HL Deb 13 November 1984 vol 457 cc219-306

Debate resumed on the Motion moved on Tuesday last by the Earl Cathcart-—namely, That a humble Address be presented to Her Majesty as follows:

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

3.4 p.m.

The Chancellor of the Duchy of Lancaster and Minister for the Arts (The Earl of Gowrie)

My Lords, I should like to support my two noble friends Lord Cathcart and the Earl of Dundee on their Motion for a humble Address, and I congratulate them on the excellent speeches with which they opened these debates one week ago. Today we debate the economy. Like everyone else in this House, and, I imagine, very many people outside it, I am eagerly looking forward to the contribution of my noble friend Lord Stockton. I am sure that people of all political persuasions are looking forward to it.

After my childhood in the austerity years, I was a teenager and young adult during the golden Macmillan era. In spite of the unfair notoriety of a phrase associated with those years, it was a good time. The Western economies were growing hard after the war and its aftermath. The industries responsible for that growth were still labour intensive. Perhaps inflation was the distant rumble of thunder at the picnic but it still seemed a long way away. How sad that that world changed irredeemably just over 10 years ago, in 1973.

Then the young men and women of the swinging sixties—and even my hair was a great deal longer at that time—grew to maturity in the post-OPEC 1970s. Someone said of the "swinging London" period, "The English are Romans in the process of becoming Italians". Now we are having to learn the stoicism and purposefulness of early Rome all over again. Surely there can be no better person than my noble friend—I would timidly suggest perhaps the best read of any of our Prime Ministers throughout history—to teach us these classical virtues. I am sorry that before the House comes to listen to the sorcerer it must put up with an apprentice, but I promise not to speak for very long.

I want to put before the House a single and very simple proposition for consideration. The proposition is this, and I put it in the form of a question. If the number of registered unemployed people was now levelling off or starting to fall, would not most people who are critical of the Government's conduct of economic affairs feel quite differently? Is it not unemployment, above all, that is obscuring the Government's economic record—a record that is generally successful?

In talking about success I am using shorthand. That is because it is, of course, people outside government who clock up the goals—and sometimes the own goals—of economic success or failure. Put quite crudely, is it not the case that this economy is climbing quite rapidly out of the recessionary 1970s; that real rates of growth are now being achieved and, even more importantly, can be sustained; that new jobs are being created, year by year, and that the British economy is slowly and painfully learning that governments can no longer cushion it from competitive pressures, whether at home or abroad?

I submit that most people are not worried about the answer to those questions. What worries them is the scale of unemployment and its pervasiveness; and it is also my guess that they take the view that none of the political parties has a very clear idea as to where unemployment is heading or what to do about it.

In this debate, as in the real world outside, we must not dodge thinking of what we are to do about unemployment. I would also say to the House that we are in danger of ducking the supreme issue of unemployment if we do not first recognise the things that are going well in the economy at present—the things which the Government can legitimately (in view of our polictical conventions) claim as successes. Because if we do not do this, we are in danger of throttling our economic recovery with attempts to tackle unemployment that in the end can only put more people out of work—because we are truly on our way. This will be the fourth successive year of significant expansion and one of the longer lasting recoveries of the post-war period.

I want, if I may, to draw this particularly to the attention of the official Opposition because, to judge from the remarks at the opening of these debates from the noble Lord, Lord Cledwyn, the remarks that the Government should modify the policies particularly in relation to public expenditure plans, I fear that we may have a Bourbon and not a Cledwyn before us. The recovery that we are enjoying, the considerable number of new jobs (well over a quarter of a million in the year to June) that are coming on stream, would be put sharply at risk if public expenditure got out of control again; or if the Government were thus prevented from raising still further those tax thresholds which are in Britain such formidable obstacles to growth and to employment.

So let us start by looking at what is going well in Britain in these mid-1980s. As I said, our curious conventions allow the Government to claim these successes as their own. But the important thing is not the Government's claim. It is that we do not spoil what is going well. It is that we encourage what is going well. It is, above all, that we try to solve the problems of unemployment by looking rather more closely at employment. It is that we do not put the clock back and have to establish the conditions for success all over again.

First, inflation. We have debated this so much in recent years that I do not propose to spend much time on it. This is quite a self-denying ordinance, because it is, after all, the area where the Government are most directly involved. As the late Lord Beveridge said—no wet he; not exactly famous for his aridity— The State is, or can be, master of money. But in a free society it is master of very little else. During the last year or two of the previous Labour Government and the first year of ours, critics simply could not see how by controlling money and constraining public borrowing within stricter limits, we could control inflation at all. And then when they were proved wrong, of course the grounds of attack changed. "Easy to control inflation", we were told, "by bringing things to a standstill, by a crude and potentially unending deflation of demand." Your Lordships will remember the famous "round robin" to this effect from the 364 economists (some of them Members of your Lordships' House) early in 1981.

But I think it is fair to claim that they have been proved wholly wrong, because demand and GDP have been growing steadily and strongly: up 8¼ per cent. on the first half of 1983; and yet inflation has been falling. This year growth will be 2½ per cent.: less good than it would have been, because of the miners' strike. But once this saddest and most unnecessary of own goals is behind us, literally as well as metaphorically, 3½per cent. growth is a clear possibility again next year.

That is a healthy rate to set against our European competitors. Oddly enough, the figure is a little over the level achieved during the golden Macmillan years. Last year, for instance, we enjoyed the fastest rate of growth in the European Community for the fourth successive year. It will, incidentally, be interesting to see—especially interesting, I would have thought, for the Labour Party—whether socialist France's fierce cutbacks in public spending allow her to catch up. I rather suspect that they will. Here at home the Government's policies are therefore achieving sustained growth without resurgence of inflation. That has been the grail of successive Governments since the last war. We have attained it and we are determined to keep hold of it.

Next, new jobs. Having been forced to concede two of their arguments in respect of inflation, critics of the Government change tack yet again. "This is all very well", they argue, "your recovery is based on lower inflation, we grant you that one, but it is not producing any jobs. It is achieved at the expense of employment". In crude political terms, I think this card has been played effectively, though not perhaps so effectively as to deny the Government reasonably healthy surpluses in surveys of opinion. But I do want to say as clearly as I can that the argument is false. New jobs are coming on stream: nearly 300,000 people between last year's Budget and June of this year; jobs that did not exist before. Nor is it good enough to complain that much of this figure is attributable to the growing employment of part-timers and women. First, growth in these categories is surely good in itself; brave the critic nowadays who complains about the growth of female employment, as in a notable intervention a year or two ago the noble Lord, Lord Spens, had the courage to do.

Second, these categories underscore another argument of the Government, the "price yourself into work" argument. I suspect that because most female workers see wage levels in terms of aggregate or household income, and most male employees do not, and because fewer female workers are members of powerful unions, wage demands are aligned more closely to their interests of remaining in, or coming into, employment. Many people may object to this fact of life in moral terms. Yet it remains that: a fact of life. So does the relationship between falling real wages in the United States in recent years and the greater success in job generation of the United States economy over the European Community economies.

Certainly few would object to another successful phenomenon, the expansion of self-employment. Throughout the 1960s and 1970s the self-employed made up a small and quite stable percentage of the workforce. Since this Government came to office they have been growing markedly from about 1¾ million to about 2¼ million. An estimated 70,000 of that increase came in the year to this June.

The CBI conference will no doubt be mined by the other side of the House during this debate (and perhaps even by critics on this side) for rods—though I think they might be nearer to wands—with which to beat the Government. But it must also be acknowledged that both the conference and their specially commissioned survey indicated that new jobs were coming on stream and more were on the way. They are coming, let it be said, from small, strike-free and often non-unionised firms. Please let no speakers in this debate subscribe to the rather extraordinary view of the Leader of the Opposition, Mr. Kinnock, that there is not much relation between pay levels and employment levels and therefore between job generation and bargaining power. I happen to be an individual in favour of higher economic wages where many of our industries are concerned. I always have been. I am in favour, for instance, of the excellent rates of pay to the mining industry. This wretched dispute has nothing to do with rates of pay which are the envy of most workers in industry.

British industrial wages, I would argue, were too low for too long. They allowed overmanning to continue far longer than it should have. But I am not in favour of higher wages without lower manning levels, higher output and productivity, and more automation. Regardless of what I, as an individual, happen to favour or not to favour, these industrial changes are happening in any case. They must continue to happen if we are to recover more lost markets and earn our living and do our jobs here on earth, rather than, if I may say with due deference to the Bishops Benches, in Heaven.

To sum up these positive elements in the British economy, I would submit that few disinterested observers would deny this Government's remarkable successes, and, certainly, the electorate has not denied them. Price increases are down, and all the indications are that they will stay down; yet profitability in industry has been increasing dramatically. The real rate of return on capital has been rising strongly for several years. This, in turn, has led to a rapid rise in investment—15 per cent. up in the first half of this year.

Investment from overseas, too, even if you exclude North Sea oil investment, doubled last year as an increasing number of companies saw the attraction both of the changed economic climate and of Britain's unusually wide-ranging high technology resources and software skills. Significantly, too, strikes have been down: from over 29 million working days lost in 1979 to fewer than four million last year. This year, alas, will be distorted by the miners, but most of the country, like indeed most of the miners, want to keep working, and I believe we shall soon be back on course.

And then again the miners' strike itself, tragically and needlessly interrupting this progress, will, as it comes to an end, signal strongly to the world that this Government have no intention of being brought down by the political leadership of a powerful public sector monopoly union; a political leadership that is being seen by more and more of its own union members as being just that: political, more interested in revolutionary politics than in the welfare, prospects or pay of the industry concerned. That will be a powerful signal—overdue, but formidable in its effect on national and international confidence.

Then, again, productivity is up. We have improved our competitiveness by about a fifth during the last three and a half years. We must do even better, substantially better, if we are to be sincere in our concern for unemployment because in the end any substantial reduction in the numbers depends on recovering markets we have lost.

So it comes back to unemployment. As I said at the beginning, it is possible for this Government both to demonstrate the success of their policies and the need to continue with them, not least in the interests of new jobs. In 1979 these policies were considered eccentric, even wilful. They are now being pursued by all of our Community partners. Our problem and theirs—I recognise that the Government may have underestimated the scale of the problem—is that jobs are not appearing on the labour market, even at the impressive rate that obtains here in Britain, in sufficient numbers to balance the social and industrial pressures in the opposite direction. The world is not the same as it was in the 1930s, nor even the 1950s and the 1960s. There is the rise in commodity prices—and who would deny the developing world rises of income? There are demographic changes—the baby bulge of the 1960s to which, as I have said before, I have to confess that I contributed, coming onto the labour market before the baby bulge of the early 1920s comes off it.

There are structural changes and the first effects of new automation. Subsequent effects can, if we keep our heads, be rather more advantageous in job terms. There is the post-inflationary hangover: a very nasty morning after indeed as the unemployed start to pick up the bills for previous bouts of borrowing, often borrowing in the interests of putting off the evil day when changes in the requirements of the labour market must take place. There is the legacy of reduced competitiveness in the past and loss of jobs to those more highly disciplined capitalist economies in the Far East. We have fallen a long way behind. The next century will belong to the Pacific rather than the Atlantic if we are not careful. But let us indeed, like the seas themselves, flow into each other and share in the action. We are doing so now. Our overseas portfolio is healthy. We shall not be able to continue, however, if Labour is in a position to bring back exchange controls.

All these are real economic phenomena. They are not excuses for high levels of registered unemployment. Even the Shadow Chancellor, Mr. Hattersley, stepped out of the party political rugger scrum for a moment when he warned against, the impression which we have sometimes given that full employment will be easily achieved". Mr. Hattersley appears to be recognising that rising employment coexists in the modern world with rising unemployment, that we live in an economy going through extensive and overdue structural alteration. The real issue, surely, is not to try to thwart changes which are coming in any case, but to mitigate their effects on individuals who are adversely affected by them.

So in general economic policy we must continue on the present path. Few people suggest that higher inflation will bring greater sustainable employment. Few people believe that higher levels of taxation will do that, either. Some believe that the Government should borrow more in order to spend more. Most of these critics acknowledge, however, that consumer demand, far from being depressed, is actually quite buoyant. The volume of retail sales is 4 per cent. higher than last year. Total spending is also up by 8 per cent. in money terms. So the most frequent appeal—we shall hear it many times this afternoon—is for what is known as selective spending; spending on infrastructure proposals, hospitals and school maintenance, waterways, rail, roads, sewers, energy conservation and the like.

I take this proposal with the greatest seriousness. It is put forward by people whom I listen to with the utmost respect, but I have to say I remain very sceptical indeed. For one thing, the argument implies that there is a capital project or infrastructure squeeze going on at present, and one of great severity. Little evidence has been presented that worthwhile projects are not going ahead due to lack of public sector funds. Take transport, for example. Looking to the future, the English trunk road building programme alone contains schemes worth more than £5 billion to be built between now and the mid-1990s. My own minuscule Office of Arts and Libraries has, in the new British Library, potentially the largest public building of the century. I would suggest that streamlining and accelerating planning decisions would be the best way to bring more construction jobs on stream—and more quickly.

And few proponents of selective reflation tell us how much additional money should be spent. My experience is that the figure is usually about £2 billion to £2.5 billion more than the Government are spending already. Well, that, or any other figure, has to be borrowed. A quotation from a recent and very interesting book goes this way: However justified the reasons for these increases in public expenditure, the fact remains that expenditure on this scale can only be financed by a combination of taxation and Government borrowing that can have adverse effects on the operation of market economies. High taxes can inhibit saving and investment and discourage the innovation, risk taking and entrepreneurial drive which underlie economic progress and increasing prosperity. High levels of Government borrowing can lead to either high interest rates, which may crowd out productive private sector investment, or to increases in the money supply, which may fuel inflation". That could have come from my right honourable friend the Prime Minister or my right honourable friend the Chancellor of the Exchequer. In fact, it came from the honourable Member for Plymouth.

Current borrowing levels, therefore, in our submission, already are having a rather greater deflationary effect in other areas than we should like. That is why we are so determined to maintain public spending at a constant level in real terms, but within that to maximise the efficiency and value of the money we are spending on reducing unemployment. There is, again, the old problem of the additional money drifting into higher wage claims. Only the Liberal Party is flying the income policy flag with great enthusiasm at present, and I do not really believe that the noble Lord, Lord Diamond, or Dr. Owen think you can tax firms, particularly dynamic and successful ones, for sharing profits with their workers; and that is the net effect of such policies.

Then, again, if job creation is our key objective, infrastructure spending is not necessarily the best buy; far from it. Most big projects involve relatively few men and much costly machinery in their construction. As I have directly experienced in Northern Ireland, their completion ends in lay-offs and disillusion. Their net Exchequer cost per job can easily be 10 or 20 times greater than the employment measures which we are pursuing already at a cost of £2 billion. My noble friend Lord Young updated and refined these when he was at the MSC, so I am not going to deal with the measures but will leave them to him. It is sufficient to say for the moment that they do have the effect of targeting efficiently on those groups who, through no fault of their own, are caught up in the grinding machinery of an economy that is changing gear. I am thinking, of course, of the young, particularly. I know that the noble Baroness, Lady Seear, has commended us for the greater emphasis we have laid on training, and I believe that my right honourable friend Mr. Prior and I can claim some credit for that shift of emphasis when we were at the Department of Employment.

To sum up, my message is that to tackle unemployment we must study employment. New jobs are coming on stream in this country. We have to determine—and it is not all that difficult—what are the special factors which are bringing them on stream. We have to determine the special constraints, the barriers, to job generation, which are still getting in the way. My noble friend will have something to say about these barriers when he winds up.

As we do this, we also have to maintain a relentless pressure on the economy not to lose the gains that have been made over inflation and increased competitiveness. Once your share of world markets has fallen, the climb-back is long and painful. But we are climbing back. We have to get across the message that borrowing money to help industry increases the cost of money, which hurts industry. Above all, by reducing personal taxation we have to deliver greater sums of take-home pay to the British people. We have to see that its value is protected. We must ensure, if we can, that the lower paid are eased more gently into the tax system.

In my view, the poverty trap is by far the greatest obstacle to a real improvement in these unemployment figures. But these things themselves—changing the thresholds, for example—need financing. They are a selective reflation, if you like, and it is to bring them about that spending has to be kept at a level which allows the Chancellor some room for manoeuvre each spring. If we continue to do these things, to play our part calmly but inexorably, Budget by Budget, I have little doubt that the British people will do the rest.

3.35 p.m.

Lord Barnett

My Lords, I join with the noble Earl in congratulating the mover and seconder of the Motion for a humble Address. I am sure that all who heard or read their speeches will have welcomed them. I also join with him in congratulating the noble Earl, Lord Stockton, and welcoming in advance the speech which I am sure everyone is waiting to hear. For my part, I am grateful to him for adding slightly to the audience we might otherwise have had.

If I may, at the outset I should like to congratulate the noble Earl, Lord Gowrie, on his promotion to the Cabinet. I am sure that all of us, in all quarters of this House, would welcome that well-deserved promotion. I wish I could congratulate him quite as much on the speech he has just delivered but I fear I cannot. The speech may have come through the voice of the noble Earl, but the real words came from the hands of the Treasury, or at least the latter part of the speech; and I must say that the words and figures of the Treasury—and, indeed, the words and figures of the Treasury in the Autumn Statement yesterday—have taken creative accountancy to even greater heights than I knew. Having done a little of it myself, I could have admired it were it not for the fact that it leaves us, regrettably and very sadly, with unemployment still going upwards.

As one would expect from the noble Earl, he made the best of a bad job; but anybody reading or hearing his speech will unfortunately come to the conclusion that he had little to offer to those who are now unemployed or who are likely to be made unemployed in the near future. As most Government spokesmen do, he blamed just about everybody else other than the Government for the fact that we have these regrettably high levels of unemployment.

I say to the noble Earl that nobody doubts his sincerity. The "in" word today is "compassion". Knowing him, nobody would doubt his compassion about the worry and anxiety over the levels of unemployment. In any event, it is foolish to impute lack of compassion to political opponents on economic policy or, indeed, on any other. But I am bound to say to the noble Earl and, indeed, to the Government that it is not easy to convert a happily embraced image of an Iron Lady to an image of one who cares deeply about unemployment, especially when the fact is that it is her policies which have created it. Sadly, that is what we now have. Indeed, I noted recently that we had the Chancellor of the Exchequer seeking to take on the role of a sort of minister for compassion—not a role for which I think even his best friend would have nominated him.

The plain fact is that we do have appalling levels of unemployment, and what the noble Earl said today, everything the Chancellor said yesterday and everything the Prime Minister has been saying during these debates, must lead everyone to conclude, regrettably, that the tragically high levels of unemployment are going to continue to rise, because, as we heard from the noble Earl, there is going to be no change in policy.

This is the last day of our debate on the gracious Speech. I am bound to say to your Lordships that the Speech was irrelevant to that central social and economic problem that faces the nation; that is to say, the one that the noble Earl addressed—the problem of unemployment. If I may say so to the noble Earl, at least I am grateful that he has now stopped quoting me—he has been reading a little wider—in his criticism of those who criticise the Government's policy on public expenditure.

It is not unfair to summarise the Government's economic policy, and, indeed, what the noble Earl said today, in this way: first, that there is to be no change in Government policy; secondly, that high wages are a major factor in the levels of unemployment; and, thirdly, the old word "TINA"—there is no alternative. If I may, I propose to deal briefly with each of these to see how likely it is that what the Government are doing or are not doing will affect that central problem that faces us.

The Chancellor, like the noble Earl, constantly reiterates this policy that there should be no change—indeed, there cannot be any change—in the Government's economic policy. If inflation is held down, we are constantly told, everything else will come right. Unfortunately for that theory, we are now well into the sixth year of the policy, and we are still waiting for unemployment to come down; for what we have seen in practice has simply not borne out the theory.

Noble Lords do not have to accept my view that the monetarist experiment has not left us with a soundly-based economy, as the Prime Minister constantly claims it has. The Institute of Directors—not normally the most serious of the Government's critics—recently carried out a survey and they found that: only 24 per cent. of businessmen were more confident about United Kingdom economic prospects than they were six months ago". Their director general, Sir John Hoskyns—a former head of the Prime Minister's own "Think Tank"—said: This significant fall in business confidence indicates the fragility of British economic recovery". So that is the description: it is not soundly-based. "Fragility" is the description given by those most directly affected, and it puts into perspective Government talk of a soundly-based economy of which we are constantly hearing and of which we heard again from the Minister today. However, it is not surprising, because the facts make the point, that far from the economy being soundly-based, we are frittering away as a nation, under the Government's direction, the huge benefit of North Sea oil. Indeed, in his Statement yesterday the Chancellor was only able to balance his books by the newly-found £2 billion extra that he is getting from North Sea oil because of the fall in the exchange rate. All this is taking place while our industrial base is being alarmingly eroded.

As the facts show all too clearly, the situation is getting very little better. The national income is only 2.2 per cent. higher than it was in 1979, and even at that time, I should be the first to concede, it was not at a particularly high level. Indeed, it is even worse, because if one excludes oil, national output is still 3 per cent. below what it was in 1979. If investment is a vital element—as even the noble Earl would be bound to concede—the fact is that investment is 3.8 per cent. below the 1979 level. To crown this disastrous economic record, unemployment has risen by more than 2 million. Against that appalling performance we were told by the Chancellor in a recent TV interview that there was "very, very little indeed" that the Government could do to create jobs. In the light of that, I must say that there seems to be little for the new noble Lord, Lord Young, to do in his new job. Nevertheless, I genuinely and warmly welcome him and I hope that he has every success in his office. But the noble Lord must know that there is nothing that he can do that will stop the further loss of real jobs if the Chancellor's policies continue, as we have heard today they are going to continue. All, or most, independent outside economic forecasters, unlike the Chancellor yesterday, are telling us that unemployment will continue to rise. That is the plain fact. I fear that, unless there is a change of policy, the noble Lord's role will be a bit like that of the hapless Mr. Eaton, or Mr. Kirk, to Mr. Ian MacGregor. Of course I make it quite clear that I wish the noble Lord well, but I am bound to say to him that all political history and experience leads me to feel that good wishes are not going to be enough.

The Chancellor, the Prime Minister, and the noble Earl today, have been arguing again on the second point that I made; namely, that low wages lead to more jobs. I want to say right away that I accept as an obvious fact that there is a clear relationship between wage costs and jobs, though I prefer the definition "unit wage costs"; that is to say, high wages matched by high productivity create more, not less, jobs. But what the Chancellor implied and what the noble Earl today implied very clearly is that our wages are generally too high and that there is evidence in other countries, where they are accepting lower wage increases, that there they are creating more jobs. The United States is often quoted in aid. But two years ago they had very high unemployment in the United States. It is now down to 7 per cent. The difference between the United Kingdom and the United States is not simply a question of wage levels, as the noble Earl must know. The United States spent its way out of unemployment with the help of a huge budget deficit. If I may point out to the noble Earl, they did it without inflation taking off as well. They managed to do it. I have noted the noble Earl's reiterated statement that he cannot do so. Maybe he should make way. Maybe there are others who feel that they may be able to do something about it. But to say that we have to live with, effectively, nearly 4 million unemployed, and rising, and that there is no way out of it, no lessons to be learned from any other country, is, frankly, defeatism of the worst possible kind.

As I say, personally I accept an obvious relationship between wages and jobs. But, it is also fair to say, as I have told your Lordships before, that there is ample evidence in the United Kingdom that many industries have not been spared massive increases in unemployment, despite very low wages. The textile industry in Lancashire is a particular example.

Nevertheless, I accept the clear correlation between high unit wage costs and jobs, and for my part I would certainly be willing to face the challenge that that represents. But the Chancellor really cannot complain. It is central to his policy to do nothing about it; indeed, the reverse. He favours, he is positively dedicated to, free collective bargaining, except, of course, for the already low paid in the public sector who have an incomes policy. They have an incomes policy imposed on them, but it is not called an incomes policy; it is called "cash limits". It is a policy that I do not apologise for introducing, but the difference is that I never intended it to be used as a substitute for an unfair and selective incomes policy, as it is being used today.

If the Chancellor believes that lower wages generally would help to reduce unemployment—and in that respect I am bound to say that he is supported by a recent survey by the Oxford Economic Forecasting Group—then it is (and I hope that your Lordships will accept this) the height of social and political irresponsibility to opt out of doing anything about it. I do not doubt the difficulties of trying to do something about it, and I certainly am not one of those—and I never have been—who advocate a statutory incomes policy. But with the tragic prospects of yet even higher unemployment, the nation deserves more than rigidly sticking to policies that have so clearly failed. There must be at least some prospects of an improvement in jobs if, instead of confrontation with the trade union movement, we had some greater attempt at conciliation with it.

But it is not only on the subject of unemployment that the Government have been unwilling to contemplate that it is just possible that they may have got it wrong. On economic policy generally, as I said, they constantly repeat the worn-out phrase of TINA, even when it is clearly shown, not just by the Opposition, that there are a number of alternatives that should, and, indeed, must, be considered.

We in the Opposition have consistently argued that there is a case in current circumstances for an increase on capital projects in the public expenditure field. Even the CBI—by no means the severest critics of this Government—have supported those proposals. I, of course, accept that there must be some limit as to how much we can spend as a nation. But having said that, we are nowhere near that limit when we are wasting so much public expenditure in keeping millions unemployed and when the public sector borrowing requirement is as low as it is today as a percentage of GDP both historically and by international comparisons. Even Sam Brittan, the strongest supporter of the Chancellor of this Government, in an article on 8th November, said: There is nothing inherently wrong with most kinds of deficit if they facilitate additional investment which will pay for their own servicing". Certainly investment in new capital projects that takes thousands of people out of the appallingly long dole queues must be servicing its own expenditure.

I am bound to say to the Minister that it would be outrageous to do what the Chancellor proposes—namely, to cut public expenditure to make room for direct income tax cuts. It would also make nonsense of any claim by Ministers to care about levels of unemployment. For it has long been recognised that an increase in public expenditure would create more jobs than would a cut in income tax. Again, your Lordships do not have to take my word for that. The Institute of Fiscal Studies, supported by the London Business School, has recently shown that for £1 billion of tax cuts approximately 30,000 jobs can be created, and that for £1 billion extra of public expenditure 185,000 jobs can be created. So capital expenditure in the public sector must surely be something which this Government—or, indeed, any government faced with this situation—must look at with a view to reversing these unemployment trends.

There are other proposals, and they are not just put forward from these Benches. The Conservative Party's own Back-Benchers have put forward proposals to the Government. I refer to the One Nation Group, which the noble Earl, Lord Gowrie, will know very well. It has put forward the proposal to abolish the employers' national insurance contribution for those under the age of 20; it has proposed a reduction in income tax on low wages, not just across the board, and a vast expansion of the existing job release scheme. These schemes would cost substantial sums.

If the noble Lord, Lord Young of Graffham, did not know before—and having been at Cabinet meetings a few times, especially in recent days, I am sure he does—he will know now that the Treasury will be opposed to his spending any more money. Perhaps I may be so bold as to give him a little advice from my experience on the other side of the Table, because the situation is too serious to take sides on this issue. He has a powerful case against the Treasury. They will argue with him that any schemes which he puts foward should be counted gross; in other words, that they should not take account of any savings in unemployment that he would obtain from his schemes. He should seek the support of his Cabinet colleagues and tell the Treasury that in current circumstances that argument which I used should not be used today. The situation is far too serious for that, and I hope that he will have the support of his noble friend Lord Gowrie when he puts forward the case against the Treasury's argument.

However, the measures to which I referred show that there are alternatives to what the Government are now doing. They are alternatives which the Government simply must consider. I am not saying, and never have said, that there is an easy option or that at a stroke we can create millions of real jobs. We cannot. The situation here, with what effectively is some 4 million unemployed and with no change in policy, meaning an inevitable rise to maybe 5 million, is too serious for lighthearted promises. But unemployment at these levels is doing too much damage to the very social fabric of our society in too many parts of Britain for us to stick rigidly to a policy that has so obviously failed. There must be change or we condemn too many decent men and women to the misery of permanent unemployment. Some of the suggestions that I have made would help. They do not offer miracle cures; they would offer hope when none now exists.

House adjourned and resumed by The LORD CHANCELLOR.

3.54 p.m.

Lord Diamond

My Lords, first, I want to offer my very sincere congratulations to the noble Earl, Lord Gowrie, on his achieving Cabinet responsibilities and status, not only on his own account but also on your Lordships' account. I regard it as very important indeed that your Lordships' House should be as well represented in the Cabinet as it is today. Indeed, I see three Cabinet Ministers sitting on the Government Front Bench.

Lord Gladwyn

My Lords, there are four altogether.

Lord Diamond

My Lords, I am well aware that there are four altogether, and it is particularly favourable and important for your Lordships that the Leader of the House should be one who has the ability to make the views of the House fully heard and fully understood in Cabinet, and we are also very grateful for that.

Next, I too am very much looking forward to the maiden speech of the noble Earl, Lord Stockton. On many occasions I have had the privilege of listening to his comments, obviously from the other side of another place, and I am sure that when he has made his maiden speech there will not be a single Member of your Lordships' House who, in relation to that speech, will not want to say, "We've never heard it so good".

I am very glad that the noble Earl, Lord Gowrie, was followed by a speech which really took most of the wind out of his sails, because one is left with the feeling that, whereas there is very little to support what the Government have been doing, the posture of a new Cabinet Minister is one of extreme carelessness about the way this country is going. The noble Earl picked out figures which are totally unknown to me—and I shall examine everything he said with the greatest possible care and I shall controvert one of them a little later in my remarks—in order to demonstrate how well the Government are doing. Of course, every economic Minister on that Bench since this present Government came to power has been doing the same thing; they have been saying that things are going very well, that we should just wait a little longer, that next year will be very good, and that growth will rise next year. It never has done; there has always been some special reason why not. The net result facing us is the sad and serious fact of the rise in the level of unemployment. No matter what their speeches said, the main purpose of economic policy, which is to enable people to earn a decent living for themselves and their families, has totally failed.

I do not recognise the picture of Great Britain which the noble Earl painted. I am aware of what used to be a great manufacturing and trading nation, which over the years has been able to earn a good living, which has been able to give a large population in these small islands an increasing standard of living, which has been able to assure an increasing fairness in our society and to provide a reasonably civilised background, now finding itself more divided than ever before, falling back from its position in world trade, its manufacturing base cut to dangerously low levels and unable to maintain the necessary modest annual increase in the living standards of its people. All those things, coupled with the fact that what was a slow—and nobody is suggesting that it should necessarily be fast—progress away from an unequal society, have been halted and even reversed.

As has been indicated, it is absolutely right to say that financially the nation is being kept afloat by what I can only call the misappropriation—yes, indeed, misappropriation—of the once-for-all oil revenues and by the continuation of this pernicious habit of selling the family silver to pay for the groceries, which the noble Earl has heard me argue several times before. I have already indicated that the one thing that hurts us above all is the growing number of millions of our fellow citizens who are being denied the right to work.

It is against that changing background, which largely occurred during the period of this present Government and which was largely, but not completely—and I have argued this as clearly as I can on two previous occasions so I shall not bore your Lordships with a repetition—attributable to the policies carried out, that we naturally turn to the gracious Speech for some solution. We turn hopefully. What do we find?—a proposal to destroy, to abolish, the GLC. Apart from the merit of that proposal itself, what possible relevance has that to our real economic difficulties? What do we find there to deal with the problem of the ever-deepening pit in which the unemployed find themselves trapped? For our decimated manufacturing industry? For the increased danger of our not being able to pay for the food and materials that we must import to maintain our people? We find nothing new. No new policies and no change in priorities.

I suppose that the true figure of the unemployed—that is to say the true figure of those offering themselves and denied the possibility of work—must now be well over 4 million, whereas the figure for inflation at the moment is something slightly above 4½ per cent. And yet top priority is still given by the Government, as confirmed in the Queen's Speech, to the level of inflation.

Of course we all want to see a further reduction in the level of inflation, but at what cost? It has already been substantially reduced by this Government, but largely at the cost of a huge increase in the number of people out of work. It is relevant to ask whether the continuation of those same policies of rigid monetary control, amounting to stark deflation, will achieve a reduction below 4½ per cent., except at the cost of more unemployed and more misery. We are told that the answer is sound money.

Sound money, said the gracious Speech, is the foundation of it all. This was repeated on Tuesday by the noble and learned Lord who sits on the Woolsack. What he said was received with murmurs of approval in your Lordships' House. I wonder how widespread is that view. I wonder what kind of reception the Lord Chancellor would get if he travelled North and spoke to any of the thousands of unemployed who are struggling to survive at subsistence levels, and he told them that the Government in their economic management were giving top priority to reducing inflation, and that they therefore need worry no longer about their bank balances being eroded? I do not think he would get a favourable reception. I do not think that the magic of the appeal of sound money is all that great when you possess neither sound nor unsound money.

Let me be clear on what I am proposing. I am not—and I must repeat not—arguing in favour of any increase in the rate of inflation. I am saying first that any further reduction in the rate must be sought by methods other than those entailing further increases in the number of unemployed or in the duration of unemployment. Secondly, I am saying that, as we are saddled with a Government that know of no other way of reducing inflation, as the gracious Speech makes clear, then at the present levels of each we should give undoubted priority to the reduction of unemployment, and that is really where the great divide comes between the two sides of the Chamber. The Government have chosen their main priority wrongly.

It may be argued that even with the accent in the wrong place, and even with no new proposals for mitigating unemployment contained in the gracious Speech, it can still be claimed that nothing new is required because existing policies are serving the nation well, as the noble Earl tried to argue, Alas that can no longer be correct. The first policy, that of inflexible monetary controls, is a depressant, whereas what industry needs, in the view of the Alliance, in the view of the Labour Party, in the view of many Tory Back-Benchers, and certainly in the view of all or nearly all Tory ex-Cabinet Ministers, and, by the way, in the view of industry itself, is a stimulant. We on these Benches have many times set out our carefully constructed proposals for a modest stimulation of the economy.

We are left with the second leg of the Government's policy, the encouragement of increased international competitiveness. That is put forward as the way to rebuild our industry and its exports. Well, in a sense, this, happily, is where we are on common ground. We too believe in improving competitiveness. The noble Earl quoted from a very good book by Dr. Owen which makes our position on that clear. Indeed, I have been hard put to it to find any political party which believes that the way to succeed in the market place is to offer your goods at a higher price than anybody else. Therefore, I am afraid that we cannot give the Government any prizes for originality in that field.

What matters is, is that policy succeeding? My answer is, no, it is not. That is the short answer. A slightly longer answer would be that there was a marked fall—and I am sorry to trouble your Lordships with these figures but, in view of what the noble Earl said, I must do so—in competitiveness in 1980, 1981 and 1982, and some improvement in 1983. It appears for the time being to have settled down at a level slightly better than the 1980 figure but considerably worse than in the years before 1979. Far from our international competitiveness having improved, we are now less competitive than we were in the years before this Government took office and made such play with this policy.

My information is drawn from a series of articles and statistics published by the Treasury, the Department of Trade and Industry, the International Monetary Fund and, incidentally, the Prime Minister herself. Speaking in the other place only a week ago in the debate on the Address on 6th November, the right honourable Lady said at col. 27: It is pay in relation to output that is the critical factor. Unit labour costs in Britain are still going up at a higher rate than in the United States and Japan. And she could well have added West Germany and France: the figures support that too. I am afraid", went on the right honourable Lady, that unless we get unit labour costs down it does not augur well for our industry. Pay in relation to output is the critical factor. Well that is indeed very true. It is also true that it is a great pity that the Prime Minister then went on to explain the number of changes and indeed sacrifices that labour must accept to keep the pay element down, without saying a word about the responsibility of management and Government to improve the output element. Not a word was said about investment, which is the first essential for improving output in relation to a given labour cost; not a word about improved management techniques; not a word about greater participation and consultation with all concerned; not a word about achieving a greater sense of unity both inside and outside the factory gates.

I realise that this is not a time to go into much detail. Suffice it to say that it must be clear to anyone reading the gracious Speech that the Government have completely run out of ideas. Faced with the evidence of their major economic policies failing and with ever growing unemployment, they have nothing new to offer to prevent us trailing further and further behind in our capacity to compete abroad, they have nothing to heal the wounds in our society and, above all, they have for yet another year nothing to offer by way of hope to the hopeless millions failing to find work. I am driven to repeat on their behalf the age-old cry of suffering, How long, O Lord, how long?".

4.11 p.m.

The Earl of Stockton

My Lords, as I rise to make a maiden speech in your Lordships' House I ask for the forbearance and sympathy which is traditionally extended to someone in that position. I cannot help recording that it is just 60 years since I underwent the same ordeal in another place.

I cannot pretend to your Lordships that the first 16 years of my life in the House of Commons was very successful. It was certainly not very happy. I found myself more and more out of sympathy with the policies—social and economic, and later and much more dangerous into the realms of defence and foreign policy—being pursued by the Government I was elected to support. Naturally, I do not blame them. I became regarded with a certain distaste and even dislike by the leaders of my party. It is an awkward situation. However, I was, fortunately, able to deal with the matter fairly soon by becoming the leader of the party myself. Noble Lords on the Front Bench need have no fear as I am too old to repeat that.

I had 40 years on and off in the House of Commons, and 20 years in complete retirement, when I have spent my time either on my own business affairs or in writing and reading about the past. I have taken no part in politics at all. I do not remember making even two political speeches all that time. So now when I come back to Parliament at my advanced age I feel a sort of political Rip van Winkle. These extraordinary changes that I see quite overcome me. First, in the political sphere, during all my active life your Lordships' House played a honoured but not a very powerful role in our politics. Now, to my amazement, I find on the very first day of the debate on the gracious Speech that so great has grown your Lordships' power—partly due I hope to the measures which my colleagues and I took by the creation of Life Peers, which I feel have strengthened and widened the House of Lords, and partly due to the decadence of the House of Commons—that your Lordships' House has been even in conflict with and forcing its amendments upon the Government of the day.

My noble friend the Leader of the House made a speech which quite took my breath away; the terms of it were radical, jacobin—"I warn the Lords not to interfere with the elected representatives of the people". I do not know how he slept that night. Were his dreams haunted by the shades of Lord Lansdowne and Lord Curzon? Of course, the reason is that your Lordships, I admit perhaps in a small field to start with, have been regarded as doing something to protect the individual, the small local group, the small local authority, against the ever-growing and engrossing powers of a centralised Government and an ambitious bureaucracy.

Now I pass to the economic affairs. Here the situation is even more surprising. Very kind things were said by two noble Lords who have spoken about the Government Administrations over which I presided; but it was not really good management; I think it was good luck. But at any rate we set ourselves some very clear purposes in the years between 1951 and 1964 when I was either a member of or presided over a Conservative Administration. Like the juggler who used to delight us all as children, we had to try to keep four or five balic in the air without any dropping to the ground. The first and most vital purpose was the maintenance of the gold exchange system set up at Bretton Woods by which we maintained the value of sterling at two dollars and eighty cents, as fixed by Sir Stafford Cripps in the previous Government. That was maintained as part of the understanding by which the whole great sterling area operated, greatly to the profit of a large part of the world which had a fixed, clear and stable currency in which to deal and make forward bargains, and was much to the advantage of this country.

That was the first purpose. Your Lordships can judge how carefully we watched the gold incomings and outgoings of the Bank of England. The second purpose one might say was full employment. We somehow had that. In fact at one time we had what was called over-full employment. To use the jargon of the day, the economy had become overheated and we even had to put up the bank rate to try to stop it; not to spur it on, but to stop it. I think it went up to some appalling figure: it must have been about 6 per cent. The average rate was 4½ per cent. throughout those years.

We then had to have a balanced budget which was very important especially for the first purpose; the value of sterling. I understand that the difference between income and capital is now regarded as a very out-of-date conception, but we still had it then. The idea was that if enough money was raised by taxes and the other income of the Government to pay for the normal expenditure, capital expenditure could be financed without inflation so long as savings could be sufficient to cover it. Hence the importance of the savings movements which started during the war but carried on after the war. Splendid groups of volunteers went around selling savings certificates. I even invented a new form in the one budget I introduced. It was called the Premium Bond. Of course I got into a bit of trouble about that. The Archbishop of Canterbury said that I had debauched the people and was driving our countrymen to nothing but gambling. I thought that it was a slightly unrealistic figure: that of millions of homes with the husband out of work or drunk, the wife without money, the children starving—all because the head of the household had developed an extreme desire to lend money to the Government free of interest. I think that the Archbishop must have confused Premium Bonds with lotteries, which they have in church bazaars. But it does not matter. I belong and, of course, belonged to the Church and I have learned (much as is my deep affection for the Church and its representatives) that episcopal and archiepiscopal plunges into economics are very often rather eccentric, even capricious.

Then we had to have a favourable balance of trade. That seemed to be all right. And so it went on. Of course, politics being politics, the Socialist Party naturally called those years the "thirteen years of Tory misrule". But nobody seemed to mind very much. As one noble Lord has reminded me, there was some enthusiast—I cannot remember his name now—who invented some slogan about, "You've never had it so good!" or something like that. Anyway, it was all right.

And then, through nobody's fault—it was not really anybody's fault—this bolt from the blue came, struck, and nearly destroyed the industrialised and modern society of the world. That was the sudden rise in the price of oil. It was a staggering blow. The amazing thing is that we withstood it, not that we wavered under it.

It had four results, significant, and all bad. First of all, it raised the cost of all manufactured goods, capital goods or consumer goods, especially to those new and emerging countries who, of course, could not now afford to buy them. Then, by its reaction upon the industrialised countries, there was an effect upon the demand for what the new countries really live on—which is not a few doles from Parliament or a little charity. They depend upon the price of minerals and vegetables which they have to sell. That is what they live on. A little rise in the price and demand for copper and rubber will do more for West Africa than anything else. It is a paradox but it is true. The only way to make the poor countries richer is to make the rich countries richer still. Of course, it is so. It stopped all that, which before had been going on well.

Thirdly, it produced this vast sum of money in the hands of the OPEC powers; it was huge, in terms that one can hardly realise, hardly take in, it was like Aladdin's cave. Money without responsibility. This money floated around the capitals of the world, here, there, and then there, destroying all the exchange systems, doing infinite harm. And then, at the end, something perhaps even more dangerous was the attempt, at seeing this, to try to use some of this floating money and steer it into countries in need but who, unfortunately, could neither afford to borrow nor ever to pay back. So there are these enormous debts of the international banking system, through loans to the Argentine and to other countries, which hang like a great cloud over the whole system. That is what has happened.

Well, everybody did their best. The Government of the day, quite naturally, thought that perhaps a little inflation would get us out of it, on the so-called neo-Keynesian system. It seemed very reasonable, but it did not. And I will tell you why. It was because of what the noble Lord who has just spoken referred to from the Front Bench. It was because we increased wages, we increased costs, and we increased the total amount of money without increasing production or productivity: and so we had inflation. Then they tried, with great gallantry, a very difficult thing. They tried to do the opposite, to put on a squeeze, to have complete control over wages, prices and dividends. Of course, like all those manoeuvres, it worked for a bit; but, alas, as pressure grew up behind them stronger and stronger, ultimately the dam burst. So then came the falling of the pound and the general confusion. We tried to go to the IMF, where we borrowed a certain amount of money and got a great deal of rather pedantic advice. I do not know who are these people—self-appointed, I suppose—on these international bodies. They seem to lecture one a great deal. It is rather like the situation after a bad report at school—not much pocket money and a lot of pijaw.

That failed and the Government went out. Then the present Government came in. I think that most of your Lordships quite honestly will feel that, whatever else may be said in criticism—and there are criticisms, of course, to make—of the Government of the last four years, and now still the Government, they faced that terrible situation, in terms of war like the breaking of an army, with a courage, a determination and a persistence which must ever be admired by all reasonable men and women. I hold that view strongly. Of course, things were very unpleasant but they had to be done. The long boom always produces a certain amount of fat in the system, both in private and in public enterprises: too many people, overmanning on the factory floor and in the secretary's office; too many motor-cars, a bit too easy. We had to go through it. To private enterprise—and this was in the first year (do we not remember?) before the Government attacked the public sector—it came pretty hard, with interest rates of 18 per cent. Of course, all the smaller and newer firms collapsed, and those who survived were only those who could hope to borrow from the banks—and they still had losses—and who had long years of profits to show behind them. It was a great and terrible year for bankruptcy and loss.

Then the Prime Minister tried to slim the public sector, and of course it is very disagreeable. Last week I listened to some moving speeches and among the speakers were noble Lords objecting, quite rightly, to the results of the cuts in the medical, educational and other services. I see it every day as Chancellor of Oxford University. But it had to be done and it still has to be done. The question is: what do we do now? We have done this—we have got some control over the machine which was completely out of control. What do we do now? As to that, it is very difficult to answer.

As always, there are broadly two answers. There are people who are on the expansionist side—and I do not think it is really political: it is more what people feel like—who are natural expansionists. They would come along and say, like the neo-Keynesians, "Let's spend a bit more". The Labour Party spent, let us say, a great deal more. The Liberal Party said, "Well, not quite that; but let's spend some more". And the Government said, "No. Do not spend any more". It is the two methods: the neo-Keynesians and the monetarists, the new economists that have come into being—and nobody knows where they come from; they say that some come from America, and some from Tibet.

There are two points of view, and it goes right through. Many of your Lordships will remember that it operated in the nursery. How do you treat a cold? One nanny said, "Feed a cold"—she was a neo-Keynesian. Another nanny said, "Starve a cold"—she was a monetarist. It is natural. The noble Lord complained that the Government have produced in the gracious Speech a list of things which are completely irrelevant; of course they are—they are meant to be. I do not rate the Government's intelligence so low as to think that they believe they have any importance. They are just to keep us happy.

And look what they do. As somebody said, the first affects about 10 million people: the people and government of London. What was the next one? That was about the fees which solicitors are to charge. Then there is one which I hope really affects only a tiny percentage—and, I am certain, none of your Lordships. As I understand it, a condemned prisoner, if he feels that the judge has been too heavy on him, can appeal, but an aggrieved prosecutor cannot appeal, and so he is going to have his chance. It is not a great contribution to either the social or the economic development of the country. The next thing, I think, is something about the prosecutions not being by the police, but by the public prosecutor. There may be some improvement in that. Perhaps one may even cross a yellow line without being got at. But of course they are meant to be irrelevant because the policy is to go on next year as before.

But while all this is going on I think it is worth while to look outside Europe. First, however, we can look inside to this extent: that even France, with a president elected on a policy of reflation on a big scale, has had completely to turn round and follow the policies of Her Majesty's Government.

Let us look somewhere else—at the country of my dear mother, the United States. Ah, that is a very different thing. I rejoice at what Reagan is doing. He has broken all the rules, and all the economists are furious. He has a completely unbalanced budget. What does he do? Of course, according to the rules you have all been following and noble Lords on the Front Bench have been following, he ought to have increased taxation. He did not do it—not all all; he has reduced it. He even gives you special grants off your payment of income tax if you can show that you have invested in industry. Then there is this huge deficit in the balance of payments, but they have not introduced any particular protectionist thoughts. When they want a thing and they like it, they buy it, like the Jaguar motorcar.

But what has happened? What has happened has been that unemployment has fallen from one in 10 to one in 17, whereas here it is one in eight and next year will be one in seven. Five million new jobs—the noble Lord spoke of this—have been created in the new industries, and at the same time inflation has been kept quite low. It is a miracle; the House should know how it has been done. I think I know how it has been done: it is because they have had the sense to make somebody else pay for it. By keeping the bank rate at 1 per cent. above everybody else they have attracted all the money from the old world to the new. It has been flowing in—not only the quick money, but also serious investment, because everybody believes in it. It is not only the quick money that moves about. If you ask any investment banker, the trustees of funds, and even, I expect, the trade union pension funds, you will see that they are all making long-term investments in the United States. In a word, Reagan (to reverse Keynes) has called in the resources of the old world in order to finance the expansion of the new.

But of course it is something more than that, too. It is because the United States, whose scientists, inventors and technologists have been the first to see the coming of the new industrial revolution, have been the first to exploit it. Curiously enough, we fear that if it is applied, it will create more unemployment, and perhaps it will temporarily. After all, wherever you substitute a capital-intensive plant for a labour-intensive plant it must produce temporary unemployment. But the experience in California, where the new revolution has been most used, is that it has created enough wealth to make a new demand for goods and services which has reduced unemployment and made their figure the lowest in the United States. So that may appear to be the way out. At any rate they have seen it; and, my Lords, if you will allow me just a few more minutes, I shall say what, in my view, we should be looking at, and we are not—not the Government, nor the trade unions, nor the managers—not enough.

There is a new industrial revolution, or a new phase in it. The first phase was based on coal and steel and the substitution of the hand-loom and the warp-loom of the cottage for that of the factory. There were great troubles and great hardships in introducing that phase: that is because people would have theories. Laissez-faire was just as bad as collectivism. Good men, good Christian men, like Mr. Cobden and Mr. Bright, closed their eyes to factories working appalling hours, employing children under 12—and not only hours in the factory, but underground, too. No, the Government could not interfere; it was against the doctrine of Laissez-faire. Once you get a doctrine, that is the end of you. Pragmatic politics are the only good ones. But anyway this is bound to happen.

The second phase came when I was a child, when the internal combustion engine was invented and the new fuel oil came into being. The motorcar and the aeroplane broke the monopoly of the railways, and the aeroplane completely destroyed that of the steamships.

And now the third phase has come, based upon the computer, silicon chips, automation, and all the incredible, skilful things which are being done by the scientists and technologists in America and a great deal in England, where there is more going on than we know. But I am sure we cannot say "Oh, well, just let it come, like the others". Then we should get into great trouble. We have got from now to think out what this means in human terms. We cannot just say, "It would be rather nice to have a bit of it", as the Government seemed to suggest. It is a complete revolution in thought.

If really capital-intensive plants are going to take the place of all labour-intensive ones, surely we shall reach the conclusion that the capital plant might as well work. After all, today, except in the metal industries, where out of necessity the plant works for 24 hours a day, the plant which is costing this enormous sum, with interest charges and sinking funds, and the rapid replacements that are made with modern techniques, probably costs 16 or 17 per cent. For how long does it work?—220 days a year, seven and a half hours a day? Why, if it worked all day and all night, that would save two-thirds of the interest. The answer surely should be that the machine should work and the man should have leisure. What we want is to have four six-hour shifts and the machine to work all day long and all night long. It is that kind of thing we have to face: a completely new concept.

I foresee that in 10 or 15 years' time we shall never use the word "unemployment". We shall refer to the proper use of leisure, and how to deploy it. We shall wish to ensure that this new leisure which man at last will be able to enjoy is properly used for his mind and education, for sport and other leisure purposes. All kinds of old beliefs on all sides will have to go by the board. Many old speeches will have to be torn up, and many old attitudes will have to be changed. We must approach the problem with an open mind. But if we are to achieve the intellectual revolution which is involved, we need also a kind of moral and spiritual revolution. Although at my age I cannot interfere or do anything about it, it breaks my heart to see what is happening in our country today. A terrible strike is being carried on by the best men in the world. They beat the Kaiser's army and they beat Hitler's army. They never gave in. The strike is pointless and endless. We cannot afford action of this kind.

Then there is the growing division, which the noble Lord who has just spoken mentioned, in our comparatively prosperous society between the South and the North and Midlands, which are ailing. This cannot be allowed to continue. There is a general sense of tension. The old English way might be to quarrel and have battles—my noble colleagues know that there were plenty of rows and battles in the past—but they were friendly. I can only describe as wicked the hatred that has been introduced and which is to be found among different types of people. That must go. Not merely an intellectual but a moral effort is required to get rid of it. I can only hope, because I am so old, to see the first gleams that precede the dawn, but I know that, if that effort is made, generations to come will see the bright sunlight of day. If some of the dreadful, wicked systems which have crept into our lives are replaced, if we abandon cynicism, criticism and hatred for each other, and if we take up the great theme which St. Paul gave to us—to rely more upon faith, hope and charity, but above all upon charity—then I foresee the young men and women from every home in England setting out with confidence on a new phase along the long road which we call Man's pilgrimage here on earth.

Noble Lords

Hear, hear!

4.44 p.m.

The Lord Bishop of Lincoln

My Lords, it is a tremendous and exacting privilege to follow the noble Earl and to pay tribute to him for the superb speech which he has just made. I have in my hand a copy of the maiden speech which he made 60 years ago. It is 60 years since his last maiden speech, but, of course, the noble Earl has had a few years between then and now in which to practise before the superb speech which he has made today. None of us will ever forget the magnificent survey of our country's economic, political and moral life which we have had the privilege to hear today.

I know that many other speakers will pay their own tribute to the noble Earl. However, I am particularly glad, despite what the noble Earl said about the bishops, that it should be a bishop who has the honour of this first response to what I like to call "this word of the Lord". I am glad to have this honour because, among many other of his many attributes, the noble Earl is a devoted member of the established Church. It was not the noble Earl who, as Prime Minister, put my name forward for the Royal Assent to my appointment as a bishop. Whether that puts me slightly out of the true apostolic succession, I cannot really say. I should also like to salute the noble Earl as a fellow guardsman—although, I have to say, in the slightly cautious way in which a Coldstreamer approaches a Grenadier.

I wonder whether the noble Earl, when choosing his title, was a little torn between Stockton and Bromley, his other Parliamentary seat. I am sure that the people of Bromley, in the favoured south-east, are in every way splendid people. However, I am very glad that the noble Earl chose Stockton because, as in the 1920s and 1930s, so now: that part of the kingdom is as hard hit as any by the recession. What the noble Earl said and wrote in those days showed him to have a heart of social compassion. That social compassion, combined with his vision as a statesman and his skill as a politician, have given him the place in our history and our hearts which he occupies today. Therefore, it is good to see him here and to listen to him here. I am proud to salute him and to follow him in this debate.

I must now turn to my eccentric speech. I suppose that all debates on the gracious Speech always have a backward and a forward look. Certainly I would want to look back and salute the Government for maintaining the low level of inflation over another year. I should like to single out a salute to the amount of money which the Government have put into the youth training scheme. I know that the youth training scheme had its teething troubles, but it has got over those now and the scheme is worthy of the support of all of us. I know that in my part of the kingdom, Lincolnshire, about 40 per cent. of the young people who are on YTS courses get jobs at the end of it.

I do not believe that people look back often enough to 1979, when the Government took office, so as to recall the very difficult economic and political inheritance which they had to take up and to which the noble Earl referred in his speech. As a result of the difficulties which have been faced by Governments of all parties, they have been unable to "make a go" of Britain. The new Government set out on the new tack of monetarism to free the market in order to make Britain efficient so that Britain might survive—but it is here that I see a dilemma which now presents itself very clearly five years later. When any human grouping, be it an institution, an industry or a nation, has no choice but to face and accept painful change, it seems to me to be of crucial importance for those seeking to manage its affairs to create, as much as may be possible, some kind of climate of confidence—some kind of context of trust in which those changes might be the more positively and creatively faced.

Monetarist policies, I fancy, are about freeing the market. One of the obstructions to this aim is monopoly of any kind, and one of the monopolies here applied, as the Government seem to see it, is the monopoly of the trade unions in the labour market. This means that building the needed climate of confidence in the nation becomes impossible, since the trade unions are at one and the same time one of the main parties with whom confidence needs to be built and one of the main obstructions, as the Government see it, to the Government's aims. I recognise the Government's claim that much of their trade union legislation is aimed at restoring trade union power to their rank and file, but if that is what eventually happens it will be in the long term—too long to right the balance of confrontation in the direction of confidence.

As the five years have crept on side by side with falling inflation, the numbers of unemployed people have crept up, as we have been hearing this afternoon, so that the nation has again become divided; millions of people divided off from being able to take any part in the nation's life. The fact that we are employing more people than ever before makes this division all the more insidious—and all the more so in that the burden falls very unequally on some sections of the community and some areas of the country.

I believe that because of these dangerous divisions the Government need—because the country needs it—to revive the aim of consensus in a quite new way. The idea of consensus has of late had a bad press. What we tend to think of as political consensus really belongs to a different world—to the 1950s, the 1960s and the very early 1970s. It belongs to the commitment then to the building of a welfare state and the maintenance of the new factor of full employment—all on the basis of the growth of those years.

It belongs to a world where, perhaps, the underlying issues were increasingly fudged. No one wants exactly that kind of consensus back. On the other hand, we could work for a consensus which seeks to get ahead of a future that will not wait. This, I believe, is what the noble Earl was so vividly and graphically putting before us.

It would be a consensus about many things, and it is something we could all agree on, I fancy. It would be a consensus about serious commitment to technical change and therefore about social policies to prevent undue hardship to those groups which will have to adjust as a result. It would be a commitment about exactly what measure of paid work is likely to emerge, and a consensus about how to pay the thousands whose skills may not equip them for much of it but who could and would do much other work—of a broadly social nature, perhaps, which cries out to be done if only it could be paid for by a living wage.

It would need to be a consensus about the working week, the working year and the working lifetime. It would need to be a consensus about education and training seen essentially as part of each other, and including the elements of education that make not just for technical efficiency but also for the social and moral discernment a mature society will need. It would be a consensus about what kind of work and working methods are likely to develop, and about what kind of human and political issues this will raise in terms of painful adjustment but also of great opportunity.

There are evidently many problems in the national life which certainly need confronting but I doubt if confrontation leads to the best solutions in the long term. I wonder if it be not true, on the whole, that large parliamentary majorities tend to be bad for politics and therefore bad for a country, let alone bad for any party which has one. I say this because it seems to me that a large majority can make politics a matter of force rather than of power. I see power as the energy which emerges when political skills have managed to carry most of the people along in some measure of overall acceptance. That engenders some sort of confidence and releases our human resources so that things get done. That really is power.

But when a party—any party—has a really large majority, it can sometimes exercise not power in that sense but force; not physical force, of course, but political force. It can sometimes force things through in the teeth of opposition, with a long-term divisive effect. This can be all the more damaging when parliamentary opposition is weak, since it can cause opposition to arise in non-parliamentary ways.

If we are to get into the future, where tremendous opportunities, as well as problems, lie ahead, we need to try to do it together. All this is not just an economic and political matter. It is a moral matter, because morality is about what is right—and what is right is what is for the true, common good of our people. That emerges and can be enjoyed when a nation pulls together and not apart; where there is enough confidence to give as well as to take. Sometimes when speaking about these matters in other place, I put it like this: where there is trust, there is thrust—and at the moment, we do not have enough of either.

4.55 p.m.

Lord Kaldor

My Lords, I, too, consider it a very great privilege to be among the first speakers to congratulate the noble Earl, Lord Stockton, on his brilliant maiden speech. The speech, both in its wisdom and in its wit, was one of the best I have ever heard. The noble Earl has been one of the leading statesmen of my lifetime; a statesman in the grand tradition of parliamentary democracy and of a Tory Party which strove to consolidate social progress through the maximum degree of consensus and tolerance for alternative points of view—as well as through respect for the views and the interests of minorities.

The Tory Party gave the British political system its peculiar flavour. Until recently, it was never a Right-wing party—any more than it would be possible to describe the noble Earl as a Right-wing politician. It was a party which moved with the times and which consolidated the reforms achieved by other parties. During the hey-day of the British political system, the two parties were never very far apart. After the war, we had a strongly reformist Labour Government—the Government of Mr Attlee—which many people recognise as being the greatest reformist government of this century. It was followed by Tory governments whose policies were so little distinguished from those of the Labour Party as to prompt someone to coin the well-known phrase, "Butskellism"—made up from the names of the Tory Chancellor, Mr Butler, and Mr Gaitskell, the Shadow Chancellor.

The noble Earl is in that grand tradition of the British Tory Party. The Governments led by the noble Earl will be long remembered for continuous full employment and for a remarkable period of industrial and social advance. The Government which came to power five years ago under Mrs Thatcher will not, I fear, be so remembered. It will be remembered as the Government which lost this country 2 million jobs. To appreciate the enormity of this figure, it is best to remember that during the worst economic depression in history, in the years from 1929 to 1932, employment fell by only 780,000, or 3.7 per cent. of the 19½ million employees in employment in 1929. As against that the figure of 2 million represents 8.7 per cent. of the 23 million employees in employment in 1979.

It is possible—and we have heard this often enough—that in 1984 employment will increase for the first time in five years, by about 250,000 as far as employees are concerned, or by 350,000 if one includes the self-employed. But that would still leave l¾| million fewer employees in employment than we had in 1979. Thus the Thatcher depression has, by every test, been twice as severe as the great depression after 1929.

Manufacturing production is still 13 per cent. below the level in the second quarter of 1979. Although it has recovered quite a lot from the bottom, it is still 13 per cent. lower. And despite all the talk about developing new industries, manufacturing investment is still 30 per cent. down in volume. Nor is there any qualitative improvement to set against the loss in production. The competitive position of British industry gets steadily worse.

We have become, for the first time in centuries, net importers of manufactures to the tune of £5½ billion last year and £7½ billion in the current year. Our share of world exports in manufactures, which, after the devaluation of 1967, stabilised around 9½ per cent. for 12 years, has been falling again and is now around only 7½ per cent. The only thing the Government have succeeded in doing, at a tremendous cost in terms of lost output and employment, is to bring down inflation. They brought it down from 10½ per cent., which it was for the 12 months prior to their taking office, to 5 per cent. But this is meagre compensation for the loss of industrial production and the miseries of well over 3 million unemployed.

The Chancellor of the Exchequer maintains that he can do very little to reduce unemployment by fiscal or monetary measures. The only way we can reduce unemployment, according to him, is to reduce real and not just money wages, and thereby cause people, to price themselves into jobs rather than out of them".—[Official Report, Commons, 30/10/84; col. 1182.] That was the view expressed in a speech in the other place exactly a fornight ago. Maybe, in the meantime, he has radically changed his view. He is speaking again today, but we shall not know about that until tomorrow. This assertion assumes that real wages are under the control of trade unions, in the same way as money wages. They could raise them or lower them at will. But that is pure nonsense. Real wages cannot be settled in wage negotiations; they depend on prices, which are not under the control of the unions. Prices relative to wages depend on the productivity of labour and the size of the percentage mark-up for profits.

Evidently, the Chancellor does not understand the link between real wages and productivity. In his Mais Lecture, delivered last June, he claimed that in the past three years productivity in manufacturing industry rose at the rate of 6 per cent. a year. This was a poetic exaggeration. The true figure, as officially calculated, was 4.9 per cent. a year between 1980 and 1983, and even this latter is no guide to the trend, since between 1980 and 1981 productivity was falling and the subsequent rise incorporates a substantial element of catching up.

Taking the whole period of the present Administration, the annual growth of productivity in manufacturing since the second quarter of 1979, and up to and including the second quarter of 1984, was 2.5 per cent. exactly, which compares badly with the 3.3 per cent. growth rate of productivity achieved in the 20 years of full employment between 1953 and 1973—a period of which members of the present Administration are apt to speak so contemptuously

But whatever the figure, it is quite inevitable that, in consequence of the rise in productivity, prices should rise less than wages. This is because the movement of prices reflects labour costs per unit of output, and the latter is the resultant of the change in productivity as well as the change in wages per man hour. Thus, since 1980 wages in this country rose by 10 per cent. a year, whereas labour costs per unit of output rose by 5½ per cent. a year—not 10 per cent.—and the price of manufactured goods in the home market rose by 6 per cent. a year.

So when the Chancellor said, as he did in his recent speech in the other place, that on the basis of a careful investigation of the evidence reducing pay increases to the level of price increases will create 500,000 new jobs a year, and 1½ million in three years, he was talking through his hat. If the increase in wages were reduced to 5 per cent. a year, instead of 10 per cent., but productivity growth remained the same, the rate of increase in prices would be 1 per cent. a year and not 6 per cent. There is no way in which you can reduce wage increases to the level of price increases. There must always be a gap between them, so long as productivity is rising.

The gap between the rise in prices and wages would remain, unless productivity ceased to rise—and I am sure that that was not his intention—or unless the mark-up for profits was pushed up fast enough to absorb the whole of the productivity gain. In any case, the movement of real wages reveals nothing about the change in the effective demand for labour, which is what determines the change in employment so long as surplus labour and under-used capacity exists.

Mr. Lawson quoted extensively from the experience of the United States where, according to him, the large increase in employment that took place in that country was due not to Keynesian measures of demand expansion, but to the fact that, in contrast to Europe, real wages were falling slightly instead of rising rapidly. Moreover, according to the Chancellor, 13 million out of the 15 million new jobs created during the last decade occurred, during the first half of the period at a time when United States fiscal policy was becoming more, not less, restrictive". On all this, the Chancellor got his facts wrong—and these are facts which can easily be ascertained by consulting the official representatives of our great ally, the United States. As I found out, they are only too ready to oblige by supplying one with the correct information. Indeed, it seems unbelievable that his official advisers in the Treasury should have failed to make sure that he got his facts right on these matters.

It is true that in America real wages have risen modestly—not fallen slightly, as Mr. Lawson said—between 1974 and 1984, by 8 per cent. in 10 years or by 0.8 per cent. a year. However, productivity per man hour increased equally modestly by 0.86 per cent. a year—that is to say, productivity changed at exactly the same rate as real earnings. It is clear that the low rate of growth of real wages in America was a reflection of the low rate of growth of productivity and of nothing else. It is another question why productivity growth was so low. Before 1973, it averaged 3 per cent. a year. The reasons for this are very puzzling to economists in the United States, but nobody suggests that this had anything to do with the trade unions or with budgetary deficits.

As regards the sources of job-creation in the United States, we again find that Mr. Lawson got his facts completely wrong. In the first place, the number of additional jobs in the decade 1974 to 1984 was 19 million and not 15 million. Secondly, this increase largely occurred in two big spurts, and both were due to fiscal stimuli through large tax cuts. The first started under President Ford and continued under President Carter, extending over the years 1975 to 1979. The second occurred under President Reagan, when employment increased by 6 million (and not 2 million, as Mr. Lawson said in the other place) in the two years 1983 and 1984. In both cases the increase in jobs was the result of substantial fiscal stimuli, mainly through tax cuts on orthodox Keynesian lines. Thus, contrary to Mr. Lawson, the huge rise in employment in the United States—for 19 million, or 25 per cent. of the total amount of employment, in 10 years is indeed a very big figure—was the consequence of large doses of reflationary stimuli introduced by two Republican Presidents. This was ruled out completely by our Chancellor and by the present Government as being purely inflationary and completely unsound.

So much for Mr. Lawson's views and his knowledge of the facts of history. Fortunately, there are some signs that his chief, the Prime Minister, is learning from experience. At any rate she now quotes Keynes rather than Hayek or Friedman, and keeps a much thumbed copy of the famous 1944 White Paper on Employment Policy in her handbag. With some difficulty, she pulled it out of her handbag recently in the other place to quote a passage from it. The main theme of that White Paper was the exact opposite of Mr. Lawson's main assertions. Its main thesis followed the lines laid down by the noble Earl, Lord Stockton, in 1938 (or six years before the publication of the White Paper) when he wrote: In a society in which opportunities for employment occur according to the efficiency of a vast and complicated mechanism employing co-operative methods of production, society should accept the responsibility of so governing that mechanism as to provide the individual with the opportunity to work …Society has not the right to abandon the individual because, as a result of faulty organisation, the labour which he is still willing to expend cannot temporarily be utilised". That quotation comes from the noble Earl's book, The Middle Way.

I must end my speech with a sincere apology. Owing to a long-standing commitment to attend a conference of central bankers and economists in Amsterdam which begins early tomorrow morning, I have to catch the last plane to Amsterdam tonight. I shall therefore not be able to follow the whole debate and stay for the summing-up.

5.14 p.m.

Viscount Caldecote

My Lords, it is a great privilege to be the first speaker on these Benches to follow the inspiring maiden speech of the noble Earl, Lord Stockton. He was a very distinguished statesman when I first joined your Lordships' House over 35 years ago, so it is with real pleasure, but with great humility, that I offer him my warmest congratulations on his magnificent, sparkling and forward-looking speech. I hope that he will in the future often give us the benefit of his long experience and unrivalled wisdom.

I was very glad that the noble Earl who opened the debate dealt so fully with the problems of job creation, because there was only a passing reference to those problems and the problems of unemployment in the gracious Speech. Like him, I intend to concentrate on unemployment. I think that we are all agreed that the principal objective of economic policy is to achieve prosperity. That includes opportunities for satisfying activity or paid jobs for everybody.

There is no greater admirer than myself of the Government for what they have achieved in controlling and bringing down inflation. I fully accept that low inflation is a necessary condition for prosperity. But low inflation is not synonymous with prosperity; it is not a sufficient condition for prosperity, and it certainly is not an objective or an end in itself. So we cannot be satisfied with the present figure of over 3 million unemployed. Worse still is the prediction of rising unemployment, the growing percentage of young people who are unemployed and the increasing numbers who will be unemployed for two years or more and who may never work again; for not yet have we reached a proper understanding of the use of leisure time, to which the noble Earl, Lord Stockton, looked forward.

Nor can we accept that the Government can do nothing in the meantime to stimulate employment—to create jobs—except to control inflation. Otherwise, they say, it is up to industry and business to create jobs. Of course industry, and manufacturing industry in particular, is the principal source of wealth creation, on which prosperity and jobs depend, and must play its part. For Britain that means that industry has to be competitive and so able to gain a greater share of world trade.

Let us for a moment examine the realities of the situation in this rapidly changing world. First, I believe that it is quite wrong to argue that because in the past technological advances, leading to greater productivity, have increased employment (as in the textile and motor-car industries) through creating bigger markets, this will happen again. The markets and the competition have changed a lot. The scale of productivity improvement is an order of magnitude greater than in the past, with automation, computers and robotics. I am sure that it is equally false to conclude that we should hold back technological advance and higher productivity to maintain employment. That is the fastest way to ruin and unemployment, through lack of competitiveness.

What are the prospects then for employment and more jobs? There are two main sources of jobs—the creation of products, as in manufacturing, including agriculture; and the provision of financial, communications, leisure and other services. In all those activities the customer in the broadest sense must be satisfied—by providing good value for money and by offering the right quality at competitive prices. Without that there will be no orders and no jobs, whether in manufacturing or in the service industries.

In vast areas of manufacturing to achieve the quality and competitive prices required we must have higher investment, which in almost every case produces greater output with fewer people, leading to more unemployment until the market expands, as other noble Lords have pointed out. Thus to increase our share of world trade involves lower employment, at least initially. Productivity in United Kingdom industry has greatly improved over the last five years. But, in spite of that, we are still 20 per cent. less competitive than we were 10 years ago, particularly as compared with our principal competitors; and, sadly, unit labour costs have been rising recently.

That means we need still more investment to reduce costs in manufacturing industry. In new small growing enterprises it is a very different story. In the USA in the past 10 years, as other noble Lords have already mentioned, more than 12 million new jobs have been created; two-thirds of those came from small, young companies, and it is estimated that half those new companies have been financed by individuals who have made their money through selling equity, share options and the like in larger companies who have employed them.

In Europe and the United Kingdom no new jobs have been created over that 10-year period. What are the reasons for that striking contrast? First of all there is a vast, dynamic market in the USA which we have not yet achieved in the European Community. That is one important factor. But perhaps even more important is the different culture and the different tax structures which have affected new company formation. For instance, in this country when somebody makes a lot of money by starting a new company and selling it to a bigger one, he all too often goes off, buys a farm and becomes a country gentleman. Whereas in the United States he would put his £100,000, or half a million, that he has made into some new industrial enterprise which quite soon would become a big new company, an employer of many people.

But of course there have been great and encouraging changes here in Britain in the last five years. There has been a new spirit of enterprise and risk taking, encouraged and stimulated by the lower taxes which were introduced by the present Government in 1979. What a tragedy that we did not have that régime of taxation 20 years ago instead of the ludicrous high rate of taxes which the party of the noble Lords opposite imposed in following their policy of equality of misery.

Now the City is awash with money. Individuals have some to spare too. Venture capital funds are springing up like mushrooms. New companies are forming every day. Management buy-outs are giving many people stakes in risk taking and initiatives with the incentives of big potential rewards. In 10 years' time those new small companies will create millions of jobs, just as they have in America, but not tomorrow or next year in the numbers we need. The fact is that in manufacturing, in our traditional industries, established companies can only survive and prosper through more labour saving investment. Some in newer industries could grow faster already but the skilled people they are needing are not there and people must be trained. That is very urgent but we shall not get quick results there, either.

Thus, though manufacturing industry remains the essential engine of wealth creation in this country and output will increase as the economy grows—and it is growing—overall the trend of employment in manufacturing is down, at least in the short term. Some do not feel too worried about that because they assert: let us control inflation and the growing economy will stimulate vast increases in labour intensive service industries. In some sectors, in leisure and entertainment for instance, that is probably true. In others, especially those trading internationally and facing competition as fierce as any competition in the manufacturing sector, they will need to reduce operating costs just as much as manufacturing companies, through technological advance and investment. In insurance, in banking, in communications, in shipping, the drive for greater productivity must go on but it will lead to lower employment in the short term. So far in the office world we are only just beginning to see the effects of the information technology revolution, and in general in the service industries.

Lastly, in Britain we are greatly dependent on international trade. Competition will grow and not diminish, especially from the newly developing countries, with their lower pay and the increasing use of modern technology. Thus on balance there are encouraging signs of growth leading to more jobs in the longer term, say in five years' time, through lower inflation, higher productivity, greater competitiveness, more enterprise and new company formation, and growth in leisure-based and other service industries.

However, in the shorter term, the outlook is less bright. Older industries must become more productive. They must shed labour to remain competitive, and indeed to stay in business at all. The service industries, too, will follow on that road, and small company formation takes time to grow jobs. Thus, it will take time to grow jobs in both the manufacturing and service industries. Therefore, I believe it is dangerously complacent to assume that low inflation and growth in the GDP will lead to the creation of sufficient jobs to reduce unemployment in the shorter term. Something more is needed if we are to avoid the misery, the frustration and the divisiveness of long-term unemployment doing irreparable damage to the structure of our society.

So much for diagnosis. Now for the treatment, recognising that much is already being done through MSC and other training schemes. First, I believe that the Government must now shift their emphasis from reducing inflation, as top priority, to job creation and reducing unemployment. That does not involve an inflationary rush for growth or throwing money at the problem. The indications are that the Chancellor is confident that he has money available to reduce taxes. It has even been suggested that he may increase indirect taxes to give more scope for direct tax reduction. I believe that the first priority must be, as other noble Lords have indicated, to get rid of the poverty trap to encourage employment at the lower end. Beyond that, any surplus must surely be used to finance investment in our decaying infrastructure rather than to reduce personal taxation.

I say that for three clear reasons. First, much of that investment in the infrastructure makes us more efficient. It reduces costs of essential services like transport. Secondly, it will create much needed jobs in the private sector and the effect will spread out both in orders and in confidence building. Thirdly, investment in housing, services and other parts of the infrastructure cannot be delayed. Like any investment it cannot be delayed indefinitely. Surely the best time to do it is now when there is ample capacity, for if we leave it until the economy is booming and then inject that demand into it, that really will be inflationary. I believe that that case for action on the infrastructure is unassailable. If the alternative of overall personal tax reduction is adopted, it will simply increase imports and job creation will be minimal.

It is equally important in the short term to sweep away the bureaucratic obstacles to the growth of small businesses. As a start, why do we not remove all planning restrictions to conducting business from home or from existing buildings, provided only that no environmental pollution occurs which is damaging to the neighbours? Why do we not for five years give exemption to owner managed businesses, employing fewer than five people, from the payment of national insurance, PAYE and all the other procedures involving form filling and paperwork, as well as from any obligation to make redundancy or similar payments? That would really stimulate employment in the small company sector.

Lastly, we need much swifter action in improving education and training to meet the needs of expanding industries. There are great shortages of skills in, for instance, information technology, in precision mechanical engineering and in manufacturing systems, which are holding back job creation. There is no time to wait for the effect of changes in schools, colleges and universities, important as they are. We need a crash programme of retraining using every device available, including distance learning techniques such as the Open University.

These are just three proposals which would stem from a decision to give absolute priority to job creation in the shorter term. No doubt many others will evolve. Of course, there are difficulties and risks in emergency action. Government and politicians are always anxious to tell industry to be enterprising and to accept risks—why not the Government, too? The noble Earl, Lord Gowrie, tried to make our flesh creep by quoting comments by the honourable Member for Plymouth—I am not quite sure who he is——

The Earl of Gowrie

My Lords, I meant Dr. Owen.

Viscount Caldecote

My Lords, the noble Lord made our flesh creep by those comments from Dr. Owen about what might happen if we go too far along the expansionist road. Of course, it is a very difficult judgment of balances between opposing economic factors. But the fact is that there is no shortage of tasks that need doing, no shortage of people to do them and no shortage of money to finance them. Surely, a Government who have achieved so much in reducing inflation and in encouraging enterprise cannot shirk the challenge of bringing those three together—the tasks, the people, and the money—and so give hope to millions of young people who are now facing a very bleak future.

5.30 p.m.

Lord Rochester

My Lords, it is always a pleasure to follow the noble Viscount, Lord Caldecote, whose views I always respect and often share, as I do this afternoon. May I also from these Benches join other noble Lords in offering warm congratulations to the noble Earl, Lord Stockton, on his moving speech. I have often benefited from the noble Earl's wise speeches and writings. That has been the case again this afternoon.

I welcome the reference in the gracious Speech to the Government's recognition of the need to provide better opportunities for employment and to help the unemployed obtain the training or work experience required to take those opportunities. However, I join the noble Lord, Lord Barnett, my noble friend Lord Diamond and, I think, if I may say so, the noble Viscount who has just sat down, in feeling some scepticism as to the effect of the Government's policies in this matter. I wish to touch on only one aspect of it.

Last Thusday, in our debate, the noble Lord, Lord Mishcon, rightly stressed the dangers stemming from the fact that almost half of the total number of unemployed are now aged under 25. It is significant, too, that the honourable Member for North Wiltshire in another place, in seconding the Motion for a humble Address to her Majesty last week, drew attention to the point that the number of people continuously out of work for more than three years has increased eightfold in the last five years. They already total nearly 60,000. That number looks like rising to more than 100,000 over the next few years.

On numerous occasions in your Lordships' House I have suggested that more places should be made available on the community programme for long-term unemployed people aged between 19 and 24. Many in this age group were too old to benefit from the youth training scheme when it was first introduced and they therefore have no skill to offer in now seeking a job. They will miss out altogether unless provision is made for them to receive training now. I would ask the noble Lord, Lord Young of Graffham, when he replies to the debate, for a specific assurance that the Government will have these unfortunate young people particularly in mind in their plans for the future.

There is one omission from the gracious Speech that I welcome. It is that the Government have no plans for further trade union legislation in this Session. Recent events seem to me to have demonstrated that there is already quite enough of it. It remains to be seen how effective laws enacted in the last five years on secondary industrial action, on closed shop ballots, on pre-strike ballots, and the rest, will prove in practice. In our discussions last summer on the Trade Union Bill, my noble friends and I opposed the introduction of pre-strike ballots not on grounds of principle, but because we feared that they might lead to even more unofficial action than there already is.

Only a few weeks ago, I nevertheless asked the Government whether, in the special case of the current coal dispute, they stood ready to introduce, if necessary, urgent legislation designed to give all those employed in the coal industry the opportunity, under suitable independent supervision, to vote in a secret national postal ballot on whether they wished the formula for settling the dispute produced by ACAS on 12th October last to be accepted. With every day that passes it becomes clearer that such legislation on the part of the Government is now unlikely to prove either necessary or desirable.

In the conduct of the dispute, there have been faults, it seems to me, on all sides. I say that in all humility because I can recall clearly enough, from the time when I had to take some responsibility in such matters, how easy it is to make a wrong move. I nevertheless feel bound to observe that, in my experience, one of the most elementary mistakes that employers can make in industrial disputes is to lose the support of their first line supervisors. The National Coal Board has done just that and then capped it by contriving to lose the confidence of its senior managers.

But let me add at once that such blunders, however regrettable, are in my view secondary to the main issue in this dispute; namely, that the president of the National Union of Mineworkers—and if challenged I am prepared to quote my authority for saying this—sees the strike as a means of bringing down the elected Government of the day. There has been mass intimidatory picketing of a criminal kind. In negotiations all the concessions have been made by the Coal Board and none by the union. The NUM executive has refused to countenance a national ballot of its members even to test the support for a settlement on the basis of that reached between the board and NACODS. There may still be room for i's to be dotted or t's to be crossed, but I see no reason why the substance of the offer already made, and still available, to mineworkers should now be varied.

If the TUC is unwilling or unable to bring sufficient pressure to bear on the NUM to cause it to alter its present attitude, it looks as though there will be no end to the dispute until it is brought about by enough miners voting with their feet to return to work. All that I can do is to use such small influence as I may possess as a spokesman for the Alliance in these matters to urge more miners to go back to work and the executive of the NUM, when it meets next Thursday, to arrange a national ballot on whether the strike should now end.

So much for the dispute itself. I make no apology for mentioning it. It is surely one of the most crucial political and industrial issues of the day. But one day it will be over and the full extent of the damage will then be revealed. In anticipation of that day and even possibly as a means of bringing it forward, I think that it might help considerably if the Government were to hold out the hope, indeed, the promise, of much more money than the £5 million already allocated being made available to assist in creating new jobs and in making other provision for the devastated mining communities.

I live in Cheshire and can therefore observe, perhaps more closely than many of your Lordships, the wide gap that exists between the absence of job opportunities and the social deprivation that there is in the north and the relative affluence of the south. I am glad to be in support of the noble Earl, Lord Stockton, in saying that.

The Earl of Gowrie

My Lords, I, too, live on the fringes of Cheshire. I should have thought that one would describe Cheshire as one of the richest parts of the United Kingdom.

Lord Rochester

My Lords, I did not for a moment suggest that Cheshire was anything else. I simply observed that, living in Cheshire, I am perhaps in a better position, in proximity to the north and in particular in having had something to do with employment or unemployment and industrial problems in the north-west, to make the observation that I did.

If, in their social policies, the Government are not perceived to be acting in the interests of the nation as a whole, I fear that we shall pay a heavy economic price for their failure. In saying that, I readily acknowledge the point that the noble Lord, Lord Boyd-Carpenter, made in our debate last Thursday—that the provision of any such selective help, including the additional training facilities for the 20 to 24 year age group I was advocating earlier, will cost money. I trust the House will accept, however, that I have always been glad to join with those who urge the need to continue to control inflation and to improve productivity so that expenditure of this kind can be financed.

I fear that in mishandling the GCHQ affair, as I believe they did, the Government threw away a glorious opportunity to establish a no-strike agreement which might later have been of inestimable value in avoiding disruption in other essential services. I can only hope that once the coal dispute is over they will go out of their way to show not vindictiveness but magnanimity towards the trade union movement in general. There is, in my view, no speedy way in which unnemployment can be reduced and our industrial performance improved except through co-operation between the Government and representatives of management and employees; and on that point I agree wholeheartedly with what the right reverend Prelate the Bishop of Lincoln had to say earlier.

Lastly, I wish to draw attention to another omission from the gracious Speech, and this time to deplore it. I refer to the absence of any apparent recognition of the need to improve human relations or to bridge the gap between "us" and "them" in British industry. Speaking on the Second Reading of the Trade Union Bill last May, on behalf of my noble friends, I said that had the Bill afforded us the opportunity to develop our own step by step approach to increasing employee involvement, we should certainly have taken it. As it is, I have tabled an Unstarred Question asking the Government, What conclusions they have reached in monitoring the action reported to have been taken by companies in introducing, maintaining and developing employee involvement in accordance with section 1 of the Employment Act 1982. I remind the House that that secion is based on an amendment which we on these Benches moved to the Bill because, among other reasons, we considered it would lead to an improvement in this country's international competitiveness. I hope there will be an early opportunity to debate this subject and to learn what effect this first, tiny step—tiny statutory step—in a desired direction is, in the Government's view, having in practice.

Hovering in the wings, so to speak, is European Community legislation in the form of the Vredling and Fifth Directives. It is a matter on which, in my view, we in this country cannot afford to stand still. To judge from one analysis of more than 200 recent statements made on the subject in the annual reports of companies (almost all of them large ones) it appears that the majority of firms do not have, or if they do, have failed to mention the existence of, any formal consultative machinery. In my view, that simply is not good enough. I remain of the opinion that, building on the practice of our best companies, it should next be made a statutory requirement that in both public and private sectors every organisation employing more that a certain number of people should have consultative bodies of some kind.

There is not time to pursue this matter further now. Suffice it to say that if a broad advance could actually be made on this front, I believe it might do more than any other single thing to improve this country's economic and industrial performance. I do not expect the noble Lord, Lord Young, when he comes to reply, to have much to say, without notice, on this subject. I hope, however, that he will acknowledge its importance and offer us at least a few words of encouragement, however general they may have to be.

5.47 p.m.

Lord Granville of Eye

My Lords, as there are many more speakers to come in this interesting debate, I am certainly going to be very brief. Like other noble Lords, I believe that the great speech we heard this afternoon from the noble Earl, Lord Stockton, will have a profound effect not only in your Lordships' House, but in the country as well. Those who remember his "Never had it so good" will agree that he has never lost the golden touch. We look forward very much to hearing him again in your Lordships' House.

The noble Earl, Lord Gowrie, who spoke for the Government, spent a good deal of time, as have other noble Lords, on unemployment and the demand abroad for our goods. If you go round the shops, in London or elsewhere, you see that they are full of goods, and there seems to be plenty of money about to buy them. The goods seem to be Italian, or French, or German, or from Taiwan or Hong Kong, but today very few seem to be British. I believe that our adverse balance of trade in our manufactures in the EEC is now a very formidable figure indeed. It has been said that without oil today we cannot keep ourselves, with our population, after the so-called baby boom and the high period of immigration.

The problem is that unfortunately we did not modernise many of our great industries after the war, while our competitors did. Certainly we never concentrated on co-operation with the shop floor as a vital priority, as many of our competitors, such as the Japanese, have done, But, as the noble Earl said, the microchip revolution may not create more immediate jobs, but they will come, and they will multiply. In the meantime, the Government emphasise the setting up of small businesses with all the Government help in their programme. However, we have to pay for our food and raw materials with our exports. It is not just a question of expecting that it will mean taking in each other's washing. As I see it, the real problem facing us today in a single sentence is this. We must be able to compete with our competitors if we are to create more employment and to get the orders. If not, unemployment will certainly rise.

I remember that last year at a trade fair in Germany I asked a well known German buyer, "Are you buying British goods now if the price is right, the deliveries are satisfactory and if the quality is up to standard?" He surprised me by saying, "No". I said, "Well, why not? You are in the EEC now". He said, "There are three reasons why I can't buy British goods at this industrial fair. The first is the English disease; the second is that your deliveries are still, I am afraid, poor; and the third is that, alas, 'Made in Britain' used to be a good sign on any product but it is not so much so today". So, sadly, American and European investors and buyers are continuing to look elsewhere.

The paradox is that if one picks up the Daily Telegraph or the Financial Times one sees pages full of vacancies, but they are mostly for skilled labour. Listening to the noble Earl's speech, I feel that we must obviously, as a priority, train far more young people in engineering skills than we are doing at present.

There is another aspect of this problem to which I hesitate to refer. I attended an international seminar in Switzerland which was comprised of directors, economists, union officials, bankers and so on. They staggered me by saying two things in the various debates which we had, which were all broadcast and shown on the eidograph. They said, "Today you are a see-saw economy and government. When the Conservatives are in power they denationalise everything. When Labour come back to power they renationalise everything. This is really government by see-saw: it is swings and roundabouts". I think that there may be something in what they said.

In some ways—as the noble Earl said—our democracy today has to face a new climate. The function of the Opposition, whether it be Labour or Conservative, has changed in our parliamentary democracy. Now it seems all too often that, whatever the Government do, the tendency is for some to cry, "stinking fish", or to throw a spanner into the works, which is highlighted by the media who love to give it priority. I do not think that that helps the national effort to try to deal with the vital problem of unemployment.

In conclusion, I think that we need a new generation of union leaders to contribute to co-operation and technology. We need a new generation of managers as well to win the shop floor co-operation, as the Japanese do when they set up factories in this country. The alternative is a low standard of living in this island in the North Sea, trying to take in each other's washing. If this debate has highlighted that, then it has achieved something worthwhile.

5.55 p.m.

Lord Bauer

My Lords, the speakers before me have already paid eloquent tribute to the exceptional maiden speech of the noble Earl, Lord Stockton. It would be otiose for me to add to their tributes except to thank the noble Earl for the pleasure and instruction that I derived from his speech.

We should emphatically endorse the Government's commitment to controlling inflation. An unwarranted and disturbing complacency, not confined to politics, is abroad on this subject, accompanied by demands for a relaxation of financial discipline. The Financial Times of 1st October reported on circulars by stockbrokers advocating expansionist policies while complacently envisaging inflation above 5 per cent. With inflation at 5 per cent., £1 would be reduced in value to 3p in a lifespan of 70 years. A very prominent economist expressed alarm over inflation, primarily because it is so unjust. I quote: Its most striking consequence is injustice to those who in good faith have committed their savings to titles to money rather than to things". He concluded: We must make it a prime object of deliberate State policy that the standard of value…should be kept stable". Who wrote that? Friedman? Hayek? Walters? Genghis Khan? It was Keynes.

There are, of course, many people who are protected against inflation or who even profit from it. But this ensures that others are hit correspondingly harder. And prudent people with modest means often cannot protect themselves against its injustices and hardships. Protection against inescapable contingencies of life, such as ill health or old age, against which prudent people can normally provide for by private saving or insurance, is supplied by the state, albeit inadequately and at great cost. At the same time the risk against which many people cannot safeguard themselves—namely, erosion of the value of money—has been promoted by policies of successive Governments, thereby driving many people into dependence on taxpayers' support.

On a taxi ride from this building, an elderly driver in indifferent health told me that he had hoped to retire long ago, but he could not do so because his savings had largely vanished. He had invested some in the purchase of a flat to let; and rent control had practically destroyed its capital value. The rest was in a building society deposit which had lost most of its purchasing power. Is it not distasteful, perhaps even disgraceful, that prosperous stockbrokers should smugly belittle inflation, which erodes the savings of the less well off, the assets of charities catering for them, and makes more people dependent on state hand-outs?

Relaxation of financial discipline is canvassed on the ground that heavy unemployment is always evidence of insufficient demand. On this argument the 4 million people unemployed in February 1947, when coal stocks gave out and factories had to close, also reflected a recession calling for financial expansion.

Mrs. Thatcher's Government are accused of deflating demand. Yet since 1979 total monetary spending has greatly increased. Look at the outcome. Between the second quarter of 1979 and the second quarter of 1984 total spending rose by 63 per cent., retail prices by 62 per cent., total output by 2.8 per cent., and recorded unemployment much more than doubled.

The volume of retail sales was at an all-time high in September. All around us people often cannot get even unskilled labour. Everywhere businesses and consumers alike economise on labour as best they can and self-service establishments spring up right and left. It is customers who chase repair men, and not the other way round.

In these conditions it is perverse to talk about "unremitting deflationary policies", as did an article in the Financial Times of 18th October. In such circumstances how can it make sense to urge expansionist financial policies? Their futility was emphasised by Mr. Callaghan in September 1977 in an oft-quoted speech.

The heavy and prolonged unemployment here and elsewhere in Europe is the result of necessary and long-overdue attempts to reduce inflation at a time when the movement of people between places and jobs is discouraged or even obstructed by a whole host of factors, mostly familiar though often unacknowledged. These include minimum wages, union restrictions, rent controls, so-called employment protection, expensive and mostly futile rescue operations, heavy taxation of low wage-earners, and the operation of the social security system. Financial expansion could not remedy any of these severe impediments to higher employment.

Nor is somewhat increased growth likely to bring much relief. In particular, greater growth by 1 or 2 per cent. will not much affect total unemployment. To expect such relief would be like hoping that an increase in population could reduce the huge farm surpluses under the CAP.

Lower interest rates may well be desirable on various grounds. But cheaper money combined with over-priced labour would further encourage capital intensive forms of production and consumption. Thus, while lower interest rates may well reduce unemployment in the short-term, they aggravate it over a longer period unless labour costs per unit of output come down. As we know from the noble Lord, Lord Wilson of Rievaulx, a week is a long time in politics. But in the present context, policies governed by this aphorism will bring early retribution.

Any impact of faster growth or even improved international competitiveness on unemployment, is counteracted by people's increasing awareness of how little they gain by working rather than by claiming various benefits. Such awareness is now encouraged by exhortations to claim benefits emanating from the DHSS and other organisations. It is also counteracted by the persistent pressure on both businesses and private people to economise in their use of high-cost labour.

Substantial and lasting reduction in unemployment requires confidence in the stability of money, opportunities and encouragement for people to price themselves into jobs; and promotion of more labour-intensive methods in both the production and consumption of goods and services at prices customers are able and willing to pay.

6.5 p.m.

The Lord Bishop of Southwell

My Lords, first, I should like to echo the congratulations and thanks which were offered from this Bench by my noble friend the right reverend Prelate the Bishop of Lincoln to the noble Earl, Lord Stockton, for what he said to us tonight. It was one of those rare parliamentary occasions which I think all of us will treasure all our lives. Secondly, I must apologise to the House for the fact that I cannot stay to the end of the debate. I hope in particular that the noble Earl, Lord Gowrie, and the noble Lord the Minister who is winding up the debate will accept my apologies. Thirdly, I should like to say how sorry I was that I had to nip out for a moment when the noble Lord, Lord Rochester, was speaking, because he was speaking about the miners' strike and it is about that that I wish to say one or two things tonight.

For two reasons, it is with considerable diffidence that I address your Lordships on this subject: first, because some of your Lordships will have heard all you want to hear from bishops on this subject; but, more importantly, because I have always believed that there is a time to speak and a time to be silent, and heretofore I have believed it important to be silent. At times I have been under pressure to speak because my diocese covers the county of Nottinghamshire, where the majority of pits are working. Other bishops have a different situation to cope with. My firm hope is that in speaking tonight I shall say nothing that will aggravate a very sad situation, for part of the trouble with this dispute is the use and meaning of words.

I begin by stressing the importance of coal for our economy. Coal is a precious commodity, vital to our wellbeing, and a fuel which will remain essential to our needs for many years to come. For this reason it is of the utmost importance that the viability of the industry is not destroyed. It could be destroyed by this dispute dragging on, or it could be destroyed by doing nothing about the present state of the industry and so allowing uneconomic pits to consume all the money which the industry needs for new developments. The great need at the present time is for a strategic plan for the proper use of all our fuel resources. A plan for coal must be part of an overall plan for energy. There is anxiety in the coal mining industry that it will be so reduced in size as to be unable to take its proper place in any overall plan, if ever one is made.

Nottinghamshire miners are sometimes accused of being selfish because the pits in Nottinghamshire are, on the whole, viable pits making a profit and the jobs of Nottinghamshire miners are therefore not so noticeably in danger. I think it is true that nearly all the Nottinghamshire pits make a profit except those few where the workings are under towns, such as Mansfield, and the Coal Board has to pay considerable sums of money in repairing property above ground which is affected by subsidence. In the coalfield there is certainly a great tradition of hard work and, indeed, of competition, which results in a good level of production per man hour.

It is however understandable that there should be great anxiety in those areas of the country where the pits are in danger of being closed and where, in consequence, the life goes out of the whole community and unemployment reaches even greater proportions than in other places. We just cannot close our eyes to these fears of unemployment and social deprivation. To offer "golden handshakes" may be all very well for those nearing retirement age or those who have the chance of finding or making for themselves useful employment; but, at a time when there are not enough jobs to go round, what is achieved by a golden handshake is the required reduction of the workforce in the industry at the cost of increasing unemployment.

Unemployment is devastating to the human spirit and all of us have the duty to try to prevent it. Mr. Scargill is therefore right when he fights for those men who face perhaps a lifetime of unemployment because of the closure of their pits. It is not very easy, as is sometimes suggested, for a man to move his family from, say, Durham to Nottinghamshire in search of a job. Coal miners no longer tend to live in coal board properties. They buy their own houses, so moving house is a much more traumatic experience than it was in the old days when in fact a not inconsiderable number of miners did move down from Durham to Nottinghamshire. We must heed the cry of those men who fear for their livelihood, even if we disagree, as I often do, with many of the words that are said, and certainly with the tactics that are employed in making the points.

But there will be no peace in the coal industry by defeating the miners. I feel that I must try to get across what I believe to be the feeling of Nottinghamshire miners. They do not like to be thanked for supporting the Government. They are not against their own union. They do not want to destroy the NUM or set up a union of their own. They are good union men. Indeed in the heart of many there is a submerged guilt about the crossing of picket lines.

They are at work to preserve their pits and their jobs. No more, no less. As good union men they expect to be consulted by their union and to have their views truthfully represented at the highest level. I do not know which way a ballot would go if the Nottinghamshire miners were to be given what they have always sought; namely, a proper ballot of their views. At the beginning of the dispute if there had been a ballot they would certainly have voted to strike.

Sadly, the dispute has developed political overtones which have turned it into a confrontation with Government. If this was purely a mining dispute all miners would be rock solid in the support of their union, and this would have been true even in Nottinghamshire. Moreover I believe that it would be unwise for the Government to read into the present trickle of men returning to work the idea that the strike is ultimately cracking. Some men in desperation are crossing picket lines to keep their families fed, but they will not thank the Government if they are starved into submission.

The Nottinghamshire miners want a strong and effective National Union of Mineworkers. It would therefore help greatly if the Government could be genuinely seen to value the unions and to be working with them rather than, as often appears, they are concerned more with clipping their wings. If we are to have genuine co-operation in industry it can only be if the unions are honoured as reputable and responsible bodies. This means of course that unions must themselves behave responsibly, and I believe that they must accept the fact that they cannot be above the law.

All your Lordships will wish to condemn, as I do, the violence on the picket lines with which the police have to deal. This intimidation, which is present in some measure in nearly all industrial disputes, is wholly counter-productive to the interests of the striking miners, the National Union of Mineworkers' leadership, and the trade unions in general. I repeat, the rule of law must prevail. I believe too that it would help enormously if the inevitable closure of some pits were not undertaken too precipitately. All down the years pits have had to close if they have become exhausted or uneconomic. Pits will still have to be closed. But—and this is the point I want to make—there is need for alternative employment to be created before the pits close, not afterwards. There must be a long-term strategy. There must be concrete proposals for the redevelopment of those areas where there is economic or social deprivation. Vague promises will not do.

When miners demand jobs for their sons, they are not seeking those jobs primarily in the coal industry. It is jobs for their sons, not necessarily jobs in the pits, that they want. I know that the coal board desires this very thing and is taking steps to help in this respect, but the Government must not pressure the Board into a too hurried programme of closures with all the consequent personal hardship. I realise that the end result has got to be a smaller, increasingly efficient industry, employing less people but still providing all the coal we need.

It is not what the Coal Board is doing but its method of doing it that needs to be looked at. There surely ought to be agreement possible between the NCB and the NUM on a programme which would achieve a more humane process of closures. I am not saying that in this dispute the fault lies on one side or the other. Indeed, my Lords, it is this apportioning of blame which is highly counter-productive. Both sides are at fault. Agreement was nearly reached, I am told, the other day and it was only the face-saving formulas which could not be found. The time has come for great men to be prepared to lose face in order to prevent total disaster.

I feel I must say a brief word about the role of the Church in this dispute. Pronouncements by bishops are the least important part of that role. Those who are at the sharp end of the business are the parish priests, who have to stand by their people in their distress. I have the greatest admiration for the pastoral work which is being done by clergy of all denominations, though obviously I know best the work of my own priests. They have endeavoured not to take sides in the dispute. Once they have taken sides they become neutered, unable to help the situation.

The Vicar of Ollerton, the scene of some horrific battles between police and pickets early on in the dispute and where one picket was killed in the mélée, is himself the son of a miner. He is torn apart by the agonies of the situation where families are divided, with one at work and one on strike; where the Miners' Welfare is boycotted by one side because the other uses it. He is a man who is trusted by both sides and who will therefore be able to help not only now but later when a lot of mending of fences will have to take place. Another of my priests, the Rector of Warsop, has two pits in his parish, one on strike and the other working. The tension in the town can be appreciated when you remember that men may work in different pits but they live side by side.

It is not my wish to support either side in this dispute, nor have I the right or the expertise to offer advice, let alone solutions, but I hope and pray that humility will prevail so that there is, first of all, an acceptance of the miners' case for the survival of the communities in which they live and for their future chances of employment; secondly, a recognition of the value of trades unions as essential partners in industry; thirdly, a more leisurely programme of pit closures so that hardships can be softened; and, fourthly, some gestures of goodwill made. This will only be possible if concessions are not regarded as defeats but as gestures of trust. A fight to the finish will destroy the industry and produce increasing poverty and violence.

The Government have a very difficult task in tackling unemployment. All of us know in the bottom of our hearts that this is a world-wide problem and a very intractable one. I am no economist and, as I said just now, my Orders do not entitle me to make economic judgments. All I can do is to observe the effects of Government policies. For this reason, I do not think it is sufficient to say, as is said in the gracious Speech, that Her Majesty's Government, will continue policies designed to achieve better opportunities for employment and to help the unemployed obtain the training or work experience needed to fill them. My Lords, in the end we must create the jobs for them to go to.

I was glad to hear the noble Earl, Lord Gowrie, say that new jobs are coming on stream. I ask, my Lords, are they coming on stream in the right places? I am aware that the CBI is not uncritical of certain aspects of Government policy, suggesting that that policy does not enable the expansion of our industries which alone can create the necessary development of our economy. This view, I believe, might be expressed thus: economic policies must serve industry; industry must not be sacrificed to policies. Those words, my Lords, are in fact a misquotation of my own archbishop, the Archbishop of York, who has said, Economic policies must serve people: people must not be sacrificed to policies. The saddest element in the present situation is the fact that in the mining industry mutual trust, so long a feature of the relationship between employers and employed, has given way to anger, distrust of each other's political motives, refusal to compromise and, finally, an inability to communicate with one another. Indeed, we cannot escape the conclusion that this is becoming a political fight to the finish. I believe that the miners, like the rest of us, are more interested in prosperity than politics. I hope we can all get back to finding proper industrial solutions to this dispute. We look to the Government to pursue policies which will give better hope of essential long-term work for our people, young and old. It is this for which the Nottinghamshire workers are working.

Viscount Hanworth

My Lords, before the right reverend Prelate sits down, may I say that I agree with much of what he said? Does he realise that there are many in the unions whose sole objective is to destroy our existing society as we know it? Does he take that into account in his assessment?

The Lord Bishop of Southwell

My Lords, I am as aware as the noble Lord opposite, whose name I am afraid I do not know, that this is sadly true of some people in the unions. I was trying to express what I believe to be the attitude and feeling of the Nottinghamshire miners, who I do not think have had their case very clearly stated over the course of these months.

Lord Taylor of Gryfe

My Lords—

Viscount Massereene and Ferrard

My Lords, I thank the noble Lord for giving way. I believe I had risen before him. May I suggest to the right reverend Prelate that redundancy is not compulsory for any miner. The coal board has promised miners that if they do not wish to be made redundant they will be found other jobs in the mines.

The Lord Bishop of Southwell

My Lords, I am aware of what the noble Viscount says. I know that this is true. The industry has offered a great many assurances of that kind.

6.23 p.m.

Lord Taylor of Gryfe

My Lords, the House this afternoon has heard at least two remarkable speeches: one from the noble Earl, Lord Stockton, and I add my tribute to all the others that have been heaped upon him. But your Lordships have just heard another outstanding and remarkable speech. It is not often that we look to the Bishops' Benches, if I may say so with due respect, to hear the authentic voice of the coal miners of Nottingham, yet I feel that there was a great deal of truth in what the right reverend Prelate said. Is it not a pity that his voice of quiet reason, great wisdom and Christian sensitivity should not have been expressed at an earlier stage in this confrontation between the miners and the coal board? I almost feel that after hearing the right reverend Prelate the Bishop of Southwell, anything that I have to say is an intrusion. A few moments' silence to digest his wisdom and his guidance might have been useful at this stage. But I return to the economic debate and the gracious Speech which is the matter before us. I agree that the contribution of the right reverend Prelate is relevant to the gracious Speech and to the economic situation.

My colleagues on these Benches will be dealing with the broad issues of economic policy. I hope that noble Lords will excuse me if I tend to concentrate on one aspect of the Government's economic policy. Coming as I do from Scotland and living in the region, many miles from London and remote from this city, I feel a certain responsibility in the area of regional policy. I believe that this country is in danger of being divided, not simply in terms of class interests and class conflict, but if one considers voting patterns one realises that we are in grave danger of dividing the country between the North, neglected, and the South, affluent. There can be no peace in any society where tension arises from that poor division of resources. I believe that it is essential to good government and stability in our nation, as well as being good economic strategy, if we pursue a sound policy in the regions.

As I have said, I live in Scotland. Scotland has suffered over the past two or three generations from massive deprivation because of the economic structure of Scotland and its heavy dependence on traditional industries like steel, shipbuilding and so on—the industries that are losing their competitive position. A massive re-structuring is required to be undertaken there.

That is equally true of other regions such as the North-East. In the gracious Speech the statement is made that we are deeply concerned about unemployment and will continue policies … to achieve better opportunities". I suggest that the present regional policy view of the Government is not likely to achieve this aim. The steps anticipated, and already quoted yesterday in the Chancellor's Statement, show that there are to be cuts in regional assistance which are not likely to provide the better opportunities promised in the gracious Speech.

Scotland, like other parts of the country such as the North-East and Wales, has suffered from too great a dependence on one or two basic industries—steel, coal and shipbuilding. These are the industries that have been heaviest hit. They are low-wage industries. The city of Glasgow had its great hey-day 100 years ago. As a result, the properties—the commercial buildings and the housing—are decaying because they are nearly all a century old. It is a city of deprivation, of massive slums and large-scale unemployment. Scotland has been badly hit. It was badly housed and over the past 50 years average incomes in Scotland have never reached the national average.

There is an imbalance and a great deal has been said today about the need for investment in infrastructure. But it is madness for any country that allows an imbalance in the economy to take place where the infrastructure—schools, education, universities, roads and communications—is already in existence.

Despite that infrastructure in the North, industry has moved steadily South and schools and other places have closed. There is an economic imbalance. Allowing that to take place poses serious consequences for the people who have grown up in these areas and want to live there.

One of Scotland's greatest exports over the years has been people. We see, all over the world, the skilled engineers, teachers and missionairies who have left their native heath, many of them simply because they could not find opportunities for their skills within their own country. A change is taking place, thanks to the intervention of the state. If I may, I will say this to the Government: that they must not rely too greatly on market forces solving economic problems. Market forces have a habit of being somewhat inhuman and not concerned with social situations. In the case of Scotland, the change is taking place—and what a delight it is!—but it is due almost entirely to two measures of state intervention. One is the existence of regional policy, a positive regional policy, and the other is the existence of a special agency, the Scottish Development Agency, which was set up as a vehicle for stimulating the change in our economic structure which is so necessary.

A week ago, I visited Nippon Electronics in the town of Livingston. It is the largest Japanese manufacturing investment in Europe. It is now about to be doubled after two years of operation because of its success. They recruit substantially in the 16-to-18 year age group. They feel that they can train them in the skills at that age, and train them in the techniques of management and involvement in the industry which is typical of the Japanese system. I looked into a window and there were 16 to 20 youngsters sitting round a table, a "quality circle" meeting in which management and workers were discussing how they could improve their productivity and their quality controls. National Semiconductors at Greenock, a £ 100 million project, is Europe's lagest manufacturer of semiconductor wafers. The IBM factory in Greenock is the sole manufacturer of the new IBM computers for export to Europe. Scotland has now 80 per cent. of the output of integrated circuits for the United Kingdom and 20 per cent. for Europe. Some 40,000 employees are now actively engaged in high technology electronics in Scotland. They are heavily involved, too, in health care and biotechnology.

The point about quoting these figures is not to offer congratulations to the Government although they have been fully supportive of the change that has taken place. The Scottish Development Agency was initiated, I think, under previous governments, but in fairness to the Government they have played their part in the stimulation of economic activities that I have mentioned. But one of the two agencies that made this possible was the Scottish Development Agency which has an £83 million grant in aid. According to yesterday's Statement by the Chancellor of the Exchequer, he has cut the budget of the Scottish Office and they will impose a cut on the Scottish Development Agency.

What kind of economic madness is this? Expressed in the gracious Speech is a concern for new opportunities for the unemployed, yet there are to be cuts in the agency which is responsible for the stimulation of that economy and the employment of people. Equally true, the Scottish Development Agency is not only an agency for developing partnerships in industry, for giving guidance to small companies, for taking direct investment, for advising in management and for being a complete stimulant to economic activity; it also has a responsibility for urban renewal.

If one goes to Glasgow nowadays one sees evidence of these dramatic changes. I believe that bad industrial relations in many industries are caused by bad environment. There are fewer strikes in the new towns, where people work in a pleasant environment, than there are in some of the mass production factories in which people earn their living today. So the Scottish Development Agency has a responsibility for urban renewal; and there are many examples there.

But, my Lords, the biggest stimulus to economic activity is in the regional development policy. It is the powerful incentive to attract the IBMs, the Nippon Electronics and all the other companies that contribute substantially to new wealth creation in Scotland and in other parts of the neglected areas. I understand that it is the intention of the Government not only to cut the budget of the Scottish Development Agency but also to impose an overall cut in regional aid throughout this country. In view of the success of regional aid in attracting new employment, in view of the success of regional aid in transforming the structure of some of the areas of this country, which is so necessary, I cannot for the life of me understand why we should be thinking in terms of cutting. I understand that a figure like £ 100 million is envisaged in the re-drawing of the map and the cutting of regional aid. Indeed, the Govenment will, in addition, take account of any assistance from Europe for regional aid and reduce the aid that is directly attributable to these regions by the amount they receive from European funds.

I must say to the Minister that I would be glad to have his confirmation that, in the interests of the creation of employment, the Scottish Development Agency and these other development agencies will be free from the cuts. In view of his desire to do something serious about reducing the high unemployment rate—and I say that quite sincerely—I would be very glad to have some assurances from him regarding regional aid. May I quote just one thing? The cuts in regional aid are not only promised—I think there is in the pipeline something like £ 100 million to be cut—but they say that figures released in the annual report of the 1982 Industrial Development Act show that automatic grants to the special development areas dropped by more than one-third last year: to £438 million in the year to March 1984 compared with £689 million in the previous 12 months.

The biggest fall affected Scotland where payments fell by a half in the last year; so that, in addition to cutting a half from regional aid in Scotland, a further cut is now envisaged. I say seriously to the Minister that this is unlikely to create any new jobs; that, in fact, the contrary will be true. But I say above all to the Minister that this is not only a matter of creating new jobs. I believe in the unity of this nation. I believe in it among social classes as well as in national groups. But if in our country there is one area seriously neglected or which feels that it is seriously neglected—as many people in Ireland have felt over the years that they were discriminated against—it has the roots of social tension which can be extremely serious. I would rather see money spent in creating jobs, creating employment and in improving the environment of these neglected areas than having to spend money on police forces in order to impose some kind of social peace.

6.39 p.m.

Lord Alport

My Lords, anyone who takes part in this debate has a particular privilege. However trite or commonplace our own contributions may be, we share in an occasion distinguished by the magnanimity, eloquence and vision of the maiden speech of my noble friend Lord Stockton. I can only say that my own sense of political values has been strongly influenced by him over a period of half a century, indeed, ever since I first read in the 'thirties his book, The Middle Way. But I never admired him more than I did this afternoon.

My Lords, the paragraphs of the gracious Speech with which this debate is mainly concerned must I think have been concocted by a coterie of chartered accountants. I have nothing against chartered accountants. Many of my friends belong to that admirable profession. Lord Bruce of Donington is a chartered accountant, I think. I rather think that the noble Lord, Lord Barnett, is a chartered accountant, and it may be that the noble Lord, Lord Diamond, who has also spoken this afternoon, is a chartered accountant. The profession plays a great and increasingly influential role in the business life of the nation, advocating financial prudence and discipline. Many members of that profession occupy high positions in industrial companies. They carry out important duties in the realm of bankruptcy and fraud and in the recovery of funds on behalf of the Government, the courts or shareholders. But I suggest to your Lordships that the mental approach and scale of values which are necessary to judge the health or otherwise of the balance-sheet of a company, to anticipate the dangers of over-trading, to forecast profit trends or to advise on the commercial good sense of some projected acquisition have only very limited application to what F. S. Oliver once called "the endless adventure of governing man".

On the face of it, the gracious Speech and the Chancellor's Statement yesterday represent financial prudence. Inflation has been contained; Government borrowing has been controlled; various national assets have been realised to help the cash-flow of the Treasury; and there is the promise that those who pay direct taxes (the better off) will have the taxes reduced. I would find it very difficult, if I were a chartered accountant, to fault the logic of the Government's policies. But the problems of governing a nation with an educated electorate, a population of over 50 million, with powerful institutions and wide differences of political and social attitudes, is not the same as running a public company. It is essentially a problem of management, not so much of material resources and money—although my noble friend Lord Stockton said that money was about the only thing Government could control—but of managing human resources; men and women.

We have heard over these last years a good deal about over-manning, of increased production through a smaller labour force, of saving money in the public services by sacking workers or by early retirement. But the fact at the moment—and this has been brought out in almost every speech we have listened to—is that we have today 3½ million unemployed. We have at the same time a marked decline in the social fabric of our country and the gradual erosion of the general benefits of what was called "the welfare system", in the development of which the Tory Party, to which I belong, rightly claimed to have a share.

Take as an example of what I am trying to say—and it was referred to particularly eloquently by the right reverend Prelate of the Bishop of Southwell—the present coal strike. It started from what I would describe as balance-sheet considerations, the closure of uneconomic pits. But uneconomic pits have been closed regularly over the last 50 years or more. I am well aware that the National Union of Mineworkers is under the influence of leaders, some of whom have political, and even perhaps Marxist, aspirations. But, my Lords, 150,000 miners on strike—Englishmen, Scotsmen and Welshmen! They are not Marxists. Have the Government really thought why these men are accepting a reduction in their material standards of living from the highly-paid élite of industrial workers in this country to a level which would have been called in Victorian times "pauperism"? What will be the balance-sheet entry to show the advantage of the savings of the closure of uneconomic pits against the cost of the strike to the taxpayer of this country and the cost of the social consequences of the strike in Northern England, Scotland and Wales for a generation to come? Whatever may be the political motives of the leaders of the National Union of Mineworkers, their success in carrying on this long and damaging strike had been fed by the fear, in those areas particularly which were to be affected by closures, of unemployment.

Although there has been in the gracious Speech a very general reference to unemployment, neither there nor in the Chancellor's speech yesterday is there any indication that the Government are prepared to make any significant changes in their strict adherence to what I have called "the policies of the balance sheet"—changes in order to tackle unemployment, even in the face of the fact that the cost of unemployment on that balance sheet is £7½ billion a year. We are assured that there is no alternative to the Government's present financial policies, but—and I would say this to my noble friends on this side of the House—any Government, their policies and actions, are judged eventually by results. If by the time of the next election there are still 3½ million unemployed in this country, the electorate will look to some other party with some other solution to a problem which in human and social terms, as opposed to balance-sheet terms, is one which affects men and women in all parts of the country and in every walk of life.

It is surely time that the Government accepted the risks involved in adopting what I can only think of in the old Rooseveltian term as a "New Deal" for Britain. If they were prepared to tell the country that they regarded the task of tackling unemployment as their major priority, that they would accept the risk, whatever might be the effect on their policies and record, that inflation might rise to 8 or 9 per cent.—though frankly, as my noble friend Lord Stockton has mentioned, this has not happened in the United States, despite their deficit financing—and if they would use their financial resources to repair and develop the structure of the public services, which are in sad decline, that reductions in direct taxation have to wait perhaps for three years or more, that the income from North Sea oil and the sale of British Telecom will not be used simply to keep down Government borrowing but would be available to foster research and development of the new industries which are to lead Britain in the new industrial revolution, so that we can enter the 21st century confident and united—all this would involve restraint and sacrifice. But if that were observed and shared equally, I feel that the nation would respond. There would be risks, certainly; but the Government stand for enterprise and risk-taking and I suggest that in the field of national finance they should not take some risks themselves.

6.48 p.m.

Lord Harris of High Cross

My Lords, I find much to applaud in the gracious Speech—the harmless circuses as well as the bread of life, which was touched upon by the noble Earl, Lord Stockton, in his delightful and uplifting maiden speech. If I join my old friend the noble Lord, Lord Alport, in lamenting, though from a rather different standpoint, the lack of radical policies to tackle unemployment, I do not of course doubt that Her Majesty's Government are deeply concerned about this grave problem. At least in this House we can agree that the issue dividing the two sides is one not of motives but of methods. Put simply, the critics think that the remedy for unemployment is always to increase public spending, measured in nominal pounds, while the Government believe (as the noble Lord, Lord Bauer, explained lucidly) that the planned increase by the Government in the money supply is already sufficient to create more real demand for labour if we hold down costs and improve incentives for more efficient production.

Quite apart from the differences in temperament mentioned by the noble Earl, Lord Stockton, it is natural, in my view, that the parties in opposition would always take more risks in expanding demand and have their fun mocking monetary policy as being either mean or meaningless. But, from the vantage point of the Cross-Benches, it carries more weight, as the noble Earl, Lord Gowrie, said, that throughout Europe, governments—whether run by Social Democrats, Christian Socialists, coalitions or in France by, nominally, Socialists—all end up deploying prudent monetary management to check inflation. For all the most amiable rhetoric of the noble Lord, Lord Barnett, the last Labour Government, when it came to the pinch, were not bad monetarists, especially after 1975, with the nudge and guidance of the International Monetary Fund, despite unemployment rising remorselessly towards one and a half million in 1979.

It is also natural that unemployed politicians in opposition can always afford to be more supremely confident that increased spending will create jobs, whereas experience in office teaches again and again that unchecked spending creates inflation. We have all learned the lesson that by distorting and discouraging investment, inflation in turn destroys future employment.

The question which keeps asking itself is: where are the new jobs coming from? In a paper with that very title for the National Economic Development Council last November, the TUC admitted, in what I can only describe as a rare lapse of candour, that nobody really knows. Indeed, it took refuge in history, as the following remarkable, if somewhat opaque, passage will show. I quote from the TUC document of 24th November 1983: Two centuries ago, the overwhelming majority of the working population was employed on the land. If, during one of the periodic crises of recession and unemployment in that period the question of where new jobs were coming from had been raised, it would have been impossible to envisage that the answer lay in a rapid upheaval characterised by a massive move of population from the land to the cities and a rapid restructuring of economic activity from agriculture to manufacturing.". That paragraph may not exactly be a literary gem, but it is struggling to convey what I believe to be a seminal historical insight. The TUC are saying that no-one could have foreseen the transformation of the first industrial revolution but that, on the day, it turned out all right for employment. A moment's reflection will explain why the trade union leaders were unable to draw the correct and hopeful lesson from this shrewd observation.

Can anybody imagine that the industrial revolution could have worked its wonders of increasing jobs and raising standards of living fourfold in a century if the dear old TUC had been around at the time to stop it? How could Lancashire cotton have circled the world if some rustic Arthur Scargill had been able to preserve in perpetuity the handloom weavers? Would the new factories, railways and docks have sprung up if fancy apprenticeships, closed shops, demarcation and other restrictive practices had been allowed to stand in the way? Could jobs have been found for the multiplying children of our Victorian forebears, if minimum wage laws had said that they must be paid a half, or more, of adult rates? Would even the devoted working class readers of Samuel Smiles' Self-Help have sought out new jobs, if high taxes had cut their take-home pay to within a few pennies or shillings of social benefits?

The questions ducked by the TUC are without end. Anyway, how could the new works have been developed if planning laws had frozen development and imposed delays of years between the conception and completion of new buildings? And how could workers have moved to new jobs if rent control had destroyed houses to let? If only the TUC had persevered with their history lesson they would have learned that the way forward for the first industrial revolution was prepared in the early years of the 19th century by a liberalising programme of monetary reconstruction, free trade and the radical reform of such obstacles to economic advance as taxation, trade unions and the old Poor Law.

I would argue on the Government's behalf that since 1979 a nominally Conservative administration has shown a more truly liberalising intent than any British administration for 100 years. It has been the first to begin to reverse almost a century of progressive collectivism which has weakened the vigour and flexibility of this economy. The trouble is that there is still a long way to go if we want production and employment to adapt to changing markets, new methods and novel ways of living, to which the noble Earl, Lord Stockton, lifted up our eyes.

It seems to me that the best pragmatic test of economic policy for employment, as Samuel Brittan never tires of teaching us and as the noble Lord, Lord Barnett, almost conceded, is its effect on labour costs per unit of output. Total demand is increasing sufficiently to raise real production and to employ more people, so long as the extra spending is not absorbed in higher costs and faster inflation. The reduction of labour and other costs should, in my view, become a crusade to release more purchasing power to spend on new production. Wherever overmanning is tolerated under the pressure of trade unions in the public services, wages should be allowed to fall. Where the market value of a worker's output rises, as at Jaguars, then wages can safely rise—and rise quite steeply—so long as management is left with enough profit to maintain and extend the capital equipment without which there can be no lasting jobs.

I believe quite passionately that the tragedy for Her Majesty's Government is that they are confronted and partly hypnotised by a nostalgic, backward-looking Labour and trade union movement which professes overriding concern about reducing unemployment yet which in practice always shrinks from helping to sweep away policies, practices and institutions that restrict progress to the desired end. If wages and salaries are to be more flexible, we should not only abolish wages councils and weaken the wrecking power of union Luddites. In the end we shall have drastically to reform and prune the monstrous tax benefit jungle. The most urgent requirement is to restore incentives not only for able-bodied men to seek work, but for efficient employers to offer more people the boon of a job at wages which can be afforded by performance in a competitive market.

6.58 p.m.

Lord Bottomley

My Lords, I find it difficult to follow the noble Lord, Lord Harris of High Cross. We are certainly not on the same wave length—not for the first time. I find myself much more in tune with the noble Earl, Lord Stockton. May I congratulate him upon his maiden speech. It was delivered with great personal dignity, elegant style and real concern and compassion. Like him, I shared the experience of the hungry 'thirties. We represented adjoining constituencies in the North-East: Stockton and Middlesbrough. Today they are experiencing the highest unemployment in the country. I quote the noble Earl when I say: Nothing can ever blot from my memory the terrible tragedy of mass unemployment. I am determined that as long as I am responsible this shall not happen again. I wish the members of the present Government were as moved by the present tragic situation. I acknowledge that they do not want unemployment, but their policies make it inevitable. They blame the world recession for our economic ills. They say we are pricing ourselves out of the world's markets because wages are too high and our productivity has to be improved. There is truth in these views, but it does not follow that there is no further action to be taken.

The Government made much emotional capital out of the Falklands campaign, although as time goes on it will be seen as a political and economic disaster. But we must praise the military skill and bravery of our armed forces in mounting a highly successful campaign; this could not have been done by private enterprise. I believe that the same kind of skill and operation is needed to overcome our economic ills. Instead of dismissing the National Enterprise Board, the Government should seek to strengthen and reorganise this body. It should be the board's duty to direct investment into those industries which can hold their own in the face of world recession. It is useless to invest and increase productivity in industries which are outdated or where goods can be produced just as cheaply and more efficiently in other countries. The British are able to produce high quality goods and there is still a demand for them in many parts of the world.

In the past, our inventive skill has been responsible for the world's higher standard of living and improved benefits and comforts. The National Enterprise Board should concentrate also on assisting research into development, design and initial production. This could assist in finding substitutes for imports, thus saving the expenditure of foreign currency on imported raw materials. We should seek to replace these with home products, both natural and synthetic, and make raw materials go further. This was done when man-made fibres were used to replace cotton imports, and it can be done today in other areas.

I was present when the first oil produced from the United Kingdom section of the continental shelf was landed. It was an event of great significance in the history of our country. Together with our massive coal and natural gas reserves and our nuclear know-how, it provides us with the strongest energy base in Western Europe. It has saved us from spending hard currency on imported oil. With the hope of even greater supplies, we must direct investment into those industries where we can hold our own in the world's markets; in chemicals, transport, communications, specialised engineering, high-quality textiles, micro chips and electronics. Capital investment should be directed also into industries having a low import content and a high labour content.

The advantage of investment in selected industries is illustrated by what has been achieved by the Scottish electronics industry. It now employs more workers than the shipbuilding, coal and steel industries in the whole of Scotland. These are positive ways of facing the world recession. Low wages are not the answer to unemployment. The less money people have to buy goods, the more the number of people unemployed. If low wages were the criterion, then India should be a prosperous country.

The Government are encouraging the acceptance of low wages by the suggested abolition of the wages councils, a system of legal minimum wages which has protected workers in low-paid services and manufacturing employment since 1909. Low pay is no route to job creation. Indeed, the growing poverty and hardship engendered by low wages can only serve to depress demand and further reduce prospects of recovery.

Unemployment and low pay create a divided society, with half the nation enduring low standards of living and unhappy at the dim prospect of leading normal, healthy lives in the future. I wonder how many of your Lordships are aware that the unemployed are worse off today than they were in the 1930s. In the 1930s, an unemployed person received 28.7 per cent. of the average wage. In 1983, he received 23.7 per cent.

Of course we have to be realistic and recognise that with modern scientific knowledge and technical developments, there will be no need for so many hours of labour. Automation and computers are making much physical and mental labour redundant. In the area which I represented in another place, I saw all the Terylene for the domestic market and for the Commonwealth being produced by machines attended by only a few workers. British Steel's basic oxygen steel-making plant in that area produced an amount of steel in minutes which previously had taken two hours to produce. The labour force was reduced by four-fifths. This is real progress. No one wants to see men toil in dirty, gas-fumed, hot and dangerous conditions. But there are many services vital to our well being which are being run down and in which people could be employed without expenditure of precious foreign currency.

The nursing and ancillary services, and the ambulance and fire services—which all performed so marvellously after the recent bomb outrage at Brighton—should be retained at full strength and even expanded. Another instance which is of concern to me is the manning of double-decker buses. When I ride in a double-decker bus full of passengers, it shocks me that there is only one person in charge. I feel that it is enough responsibility for any driver to navigate in crowded streets without having the added responsibility of collecting fares. The employment of a conductor to issue tickets and marshal passengers is a necessity, and it would certainly provide more employment.

The greater leisure which people will have as a result of modern technology must be enjoyed to the full. People should live full lives, and if wealth can be produced by machines, it must be distributed to provide leisure services for everybody. It is an interesting thought that the leisured and aristocratic members of our society have no difficulty in finding enjoyable and fruitful ways of using the time which the possession of wealth has allowed them.

Far from being unemployed, the new leisured classes—freed from daily labour—will be able to pursue their own choice in a wide and hitherto unimagined range of scientific and cultural interests. The whole of our economic and social life is being revolutionised and we shall have to re-organise our thinking if we are to avoid disaster at a later date. This will require more teachers and better educational facilities, which will again provide more employment.

We should take heed of what Winston Churchill said during the last war; that high and stable employment should henceforth be regarded as one of Government's chief objectives and responsibilities. I have indicated ways in which new technological and scientific industries can provide work and leisure services to alleviate unemployment. Instead of being hostile to the unions, the Government should be seeking their co-operation in changing attitudes to work, promoting schemes for early retirement, and achieving a reduction in the number of hours worked.

The Government argue that investment in the public sector could only provide additional jobs in the short term, at the expense of longer term higher inflation and ultimately increased unemployment. To the extent that we have to use more raw materials imported from overseas this would be true, but most of the raw materials and labour that would be required can be produced in this country. In the construction industries, house building, roadmaking and leisure amenities the labour used would not be costly in terms of foreign exchange and would find work for our people. To achieve this, of course, there has to be investment in the public sector of the economy. This investment would also obviously result in more work in the private sector, thus creating even more jobs.

There are some who are not averse to using unemployment as a means of weakening the trade unions, which they feel are too powerful an influence in our society. Some also favour unemployment as a means for reducing wage costs. But the continuation of unemployment will undermine the morale of our people and encourage revolutionary elements, opposed to our democratic way of life, to take full advantage of the situation.

7.11 p.m.

Lord Sandford

My Lords, I rise to speak for a few moments on a sector of the economy representing some one-quarter of the whole of public finance; namely, the financing of local government—a topic which I think has not received much attention in this debate so far. I rise to express three notes of welcome, the first of which is a welcome for the absence in the Queen's speech of any more of the kind of legislation which we have received over the last three or four years. I welcome that absence, because most of that legislation has demonstrated what my noble friend Lord Ferrers describes as the Ferrers principle. He has often referred to this and many of your Lordships will remember that this principle is that "most legislation has the opposite effect of that intended". That has been true of most of the legislation relating to local government finance that we have had over the last three or four years.

It is not necessary for me to elaborate on that, because it has all been done for us by the first report of the Audit Commission, which I have in my hand. That is the body appointed by the Government themselves, which issued its very first report in August this year, headed: The impact on local authorities, their economy, their efficiency and their effectiveness, of the block grant distribution system". The pages are shot through with examples of the perverse effect of this legislation. I would commend a study of this report to those of your Lordships who are not already thoroughly familiar with all the intricacies and complexities of local government finance, because it explains those matters, and the things that have gone wrong over the last three or four years, with admirable and almost unique clarity.

I say that not to criticise Her Majesty's Government for their determination to curb local government expenditure. If they are going to curb public expenditure, they must curb local government expenditure, because it constitutes one-quarter of all the public finance that there is. My criticism is that they have not set about it in the right way or tackled the subject sufficiently radically.

That brings me to my second welcome, which is a welcome to Her Majesty's Government's commitment now to embark on a proper review of local government finance. This has been expressed in quite unequivocal, and therefore very welcome, terms at the Conservative Party conference at Brighton, where the Secretary of State said: I have asked Kenneth Baker— now his Minister of State— and William Waldegrave"— now the Parliamentary Under-Secretary— to take a look at the entire system of local government finance. Secondly, I have asked them to look at the way we distribute rate support grant. Thirdly, I have asked them to look at the balance between local finance and Exchequer financing of council spending. Fourthly, I have asked them to see how we can strengthen the accountability of local authorities to their own electorates. Fifthly, I have asked them to look again at how in any new system local revenues may best be raised. My goodness! That is indeed welcome. I welcome it very much.

But what an immense amount of trouble my noble friends on the Front Bench took only last April to prevent the House of Lords adopting a reasoned amendment to the Rates Act which said all that in terms far milder and far less emphatic. If that is now the new policy of the Government towards the review of local government finance, I would ask my noble friend on the Front Bench whether he will confirm that that is what they are going to do and that it be put in the parliamentary record in other terms, if they are more appropriate. That is my second welcome.

My third welcome is for words taken from a recent statement of the Confederation of British Industry. They, and the Institute of Directors, have been recommending their members to engage positively and constructively with local councillors in the consultations prescribed in the Rates Act over the way in which local councils are financed. That is all welcome. But the CBI goes on to say—and this is what I welcome even more— and, better still, stand for election to local councils. If that message goes out strongly, not only from the CBI but from the Institute of Directors, to their members to take their full and proper part in local government, we really shall be getting somewhere.

In the course of preparing to say what I have just said, I took a historical look at the membership of the Birmingham City Council. There are now 19 businessmen on that council of 115, which constitutes 16 per cent. of the council. These are members who, from their own description, one can safely say are engaged in running a business of their own. I am not counting consultants and professional people who might have some involvement, but people who are actually running their own businesses in that city. That 16 per cent. is one-half of what it was 15 years ago; it is one-third of what it was 30 years ago and it is one-quarter of what it was before the war, when 60 per cent. of the members of Birmingham City Council were businessmen running businesses in that town. That is a situation which we must get back to.

This is not to say that members of the trade unions, professional people, retired people, housewives and so on are not also welcome on local councils, but surely it goes without saying that, before a council decides how it will spend the wealth in its own community, it ought to have some part in generating the wealth in question. To be concerned entirely with the consumption and expenditure of wealth and to have no involvement with the creation of it cannot be right, and that is one of the weaknesses in local government at the moment.

Those are the three matters that I particularly welcome in the context of this debate on the gracious Speech. I welcome the abandonment of the kind of legislation that we have had over the last three or four years, the commitment to a proper review of local government finance and the commitment to full engagement in local government by the businessmen of this country.

7.20 p.m.

Viscount St. Davids

My Lords, I am happy to say that I can reduce my speech very considerably, because a large part of what I wished to say has already been said by my noble friend Lord Harris. Although he urges me to repeat it, I am against repeating things in your Lordships' House. I shall merely say that I thoroughly agree with him.

It cannot be concealed from the Government, although it seems to be concealed from one or two of their Back-Benchers, that the funds that they have available for all purposes are not unlimited, and therefore what one must ask for at any time must be modest. I must say that I am much surprised and gratified when I see the enormous faith that the Opposition seem to put in Her Majesty's Government on the subject of raising cash for any conceivable purpose. Much as I put my faith in Her Majesty's Government, I do not take it that far. My head, I assure your Lordships, is stuffed full, almost to bursting point, with perfectly splendid ideas for improving this country. Unfortuantely, since they all involve a certain outlay of cash, I shall not put many of them today. Some of them in fact may never be put. But that is how things go.

The truth of the matter is, as Lord Harris said, that one phase is changing slowly into another, and one cannot change or fight against these major phases. I believe that the manufacturing and industrial phase which followed the agricultural phase is itself slowly passing out and is giving way to a service phase, in which the service industries are becoming the great things. To promote more employment—which we all wish to do, without exception, I believe—we really should not be trying to throw good money after bad by trying to support or reinforce the old industries.

I can say this from the Cross-Benches because obviously I have nothing to lose. If at this moment I were a member of the Labour Party, as I once was, I feel sure that for saying that I should now be shot at dawn twice nightly for a fortnight. No doubt if I were a Tory, I should be gently tapped on the shoulder and told, "You cannot say that, old boy. You will endanger our support in", some constituency or other which was vital at the time. Thank God, I am free from those difficulties. I can say what I like. Any dirt which falls will fall on my head alone. Anyway, I believe it to be wrong to support old, debilitated industries. I believe it to be wrong even to try to dole them out as small bits of co-operatives. Really it is not doing the workers of any industry any good to hand them small bits of dying duck. It is living, and not dying, industries that they must have.

The main industries—the old industries—are certain to reduce for the same reason that Lord Harris spoke of on the matter of agriculture. As we know, agriculture at one moment employed over half the people in this country. Its actual production is now up on those days. Its productivity is astronomical, and of course to match that the actual numbers employed are a very small percentage indeed. The same thing is going to happen in industry. There is going to come a time when our industrial employment will be very small. Our industrial productivity is going to be wherever it gets to, which in our days will be, as we see it, an inconceivable height; and things will have moved on.

It is quite clear, as I said, that the service industries are the next clients for building up. We need ideas on how to give employment in the service industries. Of course in my particular corner of the inland waterways I have certain ideas, and I shall put forward to the Government only those which do not involve them finding large sums but which nevertheless produce a good level of employment.

I do not believe that even the service industries will be the last of the various phases that we go through. I believe finally that what we are going to have as the industries of Britain are the caring industries. The Labour Party has always supported the caring industries. Therefore they have always had my heart with them, though sometimes not my mind when it came to expenditure of cash. I believe that when we have finally reached the state where the service industries are fully developed, that will be the next, and possibly the final step.

It is the duty of humanity to support man. Many things will be done by a robot, but to have a robot pat you on the shoulder and say that it is all right, you are a nice chap and it will help you, does not have quite the same effect as having a charming lady do it. It is really in the end only a person who is going to be able to help a person. That is where we must get finally, I believe, but it can be done only by a rich society.

It is no good saying that the poor can help the poor. We can see, for example, in Ethiopia that this is not the truth. It is the rich there who are helping the poor; and it is by making ourselves richer that we shall be able to help the poor better. That is the great truth which is obscured by so many people. If we are really to help those who are in need of help—and there are many, their needs are great, and I suffer with them, as I am sure all your Lordships do—we have to make ourselves well off, or we cannot help them. That is the real truth. On that idea, I leave your Lordships.

7.28 p.m.

Viscount Massereene and Ferrard

My Lords, before I commence the main part of my own speech I must say how delighted I was to be in the Chamber to hear the remarkable speech of my noble friend Lord Stockton. I remember well when, quite a few years ago, he came down to my house in Kent, where we had a great south-east rally of Conservatives. I think about 15,000 or 16,000 people were there. The noble Earl—or the Prime Minister, as he then was, Mr Harold Macmillan—made the most magnificent speech and received a standing ovation lasting about five minutes. I must say I am happy to have heard the noble Earl this afternoon.

I am afraid that I also am going to speak about unemployment. I would say that it is the most pressing issue of present times. The Labour Opposition remind me of an old, cracked gramophone record on which the needle has got stuck, because they keep on playing the old refrain, "Unemployment, unemployment, unemployment" .That appears to be the only criticism that they have of the Government.

However, I have been looking up some statistics. I am not going to quote too many statistics because it is a very boring thing to do. But counting the miners out on strike, the number of registered unemployed today is 3.2½ million. Of course that is a very large figure. However, as we know, though that is the registered number, it is freely admitted that there are certainly 500,000 of that number who have no wish to work. Any civil servant in the department will reaffirm that. Then there are others who are unable to work through ill health or because they are not temperamentally suited to it. So I do not know from where the Opposition get this figure that they have been bandying about, of 4 million unemployed. You see, we have forgotten that over the first half of this year we have employed an extra 245,000 people. That has brought us up to a total of 24 million employed. That is the employed working population. That is the highest that we have had for two and a half years.

We also appear to have forgotten that the working population has increased very greatly in the last few years. The working population since 1979 has increased by 400,000. This year alone it has increased by 160,000. So 20,000 new jobs have to be created each month for unemployment not to increase, just to stand still. I think the Government have done very well, with unemployment not increasing unduly even with an increase in the working population. When I was a boy, the population was only 36 million. It is now getting near 60 million. True enough, people will say, "It is a larger population, you have more employed in the services and for home goods you have more jobs in manufacturing". But of course the truth is that our manufacturing has been declining because we are importing far more goods than we ever used to for home consumption. That is a very worrying point. But we cannot all live in this country by hanging out each other's washing.

However, you have also got to remember that the number of women on the dole now is quite considerable. I remember the days when there were no women at all on the dole because, certainly before the war, all married women were in the home. But now quite a lot of married women who have been in jobs for a short time can claim the dole. I personally think that a married woman, if her husband is in good employment, ought not to be allowed to claim the dole. Probably I shall have to steer clear of a few married women for a time!

From the point of view of the small employer—and I am a small employer—one of the chief troubles which has been mentioned is the great rise that has occurred in wages. I imagine that most of those who are most vociferous on unemployment have never in their lives employed people with money out of their own pockets. To employ people today is very difficult because the employer has so many things, such as national insurance contributions and so forth to pay. Therefore it is very difficult to increase your labour force. Mine is now very tiny. But if there were some decrease in wages, then one could employ one or two more people. I know my noble friend Lord Gowrie does not agree with that because he has said—and of course I agree with him—that high wages are a very good thing, provided you can pay for them. I think my noble friend mentioned the coal miners, who are the highest paid people in the country. But, we must remember they are heavily subsidised by the taxpayer: for every tonne of coal that is mined in the country the taxpayer has to pay £60.

The Earl of Gowrie

My Lords I am most grateful to my noble friend. The point I sought to make was that in some parts of British industry I thought traditionally low wages had encouraged continual overmanning and that, as productivity and restored competitiveness came back, it was reasonable that fewer workers would have higher wages. That does not mean to say that I dissent from my noble friend about people pricing themselves into work in other parts of the economy.

Viscount Massereene and Ferrard

My Lords, I quite agree with my noble friend that overmanning proves to be a bad thing in a factory: you do not want a lot of people just idling around since some of the good workers who want to work are perhaps inclined to catch the habit. It is not really a good thing at all. However, I think we have to a great extent now got rid of overmanning.

Another trouble is this. For the last three years I think that our wages have been about 3 per cent. ahead of prices. They have been ahead of inflation. That is the road to ruin. I think we are the only country in Europe that has had that situation. As I said previously, if you take the period from 1970 to 1979, wages increased by over 400 per cent. and productivity by only 9½ per cent. We cannot go on in that fashion. We must really try not to exceed inflation in what we pay ourselves.

I am afraid I must blame the unions to a great extent for forcing wages above productivity. I do not want to attack the unions this time. I have attacked them for long enough in my life. I think we now have some really good union leaders, and that relations are going to get a lot better in that way.

Of course unemployment is an absolute curse. This summer I employed a man, aged about 40, from the Midlands who had been unemployed for some time. He could not have been better at his work. It is sad to think that such a man, who showed such excellence, had had to be unemployed. What is even more sad is this. I have been treasurer and have served on the executive for 24 years of the Kent Association of Boys Clubs, a branch of the National Association of Boys Clubs. Unemployment for the young is very serious. If they are unemployed for, say, over six months, they lose heart. It is only natural perhaps that some of them should develop the habit of feeling they do not want to work. Not with all of them, of course, but with some that is the case. I congratulate the Government on the great deal of money that they have spent on training schemes for the young. It is among the young that unemployment hits most seriously.

During the last year, unemployment—I am now talking of all unemployment—has shown a lower increase in the United Kingdom than the EC average. There has already been mention—I have spoken about it myself on previous occasions—of a rosy future in regard to wealth for everyone provided that we can train enough people in techniques involving the silicon chip, the microchip and automation. The trouble is that there will be a most appalling social problem. There will not be enough jobs but there will be a lot of wealth produced which, by means of taxation, can be divided among the population. The problem will be to devise a system in which people will not become bored. If they have hobbies, that will be one answer. But it is a matter that will require much thinking about.

The financial cost of unemployment is, I understand, far greater than that spent on defence or by some other Government departments. It is horrific. Some of this is due to the fact that benefits have been greatly increased. In the creation of new jobs, small businesses are always good things to support. However, with respect to civil servants, I do not think that they would be the best people to choose the candidates for small businesses. A panel of business men should, I think, choose those who are to run small businesses. That procedure might be more satisfactory. However, there would, of course, have to be one or two civil servants from the department on the panel.

To create jobs through deflation is very expensive. I know that the work of the Highlands and Islands Development Board cannot be compared with what happens in the Midlands or the north-west of England. The board has, however, created quite a number of jobs—low cost net job creation, I would call it. This has been done at a cost of £20,000 a job, but it has only cost the board £6,000 per job. The board provides the £6,000 and private capital the rest. It is on a share and share basis. That is a very good way to help the unemployed. Of course, it will not be possible to employ hundreds of thousands of people in this manner, but the board has done well.

I think that I have said enough, but I feel that the Government have been rather unfairly taken to task. It is easy enough for a Government to reflate the economy and to put 2 or 3 million to work digging a hole and filling it up again. However, we would soon be out of the frying pan into the fire if we did that. I feel that the Government could not really do much more in respect of unemployment than they are doing. I read in the papers only this morning that another £80 million is going into job creation.

7.45 p.m.

The Lord Bishop of Norwich

My Lords, I am particularly glad to follow the noble Viscount. Usually, he and I meet only when we are leaning over a five-barred gate helping to judge Highland cattle at the Salen show on Mull. As your Lordships know, this is the social height of the year on Mull. It is lovely to be close to each other here, far south. If your noble Lordships need to know, the noble Viscount is extremely good at judging Highland cattle as well as many other things.

Having made that passing reference, I am now in some difficulty. I am anxious about the speech that I have prepared. As our most senior maiden speaker ever has suggested that when bishops speak about the economy they are likely either to be eccentric or idiosyncratic, it makes what I now have to say a little embarrassing for me, although I trust not for your Lordships. Nevertheless, we naval chaplains live dangerously, and I shall proceed with the speech.

I want to congratulate Her Majesty's Government on two aspects of the gracious Speech in the economic area. Your Lordships will remember the words: My Government will continue to work closely with other nations and international institutions to strengthen and spread economic recovery". With that, although it takes us towards last week's debate, I touch upon as an example, the words: My Government will continue fully to support the Commonwealth, to play a constructive role at the United Nations, to maintain a substantial aid programme, and to encourage investment in developing countries". I believe that the economy is a whole and cannot be divided between at home and overseas. I wish to make two comments about the gracious Speech in terms of the economy. In both those areas, I want to congratulate the Government.

I wish then to make a third reference for their consideration. I managed last night to obtain from another place a copy of the Chancellor's Autumn Statement. I have also now read the full reports of last night's debate in another place in both The Times and the Daily Telegraph. I find that if you mention newspapers by name, you are more likely to get those newspapers to report you. Of course, there are others, and we must not differentiate between newspapers. As a theological student I was asked to give the names of the major and minor prophets in the Old Testament. I could not remember them. I therefore wrote, Far be it from me to differentiate between these holy gentlemen". That will have to do for the press gallery. I found in reading the major reports of last night's debate in another place that the two words I want to share are confirmed in detail.

Since the dreadful violence at Brighton and the merciful deliverance of both the Prime Minister and the Cabinet, for which we humbly thank Almighty God, and since the horrifying TV pictures which Michael Buerk's BBC team brought to our screens, which really have a say on the conscience of our nation, I believe that these two aspects of Government policy have become ever more clear. I would encourage Her Majesty's Government to deepen and increase them. The two words, or the two themes, are efficiency and compassion. As regards efficiency, I notice that the Secretary of State for Employment was reported as saying that the new money put aside to help the unemployed would allow for unemployed people to be paid £40 a week for a year to compensate for loss of unemployment and other benefits while establishing businesses, providing that they had invested at least £1,000. In our experience in the Lowestoft area of our diocese, where we are giving a good deal of church support to community work in relation to the establishment of small businesses, this is just the sort of boost for the jobless to set up on their own that we need, and it is both efficient and compassionate.

I am glad that the noble Lord, Lord Young, is going to reply tonight—so my Order Paper tells me—because we owe a lot to him for the work he has done in the MSC. There again, efficiency and compassion have been coming together. One can only speak from one's own experience, but the advantage of speaking in the House is that all of us can bring our varied local knowledge of a situation to test whether it is a trend which may be true across the country or offer it as a direction in which we might move nationally.

For instance, in relation to the Youth Training Scheme, we have been deeply involved from the Church point of view in this economic area of our country. We have been supporting the local authority work in Thetford, in King's Lynn and in Lowestoft. In Norwich city itself my own Diocesan Church Youth Committee are the main sponsors of our project there. I checked up today for my facts. We have got about 1,000 in training, and 60 per cent. of those who left in this current year, before the 12-month period was up, left because they had employment to go to already. Others, at the end of their time, got jobs within two to three weeks.

I believe therefore that there is a sense in which efficiency and compassion are the two notes which we want to encourage the Government to continue with and to deepen; and sometimes they should recognise that that compassion is something that is to be shared with those who are better off. I refer to the economic background to student grants as an example. We know that the minimum student grant of £205 a year was abolished a day or so ago in a package of measures which will involve the parents of 250,000 students in paying more towards their offspring's higher education. At first glance, that may look as though there are cuts for parents, but I am not so sure because, if efficiency and compassion go together, then surely it is right to encourage the Government to help the poorer students from the poorer families who really need grants, so that the richer parents of the more well-to-do students can in fact stand upon their own feet.

Because we are, on the whole, rather an elderly House, apart of course from notable exceptions among Her Majesty's Government on the Front Bench, many of us who were students before the second world war know the tremendous struggle that our parents had to get us to university. My own parents never owned a motor car; they never owned a refrigerator. It was too early to own a television; I think there were no televisions before the second world war. I remember how hard they worked to make it possible for me to get to Cambridge. I have always been grateful for that, and for their work. I speak as a parent who is comfortably off as a bishop—that is, if you can call a bishop with half a dozen children comfortably off. But they are slowly coming off our hands. We are now moving into the grandchildren syndrome. If your Lordships are interested in bishops, I can tell you that we had a new grandchild just last week, making 10.

It seems to me right and proper that these twin words "efficiency" and "compassion" should go together, and in this case I believe it right that student grants should be selective for those who need them rather than general for anyone who thinks they are simply on the shelf to be picked up. So I use those two words "efficiency" and "compassion" together. I find that, on the whole, from these Benches we do not on average appear as bishops to give to the Government that support which, when they are doing good things, they have every right to receive. On the whole, from these Benches we try to speak not in a narrow, party way but in the national interest; and of course we feel free to criticise when we desire to do so.

I have been struck by the fact that in the Chancellor's Autumn Statement, in two areas particularly concerned with compassion—namely, health and personal social services on the one hand and social security on the other—there are enormous figures showing that we are moving now to £ 16,480 million to be spent on health and personal social services; and this Autumn Statement says that this is an increase of £210 million. On social security, the amount is £39,990 million. This is an enormous figure, showing an increase of £470 million. So the size of the cake concerning those in need, whether of finance or of health or of care under that enormous spending area of health services, is such a large part of national income that it is probably a good thing for us to recognise that.

Having said that, I want to say that it is all too easy for us to say, "Well, as long as we make sure that our economic patterns and packages are suitable at home, then the rest of the world must look after themselves". I was therefore delighted to see, again from the Chancellor's report, that in his budgeting and his forecasting there are to be no cuts in the Foreign and Commonwealth Office grant, which includes ODA; that still stands at £ 1,870 million, which is a very large figure. I trust that the Foreign Office itself will continue on that path concerning immediate Government aid.

Your Lordships will remember that we had that very clear speech from the noble Lord, Lord Trefgarne, speaking in detail about the Government's immediate response to Ethiopia. This is where it seems to me today that the conscience of the nation has been touched by the Ethiopian tragedy, and Government and voluntary services have so joined together in meeting an immediate human need that I believe we are building patterns for the future in our nation which will increase those two twin words of "efficiency" and "compassion" in the whole atmosphere of our national life and of our Government. It was encouraging to see, at col. 455 of Hansard for 30th October, the noble Lord, Lord Trefgarne, saying that the Government had, also agreed to make available two further civil aircraft—one of them a Hercules"— that is, as well as the other two Hercules— to support the voluntary agencies who are doing such a fine job". He spoke about the water drilling rigs, the medical requirements, and so on.

I hope, therefore, that compassion will continue to be part of our economic policies for our overseas aid. I make a special plea here for Uganda. I have just returned after three weeks in Uganda and I find a tremendous love for this country. As your Lordships will remember, Uganda was a protectorate, not a colony. They look to us for support more than to any other of the more wealthy and developed nations. The particular area in which we have invested money there recently is, I believe, already paying big dividends. I want to stress to Her Majesty's Government my third aspect of our economic policy. One could call it value for money—that is one way of putting it—but I should prefer to call it productive use of available resources. I give a particular example from Uganda. As your Lordships know, we have now established our British military training team at Jinja Barracks in Uganda. Of course there are criticisms about the army and I believe that some of them are justified and others are not. But there is no doubt about it: that 13-man training team is doing a remarkably worthwhile job, paid for by money which the Chancellor has deliberately put aside, earmarked for that particular task; namely, to train the young officers of the Ugandan Army and the young NCOs of the Ugandan Army in discipline and in all the great principles and traditions of the British Army which they want to have from us and which they remember from the old days of the East African Rifles.

It was significant that when I spoke to the senior NCOs of that particular training team—they numbered six or seven—they said, quite simply, "If we could double the number of our team, we could double the usefulness of our work". What is the cost of 13 young officers and senior NCOs over in Uganda for a training team? It is minuscule in relation to the figures that we see before us here. If, therefore, in the Foreign Office work and in the economic patterns that we develop overseas, we can watch for these particular productive tasks, it would be tremendous.

I return to the words of the gracious Speech which refer to investment overseas. I found throughout Uganda—and I believe that it is typical of many other parts of Africa which have been part of our great Empire in the past and which are part of the Commonwealth now—a desire that we should seek to invest there. The people whom I met there were young agriculturalists, young Christian doctors and young Christian nurses. They were tremendous, first-rate young people who were idealistic and energetic and who were out there for two or three years. The same is true of Ethiopia today. We have been following, as have many bishops, the business of "Bishops' buckets for Ethiopia" and on Sunday a week ago we had a bucket in every parish church in Norfolk. When I rang through today to ask my chaplain for the figure, I was told that £14,400 has come in already from villages all over Norfolk, in sums of £30, £50 and £100. That will go straight through to Ethiopia.

I believe that we are at an idealistic moment and because of that I simply ask that Her Majesty's Government increase their efficiency, their compassion and their productivity in relation to their economic progress. I believe that if we capture the tide now, we may be able to change the weariness of the nation and gain again the idealism of the nation.

8.3 p.m.

Lord Roberthall

My Lords, all the speakers tonight except one have been very highly privileged in being allowed to speak in the debate which has contained the maiden speech of that one remaining person. Like a good maiden speaker he succeeded in being non-controversial. However, he ventured to remind your Lordships that when he was Prime Minister this country enjoyed both the lowest inflation and the lowest unemployment. At that time I was fortunate in being economic adviser to the Government, so I saw quite a lot of Mr. Macmillan, as he then was, when he was Chancellor. But during my 14-year period of office he was the only Prime Minister who was interested in economics. When he was Prime Minister he used to consult me and talk about the economic situation. He was very kind to me. However, what struck me when he was reminding us of that period was how fortunate Governments were at that time, because their economic policies rested on a consensus. The word "Butskellism", which was coined at the time, was an indication of that. It made it much easier than it has since become to run the economy more or less efficiently. If I do not forget to do so, I hope to come back to that point towards the conclusion of my speech.

I want to say a little about the long-term prospects in relation to unemployment. As always happens when one speaks towards the end of a debate such as this, the points that one wants to raise have probably been raised already, and in my case they were raised particularly well by the noble Lords, Lord Barnett and Lord Diamond. However, I shall try to develop a little the theme that they were putting forward—that on present policies we shall go on having something like the present amount of unemployment indefinitely. The Government themselves have already agreed that we are likely to have the present figure—which one can say is 3 to 4 million, according to how one counts—next year. Almost all the forecasters who are prepared to stick their necks out any futher than that would agree that that figure is likely to be about the same—some of them say that it will be even higher—in the years after that.

Why do we say that? To find the answer one has to look at the policies of the present Government. When they came to power their top objective was to get control of inflation, and their other main objective was to improve the competitiveness and the efficiency of the economy. The instrument for that was the monetary policy and, to some extent changes in the law, especially the law as regards trade unions.

As we all know, the monetary policy was applied with very great severity, and, as we are quite fairly constantly reminded by Government speakers, they have succeeded in reducing inflation and in particular, have stopped the terrifying tendancy, which was becoming so evident in 1979, for the rate to accelerate. I do not think there is any doubt that they have helped to improve the efficiency of industry. They have done so by making the climate very much colder: by forcing employers who want to stay in business at all to cut their costs and by pressing on the bargaining power of labour, both directly by making it harder to get jobs, and indirectly by the rather courageous things that they have done as regards trade union law.

The cost of all this is the tremendous waste of resources represented by the enormous and unprecedented volume of unemployment and by all the misery and suffering which that entails for people of whom we do not see as much as we might. When the noble Viscount, Lord Massereene and Ferrard, was speaking he implied that a great deal of unemployment was caused by people who did not want a job. I live in Cornwall, and a few weeks ago a lady who is a sheep farmer told me that she had been advertising for a shepherd. She had received 96 replies, and she could hardly bear to read them because of the desperation and the hope that they contained that they at least would get lucky with her. If we apply that generally throughout the country, it gives us some idea of the price.

The Government's present policy is much the same as it was when they came to office. In particular, their policy is that inflation is still the top priority and that they cannot do anything about stimulating demand because it would lead to a recrudescence of high wage demands and, therefore, inflation. We must therefore assume that their view is that, with the present state of mind of employers and workers, and with present attitudes, we need about 3 to 4 million unemployed in order to hold the inflation figure at its present level, which is about 4½ per cent.

Is there a policy for employment? It is difficult to understand exactly what the Government's policy is, but primarily it seems to be made up of reducing costs, and that mainly means reducing wage costs. The Government point to the United States as a country which has had an enormous increase in employment, with small wage increases or hardly any. It is rather a bitter commentary—the noble Lord, Lord Barnett, has already dealt with this point but I must repeat it—that a Government that are committed to doing everything to which Keynes was not committed are pointing to the United States to support their policy when they are carrying it out by deficit financing, which would have made Lord Keynes' hair stand on end.

Returning to the matter of policy, it is, as I understand it, that if the money supply is kept within the present limits, with the fiscal policy required to limit the public sector borrowing requirement (because the Government believe that that affects the money supply), we must somehow keep the product of the level of employment and the price level within these constraints. In the end that comes down to the Government thinking that they must somehow keep down wage increases. Their policy on that aspect is, of course, to maintain the severe pressure on industry, but it is also to have a very tight target in the public sector and to urge employers in the private sector also to be austere.

I do not think that that is the right approach, and I believe that it is very unlikely that they will be successful in this policy because the country is now in a stable position with a great deal of unemployment, with output rising slowly and with profits very high. These are just the conditions which in the past have led to the leapfrogging process in the wages field. We are now beginning to see signs of it. Every union which thinks that its industry is fairly prosperous will try to do as well as the best settlement. In the public sector the Government might be able to hold down wages for a little while, but we know from long experience that this generates a great sense of unfairness, which is one of the strongest forces in the human make-up, and in the end one has to give way.

Therefore, even if the Government were right in supposing—and I do not think they are—that if they could get wage settlements down low enough there would be an expansion of employment I do not think we are likely to get it. Having had long experience of this sort of thing, I have gradually come to the conclusion that we are not likely to have a combination of low inflation and high employment without some sort of consensus. That is where I return to my reference to Mr. Macmillan. At the moment we have confrontation. It is quite evident that this polarisation is taking place. I do not think that we have any hope of getting out of this without moving away from this atmosphere and trying to reach some sort of agreement about an economic policy that will allow us to do better than this. We should not be content with staying in that position.

Perhaps I may close on a slightly party note. The Alliance, to which I have the pleasure of belonging, is at least hoping to do something in that direction and is not pushing in either of the extreme directions of the main parties. I cannot help thinking of one of the early books of the noble Earl, Lord Stockton, which made a great impression on me and which was called The Middle Way.

8.16 p.m.

Lord Campbell of Alloway

My Lords, in following the noble Lord, Lord Roberthall, may I borrow his nostalgia for consensus and his search for some new approach and also, if I may, endorse his tribute to my noble friend Lord Stockton. It was said by the noble Lord, Lord Cledwyn of Penrhos, when moving the adjournment of this debate on the gracious Speech, and it has been repeated by other noble Lords today, including the noble Lords, Lord Barnett and Lord Diamond, that our country is a divided country, that on unemployment the policies of Her Majesty's Government are wanting in imagination and in resilience.

Neither assertion is well founded. As to being a divided country, it is true that a private army, as seen on television, roams the approaches to our pitheads; that intimidators brutalise the police on £14 a day blood money—apparently blood money acceptable from any source, even Libya, the veritable hydra of terrorist supply; that Tammany Hall Teamsters Union practices, imported from the Mafia, are used against the private pits and those who work in them and other trade union members who have nothing to do with the coal industry, and the name of that game is extortion; it is true that before levying a campaign of violence to unseat a duly elected Government, to compel Her Majesty to change her measures and counsels, to overawe Parliament, Marxist commanders, Moscow-trained, squirrelled away £8.5 million of their own members' funds to defeat the due process of law for calculated breaches of the rule of law. All within this realm owe allegiance, and that conduct is treason.

I speak not of prosecution in any individual case. That is a matter for my right honourable and learned friend the Attorney-General, and there may be evidential considerations of which I am not aware. But I speak of this state of lawlessness, which, far from dividing us, unites us. It unites us as we close our ranks against the forces of subversion in defence of our own free society. The reality of this situation is that we are no divided society at all. Irrespective of political affiliation, this is no divided nation. We are a trading nation, in partnership. As such, we are obliged to recover our lost markets; to find new markets; to sell to the world at a profit, and so to maintain our means of livelihood and our way of life. How is it then that policies which reduce inflation, reduce taxation, encourage new business, and so engender productivity for export can be stigmatised as wanting in imagination? How is it then that the commitment of Her Majesty's Government to spend £2¼ billion in the current year on various training schemes can be said to be devoid of resilience?

The long-term policies are right. They have worked: they are working. The prediction of my noble friend Lord Caldecote is well founded. The question is whether we should derogate, or superimpose, a short-term job-creation policy, accepting a measure of inflation, providing jobs on the infrastructure. But will it get rid of the poverty trap? What will be its impact? How much inflation? My noble friend Lord Alport says 8 per cent. With the greatest respect to him, how does he know? How does anyone know? How many jobs are involved, and how much needs to be done to the infrastructure? Is this a viable proposition, or merely a form of instant, temporary relief unrelated to productivity?

Viscount Caldecote

My Lords, would the noble Lord not agree that if money were spent on the infrastructure instead of being given away—I use the word loosely—as relief for personal taxation, that would not be inflationary?

Lord Campbell of Alloway

My Lords, I am obliged to my noble friend. I cannot agree the proposition as a broad proposition. It is all very well to state it as a theory; the theory may be right or it may be wrong. But in my view—I may be wrong about this—what you have to do is to see how much inflation, how many jobs, what needs to be done, and so on and so forth. Therefore I do not accept that you can approach this question on a matter of pragmatic theory. I think it needs looking at.

In the contest between my noble friend Lord Stockton's nannies I am on the side of nanny starve because I am against inflation and in favour of real jobs related to productivity, especially as this type of short-term job creation—on which I hope I had an amicable exchange with my noble friend—will not provide jobs at the end of the training period—jobs for which the training has been given.

If productivity is the key which opens the door to the new jobs when the training period is over, then surely the creation of a job unrelated to productivity is to some degree a cosmetic exercise. Perhaps not wholly so. There is, as I conceded to my noble friend in our exchange, some essential work which no doubt needs to be done on the infrastructure, and no doubt Her Majesty's Government have this well in mind, not only on economic grounds but also of course on grounds of compassion.

However, even sound policies—and I wholly support Her Majesty's Government's policies as sound—can founder on the submerged reefs of industrial strife. This is why it is of imperative concern—and here I take the point made by the noble Lord, Lord Roberthall—that our industrial relations should evolve to foster business confidence and fuel the expansion of productivity to hasten the creation of those new jobs at the end of the training period.

How should this be done? Ought we not to build upon, and extend, our existing voluntary structure of collective bargaining? Should we not have the voluntary conclusion of industry-wide procedure agreements which contain built-in mandatory arbitration in return for no-strike clauses?—voluntary in the sense that they can only be made if the majority of the members of any proposed signatory union entitled to vote by secret ballot so decide, for do we not accept that, since Beatrice Webb coined the phrase, collective bargaining is the only acceptable way of conducting industrial relations?

Do we not accept that collective bargaining is wholly dependent upon the existence, the strength, and the recognition of trade unions? Do we not accept now that the industrial action as a weapon of first resort is not appropriate, and that the will of the rank and file majority should prevail? We surely also accept that the ethos of consultation should obtain in this age of consultation? And, if so, that disputes as to recognition, should they arise—and they will not of necessity arise—in context with the proposed procedure agreements should be settled by some independent arbitral tribunal on which representatives of trade unions and employers sit under a chairman acceptable to both?

The tribunal, which would have no powers of committal or enforcement, would also adjudicate on the substantive dispute arising under the agreement—relevant again to the leap-frogging consideration raised by the noble Lord, Lord Roberthall—in context with predictabilities. The procedure would be informal. Its decisions would be final; there would be no appeal. The only sanction would be that in any proceedings instituted in a court of law its decisions would be treated as conclusive and would not be subject to lawful extra-judicial challenge by industrial action. Declaratory amendments to the statutes could easily be made. It involves declaratory amendments to the Act of 1974, to the Act of 1980 on secondary action, Sections 12 to 14 of the Act of 1982, and building in this concept into the balloting procedures of the Act of 1984.

The proposal, as such, is not inflationary. By increased productivity and exports we should have earned the full face value of every extra coin of unit wage cost we hope to be able to spend. It would in no way weaken the trade unions. On the contrary, it would strengthen the authority and enhance the status of any trade union which concluded such an agreement at the behest of its members. The proposal serves the interests of the membership—continued employment. It serves the interests of the economy by achieving this measure of predictability and reducing the burden of financing strikers and their families out of taxation. Not wholly of course, but only those who enter into the voluntary schemes.

In conclusion, if we affirm the virtue, and extend the scope, of our indigenous system of collective bargaining, is it not then idle to seek to divide industry into the manufacturing sector and the service sector, or to attempt to define what are, and are not, essential services; or to distinguish between civil servants, as they are called, and others who render services? Services produce goods; services maintain the means of production and distribution of goods; services finance and safeguard goods; services sell goods and even invent and adapt goods. Services ensure the health and wellbeing of all in this country concerned in the complex achievement of a favourable trade balance, and they also ensure the proper ordering of our industrial and economic affairs.

This is how it is because that is what we are—a trading nation in partnership.

8.30 p.m.

Baroness Seear

My Lords, we are all deeply indebted to the noble Earl, Lord Stockton, for a most moving address, a great House of Lords occasion. In many messages that he gave to your Lordships' House there was surely a clear message to the Government Front Bench—a message which it seems strange for a great Conservative leader to have to give to a Conservative Front Bench; do not get hooked on any dogma. He did not of course put it as crudely as that, but that message was plainly there. Do not get hooked on any dogma, and certainly not on the dogma of monetarism.

The truth is that because this is a Conservative Front Bench it is not really hooked on the dogma of monetarism, except when it is convenient to use that dogma to refuse to do things that it does not want to do. The Government are a very interventionist government. When they feel like it they forget all about their monetarism and they decide to spend—I am extremely glad they did and that they continue to do so—over £2 billion on training schemes which they consider should be financed. They did not do that in the name of monetarism, but because they had the sense to see that it needed to be done. We should not be fooled by this talk of monetarism as the reason why the Government cannot adopt policies that have been urged on them from all quarters of the House. They will not intervene to do things which they are being urged to do because those are not the things they wish to do; it is not because of any dogma to which they consistently subscribe. So let us get that right out of the way.

Everybody speaking today in your Lordships' House has spoken about unemployment. Indeed the noble Earl, Lord Gowrie, in opening the debate, himself spent a great deal of time speaking about unemployment. It will not surprise your Lordships that I believe this is the issue to which we and the Government should be paying the very greatest attention. The noble Earl, Lord Gowrie, told us, and the Chancellor told us last night, that there will be some money to spend, about £1½ billion to give away in tax reductions. May I urge the Government not to think that this money is best spent in the interests of improving the employment position and the economy just by a tax give-away?

I believe that it is desirable—I agree with the noble Earl, Lord Gowrie, though not entirely for the reasons he gave—that it is very important to take more people out of taxation altogether. It is absolutely ridiculous that when a man moves into employment at a level of pay full time which practically no adult man in this country receives, he moves into a marginal tax position of virtually 40 per cent., if one adds together income tax and social security contributions, which one must do because that is simply another tax. It might be very much more sensible if social security contributions were treated simply as another tax. I entirely support the idea that more people should be taken out of tax altogether and we could then take a step towards the removal of the poverty trap.

Where I did not go along with the noble Earl, Lord Gowrie—if I understood him correctly—was when I think he said that this in itself would be the greatest contribution to getting rid of unemployment because it would lure more people back into employment. That is saying that a great many people refuse to go to work because of the poverty trap. No doubt some do, and I am sure it would have a marginal effect on the level of unemployment, but it would be only marginal and would not be the major contribution which I understood the noble Earl to say he believed it would make.

Having raised the question of the threshold of taxation, may I also put in a plea once again for the possibility of an additional step in tax levels? Why do we have to go straight into 30 per cent.? We used to have a lower starting point of taxation when people began, and we abandoned it. I have never understood why that was so. I was under the impression that it was because the Government would not stand up to the Inland Revenue. Whether that was true or not I do not know, but if it was true, it is about time that the Government's capacity to stand up to nearly everybody else was extended to their capacity to stand up to the Inland Revenue.

But once that is done why is it necessary to say that everybody at every level of tax has to benefit from that increase? I have never understood why, if the starting point of tax is raised, it is not possible to adjust the points at which further taxation increases take place. One does not have to make people at a higher tax level better off just because people at a lower level are taken out of taxation altogether. Adjusting a point at which the tax changes take place can theoretically have a perfectly neutral effect on the total tax take.

I urge the Government not to give tax reliefs to people at higher levels just as a consequence of trying to take people out of taxation altogether. Instead, the money should be used for sensible job creation for two major reasons and in at least two directions. The first direction surely should be—as other noble Lords have said and as we from these Benches have said again and again—in capital investment in the infrastructure. There is a great deal of work here calling out to be done. It would have an immediate impact on the construction industry and that would have a multiplier effect on other industries. In addition, these are expenditures which sooner or later will have to be made. If one saves on consumption, the money saved does not have to be spent at a later date, but if one saves on capital investment, one is only postponing the evil day and having to spend more when the time comes. This is the tremendous difference between money which will have to be spent for capital investment and money which is spent on consumption.

However, perhaps I may put in a plea for some Government expenditure on the most essential down-to-earth services such as home help services which have been absurdly restricted in many parts of the country and which are an extremely economical use of public money. They keep in their own homes people who would otherwise have to be taken into extremely expensive institutions.

We on these Benches have always understood the importance of controlling inflation and not spending a great deal of money if it would lead to an increase in inflation. But if £1½ billion is to be given away, I would add my voice to those who have urged that a minimum amount of that money should be used for relief on taxation and a maximum amount should be used for job creation, especially in capital infrastructure. I say this for two reasons. The first is that whatever the Government succeed in doing in improving the condition of the economy, there is no doubt that many of the long-term unemployed will not be drawn back into employment. The nature of the jobs which are to be created is not such that many of those who are in the ranks of the long-term unemployed will be able to take them. This is the hard core of the unemployment problem, which is growing worse all the time. And it is growing worse because of our neglect of training in the past which has resulted in a swollen number of people in our labour force who have no skills and competences to sell and who are not going to acquire them in the time that is available. Unless there is job creation, we shall remain (whatever happens in the economy) with this under-class, as it has come to be known, of people who are falling out of our society altogether. The case of job creation to meet the needs of those people is surely very strong indeed.

A second and quite different reason why we need job creation at this time is as a complement to the youth training scheme. I am a very strong supporter of the youth training scheme. I believe it should be further developed and extended; but it still has to prove itself in the eyes of the public as a whole. People have to be convinced that the youth training scheme is going to lead to jobs at the end of the training programme. If it does not do so, the confidence which, I believe, is slowly building up in the youth training scheme will be dashed. Unless youngsters coming off the training courses get into jobs, even if it means that the Government have to take special steps to see that they do so, then the whole concept of the youth training scheme, which is vital to our future recovery, is going to be seriously undermined. Money spent on job creation for this purpose will be money very well invested.

It is, however, important—I do not think that much stress has been put on this and I confess that I have not been into every speech during this debate—to look beyond the immediate picture into the middle distance. I do not believe that we in this country are going to be successful unless we have a successful manufacturing industry. It has been fashionable to say that we are moving away from manufacturing into a service economy. There is much to be said for the development of the services, but this country cannot live on service industry except such service industry as has an export value. The invisibles, yes! But we cannot keep ourselves going on services except where they are also exports. This is because, after all, we have to buy so much of our raw materials from overseas. We need to salvage our manufacturing industry and to give every support we possibly can in the middle distance; and to start now, so that we continue to have a sound manufacturing sector which can succeed in export markets. Otherwise, we shall have a service economy, maybe, but it will be at a continually falling standard of living because in no other way can you work it out if you depend entirely on services with inadequate export success.

What can we do therefore, to salvage our manufacturing industry? Far too little has been said about the appalling fact that this great industrial nation, for the first time for decades and decades, imported more manufacturing goods than it exported. And one reason why we do not want to put all the one and a half billion into tax reliefs is that it would simply lead to an increase in imports and not into a strengthening of the economy. What can be done? I think it is disappointing that in this debate so little has been said about the need to foster manufacturing in two areas—to salvage what can be salvaged and to stengthen what can be strengthened in the old industries.

I am the last person to suggest that we should bolster up industries which have no future. But we have already seen (for example, in the textile industry) that there are sections of that industry which have found new markets and which by updating themselves can, in fact, compete. This, I have no doubt, is true in many other industries. What can we do to see that this process is fostered in every possible way? One thing, surely, is that the Government must think again about their apparently totally neutral attitude towards the exchange rate. Nothing did more damage to the British export industry than the over-valued pound; and the Government were entirely complacent about allowing the over-valued pound to continue, although it was devastating sections of manufacturing industry which was trying to export overseas.

But that is just one facet of what can be done. More than that, how are we going to ensure that we have a manufacturing industry which can really consistently compete? We have talked about trading. That is very important. But we have ducked the fact that pay is an important element. The United States, as other speakers have said, has been able to pull down their rates of unemployment without inflation largely because they have not had runaway pay increases as the economy begins to recover. We have done nothing to prepare for the effect upon pay of revovery in the economy.

I no not believe in social contracts. For the social contracts that we have had so far we have had to pay far too high a price in the contracts that have been made between the Government and the trade unions. But I believe, as it appears do other speakers, in the importance of a degree of consensus and understanding and development together through consultation of common policies. And I do not believe in this only at national level. I believe in it at the level of the plants. We must do far more to see that people inside individual undertakings understand that their success and their improved standards of living really depend on the success of the organisation.

Now we are back to the old policies that have been advocated from these Benches so often—a much greater extent of common ownership of industry and a much greater extent of profit sharing, full works consultation and participation of one sort or another so that people can at last identify with the undertakings in which they work. How I wish the noble Lord, Lord Campbell, was right when he said that we are not a divided country. But the history of so much industrial relations in this country gives him the lie. It ought not to be so but it is. Unless we take positive action to reverse that position, the minute that there is recovery in the economy we shall be faced with the old adversarial conflict in industry, and our hopes then of building up a manufacturing industry that can compete in the world will be very small indeed.

8.47 p.m.

Lord Bruce of Donington

My Lords, we are drawing towards the closing stages of the three debates that we have had on the gracious Speech and this day, of course, is a most important day in that we have been trying to deal, as best we may, with the economic and industrial aspects of the gracious Speech. First of all, I should like to offer my felicitations for the first time to the noble Earl, Lord Gowrie, on his accession to the Cabinet and generally to welcome him as a person with whom I believe it is possible to reason. I am bound to say, without casting any undue reflections on his colleagues, that I find this a most agreeable prospect and I sincerely hope that we have many arguments together. Also on this occasion, I should like to give a welcome to the noble Lord, Lord Young of Graffham, whom I have not had the pleasure and honour of meeting previously and to express the hope that he will find his office, his very onerous office, agreeable to him.

My Lords, my greatest felicitation must be offered to the noble Earl, Lord Stockton, whose maiden speech in this House today reminded me so vividly of the occasions when in another place I had the opportunity not only of listening to him but, at least on one or two occasions, even of arguing with him. The noble Earl today touched on matters of the utmost importance to the nation as a whole, delivered, if I may say so, with his usual panache, wit and charm. The House will therefore not need to forgive me if I return at a later stage to some of the observations that he made.

I think the House will agree with me generally that today we are as a nation very troubled indeed. All of us are worried, in one way or the other, not only in the country outside and in another place but also in this House. None of us is really certain as to the direction which is going to take place in our affairs; and I am bound to say that the gracious Speech really gives us very little clue as to how the Government propose to act in relation to the appalling situation, in regard both to employment and the manufacturing industries, with which we are now confronted. Indeed, it is necessary to turn to some remarks of the Chancellor himself to illuminate the rather bleak prospect that is laid before the House in the Queen's Speech itself.

I think the Government's attitude may well be summed up in the Statement that was made by the Chancellor on television on Sunday, 21st October, when he said: What the Government can do to create jobs is very, very little indeed". He amplified that statement by saying this in terms of unemployment: What we are talking about is not an economic problem but a social problem and a human problem". Those words, I would submit, provide the clearest possible indication of the Government's general intention towards the solution of what must be one of the most tragic and important problems of the age in which we are living. But that, too, has to be read in conjunction with some remarks made by his right honourable friend Mr. Tebbit on 11th October, when he said: The market system, allied with free enterprise, gives a better allocation of capital and human resources than any other yet devised". That is a plain declaration of the belief of the Government in relying virtually entirely on market forces, on free enterprise, to solve all their problems for them. But, as the Chancellor said, unemployment is not an economic problem: it is a social and human problem.

Then from the economic standpoint—and I am not questioning the desire to effect a degree of social amelioration which ought to be the Government's responsibility—there is nothing in the field of economics that they can do about it, apart from allowing the free play of market forces. I ask your Lordships to contemplate just what that really means. It means this: that for an indefinite period some 90 per cent. of the people of Great Britain are to be dependent on the caprice, intelligent or idiotic, greedy or altruistic, determined or weak, of a minority of the population who own and control the means of production or the capital resources to procure them. That is what it means: the free play of the market.

In recent years there has grown up an alleged science called Econometrics, which is alleged to interpret in statistical terms the variations that can take place in business expectations, in optimism or pessimism, confidence or the lack of confidence, as the case may be, and to produce the most weird curves and the most weird answers. But the fact of the matter is that what we are really doing by allowing market forces alone—I repeat "alone"—to determine the economic future of the country, is throwing most of our population to matters of caprice, to matters of whim, to matters of decisions which say, "I won't do this" or "I will do that", exercised by those who control and own the means of production or, as I say, have the finances to be able to procure those means. The rest of the country who are not owners in any sense, even remotely and even after taking direct participation in pension funds, and who are not remotely in control of any means of production to enable goods or services to be produced, are therefore literally to be left at the mercy of varying whims.

This means that the Government's whole weight has been deliberately thrown behind the capital interests of this country. There may be good reasons that can justify taking this step. Perhaps they are superior people and perhaps they are the real élite on whom everybody should rely; but that seems difficult to justify in view of some of the most extraordinary events that have taken place both in manufacturing industry and in banking over the last 20 or 30 years.

The fact of the matter is this—it has been realised a long time since Keynes and it was realised more particularly by the noble Earl, Lord Stockton, both when he was a Back-Bencher representing Stockton and later when he was a member of the coalition Government in the war. He knows, and I shall cite the passages to show, what an important part investment has to play, not only in unit costs but in terms of employment of resources. The noble Viscount, Lord Caldecote, put the position so succinctly when he summed up the task. He said: The task is to bring the tasks, the people and the money together". That is the task, and that is the task to which the Government should be addressing themselves; and in that investment plays a vital part. It is well known that investment in manufacturing industry in this country—I have given the figures on previous occasions and there have been plenty of opportunities to challenge them—expressed as a percentage of gross domestic product has, ever since 1951, comparing one year with another, lagged 30 per cent. below that of France, 40 per cent. below that of Germany and 60 per cent. below that of Japan.

This situation was envisaged in 1944 by the coalition Government. My noble friend Lord Barnett has already referred to the Prime Minister's habit of carrying in her handbag the White Paper on unemployment policy. By this time, presumably the Prime Minister has got past the introduction. The important point which was realised by the coalition Government was that there had to be investment and that if investment in the private sector fell short it was the responsibility of the state to invest in order to prevent violent fluctuations in public and private expenditure.

I shall give to the noble Lord just one example of what was in the mind of the coalition Government. Their White Paper stated: It should be possible for the Government to maintain the stability of public investment when private investment is beginning to fall off at the onset of a depression. This may not be enough. For the purpose of maintaining general employment it is desirable that public investment should actually expand when private investment is declining and should contract in periods of boom. There were further detailed proposals, which I could cite if I had the time, for maintaining the stability of public investment, for mobilising quickly public investment and also for maintaining consumer expenditure. Almost at the conclusion of the document paragraph 77 sets out the way in which it should be financed: The policy of steadily decreasing the deadweight debt while other forms of debt are increasing does not mean a rigid policy of balancing the budget each year, regardless of the state of trade. Such a policy is not required by statute, nor is it part of our tradition. There is nothing to prevent the Chancellor of the Exchequer in future, as in the past, from taking into account the requirements of trade and employment in framing his annual budget. At the same time, to the extent that the policies proposed in this paper affect the balancing of the budget in a particular year they certainly do not contemplate any departure from the principle that the budget must be balanced over a longer period. The noble Earl, Lord Stockton, referred also to a practice which has now become obsolete. I thought I detected a slight sense of regret when he said that in his time there used to be above the line and below the line expenditure, when tax revenue was used in order to finance current expenditure and when capital expenditure was funded by savings. The policies which were followed were, by and large, quite successful. Even the noble Earl, Lord Gowrie, referred to the good times.

The fact is that in the years immediately following the war the Government which I had the honour to support overcame the transitional difficulties far more easily than was anticipated in the coalition White Paper. The policies broadly set out in the coalition White Paper of 1944 were, with varying degrees of emphasis, carried out after the end of the 1939 to 1945 war. When Labour Governments were in office there was a tendency to seek to proceed faster and to seek to attain, quite lawfully, the commanding heights of the economy in order to enable the economy to be more efficiently run. When Conservative Governments were in office there was a tendency to go slower in order to protect capital and establish what they termed a property-owning democracy.

Those policies continued until 1974. It is quite true that from time to time there were periodic balance of payments difficulties. As my noble friend Lord Barnett pointed out, every now and again a rein-back was needed, but by and large those policies were successful until, as the noble Earl, Lord Stockton, pointed out, the quadrupling of oil prices in 1974 created turmoil in industry and commence throughout the world, caused rapid price and wage increases and also gave rise to very considerable difficulties in industrial relations, not only in this country but in other countries of the world.

So far there can be little dissent with my interpretation of the record. What happened next is very important. My view is that equilibrium on the basis of the Keynesian policies set out in the White Paper of 1944 could have been re-established—with difficulty, perhaps—and today we could be proceeding with the same kind of policies, with their central aim of full employment.

The noble Earl, Lord Stockton, was very careful to point out that one of the highest priorities—he put it as the second highest—was the maintenance of full employment. The policy of successive governments in varying degrees, right from the coalition White Paper of 1944—which I had the opportunity of reading while I was still in the services 40 years ago—was to put people before property; to make full employment the aim of government policies. That was the undertaking given to the forces during the war. Some of your Lordships were only boys or girls then, but the noble Viscount, Lord Whitelaw, will remember it very well indeed.

That was the undertaking. It was going to be a new world. No longer were the people of the United Kingdom to be subject to the same free enterprise, laissez-faire uncertainties and mass unemployment which they had experienced before the war. The production of employment and the continuance of full employment as a main objective of government policy remained until the introduction of the Thatcher Government in 1979. The moment the Thatcher Government came to office, full employment as an objective of policy was abandoned. Indeed, there are many instances when that has been formally expressed.

Since 1979, there has been an abrupt reversion to the completely discredited policies of the inter-war years, and complete and uncritical backing for the aims of capital expressed as an interest in this country. This has been accompanied by the statement—the ridiculous, arrogant statement—that there is no alternative. However, that statement was modified a little this last month, when the Prime Minister was recorded as saying, I know of no alternative". This marks a slight but perceptible shift.

In the meantime, because of the adoption of a laissez-faire policy and because of the abandonment of all the principles which since 1945 have—with the occasional setback—been successively put into operation in the United Kingdom large sections of British manufacturing industry have been decimated. Production is still 13 per cent. below the level when the Government came into office.

The public assets belonging to the nation as a whole have been sold or dismantled, mainly for the benefit of a small minority of the nation. Only 1.3 million individuals in the United Kingdom are wealthy enough to own shares. The rich have got richer and the poor have got poorer. Unemployment has reached a total of approximately 4 million, including 1½ million people under the age of 25. There are now approximately 4½ million people on supplementary benefit.

It is in that context that we might review what the noble and learned Lord, the Lord Chancellor, had to say about this matter in a rather surprising intervention at the conclusion of a debate on home and social affairs. When I read his words in Hansard, I could hardly believe my eyes. This was what was said by the noble and learned Lord, the Lord Chancellor—a responsible person in a Conservative Government, a member of the Cabinet, and one of the senior Law Officers: We are not living in a world where there is a gap between rich and poof".—[Official Report, 8/11/84; col. 202.] As an utterance of stupendous stupidity and insensitivity, I have yet to meet its like. There are many people in the Conservative Party, in the Conservative Government, and who are Conservatives outside those organisations, who are good, kindly and compassionate people. But we are getting a little tired of the carefully-elocutioned declarations of concern and crocodile tears of compassion coming from those who are not always familiar faces in the House.

What we want now, and what the country is looking for, is some action on the lines suggested by the noble Baroness, Lady Seear, by the noble Viscount, Lord Caldecote, and indeed by the CBI itself. There must now manifestly be some capital investment by the Government in the infrastructure of this country, in the construction industry, bearing in mind that a house, a warehouse or a factory is the end product of 100 different manufacturing trades and that the impact of that could be immediate. I have no doubt that this will be passed over on the basis that it has all been said before. Over the next few months it will be said again and again, whether or not the mathematics of the noble Viscount, Lord Massereene and Ferrard, are capable of sorting themselves out in the meantime.

I do not envy the noble Lord, Lord Young of Graffham, in winding-up this debate, because, of course, he is bound to expatiate on the new measures for training, which are indeed very welcome on this side of the House, and we shall give him support, as I am quite sure will the noble Baroness, Lady Seear, and those who sit with her, in bringing them forward. But we still have to bear in mind, as many noble Lords have said—the noble Lord, Lord Campbell of Alloway, touched on the matter—that these measures do not produce jobs at the end. What they will have the effect of doing, however, as the Financial Times pointed out recently, is conveniently to reduce the number on the register, and therefore the number of registered unemployed will decrease.

I trust that the Government will not seek to take advantage of the cosmetic effect of this, because we on this side of the House, and indeed noble Lord in parts of the other side of the House, will certainly mark this well. We therefore acquit the noble Lord, in view of his recent appointment, of any responsibility for the inaction in the economic and industrial field of which the Government are guilty. They will not be able to expiate their guilt until and unless they act more within the spirit that animated the Governments presided over by the noble Earl, Lord Stockton.

9.17 p.m.

The Minister Without Portfolio (Lord Young of Graffham)

My Lords, I rise this evening with some trepidation to sum up what is a first major debate on this subject, and my trepidation is, I fear, all the greater, for I feel rather unfit to compliment my noble friend Lord Stockton on his maiden speech. I have probably had as many hours in this Chamber as he has had years in Parliament, but I think that I can speak for the whole House in saying to him how much we appreciated his wise words. The overriding impression they have left on me at least, if I may say so without upsetting any of the noble Lords here this evening, is that his was the most forward-looking speech to grace this debate. Now that he has actually broken his duck, perhaps I may say that I have in my short time in this Chamber heard another noble Lord, fully 10 years his senior, make at least one speech and ask a number of questions, and I hope that we may have the opportunity of hearing also from my noble friend many times in the months and years to come.

I have enjoyed this debate, because it has been a particularly valuable opportunity to consider the fundamental economic policies being pursued by the Government. It is also an opportunity to offer an explanation or two and perhaps to dispel a few myths, some powerfully propagated this evening by the noble Lord, Lord Bruce of Donington. But one statement of his from which I should not wish to dissent is in regard to the White Paper so favoured now by the Prime Minister and seemingly so popular this evening—the proposition that public investment should well contract when private investment expands. It is a theme to which I hope I may return in a few minutes' time.

I must say that as I listened to the noble Lord it brought back some memories of my youth. I presume that the phrase, "commanding heights of the economy", referred to the nationalised industries. I must say that they were mere foothills by the time that I came into government in 1979.

A number of noble Lords raised concerns about the effect of the Government's spending plans in relation to the economy generally and in relation to particular industries and particular needs. I make no apology whatsoever for the fact that this is the third successive year that the Government have held the planning total for public expenditure to the level announced in previous plans. This is no more than good husbandry.

The vital importance of keeping public expenditure under control cannot possibly be overstated. The Prime Minister said at the Guildhall last night that public expenditure was about one-third of GDP when the noble Earl, Lord Stockton, was Prime Minister in 1959. By 1975–76 it had reached almost 46 per cent. No one now doubts that that increase had to be halted if the economy of this country were once again to prosper.

Now, I am glad to remind the House, public expenditure is on a declining trend, particularly if the exceptional impact of the coal strike is ignored. The estimated outturn for 1984–85 is about 42 per cent. The following year, our plans imply public spending at about 41 per cent. of total spending. But no economy is more difficult to manage than during a period of contraction of government spending. Within that difficult process, the Government have protected the important social programmes.

I started this evening by talking about myths. In education, expenditure per pupil in this country is at record levels. It has increased in real terms since 1978–79 by 16 per cent. in primary schools. It has increased since 1978–79 by 8 per cent. in secondary schools. Pupil-teacher ratios generally now stand at their best level ever.

In the health service, the provision for health spending in England in 1985–86 is over £14 billion, which is 1.4 per cent. more than the figures in the 1984 White Paper. Expenditure on the health service alone has risen by 17 per cent. in real terms since 1978–79. We have 12 per cent. more doctors and 13 per cent. more nurses than when this Government came to office. Even in the arts—and no doubt my noble friend Lord Gowrie had some part to play in this—central government spending has also risen in real terms since 1979.

But it is not this Government's policy just to spend more money. It is this Government's policy to ensure that we get better value for money. The fact that public expenditure is now under control, although it is still too high, is one of the key factors behind the fact that we are now into the fourth year of economic recovery.

A number of noble Lords—for example, the noble Lord, Lord Kaldor—questioned the strength of our economic recovery. I should like to remind him that the average annual growth in GDP between 1981 and 1985 is forecast at a healthy 2¾ per cent. per annum. That compares extremely well with the rest of the EC, and it includes the effect of the coal strike. Indeed, for next year, the United Kingdom is likely to show one of the fastest growth rates in the whole of the Community.

I believe profoundly that the key to that success has been our anti-inflation policy. Inflation was about 12 per cent. in 1981. It is now below 5 per cent., and next year it will be about 4½ per cent. That is good, but not, I fear, as good as the example set by my noble friend Lord Stockton during the course of his administration. While he was Prime Minister the annual rate of inflation was about 2 per cent. Indeed, that is the very reason why interest rates were in the region of 4 to 6 per cent. For someone who was out in the commercial world in those years I can remember the real sense of shock when interest rates in the middle '60s started to go above 6, 7, 8 and 9 per cent. as inflation rose. I suspect that when we get inflation down to those levels again and interest rates follow, so will full employment.

A number of noble Lords, including my noble friend Lord Caldecote and the noble Lord, Lord Barnett, have stressed the importance of investment. I agree with them. But I think I should remind them and this House that fixed investment across the whole economy is likely to set a post-war record in 1984 of £45 billion at 1980 prices. At current prices, that is something close to £55 billion. That is 7½ per cent. higher than last year, and we expect it to be higher still in 1985. This is a consequence of the reduction of inflation.

Of course, there is some change in the split between public and private sector investment. That is only to be expected in view of the success of the privatisation programme and the changed relativities and priorities between the public and private sectors. But that is all to the good. Private investment has to be self-supporting if it is to continue. Private investment has to produce a real return.

A number of noble Lords (for example the noble Lord, Lord Diamond) referred to particular projects or particular industries to which they would like more public expenditure to be committed. The noble Lord, Lord Bottomley, even referred to the National Enterprise Board. My first two or three years as a civil servant in the Department of Trade and Industry were closely concerned with the results of some of those investments. I suspect, without much fear of doubt, that on this side of the House we would rather see investment proceed in those organisations which have to stand up and pay the full cost than in those inspired by the public sector, which somehow never seem to make their full return. The Government are not opposed to investment in the public sector but that investment, as the CBI said only last week, must yield a proper return.

The sheer fact is—again to dispel a myth—that the Government's record on investment is a good one. Take, for example, roads and railways. Spending on trunk roads this year is 12 per cent. higher than it was last year. Since 1979, 400 miles of trunk roads have now been completed; and earlier this year, in July, we announced the electrification of the London to Edinburgh East Coast main line at a cost of some £300 million. Take sewers—again a favourite topic. The current investment programme provides for about £800 million to be spent in this particular year. Thus I believe that on every major count—public expenditure, inflation, growth and investment—the economy is sound and the economy is on course.

Of course—the noble Lord appears amused—concern over unemployment must remain. But that concern is no prerogative of any party; it is no prerogative of any Government. The concern that has been expressed today in your Lordships' House is a concern that is expressed up and down the land. It is a concern that is shared not only by the Government: it is a concern that one who has spent two and a half years of his life working for the Manpower Services Commission, travelling up and down the land and seeing the waste produced by unemployment, cannot but also share. But employment, and unemployment, again, are one of these myths. In a society in transition—which is ours—with six million job changes occurring a year, the majority of the unemployed are in transition, with days weeks or months between jobs. They are perhaps the out of work. The real unemployed are the long-term unemployed: 1.2 million today, 60 per cent. of whom are manual unskilled, clearly out of their time for tomorrow's jobs. That is why I am glad that the Manpower Services Commission is now adding a retraining element to the community programme—a programme that is working very hard and, I believe, very successfully towards returning to the world of work those who have been out of it for some time.

But it is not enough just to concentrate on unemployment. We should really look at employment. What is not widely appreciated is that employment in this country has turned a corner and is now on the way up. My noble friend Lord Gowrie referred to 300,000 more people in work between March 1983 and June 1984. But what is not often appreciated is that even today in this country we have a bigger percentage of our population of working age employed than has either Germany or France. In fact, over 66 per cent.—two-thirds of the population of working age in this country—is in employment.

Since 1979 there has been a rise of more than 10 per cent. in the number of self-employed people—now more than 2 million. Only recently, the CBI expected that smaller and medium sized firms would continue to produce more jobs in the next five years. If we suffer from a real defect in the field of unemployment—and of course we do—it is the fact that for 20 years we had the lowest birth rate of new firms in the whole of Europe. For 20 years—a period, I may say, which ended in 1979—we had policies which did not encourage the growth of enterprise and the birth of new firms.

Of course, many of the jobs which have been created in the last year or 18 months are part-time. But all our jobs are part-time compared with the hours that our forefathers worked. I make no apology for part-time jobs. Many in our society, and many women—we have, I think, the largest percentage of working women in the whole of Europe—want to work part-time. It helps to make the labour market flexible, and can only be encouraged. Many of these jobs are in services. I have no apologies for that.

Of course, manufacturing industry continues to be important in this country. But if we look at United States experience, we see that there now only 21 per cent. of the employed work force is working in manufacturing. We have 28 per cent. What is clear and undeniable is that, as the years pass and we move into the next century, fewer and fewer people will be employed in manufacturing, making more and more goods. It is the wealth that they produce that is going to support the vast growth in our service sector jobs in this country.

Since we are still on the question of myths, I should perhaps say a word about the United States and about President Reagan. The United States of America, in this last year, had a deficit that has just come up to 3.1 per cent. of its GDP. In this country ours has come down to 2.8 per cent. A year or 15 months ago the two were the same. If your Lordships think that that differential is enough to encourage the vast outpouring of jobs in the United States, I fear that it is a conviction that I do not share.

But none of this playing with figures mitigates our concern about unemployment. I hope, however, that it puts it into context. There are new jobs being created. But they are not being created fast enough at the present time to keep pace with the growth of our working population. The reason for that is not least that real wages in this country continue to grow faster than the underlying rate of productivity increase.

But this Government are concerned. We are currently spending over £2 billion on a range of measures to improve training provision and to help the unemployed back to work. The youth training scheme, as I said in your Lordships' House a short time ago, only in its second year is well on its way, I think, to changing for all time the way that we regard the transition for young people from school to work. Of course, we are looking at ways of making those measures more effective. To that end, only yesterday my right honourable friend the Secretary of State for Employment announced some changes in the programme. But I should like to stress one fact. These measures are investments. They are the real capital investments in this country—investments in people, in helping people to maintain, improve and exercise their working skills, helping them to remove obstacles to better functioning of the labour market. In that way it is an investment that fits into this Government's overall economic policies.

Two elements of my right honourable friend's statement are of particular importance. The Enterprise Allowance Scheme is highly successful. Since it was announced, 55,000 people have gone to work for themselves—all unemployed for more than 13 weeks. The changes announced yesterday mean that the Manpower Services Commission will be able to increase its programme by 25 per cent. Twelve hundred and fifty new entrants each week will work for themselves. How well does that work? The facts are that, after 18 months, 70 per cent. of the businesses supported are still trading—six months, that is, after the allowances had stopped. For every 100 people established under the scheme, 50 more jobs have been created.

Secondly, the Government have endorsed proposals for the Manpower Services Commission to extend the scheme in which I have some paternal pride: that is, TVEI—the technical and vocational education initiative. I hope that every single local education authority in the land will be able to come forward and bring into their own school system, in ways which are suitable to them and to the needs of their own people, vocational and technical courses that will help to repair some of the harm done during the 1950s, the 1960s and even the 1970s in our educational system, in bringing young people out into the world of work with the attitudes and approach and, yes, the skills that are at least the equivalent of their contemporaries in other countries.

I hope I have dealt with the major economic points mentioned today. There are a number of other points which I should like to raise. If I may say so, I am grateful for the agreement of the noble Lord, Lord Barnett, that there is indeed a correlation between wages and jobs. I am also grateful to the noble Lord, Lord Diamond, for the observation that pay in relation to output is the critical factor. If only they had been aware of that in the 1970s, would not our problems be all the less today? And if they had persuaded their colleagues, then perhaps many of our problems today might not have occurred.

A number of noble Lords, including my noble friend Lord Stockton, the noble Lord, Lord Rochester, and the right reverend Prelate the Bishop of Southwell, have referred to the current coal dispute. No one more than this Government wishes an early and reasonable settlement. No one on this side of the House doubts that the coal strike is causing great harm, not only to the miners themselves who have never been given the opportunity of voting on this dispute in a secret national ballot; there is also the harm and damage it does to the employment prospects of many others. I should like to correct the right reverend Prelate. Nottingham did vote, as I recall, and voted overwhelmingly against the prospects of a strike. This dispute must surely rank as one of the most unjustified, senseless and self-defeating of modern times, with the uncompromising demand by the NUM executive that no pit should be closed on economic grounds regardless of the scale of losses being made. Over 5,000 miners have returned to work in the last seven working days. Denied a vote by their union, they are voting with their feet, despite all the pressures—violent picketing and intimidation. I suspect that too little was made of that intimidation in your Lordships' House this afternoon.

The noble Lord, Lord Rochester, raised the question of employee involvement. This is, of course, a matter for my right honourable friend the Secretary of State for Employment, and I will draw the noble Lord's remarks to his attention. However, the Government's general position, as the noble Lord will know, is that we believe strongly that employees should be informed and consulted about matters that affect them; but this is best achieved by a voluntary approach.

The noble Lord, Lord Taylor, referred to the question of expenditure on regional programmes and on the Scottish Development Agency. As regards regional policy, the noble Lord will be aware that an announcement on this subject will be made shortly. I am sure that he would not expect me to anticipate that announcement. I am advised that the Scottish Development Agency's budget for 1985.86 has yet to be firmly determined. But the noble Lord is as aware as I am that today in Scotland more people are employed in electronics than in ships, steel and coal put together. Indeed, Scotland has a supreme virtue, and one which he might perhaps appreciate, of putting R and D together with the R and A. There are many who go to Scotland and who are employed in electronics today who are attracted by the many advantages of working there.

I am grateful to the noble Baroness, Lady Seear, for her revelation that this Government are not monetarist. I have been in it, perhaps only as a civil servant, since 1979 and I was never under any illusion. Indeed, with the PSBR that the Government consistently run, they could never have been a monetarist Government. But we believe in good husbandry, and I hope that we shall always do so. It is important that we ensure that, whatever expenditure the Government enter into, it is expenditure that will help towards real return and will not be a waste of actual resources. I hope that the expenditure which the Government have entered into in the youth training scheme, for example, is one which the weeks will show will lead more and more to young people going into jobs.

We have had an interesting debate and I do not wish to detain the House for more than a moment or two longer. However, several noble Lords have been kind enough to refer to my own role in helping to bring about improvements in our economic performance. I hope that my role will be a very broad one. But, to describe it in one sentence, it is about removing barriers—barriers to the employment of young people, particularly the 14 to 18 group; barriers to the growth of small firms (and looking at the growth of small firms is, I believe, the way ahead for employment in this country); barriers to the development of enterprise, competition and deregulation initiatives. I have no magic wand to wave. There is no single, simple answer. Nor do I believe that one is needed, because I believe firmly that we are on the right road. My contribution will be simply to help my colleagues remove one or two of the obstacles that we may find along that route.

We have heard a great deal in this House about consensus. We have heard a great deal in this House about compassion. I, for one, have spent many years in the business of consensus. What else was the Manpower Services Commission? I, for one, would defend to the end this Government's sense of compassion. But I do not believe that consensus or compassion are substitutes for soft options. I believe that there are decisions that have to be made. This Government are as concerned as any to return to full employment. We shall follow the path that we have to follow until in the end we will let loose the spirit of enterprise in the land and return, I hope, to fuller employment.

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

Bournemouth Borough Council Bill [H.L.]

London Transport (Tower Hill) Bill [H.L.]

Nottinghamshire County Council Bill [H.L.]

Hereford City Council Bill [H.L.]

Worcester City Council Bill [H.L.]

The Chairman of Committees acquainted the House, That (pursuant to the Resolutions of 30th and 31st October) the Bills had been deposited in the Private Bill Office together with the declarations of the agents; the Bills were presented, read a first time, passed through all their remaining stages pro forma and sent to the Commons.