep them constantly in mind, not least because further progress must be made. Let me set out our most significant achievements. First, we have brought inflation down to its lowest level for half a generation. For the first time in our lifetime we can hold out the hope of stable prices—maybe some time ahead, but even more important, therefore, to keep our eye firmly fixed on it. Second, we have dismantled a whole raft of controls that restricted individuals, obstructed change and hindered growth: pay control, price control, exchange control, hire-purchase control, office development permits and industrial development certificates. Third, we have improved the free working of the labour market by our trade union reforms and changes in the Employment Protection Acts.

Fourth, we have reduced the size of government. The Civil Service is now the smallest since the war. Fifth, we have denationalised important sectors of industry. We have moved them out of the public sector and back into the private sector, where they will be subject to the disciplines and the opportunities of the market economy. Sixth, the state pre-empts too big a share of the national output. The recession pushed it up even further. But it is now set firmly on a downward path: 45.8 per cent. of GDP in 1975–76, 44.2 per cent. in 1981, 42 per cent. now. It needs to come down further.

Seventh, we have greatly extended the private ownership of property—ownership by the people themselves, not by faceless state corporations. Twelve and a half million people now own their own homes: 600,000 council house tenants have bought their homes and 175,000 more are in the process of buying. There are 12 million people in occupational pension schemes, 20 million people with money in building societies, 17 million people with national savings accounts, and 2 million people owning shares in companies. This is a picture of a property-owning democracy. The ownership of property is the bulwark of freedom. What distinguishes the democracies of the West from the tyrannies of the East is the right to own private property.

Eighth, we have embarked on major reform of the tax structure designed to promote economic growth. In his Budget this year, my right honourable friend the Chancellor of the Exchequer abolished the national insurance surcharge, introduced a new structure for business taxation and made substantial increases in the main income tax thresholds, which now stand 16 per cent. higher in real terms than they did when we took office.

These, then, are the main strands of our policy—a policy designed to set our feet firmly on the road which will lead to a healthy, vigorous society. As a nation, we face a serious problem in unemployment. No one would deny the waste in resources or the hardship this causes. But it is a problem that all the countries of the Western industrial world face. Our problem is worse than most other people's because our record in terms of competitiveness is worse than other people's. The way to deal with unemployment is to create new jobs on a sound, long-term basis—new jobs in new companies, new jobs in growing companies, and new jobs in self-employment.

The key to this is competitiveness. We will only employ more people if we have a higher level of output. We will only have a higher level of output if we are fully competitive with our main industrial competitors. That is why moderation in wage settlements is essential. Real wages have been falling in the United States. They have been rising in this country. That is one of the principal reasons why millions of new jobs have been created in America, while unemployment has been increasing in this country. Every union negotiator who secures an increase in pay unmatched by productivity is negotiating unemployment for his members or the members of other unions. Every employer who concedes an excessive pay settlement damages the future of his own company and destroys job prospects.

Realism in pay settlements is not the only factor. A well-trained workforce, good management, good design, quality and innovation are all crucial factors. The Government can and do help in all these matters. But the onus rests essentially on industry itself—on managers and workforce alike. Crucially important, too, is that we should take full advantage of the growth in the service sector—not just the traditional services such as hotels, restaurants, retailing and tourism, but also the new information—based services—banking, finance, consultancy, the professions, including accountancy, information technology and the innumerable service industries which support manufacturing industry.

I have on a number of occasions made the point in your Lordships' House that it is quite wrong to try to drive a wedge between manufacture and services. We tend to think of services too much in terms of hotels and restaurants, retail distribution, and so on. These are very important. But the great growth sector today and tomorrow lies in the information-based services, and these are complementary to and supportive of manufacturing industry. We are living in an era of far-reaching economic change. You cannot obstruct economic change except at great cost to yourself. The right policy is to embrace change and make a success of it.

Despite all the difficulties, we are creating new jobs in this country. The total number of people in work has risen by 260,000 over the past year. There are over 330,000 new jobs in the service sector. We have a higher proportion of our people in work than in France, Belgium, Italy and the Netherlands, and about the same as in Western Germany. We need to do better; but that is crucially dependent on the better working of the labour market, and that is why we have directed so much attention to that. It is dependent, too, on encouraging people to set up in business where they will not only employ themselves but offer employment to others. Our fiscal policy is directed to this end. So, too, is the enterprise allowance scheme which is helping 1,000 a week of the unemployed to set up in business.

A long hot summer is coming to an end. On this, the last day of term, we look forward to Autumn, to Keats', Season of mists and mellow fruitfulness". When in years to come we look back over these years through which we have lived—these historic years, these years of change—the difficulties of the present will largely be forgotten. We will wonder why we worried so much about them. Only those who lived through these years will remember why, will remember that stress and strain are very real when they are suffered. But courage and leadership alike demand that we should keep an eye firmly on the future; that we should know where we are going; that we should nurture an unfaltering determination to reach our goal; that we should resist with all our might those who would destroy our ancient freedoms, or, for reasons selfish or misguided, would obstruct our progress. We have indeed transformed the basis of our economic society. We have set our feet on a new path. The verdict of history will be that it was the right path: that we lacked neither courage nor leadership; and that together we have taken our people to a better future.

3.57 p.m.

Lord Barnett

My Lords, I imagine that some of us listened with some astonishment to the speech we have just heard from the noble Lord, Lord Cockfield. I know the sun was shining—at least, it was when we started—but the degree of complacency was quite unbelievable. The speech would have been listened to with outrage and astonishment by the near 4 million people outside who do not share his complacency because they are not free to work. Really, it was a quite astonishing catalogue of complacency—one that has rarely been heard in this House, I should have thought, or, indeed, in any other.

I should like to begin, if I may, by congratulating the noble Lord, Lord Diamond. I almost said "my noble friend", because I am bound to regard in that light anybody who was a noble friend for so long, and a former Chief Secretary. I congratulate him both on his Motion and on his speech. I hope the House will join with me in saying that we hope the surgery to which he referred will be highly successful and that he will be with us, in the best of health, after the Recess.

I must say to the noble Lord, Lord Cockfield, that when he started to tell us about the course of true love I wondered what kind of a speech he was about to deliver. Of course, at the end it was clear to me what kind of a speech it was. It was about some unique course of true love, with no squalls; indeed, he used the word "squalls". He said, "There's no need for change; everything is marvellous; we'll just carry on as we are". His platitudes were a little mixed in the sense that he told us we had got to have change as well. So we cannot continue just as we are; we have got to have change. continuing as we are. If the noble Lord does not mind my saying so, it was a very odd speech. In a moment I shall refer to some parts of it.

I should like to come straightaway to the Motion, which refers to, the lack of confidence in sterling". Let me say at once that I think all Treasury Ministers—past, present, and hopeful ones for the future—should have a certain sense of humility about the level of sterling at any particular time. Certainly I would share the view of the noble Lord, Lord Cockfield, that the present strength of the dollar is very much the reason, rather than the weakness of the pound, for the dollar/pound relationship. The Government cannot, of course, be blamed for that strength of the dollar, although even there I am bound to say to the noble Lord that some of his arguments about the state of the economy of the United States, and their deficit, sounded a little odd, to say the least, in relationship to the fact that, despite that deficit, the United States are still managing to maintain levels of employment that we have not been able to get anywhere near. There are things to be learned from what the United States have been doing in their economic performance.

But I say right at the outset that I do not blame the Government directly for the fact that the dollar is strong and the pound is weak against the dollar. On the other hand, it is hardly a sign of confidence in the way our Government are handling our economy when we see what is happening to sterling in the world. Of course, the Government would be more credible—much more credible—if they had not claimed the huge success for their stable economic policies that they did when the pound was at 2.40 dollars. I am sure that the noble Lord will recall the Prime Minister's words at that time: oh, yes, 2.40 dollars was not too strong; that was a sign of the great strength of the British economy. We did not hear anything then like we heard today from the noble Lord about the great opportunities for exporters with the low exchange rate. We never heard anything about that. The 2.40 dollars was a sign of stability in the pound and the British economy.

Therefore, I am bound to say to the noble Lord that he should be rather more careful in the way in which he chooses to speak about our relationship with the US dollar. I, for my part, accept that much of the relationship of sterling with the dollar is not our fault. On the other hand, the noble Lord is also right when he says that the effective rate is a more important measure. It is a nonsense that we arc constantly looking only at the dollar/sterling exchange rate. The effective rate is much the more important measure: and, of course, it has been relatively strong in recent years and in recent weeks and months. Indeed, from 30th March to 25th June the effective rate actually rose l½ per cent.

But the key question is: if the noble Lord is right, if the effective rate is what matters (and I agree with him), then why are we slavishly following the United States interest rates? What is the point of that? If we should be looking not at the dollar exchange rate but only at the effective rate, what on earth are we doing damaging our economy to the extent that we are, which the noble Lord will be the first to admit? Indeed, the Chancellor told us that he hopes that it will be only temporary, because he knows the damage that high interest rates do. Yet despite the fact that what matters is the effective rate, we are still following the United States interest rates up. Why? Perhaps the noble Earl, Lord Gowrie, may even one day be in the exalted position of being able to speak even more importantly on economic matters than he already does, and perhaps this evening he will be able to tell us why we are following the United States in this matter.

But if we cannot claim it to be our fault because the United States interest rates are high, neither does it indicate (from the way in which the noble Lord presented it) great confidence in the way in which we manage our economy, in the way in which the Government's policies are working so magnificently (according to what he was saying), when even to maintain the present effective rate we have had to increase interest rates to the present high and damaging levels. Why on earth has that been necessary if we have been as strong and as stable an economy as the noble Lord told us this afternoon? Why has he had to do that? The noble Lord will not be speaking again, and so I direct my question to the noble Earl, and no doubt he will be able to tell us.

Of course, the rate—the effective rate as well—is not only directly affected by what the United States do: it is affected by other events beyond Government control. It is affected by what is happening to the oil price in the world. We cannot blame the Government for that. Things happen in the Middle East and in all parts of the world, and the state of oil prices is not the Government's fault. But as the noble Lord said, it is also affected by events nearer home. It is affected by industrial disputes. Indeed, we have been told not only today but on many occasions how damaging are industrial disputes. If they are that damaging, why on earth do the Government sit back for 20 weeks and let them go on at a huge cost to the British economy? That is what most people outside this House do not understand. We can all blame this or that man or the other, but the plain fact is that when the Government tell us how damaging it all is and they sit on the sidelines, or pretend to do so, for 20 weeks and allow it all to happen and affect the exchange rate, as the noble Lord told us again today, then I ask why on earth are the Government doing nothing whatever about it?

The Government have always argued, although the noble Lord did not do so today, that they do not have an exchange rate policy. I would be interested to know from the noble Earl, as he is listing the questions that he is to answer this evening, whether the Government still have no exchange rate policy. Is that still the argument? Of course, I am bound to tell the noble Lord that nobody believed it at the time, and if he says "Yes" this evening they will not believe him this evening. They have managed to contend to some extent that they did not have an exchange rate policy while we "de-coupled"—that is the correct word. We kept our interest rates below those in the United States and, if we did not have an exchange rate policy, left the exchange rate to take the strain at whatever level the market felt right. It could then be argued that there was no exchange rate policy.

But we are now back to a situation where the Government have decided to take the strain on interest rates. So we have the worst possible kind of exchange rate policy, doing great damage to the hopes of sustained recovery, of which the noble Lord spoke. Professor Symons of the LSE has argued that each 1 per cent. rise in short-term interest rates results in a ¼ per cent. fall in employment below what would otherwise be. Yet despite that, despite the fact that what matters is the effective rate, as the noble Lord himself said, the Government are still allowing the economy to be damaged by these excessively high interest rates. Despite the change, despite all that has been going on in the last few weeks and the damage to the economy through the high interest rates, the whole of the noble Lord's speech was a catalogue of what used to be called TINA—There Is No Alternative.

I am sorry to tell the noble Lord that one of the Government's strong supporters—indeed, possibly their strongest supporter; a great monetarist named Gordon Pepper of Greenwells—disagrees with the Government at present. He has two suggestions. First, he suggests that the Government should strive for international agreement particularly with Japan and Germany, and should not follow United States interest rates up. I think that is a good idea, although I am bound to say to Gordon Pepper and the Government that I do not think that there is a great prospect of success in the direction of getting the agreement of the Japanese and the Germans in this particular area. But it is certainly worth following.

However, he went on to make another suggestion, and before I come to that let me say what I think might be helpful—and, again, it is not the total answer, but it is something that we could do without international agreement. We could join the EMS, the full exchange rate mechanism. I do not pretend that it would be a panacea, but certainly in view of our present exchange rate levels it would be some help, and it would not leave us in the kind of situation that the Government are in at the present time. But it is not of itself the answer.

Lord Bruce-Gardyne

My Lords, will the noble Lord give way?

Lord Barnett

Certainly, my Lords. I have always told the noble Lord that we should pretend that we are in the other place.

Lord Bruce-Gardyne

My Lords, I am most grateful to the noble Lord. I want to make sure that I have understood what the noble Lord has just said. Is the noble Lord seriously contending that had we been members of the European monetary mechanism last month we should have been able to avoid the rise in interest rates that then occurred? Is not the truth of the matter that in order to maintain our place in the monetary grid we should have had to acquiesce to a much sharper, swifter and earlier rise in interest rates?

Lord Barnett

My Lords, I was not saying that, but I do not know whether those comments obviate the need for the noble Lord to make a speech later. There will be some who will hope that that will be the case! I certainly was not advocating what the noble Lord has put forward. I was careful to say that I do not believe that joining the full exchange rate mechanism of the EMS is a panacea or a full answer. There are still other problems which face this country and which would face this country whether we were in or out. But I do believe that it would be of some help. I know that the noble Lord is a great supporter of Mr. Gordon Pepper and so he will be very interested in the second suggestion of Mr. Pepper which I propose to quote for his benefit, and I hope for the benefit of the noble Lord, Lord Cockfield, and the House. He said: If such an agreement cannot be achieved"— that is the one to which I previously referred— and sterling comes under pressure, the UK [monetary] authorities should adopt a foreign exchange policy of benign neglect and resist those who argue that they must accede to ingrained market expectations of a rise in interest rates". So Mr. Pepper, who shares monetarist theories with the noble Lord, puts that forward as a proposal.

I am bound to say to Mr. Pepper and to the House that on this occasion I entirely agree with him. I think that the Government should allow the strain to be taken on the exchange rate rather than interest rates, which are much more damaging to our economic stability and our prospects and hopes for growth. I say to the noble Lord, Lord Cockfield, and to the Government that if they decide—not because I have asked them to—to take the strain on the exchange rate rather than on interest rates, I promise the noble Lord, the Prime Minister and the Chancellor that, despite what they used to say to me in 1976 when the rate dropped to the catastrophic level of 1.56 dollars to the pound, I for one will not attack them for a temporary fall in the pound. It would certainly be preferable to a large increase in interest rates, which we now have.

However, if we are to have a weighted average strong pound, in the longer term the real answer will depend upon the underlying strength of the economy, including, as the Motion says, levels of industrial production, and the need for measures to improve the infrastructure, and living standards and to create a stable society.

Sadly, despite what the noble Lord said about levels of industrial production today—and they are certainly higher than they have been—the plain fact is (the noble Lord never spoke about it, but he knows it) that virtually every independent outside economic observer and forecaster is forecasting a decline next year. The noble Lord knows that and it will be much worse if interest rates stay as high as they are at the present time. He knows that, and that should have made him deliver a somewhat less complacent speech than the one which we heard this afternoon. However, even with present levels of industrial output, we are still not achieving the improvements in the desperately needed expenditure on infrastructure that this country requires.

My noble friend Lord Cledwyn, our Leader, in a debate on 18th January in this House spelt out in very detailed terms the vital, if not desperate, needs we have in terms of infrastructure. On sewage, he spoke of "5,000 sewer failures a year"; on major roads he spoke of the frightening increase in the maintenance required; on minor roads he referred, as every noble Lord will know, to the evidence all around us of the appalling deterioration; on the subject of the railways he said that much of the system was built in the last century; on housing, where the Government themselves have argued that we need 300,000 more starts a year, he said that we are getting 200,000 and fewer; and now we have a drought, which illustrates the desperate need for increased expenditure on water supply.

It is, indeed, a dismal picture as opposed to the one which the noble Lord presented this afternoon and it is compounded by the Government's short-sighted refusal to recognise the different circumstances pertaining now as against the time when unemployment levels were much lower and when we did not have the benefits of North Sea oil. Instead of spending on vitally needed infrastructure, this Government are squandering the benefits of North Sea oil and other scarce resources on financing unemployment, which they themselves have created.

As to the Motion's reference to: the measures required to improve living standards", I have spoken in this House recently about poverty in our country and I do not pretend for one moment that in the short term, with the limited resources available and the need to concentrate on infrastructure, there will be much room for a general improvement in living standards. Indeed, I believe that it would be dishonest to pretend that any Government could provide huge general increases in living standards and at one and the same time help those in the direst need and find the money from public resources for the infrastructure. We could not.

The trouble with the Government's policies is that they are improving living standards for some, as the noble Lord told us, but, as was made quite clear in a recent debate, by any British standards millions of people are living on far too low a level. All this is creating anything but the stable society of which the Government boasted. I very much agree with the Motion that we need to "restore a stable society". Regretfully, the Government are ignoring the obvious need for a change of direction. Indeed, we were told today that they would stick steadily to this course. They told us that. Having set themselves on this path, it must inevitably mean this. With the current level of growth in output that we have this year, if we cannot reduce the level of unemployment, when growth falls in the next few years unemployment will inevitably increase even further. So the whole strategy which the Government are deploying, and of which the noble Lord boasted, is making a stable society impossible.

On the other hand, I have to say to the noble Lord, Lord Diamond, that he did not spell out any alternative policies today. I agree with much of his diagnosis. We know what the noble Lord's party's policies are; he did not have time to spell them out today. They want a statutory incomes policy of a kind. But real success cannot be achieved without a working arrangement with the trade unions in this country. That is not a statutory incomes policy. A statutory incomes policy is not necessary if you have agreement and it is unworkable if you do not have agreement. I willingly concede that no Government, including a Labour Government, have yet achieved such working arrangements, but I am bound to tell your Lordships that it remains the only hope, and Labour remains the only party with any prospects of achieving it.

4.17 p.m.

The Lord Bishop of Coventry

My Lords, I too am grateful to the noble Lord, Lord Diamond, for his comprehensive Motion. It is very tempting to comment on a wide range of issues, but I wish to discipline myself to one main general observation concerning that part of the Motion about restoring a stable society. There can be no doubt that economic considerations are crucial for the health of our country and the battle against inflation. The promotion of policies aimed at economic growth must occupy the energies of those responsible for government. Without economic stability the outlook is indeed bleak. That must be a priority concern.

But it also needs to be said that economic viability is not itself sufficient. It is simply not true that economic stability automatically guarantees social stability, and it is the absence of coherent social policy which constitutes the real anxiety just now. We may be successful in winning the economic battle, thus ensuring a future for our society, but we may then have a society which we do not want.

A critical scrutiny of social trends must therefore accompany economic progress and a vigilant attention to the quality of life is necessary if we are to combat the threats to social stability. Present economic policies aimed at reducing levels of public expenditure are having a serious effect on central and local government, and in turn on their capacity to provide services necessary for our social health. Cuts in education, for example, are affecting the whole educational spectrum—higher education as well as schools.

The Open University—which I believe has made an incalculable contribution since its inception—is to be cut by 17 per cent. over the next three years, and that is a crippling cut for so important a service. Education represents an enormous personal investment in the future of our society, and I cannot believe that monetary saving justifies the starving of this investment.

There are a number of areas where policy has set targets and expectations but where lack of resources has led to an inadequate service being offered. In London the statutory obligations on local authorities to house families can only be fulfilled by an increasing and intolerable use of bed and breakfast hotels. Even here delayed payment of social security benefits can lead to families being put out on the streets because they cannot pay their bills.

At the General Synod group of sessions a few weeks ago much concern was expressed in a debate about our treatment of the mentally handicapped. Many authorities have made little or no progress to offer care in the community to increasing numbers of mentally handicapped people living locally. It is a common experience in times of stringency that the survival of well-established services makes consideration of any new demands virtually impossible, and rate capping and the strict application of control prevents the development of new services.

Again the continuing high levels of unemployment cause concern about our future stability. The collapse of some areas of manufacturing industry has had a very detrimental effect on many local communities. I speak with feeling since Coventry, with its narrow economic base—namely, the car industry—has been badly affected. I have often felt that if it is necessary that many should be made unemployed for the sake of the national economy, there is some injustice in expecting them to bear the brunt of economic solutions without giving equal attention to their plight.

I know of course that it is easy to dramatise the connection between unemployment and social instability, and that many will deny that there is any connection. But your Lordships' committee on unemployment seemed to be in no two minds that unemployment provides motive and opportunity for one great threat to social stability; namely, crime. Unemployment is a great spectre in our inner cities, and the frustration it causes, together with the decline in housing, social security, education and other services, adds to the air of frustration and canvas of the economy. As a non-economist that is what I propose to do. I have no doubt that the manifest lack of confidence in sterling is a complicated issue. Economists assure me that that is so. There are proximate reasons given, and one of them given today hopelessness, and—alas!—the ethnic minorities appear to be among the hardest hit.

Whatever the rights and wrongs of the present miners' dispute, the levels of social conflict it has engendered must be a matter of the greatest anxiety. On the law and order aspect of this debate, we must note how much police time and resources are being taken up in this prolonged conflict, and the detrimental effect it has on helpful moves such as community policing. Social control at present is too much led by the police themselves, and that is not a criticism of the police. They have to execute an unenviable duty on behalf of the whole community. Incidentally, it is not irrelevant in this connection and to the whole matter of social stability to note that we still have only 200 black policemen in London in a total of 26,500.

When Beveridge devised his insurance principle, he envisaged the situation where practically full-time employment was possible. By 1983 over 1 million people had been unemployed for over a year. Recent figures suggest that 650,000 have been unemployed for two years. As we look ahead I believe that one of our greatest social problems is that of large numbers of young people who will have no experience at all of employment.

I have been engaged in much consultation about the future of work in the city of Coventry, and I know how difficult it is to arrive at any coherent prediction about employment trends, and whether modern technology will create enough jobs in the future as industry has in the past, or whether on the contrary it will preclude a return to the notion of full employment.

It seems essential that we ought to be giving serious thought to the structuring of a society where work is not necessarily equated with paid employment and where the dignity of human service is preserved. That thinking, in my judgment, is essential if we are to banish anxiety about our future stability, and there is all too little thought being given to that particular issue. My plea, therefore, is for serious thought about trends of society and the quality of its life, for economic viability alone will not guarantee a stable society.

4.26 p.m.

Lord boson

My Lords, I shall not follow the right reverend Prelate the Bishop of Coventry in what he said, save to say that I very much agreed with him, and as he spoke the question came to my mind, is the heavy social cost we have paid in the last few years justified by the economic achievements? If not,there is something seriously wrong.

I am neither a businessman nor an economist, and I was lost in admiration for the astonishing speech made by the noble Lord, Lord Cockfield, with his many flights of poetic fancy. Early in his speech he took reassurance from the words of, I think, Francis Bacon: Adversity is not without comforts and hopes". Thereafter it seemed to me that his speech was singularly lacking in "comforts" and singularly dependent on "hopes".

The noble Lord invited us to look at the broad has been the strength of the American dollar. I have heard other reasons given, such as the expected fall in the price of oil with its resultant effect on the rate of inflation. But it is also, surely, a measure of the assessment of the outside world of the effectiveness of Government long-term policies.

In this House we ought at least to be able to detach ourselves a little from the party warfare which so affects our political life in the other place, and in many ways clouds the judgment of the country on many of these issues.

We all take up a partisan view and often put ourselves in blinkers because of that. One of the attractions of the Prime Minister's economic policy when she came to power was her emphasis on the need for a long-term view of economic life, and her attempt, as she described it, to get away from the hand-to-mouth living of the governments which had preceded her. There was a great deal to be said for this approach. There is no doubt that there had been a steady decline in the competitiveness of British industry. Anybody taking a detached view in 1979, whatever their political colour, would have been fairly convinced that there had to be some drastic changes in the British economy and in the measures that we have taken with regard to it.

The noble Lord, Lord Cockfield, came back in the course of his speech to what is regarded by this Government, and regarded widely, as the touchstone for eventual success: namely, competitiveness: that we must restore the competitiveness of this country. I use the term "competitiveness" now in its widest sense, because competitiveness not only means price but reliability of the product and so on. Five years after 1979 I should like to pose this question: are we really more competitive? Because, if we are not, all the struggle, all the social costs so excellently described by the right reverend Prelate, have been to no avail.

The emphasis put by the Government on productivity increases—and reference was made by the noble Lord to improvements in productivity, for example, in 1983—is due primarily to the shedding of the least productive labour and not to any significant degree to new investment, to retraining, retooling and other growth components. In other words, this country is to a considerable extent treading water.

We ought to consider what steps have been taken by the Government to achieve their long-term aims and whether they are proving effective. Successive Chancellors of the Exchequer justify reductions in taxation for the better off because it was argued that this would help to increase savings, these savings would be translated into investment in British industry, and if we allowed the free forces of the market to operate we would have considerably more investment in British industry. But the truth is—and we all have to face this—that this just has not happened. In the last five years £15 billion of British savings has been invested abroad. Is there any reason to think that with the buoyancy of the American market at the moment the money markets of London and those advising them do not advise our investors large and small to invest abroad rather than at home? Is this not what has been happening in the country? Are the Government happy about this?

The Earl of Gowrie

My Lords, I am most grateful to the noble Lord for giving way. I shall answer this point at length when I wind up, but while this point is fresh in the minds of the House I must tell the noble Lord that there is no evidence whatsoever of any shortage of investment capital in this country for profitable activity.

Lord Hooson

My Lords, there never has been any lack of investment capital. There is a lack of investment and opportunity for investment. What the Government have to do is to create the right atmosphere and the right opportunities for investment. The truth is that the investment is going abroad. Are the Government happy about this? Is this what was envisaged when taxation was reduced? Are we going through all this miserable social battle for little or no eventual benefit? That is the real question at issue. Is it possible to claim that there is in any way now a true free market which the Government so insist upon, referring to its virtues?

In the earlier part of the nineteenth century the Liberals were great believers in the effectiveness of the free market, but we lived in very different social and economic conditions in those days. Even then we paid a very heavy social price for the operation of the so-called free market. The Government attitude towards trade unions indicates that they believe that the unions' power distorts the ability to operate in a free market, but there is no comparable sign of any vigour in Government policy to deal with the great market power of the large corporations which again distorts the free market.

Is not the lack of confidence in sterling due more to a growing belief among people outside this country that the Government's policies are not arresting the long-term economic decline of our country, save marginally, than to proximate causes?

Above all, the Government seemed to have failed to provide the leadership to ensure reinvestment in this country. The capital is here to be invested: why is it not being invested? I have never heard a single answer to that question. Why are our investors constantly being advised to invest abroad? They are investing abroad and why is it that the home market does not appear to be attractive? Why have the Government failed to create the necessary poise and confidence to restrore stability to Britain's manufacturing industry?

The Motion refers to the state of the nation's infrastructure. The state of the infrastructure is obviously a considerable indicator in determining whether a country is in a state to arrest its industrial decline. The noble Lord from the Opposition Front Bench spoke of the current water problem and the lack of expenditure on the infrastructure in the water industry. I remember the late Nye Bevan once saying about our country that we were a country almost made of coal and surrounded by fish and only a genius could produce a shortage. We might add to that that we are heavily endowed with water, yet whenever we have a warm summer we seem to be lacking in water resources, obviously due to the lack of expenditure on the infrastructure.

There is deterioration of our roads at A time when millions are unemployed. Our railways are under threat; our sewers, especially in the larger inner city areas, are greatly in need of modernisation and repair. Yet we can tolerate 3 or 4 million unemployed and we do not provide the capital for this work to be done.

The question has been asked: why is the United States economy succeeding when ours is not? Is it because the Americans at least see in their country the opportunity for investing and are investing? I was told recently by somebody who had been in Philadelphia three years ago that he found that work on the rather derelict inner city had made enormous changes in the last two or three years.

Are we content to go along with the hopes of this Government that the economy in some magical way will improve? Or do we need to take more substantial steps to improve it? It seems to me that the heart of the problem is the need to invest in British industry to ensure that there is proper capital investment and proper training for management. The difference in management already referred to at Jaguars has made an enormous difference, coupled with the right capital investment behind it. The retraining and retooling of British industry is still very much overdue. After five years of this Government what have we got—real progress? All we have done, surely, is slim at the margin. We have not begun to set the real basis for economic recovery.

4.38 p.m.

Lord Bruce-Gardyne

My Lords, I listened to what the noble Lord, Lord Hooson, had to say about the need for investment. I must honestly confess that I have sometimes felt that we have not suffered in this country so much from inadequate investment as inadequate return from the investment that we have made. If one contemplates the record of state provision of investment from Concorde right the way through to DeLorean, one has to have considerable reservations about the ability of Governments in this country to make wise and salubrious decisions in this area.

I should like to join with other noble Lords in congratulating the noble Lord, Lord Diamond, on initiating this debate. He has given us a wide menu. One might almost say that all human life is there. I listened with particular interest to what he had to say and also to what the noble Lord, Lord Barnett, had to say on the matter of the exchange rate which features in this Motion. It is sometimes difficult for the Government to get it right. Most of the time we are told by the Opposition parties that what we ought to have is a more competitive exchange rate. Then when the exchange rate slips they say that it is a demonstration of the total collapse of confidence in Her Majesty's Government. I suppose it is the privilege of Opposition parties always to have it both ways. We have heard a bit of both arguments this afternoon.

Fortunately, or unfortunately, I for my part tend to wonder about the capacity of governments by taking counsel in an arena of floating exchange rates to be able to determine, or even to influence, to any great extent, the status of parity. I suspect that one apocalyptic comment from Dr. Henry Kaufman or the sale of a single Jumbo jet to Saudi Arabia in exchange for oil is likely to have more impact on the sterling exchange rate than any burning of midnight oil in Great George Street. And to a considerable extent I suspect that this is also the case about interest rates.

The noble Lord, Lord Barnett, waxed very indignant about the way in which, according to him, the Government had put the recovery at risk by pushing up interest rates in order to stabilise the exchange rate. He quoted at length Mr. Gordon Pepper, for whom I have much admiration and respect. I must confess that I even wonder whether Mr. Gordon Pepper is fully seized of the comparative difficulty of ensuring that you can get interest rates necessarily where you want them at any given time. I submit to your Lordships that if the markets are sufficiently determined with sufficient pressure to push interest rates up, the situation will require more than the sort of agreement which Mr. Gordon Pepper talks of with the Germans and the Japanese—and I agree with the noble Lord, Lord Barnett, that it might not be easy to come to that—and more also, I suggest, than loud pronouncements about our willingness to take pressures on the exchange rate on the chin.

Indeed, I think we could afford to pay some attention to what happened last month when the Bank of England issued a statement—whether they were responsible for it, I know not—to the effect that there was no reason on grounds of domestic monetary policy for a rise in interest rates. Did that satisfy the markets? On the contrary. The immediate reaction of the market, I think entirely predictably, was to push the pressure for higher interest rates all the more strongly. I think that one of the lessons of this recent experience, if I may say so, is that not only is the power of governments to determine the exchange rate or level of interest rates pretty restricted but, furthermore, if they attempt to defy the judgment and the pressures of the market at any given time they are liable to find that they have to make an adjustment in the end which is more severe and steeper than it would have been had they acted more promptly in response to market pressures.

None of that is to argue that we are totally powerless to influence the levels of interest rates. I have no doubt at all that the smaller the public sector borrowing requirement, other things being equal, the lower our level of interest rates will be. That is why I so strongly commend the Government on the way in which they have responded to what, for my money, I must confess is an excessive level of public expenditure for reasons which we understand, by insisting that that should be properly financed out of taxation. I think that that has been entirely right because I believe that by achieving a falling PSBR as a proportion of GDP we create the environment for interest rates being lower than they would otherwise be. But it is a relative influence and not an absolute influence, and I must say that I doubt very much that we can expect to decouple totally from interest rate movements on the other side of the Atlantic or that we can necessarily expect to escape the pressures when sentiment changes, for example, in the oil market. Before I turn, as I should like to, briefly, to what seem to me to be the prospects now, I should like to pick up one further grievance upon which the noble Lord, Lord Diamond, spent a minute or two. This is what he described as the Government's propensity to sell off the family silver. He suggested that the experience of Jaguar and the experience of British Airways demonstrated that an industry could be perfectly well turned round by good management in the public sector. I would accept the examples that he gave us, but I would tell him of a conversation that I had with the father of the noble Lord, Lord Melchett, shortly after he had been appointed by the noble Lord, Lord Wilson, to be the first chairman of the nationalised steel industry in the 1960s. He said to me then that he did not think that the name in the share register, whether it was the Government or a host of private shareholders, made any difference. I saw him three or four years later, shortly before his death, and I reminded him of this conversation. I asked him if he was still of that opinion. He said that he was still of the opinion that that should be the case but he had to concede that it was not remotely the case and that the truth was that life in the public sector for management was totally different. That, to my mind, is the fundamental reason why it is all the better to get the successful companies like Jaguar and like British Airways out of the public sector where management can perform and be judged on its performance by the market.

If I may now turn briefly to what seem to me to be the prospects ahead of us, the noble Lord, Lord Barnett, said that every independent forecaster—I hope that I heard him correctly—was forecasting a decline in output for the United Kingdom next year. I do not know which independent forecaster he reads, but I am bound to say that I must be reading different ones. I would draw his attention, for example, to the latest predictions from the OECD. The OECD could hardly be described as a sort of "Thatcherism in exile". Their prediction is that next year is liable to see a rate of growth in the United Kingdom economy of about 2.7 per cent. with an actual fall in the level of unemployment—one of the only three countries in western Europe which they foresee experiencing a fall in the level of unemployment.

My right honourable friend has reminded the House of the latest CBI prediction on investment and the extremely encouraging rise in the trend of profitability in manufacturing industry which has been so desperately needed. I do not try to pretend, and I would not dream of doing so, that all these forecasts can be taken as Holy Writ, any more than I would accept that the gloomy predictions of the noble Lord can be taken as Holy Writ. I was slightly worried, I must confess, to hear my noble friend say that there were no signs of any problems and that there were no storms imminent. I do not like these sorts of medium-term weather forecasts. I think they can sometimes cause us trouble.

I must say that I would have thought that there were one or two potential shocks lurking around. For example—and we have not heard much about it this afternoon—I have a suspicion that it is more possible now than perhaps it has been hitherto that there could be a real sharp break in the international oil price: and I think that that is something we need to consider. I believe that if that were to happen it is a circumstance where it would be entirely right for the Government, to the extent that they possibly could—and I do not overestimate that—to accept that such a pressure of such a crack in the oil price should be taken on the exchange rate: because, after all, the inflationary pressures would be sharply muted by cheaper prices of commodities. If, indeed, any corrective action were needed in those circumstances, and I do not say that it would be, I would have thought that the logical place to look to was some possible rise in the levels of indirect taxation. I think that we should be prepared possibly for some strains in this area in the weeks and months ahead. On balance, I suspect that they will actually be conducive to the encouragement of the recovery from the world recession rather than the other way round.

Finally, I want to conclude with one word on a subject that was, of course, rightly raised by the noble Lord, Lord Diamond, and a number of other speakers. That is the intractable problem of unemployment. My noble friend drew attention to the difference between the experience of the United States and ourselves in this area over recent years. I am convinced that we still need to look more closely at some of the artificial barriers that we have erected in the labour markets, particularly in this country.

I hope that my noble friends will study carefully the latest publications from the Institute of Economic Affairs which analyse the consequences of the work of the wages councils and bodies such as the Equal Opportunities Commission. I read the other day that since the Equal Opportunities Commission has been managing our affairs in this area the wages of women in our society have risen from 63 per cent. of male wages to 74 per cent. in a period of 14 years. What we were not told was that the number of women in unemployment as a proportion of total unemployment has, over the same period, risen from 14 per cent. to 30 per cent.

Baroness Seear

My Lords, perhaps I may—

Lord Bruce-Gardyne

My Lords, if the noble Baroness will forgive me, I am just completing my remarks. I do not wish to delay the House and I am sure that she will pick up that point when she comes to make her own speech towards the end of the debate.

I hope that we have not gone soft on the need to examine very closely the desirability of some of these artificial distortions of the labour market. If we look particularly at the area of youth employment we can hardly fail to realise that the artificial narrowing of differentials between the earnings of juveniles and of adults must have been a contributory factor to the relatively poor performance in the field of youth employment in this country compared with our neighbours. These are areas at which we should look and I believe that the opportunities could come to follow on next year in that arena.

4.52 p.m.

Lord Harris of Greenwich

My Lords, I hope that the noble Lord, Lord Bruce-Gardyne, will forgive me if I do not follow him in his interesting speech this afternoon because I want to devote my attention to the last few words of the Motion of my noble friend which makes reference to the need … to "restore a stable society". It would be tempting to follow the noble Lord, Lord Bruce-Gardyne, particularly in the light of what he has just said about the improvement of the position of women in terms of their income over the past few years, but I suspect that my noble friend Lady Seear will be in a rather better position to deal with that point when she speaks in this debate later this evening.

I wish to discuss this more limited area set out in the Motion of my noble friend as did the right reverend Prelate the Bishop of Coventry, with whose speech, if I may say so, I very much agreed. I want to discuss two inter-related issues; but before I do so I should perhaps declare an interest in that I am a director of a company involved in job creation and of another which has recently been involved in litigation with the National Graphical Association based on the Government's fairly recent trade union legislation.

I want to discuss, first, the dispute between the National Union of Mineworkers and the National Coal Board; and, secondly, the serious consequences that this is having on the police service in its efforts to maintain public order in the coalfields. Let me say at the outset that I understand and sympathise with miners who fear that the closure of their pits will damage grievously their local communities, making it still more difficult for their own children to secure jobs when they leave school. It is simply silly in my view to minimise these fears or to attempt to do so in communities which are sometimes experiencing unemployment at a level of 18 per cent. or more.

That is why I very much regret that the Government—so far at least—have not done something to reduce these wholly understandable anxieties. To take just one example, I consider that they should have encouraged the National Coal Board to follow the excellent example of the British Steel Corporation and establish a job creation agency to help men where pits are likely to be closed to set up in business on their own account. The British steel industry has done admirable work in this field in creating workshops in steel closure areas—in communities as diverse as Corby, Consett, and Cardiff. If the Govenment are prepared to continue to support an initiative in the publicly-owned steel industry, why have they so far at least appeared to take an entirely contrary view when it comes to the publicly-owned mining industry?

I turn now to the merits of the dispute. I find it hard to understand how any rational, balanced, person, aspiring to any position of political responsibility, can do other than oppose Mr. Scargill. He says that unless a mine is physically exhausted, it must remain open. He concedes nothing—whether a pit is losing £5 million a year, £10 million a year or £15 million a year is, to Mr. Scargill, totally irrelevant. It must in all circumstances remain open. I do not believe that any Government of any political persuasion could possibly accept such an entirely nonsensical proposition. And in the past of course a closure programme has continued both under Labour and Conservative Governments, under the noble Lord, Lord Robens, and under my noble friend Lord Ezra.

What has changed has been the arrival on the scene of Mr. Scargill as president of the National Union of Mineworkers. Mr. Scargill, as we know, views with total contempt his precedessors as leaders of the NUM. He believes that they were collaborationists with the class enemy. To him, the dispute is simply another engagement in the class war. He rejects any thought of compromise. It is to be victory or nothing. Despite the clear rules of the National Union of Mineworkers, he has rejected a ballot of his own membership. He has encouraged the most brutal methods against miners who want to go to work. Almost nightly we witness on television the sickening episodes of violence as sometimes hundreds of miners charge lines of police officers attempting to maintain the right of free men to go to work.

But it is not just a question of violence on the picket line. We have intimidation directed against non-strikers' homes—men who are just as much members of the National Union of Mineworkers as Mr. Scargill and Mr. McGahey, but who, in the absence of the ballot which is required by the union's own rules, are not prepared to go on strike. We have seen the case of Mr. Inverarity in East Lothian, with his house surrounded by 40 strikers from County Durham. Their purpose is to intimidate Mr. Inverarity and his family so that he would cease going to work at Bilston Glen colliery. We have had the even more tragic case of Mr. James Clay of Sneyd Green near Stoke-on-Trent. He returned to work because the financial pressures of remaining on strike had begun to overwhelm him and his family. He was abused and spat at by strikers. His wife received threatening telephone calls; one directed in the most brutal terms at his 12 year-old daughter. Mr. Clay could stand it no longer and he killed himself. The North Staffordshire coroner said at the inquest: I am fully aware of the fact that this is not an isolated case, but the consequences are, thank God, isolated". Later a chief superintendent of the Staffordshire police said that 30 other working miners had received threats, and he believed that many other cases had gone unreported. In Nottinghamshire the situation is even worse. There the chief constable has said that 486 cases of intimidation have been reported to the police; and how many more have gone, again, unreported?

When Mr. Scargill is confronted with evidence of this character, he exhibits not even a trace of human compassion. He simply denounces the police. I have no doubt that many Labour Members of this House—I am quite sure the overwhelming majority, if not all—are just as disgusted as everybody else by conduct of this character. But their colleagues in another place—with only one or two very important exceptions, it has to be said—have been preoccupied by what they claim to be the intolerable conduct of the police in the mining dispute and it is to this issue that I now wish to turn.

In the early stages of the strike, the Opposition in another place remained fairly silent on the issue; but as the violence on the picket line began, so did their attacks upon the police. Of course, I have no doubt whatever that in a number of isolated cases individual policemen have "lost their heads". Tired of being abused and assaulted, they have struck back. Such conduct is of course entirely unacceptable, and if it is proved that it has taken place it is right that disciplinary action should follow.

But who seriously believes that the problems we are now facing in the coalfields of Derbyshire, Nottinghamshire, Lancashire and Scotland are caused by the police? Such a suggestion is in my view entirely absurd, yet that is precisely what was the central feature of the Opposition's attack in another place only last week. At about the same time we had the speech of the Leader of the Opposition in another place, Mr. Kinnock, at the Durham miners' gala. He declared: We cannot permit Mrs. Thatcher to have a further victory in her war against the British people."— and he added— This is a fight for survival. I can recall few incidents since the war in which any Opposition has committed itself so explicitly to support a trade union in such a punishing national strike, and I can think of no occasion on which it has done so when 30 per cent. of the workers involved have refused to go on strike. Yet that is where the Leader of the Opposition in another place has led his party. I am sure that he has many private doubts about this whole question, but his public position is one of firm public support for Mr. Scargill, and this, together with the campaign which is being waged in another place and outside Parliament against the police, is already creating serious problems concerning the relationship between a number of chief constables and their police authorities. I know of at least five police authorities where this is now beginning to be an extremely serious potential problem. In one case, the case of South Yorkshire, this matter has already gone before the courts.

Let us be quite clear about what is happening. A determined effort is being made to prevent the police from carrying out their duties. The police of course have an absolute duty to maintain the Queen's peace. They have an absolute duty to ensure that men who want to go to work are not prevented from doing so by large, unruly mobs. They have an absolute duty to prevent the harassment of the wives and children of those going to work by violent men trying to force them to go on strike.

The quite deliberate attempt which is being made by a number of councillors on this limited but important number of police authorities to apply grossly improper pressure on chief constables will I am sure be resisted. I would add only this. If this type of conduct continues, it may do serious long-term damage to the relationship between police authorities and chief constables. It may also be used as an excuse to raise again the question of the reorganistion of the structure of policing in this country. I would very much regret that. I want, as do my noble friends, to maintain a situation in which police forces continue to have the closest relationship with the communities that they are called upon to police. But that being so, and quite apart from all the other factors involved, I very much hope that the supporters of Mr. Scargill on some of our police authorities will begin to realise the dangers to which their own irresponsible conduct is beginning to lead them.

I turn finally to another question which relates directly to the violence on the picket lines. The police have charged large numbers of demonstrators with criminal offences. However—and the noble Earl, Lord Gowrie, will not be surprised when I come back to this point: we debated it on the Trade Union Act only a very few days ago—why is it the case that the nationalised industries have refrained from using the civil law? We have been reminded by the Government repeatedly of the great benefits that we are all deriving from their trade union legislation, and in particular from the fact that it makes secondary action unlawful. But we are seeing examples on television every night of secondary picketing. It is violent, it is often brutal and it is wholly unlawful.

Yet the nationalised industries concerned have, as we know, taken no action at all in the courts. They have sat on their hands and—as I mentioned to the noble Earl only a few days ago—thanks to the leaks of Government documents to the Daily Mirror we now know why. They have been told by the Government not to go to the courts. It has been left to small private employers to take the risks—and these are considerable—of using the Government's trade union legislation, when the industries over which the Government have direct control are told by the Government not to use the law in any circumstances—

The Earl of Gowrie

My Lords, I am most grateful to the noble Lord for giving way, but this is an extemely important point. When he took me to task in the earlier stages of the debate with the fact that the law was not being used, his implication was that the law was not being used at all. The noble Lord's implication has now changed. He accepts that the law is being used by some independent sector industries against the National Union of Mineworkers, so he will see that the law is in fact being used. He is now asking why the nationalised industries are not making use of the law. At that stage, I said that the essence of civil law was its voluntary character, as distinct, as we all know, from the criminal law which we all have to obey; that it is up to the Coal Board to decide whether to seek injunctions from the courts and the rest in this instance. I also said that I had no doubt at all that, if the situation deteriorated, this and other industries would decide it might well be in their interests to go to law.

Lord Harris of Greenwich

My Lords, I am grateful to the noble Earl. If I may say so, I was not altogether surprised by the fact that some private employers were using the law, given the fact that I happen to be on the board of a company which has itself used the law. I made it quite clear on the last occasion that the most disturbing aspect of this situation was the fact—it has not been denied, and it has not been denied by the noble Earl this afternoon—that the Government have given instructions to nationalised industries—

The Earl of Gowrie

No.

Lord Harris of Greenwich

My Lords, I will listen with interest and with particular care to what the noble Earl says when he comes to reply. But I am bound to tell him that it has not only been published in the press and there has been no attempt to deny it up to now. It is also the opinion of many nationalised industries that that is the very firm view of the Government. If the noble Earl wishes to make it clear tonight that nationalised industries are perfectly free to use the civil law forthwith, I am sure that they will be extremely glad to have that reassurance from the noble Earl. It would be quite intolerable if it were going to be left simply to Mr. Richard Read and Mr. George Read to use the civil remedies which exist to prevent these continual breaches of the law.

Nobody on these Benches would derive any pleasure from seeing this great union, the National Union of Mineworkers, grievously and perhaps irretrievably damaged by this dispute. I can remember, as can many of my noble friends, many fine men who have devoted their lives to building up the National Union of Mineworkers—men such as my old friend and colleague Sam Watson and the noble Lord, Lord Gormley. The union's present course of action cannot possibly succeed. When, following the decision of Mr. Justice Park on Monday to fine the South Wales area of the National Union of Mineworkers £50,000 for contempt, Mr. Scargill called on the trade union movement—and I quote him—"to give total physical support" to his union he was demonstrating once again, in my view, that this dispute is not, to him, a normal dispute between a trade union and an employer. He was calling on the trade union movement to join him in a full-blooded assault upon the rule of law.

We on these Benches want there to be a reasonable solution to the present deeply damaging dispute in the coalfields. I am sure that that is the view of all sensible people in all parts of the House. However, on one matter we must make our position entirely clear. The attack by Mr. Scargill on the rule of law is not a matter upon which anybody who believes in the fundamental principles of our parliamentary democracy can possibly remain neutral. I believe that everybody who wants Britain to remain a liberal and tolerant society must speak out and do so without any ambiguity. Mr. Scargill cannot be allowed to succeed.

5.12 p.m.

Lord Marsh

My Lords, one of the very real problems of membership of this House, as I have discovered, is that so many of its Members have worked together so closely in the past that they share the experiences of each other. I am bound to say that when I listened to the noble Lord, Lord Diamond, with whom I worked as a colleague and from whom I learned a great deal, I had to remind myself that we had sat in the same Government around the same Cabinet table. There certainly seemed to me to be no recollection by the noble Lord of the economic horrors through which we lived during that period: the dashed hopes and dreams, the realisation of the limitations of governmental power, faced with a hostile international economic situation. Those aspects were certainly borne in on me.

I remember at that stage being badly treated by the noble Lord, Lord Diamond—as all Ministers are by all Chief Secretaries to the Treasury—in his every effort to grasp back every penny that he conceivably could in order to cut public expenditure in every direction that he conceivably could. This is the same noble Lord to whom I was summoned—members of the public are not aware that Chief Secretaries summon Cabinet Ministers—during a great battle about the number of traffic wardens who could be employed in Central London, because of the need to cut back on public expenditure. If the noble Lord remembers a calm, stable economy—all of us, having heard the noble Lord, Lord Cockfield, are in danger of sliding into a lyrical way of speech—with Ministers confidently steering the nation through the economic troubles of those days, I am bound to tell him that I remember a very different picture. Indeed, the key reason why I moved from the Labour Party to, technically, these Cross-Benches, but in practice possibly slightly further—

A noble Lord

My Lords, in reality.

Lord Marsh

Certainly; I am grateful for the compliment. One of the reasons in my mind was not the change—I shall come to that in a moment—in political power and direction within the Labour Party, as applied to some people subsequently after failing to be elected to the National Executive of the Labour Party. The main reason why I moved across was because that period proved to me that the measures upon which the entire socialist approach to economic matters was based did not work. I remember 14th March 1968, when we looked over the edge and saw how close we were to total economic collapse at that period and how grateful we were that the International Monetary Fund, like the Eleventh United States Cavalry in a bad "B" feature movie, came to our rescue and forced us to do things that we were longing to do but which politically we were unable to do.

That was the situation in those days. Of course we have problems today, but it is foolish to exaggerate them. The noble Lord referred to the continuing drop in the value of the pound, and the Motion speaks of "the lack of confidence in sterling". That simply is not true. As the noble Lord, Lord Barnett, gently pointed out, the pound, in common with virtually every other currency, is "off" against the United States dollar, but it is not down against the majority of other currencies. It is a problem, but it is an international problem. Until we get used to the idea (this was the problem when I was a member of the Government) that this is a very small island which cannot manage its economy internally as if it were on a different planet, and that it is affected by matters in other, bigger and more important countries, we shall not solve the problem.

The noble Lord mentioned the drop in the London stock market. Again, most of the stock markets around the world outside the United States are down. Even the Tokyo stock market is down. This is a worldwide phenomenon. This is not to suggest that we have no problems. The most serious problem we face, which is referred to in every debate of this type, is unemployment. That is an incredibly serious and sad problem, but it is a problem which exists at present in most Western European countries. It is not a peculiarly British problem. Nevertheless, it is a serious, deep, endemic and complex problem.

The righ reverend Prelate the Bishop of Coventry referred to the effect on communities of the contraction in the automobile industry in the Coventry area. May I mention just one element in that problem. The reason why the automobile industry has recovered to some extent in the United Kingdom is not because of anything that the Government have done but because the people working in the industry, at long last and just in time, in some cases, realised that they themselves were destroying their industry. The reason why the British car industry could not compete in third markets and, even worse, could not compete even in its own domestic market was largely because of the actions of people within the British car industry.

This is not to say that all of the problems we face over unemployment are due to the people who work in industry. It is a much more complex problem than that. It is one problem among very many. Anybody who suggests that there is a single cause of British unemployment is either naïve or stupid. There are very many different reasons. Our problems go back a very long way. One factor which is very clear in my mind and which is at the basis of this debate is that what was described as Butskellism—a sort of Galbraithian approach to the economy and politics—simply did not work. Both parties tried it. There was very little difference between the two parties. With the greatest respect, there is little difference between the majority who sit now on these Benches and a large number of Conservative BackBenchers. There are differences of emphasis and differences of argument, but the idea that there was a central, cosy approach to British politics and to the British economy is dead, because it did not work.

What happened at the general election of 1979 was that for the first time this country embarked upon a radical change of approach in direction on both the economic and the political front. It was bound to be a very uncomfortable ride; you cannot change the attitudes, habits, and thinking of a nation overnight simply by changing the Prime Minister—though I think she has had that effect on some of her immediate colleagues. But what you can do, I think, is to see clear evidence that fundamentally the country is now beginning to move towards a very different but more stable approach with a likelihood that we can now survive the problems of the future. I think the country is on a more hopeful course now than at any time in the last 25 years.

The problems of the steel industry, the coal industry and the railway industry have demonstrably not been solved or even reduced since I was a member of the Government dealing with those nationalised industries in the 1960s. Indeed, we are seeing today the consequences of trying, and failing completely, to ignore the pressure of market forces in those industries. Contrary to popular opinion, if the nationalised industries had been allowed to contract steadily, there would have been far less hardship.

What happened under both parties? Certainly, I played my part in this. We believed that we could halt the move towards contraction, so time and again in every one of those industries we went to the men and said: one more heave, a plan for coal, a plan for steel, a plan for the railways: let us have this number of redundancies and then you are on a plateau. Five years went past and there was another crisis. and another 10,000, 15,000 or 20,000 men suddenly found themselves out of work when they had been promised security. So we came back and we produced another plan for coal. another plan for steel and another plan for the railways and said: another 15,000 redundancies and then you have a career for life. It was a wicked deception but one which was based on ignorance and not on any desire to deceive.

It is true of coal as much as anything. In the 1960s I was closing pits. I do not know how many I was responsible for closing but it was certainly quite a lot. This was with the full support of the entire Labour Cabinet at that time and, to their credit, with the tacit support of some of the leaders of the National Union of Mineworkers then who knew full well that these pits could not stay open. and they wanted the best deal they could get for their members in the process. That, I think, is the role of a trade union leadership.

Towards the end of his speech the noble Lord read a fascinating letter from his Moscow friend about the miners' strike and violence on the picket lines. I am sure it would worry any audience in the world. I am sure that which we see is terrifying to any person living in this country.

I was amazed to hear the noble Lord. Lord Barnett—another member of the National Union of former Chief Secretaries to the Treasury. I found his arguments very persuasive. I do not think some of them would be very popular among many of the leading or more powerful figures in his party; I found his arguments very persuasive. I was amazed to hear him hint that the Government should intervene in the present dispute in the coal industry. They can only intervene in this dispute at this stage by surrendering. If that were to happen it would be the most disastrous thing which had happened to this country for many years. I believe it would be a disastrous thing for the Conservative Party as well. Fortunately, there is no possibility of that happening.

I return to a theme of the noble Lord. Lord Harris of Greenwich. Night after night we are seeing, until we now accept it, a state of total lawlessness in this country. It is not a question of failing to observe trade union legislation; we are talking about criminal law. We know—because they boast of it—that there are men in the present dispute who meet (because they tell us when they have had a meeting) and they discuss and plan violence and intimidation: violence against people and damage to property. It does not happen by accident; you do not have 10,000 pickets to have a cosy chat with 30 miners going to work; you do it to frighten people; you smash windows to frighten them. I am not a lawyer but I cannot believe that that which we are seeing night after night is legal. I think the time is coming when we have to take action on that basis. I think the line has been reached now when we can no longer sit back and fine people £500 when we know that they are just puppets of men who are orchestrating the whole campaign. If that means we have to reach a stage where the egocentrics of the Left have to go to gaol, then so be it; because there were nice cosy Liberals in the 'thirties who baulked at the bad behaviour of ruffians and louts in the streets but did nothing about it. In the end they suffered—and many other people suffered with them.

In the past we would never have accepted the right of the Army, the CBI, the unions or anybody to challenge an elected Government. Today we do accept it; everybody speaks about it; no problem. Last Sunday the agenda for the forthcoming conference of the TUC was published. Over and over again, as if in the course of cocktail chat, the resolutions are designed to use industrial power to bring down the Government. On this issue I do not care whether it is a Labour Government, a Conservative Government, or, to be fanciful, a Liberal Government in office: I will defend to the end the right of the Government to see out its period on the basis of the votes of the people which put it there. If that is being challenged, then I think Parliament has to pick up that challenge.

The other day an article came into my possession. We cannot pretend we do not know what is going on. The article referred to Mr. Scargill, who is only one of many. They are not under the bed any more; we know who they are: Mr. Ted Grant is well-known to Members of these Benches; he is a powerful figure in the land regarding selection conferences of sitting Members of Parliament. Mr. Ken Livingstone's charm is exceeded only by his sinisterness. Ted Knight is another. There are many of them. They explain in the article quite clearly what they want to do. Mr. Scargill was interviewed in 1975 in the New Left Review. He was looking back at the strikes of 1969, 1972 and 1974. He took a little peep into the future. Of the strike in 1969 he said: a number of us had launched an organisation called the Barnsley Miners' Forum, of which I was secretary. This forum was a platform for the left and a platform for ideas within the movement. You cannot have this sort of forum without having a concentration of ideas, and some kind of unity developing in the coalfields— In 1970 we had an abortive strike in Yorkshire. This was mainly because the issue at stake was the wrong one; we couldn't get the unity we wanted among the left and there were splits". That was a quite conscious decision as far back as that. Then he refers to 1972: You see, we took the view that we were in a class war. We were not playing cricket on the village green, like they did in '26. We were out to defeat Heath and Heath's policies because we were fighting a government. Anyone who thinks otherwise was living in cloud-cuckoo land. We had to declare war on them and the only way you could declare war was to attack the vulnerable points … The miners' union was not opposed to the distribution of coal. We were only opposed to the distribution of coal to industry because we wished to paralyse the nation's economy". He seems to be a very open sort of character. It's as simple as that. We were fighting a class war and you don't fight a war with sticks and bladders. You fight a war with the weapons that are going to win it". Finally, he said: you will not get common ownership of the means of production, you will not get real control of the society in which we live, unless you commit and convince the working class of the need to struggle". This, bear in mind, was in 1975. It may be that we get a strike situation on our hands similar to '72 or '74 where another Saltley [mine] can occur. If we get another Saltley then the whole picture can change from one where you have a peaceful road to one where you do not have such a peaceful road. I think the challenge has been spelt out very clearly. In the 1970s people decided the only way they could get power in this country was to infiltrate the Labour Party. The noble Lord, Lord Underhill, who is not here now, made a major effort to prevent them doing it—a very gallant effort at some risk to his own employment—but he failed because it was too late.

I remember the screams when Andy Bevan became the Labour Party's youth officer, because he was a dedicated "Trot". That is now commonplace. We now see the natural, logical conclusion. We see people who would not be seen dead in the same conference chamber as the noble Lord, Lord Barnett—and he would make a pretty good effort to get out before they entered, anyhow!2014;in positions of great power and influence in the Labour Party, in positions of power controlling our great municipalities throughout the country. Do not believe that rate capping is the result of some theoretical, constitutional argument. It is an effort to stop the use of public money for very dubious purposes. We see the same trend in areas of the trade union movement.

We have stayed quiet for so long that the Government now have a duty to pick up that challenge in the very near future and fight back. When ordinary people are too delicate and too gentle, they always get trodden on by the nasty people. The ordinary people of this country have reached the stage where they are entitled to demand protection from the violence of thugs seeking to gain political power through sheer brutality and intimidation.

5.31 p.m.

Lord Taylor of Gryfe

My Lords, your Lordships will forgive me if I try to reduce the temperature of this debate. It is not that I am without sympathy for some of the observations which have been made by the noble Lord, Lord Marsh, and by my noble friend Lord Harris of Greenwich, but I am afraid that this important debate on the broad spectrum of the economy of this country will be somewhat over-shadowed by the issues which have been raised by those two noble Lords. That would be a pity, but inevitably the headlines will be directed towards the matters they have raised to the exclusion of some of the major issues which we have to discuss this afternoon.

I was somewhat disappointed with the speech of the noble Lord, Lord Cockfield. That is not because I am not an admirer of the noble Lord, because I admire his lucidity and competence. But what shook me was his confidence and complacency. It is a confidence that is not justified by events. I hope that he will take cognisance of some of the comments made by the noble Lord, Lord Bruce-Gardyne: that it is not easy to forecast the trend in international economic affairs. The upset in the price of oil which is well on the way will have substantial effects on the state of the United Kingdom's economy.

Some noble Lords may be interested to learn that I lunched today with the noble Lord, Lord Lever of Manchester, and will not be surprised to hear that I was impressed by his lack of confidence in the international banking situation. Noble Lords might direct their attention to the interesting situation concerning Continental Illinois Bank in the United States. Of all the free enterprise countries, there the government had to move in and the Federal Reserve had to guarantee Continental Illinois, one of the largest banks in the United States. These are all indications of a degree of uncertainty in the international situation. There is also the problem of high interest rates and their impact on the indebtedness of third world countries, to which my noble friend Lord Walston will no doubt refer later. These are all major areas of uncertainty which can easily upset the confidence expressed by the noble Lord. Lord Cockfield, this afternoon.

I hope that when we are examining these economic problems we will look at them with some humility, knowing that these uncertainties exist. I hope that we will examine these problems with objectivity and without necessarily a commitment to party dogma. The experience of the noble Lord, Lord Marsh, is similar to my own. We have both been members of the Labour Party. The factor which brought me to these Benches was that this is an objective, pragmatic party which seeks to solve economic problems not with slogans or with blanket solutions but by examining the issues critically and trying to develop solutions which are in the national interest.

The Labour Party is still committed, I am afraid, to the Clause 4 solutions to our economic problems, which are quite out of date. I am sure that the noble Lord, Lord Barnett, does not subscribe completely to that theory. By the same token. the Conservative Party and the Government are committed with a dedication that is surprising to the dogma that simply by privatising large sectors of the economy there will suddenly be achieved some economic growth and stability, and that great powers of energy and inventiveness will be released.

As this is the "end of term", perhaps we should be looking at these matters in a non-partisan way. Perhaps I should call in evidence the external examiner, the Economist of 7th July, which states in an important article: Mrs. Thatcher's second government is stepping out to become Britain's most inept since the war. The mishaps, mistakes and omissions which have characterised its first full year now have ministers in difficulty with farmers, miners, peers, local authorities, EEC allies, even City financiers". It cannot be said that the Economist is the official organ of the Social Democratic Party, or of the Alliance, or even of the Labour Party. But this article does indicate that all is not as certain or as rosy as was pretended this afternoon by the noble Lord, Lord Cockfield.

What is the basic element in the Government's economic strategy in relation to nationalisation? The noble Lord, Lord Diamond, has dealt with this aspect to some extent, but I will give your Lordships the list, because this was given when Mr. John Moore, Treasury Financial Secretary, made what was described as a reasssuring speech, according to the Financial Times. The report was headlined, "Moore moves to lift confidence", and he was reported as saying that the Government still have a full programme ahead, hoping to return Rolls-Royce, Shorts and British Leyland to the private sector before the end of this Parliament, together with as many as possible of Britain's airports, substantial parts of British Steel and British Shipbuilders, the operations of National Bus and the Royal Ordnance factories. According to Mr. Moore, the Government's official spokesman, all this is to be completed before the end of this Parliament. Does anyone seriously believe that that kind of programme will release some kind of industrial revival in Great Britain? It is more likely to disrupt industrial revival than to encourage it.

The Financial Times—which, again, is not a supporter of this party at all—reported in another article: At first the Treasury just assumed it could sell £2 billion or more a year; now it is having to listen to the City more and to take account of the impact on the stock market, on rights issues and on gilt-edged issues". A great deal was said in earlier economic debates about crowding out borrowing by the nationalised industries, but certainly the market will be crowded out by the unloading of all this stock onto the market to the detriment of rights issues and the ability of private companies to raise capital. So this is not a recipe for economic success.

The Social Democrats and the Liberal Party, our allies, take the view that there are certain sectors of the economy which should be released for private investment. Obviously, Sealink and hotels had become irrelevant to the conduct of British Rail; and even the car industry—if one does not separate the profitable part from the unprofitable part—might be a candidate for the injection of private capital. Therefore, we should be looking at these matters not in terms of whether they fit the party programme but objectively as to whether they could be better run and organised and what their impact would be on the total national economy.

The Government are committed substantially to this programme, but their timing and pricing of issues so far has not given us great confidence in their ability to discharge the ambitious programme that they have ahead of them. The issues of Amersham and British Aerospace, Associated British Ports—35 times over-subscribed and dealt the next day at a premium of 23 per cent.—are all indications that the pressure of the Treasury to get the £2 billion each year drives the Government into a situation into which the conditions of the market are discarded; whereas any private company would examine the state of the market before it engaged in such a programme.

That has not been a feature of the Treasury's behaviour. Enterprise Oil was launched at a time when the oil market was weak and a large amount was left with the underwriters. In fact, RTZ entered the market and bought up the shares from the underwriters. That issue gave no confidence to the City and the underwriters for the forthcoming British Telecom issue. We used to talk about British Telecom realising about £4 billion to £5 billion on this great issue. I notice that speakers are now talking about £3 billion and £4 billion as though £1 billion was neither here nor there. The American market is not responsive to this issue, despite all the propaganda and the fact that £60 million is, I gather, to be spent on advertising the issue and perhaps a similar sum in fees. It does not look as though the nation will get anything like the asset value of the company which the Government are now selling.

I want simply to deal with one other problem because I have been tempted by the noble Lord, Lord Cockfield, to pursue him in his philosophical speculation on the good society and the kind of society that we want. Like the noble Lord, Lord Marsh, I became a socialist very early on because I had some vision of a good society. I am not sure that the good society will be realised with the policies now being pursued by the official Opposition and that is why I am no longer with them. However, I have always believed that the good society and the existence of democracy depended on a great degree of consensus, agreement and patient understanding. But this Government have elevated confrontation to be a virtue. They have alienated local authorities and turned industrial disputes, education, health and other areas into a situation where there is tension in our society.

The good society depends on a fraternal relationship between human beings who live in that society. It is dependent on caring for people; it is dependent on compassion; it is dependent on the right priorities. Medical research was discussed this afternoon in a Question. In a good society I would regard that as a major and top priority. I do not believe that massive spending on the Trident missile, for example, instead of some of the social services is sensible in a good society. I suggest to the noble Lord, Lord Cockfield, because I know he is a sensitive man, that during the Recess he should take a walk through Bathgate, Linwood, or the areas of high unemployment in Scotland. If he thinks that we are now in the uplands heading for a new and bright society where the creative energies of the people are released, he is living in a fantasy world.

There are millions of people who are anxious to work in our society but who are denied that opportunity. Those people are concerned about the welfare of their children, their education, care and so on. Every night they see advertisements on ITV promoting this or that product and their children want these things just as much as any of our children, but they are denied them. We are just about to depart for our holidays, but they are denied holidays. The society that has been created is not the good society. It is not the fraternal society. It is not the society of neighbourliness. It is not the society of partnership in industrial relations which we on these Benches advocate. It is not the society of caring. It is a society of confrontation.

The Government are to be condemned, not simply on the basis of the economic statistics that are bandied about in this debate, but because they are not creating a society where people feel at one with one another, who are prepared to encourage service, voluntaryism and all those virtues of a good society. It is on that score that the Government are to be condemned.

5.45 p.m.

Lord Walston

My Lords, I am glad to be following my noble friend Lord Taylor of Gryfe, in particular on his last point because it is about that rather than the third world, as he suggested I might, that I should like to take up your Lordships' time for a very few minutes.

For the Motion we are enormously grateful to the noble Lord, Lord Diamond. If he has the clarity of vision with his eyes that he does with his mind there is certainly no need for any further operation on them. To have the economic recovery which is still as far away, a stable society and the other things mentioned in this Motion we need a whole variety of things. We must conquer inflation and the Government—I give them credit for it—have gone a long way, not the whole way but a long way in overcoming inflation. We must have more investment of the right sort. We must have investment in all the things we have heard about today and on other occasions; in the infrastructure, in the factories and the other aspects necessary for a modern, sophisticated economic society.

We must have investment in education, but in that the Government are very weak. We must have investment in research—not only research in the factories themselves in the various industries but in basic research. When we have trained our scientists we must be sure that they remain in this country instead of going overseas where one hears increasingly that there are more opportunities for them.

In addition to all those things we must have good labour relations. No matter how modern and efficient a factory may be, no matter how high class its scientists or how good its salesman and no matter what infrastructure there may be to carry its goods about the world, unless there are good labour relations we shall never succeed. Following the point touched on by my noble friend Lord Taylor of Gryfe, to my mind that is one of the greatest failings of the present Government. They are a Government who believe in figures and are guided by economic theories, who listen to experts of one kind or another and who pursue a narrow aim wholeheartedly. On certain occasions, as with the Falklands episode, they have an amazing success but that is not the way to re-create a country and its economy.

One cannot do it purely by figures, statistics or theory. One must do it with human beings—the human beings who will produce the wealth. Alas, with the present Government as time has gone by the human factor has become of decreasing importance. The result is that the ordinary people feel less and less at one with the Government and are coming to feel not only not at one but actively opposed to the Government, because they believe the Government are opposed to them. They do not have their interests at heart. They work in statistics, and not in human beings.

Of course it is the job of any good industrialist, any good employer of labour, to make sure that the members of his workforce not only understand the objectives but have trust in their bosses as being people who will give them a square deal, they knowing that if the firm is going through a good time they will share in its advantages, and if it is going through a bad time then they will be prepared also to share in some of the disadvantages. That is an essential part of good labour relations. Many firms have that, much to their credit. But the bigger ones especially are finding it harder and harder to maintain that good relationship in the light of the Government's general attitude, not only to labour but to so many other things.

One could expand on that thesis in many ways. For example, there are our troubles with the European Economic Community. We may say that we have come back from Fontainebleau with a victory or we may say that the action of the European Parliament is despicable. But what we have created in Europe is exactly the same as what the Government are creating in labour relations in this country. As my noble friend said, it is an attitude of confrontation: "I am right, and anybody who disagrees with me is wrong, wrong, wrong". One cannot get co-operation and success in any walk of life if that is the attitude.

We have heard—and it is not surprising—about Mr. Scargill and what he is doing to the coal industry and the entire economy in this country. As I think your Lordships know, I am a farmer. I know that you can sow your seed where you like, but, whether the seed is good or bad, it will come up well only if you have prepared the land, if you have tilled it and cultivated it properly. The Government are the ones who till and cultivate the land. It has to be faced that Mr. Scargill's evil seed would never have come up in the way that it has, it would never have spread throughout the country in the way that it has, unless the Government had prepared the soil for it so that it could flourish.

I very much fear that unless there is a change of heart, and a speedy change of heart, which is translated in such a way that the whole country sees it, we shall have not only the Scargills but other people with similar views—possibly with less extreme views—who will find it easier and easier, either for their own political doctrinaire reasons or for their own self-aggrandisement, their own personal ambition, to sow their seeds on the land well prepared, alas!, by the Government.

We must create, and we must make sure that the people of this country realise that we have a Government who are determined to create, the right kind of society. They must be seen to be a Government who are not only conquering inflation, who are not only standing up for our interests in Europe and who are not only striving to make industry more efficient, but who are determined to see that we have a society which is based on justice, on understanding and on that much over-used word, compassion. That is the Government's job in this. When they do that—if they do that!—the industrialists, the employers of labour, will have a very much easier task in ensuring that the people who work for them and with them work with a will, with enthusiasm and with success for themselves—that is an important factor, it is true—but, above all, for the country.

I believe—I was going to say I fear, and perhaps in a way I do—that the present Government have by their actions and attitudes shown that they are incapable of creating that type of society. It is something which does not appeal to them and which does not strike at them in any serious way. I am afraid that the official Labour Opposition have shown by their actions in another place—not by the very fine speech of the noble Lord, Lord Barnett—that they are a party of appeasement and not one which will stand up for the things which my noble friend Lord Harris of Greenwich and others have spoken about. I believe that the only hope for this country—a hope which inevitably must be deferred for at least three years—is in a party pledged to the attitude and ideals of the Alliance. For that reason I am happy to say a few words in support of the Motion of my noble friend Lord Diamond.

5.55 p.m.

Baroness Elles

My Lords. I too should like warmly to thank the noble Lord, Lord Diamond, for having given this House an opportunity to have what might be called a state of the nation debate. So many aspects of our society and economy have been debated by so many noble Lords that it would be fair game for any Member of your Lordships' House to pick up any one of the strands thrown before us this afternoon and elaborate on it.

I say to the noble Lord, Lord Walston (whom I cannot entirely follow in what he was saying in criticising the Government) that we readily forget successes and are only too ready to point out what may appear at the moment to be the failures. But only in the last few weeks—and this was adumbrated by the noble Lord, Lord Marsh—the Government have had a great success in slimming down British Steel. It was an extremely difficult task and, as far as one can make out, it has been done with extreme success. It now produces 4 million tonnes less a year, but its productivity rate has gone up by 28 per cent. Why are the workers of British Steel determined to hold on to their jobs. despite great difficulties and the attempts that have been made to stop them carrying on with their work? That is the kind of successful measure which the Government have had the courage to carry out and for which I believe they have been given too little credit.

I should like to take this opportunity to give credit to Bill Sirs and to all those in the steel industry who have worked together to keep men on the job and to cam, on the work which they have been entrusted with for the benefit of the nation and which others in a totally totalitarian way are trying to stop. There are many other examples. I take issue with the noble Lord, Lord Walston, and would point out that the Government are compassionate. They are concerned with the people in this country. Indeed, if they were not, they would not have been returned with such overwhelming success in June of last year.

If imitation is the sincerest form of flattery, the Government must be extremely pleased with the imitation that they have had from all the major Western governments in the past two or three years. We all remember the attacks on the Prime Minister and on the form of policies that the Government were said to be implementing in this country. But I do not think that there is now one Western government with a democratic regime that has not followed the programmes of this Government in the economic field. Even the OECD Ministers, who met quite recently, referred to the fundamental necessity for lower inflation and said that it was: an essential component of a stable economic environment leading to higher growth and employment". I think that most noble Lords follow affairs across the Channel, despite the fact that such things are foreign. Your Lordships will know that the Socialist Government in France started off with the usual Socialist tactics. They went for reflation and for high combined government and worker expenditure, and they raised the minimum wage by 10 per cent. What happened? With their French logic, of course, they recognised clearly that they were on the road to economic disaster, and had the courage while still in government to change their tactic. They radically changed their economic programme. One of the first things they did was to make immediate attempts to slash public expenditure, and they transferred investment from declining heavy industries to new technology. Everything they have been doing has been in conformity with the policies successfully carried out by our present Government. The result in France has been that, as in this country, they have reduced the rate of inflation from somewhere well over 9 per cent. only last year to somewhere near 7½ per cent. within the short space of time since the change of policies. I think that this is a tribute to the policies which this Government have also been following.

I should like to comment in a few words on what the right reverend Prelate the Bishop of Coventry said. Unfortunately he is not in his place at the moment. He spoke on the question of a sound social policy. Of course a sound social policy is an essential aspect of raising the standard of living. This is referred to in Lord Diamond's Motion. However, sufficient credit is never given to the fact that it is the reduction in the rate of inflation which has primarily removed the undue burdens on those with low fixed incomes, be they in the form of state payments or resulting from personal savings.

This has been one of the major contributions of the Government. By reducing the rate of inflation they have removed the fears of eight million or so pensioners and families on low incomes who every week were being faced with the problem of how to meet rises in prices. You cannot estimate the result of a low inflation rate unless you have done social work for many years and seen the horror, fear and anxiety of people being presented with regularly increasing bills and a fixed low income, knowing that the two will never be able to meet each other. This is again a major feature of the Government's policy to which insufficient attention has been paid.

However, I say this to the Government. If they have not already started looking at it I would ask them earnestly to study the proposal of the Institute of Fiscal Studies. This is dealing with an old problem which I know my noble friend Lord Cockfield has considered for many years—the relationship between social security and tax benefits. The proposal suggests that it is not totally in the search for efficiency that we shall find a solution. This is because it is precisely the people in need of social security and social aid whose life is least accurately described by the word "efficiency". This may result from desertion, death, imprisonment, illness, or whatever; these are the kind of impacts on one's life that cannot be computerised. Therefore, there must be a means of dealing with the events in life which distort and change the circumstances of those who need social or financial help of one kind or another. There must be flexibility in any scheme which is produced along the lines—if they are to he followed—of the proposals of the institute.

I should like now to turn to three isolated points which are nevertheless, connected with the ongoing success of the economy of this country. Two of them refer to questions related to the European Economic Community. I know my noble friend Lord Bruce-Gardyne will not agree with me. Nevertheless, I shall risk saying it and, as I have never had and never shall have the honour of serving in the Treasury, I feel free to speak my mind, untrained and uncritical.

My first comment refers to the stability of the exchange rate. I believe that you cannot conduct a successful commercial enterprise in the world as it stands today unless you have the benefit of a stable exchange rate. This is one of the reasons why I personally believe—and I know this is not Government policy but I state it from these Benches in a personal capacity—that we must join the exchange rate mechanism of the European Monetary System. There is no doubt in my mind about that. Of course there are financial and technical reasons why we should not have done so in the past. Nevertheless I still believe that there are overriding political, financial and commercial reasons for joining which outweigh those for staying out.

I believe joining would have three results. The pound would acquire greater stability in relation to Euro currencies, which are after all the currencies with which this country deals in the major quantities of its exports and trade. It would serve to strengthen the Euro currencies themselves as against the volatility of the dollar and the high interest rates from which we in this part of the world are all suffering. I believe that, if you had a strong European Monetary System or indeed a European monetary union, the European currencies together would be able to exert a much stronger effect and be less influenced by the actions and reactions of the dollar.

It would also enable an expansion of the use of the common currency—ecus—throughout the European Community, which would of course lead to great savings on the exchanges, because trade and commerce could be dealt with in one currency. It does not take a lot of imagination to realise what was the loss to this country with the collapse of the sterling area, where one had had a common currency with a very large home market in terms of numbers, when one compares it with the US dollar, which after all serves a home market of 230 million people. It is surely logical that we should seek some kind of operation, obviously not removing sterling altogether but one where we could use a common unit for commerce and financial deals between countries which, after all, are part of a single economic community.

The second matter about which I would beg the Government to do something as soon as possible is to take note in the first place of the agreement between the French and German governments for the opening of frontiers between the countries, so enabling transport to flow freely with the minimum of checks and customs procedure. It is of course well known to the Government and to your Lordships that the cost of customs procedures and hold-ups at customs alone amounts to well over £500 million a year to businesses.

If the Government were to come to bilateral agreements with those countries which have channel ports on the Continent and with which we do a considerable amount of trade, I believe it would be of great assistance to businessmen in getting their goods and traffic through easily and quickly with the same facility as exists between France and Germany. If we hold back on this, again we shall lose the edge of competitiveness of our products in the markets of the European Community member states as against those of France and Germany. So I would beg the Government to look at this and not wait for some Commission regulation which will be fought over for years. I beg the Government to start immediately on bilateral agreements, just as France and Germany have done.

The third point I should like to make is on the question of investment. That has been discussed quite widely during the debate. Investment, particularly in high tech industries in this country, is not only investment in industry but investment in people. We are already finding that there are flourishing firms who are looking to expand their products and their markets and already find that they cannot get a sufficient number of trained electronic and computer engineers to handle these jobs. They are not only the jobs of tomorrow, as they are so often called, but they are already the jobs of today. This is something at which I believe the Government should look with all urgency.

I ask the Government to consider this. In the 'seventies in the United States 30 per cent. of young people aged 20 were still in higher education. In Japan there were 25 per cent. But in Europe the figure varied from 11 to 17 per cent. If we are going to benefit from the programme of information technology with which this country is meant to be developing its future industries something must be done about it. You have only to consider that six out of eight of computers in this country come from the United States and nine out of 10 video recorders come from Japan. I understand that the McKinsey Report which was prepared quite recently for the European Commission (which I must confess I have not read but I have merely seen the details that were reported) said that there are about 4 million jobs at risk. I understand that by 1990, if the right measures are not taken by European governments, including that of the United Kingdom, to deal with research, development, training and investment, we can lose 2 million jobs. If we do the right thing and follow the correct policies as outlined in the McKinsey Report there can be 2 million new jobs. This is only in the field of information technology. We cannot afford to lose the opportunities available to us.

The final words of Lord Diamond's Motion refer to a return to stability, to a stable society. We have had remarkable speeches today from the noble Lord, Lord Marsh, and the noble Lord, Lord Harris of Greenwich. I think that they were really informing this House that we actually have a stable society; we are not returning to one. Our problem is to retain the stable society which we have and to resist the attacks which are now trying to undermine democracy and the elected Government of this country. I would certainly hope that all sides of this House would be willing to pay tribute to the 60,000 miners and their families who nightly have to resist physical intimidation and physical violence by those who are using weapons which I, in my lifetime, and I am sure the majority of noble Lords in this House will have known as the signs of totalitarianism—a form of government and a form of regime that I hope will never be acceptable to noble Lords on any side of this House.

6.10 p.m.

Lord Ezra

My Lords, the big advantage that my noble friend Lord Diamond has conferred on us this afternoon is not only the timeliness of the Motion that he has put to the House but also the wide ranging way in which it has been framed. It enables those who speak to choose particular aspects instead of going over the same ground again. I should like to choose the aspect of the levels of industrial production and the state of the infrastructure. I should like to get there by considering for a moment some of the difficulties that I feel we are confronting as a nation. Whether these difficulties are due to external or internal factors, they are nevertheless difficulties. They are emerging in different ways. For example, one rather unsettling report in the newspapers this morning is the CBI quarterly review. It is the most disturbing quarterly review for the past 18 months—still, on balance, optimistic but the measure of optimism has been very much reduced.

Reference has been made to the exchange rate and to the interest rate increase. These are also disturbing factors, whatever might be the cause. The prospect of unsettlement in oil prices could be a very serious matter for this country bearing in mind our involvement in the North Sea. The fact that unemployment has remained so stubbornly at its present level—indeed, tending to increase—is another adverse factor. Others are the fact that our manufacturing capability has tended to reduce over recent years and the fact that our balance of payments on manufactured goods has shown a really dramatic decline in relation to imports. In 1982 we showed a balance-of-payments surplus on manufactured goods trade of £2.5 billion, converted in 1983 to a deficit of £2 billion. In the first quarter of this year, we incurred a deficit of £650 million; in the second quarter £990 million. I am not listing these items to contend that things are all going wrong. I merely think that at this stage we should be thoroughly objective, identify the things that are causing difficulties, and then see whether, out of this variety of problems that have suddenly beset us, something emerges that might suggest a change of emphasis in policies.

I believe that there is a certain factor which is a source of weakness in our affairs. Although the oil in the North Sea is an undoubted and undisputed asset, its possession has created difficulties that need to be counter-balanced. The fact is that sterling soared to its highest level in recent years not because of anything that was happening in the general economy of Britain but because the oil price was very high at that period. Sterling not only is now weakened because of the dollar position but could be further weakened because the oil price might be coming down substantially. In other words, I believe that we are becoming unduly dependent on our oil assets.

So the question that we can honestly ask ourselves, in trying to be totally objective, is, "Should we do something to counter-balance that situation? Without in any way diminishing the benefits to be derived from the possession of oil, should we seek to insure ourselves against a situation in which we seem to be pushed around by world forces because of our possession of the oil?" The way in which this needs to be counter-balanced is for us to pay more attention to our industrial and manufacturing capability and our infrastructure. I am afraid that Government policies, and certainly speeches made in this House, have given the impression that the Government feel that it is not particularly important if our manufacturing capability diminishes because other things can take its place; for example, service activities, banking activities, high technology, and so on.

I do not believe that this is a valid proposition. The simple fact is that we are going to require, as far ahead as we can see, the products of manufacturing industry. If we do not produce those things ourselves, we shall have to get them from elsewhere. We are already seeing the signs and shape of things to come. What makes it doubly serious is that even though the prospects of oil reserves are now stated to be rather better than we had at one time thought, it is nevertheless the consensus of opinion among the experts in the oil industry that we are likely to reach our peak in oil production in this country in about two years' time. From then on there will be a progressive diminution in our overseas earnings from oil, even though we may remain for a long time capable of meeting our own needs in oil. If, at the same time, this unfortunate trend in the balance of payments on manufactured goods continues on the lines on which it is proceeding at the moment, it does not take much imagination to see the difficulties that we could be in.

The question, of course, arises, "How can this emphasis be changed?" I was interested by an article in the Economist recently, where it was shown, in an analysis of the American industrial resurgence, that this was not exclusively a matter of high technology, not exclusively a matter of expanding service industries. What was now beginning to happen was that high technology was being applied more and more to what had become known as the smoke-stack industries. The Economist concluded: The question for Britain is not whether to spend £400 million on a fifth generation computer project, but what can the micro-chip do for existing industries in Bolton and Bradford? I believe that there is here a challenge that we ought to be facing up to more effectively than appears to be the case at the moment. We have the benefit of the oil. We have still a very large manufacturing base. We have also developed exceptional skills in high technology. We have to create a blend of these three components which will give us a greater prospect of international stability than it looks as if we shall have. I am talking particularly about stability in the balance of payments.

I fear also that the apparent neglect of the infrastructure—I know that this is a rather boring topic for some noble Lords on the Government Bench but nevertheless we must keep coming back to it—is exacerbating the difficulties to which I have referred. Any improvement in the infrastructure leads to more jobs and more contracts for the private sector of industry. There are large segments of the private sector entirely dependent on the contracts that they can get for the infrastructure. This in itself would be no justification for launching into major projects in order to give them contracts. However, I have been examining fairly closely the various aspects of the infrastructure and talking to many of those involved over the past couple of years or so.

I must say that I have come to the conclusion that whether one talks about the water industry, sewerage, roads, or the state of house disrepair, there is a great amount of work to be done in all these sectors. We know all about it. There have been an enormous number of highly-detailed reports on these subjects. If the number of pages which have been written in recent years on these subjects had been converted into positive investment, we would have solved the problem; so there is no cause for any further inquiries.

On roads, we have had very full reports, one recently by the CBI. On the water supply system, your Lordships' own House produced a report through the Select Committee on Science and Technology; we debated that last year; and there have been many others. On housing, there has been the recent survey of English housing, which has demonstrated the problems. So the issues are extremely clear, and it seems to me that we need to take another look at this whole infrastructure position if we are committed, as any Government in this country must be committed, to sound economic growth. We cannot have that economic growth without having an adequate infrastructure on which to base it in physical terms. This indeed is the point that was made by the CBI in their recent report, The Fabric of the Nation.

Infrastructure investment for desirable purposes will itself stimulate greater activity through manufacturing industry, because one thing leads to another. The contracts are taken up; the roads have to be built; the houses have to be repaired. The people who manufacture the components then get into activity, and so it works its way through. At the same time we have this stimulus at the consumer end of the economy and at the high-technology end. A stimulus at the lower end could then mean that we could have a more balanced movement throughout the whole of the industrial sector.

I invite the Government to have another look at this question of the infrastructure. When we on this side of the House raise questions about the infrastructure, almost invariably we are told, "Yes, of course these things might be desirable, but it's a question of what money we have". I do not know how the money availability is calculated. If infrastructure projects are left right to the end of the queue it is no surprise that there is very little money left. If they were treated with rather higher priority, as I believe they should be, then we could be taking a different view of what we could afford and what we could not afford.

I believe we have now come to a period when perhaps we should be trying to redress the balance of the economic activity of our country, and accept, as has now been recognised in other major industrialised countries, that we should not be making a wholesale transition away from manufacturing industry into other activities. The transition we should be making is a transition into a new sort of manufacturing industry, infused with the benefits of high technology so as to expand those industries on that new basis, and not progressively to give them up.

Overshadowing the whole of our industrial scene at the moment is the unfortunate dispute in the coal industry. Having been involved in that industry for many years, I witness it all with a great feeling of sadness. It was an industry of great achievement and it has a great potential, but the longer this dispute lasts, the more it widens its scope, the more that future prospects are going to be damaged for all—those in the industry and those who they serve. Like everyone else in this House, I deplore thoroughly what has been happening on the picket line. I do not believe that that represents the average British miner expressing his opposition in an industrial dispute. I am at a loss personally, as most people must be, to suggest how we can quickly resolve this issue on a proper basis. I regret that the most recent negotiations held between the Coal Board and the NUM ended in failure. I thought the Coal Board had gone a very long way to meet what I thought were the stated claims of the NUM. I should have expected the dispute to be settled on that basis. I was extremely surprised that it was not.

There is only one suggestion that I should like to make for consideration and in an attempt to help. From time to time members of the Government—the Secretary of State for Energy in particular; occasionally the Prime Minister and other leading ministers—have indicated their intention to continue to support the coal industry by investment and in other ways. The Coal Board also have made their various offers in negotiations. I think it might be timely, at an appropriate moment for all this to be put together in a single, simple document which would make clear to the public and to the mineworkers what the Government's policy is. I think that there is some confusion in the public mind, although those of us who follow these things are perfectly well aware of what the Government have said; but it has been said on a number of occasions and in different places.

I should like to see this dispute ended quickly. But for it to be ended quickly it has to be brought back to being a dispute within the coal industry and not a political one. If the Government were to issue at the appropriate time a clear statement of their policy towards coal, this might help to achieve that desirable objective.

6.27 p.m.

Lord Wilson of Langside

My Lords, the noble Lord, Lord Ezra, said that the Front Bench opposite might well find boring the subject of infrastructure. I imagine that not only the Front Benches but perhaps the rest of the House would find even more boring the subject of social stability and its retention or restoration. We are all agreed that we are much in debt to the noble Lord, Lord Diamond, for his presentation of this extremely wide Motion.

I would not venture into any other aspects of the Motion—at least, not in this company, for I am only a more or less hard-working lawyer—but I should like to take up the point raised by the noble Lord, Lord Marsh; and I am sorry he is not in his place. He referred graphically to the nightly scenes of violence on the picket lines, and he asked whether or not they were legal. I have no doubt at all that, at least in the jurisdiction with which I am familiar, they are very far from legal. Then he went on to say that it was time the Government took up the challenge. Many of your Lordships on the other side of the House expressed warm and wholehearted agreement with that.

What puzzles me is why the Government have not already taken up this challenge. It has been obvious from a very early stage that, to the Scargill-McGahey axis, this was a political strike. Of course, they are perfectly entitled to their points of view. I think Mr. McGahey is a member of the Communist Party. In this free country they are perfectly entitled to these views; but their purpose is to create instability. That is their declared purpose. This we know. Why, then, did the Government not take up the challenge?

I can understand that, if intervention could mean nothing else except buns and beer in Downing Street with the bully boys of the Scargill-McGahey axis, there would be little to be said for it. But why at an early stage did the Government not make it clear that, while the settlement of the dispute between the National Union of Mineworkers and the National Coal Board would be left, at least at the early stage, to them to resolve, they would exercise the full powers and authority of government to ensure, for example, that a supply of fuel, coal, coke and iron ore to, in particular, Ravenscraig, Llanwern and Scunthorpe was maintained? The only reason those steelworks are still in operation—and this point appears to have escaped a great many people—is due to the action of the police. As I see it, we are indebted to the police for the preservation of these great steelworks. If the police had not been there, those steelworks would be gone by now, and gone for good. That is merely one of the aspects as regards which we are indebted to the police.

But why did the Government leave it to the police? Why did not the Government say explicitly right from the beginning that they would exercise all the legitimate authority and powers of government to ensure that whatever happened between the National Union of Mineworkers and the National Coal Board, supplies to industry would be maintained? Indeed, they could have gone further and they could have said, "If our powers are inadequate to this end, then we shall ask Parliament for more". They have not done that. They have not done it yet. My impression is that the Scargill-McGahey axis has found the Government's approach of a combination of rhetorical denunciations of mob rule and a passive lack of positive action, utterly resistible. Indeed, there was one time a few days ago when the press were beginning to talk as if the axis would win. You cannot compromise politically with people like that.

It is an elementary political lesson that I thought most politicians learned in their political cradle that the basis of parliamentary democracy is agreement on fundamentals. If you do not have that, you cannot have compromise and consensus. So there is no point in thinking that the Government can compromise with Scargill, McGahey and company. I know that they have denounced them, but that is not enough. Have Ministers not learned that the Scargills and the McGaheys of this political world love to be in a position to exchange denunciations? They are experts in rhetorical denunciation. They love to be asked what they have to say about violence on the picket line. They are demagogues. They have no conscience in saying that of course it is all the fault of the police. My own impression of the Government in this context is that they have been (to use a good old Scottish word which at least the noble and learned Lord, Lord Cameron of Lochbroom, will know) a bit "dwaibly". Your Lordships can ask the noble and learned Lord for the translation. It was a favourite word of Robert Louis Stevenson.

I took up the point made by the noble Lord, Lord Marsh, because, like him, I was in the Labour Party from adolescence to late middle age, and then I felt I ought to have known better. But rather than go to the Cross-Benches I came here, not because I am left with any illusions about political parties—in my advanced years I tend to regard political parties as necessary evils—but because at least I have faith that we here are on the right lines; and I think that the noble Lord, Lord Marsh, was quite wrong when he suggested that the present Government were on the right lines, at least in the context of achieving social stability. Social stability is under threat. There is no doubt about that; and the Government concede it. They say that there are enemies within and that we must now fight the enemies within. I must say, to use the phrase beloved of Mr. Jimmy Edwards, the comedian, that I find this a somewhat primitive and ugly political approach. I do not think that it promotes social stability.

Ministers are charged—in my view sometimes unfairly—with complacency, and certainly many people feel that they are complacent about the present situation. The noble Lord. Lord Cockfield, even suggested that in a few years we would be wondering why we were worrying about the present situation, why we were worrying about the school-leavers who cannot get jobs and who turn to crime. The Government seem reluctant even to concede that there is a link between crime, unemployment and other forms of deprivation.

If you test the question of the success or otherwise of the Government's attempts to maintain social stability against, for example, the background of the miners' dispute or against the incidence of crime, which has reached an unacceptable level, you have to ask the question: is the Government's approach to this problem of social stability adequate, not only to meet the immediate threat of, for example, the miners' dispute, but to create the type of social and industrial atmosphere that will immunise us against future threats? If there was a general feeling in the nation that the Government were on the right lines as regards the attack in inflation and unemployment, which are the real enemies, and if the nation felt that the Government were on the right lines as regards defeating those enemies, then we would have no need to fear the Scargills and the McGaheys. But the nation, whatever the noble Lord, Lord Cockfield, may say, does not feel that, and manifestly I think that the nation is right.

6.40 p.m.

Baroness Seear

My Lords, those of us who are in many ways deeply critical of the Government's policies and practices do our cause no good by denying the achievements which the Government have to their record. It is a great achievement that inflation has been reduced to the extent that it has, and I very much agree with the noble Baroness, Lady Elles, that it is easy to forget past pain and to forget the grip of fear that millions of people felt as inflation rose and rose and as resources to meet those increasing prices seemed to get fewer and fewer.

Therefore, from these Benches we have always supported the need to fight the battle against inflation. We also recognise that the Government have, at any rate, done something to increase competitiveness and to take action in areas which had previously been neglected—such as the professions, in which competition has been remarkably limited in the past. So far the Government have not gone very far in that direction, but at least they have taken a long overdue step.

Of course, not all the Government's stated moves in the direction of increasing competitiveness carry a great deal of conviction, and we who take a pragmatic view about privatisation, object to it primarily where the creation of so—called private enterprise out of public enterprise has been nothing more than the creation of yet another monopoly rather than a real increase in competitiveness. We also recognise that the Government have at any rate done something to shift this muscle-bound old country towards a more subtle and alert approach to the problems that confront it.

We recognise that the Government did get a majority in the House of Commons in support of what they had done in the previous five years. I would remind the Government that it was a majority in the House of Commons, not a majority in the country. I am surprised that none of my colleagues from these Benches has made this point this evening. It would be totally inappropriate for a debate of this kind to come to an end without pointing out that the Government do, in fact, represent a minority in this country and not a majority, and that their boasted support of the majority in the House of Commons is based on the false electoral system, so strongly supported by both the Conservative Government and the Labour Party, who are determined not to give up their highly preferential position of being able to command seats on a very small number of votes. But that is by the way and is not really to be found under the heading of today's debate introduced by my noble friend Lord Diamond. Therefore, we recognise that the Government have had achievements.

However, there are deep worries. There are deep worries about interest rates. In real terms these are the highest interest rates we have ever had. I do not reach back as far as the Middle Ages, to which my noble friend Lord Diamond referred: but in real terms, interest rates are tremendously high. If they stay at their present level then they run the risk of undermining much of the achievement that the Government have had. We cannot have high interest rates of this kind without mortgage rates being seriously affected, which in turn is bound to bring high pressure for increased wages and for increased social security payments. It will of course curb consumer expenditure. If you curb consumer expenditure, then the confidence, on which industry is beginning to revive (and I give credit to the Government that there is a sign of recovery) will disappear if these interest rates stay at this present abnormal level.

I for my part—and I know that there is disagreement in many quarters and across parties about this—would have been willing to see the value of the pound go down further rather than have it supported by the present level of high interest rates. After all, advantages would flow from this—advantages in our ability to export, and advantages in our ability to limit imports without in any way cutting across our obligation to fight protectionism. But that has not been how the Government have seen it. I just hope that they will have second thoughts.

The second large criticism is of course the extent to which the Government have failed to deal with the problem of unemployment. I should like to make a point to the noble Lord, Lord Bruce-Gardyne, which I was unable to make when he made his speech, when he referred to the great increase in women's unemployment and attributed this to the EOC policies, based of course on the Equal Pay Act, which was passed by Parliament and which the EOC was entrusted to implement. He was inferring that the existence of equal pay had created greater unemployment among women. First and foremost, nobody really knows what the increase in women's unemployment has been because of the extraordinary provision which we had in the past, that married women did not have to pay national insurance contributions, were therefore not eligible for unemployment pay, and therefore did not register, and nobody has ever really known how many women were unemployed and how many were not. Then there is great surprise when there is a recovery in the economy because unexpectedly more women come onto the labour market and start to work. Nobody knew they were there because their names were not on the register of the unemployed. So the unlikely argument of the noble Lord, Lord Bruce-Gardyne, that it is the Equal Pay Act that has led women to unemployment is, to say the least, not proven; and there are many other reasons why women are unemployed besides the only very partially successful implementation of the Equal Pay Act.

Leaving that on one side, the existence of nearly 4 million unemployed—because we need to include these women who are not registered in the numbers of unemployed—is something about which the Government should be deeply concerned and they should recognise that it is a failure to offset the successes that they claim. We find it is extremely difficult to believe that they can themselves believe that market forces will clear the unemployment position without more action being taken. The noble Earl, Lord Gowrie, shakes his head, but at any rate there are some influential members of his party who believe that you can leave it all to market forces. I shall return to that matter in a moment, but that must be marked as one of the gravest failures of this Government.

However, it is not only the ways in which the Government have not succeeded in dealing with some of our most serious problems. which today are in danger of undermining even the successes that they have achieved, which concern us. One of the most important parts of a Government's job is to look to the future to see that they are not only dealing with today's problems but that they are anticipating and coping with the issues that will confront us in the near future. I do not ask them to star-gaze into the great distance, but to look at problems which will be upon us before very long.

I should like to make three points as to where I believe the Government should direct attention if such successes as they have had are to be sustained and if the problems with which they have failed to deal have any hope of being adequately dealt with in the future. I take up the point that the noble Baroness, Lady Elles, made. I believe that the Government should now come out strongly as a far more determined and convinced member of the European Community than they have ever shown themselves to be in the past. Our stability in the future depends on an effective European Community, a genuine free trade area and a genuine community. This will not be achieved if the Government maintain their present Gaullist approach towards the European Community.

So many times this Government have given the impression that they are fighting their corner in Europe, defending British interests, regardless of what it does to the real development of the Community as a community. Can we not at least suggest that the time has now come fully to join the EMS, the monetary mechanism, and to become a real part of the European community, taking advantage of it and playing our full part in the monetary and economic developments in which our participation is long overdue? We were told in the past that we could not do it because the value of the pound was too high; we are almost being told now that we cannot do it because the value of the pound is too low. There is no perfect moment and there is no perfect point in the value of the pound. We must get on with it, partly because of the economic advantages and partly because it would show (and such a gesture is long overdue) that we really do mean business by Europe.

Those of us who ever go to Europe—and everyone on the Government Front Bench must do this—and who meet colleagues inside the Community, know how unpopular we have made ourselves. It is no good saying that it is all the fault of the other people, that they do not understand us, and that we have justice on our side. The senior politicians in Europe are now saying, "If the British don't like it, they had better get out, or at least we will have a two-tier Europe and Britain will be in the lower of those two tiers". This is no position for us to be in if we are going to face the future with any confidence, and get the full value that is to be got from our membership of the Community, and to give what it is in our capacity to give in order to make the Community a really effective element. This should be one of the high priorities of the Government in the months to come.

Secondly, what thought have the Government really given to what is going to happen on the wages front and to inflation if the recovery—which the Government tell us is coming, and which we all hope is coming—is a reality and is sustained? What evidence is there that the Government will not find themselves faced, as we have been faced again and again when there is recovery in this country, with a pressure for wage increases which they will not be able to halt, and which will turn us back on the path of inflation from which we have recovered with such difficulty and such pain over recent years?

There are only two ways in which you can avoid wage increases leading to inflation. There is no doubt that excessive wage increases are a major, if not the major, cause of inflation in country after country. As the noble Lord, Lord Cockfield, pointed out, the fact that the Americans have been able to increase the number of jobs without having inflation has been due to the fact that there has been sensible wage restraint in the United States. Have the Government any reason to suppose that the same kind of restraint will be exercised in this country when the recovery comes and the trade unions are in the bargaining position that they would like to get back to as soon as they possibly can? What preparation are they making for that?

There are only two ways of dealing with it. One is some kind of wages policy, against which the Government have set their face. The other is to get real collaboration and support from the trade unions and trade union members up and down the country. The Government have gone out of their way to make it more difficult to get this support, to get this consensus, to get this understanding. It must have been a masterpiece unrivalled in the history of any Government to have fallen foul of the Right-wing trade unionists over Cheltenham in the way the Government did, and to have betrayed—and that is not too strong a word—Len Murray, the General Secretary of the TUC, by the way they conducted their affairs in Cheltenham.

Len Murray had gone out on a limb in order to try to get discussion going again with the Government. Len Murray had taken the line that the law must be obeyed at all costs. He had been accused—of course he had been accused—of selling out to the Government. Then within a matter of weeks the Cheltenham incident occurred and he was left defenceless against his critics, the very people the Government should have been trying to immobilise.

In the face of that, how do the Government think they are really going to get the kind of collaboration they need? If they do not get that collaboration, and they will not have an incomes policy, how are they going to stop wage inflation the minute that the national economic recovery returns? What plans have the Government for dealing with unemployment in the future? I pay tribute to the Government for having done more to get a trained labour force than any previous government. It is long overdue, but they are at least doing it.

Although there have been mistakes, the Government have put more money into training, and paid more recognition to the need for a trained labour force, than any Government previously of any colour. But unemployment is not going to be dealt with by national economic recovery. In fact in some ways the quicker the recovery the more severe aspects of the unemployment problem will become. As we have said so often, there will be no economic future for the unskilled. The unskilled, those with no competences. will not find jobs as the economy recovers.

We are in serious danger—and this is where the phrases about stability in this Motion come very much into play—of developing a permanent under-class of people who take no part in the economic, and therefore no part in the social, life of our society. We have to face the fact that there have to be interventionist policies which will draw these people, who would otherwise fall into this under-class, into real economic activity; into real participation in the activities of our society.

The Government have made partial moves in this direction through some of the MSC Programmes, particularly the Community programmes, but again the Government have a good idea and then they ruin it. It was beginning to build real participation at local level between local authorities, voluntary bodies, and Government money through the MSC. But do the Government realise what damage they have done at local level with their stop and start policies which have alienated so many of the voluntary bodies that the whole movement, which was one of the most exciting developments of grass-roots collaboration between the statutory and the voluntary, is in danger of being seriously undermined? Will the Government look at that again? Will they really see whether they cannot give greater stability to the schemes which have been undertaken, and to which a great deal of time and energy have been devoted but which are now being seriously undermined?

Finally this Government are throwing away the opportunity—I was going to say of the century, but at least of decades. There is today a great vacuum in political thinking. Throughout my youth a great many of the political enthusiasts believed that socialism was the doctrine to be followed that would lead us to a better society. Today there are very few true believers left. In fact, the only true believers—and this is the problem of the Labour Party—are the people on the Left; the people whom they would reject. This is their great dilemma. It is their dilemma, not my dilemma or the Government's dilemma; but it is the Government's opportunity because there is a great vacuum through the failure of socialism. The noble Baroness, Lady Elles, referred to it. But look across the globe. Look at Bob Hawke in Australia. Look at Mitterrand in France. They are all socialists, but their policies —this is true—are very much the policies of the monetarists, of the Government, because the facts of the situation make it abundantly clear that the old socialist analyses of society and the economy simply do not work. It is a busted flush. It has left a vacuum.

What are the Government putting into that vacuum? They have the chance to create a new concept of the kind of society that we want. I was waiting to hear what the noble Lord, Lord Cockfield, would say in answer to the question which was in my mind. I think he thought he was answering it with that list he gave at the end of his speech, but the great weakness of the Government's approach showed up when he said that the difference between Western countries and the East is that in the West we own property. My Lords, the difference between the East and the West is the difference that we believe in human rights, and they do not; that we believe in the supreme importance of individuals, and they do not. To say that we let them own their own house is a very inadequate interpretation.

6.59 p.m.

Lord Bruce of Donington

My Lords, we on this side are most grateful to the Alliance for having secured the opportunity for this debate. I find myself in almost entire agreement with the diagnosis put forward by the noble Lord, Lord Diamond. I would sincerely hope that his future advancement within the Alliance will not suffer in any way because of the support I feel bound, in all honesty, to give to him this afternoon.

I listened with great interest to the speech of the noble Lord, Lord Cockfield, to whom I have already paid tribute for the one achievement of the Government which I outlined in my speech to your Lordships' House on 25th July. I do not propose to repeat my appreciation this afternoon. The noble Lord was, as usual, beamingly self-satisfied. There were occasional cross-currents he admitted, but he did not see any storm clouds on the horizon and no change of course was necessary. There were temporary difficulties, but there was good hope. One could see his satisfaction about the absence of clouds on the horizon until the tropical storm blew up from the noble Lord, Lord Marsh, who made it quite clear that there is a very substantial cloud indeed on the horizon. I thought the noble Lord frowned a little in the course of that vitriolic attack on the Government.

I listened to the stern words of the noble Lord, Lord Marsh; in his view the Government were not doing all the things that he and all responsible citizens wanted them to do. I should have thought that that would have amounted to a criticism, but perhaps the Government are so used to self-congratulation that they applauded the one onslaught they have had from within their own ranks.

Things are not really like this. It is no good Government spokesmen in either House getting up after five years—most of which years have been punctuated by assurances from Ministers that things would be better next year—and saying that everything is on course, that there are no storm clouds on the horizon, when this conflicts with people's everyday experience.

I will not repeat any of the figures, or indeed the arguments, that I made in our last economics debate. But I am bound to say that noble Lords are living under an illusion if they really think that the ordinary citizen of this country thinks that things are improving, that everything is all right, that the economy is in good shape and that there is a roseate future.

The noble Lord, Lord Bruce-Gardyne, in the course of his observations said that some doubts had been cast upon the future of the economy, but he was not acquainted with the forecasts that cast doubts on the Government's own forecast. I have them before me. I will certainly not read them out, but if the noble Lord would care to refer some time later to the Financial Times of 16th June headed, "Industrial output figures show fall continuing", or the Financial Times of 14th July which says, "Recovery slows in manufacturing", alternatively another quotation from the Financial Times of 19th July saying, "Long-term indicator casts doubt on recovery", or a further article on 24th July saying, "Slower growth this year forecast", then he must expect that there is a substantial body of responsible forecasting opinion within the City of London itself that casts considerable doubt on the noble Lord's complacency in this matter.

Messrs. James Capel, the well-known stockbrokers in the City—and I refer the noble Lord to the Financial Times of 30th July—are already hazarding the possibility of the recovery, as far as it has gone, petering out, with the possibility of a recession, albeit a mild one, in the year 1986. It really is not true to say that the predictions of the noble Lord forecasting a reasonably smooth situation and hope, above all things, are not contradicted by criticism from responsible sources within the City.

The principal question that we have to decide—this continues to be raised in this House and in another place time after time—is what can the Government do in situations of this kind? Is it true that there is nothing that they can do except to allow the free vent of ordinary market forces? This is the official view of the Government. As I have said before, it does not stop them whenever things go well in a particular part of the economy to claim immediate credit for it, whereas all the adverse factors are either acts of God or beyond their control.

May I take noble Lords back a little—and carry with me the noble Lord, Lord Marsh, as well—to what were derisorily called the Butskellite eras, the eras of successive Labour and Conservative Governments who, although they had different emphasis and pursued different policies and different priorities, nevertheless had a broad degree of consensus. The noble Lord gave some graphic examples in considerable rhetorical form of his experiences within the Labour Government. Perhaps noble Lords will forgive me if I reiterate my own allegiance to my party because so many other people seem to have fallen by the wayside. I joined the Labour Party in 1935. I have remained a member ever since and am very pleased and proud to be a member of the Labour Party.

But the noble Lord recounted his circumstances when he was a member of the Labour Government. He pointed out that he was forced, or the Government were forced, at that time to take action that was repugnant to the very policies that they had been putting forward due to international pressures arising from the balance-of-payments situation. This happened under Conservative and Labour Governments right the way through at intervals because the economy became (to use the overworked term) "overheated" and it had to be "cooled down" because the balance-of-payments situation made it absolutely necessary.

That does not prove that the endeavours by successive governments to try to steer the economy were themselves wrong. In fact, owing precisely to the fact that both governments in their own ways and with their own priorities were able to steer the economy through, in part, their ownership of the nationalised industries—exercising considerable demand on the manufacturing capacity of the private sector—they were enabled to achieve a broad degree of stability. This much must be said. Those particular years, until the oil crisis itself, were a period—and the noble Lord very often boasted about it—of rising prosperity generally in the United Kingdom; although, as we have repeatedly pointed out on this side of the House, it still left pockets of poverty—large pockets of poverty—which under this Government have increased out of all recognition both in size and in intensity.

Lord Marsh

My Lords, will the noble Lord allow me?

Lord Bruce of Donington

My Lords, I did not interrupt the noble Lord when he was speaking and my time is very limited. After having accumulated the experience of the years immediately following the war and after making many mistakes, as all governments composed of human beings make mistakes—and even though the noble Lord, Lord Cockfield, who never makes a mistake, is a Member of this particular Cabinet—it was really silly to abandon the kind of very limited guidance and control that was adopted in those years; it was very silly indeed because the experience that had been accumulated over those years since the end of the war under conditions in which this country was no longer exposed to the balance of payments difficulties that had taken place in the past owing precisely to North Sea oil, would have made it far easier not to have conducted the economy but to have guided it in a way in which we should not have had inflicted upon us the large-scale unemployment that we have today.

In fact, it has been a wasted opportunity. Even after May 1979, we could have avoided this if we had taken suitable steps to stimulate investment, albeit on a limited scale, and if we had made a real endeavour over the control of interest rates. The noble Lord, Lord Bruce-Gardyne, said that the Government had no control over interest rates. He should go back to the interest rates of 1979. I have the chart in front of me. American interest rates were lagging below ours until this idiotic rise in interest rates took place, a matter of some 5 per cent. in two or three months in the later months of 1979, where we put them up way above American interest rates and the interest rates in the United States followed.

So we had a chance. We have a number of problems today. There are clouds, whatever the noble Lord, Lord Cockfield, may say. There is a prospect which has been referred to of the possibility—and it is only a possibility; I do not want to give credence to it—of a sharp fall in oil prices. This would have a very considerable effect upon Treasury revenues as the noble Lord knows. There is the menace (which is getting rather more than a cloud) of the international banking system which was referred to by the noble Lord, Lord Taylor of Gryfe. There is also again the problem of the whole instability of the Middle East which one simply cannot shove under the carpet and pretend that it does not exist. There is the whole problem of unemployment and the threat to social stability that arises from it.

These are very great problems and to imagine for one moment that everything can be left to the free play of the market to solve is really a lot of nonsense. Within two or three months from now, when Parliament resumes, I venture to predict even now that although noble Lords opposite will be spelling out the same story as before, the problems will become graver and the problems will become more menacing. But it requires more than the economic steps that have to be taken. It requires more than the investment in the infrastructure, the investment if necessary in manufacture, which can begin to stimulate demand and to stimulate output.

All these things are easily capable of accomplishment provided that the will is there and that the humility is there also, the humility to say to oneself. "Really, I have made a number of mistakes in the past in the way that I have conducted this affair; and I am now prepared to learn from the mistakes"—because the population at large simply do not believe that the Government have not made any mistakes. To pretend that they have been on one course of rectitude for the whole time, a course which is not going to change, is something that the public will not indefinitely accept. The Government will have to do more than that.

These are not entirely economic matters. These are matters of what we will call for the moment, very loosely, social ethos. These are a matter, when people are leaders, of tapping the spirit of men, of engaging their affections, of stimulating them to purpose. These are the real functions of leadership. One does not have to go very far to encapsulate the kind of spirit about which I am talking. In today's issue of the Financial Times, to which I draw the attention of noble Lords, there is a feature by Professor Michael D. Stephens and Dr. Kenneth H. Lawson. It is not at all remarkable these days that it should appear in the Financial Times because, unlike most of the press that is under the patronage of the Prime Minister and the party opposite, articles do appear in it of which the late C. P. Scott would have thoroughly approved for inclusion in his very great newspaper.

What I mean can be encapsulated thus. This is what the writers say—and it should burn into the minds of those that really want to understand it. They say: There is no vision of the ideal state: there is no conception of 'a good life' to be striven for. Government plays only a minimal role. It is concerned with the processes of ensuring that the rights and the rule of law are upheld, that the state is defended and little else. It is no accident, therefore, that notions such as 'the welfare state' are unfashionable, because they require the establishment of shared values and of consensus about social goals. What has emerged from the freedom of the 1960s is a single universal criterion by which to judge policies, decisions and the conduct of affairs at all levels. It is money. 'That something pays' is the criterion of its worth, and all the processes in society are judged by it. What is done, what is made, and what is said are of no consequence provided that the processes involved cost little and earn much. We have emerged as a society in which discussion about worthwhile ends is ruled out as irrelevant because we have come to believe that there are no worthwhile ends beyond our self-preservation". That, my Lords, is an adequate expression of the Government's philosophy and the consequences of its application. In the six weeks or two months that we are relieved from our parliamentary duties and are perhaps able to reflect a little more than we can in the hurly-burly of parliamentary and business life, we can hope that some of the truth contained within that very adequate statement may sink in and that possibly on our return the Prime Minister and the Government may consider giving a moral lead to Britain.

7.22 p.m.

The Earl of Gowrie

My Lords, the noble Lord, Lord Bruce of Donington, could best be described as a robust Bourbon. In his 35 years' membership, as he described it, of the Labour Party, he has not learned a great deal and he has forgotten very little—

Lord Bruce of Donington

My Lords. 49 years.

The Earl of Gowrie

My Lords, I beg the pardon of the noble Lord, he is even more Bourbonesque than I expected. He may have forgotten very little and he may not have learned very much, but he delivers his views with robustness, good humour and a great deal of clarity. I find it a little rich that a noble Lord of the class of 1945 should be lecturing the Benches on which I sit and those behind me on consensus politics, the virtues of Butskellism and the rest of it. I might point out to him that I think it was the noble Lord, Lord Butler, himself, who introduced my noble friend Lord Cockfield into this House. My noble friend was whispering to me on the Front Bench a few moments ago that his initial Treasury experience was gained at the knee of the noble Lord, Lord Butler, when he was Chancellor in 1951.

There is a serious point here. As I argued when I was sitting where the noble Lord, Lord Bruce of Donington, now sits, when his party were in Government—I was an economics spokesman in your Lordships' House—we were all learning in the 'seventies that the manipulation of demand in order to deliver employment was not an option any longer enjoyed by contemporary Western Governments, and if we were going to look at the issue of unemployment we would have to look at it through slightly different lenses. I learned that lesson not from the noble Lord, Lord Butler, but from Mr. Joel Barnett, as he then was, from the right honourable gentleman Mr. Denis Healey, and indeed from the then Prime Minister, Mr. Callaghan. They all preached that message. It is a pity that the present Labour Party is not acknowledging it, is not building on the lessons learned at that time, and that we are right back into the Bourbonesque era of the 'sixties in the speech made by the noble Lord, Lord Bruce of Donington, in winding up the debate tonight.

It has been a very interesting debate. It was a little disjointed, perhaps, in that I was not quite sure at any given point whether we were debating the miners' strike or the economy in general. I hope the House will be content if I stick to the economy in general, and as we are all a little "demob" happy at this hour of the evening and at this stage in July—

Noble Lords

Augustx0021;

The Earl of Gowrie

My Lords, August. It has seemed a longer July than usual, and I do not want to extend it artificially. I shall simply deal as best I can with some of the points that have been made.

After five years it is a good time to take stock; and after five years of Conservative Government our view is that the British economy is substantially healthier now—not a question of looking to a roseate future. This comment was made not by anyone on my side of the House during this debate but by the noble Lord, Lord Marsh, a former Labour Minister, and, indeed (to be fair to her, in the context of other remarks which were critical of the Government), by the noble Baroness, Lady Seear. The fact is that the prospects for the long-term are much brighter if one has lower inflation. We have rising employment in this country. We have a higher rate of growth than we have enjoyed on a substained level for many years: and we have much greater competitiveness. Of course, the fundamental soundness of the economy—this was the point of squalls and storms made by my noble friend—has recently been overshadowed, particularly in its presentation, by the appalling violence on the miners' picket lines and by the tragedy of the lives of many individual miners who do not wish to strike. The intransigent attitude of the leadership of the National Union of Mineworkers has led to misgivings and anxieties both at home and abroad.

I would say, however, to the noble Lord, Lord Bruce of Donington, that some of the headlines expressing a certain amount of anxiety and gloom which he read out were taken from before the dock strike was settled. I think there was a substantial revival in confidence when it was seen that this brushfire was not spreading.

We are committed to maintaining policies designed to build a firm financial framework in which industry and commerce can flourish, with stable prices. That is a very far cry from saying that governments never make mistakes or are never wrong. In fact, I think it was my right honourable friend Sir Keith Joseph who said loudly and publicly fairly early on in the Government's period of office that we lost our first year. Reflecting back on the vanished glories of Professor Clegg, how right he wasx0021;

It is nevertheless most important for government to give a clear steer in the areas where they are uniquely responsible for financial stability. It is therefore reasonable for the Government to look at the indicators of increased productivity, investment, rising employment and the like, and to claim a very considerable degree of success. The Government can further claim that if this can be maintained and if own goals are not scored, the success will continue. But in saving that, one must recognise a very simple and uncomfortable truth. It is, alas, the purest illusion to think that unemployment is any longer the indication of economic health within the British wages and welfare context that it used to be.

When I went to Oxford some 20 to 25 years ago I asked who were the cleverest men in that university. I was told that there were two who were head and shoulders above all the others. One was Sir Isaiah Berlin and the other was Mr. Brian Walden. On the whole, as a Conservative fellow, I have stuck to that view over the past 25 years; and when I have any personal anxieties or difficulties which need intellectual solution I consult Sir Isaiah, and when I have any political or economic doubts I consult Mr. Walden. I noticed that in a recent article—at least as recent as the article quoted by the noble Lord, Lord Bruce of Donington—Mr. Walden said: Already we have learnt something. The British want unemployment reduced but within the confines of existing beliefs about wages and welfare". Within that context. I doubt whether unemployment in the wider level will be at all easily reduced.

We certainly need to discuss the issue on this and on other occasions, and we need to discuss the social consequences of high levels of unemployment and the social polices that we need to ameliorate them. I was very glad that it was my noble friend Lady Elles who took up the challenge set down by the right reverend Prelate in front of her to consider those policies. But the simple fact is that in an age when machines make other machines more effectively than human beings can, it is idle to pretend that the levels of unemployment, which still seem to me to be remarkably high in this economy, are the indicators that they used to be.

A great deal of the argument in this evening's debate has centered around the issue of privatisation, and we had that familiar and much loved trope given to us again, in the phrase of the noble Lord, Lord Diamond, about the family silver being sold for weekly housekeeping. I prefer, as your Lordships will remember, to think of the family silver being returned to the family. But the noble Lord, Lord Diamond, said that the Government were pursuing privatisation with ever-increasing abandon—a kind of wanton denationalisation.

I thought that that part of the noble Lord's speech—and I do not wish, in any way, to get him into trouble with his own high command, because I have a very high regard for him—was somewhat at variance with a statement put out by his leader, Dr. Owen, who said: Profits are the motive force of the private sector and service the motive force of the public sector. The public sector then has to be broken down further so as to identify the commercial public sector and the public service sector"— those are unexceptional and sensible statements. He then went on to say: The SDP has not yet developed a strategic view on the role of the commercial public sector. If public ownership is to be just about efficiency in acting commercially, privatisation is logically invevitable". Of course, the sole purpose of public sector activity is not necessarily about efficiency and acting commercially, but wealth generation and wealth creation is about that. One of the things that we confuse in this economy, and we sometimes also confuse in these debates, is the distinction between going all out for commercial success and efficiency, in order to generate money—and you can then have an argument about how to distribute it socially—and the feeling that somehow you must attend to the social consequences of what is fundamentally an economic argument about wealth generation, while you are trying to make wealth. I think that that confusion is one that constantly needs clearing up.

Much was also made in the debate by noble Lords about capital spending, and the amount and volume of capital spending in the public sector. It seemed to me to be the burden of the policy of the noble Lord, Lord Diamond, after his criticisms of the Government, that we should borrow more money, presumably for greater capital spending, particularly on the infrastructure. No government hitherto—and perhaps we should all mend our ways—have had precise targets for spending on the infrastructure. Proposals for capital spending are of course considered on their merits with particular attention to the benefit to the United Kingdom economy as a whole.

It seemed to me to be curious that the noble Lords, Lord Diamond and Lord Ezra, talked as if no capital spending was going on in this economy. You have only to look at the budgets of my right honourable friend Mr. Heseltine at the Ministry of Defence, and the capital spending there, to give the lie to that. To take an area with which the noble Lord, Lord Marsh, is familiar, no less than £306 million has recently been given to British Rail for the electrification of the East coast main line. That would seem to me to be a thoroughly sensible project—

Lord Ezra

My Lords, if I may intervene and thank the noble Earl for giving way, I certainly had no intention of indicating that there was no capital expenditure. But I indicated certain sectors of the infrastructure where I thought the needs exceeded the amount of money that is presently being made available.

The Earl of Gowrie

My Lords, I am sure we could all think of those. But as the noble Lord knows, in the coal industry, with which he is profoundly familiar—and I welcomed nearly everything he had to say in his remarkable speech about the tragedy facing the coal industry at present—the immense volume of spending by the Government denies resources to other industries which may need capital projects. We have to tailor the capital spending that we all want to the resources that we have.

There is of course a significant volume of spending on roads. In England this year, alone, the spending is planned to be £1¼ billion. Spending includes large projects like the M.25 orbital motorway around London, on which no less than £360 million has been spent since 1979, and in total public sector capital spending has been broadly constant in real terms over the period since 1978–79. I am sure that noble Lords on all sides of the House would not think that we could engineer greater economic growth in this country by increasing our motorway programme over and above the resources that will be available to fill it, or by borrowing at a level that would be difficult to pay back.

May I say, too, to the noble Lord, Lord Ezra, on the issue of interest rates—and these were also raised by the noble Lord, Lord Barnett—that we have not come to the conclusion, and we should not come to the conclusion, that the US budget deficit is the cause of better employment performance in the USA. That was a rather misleading suggestion to make, if I may say so. It is quite clear that the contrast between the United States and the European experience on jobs—that is to say, 15 million new jobs in the United States and falling employment in Europe over the past 10 years—cannot be explained by differences in budgetary policies.

United States employment rose 13 million between 1975 and 1979, a period over which United States fiscal policy became more restrictive, but increased by only 2 million between 1979 and 1983, when fiscal policy was becoming much more expansionary. Surely, the sharp contrast between the experience of the United States and Europe is almost entirely due to more efficient, competitive, innovative and adaptive labour and goods markets in the United States. This is a point that was being made by Mr. Brian Walden in his article. Over the past 10 years, average earnings in the United States have declined in real terms, while workers in Western Europe have seen real earnings rise by around one-eighth.

I am perfectly prepared to take criticism of the Government's record on unemployment from people who are suggesting that their own wages—like, I may say, those of most Ministers—should be kept in line with what the economy can afford. Charity does begin at home and does begin in one's own pocket. Those of us, as I have said on many occasions, who work in the public service sector and do not have direct profits to show must be extremely modest in what we ask from the economy at this time, unless we do not care very much about unemployment.

The effects, too, of the dock strike and rising interest rates during the survey period of the CBI, which was mentioned by the noble Lord, Lord Bruce, seem to have had an adverse effect on recorded business optimism. It is not surprising that some of these results should have been adversely affected; but what is important is that the underlying message of the CBI's recent survey is that the recovery is continuing with no signs of increased inflationary pressures.

The lesson the Government have to give again and again is that what we are in business to try to achieve is sustained jobs and a sustainable improvement in the economy—not a dash out of difficulty or a dash for growth. We as a political party have been guilty of that in our own time—I am perfectly prepared to admit to past mistakes—but at least, unlike the noble Lord, Lord Bruce of Donington, we are prepared to learn from our mistakes.

I do not believe that this is either the moment or the occasion for me to talk too much about the miners' strike. It is a terrible tragedy—all the more so because it is needless. Nobody, not even the most strident critic of the Government, has suggested that there is anything whatsoever wrong with the package being offered to the coal industry, or the degree of the Government's commitment to it. All the criticisms, all the arguments, have revolved around something that is quite different. I must say that I thought the speech of the noble Lord, Lord Marsh, was remarkable for its vigour and power and for the noble Lord's particularly virile way of putting things, if I may so describe it. But those who might find the noble Lord's style a little overdone for their taste can find very many of the same points being made dim inuendo by the noble Lord, Lord Ezra. As your Lordships know, both these men have deep experience of the situation in the nationalised industries.

What we have to hope will come out of the miners' strike, in terms of social stability—another matter under debate—is the message that violence and intimidation cannot and must not be seen to pay. if we are able to get that message over, we shall be able to underscore ourselves both at home and abroad as the stable society which profoundly and at heart we are.

I turn back to the main theme of the debate and the speech made by the noble Lord, Lord Hooson. Recently I emigrated to the noble Lord's old constituency. It is very remarkable that the noble Lord has consented to leave it and come here. It is such a beautiful constituency. It is a great pleasure for me to live in it. The noble Lord was wrong, however, despite his good background, in the point that he made about investment abroad. The British economy has always invested abroad. Many commentators—sometimes I sympathise with them—have said that where we went wrong was when we ceased to be shopkeepers and traders and became imperialists and that the British Empire should have stayed as it started off, as the East India Company. I have some sympathy with that point of view. It is extremely sensible, at a time of diminishing energy assets, that we should be storing up treasure abroad which will come back to us. But people are investing at home as well. As I said in my brief intervention during the noble Lord's speech, there is no difficulty about obtaining capital in this country if, first, one can obtain the profitable enterprises into which to put capital. If therefore we are all aiming to ensure that there are more profitable enterprises, we should have no difficulty in getting the money.

Service sector investment is now at an all-time high. Manufacturing investment—and I agree that we need investment in manufacturing at least as much—which was hard hit during the recession has turned round to show an increase of some 11 per cent. in the six months to March compared with the previous six months. This follows in the wake of a dramatic turn-round in company profits and profitability. The profits of industrial and commercial companies have risen by no less than 40 per cent. in the last two years. During the last year. the share of industrial and commercial companies' profits in total domestic income was higher than at any time since figures were first compiled in 1960—about 18 per cent.

I share the view of my right honourable friend the Chancellor of the Exchequer that the present increase in interest rates is a very regrettable response to market forces. We believe that we have to respond to such forces. The consequences of not so doing can be very grave indeed. But we do not think that the market is right in its judgment. We believe that the market will come to its senses and that before very long the rates will come down. The real net rate of return for non-North Sea industrial and commercial companies has recovered sharply and this year could be the highest for over 10 years. Company liquidity is high. Businesses are seeing their financial position strengthened —indeed, stronger than for a long time—though I admit that this is from a low base. But recovery is what we are in business to try to achieve.

I sympathise with the noble Lord. Lord Barnett, whose admirable book Inside the Treasury has once more been quoted, not merely in this debate but yesterday by no less a person than the Prime Minister. It must be a terrible burden for the noble Lord to have so many readers. I hope that they all bought their copies, or at least that the public finance coming from my own Ministry in terms of public lending right is helping the noble Lord out a bit. We have a great deal to learn from him.

The noble Lord asked me about our exchange rate policy. We keep an eye on the exchange rate. It is an indicator, like other indicators. I do not believe that it is the engine of economic growth. On the whole, it tends to tell you where you are at a given point rather than how to get there. But we shall certainly keep this indicator closely in view.

I am a bit of a heretic within my own party. Why should not one be so from time to time? I slightly incline to the view of the noble Baroness and, indeed, of my noble friend about the European Monetary System. But at present I am kept safely away from these issues and can therefore enjoy the luxury of my heresies in the Office of Arts and Libraries.

In conclusion, the overall message is still clear: the Government can set the framework for British competitive success but cannot guarantee that success. If British business and industry wins orders at home and abroad there will be more jobs. If we win fewer orders there will be fewer jobs. We believe profoundly and passionately in competition and in the ability of the British to compete if they are given clear signals to do so, if those who put obstacles in their path are not rewarded and if the consequences of both success and failure are clear to all. If, for instance, public spending rises as a proportion of gross domestic product, there will be fewer resources available for business expansion and consumer choice. If strikes are of benefit to workers, there are likely to be more strikes. If not, there will be fewer strikes. If labour costs rise faster than output, there will be fewer jobs. Our economic policy is, in short, about the return of common sense to economics. I certainly did not feel that in his reiteration of that point the noble Lord, Lord Marsh, was in any way critical of the Government.

Since we are a trading economy and are not self-sufficient we have to score goals if we are to earn the money for that large proportion of our food which we cannot, even with a highly efficient agricultural sector, produce ourselves. We have to score goals, too, if we are to earn the money to support our cherished welfare services. We cannot afford own goals like the present miners' strike, and are bound to suffer from such own goals. Therefore, it is of the first importance that the community as a whole should receive clear signals that strikes do not pay. The private sector and most of the public industries have learned this lesson. The leadership of the National Union of Mineworkers, unlike so many of their members, have yet to do so. But they will learn it.

In our first year in office, the medium term financial strategy set us on the road towards currency stability. We are well on our way. We still have some way to go, but nobody doubts that our purpose is to stay on that road. What we now also have to do is to give to the British public clear signals about the need to win orders at home and abroad, if we are to improve the employment situation and job opportunities for our children. New jobs are coming on stream at present at the rate of about one-quarter of a million new jobs per annum. Of course, there will continue to be job losses in older businesses and industries, or in those which can no longer compete successfully. That is why unemployment overall continues to rise, though I am glad to say at a substantially lower rate than during the past few years.

Add great sea changes in the labour market, the rise in the population of working age and the continuing and thoroughly justified desire of more and more women to seek employment; add, too, the growth in new technologies, and your Lordships will, I believe, come to the conclusion that high unemployment is likely to remain a major problem for the Western economies for many years to come. So we shall have to go on spending large sums in protecting those who, through no fault of their own, are caught in the painful machinery of an economy changing gear. We shall have to go on spending large sums to train people for new industries and to buy people out of old industries. I must say to the House that I can think of no better way to spend the revenue from North Sea oil than on any of these things.

7.51 p.m.

Lord Diamond

My Lords, on behalf of all those who have contributed to this debate, I am sure I can say to the noble Earl, Lord Gowrie, that we are grateful to him for the care which he has taken to answer so many of the points put forward by speakers. All that remains for me to do is to repeat my thanks and to explain the anxiety I had when I put down the Motion. I feared that I might be criticised because a very wide Motion might result in the debate being a series of parallel thrusts which never meet; we would therefore have had no confrontation of the kind which happened in another place quite recently. I feel that your Lordships have been very kind indeed in accepting the view that a very broadly based Motion was suitable at this time to give all of us an opportunity to contribute, and to give the Government an opportunity of covering a very wide field.

I am most grateful to everybody who has participated in the debate, and I am even grateful to the noble Lord, Lord Marsh for criticising me because I did not give him enough money for something or other. The noble Lord has apparently forgotten that chief secretaries only enjoy criticism. If any Minister says "Thank you" to a chief secretary, then the chief secretary knows immediately that he has made a ghastly error.

I wish I could go individually into those speeches which have been made. I have been most impressed. I have listened to every single speech and enjoyed every second. I shall read them all again tomorrow in the Official Report. I think it has been a very worthwhile debate. I am glad my part in the debate is over. All that remains for me to do is to say to the members of the Government Front Bench that they need a good holiday and I wish them a good holiday. Would that I could wish them a very long holiday! Having said that, may I ask leave to withdraw the Motion.

Motion for Papers, by leave, withdrawn.