Unemployment

HL Deb 25 November 1992 vol 540 cc960-1031

3.5 p.m.

Baroness Turner of Camden rose to call attention to the case for a strategy to reduce unemployment; and to move for Papers.

The noble Baroness said: My Lords, it gives me no pleasure to address this House once again on the subject of unemployment. We on this side of the House have always endeavoured to make sure that unemployment and its consequences have been brought to the attention of your Lordships, but we are now in a truly crisis situation.

We are all aware of the problems facing the coal industry. The issues have been debated in this House and the Government were defeated when it came to a vote here. The Government betrayed their insensitiv-ity by agreeing to the closure of 31 pits and the loss of a minimum of 30,000 jobs without apparently realising that so massive an attack upon a great industry, employing thousands of people either directly or indirectly, would result in a public outcry which would include numbers of their own supporters. undancy notices despite the inquiry, and some pits are already closing.

There are still major problems arising from the policies that have been pursued in regard to energy by previous Conservative administrations, but the coal industry debacle simply adds to current and prospective miseries. The recession is now affecting everyone and all industries. One in 10 of the UK population is now without employment. Major industries are in crisis. The building industry is said to have lost 450,000 jobs in the past decade, and the Building Employers Confederation has been forecast-ing more job losses —perhaps as many as 50,000— despite the measures indicated in the Autumn Statement, to which I shall return later. The Engineering Employers Federation has predicted further job losses, in addition to the 110,000 lost this year.

Thousands of employees in banking and in insurance will be facing redundancies in the coming months. According to the press, 25,000 jobs are likely to go in banking. I can well remember when a job in banking meant, if not a job for life, at least reasonable security—but no longer. Exceptionally, adverse claims experience, plus the knock-on effects of recession, have had a disastrous effect upon sections of the insurance industry.

Ford and Lucas have both intimated that there will be widespread redundancies. Industries that were once great local institutions are now facing difficulties and sometimes closure.

What is happening in the aerospace industry (and in the defence industries generally) is of crucial importance. The unions with membership in these industries tell me that the situation is very serious. The defence industries, they say, are collapsing. Over 120,000 jobs have gone since June 1990.

But it is not only about jobs. Technology vital to the UK's manufacturing future is in danger of being lost. This is a very highly skilled workforce. An enormous amount of Ramp;D is tied up in the defence industries. Everyone welcomes the end of the cold war, and there was much talk at one time of a "peace dividend", but there has to be a diversification programme. The unions have called for the creation of a new defence diversification agency but, for this, government leadership and support are required and neither has been forthcoming so far.

During the past week we have had the shock announcement of possibly 5,000 jobs going in British Rail. I should have thought that both Underground and railway staff had been reduced to the point where they are scarcely visible—to the point where further cuts were neither conceivable nor desirable. But the Government seem intent upon their privatisation programme no matter what. There seems to have been a reprieve as far as the projected industrial dispute is concerned (and everybody must be grateful for that), but the problems have not disappeared.

The Government's privatisation policies in the Civil Service also are likely to result in more redundancies. Again, that was an area in which a degree of security could once have been anticipated by the people working in it, but no longer.

In this recession, everyone is affected. It is hardly surprising that in this situation people who do have a little money are not spending it. Even those who still have jobs are frightened of losing them. We had a debate in this House recently about small businesses. Where are these small businesses to get their customers when those they once had are trying to survive on unemployment pay and there are no new customers in sight? Bankruptcies continue at an increasing rate, bringing tragedy to numbers of people who have invested their savings—and sometimes their redundancy pay—as well as their energy and enthusiasm in what they thought was an entrepreneu-rial culture. But they have not been able to cope with the recession. They have simply gone under.

I am sure that I do not need to tell the House that for most people unemployment causes total disrup tion of their lives and often brings ill health and the break-up of families. Encouraged into the housing market in the 1980s during the so-called boom years, many find themselves, if not repossessed—and that has happened to far too many people —saddled with what is euphemistically called "negative equity". They cannot afford to continue living in houses they bought during the credit boom and the houses are unsellable at the prices originally paid, so they cannot even trade down. All this is creating despair among people who would not normally have expected all this to happen to them. For the first time in their lives many are having to come to grips with the intricacies of the social security system and a desperately worsening life-style.

It is surely clear now that the so-called successes of previous Conservative administrations have been illusory. The target was low inflation at all costs—zero inflation eventually. Everything was to be left to "market forces"—there was to be no government intervention—and a far reaching privatisation programme was embarked upon, which is apparently still very much the objective. Perhaps the greatest folly of those years was the neglect of manufacturing industry. Without a strong manufacturing base recovery is bound to be slow; and if and when confidence does return there is the danger that imports will be sucked in with further damage to our balance of payments. We have now had the Chancellor's Autumn Statement, and although there are welcome signs that the Government are departing from some previous policies, it scarcely justifies, in my view, the praise heaped upon it by certain members of the party opposite. A certain Member in the other place may have described the Chancellor as "Franklin D. Lamont", but the measures enunciated scarcely amount to a New Deal.

So what do we think should now be done? Clearly, there are no easy, short-term solutions, but first let me say what I think should not be done. The Government still seem determined to make the poorest pay the price. While I was relieved that social security benefits have in the main escaped the axe this time, I am appalled that the Government still seem to think that the creation of a low wage economy in the UK will somehow assist in ending unemployment.

The Government intend to abolish wages councils altogether. The councils have given at least some protection to poorly organised workers in a number of industries. Many of these workers are women from ethnic minorities who, without some kind of protection, will be totally vulnerable to exploitation. If all protection is removed from low paid workers, the rest of us will be subsidising exploitative employers through family credit and other social benefits. I fail to see why we should do that. It will not assist the unemployed or anyone else if the Government proceed with the creation of "sweatshop Britain".

Then, again, public sector employees are to have to take a wage cut, for this is what a ceiling of 1.5 per cent. means in real terms. Privatisation has meant that public sector employees no longer have the security that they once had and they remain poorly paid relative to the private sector. The Government may find that this policy is no more popular with the public than the Coal Board's attitude to the mine workers. The public sector includes people like nurses and fire fighters, who are generally highly regarded and certainly not overpaid.

The cut in interest rates is of course welcome, but it comes too late and in the opinion of many is insufficient to provide the stimulus so badly needed. One hopes that the capital projects envisaged will help the building industry, although the industry's leaders so far do not appear to think that what has been done is enough. In particular, there needs to be a Europe-wide initiative to invest in growth and to deal with unemployment. The unions and employers at European level have been co-operating to lobby for a change of policy to boost jobs and output. The UK should welcome Jacques Delors' plan for a major programme of infrastructure projects and one would hope that the UK presidency, which does not seem to have won many plaudits so far, would regard this as a worthwhile and important initiative. I shall listen with some interest to what the Minister has to say about that.

In the EC there is at least an acceptance of the fact that unions can play a positive role—hence the use of the term "social partners" to describe them. The UK Government, however, who must by now be the most anti-union government in Europe, still intend to proceed with another trade union Bill which is quite irrelevant to the UK's current economic needs and will be seen by the unions as yet another attempt to make their continued existence as difficult as possible. Support of the unions and their members is necessary if there are to be co-operation and consensus to pull us out of the recession and its attendant miseries. Co-operation is necessary in regard to a training programme, which everyone agrees is absolutely necessary for our future.

I should like to draw attention to the industrial strategy document issued this week by the Engineering Employers Federation. The EEF stresses the need to rebuild our manufacturing base in the way that I have already stressed. It says—and I agree—that the UK is an industrial nation with an anti-industrial culture. It points out that the 1980s saw a vast expansion of banking and financial services, accompanied by a shrinkage in the UK manufacturing base. It says—and I absolutely agree—that the UK manufacturing sector is now too small. It urges the Government to adopt a comprehensive strategy for manufacturing industry, which includes extending capital allowances for plant and machinery permanently to 100 per cent., support for technological development and the establishment of interdepartmental task forces, including representatives from industry and financial institutions, to identify priority and long-term infrastructure projects.

The EEF has understood that there must be co-operation between the financial services sector and manufacturing industry, as happens in other countries normally regarded as having successful economies. It believes that a government initiative would help to bring that about. It may seem strange that I, as a trade union official, should come to the Dispatch Box to praise a document from the Engineering Employers Federation. However, I commend this document to the Government because it sets out many things which I believe are sensible and in everyone's interests.

I hope that the Government will consider the advice being offered. The situation is very serious. No one pretends, least of all those of us on this side of the House, that there are any quick-fix solutions. However, I wish that the Government and some of their supporters would not talk as though the recession were some kind of natural disaster for which they and their predecessors have no responsibility. In fact, what we are now witnessing is the result, as I said earlier, of previous mistaken, ideology-driven policies. Similar policies have been followed, admittedly, in other parts of the world, but they are increasingly seen as misguided. They have consisted of a belief in the supremacy of market forces, opposition to interven-tionist policies and neglect of manufacturing industry in favour of an expansion of financial services. It was never going to be possible to be prosperous on the basis of a service sector economy alone. That is now increasingly recognised.

We cannot go on as we are. I hope that the Government will now come to that conclusion and will embark upon an imaginative strategy designed to lift the UK out of the crisis and restore jobs and confidence. I do not have a great deal of hope that the present Government will take the appropriate steps, but it is in the interests of us all that an alternative strategy to the one followed for the past 12 years is adopted.

Finally, perhaps I may say how gratified I am to see that a large number of noble Lords have indicated their interest in this subject by putting down their names to speak in the debate. In particular, I look forward to listening to the maiden speeches of my noble friend Lord Ewing of Kirkford and the noble Earl, Lord Attlee. My Lords, I beg to move for Papers.

3.20 p.m.

The Parliamentary Under-Secretary of State, Department of Employment (Viscount Ullswater)

My Lords, the noble Baroness, Lady Turner of Camden, has chosen an important topic for debate. I welcome the opportunity to outline the Government's strategy to reduce unemployment. First, I should like to reflect upon Britain's economic situation. That has a direct bearing on employment.

Our economy has been going through a difficult period. But this is not a localised phenomenon. No country has been immune from the effects of global economic problems. There are 17 million unemployed in the EC alone. The structure of employment is also changing. Just as there was a move from agriculture to production there is now a move from industry to services. Investment in machinery, computerisation, and robotisation have had a significant impact and improvements in productivity continue to be made. Those developments are wholly desirable. Growth in output and in jobs depends upon our success in competing with the world's best. At a time of recession, however, it is harder to accept the need for change. Change is always easier when the economy is growing and when new jobs are more readily available.

Nonetheless, change has to be accepted. Government's job is to help people make the transition from one industry to another, from one job to another, and from one set of skills to another. So the underlying theme of this Government's policies is to help individuals. That is what the Prime Minister has called the privatisation of choice. What does that mean in practice? It means removing burdens that stop people getting new jobs or that destroy existing jobs. The House is familiar with the reforms in industrial relations we have already made. The United Kingdom now loses fewer days in strikes than at any time since records were first kept in 1891.

We have given the trade unions back to their members. Women and young people are no longer prevented from working when and where they wish. And the House will shortly debate further deregula-tion of the labour market when the Trade Union Reform and Employment Rights Bill is put before it. What is more, allowing greater choices to individuals does work. For example, the UK and Denmark have the least restrictive employment legislation in the European Community. Noble Lords may laugh. But they also have the highest share of their population in employment. The proportion of women working in those two countries is particularly high. What is more, partly because there is a greater diversity of work allowed, the UK is the only EC country where the female unemployment rate is below that of men.

Britain's future as a successful trading nation lies in its ability to be competitive with the rest of the world. The single market, for example, gives Britain a home market of some 340 million people. That offers both a challenge and an opportunity. I believe that British industry will rise to that challenge.

There are many signs that give me encouragement for the future. Unit wage costs have moved much closer to those of our main competitors; and manufacturing productivity is at a record high. Our interest rates are the lowest in the EC. We now have a highly competitive exchange rate. There is unmistakeable evidence of victory in the battle against inflation. This country's retail prices index inflation has been below the European Community average in each of the past 14 months, and the Government remain committed to matching the inflation perfor-mance of the best of our competitors. All that gives us a vital edge over our competitors. It will also help our domestic construction and manufacturing industries as well as exporters. It will help boost investment and confidence, and lead to more employment.

There are those who doubt industry's ability to grasp those opportunities. They are wrong. Inward investment in the car industry, for example, has helped to increase car production by over 50 per cent. in the past decade. The chemical sector grew by 3.5 per cent. per year over the decade, 1980 to 1990. As those examples show, British firms can, and do, take on the best competition in the world, and beat it.

The Department of Employment has a vital role to play in carrying forward the Government's economic strategy. That we do by helping to ensure a skilled and productive workforce; by developing a more flexible and competitive labour market; and by making sure that unemployed people have the help that they need to find jobs. The present situation is one of high unemployment and very tight public expenditure constraints. So it is more important than ever that we obtain the best possible value for money from our programmes to help unemployed people. An extensive package of new measures has recently been announced by my right honourable friend the Secretary of State for Employment. I am sure that those will be widely welcomed. They build on our existing successful programmes while widening the range of help available. Priority will be given to the long-term unemployed and to those particularly disadvantaged in the labour market. Those are the groups most in danger of being marginalised and who can benefit most from the help available. Next year we expect there to be nearly 1.5 million opportunities in all. That is a total of around 500,000 more than this year.

Those policies will bear fruit. The underlying strengths of British industry remain, despite recession. As the policies announced by the Chancellor in his Autumn Statement are put into effect, the recovery will become firmly established and the present unemployment pattern will revert to that of the decade to 1989 when employment in Britain grew faster than in any other major country.

3.28 p.m.

Lord Rochester

My Lords, from these Benches I too should like to join in thanking the noble Baroness, Lady Turner of Camden, for the way in which she introduced the Motion. She could hardly have done so at a more opportune time. We look forward also to hearing the maiden speeches of the noble Lord, Lord Ewing of Kirkford, and the noble Earl, Lord Attlee.

A strategy to reduce unemployment cannot be divorced from an overall economic and industrial strategy, and I shall approach the subject accordingly. We cannot escape from asking the three questions posed by my noble friend Lord Jenkins of Hillhead in the debate on measures needed for sustainable economic recovery that he initiated earlier this month. He asked: What about the new emphasis on growth? … Is it to be given a new priority over inflation? If so, how is that to be achieved?"—[Official Report, 4/11/92; col. 1432.] My answer must remain the one I have sought consistently to argue in the House over the past 15 or 20 years; namely, that inflation is still public enemy number one. That means that in supporting, and congratulating, the Government on their conversion to the need for additional borrowing in the short term to extricate us from the current recession and to safeguard our manufacturing base, I accept also that when the upturn comes countervailing measures may have to be taken if that proves necessary to balance the nation's books.

As to how prices are to be kept stable in the longer term, I notice that in a recent speech the Governor of the Bank of England argued that the best way of ensuring that inflation did not retard long-term growth would be to establish a national consensus requiring the Government to keep the annual rate of inflation at 2 per cent. or less. The Governor said that otherwise there would always be some who would argue that whatever the present rate of inflation, a bit more would do no harm. I find that proposition persuasive.

Only a few weeks ago, following the coal mines debacle, I thought that perhaps in the field of industrial relations at least the Government might be thinking on the same consensual lines. It was reported that the introduction of yet more legislation to reform trade unions—and I should remind your Lordships that we from these Benches supported much of the earlier legislation—was to be delayed.

At about the same time, it transpired that in contrast with the earlier decision to abolish NEDO —the National Economic Development Office—the Chancellor was to listen to the views of the TUC on how economic recovery might be stimulated. I began to think that in our present national predicament the Government, instead of antagonising the trade unions still further, might actually be considering how they could encourage management and employees to engage in constructive co-operation. In that way they could enhance employee involvement—in my view, an essential element of any employment strategy.

In his speech at the Lord Mayor's Banquet last week, the Prime Minister stressed the need for the partnership between government and industry. He called it, a true partnership for prosperity". I have to ask whether he envisages partnership as a relationship only with employers, from which employees and their representatives are excluded. To widen that concept of partnership need not involve a return to outdated notions of corporatism. Rather, it would demonstrate a willingness before taking decisions to take account of the views of all those affected by the decisions.

So far I have talked in the most general terms. As to specific measures that might be taken to alleviate unemployment, at the CBI's annual conference in Harrogate the other day I was pleased to hear the chairman of its economic committee advocating measures very similar to those suggested by my party and now accepted, at least in part, by the Government. I am here thinking of much needed short-term expenditure on such items as transport, housing, education and training. However, I do not believe that the Government's measures are as far reaching as they may appear at first sight. For example, it has been decided to allow local authorities to increase their capital expenditure on the basis of future sales of capital. But capital projects cannot be started until sales have been carried out. Those sales will have to be made at a time when the market and the prices that can be obtained in it are at their lowest.

Much the same can be said about projected expenditure on transport. Next year, that on roads allows only for the protection of expenditure already planned. An extra £130 million is to be made available to British Rail and the Jubilee Line is to be built. But this appears to be at the expense of development work on London Underground. Now we hear of 5,000 BR job losses and the prospective closure of parts of the system because of inadequate provision for mainte-nance. The basic question I have to ask, therefore, is whether what purports to be an increase in expenditure on the infrastructure is in reality no more than cosmetic.

As regards training, I am glad to see that TECs are to have more flexibility to decide how best to use their resources in line with local labour needs. I am also relieved to learn that plans for the Department of Employment provide for real growth of 1 per cent. over the planned level in 1992–93. But I am unclear as to how much of the total expenditure planned for the department will be available specifically for training. I should be grateful if, when he replies to the debate, the noble Viscount, Lord Ullswater, will say whether I am right in thinking that the training budget for 1993–94 is to be held at £2.8 billion. In real terms, that surely represents a cut of 3 per cent.

In her recent interview with The Times, the Secretary of State acknowledged that the recession has led to a shortage of places in the youth training scheme and, in her own words, that "a lot of work" has to be done to help those involved. I should stress here that I am genuinely seeking enlightenment rather than trying to score party points. I shall welcome any further information that the Minister can give.

What else can the Government do, in the face of the present torrent of redundancies, to maintain employment in manufacturing industry? The increase in capital allowances for machinery, plant and buildings, announced in the Autumn Statement, is most welcome. But I could find nothing in the public expenditure figures directed specifically towards helping the small businesses which were the subject of a debate in this House two weeks ago. I shall be interested to hear whether the noble Lord, Lord Joseph, who rightly places great emphasis on the need to encourage the entrepreneurial spirit, has any observations to make on this point.

I cannot sit down without applauding the deal on agriculture reached last week between the European Community and the United States. It is fervently to be hoped that before long there will be a comprehensive GATT agreement. More than anything else, that would improve employment prospects and help our exporters.

There is one further matter relating to the question of a long-term strategy to reduce unemployment to which I should like to refer. It could hardly be more fundamental. It is the problem of whether, and if so how, with the relentless advance of new technology, it will be possible to offer work to anything like the number of people who will be seeking it, or indeed who are now in employment. I have no answer to that basic question to put forward today, except to say that in my view it adds considerable weight to the need somehow to establish a national consensus in these matters if social stability is to be maintained in our country.

3.37 p.m.

The Lord Bishop of St. Edmundsbury and Ipswich

My Lords, the House will not want me to comment on matters political or economic or to struggle with statistics. However, I am grateful for the courtesy of noble Lords in calling me at this early moment in the debate because I believe that there are issues which the House would be grateful if I were to articulate and which underlie everything of which we speak. There are two issues, both relating to human dignity.

In this country, in the culture in which we live, the second question that a man or woman is asked after, "What is your name?", is, "What is it that you do?" The work which occupies our time is not simply, as we all know, a matter of earning ourselves our daily living. It is a matter of identifying us in relation to those around us and also to a marked degree in our relationship to ourselves. It is there that we frequently find our neighbours and our friends; it is there that we find a structure to our day. It is there that many of us find the ability to be stretched against the challenges with which our work presents us; and it is there that we find ourselves.

When a man or woman finds themselves without work—and that happens additionally sometimes when a man or woman retires—they are frequently devastated, lost, covered with a sense of guilt (unjustified guilt), shame (unjustified shame), anger, sadness and what I can only describe as a cycle of sadness. As we all know, this washes off on the family. There is nothing new about this. That is the way things have been for the whole of time. Many years ago Archbishop Temple, who was a notable supporter of the underprivileged in this country, spoke in this noble House of the unmitigated evil of long-term unemployment. In 1982 the Economic Intelligence Unit spoke of character changes that were noted in those who had been studied which manifested themselves within three months of those people finding themselves unemployed.

Current figures which are being produced by Relate, for example, refer to a 15 per cent. increase year by year over the past five years of those who seek counselling. I do not wish to oversimplify the correlation between the one issue and the other but clearly there is a connection. Most of all, we all know from our own experience what the effects of unemployment and redundancy are.

The churches, I would suggest, are in one of the strongest positions of all sections of society to be able to observe this matter most accurately, not simply in terms of noting that there are fewer faces present at the workplace, nor simply in terms of seeing more people present in benefit queues, but in terms of observing people's domestic and home lives and the effects of unemployment on people in their own homes with their own families. The churches already perform stalwart work in encouraging individuals and groups who find themselves in this situation. The churches have the ability and the perception to observe this situation clearly and it is no surprise to me that the churches' action with the unemployed—I stress with the unemployed and not for the unemployed; there is a subtle but very significant distinction there—has led them this week to initiate a call for a major commission to consider matters of unemployment.

I believe that the churches foresee the phenomenon that my noble friend referred to a moment ago which I believe is known as structured unemployment. Structured unemployment means that even as the recession lifts some jobs will no longer be available as technology advances. There is a need for a strategy to deal with that position. I hope that if a plan for a strategy is developed, the factor I have just referred to will also be borne in mind. I believe that the churches' action with the unemployed and their call for a commission are not very distinct from the terms of the Motion of the noble Baroness.

That leads me to my next point. The churches are stressing that if any study of this issue is to be carried out and any realistic, comprehensive and successful action is to be undertaken, it needs to be undertaken by people representing as broad a base as possible. Action should not be undertaken simply by government, although clearly government have their place, but by as many representatives coming from as broad a base of the community as is possible. That matter concerns the dignity of man. My first point is that human dignity and human worth are at stake in this matter and my second point is that our human dignity relates not just to ourselves as individuals but to ourselves as members of society. One of the great traditions of this noble House and another place is that we belong to each other. We are a community committed to one another. When a situation arises where one section of the community can allow itself to benefit at the cost of another section of the community, such a situation is below the standards and below the ideals of our nation. I believe and would claim that that issue is fundamental to our nature as human beings.

Therefore I would urge that any strategy that is developed is developed upon that basis, with representatives coming from as broad a base as possible and representing all sections of the community who are affected by unemployment. One could cite many examples of that but I have no wish to do so. They will no doubt be mentioned later in the course of this debate. However, I claim that one of the sectors in society which may have a voice to express which may be worth hearing and which may have a contribution to make—indeed, it has already made a contribution—is the churches themselves.

3.45 p.m.

Lord Ewing of Kirkford

My Lords, my first words to your Lordships' House today are words of sincere thanks and gratitude for a very warm and kind welcome and for all the help I have received since my introduction to your Lordships' House some five weeks ago. I have known great friendship from all parts of the House and I am very grateful for that. I also wish to thank the staff and the Officers of the House who have been most helpful in smoothing my path.

I start with a story of a theatrical friend of mine who witnessed my introduction. When I asked him what he thought of it his answer was most revealing. He said, "The set was absolutely immaculate. The script was word perfect but the players looked badly under-rehearsed". Under-rehearsed I may be in introductions to your Lordships' House but I am certainly not under-rehearsed on the question of unemployment.

I can remember vividly in 1972 when, in my early days as a Member of another place, the noble Lord, Lord Carr, in his role then as Secretary of State for Employment was very distressed on the day on which unemployment breached 1 million in this country for the first time since the early 1930s. So accepting have we become of unemployment that there are many who say, "Oh for a return to those days of only 1 million". I hope in all sincerity that I never fall into that trap. My aim in life has always been that there should be work for all. I hope that will be the aim of each and every one of us. The temptation in a debate such as this is to span over almost every aspect of unemployment. Your Lordships will be most relieved to know that I do not intend to do so because I wish to concentrate my remarks on one specific issue.

I am grateful to the noble Viscount, Lord Ullswater, for announcing to the House from the Government Dispatch Box that it is part of the Government's strategy to prevent the destruction of existing jobs. It is to that aspect that I wish to relate my remarks today. Over the past 15 years my country, Scotland, has seen some major closures beginning with the car plant at Linwood, the British Leyland truck and tractor division at Bathgate, followed quickly by the closure of the pulp mill at Corpach and the aluminium smelter at Invergordon, and followed recently by the tragic closure of Ravenscraig steelworks in Lanarkshire. Tragically, we have only one deep mine left in the whole of the Scottish coalfield.

All of those closures have one common factor; they all began with doubts being expressed about the future viability of the particular plant. Those doubts were followed by the usual three or four month period—in the case of Ravenscraig it was over a year—of rumour and counter rumour. There then followed the closure announcements. I paint that picture to your Lordships to illustrate my deep concern about the issue I wish to address for a few brief moments today; namely, the future of Rosyth dockyard.

Here again we have heard doubts expressed about the future viability of Rosyth dockyard. We have seen the rumour factory operate almost night and day as to whether or not Rosyth dockyard has a future. Let me say at once to your Lordships that it is no part of my argument, or that of the workforce at Rosyth dockyard, that the dockyard at Devonport should be closed. On the contrary, it is part of the Rosyth argument and my argument that the Ministry of Defence, in considering the future of servicing and refitting of all its vessels, both submarine and surface, should go for the dual option of Rosyth doing what Rosyth does best—refitting and servicing nuclear and Trident submarines—and Devonport doing what Devonport does best—refitting and servicing surface vessels—under one single management. I accept, and it is widely accepted by economists who have examined the argument, that the cost savings to be made in having one single management are far greater than the Treasury has yet appreciated.

Rosyth dockyard, which down the years, in war and peace, has served this country well, has an expertise which I know is widely appreciated in all parts of this House. It is almost the only organisation in Scotland at the present time which is doing any degree of skilled training. Six hundred engineering apprentices are being trained in Scotland and 50 per cent. of those 600— 300—are being trained in Rosyth dockyard. I have cause to know that. I should declare an interest in that I have a son and three nephews presently working in the dockyard, and I have long family connections with Rosyth dockyard.

Up to the present £150 million has been spent on the Trident nuclear refitting facility. It is rumoured by the rumourmongers that the Secretary of State for Defence, in making his announcement towards the end of this year, will come up with some form of shoddy compromise which keeps Rosyth open until 1996, until such time as Devonport has built up the nuclear expertise it lacks at the moment, and then close Rosyth on a slow death basis. Any compromise that is announced by the Government towards the end of this year will be judged on whether the Trident nuclear refitting facility at Rosyth is to be completed or the work is to stop. I say to the Minister—and I know that he will transmit this to his colleagues—that an announcement which puts an end to the Trident refitting facility at Rosyth will be seen as an announcement putting an end to Rosyth altogether. Your Lordships' will understand that Scotland simply cannot stand another closure of that nature and magnitude.

In those few brief moments I hope that I have said sufficient to the Government to persuade them that, on all those grounds, Rosyth should be retained.

3.53 p.m.

Lord Joseph

My Lords, I am sure that I speak for the whole House in congratulating the noble Lord, Lord Ewing, on his maiden speech. The House will have listened with pleasure to the beguiling opening moments of his speech and will have heard with deep attention the effective and, be it noted, noteless way in which he presented the case for Rosyth dockyard. I hope that the noble Lord will recognise, however, that any government face difficult decisions. He does so recognise.

I was particularly interested in what the noble Lord had to say, having sat opposite him for some years in another place. I recognise that in his career he has played a prolonged part in the co-operative movement. I have often paid tribute to the innovative part played in our economic and social life by the initiators of co-operation in this country all those generations ago. I wish that that spirit of innovation still existed and that the co-operative movement could have remained as important a part of the economy as it then was. We certainly welcome the noble Lord to the House and look forward to hearing him many times in the future.

I do not for one moment minimise the miseries which unemployment causes. Nor do I flinch from admitting the background to our present economic plight. It was a misjudgment of the overheating of the economy in the mid and late 1980s by the Conservative Government of the time. It would have been more becoming if the noble Baroness, Lady Turner, had admitted, in her catalogue of woes, that Her Majesty's Opposition had backed the judgment of Ministers in their error of neglecting overheating. In fact, Her Majesty's Opposition urged the Government to go even further in allowing the boom to continue.

I am glad, however, that the noble Baroness recognised on two occasions that there is no easy short-term solution. I have to correct one thing she said. Not for a moment do the Conservative Government want—any more than a Labour government would want—a low wage economy. It is a low unit cost economy, a competitive economy, as my noble friend the Minister rightly emphasised twice in his speech. We can have, as other countries have, a high earnings economy, made internationally com-petitive and profitable by higher productivity in services and manufacture. That is surely the aim of all in this House.

I fear that the solutions offered by opposition speakers in today's debate will tend to make matters worse rather than better. I hope that I am proved wrong. I guess, however, that they will mostly propose extra spending of one sort or another to be paid for by more taxes, by more borrowing or by cutting existing spending in some way. That is no solution whatever. It is no solution to find a job for Peter by sacking Paul. Yet to put up taxes, to increase borrowing or to cut existing government spending—desirable though that may be in general circumstances—would produce precisely that result. It would produce jobs for some at the cost of loss of jobs for others. Therefore, I would adopt a different method.

I want to spend my short ration of time on one or two suggestions. I wrote a pamphlet 14 years ago on conditions for fuller employment. Much of its analysis, I am glad to say, is now taken for granted. I acknowledge that the climate for fuller employment is a stable economy, profitably competitive internation-ally, with an encouraging tax framework and sensible safety nets. We have certainly not had stability in the last few years. However, whatever the climate—grim, as now, or benign—the number and quality of jobs will depend on one characteristic above all, namely, adaptability.

It will depend on the adaptability of entrepreneurs. The noble Lord, Lord Rochester, was right in saying that I would not fail to introduce that word. It will depend on the adaptability of entrepreneurs to see market opportunities at home and abroad. It will depend on the adaptability of designers, managers and workers to co-operate in serving that market in terms of value for money and yielding a profit to investors, who may well include occupational pension funds.

In addition to the tens of thousands of entrepreneurs who exist and are in action there are probably hundreds of thousands of potential entrepreneurs in this country. They are people who have perceived market opportunities and who would like to be self-employed and perhaps to employ others. What prevents those men and women who see market opportunities that most of us cannot see from doing what they want? Such research as there is, and there is not much, suggests that it is lack of access to money or credit to launch their particular project.

If anyone doubts that in our present economic climate there are business opportunities, let them consider the record of some immigrant groups. Research here and in the United States shows that immigrants tend to find or make jobs for themselves and their families proportionately more than does the indigenous population. During the ups and downs of the 1980s newcomers fared better than average. Why should that be so? I believe that it is because immigrant groups tend to be adaptable. In the case of immigrants it has often been adaptability both in entrepreneurship and in co-operation with entrepre-neurs.

Noble Lords may well ask what the Government can do. There is not much that the Government can do directly. I would however point out that a firm was set up decades ago by the banks called 3i. One of our colleagues in this House, my noble friend Lord Caldecote, was chairman of 3i some time ago. That company has been the midwife to thousands of new companies or the enlargement of small companies. I know that the banks have their problems, but what a blessing it would be if they set up firms on the lines of 3i in some parts of this country. In many cases very small loans would suffice. Some new enterprises would fail, and some would grow. I shall be told that banks already have branches everywhere. Yes, they do. But that did not stop the banks setting up 3i to specialise in encouraging entrepreneurship. So what can the Government do? They can talk to banks about the idea.

But adaptability is crucial in all sectors of the community eager for jobs, including workers. I note —I hope I am right—that when firms get into trouble and there is fear of bankruptcy, there is sometimes, perhaps often, a spurt of adaptability. Efforts to raise productivity or quality are volunteered in order to save jobs.

The fact is that people can price themselves out of jobs. That is, and has been, all too clear. No one can deny it. But there is another truth which is not so widely recognised. People can price themselves into jobs.

I ask why groups of unemployed, salaried and waged, in an area cannot offer their services to existing and potential entrepreneurs or firms on the understanding that they will co-operate in every way practicable to keep unit costs down, in terms of productivity as well perhaps as wage rates and value for money, in order to capture and hold a new or ill served market at home or abroad.

The right reverend Prelate spoke very effectively of human dignity. It cannot be a service to human dignity to wait upon an unemployment queue if one has not only a strong desire to work but also a sense that one can form a voluntary group to offer to be employed if a project would be made competitive, profitable and practicable by the co-operation of very willing workers. I know that that raises problems. If I had time I would speak of the problems that such initiatives have to overcome and nevertheless the scope of such initiatives. I realise that I am up against time but I have one or two other points to make.

I realise that the trade unions and many individuals will be horrified that earnings might be lower than normal. However, I repeat that adaptability, including acceptance of pay which is less than usual but still far above benefit, is a crucial factor in fuller employment. I repeat that people can price themselves into work as well as price themselves out of work.

In the interests of time I shall conclude. I hope that the Government will succeed with the people in liberating and putting into action more of the entrepreneurship that is latent in our society and more adaptability. Both will be necessary if we are to get unemployment lower.

4.4 p.m.

Earl Attlee

My Lords, I rise to speak with the full standard issue of trepidation and crave your Lordships' indulgence. I am particularly grateful to the noble Baroness, Lady Turner of Camden, for having initiated this debate. I think it is a fairly good subject to come in on, and I am not the only one to be making a maiden speech today. I am sure I should congratulate the noble Lord, Lord Ewing of Kirkford, on his maiden speech. I hope that mine is as well received.

Two weeks ago we had an interesting debate to call attention to the contribution made by small businesses to the economy. Many noble Lords pointed to the difficulties caused to small businesses by late payment of invoices. I thought that the treatment of this subject by the noble Lord, Lord Ezra, was perhaps the best of the day. It seems to me common ground that late payment is undesirable, but not necessarily in the same sense as it is understood in your Lordships' House. Whether the business is large or small the problem of extra costs arising from late payment is well understood. I would like to draw your Lordships' attention to the domino effect of this problem.

Let us consider a fictitious small packaging firm struggling to survive the recession. Sales have fallen but costs have been reduced, with much less overtime worked and some natural wastage of staff. However, financial reserves have fallen and now the firm is well in debt with the bank. The firm is still profitable and solvent, but let us suppose that one of its major customers unexpectedly goes into liquidation. Naturally, in order to survive that customer has stretched payment to at least 12 weeks. The damage caused to the balance sheet is enough to make our firm insolvent. Of course, it is a double whammy having to write off a large chunk of current assets and to work with a reduced turnover. An optimist would think that with a helpful bank and a redundancy programme the firm might survive. A grimmer view is that the rug is pulled from under it and the firm goes into liquidation. The workers, of course, will become unemployed.

Let us now consider the packaging firm's own suppliers. They are already enjoying payment at 12 weeks. Should the packaging firm collapse, the suppliers will suffer the same problems as the packaging firm. If any of the suppliers collapses, more will become unemployed. Thus there is the domino effect of companies collapsing in succession.

That is clearly not the only factor causing businesses to collapse and unemployment to increase. But the problem can be seen in large and small businesses alike. Voluntary regulation does not seem to work. In my scenario our packaging company is bound to delay payment even more; and who would criticise it? I feel that we need a regime where the principle is that everybody pays by the end of the month following the month of invoice. It needs to be backed by civil legislation to make it quite uneconomic to pay suppliers late.

I am well aware of the great difficulty of such legislation and the fate of the Interest on Debts Bill in February 1990 in another place. I shall not abuse my privilege or tax your Lordships' patience by putting the argument more forcefully, detailing how a decent payment regime could be achieved or even who should be responsible for promoting it.

4.10 p.m.

Lord Mason of Barnsley

My Lords, on behalf of your Lordships I congratulate the noble Earl, Lord Attlee, on his maiden speech, especially as a spokesman for small businesses. No doubt he will be renowned for that and with his specialised knowledge of that subject no doubt the House will want to listen to him again on future occasions. I suppose he will be relieved that his maiden speech is over and that he can now regard himself as "fully fledged" and able to participate in every activity in your Lordships' House. My personal congratulations are conveyed to him in the same spirit as when his grandfather congratulated me on entering another place in March 1953.

The Government must surely be constantly embarrassed and ashamed at the remorseless, non-stop rise in unemployment for the 30th consecutive month. Now 2,867,000 people are on the dole—one out of every 10 people in the country. The underlying trend has been an average increase of 40,000 every month since May 1990, and it looks even worse for this November and December. Soon 3 million people will be on the industrial scrap heap. That is what it means when one realises that about 1 million people have been on the dole for more than a year. What also must be taken into account is that 30 changes have been made to the official count by this Government compared with the pre-1979 accounting method. Using the latter method, unemployment would now stand at over 4 million. According to the Employment Unit those excluded from the count total 1,145,000. If that is true, it is an appalling state of affairs.

Unemployment has low priority in Government policy, and yet here are 4 million human beings, most of them suffering daily, living on or below the breadline. They suffer the indignity of state benefits and need handouts to survive. There is so much poverty, unhappiness and family distress; and there are thousands of youngsters with no hope of work. There are so many men who are losing pride. We have 16 and 17 year-olds kidded into training and then finding there is no work. Vacancy levels have fallen to 97,000, the lowest level for 11 years: just one job for every 29 unemployed people. Youngsters are now shunning training and the system is breaking down.

The same is true of manufacturing industries, to which my noble friend Lady Turner referred. We now employ only 4,300,000 in manufacturing industries, almost half the figure we had in the early 'seventies. From June to September of this year 128,000 jobs were lost: that is the worst quarter since 1981. That is why we are now importing more manufactured goods than we export. Industrialists are losing faith in the Government. The country's industrial infrastructure is being torn apart. Business confidence is being shattered, and the Government cannot disguise the fact that the nation is not in deep recession but in fact is in a slump. I believe the Government are destroying our manufacturing base and therefore undermining our economy. It is galling to note that keeping 3 million people on the dole costs the country £24,000 million, when we reckon the payment of benefits and the loss of tax revenue: an estimated cost of between £8,000 and £9,000 per person per year. What a price to pay.

With this awfully depressing picture in mind, Government plans and policies for a national revival and recovery programme are urgently needed. Beyond our frontiers, if GATT is successful and tariffs are lowered, and more markets become available in the longer term, we should benefit provided that we can compete. Within the European Community, and indeed at the Edinburgh summit, leaders are coming under increased pressure to tackle the jobs crisis. The European Community sees a worsening recession, with western Europe drifting into a slump and another 1 million unemployed forecast for next year. The situation necessitates an injection into the European Community's economy. It needs a co-operative Community package. It needs a major bold initiative to jerk us out of an impending European jobs crisis. It is well to remember that the European Community is Britain's biggest market, and if Europe is slumping then we sink with it.

At home our Secretary of State for Employment is planning to spend £75 million on career guidance, job clubs and work travel permits, etc. Those are candy floss measures. Would it not be better to spend that money on supporting a public investment pro-gramme? I felt that the Autumn Statement was nit-picking, with the Chancellor hoping to boost the economy in 1993. I believe it needs a bigger and bolder outlook than that. On the present basis, unemploy-ment will continue to rise next year.

What of the regions? In South Yorkshire the pace of steel and pit closures has hit us hard. Barnsley has lost 18,000 mining jobs since 1981. There was another net loss of 1,000 last year, and now there is another sickening blow with Grimethorpe and Houghton Main mentioned as being among the first 10 pits to close in the new closure programme. Nationally, if the announced pit closures go ahead the total job losses, according to the Henley Centre for Forecasting, will add 95,000 to the dole queues in 1993 and a further 110,000 in 1994. In Barnsley the closure of Grimethorpe and Houghton Main, taking into consideration those jobs dependent upon coal, will put 6,000 out of work. That will take local unemployment from 13 per cent. to 20 per cent. overall, and 30 per cent. for men. In Grimethorpe itself unemployment among men will rise to 40 per cent. if the pit is closed. In areas like South Yorkshire and Barnsley the coalfield communities will need help and extra regional financial assistance.

These communities are destined to be hit again. They need action plans from the Government, involving the local authorities, the TECs, British Coal Enterprise, the regional offices of the Department of Employment and the Department of Trade and Industry, with a Ministerial head channelling moneys from Brussels earmarked for the areas with long-term unemployment. That should be allied with enhanced regional status to plan the development now of the infrastructure in these run down mining communities. We should be given new industrial sites, incentives for inward industrial investment and environmental improvements. We can see the problems now and it is therefore of the utmost urgency that we plan the economic and social regeneration of those areas soon. Let us do that before it is too late.

4.18 p.m.

Lord Boyd-Carpenter

My Lords, I have one feeling in common with the noble Lord, Lord Mason of Barnsley, concerning his reference to the admirable maiden speech of the noble Earl, Lord Attlee. Like the noble Lord, Lord Mason, I also made my maiden speech in another place when the noble Earl's grandfather was Prime Minister. With his habitual kindness—because he was an extremely kind and indeed very likable man—he made some kindly reference to me which I have always remembered. I therefore share the appreciation which the noble Lord, Lord Mason of Barnsley, feels. I am sure that his grandfather would have been delighted to know that the noble Earl is now in this House and that he had made the admirable speech he did today.

I turn once more to the speech of the noble Lord, Lord Mason of Barnsley, who, no doubt by a slip of the tongue, got some quite important figures wrong. He said that one-tenth of our population were out of a job. That is not so. It is one-tenth of the registered workers—a very different figure from that of the population. If it were really one-tenth of the population, it would mean that the unemployment figure was 5,500,000, which mercifully it is not. It is necessary for the sake of the record to get that quite clear, lest the noble Lord, Lord Mason of Barnsley, should mislead opinion outside.

No one is happy about the level of unemployment. I share fully the views that have been expressed as to the personal misery and humiliation that it imposes on large numbers of our admirable fellow citizens. There is no difference of view on any side of the House that unemployment is a terrible thing; that it is right that your Lordships' House should debate it; and that it is very right indeed that your Lordships' House should put forward any suggestions that it can make to help.

Of course it is foolish also not to remember that unemployment, recession, depression, call it what you will, exists throughout the world. Indeed, there is the interesting fact that a higher proportion of our adult population are in jobs in this country than in any other European Community country except, as it happens, Denmark. Therefore, the misery and difficulties that we are facing are not a uniquely British sensation. It is a worldwide problem and one which is particularly strong among our European colleagues.

The noble Baroness, Lady Turner of Camden, and the noble Lord, Lord Mason of Barnsley, expounded, perfectly understandably, on the misery of unemploy-ment. Where, however, their speeches did not go further was in describing the effective remedies to be applied. It is extremely easy to denounce the levels of unemployment; anybody can do that. What is important is to get clear the measures that we should take in order to help rather than hinder the situation. I believe that the Government are acting on the right lines. I do not believe that they will cure the heavy level of unemployment for a considerable time, but I am pretty certain that most of the alternative courses that have been offered would not only not cure unemployment but would indeed inflate it. In addition they would bring back the equally great curse of inflation.

It is therefore sensible for your Lordships' House to make any suggestions that can help the steady process that the Government have initiated and, I hope and believe, will continue to deal with this evil. It is particularly important that we should get clear that quite a number of the courses that are being outlined and suggested would make unemployment worse rather than better. I am sure, for example, that the Government are right to deal with the wages council

problem. I am certain that one of the ways of increasing unemployment is by fixing minimum wages either by a legal or a social inhibition.

if you fix a minimum wage you are certainly dooming to unemployment those men and women —there are a great many —who are partially disabled, who have a certain weakness or physical lack of stamina and who suffer occasional complaints arising from inherent diseases, who cannot earn a full week's work at current wage levels but who, if allowed to work a shorter week at a lower wage level, have a job, have the satisfaction and self respect of having a job, and equally have some earnings. It is a great mistake, as suggested within the European Community and as still operates to some extent in a limited area in this country by way of wages councils, to fix a minimum wage. If someone with a handicap is able to work for less than a statutory wage, it is wrong to prevent him or her doing so. I hope therefore that the Government will proceed firmly and resolutely with their proposals which are, I understand, making their way from another place, to deal with wages councils.

The other point that I leave with your Lordships is this: high taxation, however worthy the purpose for which it is proposed to apply the funds, if it makes our products less competitive in the markets of the world, adds to unemployment. It is therefore essential that the Government should maintain a firm control over public expenditure, should see to it that we do not inflate our costs by heavy taxation, and that therefore we have restraint in that respect. In that context I would point out the inflationary effects of VAT.

VAT at 17.5 per cent., charged not only on products but on services, makes our industry less competitive. It would be highly desirable in the interests of increasing our competitiveness if VAT could be reduced. It is a bad tax and it does a certain amount of harm in the vital area of our competitiveness. It is only by this country maintaining a highly competitive industry and highly competitive activity that we shall deal with the curse of unemployment. The fact that your Lordships care so much about it is perhaps a reassurance to us, and suggests that your Lordships generally will support any measures that will seriously reduce the burden of unemployment and the hardship it imposes.

4.27 p.m.

Lord Beaumont of Whitley

My Lords, there was a time when most of us would have said in framing this Motion, "A strategy to abolish unemployment"; but we have learnt better, or at the very least we have learnt that unemployment cannot be abolished while continuing to think in the outmoded terms of conventional economics. The reasons are many and varied, and I am sure that a large number of Members of this House will have their own. But I believe that we must come to terms with the fact that the world ran out of growth somewhere in the 1960s.

There is not going to be quantitative growth again. Of course the rich are going to get richer, but in the global balance sheet the gains will be at least balanced by the depletion of global capital caused by the rape of the planet and by pollution. This may seem rather airy-fairy when compared with the topic of unemployment in this country, but it has a spillover to the economies of any given country. We have to rethink our economics from scratch.

The challenge of a change of paradigm is to devise new remedies to meet the new problems. If we do that we no longer need to limit ourselves to reducing unemployment. We could go back to what we would like to do—and what a number of your Lordships have said this afternoon that we should do—and that is to devise a strategy for giving everyone employment.

If we are to do that we must start from certain basic beliefs. The Government of this country have a duty to see that none of their citizens starves. That is one.

But also every person, in order to be wholly human, needs to have a worthwhile job: not necessarily a paid job—that is the old economics—but worthwhile in that he or she feels that they contribute something to the welfare of their fellow men and women. Those are the tasks which we, as the legislature of this country, must set ourselves.

The first aim of preserving citizens from total penury and starvation is obligatory. The second aim of providing worthwhile jobs for everyone must be regarded as slightly Utopian because it has never been achieved by any country. However, that should not stop us from pursuing it. The need to pursue the first task—preservation from the extreme life-threatening forms of poverty—is urgent. Our streets are full of what a member of Church Action on Poverty has called the rubbish of the rich; the human detritus that we pass every day on our way to your Lordships' House.

The way forward to deal with that is fairly clear. The policies of the Basic Rights Income Group for a modest citizen's income are the first step. That at least is no Utopian dream. The detailed work of Hermione Parker, a highly regarded professional who in the last Parliament was a research assistant to the noble Lord, Lord Gilmour, will be known to many of your Lordships, not least to my colleagues on these Benches who have adopted the work as part of their basic policy.

The extra advantage of a basic income—and this may be the only part of my speech which will appeal to the noble Lord, Lord Boyd-Carpenter—is that it should be possible to do away with minimum wages. You can offer people jobs which they want to do and pay them wages which are less than were considered necessary in the old economics. People may decide not to take those jobs, but that is a spur which is offered to society as a whole: to produce jobs which are worth doing. They are genuinely attractive because they are genuinely worthwhile. Young people in this country will know exactly what I am talking about. A great many of them take such jobs because they believe in them rather than for any other reason.

I do not deny that that appears to be revolutionary, but my party has very farsightedly accepted it. I have little doubt that the other political parties must eventually follow suit. I merely plead that we do not continue talking and kidding ourselves that economic growth as we have been used to it through the 1940s, 1950s and 1960s is possible, because it is no longer possible.

4.34 p.m.

Lord Dormand of Easington

My Lords, when the noble Lord, Lord Boyd-Carpenter, mentioned that we should have confidence in what he called the steady progress of government policy in relation to unemployment, my thoughts immediately turned to the steady downward spiral which has continued for no less than two-and-a-half years during which unemployment has increased. I thought, "How steady can you get?"

That downward spiral started in May 1990, since when the number of jobless people has increased each month to over 2.8 million. During the past two-and-a-half years we have constantly been told, first, that the unemployment situation was caused by recession in other countries and the British Government's policies have little or nothing to do with such a disastrous situation; and secondly, that in spite of the difficulties thrust upon us by those incompetent foreigners matters would improve. Those improvements have been described in well worn phrases over the months: "Things are now in place for recovery. There are stirrings in the economy. The green shoots are now showing". We have heard those comments ad nauseam. The fact is that the recession in this country, which has given rise to what will undoubtedly become a record number of unemployed, has been longer and deeper than in any other industrial country.

All unemployment is cruel. It brings poverty and ill health and has other adverse effects on family life. It causes an increase in crime and the loss of self-respect. The Government do not seem to appreciate that.

Worst of all is long-term unemployment. It is that aspect of the problem on which I wish to concentrate for most of my contribution to the debate. Unemployment figures announced this month show that long-term unemployment has soared to almost 1 million. They show that the number of people out of work and claiming benefit for more than one year— that is the definition of long-term unemployment— has almost doubled since unemployment began to increase in May 1990. An increase of no less than 50,000 in the three months to October took the total to a four-and-a-half year high of 956,000. It is worth mentioning also that in the total number of jobless, no fewer than 1.52 million have been without work for six months or more. Six months is a long time in which to be unemployed.

In spite of all the fine phrases which we still hear from the Government, there is no doubt that unemployment will continue to increase. In his Autumn Statement two weeks ago the Chancellor said that it would increase, "for some time to come". That means that the figure will be more than 3 million. I mention that figure because when some of us forecast that a year ago Ministers trotted out the phrases which I quoted earlier. It also means that the number of long-term unemployed will inevitably increase.

hope that the Government have studied a report published this year by the Council of Europe entitled The role of employment and training services infighting long-term unemployment. If they have read it, I hope that the Minister will tell your Lordships whether any or all of the proposals contained in the report are being implemented. Those proposals appear to me to be very valuable.

Time does not permit me to deal with all the recommendations but perhaps I may briefly mention some of them. Early intervention is needed in order to prevent an unemployed person becoming long-term unemployed. That sounds simple and obvious but it is manifestly not being carried out in this country. I must say in all honesty that I believe that the screening process involved can present difficulties, but that should not prevent the task being carried out.

The report also says that measures should be tailored rather than established provisions being taken off the shelf. The long-term unemployed often suffer from a wide range of problems so that measures involving other agencies may be required to be used in assisting them. I am sure the Minister will correct me if I am wrong, but I doubt whether that is being implemented.

There is another practical and vital proposal; that is, it is important that the financial incentives and the way in which the unemployment insurance system operates work together—that is crucial—to reinforce the individual's wish to participate in his rehabilita-tion. I hope that those examples demonstrate the importance of special measures being required to deal with long-term unemployment.

I am glad that the Council of Europe has felt it necessary to study the problem. As far as I know, this is the only study to be carried out by the Council of Europe or the EC. But a study without action by member nations will be of little use. I hope that Britain, with its massive long-term unemployment problem, will take it seriously.

Long-term unemployment also carries the danger that the people concerned become more and more out of touch with the skills and attitudes which employment requires. It goes almost without saying that not only is training necessary but retraining is also required. I go further and say that courses longer than the normal training and retraining courses are required. The colleges and former polytechnics, now universities, have an important role to play in that. I made that point at Question Time today. I hope that the Government will place more emphasis on that aspect of the problems associated with long-term unemployment.

Your Lordships will know that the scheme known as Employment Training has as its main purpose helping the longer-term unemployed to acquire appropriate qualifications and skills. Those are laudable aims. But the scheme in detail is only a shadow of what is required to meet a huge problem. For the current financial year, 1992–93, the scheme has a budget of £807 million, which is a reduction in real terms from the previous year and which is required to meet the needs of up to 250,000 trainees. Those figures are taken from the government publication, Employment in Britain, with which I am sure the Minister is familiar. If one compares that figure of 250,000 trainees with the figure I mentioned a moment ago of 956,000 long-term unemployed, one finds the clearest indication of the real lack of concern for the long-term unemployed. The Minister shakes his head. Perhaps he can deal with the point when he replies.

Can the Minister say what happened to the other 700,000 who have been without a job for a year and some for two or even three years? Last week we had a valuable debate on the economy of the North East. I shall repeat only one point I made in that debate, which is often forgotten when the improvements in the region are discussed. I refer to the fact that the rate of unemployment in the region remains the highest in the United Kingdom, outside Northern Ireland. I say "remains" because it was ever thus since regional statistics were first issued. Your Lordships may not be surprised to learn that the North has the highest rate of long-term unemployment, nor that long-term unemployment is the highest among former miners. The main reasons for that are that so many pits have been closed in a relatively short space of time and alternative employment has not been available.

The recent government announcement that a further 31 pits were to close met with unprecedented protest from all parts of the country, so much so that a review was promised. There will be little or no change as a result of that review. My cynicism can be illustrated by the following example. Two pits in my former constituency are in the review. Yesterday I was told that British Coal has already gone ahead— already gone ahead—with its planning application to demolish the entire surface workings of those pits. I possess a copy of that application. Around 3,000 miners will lose their jobs at Easington and Vane Tempest. I shudder to think how many of that number will join the ranks of the long-term unemployed.

The recent Autumn Statement will hardly touch the problem of long-term unemployment. The measures are an admission that previous policies failed. They do not begin to match the problems facing the country. In particular, the Government still have no long-term economic strategy for rebuilding our manufacturing base, on which so much depends, including the stimulation of employment. I regret to say that many of our long-term unemployed are unlikely to work again. Those who are fortunate enough to obtain jobs will carry the scars of long-term unemployment for the rest of their lives.

The Labour Opposition chose this subject for debate today not only because we are acutely aware of the scale of unemployment but because of the sheer scale of it at the present time. It is difficult to understand why the Government do not appreciate the misery and desperation caused by unemployment. Let us hope that the debate will be a turning point not only for their policies but for their attitude towards what many of us believe is the greatest problem for any human being.

4.43 p.m.

Lord Skidelsky

My Lords, I am sure that we are all grateful to the noble Baroness, Lady Turner, for introducing this topic this afternoon. Unemployment is a great human and social problem but it is also an economic problem of the most challenging kind. I wish to turn to that aspect this afternoon.

What is called "Keynesianism" has long been out of fashion. But a few facts are worth pondering. The noble Lord, Lord Ewing, mentioned earlier a number of them in his moving maiden speech. Between 1950 and 1970 when Keynesian policy was in the ascendant, the average annual rate of unemployment in OECD countries was 3 per cent. In the 1970s, which were half Keynesian and half monetarist, it went up to over 4 per cent. In the 1980s, when governments gave up the attempt to maintain full employment, it averaged 6 per cent. over the whole of the OECD world. In Britain it averaged just over 8 per cent.

Therefore, despite the many mounting problems of the Keynesian era, including the tendency of inflation to rise, from the employment point of view it was a golden age. Today we seem to have lost our belief in our capacity to regain it. I sometimes hear the argument that our economy will never again provide enough jobs for all those who want to work. If so, it is a failure of design both nationally and globally of colossal proportions. When all reasonable wants the world over are satisfied, then we shall look forward to a life of leisure and increasing variety. That is the ultimate object of all economic striving. But to suggest that we have reached that Utopia already is absurd.

Noble Lords will recall that between 1979 and 1990 the British economy generated nearly 2 million new jobs—a net increase in the total of employment. There was no sign of any exhaustion of wants in that story. The tragedy is that many of those who lost their old jobs were never re-employed. But we must remember that the great rise in unemployment in the early 1980s took place in the context of a massive restructuring of British industry, and particularly a large shake-out of labour from the overmanned industries rendered bloated and uncompetitive by the massive public subsidies which were being pumped into them in the 1970s. In my view, the Conservative governments were quite right to end that system which simply hid from us the weakness of our competitive position and the true gravity of our unemployment problem.

I should like to turn to the problem of pay because it seems to me that that will be crucial in the months and years ahead. In his memoirs, my noble friend Lord Lawson, wrote that, Britain's wage inflexibility remains the biggest avoidable cause of unemployment". That is largely true though I would add that avoidable monetary mismanagement also played its part in producing the present slump. It is wrong to attribute the big increase in unemployment that has occurred since 1990 to wage inflexibility and ignore the role of the policy of high interest rates which were needed to bring down inflation.

The instant adjustment of wages to prices takes place only in the pages of economic textbooks; not in real life. Nevertheless, there was one interesting result of the downturn of the past year or two. When the inflation rate falls, the real wages of those in employment tend to rise. That is exactly what happened between 1990 and 1992. That means that those who remain in employment are receiving an unearned increase in the value of their take-home pay at the expense of those being made redundant. That was particularly striking in 1991 when productivity was flat. It is that legacy of an unearned increase in the average real wage that we must overcome as we set our sights on recovery.

The noble Baroness, Lady Turner, attacked the concept of a low-wage economy. Of course everyone agrees with that. She condemned the public sector wage freeze which the Government announced. But she did not explain how employment can be increased without a fall in the average real wage. A high wage economy must be earned; it cannot simply be announced. That means that as prices start to rise—as they certainly will in the next year or so—money wages must rise less than prices. That is the meaning of the Government's public sector wage freeze. The Government are saying that public sector wages must rise less than the selling prices of public sector services if public sector employment is to increase. That makes perfectly good economic sense.

If private employers were able to secure a similar wage restraint in the private sector, we would be back to a classic incomes policy. That is already happening in individual plants. But I am not advocating a full-blown incomes policy of the sort that so often came to grief in the 1970s.

The problem of our wages system can be stated very simply. It is unable to generate rates of pay consistent with sustainable full employment. If past experience is any guide, wage inflation will start up again as soon as people feel that the recession is behind them. If the Government refuse to accommodate it by printing money, as I hope that they will, the employment recovery will soon be aborted.

Perhaps I may quote my noble friend Lord Lawson again: Our long term aim was decentralised wage bargaining which took account of local market forces, productivity, regional differential, job security and profitability". It remains to be seen how far the supply side reforms of the 1980s, including the very necessary trade union reforms, have permanently influenced wage behaviour.

Contrary to what the noble Baroness, Lady Turner, said, I welcome the Government's decision to abolish wage councils. Wage rates should respond flexibly to local labour market conditions and not to arbitrary wage-fixing arrangements. We need to build on some of the imaginative reforms of the 1980s. By the end of 1991, as a result of tax incentives, there were 3,000 profit-related pay schemes covering 600,000 workers. When it comes, the upswing will provide the best possible climate for extending that scheme. I hope that the Chancellor will consider further incentives to promote its spread.

Another crucial requirement for more flexible pay is the spread of bargaining at plant level. We have to get away from the notion of the going rate for the job independent of local conditions and company profitability. We need to improve labour mobility. One of the biggest obstacles remains the lack of low-cost private, rented accommodation. I wish the Government would take their courage in their hands, and sweep away the remaining rent control legislation; a survival of earlier conditions which no longer apply. It will cost the Treasury something, but it would be a price well worth paying, actually as well as symbolically.

Finally, I wish we could find some way of disaggregating prices indices so as to highlight regional variations in the cost of living. That would be an important help to sensible wage bargaining. That does not exhaust the possibilities of supply side policy —though it exhausts the possibilities of my speech. The steps I have outlined are directed towards increasing the efficiency of labour markets. Just as important is the improvement in the level of skills, to which many noble Lords have alluded, which should be the most important immediate object of our education and training policy.

Perhaps it is not too visionary to look forward to a situation in which improvements in efficiency are shared between money wages modestly rising and prices of products modestly falling, so that the price level on average does not change much from decade to decade. A government which can achieve that kind of culmination will have deserved well of the country.

4.53 p.m.

Lord Bruce of Donington

My Lords, the House is grateful to the noble Lord, Lord Skidelsky, for having drawn its attention to the comparative success in the United Kingdom of Keynesian economics. In following those economics—which was the avowed policy of the coalition government as reproduced in their famous 1944 White Paper, Statement of Government Policy on Employment—the maintenance of full employment was the first priority of the government and remained so for some time.

What the noble Lord has successfully proved in his speech is that leaving everything to market forces has in fact resulted in comparative disaster. A degree of democratic intervention by the government of the day in the economy is in fact a prerequisite of the attainment once again of full employment in the United Kingdom. By that I mean a percentage of unemployment which only allows for normal frictional unemployment.

This afternoon we are discussing a strategy for the lowering of unemployment. The first necessity when formulating a strategy is to convince all who are to take part in the vital need to have a strategy at all. That means that no longer should unemployment be referred to in abstract or statistical terms. It is a very real and personal problem to those who endure it and particularly to those with very low, diminutive incomes. It is how they experience it and what effect it has on their family life, health, and the maintenance of normal law and order in the United Kingdom.

We must first convince people that unemployment is a problem and not an abstract thing; it is something which vitally concerns us all. The noble Lord opposite mentioned (as indeed is the case) that there are 17 million unemployed in the European Community. That is a figure which should send shudders down our spines. It was precisely the onset of unemployment in Europe, particularly in Germany, that preceded and caused the strengthening of the Nazi movement. At the moment we are getting some slight symptoms of that occurring again.

So anyone who considers unemployment in abstract terms as implied, for example, in "unemploy-ment is a price well worth paying" or "if it isn't hurting, it isn't working" had better think again. As is his custom, the noble Lord, Lord Boyd-Carpenter, put forward the absolute necessity for controlling public expenditure and lowering taxation as far as that is feasible. We are well accustomed to the noble Lord formulating those doctrines.

There is no better way of lowering public expenditure than by reducing unemployment because the latter imposes a terrific fiscal constriction and burden on the United Kingdom in terms of about £8,000 per annum per unemployed person, apart from the extra costs that are bound to be incurred by the National Health Service due to physical and mental ill-health that is caused by a lack of work and the emotional and family distress arising directly from unemployment. So to reduce unemployment makes fiscal sense. Moreover, it is quite clear that any person who is in receipt of state aid, whether by way of unemployment benefit or through the other various social services available to him, and who produces nothing is, by his own inertia, contributing to inflation. It is not so inflationary to produce something for which one is paid as it is to produce nothing and to be paid something. That is absolute common sense.

A number of suggestions for reducing unemploy-ment have been made this afternoon. Perhaps I may commend one to your Lordships which is immediately practicable. I shall mention costs and must therefore answer a point that was raised by the noble Lord, Lord Skidelsky, when referring to wages costs. What is vital is that unit labour costs should be reduced. The wage part of unit labour costs is not the only factor; investment is also a factor. If there is no or very low investment, unit labour costs are bound to increase. One of the main troubles in the United Kingdom since—

Lord Joseph

My Lords, perhaps—

Noble Lords

Order.

Lord Bruce of Donington

My Lords, I shall give way to the noble Lord in a moment.

One of the main weaknesses of the United Kingdom since 1972, as enunciated by the then Mr. Edward Heath in 1972, has been the reluctance of investors in this country and the unwillingness of manufacturers to invest. That has been a continuing trouble in the United Kingdom. There must therefore be long-term investment—if necessary, by the Government themselves, as advocated in the original White Paper by the coalition government. I shall give way now to the noble Lord, Lord Joseph, but I trust that he will realise that I am subject to a time constraint.

Lord Joseph

My Lords, almost as important as investment is productivity. That is all that I was trying to say.

Lord Bruce of Donington

My Lords, I agree with the noble Lord. As a practising accountant, I have just given the House the accounting aspect and there are two ingredients—investment and labour.

There is one way in which an immediate kickstart could be given to the economy. I could not agree more that there needs to be investment—and long-term investment—on the supply side, but investment plans take time to formulate. Plans take time to make. Quotations and planning approvals have to be obtained. It is about two years before large-scale capital investment ultimately materialises, as Sir Stafford Cripps found out in his time.

What is required is a kickstart now—and that kickstart should be in the building industry in order to relieve the shortage of housing in the United Kingdom. That is what should be done because the building industry is an assembly industry. It requires very little further investment. It involves the assembly of the end products of 100 different trades. The labour and the materials are available and, in most cases, the plans are available. There is no reason at all why 100,000 or 150,000 workers in the building trade could not be employed tomorrow if the Government had the will to do that—and they could do it without any inflationary effect whatsoever. Moreover, the multi-plier factor would apply. As more workers in the building industry go back to work, so there is more demand in the local shops. The multiplier factor adds about two-and-a-half times the original number to those employed in the labour force.

That is one group of measures that could be taken straightaway. There is a vast need for houses, and masses of people in the building industry who are unemployed. All the materials—bricks, timber and everything else—are in situ. Why do the Government not get on with the job?

5.4 p.m.

Lord Jay

My Lords, we can all be warmly thankful today to the noble Baroness, Lady Turner of Camden, for initiating this debate and to the two maiden speakers. But I must confess that I found the Government's contribution one of the most disap-pointing and discouraging that I have ever heard in an economics debate. That was not due to any personal fault of the Minister but to the failure of the Government generally.

Those of us who have been calling in these debates for the past two years for a more competitive exchange rate and for lower interest rates must at least be thankful that the Government have abandoned the misleading arguments to which we listened during those years. Until now we have constantly been told that leaving the exchange rate mechanism would not permit lower interest rates and might even mean higher interest rates. Now we are told by the Chancellor in his Autumn Statement: Outside the ERM, I have been able to rebalance policy by cutting two percentage points off interest rates. That, in itself, will provide a significant boost to the economy".—[Official Report, Commons, 12/11/92; col. 992.] That is what some of us have been saying all along. Then we were told by the Government that a lower exchange rate would not be of any material help to exporters, but now we are told by the Chancellor—and I quote again from the Autumn Statement: The reduction in the exchange rate has offered immense opportunities to exporters".—[Official Report, Commons, 12/11/92; col. 997.] We are all glad of that conversion—or most of us, at any rate.

Unhappily, however, the evidence accumulates every day that the deflationary forces that had been working have until now been pushed so far that the Autumn Statement's relaxations are not nearly enough. Evidence for this comes from the Government themselves. The official forecast in the Chancellor's Statement is that real GDP, having fallen by 1 per cent. in 1992, will rise by only 1 per cent. in 1993. But that means, on the Government's own showing, that unemployment—so far from even flattening out in 1993—will actually go on increasing until 1994. We are also told by the Central Statistical Office that total GDP has fallen by 4 per cent. since we joined the ERM two years ago. This means that real GDP in the present year is about 8 per cent. worse than it would have been if we had had the normal 2 per cent. over those years. But 8 per cent. of GDP now means a real national income of nearly £60 billion a year, and the loss of it—the reverse side—is the 3 million unemployed.

It is now all too miserably clear that the decision two years ago to imprison ourselves in the ERM at a blatantly over-valued rate was one of the worst mistakes in the United Kingdom's post-war economic policy. During the two years that we were members of the ERM, UK unemployment increased by 1.2 million. The main reasons that the Government got their forecasts all wrong and led us into this disaster are, first, their forgetting that whenever 10,000 miners, factory workers or any other workers are thrown out of work they will cut their spending by anything up to 50 per cent. and throw another group of workers out of a job. Deflation, like inflation, is cumulative. Secondly, the Government forgot that a balance of trade deficit is itself deflationary because both exports and another slice of the home market are lost to British industry.

Now that all these mistakes have been made, what should we do henceforth if we genuinely desire recovery? We can all sincerely thank heaven that the GATT Uruguay Round at least appears to have been almost successfully concluded, and we can congra-tulate our own Government on having resisted the French efforts at sabotage. Perhaps we should also congratulate our own Parliament on having kept up the pressure on the Government to stick to the job. But, of course, we must not underestimate either the ability or the wish of the French Government to sabotage the whole enterprise even now. The Uruguay Round gives us the opportunity for recovery but of itself does not automatically generate that recovery. If world demand can be reflated, the opportunity will be seized. But freer trade on its own in a deflationary situation would have disappointing results.

Since on the Government's own showing unem-ployment is estimated to go on rising until 1994, further steps are clearly essential. First, we must not shrink from letting the exchange rate fall to a competitive level. There is no other way left now to correct our disastrous balance of payments deficit. Incidentally, the Government now estimate that the deficit will be £15 billion in 1993. Of course there has been some increase in import prices but that is surely the price we pay for national soverency and for full use of capacity. It is the only way in which excessive imports can be restrained. A rise in the price of some imports which we do not need would be positively desirable. Therefore we should avoid fixed exchange rates like the plague.

Secondly, interest rates must come down further until recovery begins. Depressions do not end automatically, as the Government still seem to think, by the will of providence. They end when governments and central banks change their macro-economic policies, as happened in 1933 at the time of the greatest depression of all. Those who believe in market forces should also remember that in the classical Victorian trade cycle the bank rate normally fell to 2 per cent. before any recovery began.

I am not surprised that the Government are scared of budgetary expansion of demand, because their policies have produced a situation in which both the budget and the balance of payments are in huge deficit at the same time. But the reason for the high deficit, apart from high unemployment, is the reckless sacrifice of budget revenue by the noble Lord, Lord Lawson, in his tax give-away in the summer of 1988. I do not myself blame the noble Lord for his reductions in interest rates in 1987. We still do not know whether there might not have been a much more severe slump if he had not done that. What I think was wrong was to give away large sums of revenue, which would now be greatly valued, to the wrong people at the wrong time at the top of a boom.

One does not atone for that fault now, in a pit of depression, by making damaging cuts in capital spending like the little disguised cuts which are now being made in respect of British Rail and London Transport. To make crippling cuts in public services which are already suffering acute arrears of maintenance—not to mention modernisation—is a deplorable mistake. In the case of London Underground, which is used by several million people every day, where undermanning and arrears of maintenance have already increased journey times by around 50 per cent., it is a huge burden on the productivity of London's economy. To make those cuts will be highly damaging. What is the good of having a Passenger's Charter if the train is cancelled because there is no driver and no rolling stock? That is the kind of thing that is now happening regularly.

What is the use of an EC £40 billion or £50 billion growth fund for capital spending if we are acting in exactly the opposite direction in this country?

The time for balanced budgets and repayment of debt is when and if boom times return. To make excessive false economies now is to kill those green shoots of recovery even before they have appeared above the ground.

5.15 p.m.

Lord Harris of High Cross

My Lords, I am delighted to express very strong agreement with the remarks of the noble Lords, Lord Boyd-Carpenter, Lord Joseph, and with Lord Jay, on the GATT. I especially enjoyed the tour de force by the noble Lord, Lord Skidelsky, from his unexpected position above the Bishops' Bench. I should like to reinforce what the noble Lord, Lord Skidelsky, as a historian, had to say from the viewpoint of an unrepentant market economist although I feel I should seek the indulgence of the noble Lord, Lord Gilmour, and allow him, if he wishes, to depart.

There should be wider grounds for hope in examining what light fundamental market analysis can throw on today's appalling scourge of unemploy-ment. I have been much encouraged in the past decade to detect a spreading appreciation of market economics—to give credit—even among Labour spokesmen when they are on their best behaviour. Alas, I fear that so far few speakers from the Labour Benches have been in a market mode.

Today, instead of relying on Adam Smith, Hayek, Friedman and other once unmentionable gurus, I should like to put my best Keynesian foot forward. This is not the prelude to approving a massive boost to already excessive government spending financed by still more reckless borrowing, which my old adversary, the noble Lord, Lord Bruce of Donington, seems to be up to again. If we go back to Keynes' general theory, we find that deficient demand was not the only cause of unemployment diagnosed by the great man, as many one-eyed Keynesians suppose. Indeed, in chapter 2 Keynes rehearsed the classical analysis, which distinguished two further categories that are relevant to our present pickle. The first was "frictional" unemployment arising from the geo-graphical or occupational mismatch between people without work and changing job opportunities. What was said about rent control and so on had some relevance. If we ignore altogether the dreadful recession, we must accept that the hectic pace of change in modern technology and world trade would account for a sizeable fraction of frictional unemployment in a total labour force of 28 million.

The second category acknowledged by Keynes was "voluntary" unemployment, which, in the sense Keynes defined it, accounts for a large part of a total fast approaching 3 million. Before risking arrest for lack of compassion, I would ask noble Lords to judge from Keynes's own words. Since it is quite a mouthful, I am tempted to say, "Listen carefully, I shall read this only once." He wrote that, 'voluntary' unemployment [is] due to the refusal or inability of a unit of labour, as a result of legislation or social practices, or of combination for collective bargaining, or of slow response to change … to accept a reward corresponding to the value of the product attributable to its marginal productivity". If that sounds like what Keynes sometimes called Cherokee, I would say that Keynes was acknowledg-ing that unemployment can be caused by people pricing themselves out of jobs or being priced out of jobs. That is very different from the one-eyed Keynesian obsession with aggregate, macropolicy.

It will not do for critics of liberal economics to scoff that markets are fine in theory but do not work very well in practice. There will always be large imperfections, but the most stubborn imperfections are often the fault of well-intentioned policy. For example, it took less courage 60 years ago for Keynes to deliver himself of the following verdict: The existence of the dole undoubtedly diminishes the pressure on the individual man to accept a rate of wages or a kind of job which is not just what he wants or what he is used to". How much greater the resistance these days to accepting a low-paid job when take-home pay, after tax, travel and other work expenses, may be less than social benefits, now topped up by high rent or mortgage interest payments. But the relative attractiveness of social benefits is not the only cause of Keynes's voluntary unemployment. His category would also include wages councils, referred to by the noble Lord, Lord Skidelsky. It would include the annual automatic wage round, and all formal and informal practices for raising pay without concern for market demand.

Lord McCarthy

My Lords, the noble Lord stresses the role of voluntary unemployment. How does he explain the long period throughout the 40s, the 50s and half way through the 60s when unemployment remained below 3 per cent? Where was all the voluntary unemployment then?

Lord Harris of High Cross

My Lords, we have become used to inflation and the bad habits that follow inflation. I shall say something about that immediately. The persistent refusal of unions to price their members into work in present conditions by moderating wage claims led one-eyed Keynesians of all parties to attempt to spend their way out of unemployment. The noble Lord, Lord Jenkins of Hillhead, bravely called a halt after 1967, as did the noble Lord, Lord Healey (with the help of the IMF) after 1976. The noble and learned Lord, Lord Howe (with the help of a certain lady and of a Professor Walters) most successfully called a halt in the early 1980s. But the hallmark—this is my answer in summary to the noble Lord, Lord McCarthy—of the post-war, one-eyed Keynesian era has been accelerat-ing inflation, alternating with periods of savage disinflation that were never sufficient to arrest the progressive devaluation of the currency.

The resulting destabilisation of the entire economy has been at the root of all our troubles. It has disrupted company planning and investment, especi-ally in manufacturing industry. It has played havoc with public budgeting, raised interest rates, and dislocated the exchanges. It has put a premium on short-termism, reduced personal savings and upset family budgeting. After such prolonged political buffeting and battering throughout the post-war years, I find it somewhat remarkable that as many as 25 million people are still at work.

Of course, we need a medium-term financial strategy but under a Treasury team that inspires confidence, as the noble Lord, Lord Lawson, once did. Like the noble Lord, Lord Skidelsky, I believe that we also need a fundamental re-direction of labour market policy. To reduce the moral hazard of social benefits, taxation on low incomes should be phased out and universal benefits made more selective. To encourage market-clearing labour costs, all statutory minimum wages should be ended: better low pay than no pay. The noble Baroness, Lady Turner, talked of a sweat shop. I should rather see people sweating than shivering from want of work. Above all, to enable employment to be maintained in the face of varying economic fortunes, companies should take a leaf from the Japanese book by negotiating flexible wage and salary contracts. Basic pay, including that of top management, should be set at a rate appropriate to hard times, such as the present, and in the place of automatic annual wage rounds, all subsequent increases should be conditional upon the state of the market for each firm's output.

There has been much talk of crisis, but hitherto all parties, business organisations and trade unions have shrunk from such a radical reconsideration of policy. Today we should at last have learned that without downward flexibility, as well as upward flexibility, of labour costs in bad times, the brunt of adjustment to all economic fluctuations will continue to be borne by higher unemployment, followed by faster inflation, excessive rates of interest and an endlessly depreciat-ing currency.

5.24 p.m.

Lord Monkswell

My Lords, I was interested to hear the contribution of the noble Lord, Lord Harris, and, in particular, his exposition of voluntary unemployment. It reminded me of a 26 year-old lady who, earlier this summer, having worked for one of Gerald Ratner's emporiums for a number of years, was required to work on a Sunday for no extra pay. It is bad enough for people to be required to work on a Sunday—the accepted payment rate for Sunday work is double time—and it would be pretty bad if an employee were offered ordinary time for Sunday working, but this young lady was required to work on a Sunday for no pay. She left that employment. One could argue that that was voluntary unemployment, but I would argue that she was within her rights to refuse that employment as it was nothing approaching satisfactory.

The debate, initiated, I am pleased to say, by our side of the House, is about unemployment. Realistically, we need to think of it in terms of two positions: either that unemployment is an acceptable requirement to achieve sound money or in terms of full employment. The object of our society, government policy and every decent member of our society should be to achieve full employment. Why? Because human beings are important. I hope that it would be regarded as fundamental in a democracy that human beings are more important than money.

There are more discrete reasons why full employment is so important. The first is the waste of resources. At the moment 10 per cent. of our productive resources are effectively not in production. Society is wasting 10 per cent. of its effort. Next, we should consider the effect on individuals and the damage caused to the individual's mental or physical health, something that is now well documented, and the mental and physical health of the families of unemployed people. Another factor we must consider is the damage to the very fabric of our society.

How do we achieve full employment? First, we do it by defending existing productive organisations that are meeting needs; and, secondly, by harnessing the resources that exist in society to meet the needs of our society. Above all, we must learn from experience. We need to learn from the experiences of our fathers and grandfathers in the 1920s and 1930s. We need to recognise the essential international dimension of the problem that faces us.

From the 1940s to the 1970s, as a number of speakers have said, we had virtually full employment. For 30 years there was a consensus, right across our society. The Labour Party, the Conservative Party, and even the Liberal Party I think at that time, espoused a policy of full employment. That policy was broadly achieved. Yes, full employment is achievable. In a democracy, anything is possible if there is a general consensus that something is to be achieved.

The noble Viscount, Lord Ullswater, speaking for the Government, said that industry was dying and that services were the future. Fighting inflation was the most important thing. It should have come as no surprise to us that the Front Bench spokesperson for the Liberal Party supported the Government. That is only a carry-over of their support for the Government on the miners a few weeks ago. The Government said that inflation was the most important enemy. What we are talking about is a modern version of the gold standard. We need to recognise that in the 1920s and the 1930s adherence to the gold standard did this country and the international community no good at all. It is an attitude that does us great harm now.

As I said, war resulted from the problems that the international and national communities faced in the 1930s. There is the breakdown of social order, not only within regions and within nations but also internationally. We need to look at our present experience and what is happening in our society. We can see the rise of what used to be described as inner city violence, but it is no longer merely the hard core of the inner cities that erupts in violence which is virtually uncontainable by our police forces. If we look at the international situation, we see that largely because of the incredible rise to what I believe is a figure of 18 per cent. unemployment in Yugoslavia that nation state has disintegrated and violent civil conflagration is the order of the day there. If we look at what is happening in the former Soviet Union—the conflicts that are erupting almost daily, progressively between the different republics and within them—we see a horrendous international dimension.

A little closer to home, we see what is happening in Germany. With unification, the economy of the eastern part of Germany virtually collapsed overnight. Mass unemployment was the result and we are now seeing the product of the social disintegration of that society daily on our television screens. There are the attacks on immigrant hostels, the desecration of Jewish cemeteries and memorials to the Holocaust, and the antagonism that is engendered within German society towards what are perceived to be scapegoats.

What can we do? We must defend the jobs we have; we must take a strategic view. In the House we have debated the future, to a limited extent, of the mining industry. We have had a terrific contribution this evening from my colleague and noble friend Lord Ewing of Kirkford, demonstrating in his maiden speech the need for, and the importance and the validity of, retaining Rosyth dockyard. I pay tribute to him as one of the first speakers in the debate who mentioned full employment. We must match need with resources.

We have a housing crisis in the country. We have the ability to build and improve housing for people. We have a transport problem. We are opening the Channel Tunnel. Yet little is being done to ensure that our manufactured goods can reach the markets in Europe. I think I read an estimate that £40 billion needed to be spent by the water industry over the next 10 years to improve standards of drinking and bathing water in this country. Why should we have to wait 10 years for clean water? Why cannot we commit those resources in a much shorter timescale and put people back to work? Finally, I make the plea that we recognise that full employment is a possibility and dedicate ourselves to achieving it.

5.35 p.m.

Lord Redesdale

My Lords, I thank the Labour Benches for bringing this debate to our attention. I feel it is a pity that in the Motion they used the wording "to reduce unemployment". One of the real evils this country is now beginning to face and to accept as a fact of life is that one of the bases of unemployment is structural unemployment. That is what I wish to address in my speech.

The recession has caused a great deal of unemployment, but it has masked the growth in structural unemployment which has been with us for a number of years. The Minister quite nicely sidestepped the issue when he talked about choice. Coming from the North East, where in certain areas male unemployment is running as high as 50 per cent., I feel that, although his view is laudable, there is no choice. There is no choice even in getting the lowest paid work in some areas. Some of the fast food chains in the area used to have work which people did only if they were really desperate, but now they have long waiting lists. I know that for a fact.

In his speech earlier the right reverend Prelate discussed what it means to be unemployed, to find that one's parents have been unemployed and to hold the view that one's children will probably also be in the same boat. A story came recently from Newcastle from a friend of mine who is a teacher there. She asked a little girl in primary school what she would do for a job. The answer was, "I don't need a job. I'll just go down to the Post Office". It is not easy to agree with the viewpoint that living on the dole is an acceptable solution. I am sure that many people, given the opportunity to work, would do so. It is not that easy to live on the small amount that one can get from social security.

Even if quite soon we come out of the recession which we face at the moment, that will not combat structural unemployment. We must look at what the boom in the 1980s was built on. It was built on a growth in the City, a growth in tourism and in services. The City has retracted almost as fast as it expanded; tourism, because of the worldwide state of recession, has fallen off dramatically; and services have also been affected.

The Government have put forward two choices on the way to get out of the recession at the moment, both based on confidence. One is based on houses: when the recession first started many people talked about it being ended by people buying houses; when the housing market picked up again, that would happen. We now all realise through the figures on negative equity that this will not happen. People who do not have a job now and are worried that they will not have a job in the future will hardly go out and buy a house. Those families where both the man and the woman have a job, even if they are considering moving, are seeking a mortgage that they can afford if one of them is put out of work. I do not believe that the housing market will change and pull us out of the recession. Even if it does, I do not see it taking off in the same way as it did in the 1980s.

The other area which we have been given to believe will take us out of the recession is consumer spending. I agree that we shall be taken out of the recession if massive consumer spending takes place. But at the moment consumer spending will be based on credit, which, as we all know, is a trap, and many people will not be able to meet the repayments. Also, if I went into the shops today and decided to get us out of the recession by spending on certain items, as likely as not I should buy imports, which would only add to our foreign debt.

I have been asked quite pointedly why during the debate on the economy of the North East I did not press the Government further on unemployment. Unemployment is a fact of life but it is not one that we must accept, as a number of people seem to do. Several speakers have pointed out that unemployment should not be a fact of life; while full employment may not happen in the foreseeable future, employment can be brought about. One way of helping to end the recession and reduce unemployment is to kick-start the economy. The Government have proposed many areas where this could occur, for example in spending on roads. However, it seems that the Government are set not to spend any money on the railways. Indeed, through the introduction of privatisation it appears that the Government are set to destroy the rail network.

if the Government could make a firm commitment to renew tracks and to reverse the trend of disinvestment in rail, and if they could make a firm commitment to shift goods from the roads to rail, that would admittedly constitute a large expense but would represent an investment in our future. Such a step would also represent an investment in the future of the European Community because we could transport our goods from their places of manufacture into Europe. Europe's rail systems especially are far better than ours. The Government always talk about a level playing field and perhaps this is one area where they could achieve such a level playing field.

It would be rather nice if the Government would consider investing in our own industry. That process has already been started through the development corporations. In the 1980s many held the view that there was no point in investing in manufacturing industry as they considered it had already died. Many thought it was better to consider other areas where the country could grow. Perhaps that attitude has to be reversed and perhaps the Government should put millions, perhaps even billions, of pounds into specific firms. Without that injection of capital big companies will become small companies and small companies will face extinction. Small companies have already had the fat cut off them in the previous recession. This recession has meant that they either shelve their workforces or go out of business. They will not be able to expand when the boom comes and even when the upturn occurs it will happen very slowly and the banks will want to recoup the money they have lent out as quickly as possible. That will hinder the growth of small businesses.

If the Government could give a commitment to manufacturing industries and start pumping money into them that might in the long run cut down on our structural unemployment. There has been a retraction of our industries. There has been a great movement away from large heavy industries, the great monoliths of the past, but now we have made that transition perhaps it is time to invest in an industrial revolution along different lines for the future.

5.42 p.m.

Lord McCarthy

My Lords, I join other noble Lords in congratulating our two maiden speakers in this debate. Noble Lords on this side of the House have, of course, known the noble Lord, Lord Ewing of Kirkford, for a long time and we are pleased to welcome him. We also knew the grandfather of the noble Earl, Lord Attlee, for even longer and we welcome the present noble Earl today. In the fine biography of Attlee, written by Kenneth Harris, the author talks about how towards the end of his life Attlee became ever more laconic, particularly when speaking in the House of Lords, and ever further to the Left. When Kenneth Harris asked the noble Earl why he had become ever more laconic and had progressed ever further towards the Left he used to reply "not much time". Whether the present noble Earl moves further to the Right or to the Left, we have a great deal of time for him. We hope he will make many more speeches.

I also wish to thank the noble Baroness, Lady Turner, for giving us an opportunity to discuss the Government's economic strategy. The details of what that strategy has meant in terms of unemployment were well laid out by the noble Lord, Lord Mason, and I do not wish to comment further on that and on all the figures he gave. However, I should remind the House that we now have a worse rate of unemployment than any other country in the OECD except for four countries. Our employment rate is significantly below the EC average and has been so for quite some time. The situation is getting worse. That leads me to the question of what the Government are doing about it.

One could look upon the Government's economic policy and its effect upon employment in two ways. One could first of all look at the short term. What are the Government doing in terms of short-term job creation? I have raised my following point before, but the Government have never fully explained or defended their position. I am not contrasting the Government's policy with what the Labour Government did, but rather with what this Conservative Government did in the early 1980s. They took over policies which were introduced by a Labour Government but they greatly extended them. The Conservative Government were proud of the fact that by the years 1981, 1982 and 1983—I see this point is mentioned in the memoirs of a previous Chancellor of the Exchequer—they were taking 750,000 people off the unemployment register. However, we cannot see that today. We see no sign of a new community programme. All the promises, statements and claims that were made by the noble Lord, Lord Howe, as he now is, and others in the early 1980s about what the Conservatives were doing for short-term unemploy-ment and as regards taking the long-term unemployed off the register are not now made.

We used to think the excuse was that the Government did not believe the present recession was a real one. They thought the green shoots were coming through. However, even they cannot say that today. We all know that unemployment will continue to rise for at least another 12 months. However, there is no sign whatever of any significant emergency pro-gramme to take people off the register. According to my calculations, the present employment action programme has up to now dealt with about 5 per cent. of the long-term unemployed. That is not a policy in terms of the Government's own previous policies. I ask the Minister once again to try to explain that position to us today.

However, as regards longer term matters there are two aspects of government policy which could be helpful in relation to unemployment. One is the Government's policy towards pay—I shall come to that—and the other is their policy towards the exchange rate which the noble Lord, Lord Jay, mentioned earlier. There have been five phases of exchange rate policies. I would argue that almost all of them have been destructive from the point of view of

employment. First of all, between 1979 and 1982, we had the over-revaluation of 33 per cent., which helped to double the rate of unemployment, in an attempt to cure inflation that was largely self-engendered. That was the first great Tory revaluation.

That was then followed between 1982 and 1987 by the over-devaluation—the reverse process—of some-thing like 23 per cent. That cut unemployment. It did not get unemployment back down to the level of 1979 but it cut unemployment and, along the way, it induced a boom which enabled the Government to win two elections. However, it could not be sustained and therefore we moved, in 1987 to 1990, to preparing to enter the ERM. Before that we had a strange period when the Chancellor was trying to shadow the deutschmark without the Prime Minister finding out. He was then told not to do so and then he allowed interest rates to rise. He made it absolutely certain that by 1990 we went into the ERM at too high a parity.

If one looks at all that, what kind of conclusions can one reach? Surely one reaches the conclusion that the Government have used the exchange rate to do everything but assist unemployment. They used the exchange rate first to attempt to cure inflation. They then used the exchange rate to create a boom for electoral purposes. They then used the exchange rate when they felt their monetary policy was falling apart. In the past two years, as the noble Lord, Lord Jay, said, when we were in an impossible exchange rate position the Government were using a high exchange rate to force British industry to become competitive or go bust. In the end the Government went bust.

The moral of that is that one has to use the exchange rate for a much more narrow and precise purpose. It is not a great gun to be used whenever one wants it. One has to use the exchange rate primarily for a limited purpose: to facilitate a healthy balance of trade and to preserve, if one can, the long-term competitiveness of British industry. The one time when we got that right—and noble Lords will not be surprised that I mention this, because it suits me—was in 1949 when the Labour Government devalued by 40 per cent. That lasted for 18 years. That is the kind of courage that a government needs: to make periodic devaluations, hopefully when nobody is looking.

That is the kind of policy I should like the Government to enunciate. I should like the Government at least to tell us their policy on the exchange rate—whether it is constant drift down-wards or whether there is some underlying concept.

I move now to the subject of pay. There are five periods here, too. In 1979–82 we began with the noble Lord, Lord Howe, as he now is, telling us that we did not need a policy for pay at all and that it did not matter how much pay rose because M3 would solve everything by and by. Then, as the noble Lord, Lord Skidelsky, said, Mr. Lawson, as he then was, invented a link between pay and employment. It was a precise link. He said that every 1 per cent. fall in the level of real pay—although no one quite knows why he said real pay—induces a half per cent. rise in the level of employment. When one has such a level of precision in a policy it becomes extremely impractical to operate.

then the noble Lord, Lord Young, changed the policy. He said that it was only inflationary and bad for unemployment if it was the poor who were receiving wage increases. If the rich got the pay increases it did not matter because the increases were self-generating. It was a kind of Laffer curve on pay for the rich; somehow it increased productivity and the resources of the country and was probably a jolly good thing.

Now we have the last phase: that of leaning again on the public sector. A limit of 1£ per cent. has been placed on public sector pay, unless one is lucky enough to receive increments or performance related pay, under which we now know people can get a great deal more. The trouble with that is that it totally ignores what has been happening to pay in this country over the past 14 years. During that time the private sector has received significantly more than the public sector, until the last two years; individual pay as against collective pay has been moving much faster, so it is not the fault of the trade unions; and basic rates have been phased out and all kinds of phoney productivity deals and performance-related fiddles are being introduced, especially for management at the top.

If there is a pay inflation problem in this country it is the direct reverse of what it was in the 70s. It comes at the top. It comes in the non-union sector. It comes from managing directors and chief executives paying themselves so much of an increase that they feel they have to let people further down have increases at least to match the RPI. Therefore, if we were to have an incomes policy it would be the total reverse of what the Government want now. It would not focus on the public sector or the lower paid. It would not save 1 per cent. on pay for cleaners. It would be a policy across the board. Unless the Government can bring themselves to adopt a policy of that kind they had better not talk about a pay policy at all.

5.54 p.m.

Lord Blease

My Lords, I agree with the noble Viscount when he said in his opening remarks that this is an important and timely debate. Many of the matters which have been put before the House today demonstrate that timeliness. All the indications are that unless radically different government policies are adopted and urgently pursued, the outlook is bleak not only for employment throughout the United Kingdom but also disastrous for the economy, industry, community well-being and family life.

Figures published by the House of Commons Library on 16th November (in Research Note No. 100) indicate that unemployment in the United Kingdom will continue to rise to some 3 million by 1995–96. What a prospect! The PA Consulting Group, which for some years has produced a reliable and respected quarterly survey of business prospects, states that unemployment in Northern Ireland will rise by 2 per cent. during the next year. That is 2 per cent. above the present Department of Employment adjusted count of 14.8 per cent. or the unemployment unit unadjusted index figure of 21.5 per cent. The unemployment figures are disputed right, left and centre by people who are competent to judge such matters.

The debate is important not only for what may be said but also for the earnest, considered response of the Minister on behalf of the Government to the need for constructive strategic policies and action to promote increased economic, productive and socially acceptable employment in all regions of the United Kingdom. I emphasise that it must be economically productive and socially acceptable employment. I listened to the remarks of the noble Lord, Lord Harris of High Cross. I have the greatest respect for academics and theoreticians in any subject; but I suggest with respect that the noble Lord asks the practitioners what they have to say. He should hear what the CBI, the Engineering Employers' Federation and the construction industry employers' federation have to say about the market economy and theoretical approaches to the economy.

I wish to make a few observations in this crucial debate. It is crucial because if we do not soon see active government policies to deal with the critical unemployment among blue collar and white collar workers—the artisans and the professionals—we are heading for an upsurge in social unrest of the kind not seen in Great Britain since the 1820s. That is not a wild statement on my part. Similar views have been expressed in current press statements and in this House, and in relation to what is happening in Germany where high unemployment is beginning to bite.

I propose three important elements for considera-tion in relation to any proposed employment strategy: pronounced regional structures and developments; factual and open discussion of the relevant data concerning unemployment; and genuine policies to foster and forge the positive strengths of active social partners working together at all industrial and commercial levels.

I recognise that the world is changing with great rapidity. Today the framing of a successful economic strategy for the United Kingdom and for the 11 distinctive regions of the United Kingdom requires new and imaginative approaches. There is increasing internationalism in financial institutions, foreign investment and speculation, production techniques and trading organisations. Those changes demand global vision, national objectives and effective local action.

Regional disparities in economic performance and in general standards of living are well established in Wales, Scotland, Northern Ireland and the other officially delineated regions of the United Kingdom.

In order effectively to cope with the various problems of high and chronic unemployment, business failures, repossessed homes and a decline in manufacturing investment, there is an urgent need to set up publicly accountable and representative regional development bodies in the United Kingdom. The aim should be to transfer responsibility for distinctive regional issues from Whitehall to the respective regional bodies.

Noble Lords may ask why we need to decentralise regional functions, what functions the newly established development bodies would have and what organisational form the regional bodies should adopt. That requires to be debated at length and agreed. But it is a fact that we must accept in principle that regional organisation and decentralisation is urgently required as far as tackling unemployment is concerned.

There is no disputing the main advantages of decentralisation. Regional development bodies could be better able to champion their own regional interest with more vigour and understanding than might be expected of Whitehall. These are among the many factors which should give the respective regional representatives and communities a greater sense of involvement and accountability. That is essential for any development that is to be competitive—the local feeling of involvement and accountability. Regionalism should develop a spirit of self-reliance in finding relevant and effective policies and solutions to regional problems.

I should like to add that the basic tenet of what I have to say is enshrined in that much acclaimed word "subsidiarity". Subsidiarity, as I understand it, is not to undertake centrally what can best be done at local level. Another aspect is that all social activities should be to help members and never to absorb or destroy them. That point was referred to by the right reverend Prelate who spoke in this debate.

There is substantial discontent with the way the European Community funds for local and regional development are currently administered throughout the United Kingdom. The most serious criticism concerns the issue of additionality. A related problem is that the EC grants to local authorities to support infrastructure projects cannot always be spent because of expenditure controls imposed on regional areas by the Government at Westminster. The noble Lord, Lord Mason, made a reference to this aspect of regional matters and the need for capital expenditure to be used in that direction.

There can be little doubt that reducing regional disparities in unemployment would greatly help reduce inflationary pressure and the high fiscal expenditure on social welfare payments. Not only is this a morally sound and constructive use of public funds; it is also a more equitable way to provide the kick-start required to drive us out of the morass of recession that we are in.

Many of our major corporate institutions are regionally based. These include the CBI, the chambers of commerce, employers' federations, finance and building society organisations, educational and professional organisations and the trade unions. They know how to get on with the job so far as regional dynamics are concerned.

I close with these remarks. We urgently need a regional policy framework. We require a clear understanding of the employment problems and the way to prevent the sheer waste of valuable human resources. I ask the Minister whether it is time that the Government established a mechanism within which the social partners could develop a consensus over the key economic and social policies required to promote employment in the regions.

6.4 p.m.

Lord Elibank

My Lords, this debate on unemployment has turned largely on an attack on and a defence of the Government's employment policies. That seems to me wholly right because to an overwhelming extent employment will depend upon the economic status of a country at a given time. When that country is economically buoyant, employment will be high. When it is in depression employment will be low. It is questionable how far a government, however benign, can buck that particular trend.

There have been a number of suggestions as to how the Government might act. Most of them fall into the category mentioned by my noble friend Lord Joseph as requiring the expenditure of money. That applies particularly to infrastructure projects. We are faced with an enormous budget deficit. Expenditure will be extremely difficult and will have to be very closely supervised. Money can be spent only on what is as near as not a guaranteed winner.

One guaranteed winner that has not been mentioned much in this debate, perhaps for good reason, is training. When any sort of upturn in the economy comes, we shall need a fully trained workforce that can compete with our competitors in the Western world. We are constantly told that other countries, particularly Germany and Japan but others as well, have a much better trained workforce, particularly in the areas of technology and craft-smanship. It is clearly to our benefit to spend whatever resources we can spare on training our workforce for the future.

That is not devoid of problems. To take a young person, or even a middle-aged man or woman, put them on a training course and say to them—or conceal from them—that at the end of that course there will be no work is a very difficult situation. If one treats it with total honesty, one is left with the problem of motivating people to start on a course which seems to have no obvious destination. Particularly to the young, a month ahead is a long time and six or nine months ahead is an eternity. Nevertheless, it seems to me that if limited funds are available, that is the best possible use that could be made of them.

One thing we can do is not add to the workforce more than we have to. Until fairly recently we were told that we were dealing with an ageing workforce and that if we were to maintain the economy of the country (and incidentally pay our pensions) we would need to recruit large groups of workers who had not been there before. The two favourite categories were married women and old-age pensioners.

Not for a moment do I wish to deny anyone the opportunity to join the workforce if a job is in sight. But that is rather different from actively encouraging people to come in at a time when there are not enough jobs for those at present available for work.

I should like to spend a few minutes on a subject raised by the noble Lord, Lord Rochester, and dealt with at greater length by the noble Lord, Lord Redesdale; namely, the future. In the past few days we have seen thousands of employees of banks and car firms turned out of work or threatened with unemployment. With the best will in the world, can one foresee that in the near or even medium-term future those people will be able to get back into employment? Their jobs have fallen because they have been superseded by technology of one sort or another.

We all pay lip service, or indeed give genuine feeling, to full employment. That is measured by what we consider to be a normal working span; namely, a job from nine to five through the day and for 40 or more weeks in the year. I should like to suggest that perhaps that is a dangerous way of proceeding. Full employment, as we talk of it, as a theory will not return to this country or indeed to the Western world. If you try to put some sort of figure on it —it can only be the wildest guesswork—it looks as though in this country in times of recession something like 3 million people are unemployed; but in times of boom and economic prosperity that figure would drop to perhaps 1 million. But averaged, it still leaves a figure in the ball-park of 2 million members of our society who will not work at any given time. Your Lordships can of course choose your own figure rather than use 2 million, but I would suggest that it is a high figure —and perhaps much higher than has been contem-plated in this debate by some noble Lords.

If this is true, or if anything like it is true, how do we grapple with the problem? There seem to me to be broadly two ways. One is to acknowledge that the depressed members of our workforce will simply never work. That depressed level may change a bit in name but the numbers will remain about the same. For most of their active life these people simply will not have a job, in which case any training must be directed towards happy occupation time rather than gainful employment.

The other way to tackle the problem is to say that there is a finite work cake in the nation but this is insufficient to maintain all our workers in full employment, as I have described it, and therefore it has to be shared out. That can be done in a variety of ways. One could insist on shared jobs; one could insist on retirement at a very early age, 50 or younger, for instance; one could insist on long and frequent sabbaticals. When I say "insist on", this could be done by persuasion or by policy, but in the last analysis it would be done by government regulation.

It is important to direct our minds towards this and not to take the rather facile view that, if the economy picks up and the Government's policies are right, then full employment will follow as night follows day. As long as we keep on thinking, and indeed planning, along those lines the points that I have mentioned to your Lordships will not receive proper discussion.

6.12 p.m.

Lord Macaulay of Bragar

My Lords, may I first apologise to the noble Earl, Lord Attlee, for my absence from the Chamber when he made his maiden speech? I had hoped to be here but was called out to deal with some other business. However, I look forward to hearing his contributions in the future. I was present to hear my noble friend Lord Ewing of Kirkford make his very powerful maiden speech, concentrating on the problems in Rosyth. Of course, being an ex-Post Office man, it is not surprising that his delivery was first class. I am sure that in the future he will keep up the high standard he has set for himself.

I should like also to thank my noble friend Lady Turner of Camden for initiating this important debate to reflect on the negative economic policies of this Government. The Government do not seem to have any sense of economic direction, either now or for the future. I must say, with the greatest respect to the Minister, that what he said in his opening remarks does not encourage me to think that that statement should be altered. The Government's policy of "Let the market forces prevail" has failed. They must look for a new solution to the economic situation. What has replaced the market forces is a series of hopeful but patchwork policies which will never gel together because they lack cohesion and a sense of economic and social purpose. It is a Mr. Micawber approach to the welfare of this country. This Government must realise, after 13 years in office, that they cannot just stand back waiting for something to turn up and spend their time blaming other people for what is happening to the economy. It is their duty to the country to do something about the direction in which the country is going to move, in the economic sense, which is of course reflected in terms of employment and unemployment. There must be a firm policy involving all sectors of employment.

The policy should involve the employers, as has been said, the CBI and related bodies, the trade unions, economic forecasters, and so on. Getting out of this appalling and continuing recession—the third for this Government and the worst since the 1930s —requires something that this Government do not approve of; that is, a sense of humility that they have failed together with a recognition that the policies that they have been following for the last 13 years have to be cast aside. They must change their approach from confrontation—casting aside the trade unions, which has also been mentioned—to co-operation.

Bandying figures about is all very well, but it does not provide economic solutions. It only reflects what is happening in fact. I am quite certain, although I do not speak on behalf of any trade union, that if the Government were to approach the TUC with constructive suggestions regarding the economic future of this country, they would meet with a good response, not only from the trade unions but also from industry. The figures for unemployment need not be rehearsed again: if the Government do not know about them by now they never will. I have no doubt that my noble friend Lord McIntosh of Haringey will deal with these matters when he winds up for this side of the House.

It would be useful if Ministers got out into the country and captured the feelings of despair and hopelessness which unemployment brings. It has been said by several speakers but I make no apology for repeating it again. It may be a cheap point to make, but I should like to know how many members of the Government Front Bench have ever experienced unemployment. Each unemployed person, looked at these days, is merely a government statistic, costing £9,000 per annum. But to the individual who is rendered unemployed it is a 100 per cent. tragedy, as my noble friend Lord Bruce of Donington said in his very powerful speech. I am not exaggerating when I say that to some people it becomes a living death, a situation where there is no hope. The individual is robbed of his individuality and his purpose in life, along with his sense of dignity and of his worth to the community as a whole. That applies also to his family. It is medically recognised, as my noble friend Lord Bruce said, that such individuals are more prone than those who are in work to illness, including depression. And depression is one of the more serious of illnesses which can in many cases lead to suicide.

The problems are not just economic statistics produced out of a computer; they are serious personal and social problems, the consequences of which all cost the state money. It would be better if the Government applied themselves to producing some form of social policy to try to get people back into work. The Government say that recovery is just round the corner. The problem about that is that you have to be in the road before you can turn the corner. This Government are not on any recognisable economic road; there is therefore no corner to turn.

The newspapers, now almost on a daily basis, record continuing redundancies and failures. As my noble friend Lady Turner said, even the banks are affected. Last week the Royal Bank of Scotland was talking about losing 3,500 from a workforce of about 1,500,000. Barclays are talking of a further 3,000. Even making allowance for the restructuring of the bank following the crazy commercial decisions that were made in the 1980s to bring in bad debts, not all bad debts can be attributed to that. Businesses fail by the day. In Scotland there were 50,000 bankruptcies last year; not so long ago the figure was very small. The banks must look after their own interests. So people go to the wall and their families also go to the wall. Last week, a newspaper recorded 9,000 job losses on one day—20th November—or over a projected period. That is a scandalous figure.

On the surface, Scotland is not so badly affected at the moment because it did not indulge in the financial lunacies of the 1980s. But the danger signs are still there. I should like to spell out a few. The oil industry is now in what we call the maturing stage, which means that the bonanza days are over and the continuing protective employment umbrella will not be there for all time. Figures for tourism are down by 5 per cent. this year, despite an increase in foreign visitors. By "foreign visitors" I mean people from abroad and not from England. What has happened is that the Scottish Tourist Board depends for 50 per cent. of its income on English visitors, and they have disappeared. There is only one reason for that. It is not because they do not like Scotsmen—we are all very nice to the English when they cross the Border—but because the recession means that people cannot afford even to cross the Border.

The future of Dounreay, losing 1,500 jobs, is bleak. In the Highlands and Islands of Scotland a population decline, because of lack of opportunity, is predicted for Caithness and the Western Isles. There is the prospect of young people leaving their homeland. It is important to impress on your Lordships' House that it is their homeland; for wherever it might be, home is home. They are having to leave because the work is not there. The lifeblood of the community is being drained to leave only an elderly population in the villages.

All the work that has been done since the 1960s to keep young people in the Highlands and Islands has been undermined by this Government's deplorable record over the last 13 years. Farming and fish farming, which were to be the hope for the Highlands, are dead or dying. Certainly, they are in decline. I appeal to the Scottish Office—I know that the Minister may not have responsibility for the Scottish Office—to get together with people involved in industry in Scotland and conduct an urgent review of what is happening in Scotland. There is need for a radical approach, including a land use strategy, which we do not have in Scotland, to see what can be done.

The ultimate irony of events in Scotland is that in the south, Scottish National Enterprise, which was a government flagship to supervise the local enterprise companies, is about to reduce its staff by between 80 and 100 people. That is what is happening in Scotland. According to present forecasts 600 jobs a week are being lost. It is a gloomy prospect that I present for Scotland, but on behalf of the Scottish people we must get some action. Not only Scotland but Britain is haemorrhaging economically. At some point a haemorrhage must be stopped, otherwise the patient dies. What the Government are applying is elastoplast when urgent surgery is required.

6.22 p.m.

Lord Ennals

My Lords, I agree very much with the spirit of the speech of my noble friend Lord Macaulay of Bragar. I feel, as he does, angered by the situation. But I want to start by saying that I am not angry at all with our two maiden speakers. Both of them were extremely good. Of course, I knew my noble friend Lord Ewing of Kirkford in another place. He was always pungent, direct and positive, and thank the Lord he is here because we need just his sort of directness, and I know that we shall value it very much. Anyone who comes to this House with the name of Attlee has many friends here. We all have our Clem stories, and I am not going to tell mine, but any relation of Clem has lots of friends in this place.

I should like to thank my noble friend Lady Turner for introducing this debate on a crucially important subject. As a member of the Privy Council—and there are one or two others here—I shared and perhaps had some sympathy with, the view expressed by Her Majesty the Queen in a speech yesterday that 1992 has been a horrible year. It has been a horrible year for her and the Royal Family, and it has been a horrible year for the nation, too. It must have been one of the worst years that we can recall in the history of governments, certainly since the Second World War. When one looks around at the consequences not just of the fearful unemployment and the mishandling of the economy but the mishandling of our presidency of the EC, one cannot help but feel angry. One thinks of the opportunities that have been lost. Normally, the country holding the presidency of the Community tries to solve problems. In this case the British Government have caused most of the problems facing the Community. I find that disgraceful. I believe that the damage may never be properly repaired.

I want mainly to speak from a couple of experiences that I have had in the past two days. Yesterday, as president of MIND, I attended its annual conference in Bournemouth, and a very well attended conference it was. Nearly 600 delegates were there representing local branches of MIND from all over the country. Inevitably, an important subject for discussion was the impact of unemployment and also the fear of unemployment in ordinary people throughout the United Kingdom. As I heard them talk, and as we sat in our study groups, I recognised that it really does affect people all over the country in a way that no other economic crisis has done before.

I shall refer to one example in just a moment. There is the effect upon the male worker who still has his job of father of a family but who no longer has a job of work and therefore loses his dignity in his own home. There is the problem of women workers, particularly if they are single parent mothers and have responsibility for their families, who often plunge into a bed and breakfast type situation because they are unable to work. There are the young people who have never had a job at all. They come out of school, university, or techs, and it is not that they do not try. Some of them have tried virtually hundreds of times to get a job, and they are frustrated all the time. When you are that frustrated you become frustrated with society as it is, and feel angry with those who are in authority.

With the higher levels of unemployment and the higher levels of genuine poverty among those pockets of poverty it is not surprising that social behaviour declines. We have more crime, more drug abuse, and the whole effect upon the quality of life of our people is gravely undermined. I heard the noble Lord, Lord Elibank, more or less saying, "Well, we must just accept it. If we are lucky we will only get a million unemployed. In bad years we will get 3 million unemployed. The average is going to be 2 million unemployed". I do not believe that we can accept that. If that is the best way in which we can manage our society, if we think it does not really matter that 3 million people who want to work are deprived of the opportunity to do so, then there is something wrong in the way in which this Government are managing the economy of the country. It is time for a change. One of the tragedies of this year was that we did not see a change. All right, we have to live with that tragedy, but just put it to the vote now and there would be a different result. I have no doubt about that.

Also with my experiences in mind I want to say that the point has been made that if you have had a mental illness, if you are recovering from a mental illness and want to get back into work, it is much more difficult when competition is greater. With the present levels of unemployment it is difficult for people who have been out of work for two or three years, and who now need to get back, to obtain employment. In the same way, the underprivileged—whether mentally ill, mentally handicapped or physically handicapped —are at a disadvantage. The social effect of unemployment is one that any government must seriously consider.

I spent this morning at the new university of Hertfordshire. I was presenting the awards to those who had obtained degrees in various subjects. It was a lovely occasion. However, I soon realised that this part of the world, which is not used to unemployment at all, is now faced with nearly 9 per cent, unemployment. In the almost sunny uplands (or whatever you call them) of Hertfordshire, in that pleasant countryside, middle-class people are now really suffering from unemployment.

The biggest recent blow to Hertfordshire's stricken economy is the announcement by British Aerospace two months ago that 3,000 more jobs will go in April, and the Hatfield plant will close. There is a university which was also planning to do a lot of retraining of people who were moving, they hoped, from one job into another. They are moving from one job, but there is not another job to move into. Training people is useless if there are no jobs. Therefore, the Hertfordshire development organisation, set up only two months ago by the TEC, the county and the district councils are trying to attract new industry to the area.

There are lots of glossy publications and talk of high-tech industry—there always is—but the reality is that no one knows what sort of business, if any, is going to be attracted to the area. There is an atmosphere of resentment and anger that the Government seem to have no policy to deal with the problems.

I had hoped—and I believe that we all hoped—that the Autumn Statement would be the beginning of a new drive for jobs and development in the construction industry, and so on. As we reflect on the Autumn Statement, I believe that all the prospects are that unemployment will increase to 3 million. Some people say that we must expect that and not worry about it. I believe that the real figure is over 4 million. Of course, if enough changes are made in the unemployment calculations the figures can be massaged downwards. The Autumn Statement makes no forecast on the rise in unemployment. According to City forecasters, Goldman Sachs, unemployment will rise to 3.2 million by next year. Growth needs to be above 2.5 per cent, to have any impact on unemployment. With the growth of only 1 per cent, forecast for next year, unemployment will continue to rise.

I know that the Prime Minister is travelling around Europe in an endeavour to put together a package for the Edinburgh summit. But unless the British Government are prepared to put something into that package and are prepared to give something of a lead, which we have not seen at all during the presidency, then the situation, not only in Britain but also in Europe, will get worse rather than better. I hope that when the Minister replies he will say something more positive, in terms of government policy, than he said in his introductory remarks.

6.32 p.m.

Lord Alport

My Lords, I thank the noble Baroness, Lady Turner of Camden, for giving us this opportunity to consider the unemployment problem. I note, as the noble Baroness did, that this is the third time that your Lordships have discussed this subject in about eight sitting weeks. The reason for that may be that for many Members of this House, their consciousness of the social problems which unemployment produces derives from the years of industrial unemployment in the 1930s and the memory of the period after 1945 when full employment was the main plank of the policies of all parties.

It is difficult to imagine in those years any politician announcing that unemployment was a price worth paying for anything or, as more recently, forecasting that unemployment would increase without apparently producing any convincing ideas as to what should be done about it. Of course, the unemployment problem today is different from that in the 1930s. It is not one which has its devastating impact mainly on one part of the country or on one particular industry, except in the case of the coal industry, if 31 pits are to close. Unemployment is a problem which affects the service industries as well as manufacturing; executive management as well as workers; and people of all ages between 16 and 65.

I wish to focus my remarks on the problems of the part of England in which I live; namely, Colchester. Until now that has been an extremely prosperous town. Recently when I have asked after someone whom I have not seen for a long time I have been told, "Oh, he is all right; but, you know, he has lost his job". If I ask after a youngster I am told, "Oh, we have him at home. He is unemployed". The figure for unemployment in the Colchester "travel to work" area in June 1989 was 2,809. In October 1992 the figure was 8,595, which is 10.7 per cent, of the workforce.

Significant though they are, those figures do not tell the whole story. I reckon that the lives of between 20,000 and 25,000 people—wives, families and parents—are affected directly or indirectly by unemployment in my part of the world. Beyond that, in closely knit communities like mine, people know what is happening to friends and neighbours and fear that their turn will come next.

I recognise that because of redundancy payments and the present levels of social security, the degree of poverty and real destitution which we saw in the 1930s are not so evident today. But that is relative. There is an increasing divide between the standard of living of those who are in employment and those who cannot get a job. That has extremely serious social consequences which will grow with higher unemployment in the future.

As regards Colchester and North Essex, between the low point of April 1990 and September 1992 unemployment increased by 171 per cent. It is estimated that it will grow by a further 19 per cent, by December 1993, as compared with 12.5 per cent. for the rest of the United Kingdom. There are 299 vacancies at the Jobcentre and 22 vacancies at the careers office. I visited the Jobcentre last Monday. I was greatly impressed by what I saw. I was impressed by its efficiency, its understanding of the problem and the extraordinary contrast between the atmosphere of its working areas and the dreary inhumanity of the old labour exchanges. I was impressed also by the stream of people signing on and the variety in age, class and sex of those seeking help and advice. On average there are 313 new claims for benefit each week. Temporary Christmas employment has dried up. Local manufacturing firms are operating at 80 per cent, of capacity. The construction industry has been particularly hard hit and in Colchester there is the additional problem of finding jobs for soldiers who have been made redundant from the garrison.

I have taken Colchester as a kind of laboratory specimen. I know that the same thing is happening throughout Great Britain. My argument is that economic revival depends on giving people the confidence that they will not lose their jobs tomorrow and those who are unemployed must believe that they have a chance of finding a job in the foreseeable future.

It was put rather well in a review of my noble friend Lord Skidelsky's second volume of the life of Maynard Keynes. It stated: Acutely aware that economics is more than algebra, that it is driven by the hopes and fears of people, he understood that Britain could not return to Victorian laissez faire, the Gold Standard and all". Fifty years later in the 1980s all the same mistakes have been made with almost exactly the same results. Until the public sees that unemployment is beginning to recede, the Government will be able to do nothing to halt the decline of the British economy. Some people may become richer but many will become poorer. Nothing will restore the confidence of all classes in the Government except for falling unemployment.

Ministers and financial experts may speak in terms of macro-economics and see a solution in 10 years time because of the effects of the GATT agreement or in other politico-algebraic formulae. No doubt there will be long-term solutions. But as Keynes said, in the long run, we are all dead.

I have no doubt that what is required today is a planned programme of public capital investment, but that must be accompanied by a clear statement that reducing unemployment takes priority over every other objective. Many of your Lordships will remember the galvanising effect of Roosevelt's New Deal in the 1930s. As a student, I happened to visit the United States at that time. I sensed the extraordinary revival of hope in that wonderful country.

Public investment means mainly support for the construction industry and for the development of the infrastructure of the whole country; for example, buildings, houses, utilities, railways, roads and the environment. The construction industry has special characteristics. It is labour intensive. Its operations cover a large number of skills. It employs both skilled and unskilled workers. I believe that employers should be encouraged to take on young workers to learn their trades on site by subsidising their wages. Construction feeds into a large number of other industries. It provides work for small firms through sub-contracting and covers the whole country.

Such investment represents a legacy for the future. It may mean higher taxation, but the Chancellor has promised us that anyway. It means a higher PSBR, but increased unemployment will make that inevitable. It will mean that the Government must shake themselves free of the economic and moral fallacies of the 1980s. They must make the attack on unemployment their overriding priority. We want a new deal for the 1990s. Then, when I next go to the job centre, I may find that there is no one there except a sympathetic and dedicated staff.

6.40 p.m.

Lord Desai

My Lords, we have had a good debate this afternoon thanks to my noble friend Lady Turner. We heard the usual lame excuses from the government side: "It is not our fault. It is happening everywhere. We have lots of inward investment. We had growth once before. We have lots of employment", and so forth. The way the calculation of the number of those employed has been altered exaggerates the growth; the way unemployment is calculated underestimates its growth. I wonder what the technical reasons are for that. But despite that we have a high level of unemployment.

Inasmuch as the debate today concerns the case for a strategy to tackle unemployment, let me say immediately that the Government have no strategy at all to tackle unemployment. The Autumn Statement confesses that at the end of the day unemployment will rise in 1993. It is strange that, when facing an election, the Government can quietly let the PSBR slip from £10.5 billion to £14 billion, as it did before 1992, but when the election is far away, once again fiscal orthodoxy becomes the religion. They maintain certain disciplines in regard to whatever figures they fix for total spending.

The consistent political economic policy the Conservatives have had over the past 15 years is not fighting inflation; it is not fighting trade unionists; it is not going for growth; it is to be re-elected. As long as the election is far away they claim all kinds of principles; for instance, "We must bring inflation down". The Government have twice doubled the rate of inflation; they have twice caused a recession; they abandoned fiscal discipline in the most profligate manner possible between 1986 and 1989. They adopted firm exchange rate strategies and abandoned them gaily as though they did not matter. Simultaneously we are told that low inflation is the only guarantee for long-term jobs; and when the Government abandon the exchange rate strategy we are told that we will still have growth; it does not matter because inflation will not happen.

We must abandon the Government's meanderings. Sadly, while they are in power—especially the present personnel in the Treasury—there is little prospect that confidence will be restored. There have been no dramatic gestures to indicate that they understand the seriousness of the problem. However, we have heard some interesting observations and good theoretical suggestions today. Perhaps I should turn now to those. By good theory we may obtain a good strategy; we shall certainly not obtain a good strategy otherwise.

The noble Lord, Lord Harris of High Cross, will not be surprised that I disagree with him. In a sense it is not so much that we do not know the category of frictional unemployment, voluntary unemployment or structural unemployment; it is that we have lived through 25 years when, despite the problems of people not being willing to work, of rapid technological progress and of everything shifting around—that is the nature of capitalism; constant changes are always happening—we not only experienced low unemployment but also low inflation.

Compare the figures for unemployment and inflation for the 1950s and 1960s—the bad old Keynesian days with no fiscal responsibility. Inflation was lower than in the great and responsible monetarist days of the 1980s and employment was high as well. Let us not deride poor old Keynes. Let us not say that somehow he was in favour of voluntary unemployment. He was trying to show that the definition of voluntary unemployment, as he stated it, was insufficient to explain unemployment in a capitalist society because it was not open to individuals to negotiate the real wages. Cuts in real wages do not increase employment. Total aggregate demand increases employment. Despite everything that has been said by monetarists of various hues, I see no reason to abandon that belief.

However, we may have a change. Globalisation of the world economy has put certain limits on Keynesianism in one country and we must ask ourselves how far government action here can go and how far we need co-ordinated action among different countries. That is an important point. It is not that Keynesianism is no longer valid, but perhaps it needs to be practised at a European rather than merely at a UK level.

I believe that even at the British level much more can be done to reduce unemployment; and much more should be done. The dogma of the way the PSBR is calculated should be abandoned and we should introduce the rule that as much borrowing as can be profitably employed should be indulged in as long as the Government can borrow at a rate below the rate of return on public investment. I believe that there are many such investments which could be pursued and therefore we should abandon the false accounting of PSBR which mixes up the category of current and capital revenue.

Having said that, I believe that we must inaugurate a full-throttled expansion, especially in the construction industry and the public infrastructure. Those are actions that must be taken when private investment does not voluntarily come forward. The problem is that we temporarily have excess savings. People are not spending their money. If they are not spending their money, let us borrow it temporarily and spend it for them until they go out and spend it on their own. That is perfectly all right.

I believe that that policy would be financially prudent. Indeed, as many noble Lords pointed out, since unemployment costs £9,000 per unemployed person, not to mention the multiplying factors of unemployment, in order to reduce the PSBR the right strategy is to increase expenditure and not to cut it.

Beyond that, I believe that there is a great case— and this should have been done long ago, yet even now I find the Government dragging their feet—for the Delors' plan of co-ordinated reflation at the European level. The point of doing it at a European level is not so much in regard to subsidiarity or non-subsidiarity, but that a single country in a large area where there is free capital and labour mobility cannot keep capital within its confines if it is seen to be following policies which will be harmful to profitability. A large area like Europe can do that. Therefore we can pursue Keynesian policies at a European level; and we should do so. Figures such as £50 billion or £60 billion become unimportant when compared to the benefit of reducing our total unemployment in Europe from 17 million down to 8 million. If we halved unemployment we would gain more than £50 billion.

In conclusion, it has been a good discussion. There are limits to Keynesianism in a country. Even so, there is a policy to be pursued at a European level which is perfectly feasible and which should be pursued with the utmost speed.

6.50 p.m.

Lord Jenkins of Putney

My Lords, my noble friend Lord Desai said that this has been a good debate. His own contribution to it certainly assisted in that. There is a great deal in his speech which needs to be dealt with. It may be that some noble Lords agree and that I am not alone in that belief. Let us hope that there were some open ears even on the Government side.

The name of Sir George Alexander may ring a faint bell in the minds of some of your Lordships. He was an actor-manager at the turn of the century. He was a good actor and manager. The breed is extinct now. He said something which has stayed in my mind over the years since I first heard it. He was primarily a manager at the time when he said: The economy of the theatre is founded on the assumption that the actor is normally unemployed". That is true and it was true then. How else can one run the economy of a theatre other than to have a group of people from which one can pick a name from a book and say, "Yes, I'll have him". The chances are that he is out of work.

That was an aspect of casual labour which existed not only in the theatre. There was domestic service and casual labour in the docks. My fear is that if the Government are allowed to continue as they are, in a year or two's time we shall return to casual labour. That is something to be avoided.

I tried to do something about it in the theatre because casual labour is very difficult to avoid. I negotiated a three-year contract with the Royal Shakespeare Theatre. There has never been a longer one in the theatre. I do not know whether it is still using it. Unhappily, that type of contract did not grow. The only area in which there is any reasonable degree of security of employment in the theatre now is in the BBC where there is drama repertory. One can possibly stay in that; but one does not have a lifetime job. There is a period of employment which is likely to be renewed.

I am going into this matter not to keep on about actors and their problems, but to say that if we are not careful we will slide into this kind of situation. The pool of labour was so large and people so desperate for work that they queued up for it. One could pick whom one liked for a job that needed to be done. It was not a healthy situation and we do not wish to return to it. However, some things are happening now which in their own way are equally alarming.

As regards redundancy money, what happens so often is that after a while the recipient becomes desperate because he cannot get a job. He puts the money into a little business and in a couple of years it goes bankrupt. That explains the huge rise in bankruptcies which has occurred lately. It affects mostly small people and small organisations. I go up and down Putney High Street quite often. The ownership of the shops changes hands as one after another the businesses go bankrupt.

We are heading into that situation. It is not merely a question of the Government managing the economy properly. We are running into a position which is getting gradually worse. The situation cannot be covered up by optimistic remarks such as seeing recovery around the corner. Recovery is not there until some quite drastic action is taken. My noble friend Lord Desai has indicated some of the things which need to be done, and I shall not repeat them.

I do not believe that recovery can be effectively seen in this country while the Government are so heavily centralised and while our decision-making is taken more and more at the centre. The theory of both sides of Parliament is always that there should be decentralisation. We talk about it. The Conservative Party was the kingpin of that theory. It was going to decentralise everything and all decisions were to be taken locally, but they are not. The situation is quite the opposite. Nowadays decisions are taken more and more centrally.

That structural question is at the heart of our failure to recover economically. We are simply not using the talent, the initiative or the possibility. We have not completely removed power from local government, but centralised it too much. We have limited the powers of local government, but we should enlarge it. We should face the question of the establishment in this country of a regional form of government with authorities which have the power not only to spend money but to raise it. Regional government should not be subject to total control from a central point. There must be some control because central government has duties which it must continue to carry out.

Our problem is that there is too much centralisation. We need to get rid of it. Even if Labour comes into power, it will need to devolve the machinery so that the initiative of people at government, academic and technical levels can be free. We are held down by gross centralisation in which decision-making involves looking over one's shoulder and considering whether one can do this or that. Sometimes that is given as an excuse because people do not want to carry out certain functions. If people are given the power and authority to do something and they do not do so, they cannot then say that they blame central government. Sometimes too much blame is placed on it. The only way to get rid of that is for central government to say that local government can get on with it within limits laid down.

Perhaps I have ranged a little too far in this short debate. Those are the matters which we should begin to look at. We must consider whether our structure of government is one which can release the natural energy of our people. If we can do that in the ways that I have suggested and which have been dealt with in greater detail by my noble friend Lord Desai, we can tackle the problem. However, if we carry on in our traditional way, I very much doubt whether we can do so.

Before I sit down perhaps I may make the traditional noises about maiden speakers. I was not in the Chamber when the speeches were made. I also sincerely congratulate my noble friend Lady Turner for initiating this debate.

6.57 p.m.

Baroness Seear

My Lords, we have had a fascinating review of many macro-economic policies. I would dearly love to follow them up but I am not going to, much as I would like particularly to follow what the noble Lord, Lord Desai, said. I hope that we shall look again very carefully at the points he made—which I believe no one else had dealt with—for tackling some of the problems at a European rather than a national level.

I wish to follow the noble Lord, Lord Alport, who concentrated on what can be done immediately. I stress the word "immediately". As he said, a great deal of the problem is that of confidence. Nothing is going to happen so long as the current mood of near-despair continues. Therefore, it is very important that the Government take the kind of action which can show results quickly. That is not the only action which they need to be taking. They should concentrate immediately on things which can begin quickly in order to produce results.

As other noble Lords have said, one can start very easily with housing. The plans are there; the money is there with the local authorities and the demand is there. As so many other noble Lords have said, the construction industry is a very good way to begin. That industry is a motor to get the economy going. There is a great deal of unemployed labour in that industry. There is work that needs to be done, and there is a large multiplier effect once the construction industry gets under way.

The money is ready for housing and the other macro-construction policies and infrastructure issues to which we have called attention so often. In a previous debate I referred to the London-Heathrow link where I understand private money is waiting to be used. It is a scheme which is ready to be put into action and that can be done straightway.

I believe that there is widespread agreement that the construction industry is a first-class starting point if the Government can pick those schemes which can be put into operation quickly so that we get the beginnings of the signs of recovery and people who had not previously expected to get jobs beginning to do so. That would be a very good way of starting.

I am surprised that so little has been said this afternoon about small businesses. I refer both to the extent to which small businesses are collapsing and to the potential for increasing employment and earnings by the establishment and maintenance of small businesses. We have talked about this often; but some things could be done straightaway. What about reducing the uniform business rate? A great many small businesses would be very encouraged if they knew that that level of tax on them would be reduced. Perhaps we could also do something about the debt problem of small businesses. Again, we have talked about this often. Surely it is not beyond the wit of the Government to find a way in which suppliers, government departments and local authorities could be forced to pay their bills to small businesses. That, combined with a cut in the uniform business rate, would be very helpful to many small businesses. It could be done, I should have thought, if not overnight, very quickly. I must stress the importance of speed as we begin to see results if we are to give people encouragement that there is a return to at least the possibility of prosperity.

There also needs to be more help given to the establishment of the kind of small business that has a hope of survival. Many things could be done in that respect. We have learnt a lot about small businesses, about what makes them successful and about what does not. The enterprise allowance scheme did a very great deal. There are many people who could give advice and help. The banks are still willing to give advice and help; but we need a real drive to get those small businesses with a future going again. Surely that is something that the Government could do straightaway.

Furthermore on the point about what could be done straightaway, I refer to the problem of unemployment among school leavers. The number of young people who do not have employment, who get into the habit of being without it because they have never known it, and who do not see any prospect of ever getting it is catastrophic. I have recently pointed out in a debate the possibility of persuading employers to take on two school leavers for each job and using the half time for training. That would be a first-class way of providing those youngsters with training at the age and stage at which they need it. If the Government are not prepared to go that far, they should at least say that youngsters between the ages of 16 and 18 must have two days' off each week for training. One cannot expect employers to pay the whole cost; but if the Government were to provide a subsidy to employers for that purpose, it would be money extremely well spent. I shall not enlarge on the surrounding problems of youth unemployment, but your Lordships are all too well aware of them.

Those are some of the short-term things which the Government could do—and could do quickly. However, I should also like to draw attention to and to stress the longer-term problems because we are moving into a new phase. Although I may be premature in saying this, thank goodness that from recent news it looks as though the GATT round will succeed. It must succeed and the remaining obstacles must not be allowed to block it. It opens up world trade on a global scale. This is an opportunity, but it is also a threat if we are not able to take advantage of the opportunity.

Many noble Lords, including my noble friend Lord Beaumont of Whitley, have talked about the effect of increased technology, but increased technology also means the disappearance of work. So it does maybe if one can find it in this country, but if one is talking about the global economy, it is a nonsense to say that we are running out of demand. In the global economy, the world is full not just of wants, but of needs of the most basic kind. There are huge markets m the global economy for those who can take advantage of it. That is the point: for those who can take advantage of it. We are told—I do not know how accurate the figure is—that if the Uruguay Round is successful, it will open up additional world trade to the tune of 200 billion dollars a year. That is an enormous increased opportunity, but where will we be in the face of these opportunities?

One of our overriding problems is our tremendous backlog of untrained, unskilled people. There will not be work in this country for those people. Except for the unskilled jobs which are fixed in the country, unskilled work is now going overseas to a large extent. We all know companies—and this is right in terms of the development of the global economy—which are increasingly sending the unskilled aspects of their work to other countries. Fewer and fewer unskilled people will be required in this country.

It is because for decades we have failed to train in this country that we have a heavy burden of untrained people. I beg the Government to make a real and major attack on reducing the number of people without skills. It is no good the Minister telling me, "We are leaving all this to the training and enterprise councils", because the TECs are training for the jobs that they can foresee in the short-run in their own particular areas. That is fair enough from the point of view of the TECs, but it does not begin to tackle the problem of what to do with the backlog of untrained people. Only a mammoth government scheme will ensure that we reduce those numbers and that we are therefore ready to take advantage of the opportunities of the global economy. If we do not, we shall not only have unemployment in the short run but, because of our large number of unskilled people, even when the economy picks up in other ways and in other countries, we shall still have people for whom we cannot find any work. That is something that only the Government can tackle. The TECs cannot do it. It is not their job and they do not have the finance to do it. Incidentally, perhaps the Minister will also give us an assurance that the TECs will get more not less money at the present time. But even so, they will not be able to deal with the backlog of unskilled people.

Now is the time to do it. Now is the time to bring together the people who can see how to do it and who can put the schemes together. We are not talking only about youngsters, but about the backlog of adults in the labour force who have not been trained and who therefore cannot be used. I have gone over my time, but I beg the Government to look at this as a matter of the greatest possible urgency.

7.7 p.m.

Lord Mclntosh of Haringey

My Lords, we from these Benches make no apology for raising the issue of unemployment in your Lordships' House again. Although it was debated only recently, it will be debated again in the near future and will continue to be debated. We shall continue raising it until we have some spark of recognition on the part of the Government of the seriousness of the problem.

This has been a valuable debate, not least because of the notable contributions of two maiden speakers; my noble friend Lord Ewing of Kirkford, who made a passionate yet rational defence—incidentally, without notes—of the Rosyth dockyard, which he knows so well, and the noble Earl, Lord Attlee, who also spoke effectively about a subject which he knows well.

The debate is also noticeable for its timing. We are within a few days of the 50th anniversary of the publication of the Beveridge report on social insurance. It was very nearly 50 years ago that Beveridge wrote a powerful book, Full Employment in a Free Society. I wonder whether there are many economists or political thinkers who would dare to write a book about full employment in a free society today. It seems to me that too much of our establishment—I mean particularly the Government—has given up on the prospect of a successful economy with anything approaching full employment. The statistical appendix to Beveridge's book was written by Nicholas Kaldor. He assumed—it was thought at the time to be very pessimistic—that there might be an underlying level of unemployment of 5 per cent. That was thought to be a disgraceful yielding to a concept of an unacceptably high level of unemployment. Anyone who thinks that in present conditions we can get back to 5 per cent, unemployment—real 5 per cent, unemployment; I am not talking about the massaged figures which the Government present to us today—would be seen as a wild optimist rather than a pessimist.

We have had a good deal of talk about Keynes. I shall certainly be returning to the issue of Keynesianism before I conclude my remarks but I wish to refer briefly to the speech of the noble Viscount, Lord Ullswater, which expressed views—I am not attributing any of those views to him personally—which I found unbearably smug. The way in which the noble Viscount felt it possible to express the Government's view that everything will be all right in the end—dawn on the Cambrian hills, one might think, going back to Lloyd George—I found unbearable. We did not, I admit, have any of the talk about unemployment being a price worth paying. We did not hear the phrase, "If it's not hurting, it's not working", which we heard from Cabinet Ministers only months ago. But we still have the claim that unemployment will be all right because we are getting the rest of the economy right. Getting the rest of the economy right when we had a decline in growth of 2.5 per cent, in 1991, a decline of 1 per cent, in 1992 and when there is a projected rise in growth in 1993 of 1 per cent! Anyone who has looked recently at the Treasury's record in forecasting will know how little credibility can be given to that figure.

We had a decline in fixed investment of 10 per cent, in 1991 and a decline of 2 per cent, in 1992. The forecast for 1993 is a rise of 0.25 per cent. The Government are certainly hedging their bets. We have a trade gap at a time of recession of £12 billion this year and a government official forecast of £15.5 billion next year. We have a public sector borrowing requirement—that has been pretty heavily massaged as well—of £37 billion. And of course we have unemployment at almost 3 million, according to the Government's figures, and certainly much nearer 4 million in real terms.

The most recent example of the Government's statistical sleight of hand with unemployment figures was the quiet redefinition of full-time work from being 24 hours a week to 16 hours a week so that those who used to be on income supplement now, if they have children, have to be on family credit. The effect is that those who are in so-called full-time work of less than 24 hours a week are not included in the unemployment statistics. But no one can tell me that they are not looking for full-time proper jobs that would pay them properly. To that extent, even after all of the changes that have taken place to disguise the real level of unemployment in recent years, we have a further example of it now.

Looking at the Autumn Statement, I question not just whether the Government are succeeding in attacking unemployment but whether they are even trying or whether they are even pretending to try. When I look at the Autumn Statement I find only one reference to unemployment: Low inflation is the key to sustainable growth and a lasting reduction in unemployment".—[Official Report, Commons, 12/11/92; col.991.] That statement is most patently untrue. It may be argued plausibly that low inflation is a relevant consideration in sustainable growth and a lasting reduction in unemployment. But to say that it is "the key" flies in the face of all economic experience in recent years. Yet the cost of unemployment both in human and economic terms is immeasurable.

There has been a valuable thread through our discussion about the social effects of unemployment. It was started by the right reverend Prelate the Bishop of St. Edmundsbury and Ipswich, who spoke effectively about human dignity. The noble Lord, Lord Beaumont of Whitley, spoke of measures to alleviate the effects of unemployment. My noble friend Lord Dormand of Easington spoke of the long-term unemployed and my noble friends Lords Macaulay of Bragar and Lord Ennals spoke about the effect of unemployment in terms of health and sickness.

Beyond all that must be the economic effect of unemployment. What I accuse the Government of is a failure of nerve. I accuse the Government of failing to recognise the possibility that we can have a successful economy in which there is full employment. They seem to think that there is an equilibrium which can be achieved at a level of under-employment at about 8 per cent., 9 per cent., 10 per cent or even 11 per cent. They seem to believe—sometimes it is because it is convenient to believe so—that these matters are best dealt with by versions of inaction, which is how I describe monetary policy. Incidentally, I thought that the noble Lord, Lord Harris of High Cross, had a certain amount of nerve when he described Adam Smith and Hayek as being unfashionable. The point is that Adam Smith, Hayek and Friedman—Adam Smith to a lesser extent because most Adam Smithism is one-eyed—have had a very good run for their money in the past 10 years. And much good has it done us, either in this country or the world as a whole.

The Government seem to think that one can deal with these matters by high-level monetary policies rather than by intervention. They think it is lovely for them because there is no bureaucracy. There is no public cost. And no public action is required. It is no use, under those circumstances, their wringing their hands. The noble Lord, Lord Boyd-Carpenter, says that no one is happy about the level of unemployment. If he had said that in the 1930s Harold Macmillan would have rounded on him, because Harold Macmillan did more than say that no one is happy about the level of unemployment. He said that something had to be done about it.

There is an alternative. There is the alternative of work. There is, above all, the alternative of public investment. If that requires that there should be a deficit in the public accounts, a deficit in the public accounts is another word for public investment. It is quite extraordinary that, in claiming in the Autumn Statement to be giving a kickstart to the economy, the Government should at the same time be sticking to the figure of £244.5 billion for public expenditure. It is not just a matter of the public sector borrowing requirement. What they are doing, of course, is taking money out of the economy by the wage freeze for public servants. The public sector borrowing requirement could well have been dealt with by increasing taxation for the better off rather than by making those in the poorest circumstances in our society suffer for the Government's ideology.

It can be argued that a revival of public investment —many of my noble friends have given eloquent testimony to how that could be done—cannot be achieved only on a national basis. I agree. We are going to see a test of the Government within the next week or two. That test will be the response which the Government make in their presidency of the European Community to the proposals by Community officials for a kickstart to the European economy through the expenditure of around £50 billion—I do not know what that is in ecus—as a programme for growth. Unless the Government give their immediate and wholehearted support to that kind of solution on a European basis, then we can have no faith in their determination to do anything about unemployment and the economy.

It is wider than a European issue. It is above all an issue for the Group of Seven. All countries in the Group of Seven except Japan have the same kind of economic and unemployment problems. By the way, that is no excuse for the Government. What that means is that we have a failure of international capitalism. We do not have any confidence that those who adhere to capitalist theory will do anything effective about it. If the Government were really serious they would be taking part with our partners in the European Community and with other members of the G7 in an international New Deal. That is the challenge before the Government.

7.20 p.m.

Viscount Ullswater

My Lords, before I start my remarks, I am sure that the House would like to know that the noble Lord, Lord Underhill, has gone to Westminster Hospital for some precautionary checks and is being well looked after. The Opposition Chief Whip has every intention of taking him home tonight. We should like to join noble Lords opposite in wishing him a very speedy recovery.

Noble Lords

Hear, hear!

Viscount Ullswater

My Lords, first, I thank all noble Lords who have participated in the debate, especially the two maiden speakers. As would be expected for a topic of such universal interest, it has given rise to an interesting and lively discussion. Noble Lords have spoken with sympathy and compassion about the difficulties faced by those unfortunate enough to become unemployed and the problems caused to their families. I do not for a moment underestimate the fears and anxieties of those who are unemployed and their families. The noble Lord, Lord Mclntosh of Haringey, accused me of being unbearably smug. That, of course, is his debating style.

Lord Mclntosh of Haringey

My Lords, I did not accuse the noble Viscount of being unbearably smug; I accused him of expressing a Government view that is unbearably smug.

Viscount Ullswater

My Lords, as the noble Lord was looking so hard at me, I thought that he was accusing me of being unbearably smug. In defence, I have to say that I believe that I have shown considerable compassion for those who are unemployed, and I mean the remarks I have made on many occasions from this Dispatch Box.

The noble Baroness, Lady Turner of Camden, opened the debate by cataloguing a long list of the industries where job losses have taken place or are threatened. One moment she called for a diversification programme for the defence industry, then she went on to say that the Government's greatest folly was their neglect of manufacturing industry. I am sure unintentionally, she did not mention that in the 1980s manufacturing productivity had grown much faster in the United Kingdom than in any other major industrial country. In the 1960s and 1970s, the UK was bottom of the productivity growth league. Now the manufacturing share of GNP remains just under 25 per cent, of GDP. What is more, the UK's share of world trade was stabilised in the mid-1980s after decades of decline. However, costs, wages and profits increased by more than those of our competitors.

The noble Lord, Lord Mason of Barnsley, said that we have to be in there so long as we can compete. Those are important words, because we have been unable to compete. Our increased efficiency was not reflected fully in an increase of market share. It is easy enough to say how many job losses there have been in manufacturing industry, but it is most important that our productivity should increase and be competitive with that of the rest of the world.

The noble Lord also asked me whether there would be a plan to deal with the coal closures. He is probably aware that the TECs have been asked to draw up contingency action plans for all the areas affected, in partnership with British Coal Enterprise and other local agencies. The first six contingency plans, covering the 10 pits in which consultations are now taking place, are a basis for further detailed work; so I hope that he will be relieved to hear that action is being taken.

The noble Lord, Lord Rochester, agrees with me and the Government that inflation is public enemy number one. I believe that those were the words that he used. He also said that he supported Government policy on conquering inflation; but he urged us to make short-term expenditure on infrastructure, transport, roads and housing. I shall come to those matters a little later, because a number of noble Lords mentioned them. However, I am aware that the noble Lord's main interest has always been in training, as was that of my noble friend Lord Elibank who said that with the limited funds available to government, government training strategy was important.

The Government training strategy is to secure a skilled and productive workforce, well able to compete in world markets. That will be achieved through an equal and flexible partnership of the Government, TECs (LECs of course in Scotland), industry training organisations, employers and individuals.

To answer the noble Baroness, Lady Seear, we do not believe that the Government provide the only effective way of training a workforce. We look to employers as being the major investors in training, and therefore in the lead on delivery. Employers spend about £20 billion a year on training. The indications are that they are continuing to invest in the training of their workforce.

Baroness Seear

My Lords, of course I know that, and I agree that a great deal of training has to go on in industry. My point was that there are people beyond the area in which industry will train for its needs who are terribly undertrained. There is a greater government responsibility. A great deal has to be done by employers and TECs, but not only by them. They cannot cover the whole backlog of training which has resulted from decades of neglect.

Viscount Ullswater

My Lords, of course I have to remind the noble Baroness that training undertaken by the Government is limited by the amount that the Government can afford to spend on such a measure. In the new training programmes, the TECs have been given the flexibility for which they were looking. The TECs' budgets remain, in cash terms, broadly the same as they were last year. It would be wrong to say that it is training only that is made use of by those who are unemployed. That denies the work that the employment service does through job clubs. Their results have been remarkably successful.

Lord Rochester

My Lords, before the noble Viscount leaves the subject of training, perhaps he will answer the question that I asked on whether it is true that, in real terms, there has been a 3 per cent, cut in the training budget for 1993-94.

Viscount Ullswater

My Lords, no. What I said was that the TEC budget remains, in cash terms, broadly the same as compared with 1992-93.

Lord McCarthy

My Lords—

Viscount Ullswater

My Lords, I must get on. I believe that eight minutes have already passed.

Lord McCarthy

My Lords, the Minister said "cash terms". That is the point he is making. He is not saying "real terms".

Viscount Ullswater

My Lords, what I said was clear. I said "cash terms".

Noble Lords

Yes!

Viscount Ullswater

My Lords, my noble friend Lord Elibank made a suggestion which I do not think I shall follow him on. He said that married women and pensioners should not be encouraged to join the workforce. We should all be allowed the privilege of joining it. He made some useful suggestions about job sharing and early retirement. On that basis, I cannot agree with what the noble Lord, Lord Jenkins of Putney, said about casual or part-time working. Many people wish to work less than full time. It would be wrong to deny them that opportunity.

We had two fine maiden speeches. The first was from the noble Lord, Lord Ewing of Kirkford, who expressed his wishes for the future of the Rosyth dockyard. Of course I understand his anxiety which he expressed eloquently. Although he would not expect me to give him an answer on that tonight, I am informed that all options remain open. However, I shall certainly guarantee to pass on his remarks to the Secretary of State for Defence.

The noble Earl, Lord Attlee, also "broke his duck", if that is the right way of putting it, by concentrating on a small but important area of the late payment of invoices. He may be interested to know that for some time the European Community has been looking at the problem of late payments. It is possible that the Commission will issue a Green Paper on the subject and the Government will obviously give careful consideration to any recommendations or suggestions that it may make.

It is always a pleasure to listen to my noble friend Lord Joseph because he usually has such good ideas. In this instance he came out with some equally interesting ideas which I know he has spoken of on previous occasions. The idea on which he concentrated was the adaptability of entrepreneurs. He also said that it was not only important to have entrepreneurs in business but also in self-employment. I wholeheartedly agree: it is not just employment, it is self-employment too.

A theme of the Government has been to increase enterprise, to enable people to become self-employed or to set up in business, and thus add another source of choice and opportunity. I believe that the Government have attempted to remove the barriers to that. First are the barriers associated with taxation. The tax system is now simpler and fairer and taxes are lower. The Government have attempted to remove the barriers associated with unnecessary regulation, the barriers associated with outmoded attitudes. All those barriers have been removed and banks have been encouraged to consider entrepreneurs on their merits, not on the banks' perception of them.

Lord Monkswell

My Lords, I thank the Minister for giving way. He said that taxation had been reduced. I think he would wish to clarify that. My understanding is that the overall rate of taxation taken from the British people is no lower now than in 1979.

Viscount Ullswater

My Lords, the corporation tax has been reduced to 30 per cent. for small businesses and income tax has been reduced to 20 per cent. at the lowest level. That is a great reduction on the taxes that the noble Lord's party had in place.

Lord Bruce of Donington

My Lords, does the noble Viscount agree that value added tax has gone up?

Viscount Ullswater

Yes, my Lords, but I was talking about direct taxation rather than indirect taxation, which my noble friend also mentioned and to which I shall speak later.

My noble friend Lord Boyd-Carpenter drew attention to the important fact of the number of people in work. He quoted a figure suggesting that we were on the same percentage rate as Denmark and both countries are higher than any other country in the European Community. My noble friend said quite rightly that we need to bear down on inflation. One way of doing that is, I believe strongly, that the wages councils should be done away with. The need for wages councils has long since disappeared. The system is anachronistic and shot through with anomalies. It is an ineffective way of tackling poverty. Low pay, surely, is not the same as low income. Most low paid do not live in poor households. Most studies of the employment effect of the introduction of a national minimum wage agree that there would be considerable job losses.

My noble friend Lord Skidelsky also supported the abolition of wages councils. He took up the important point made by my noble friend Lord Joseph that some people's wage increases will put other people out of work. That is a fact of life at the moment; that is exactly what is happening. That is why labour is being shed in many industries. The high wage economy which we all want has to be earned and cannot be announced. My noble friend stressed that pay bargaining should be done on a local basis. That has been the strategy of the Government over a number of years. He even encouraged us to form local indices so that the problem would be assisted by that.

The noble Lord, Lord Harris of High Cross, explained for our benefit the two forms of unemployment: the frictional unemployment, which he put in rather better terms than the remarks I made earlier in the debate when I spoke about the sizeable number of people who will always be unemployed, and the readjustment of industries, from industry to industry, as the pattern changes over the decades. There is also the form of voluntary unemployment, with people pricing themselves out of a job or being priced out of a job and, I would even add, pricing other people out of a job.

The noble Lord said that recent inflation had buffeted the economy and universal benefits should be more selective. I should not wish to follow him down that route, nor to follow him on his argument that he made towards the end of his remarks about market clearance of wages. I believe that it would be an unpopular topic to raise at the moment. In my understanding, it would mean that most people should take a fairly substantial pay cut in order to clear the market of unemployment.

Turning to the remarks of the noble Lord, Lord Dormand of Easington, I have argued with him on this subject on many occasions, always in a spirit of friendliness, I know. He brought up the important point which was echoed by other noble Lords and the right reverend Prelate—the loss of respect that unemployment brings to people, including the loss of self-respect. That was also mentioned by the noble Lord, Lord Macaulay of Bragar. The noble Lord, Lord Dormand, concentrated his remarks on the long-term unemployed. My reply is that, of course, the employment service and the TECs, with their programmes, concentrate their work particularly on the long-term unemployed and those who have been out of work for six months or more. As the noble Lord will know, two-thirds of those losing their jobs will find employment within six months. Therefore, it is right that precious national and public resources should be given to those who are being marginalised in the labour force. I used those words in my opening remarks.

Again, when the noble Lord, Lord Dormand, was talking about training, he forgot the good work that is done by the employment service through the operation of the job clubs, which have been very successful.

Lord Dormand of Easington

My Lords, to save time perhaps the Minister will write to me about the Council of Europe report on long-term unemployment, which was one of the most important parts of my speech.

Viscount Ullswater

Yes, my Lords, of course. Those are matters which we consider all the time, but I am happy to agree to the noble Lord's request.

My noble friend Lord Boyd-Carpenter suggested that the levels of taxation should not be higher than they need. He even suggested that the rate of VAT should be reduced. I believe that it is important that tax policy should be as broadly based as it can be. As the Chancellor said in the Autumn Statement, Low tax rates and a broad tax base provide the best framework for the medium term". Again, in order to achieve the reductions we need to be prudent on our public spending. The Government's objective is to reduce public spending as a share of output. Obviously, if we can achieve that we can then discuss tax reductions. I certainly note my noble friend's remarks when he mentioned which tax he would like to see reduced.

It is true that some of the elements in the Autumn Statement did not accord with the principle of this broadly-based tax with no tax breaks. For example, investment allowances have been raised from 25 to 40 per cent. I do not know whether I can go along with the request of the noble Baroness, Lady Turner—she quoted from the EEF report—for 100 per cent, capital allowances. As far as I could ascertain, she wanted that to be prolonged indefinitely. I believe that the part of the supplementary package which was announced by my right honourable friend the Chancellor is strictly time-limited. The idea is that it should not contort the market-place by having one instrument favoured rather than another.

It is always entertaining to listen to the noble Lord, Lord McCarthy. However, I have a feeling that I have heard his speech all before. The noble Lord particularly criticised the Government's use of exchange rate policy. He, and also the noble Lord, Lord Jay, quite stoutly with the benefit of 20:20 hindsight, said we went into the ERM at too high a parity.

Lord Jay

My Lords, I must be allowed to say that I said that many times before we went in.

Viscount Ullswater

My Lords, I am glad there is what one might call a variety of views on the Benches opposite. The noble Lord, Lord Peston, has said from the Opposition Front Bench on many occasions—I would have to agree with him—that the rate was the correct one. However, I do not take that as meaning that the noble Lord, Lord Jay, has not said what he said today on previous occasions.

The noble Lord, Lord McCarthy, again criticised the pay policy of the Government in trying to control pay in the public sector. However, I have a feeling that the noble Lord would want some form of institutional pay policy. That was the impression I obtained from him. I believe he was saying pay needs to be controlled but the way the Government are doing that is not the way to go about it. I believe the noble Lord told the House that the way to deal with the balance of payments is to allow regular, and if possible, out-of-sight devaluations of the currency. The noble Lord, Lord Desai, said we can take the reins off public expenditure and let the PSBR go hang. I now know that is the policy the Labour Party would follow. I find it quite an interesting policy but it is one I should not wish to follow.

I believe the noble Lord, Lord Bruce of Donington, identified himself as being an interventionist. He was genuine, I believe, in feeling he needed to convince everyone—he certainly tried to convince the House—that if there is a strategy, everyone has to be persuaded that there is a strategy. He quite rightly picked on the short-term problems that could be cured by short-term investment, particularly in the housing and construction industries. That theme was picked up by the noble Lord, Lord Mclntosh, by my noble friend Lord Alport, by the noble Lord, Lord Desai, and by the noble Baroness, Lady Seear. I believe the noble Lord is right. I have a great deal of sympathy with what he said and that is exactly what my right honourable friend the Chancellor has just done in his announcement in the Autumn Statement. I have in mind the extra £750 million he has allocated to buy up empty properties for social housing. I also have in mind the £1.8 billion that, over the next few months, local authorities will be able to spend from their capital receipts. That money can easily be put into the housing and construction industries. I am quite certain that it will be.

The noble Lord, Lord Redesdale, talked about structural employment. He also suggested that we should put money into housing and transport. When he talked of his own experience in the North East he made no mention of self-employment, which I believe is an important area. He made no mention of the opportunities self-employment can provide if there are no outlets for employment in that particular community.

Lord Redesdale

My Lords, I did not mention that factor because, as a number of documents state, self-employment in the North East is particularly low. I did not wish to raise that point.

Viscount Ullswater

My Lords, I accept what the noble Lord has said. The noble Baroness, Lady Seear, asked me about help for the construction industry. I have replied to that point. She also asked what could be done to reduce business rates. Under the uniform business rate businesses at least know now where they are from one year to another because the UBR will not rise more than the rate of inflation. Before the UBR was established, the local rating system was set by local authorities who were not at all accountable to the businesses within their areas. At least a national framework sets a uniform poundage and avoids these distortions. It is a much fairer method for business. However, I am sure the remarks of the noble Baroness are perfectly genuine. The funding of local government needs to be addressed. She seeks to withdraw that form of funding of local businesses, which will obviously have to be made up somewhere else.

The noble Baroness also spoke about late payments and the enterprise initiative. She stressed the problems of young people. Youth training leads to the acquirement of skills and to national vocational qualifications. I believe that is what young people should be striving towards. However, the noble Baroness proposed an alternative scheme for employing young people and I wish to consider carefully what she has said to see whether anything can be done in that area.

We have had an interesting debate. I am pleased because it has given me an opportunity to respond to many of the important points and questions noble Lords have raised today. I apologise to those noble Lords whose observations I have not been able to respond to, but I shall read Hansard carefully and write to them. It is not governments who create jobs, but the Government are committed to low inflation and sound public finances—policies that in themselves lead to increased employment. The Government's objective is, therefore, sustainable long-term growth. Our success in bringing inflation under control means that we can concentrate our efforts on jobs. British business can now take advantage of the lowest interest rates in the European Community and a highly competitive exchange rate.

The new public spending plans give priority to capital programmes and boost education. The measures the Chancellor announced will help construction, manufacturing, exporters and home owners. British business is now presented with a great opportunity. As well as a competitive pound we have the lowest inflation rate since 1978. Tax rates are also low. There are extra incentives for investment, extra help for exporters and specific help for housing, construction and the motor industry. The Government are committed to low inflation and sound public finances and policies are in place to deliver both.

This is the break that business has been looking for. Now is the chance to increase sales and expand production, to invest in the future and to bring the country out of recession. Industry can now seize the new opportunities in the knowledge that the Government will play their full part. We have new spending plans. They will protect the poorest in society. They offer hope, help and opportunity by switching resources to programmes to support the long-term prosperity of the country. We have a carefully targeted set of measures designed to lift confidence and get the country back to work. Industry and commerce will show that it is they who create employment through improved competitiveness and by providing the goods and services that customers want at prices they can afford.

7.50 p.m.

Baroness Turner of Camden

My Lords, I rise at the end of this debate to thank, as is customary, all noble Lords who participated in what was a very interesting debate this afternoon. In particular, I should like to thank the two maiden speakers, the noble Earl, Lord Attlee, with his expertise in small businesses, and my noble friend Lord Ewing of Kirkford.

I am very disappointed with the Minister's response. I had expected a rather more emphatic response to some of the points which have been raised. Some of the suggestions which have been made by noble Lords in the course of the debate are worthy of a great deal more consideration than seems to have been given to them. In particular, I emphasise the proposition from our side of the House that there should be support for the European initiative. There has been no real reply to that. There has been no response to our request for the development of a global strategy to deal with unemployment.

In particular, I should like to thank the noble Lord, Lord Alport, for his contribution this afternoon. He gave voice to the point on which I should like to end the debate; namely, that reducing unemployment must take precedence over everything. On those grounds I should like to withdraw the Motion for Papers before your Lordships tonight.

Motion for Papers, by leave, withdrawn.