Sitting of 8 November 1977

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]

EXPERIMENTS ON LIVING ANIMALS
Return ordered,
of Experiments performed under the Act 39 and 40 Vict. c.77, during 1976.—[Mrs. Ann Taylor.]

ORAL ANSWERS TO QUESTIONS
  ORAL ANSWERS TO QUESTIONS
  Mr. Speaker: Before we start Questions, I remind :he House of the exchanges we had yesterday at the end of Questions and ask for co-operation, with briefer supplementary questions. I fear that I shall be able to call fewer supplementary questions if I am to meet the wish of the House to move on to other Questions.
  DEFENCE

    Exercise Purple Oyster
    Mr. Edwin Wainwrightasked the Secretary of State for Defence if he will make a statement on the results of the recent Purple Oyster exercise in the North Sea.
    The Under-Secretary of State for Defence for the Royal Navy (Mr. A. E. P. Duffy): Exercise Purple Oyster 77 was the latest in a series of exercises to test arrangements for the protection of offshore oil and gas installations. Many procedures for dealing with a terrorist incident were practised, and I am satisfied with the progress made in training personnel who would be involved in a real incident.
    Mr. Wainwright: My hon. Friend must be aware that there are strong doubts
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    throughout the country as to whether the safeguards about which he talks are satisfactory. Could he say more about the recent exercise to test means to safeguard the rigs, to show the country that we are controlling them and making certain that no damage can be done to them?
    Mr. Duffy: Perhaps I may briefly explain what happened and then offer an assessment of the result. It was assumed that terrorists had captured an installation in the Indefatigable Field some 50 miles off the Norfolk coast. Surveillance flights were made and reaction forces were deployed to the area. Hon. Members will not expect me to give the detailed results of the exercise, but it was possible to test arrangements for dealing with this type of situation, and all those involved gained useful experience and training.
    Mr. Wall: Can the Minister say what was the participation of the Royal Marines in the exercise? May I take this opportunity to congratulate his right hon. Friend the Secretary of State on saving a Royal Marine Commando?
    Mr. Duffy: The hon. Gentleman will know that it is the Royal Marines who provide the military response—the quick reaction force—together with an associated Royal Navy helicopter airlift, backed up as necessary by explosive disposal teams and other units of the Armed Services. This exercise followed the pattern of previous ones. However, as with previous exercises, it was understood that these units could act only at the request of the civil power

    Cruise Missile
    Mr. Arnoldasked the Secretary of State for Defence what plans he has for the development of a cruise missile.
    The Secretary of State for Defence (Mr. Frederick Mulley): We are examining cruise missiles so as to be able to participate in discussions within the Alliance concerning their potential. We have no plans to develop or acquire them.
    Mr. Arnold: What representations were made by the Government to the Americans when they apparently agreed with the Russians not to transfer cruise missile technology? Why do the Government now believe that the development

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    of the new deterrent force has become unnecessary?
    Mr. Mulley: The hon. Gentleman's questions are not necessarily related. As far as I am advised, no final agreements have been reached between the Soviet Union and the United States. If I were the hon. Gentleman, I would not necessarily accept all the Press reports as to what may or may not be part of such agreements. Naturally, consultations that we have within the Alliance must remain confidential. The reason why we are satisfied with the Polaris force is that it will have a useful life for many years to come.
    Mr. Robin F. Cook: As my right hon. Friend has said that we have no plans to develop the cruise missile, can we take it that the British Government are entirely behind the move to place a restriction on the range of cruise missiles within the context of the SALT talks, which clearly is necessary if any agreement is to be an effective disarmament agreement?
    Mr. Mulley: As my hon. Friend knows, we are not a party directly involved in the discussions and negotiations for a SALT II agreement, but our United States allies keep us and all members of NATO informed about progress. The detailed arrangements are, I think. still to be finally settled.
    Mr. Gwynfor Evans: Will the right hon. Gentleman and the Government take into consideration the fact that the use of cruise missiles would blur the distinction between conventional and nuclear war and that their use could well lead to a full nuclear war, employing strategic nuclear weapons?
    Mr. Mulley: I understand the hon. Gentleman's concern, but I do not think that he has fully understood what the function of a cruise missile in the Alliance would be. It is essentially a means of delivery. It is not itself a weapon. The character of the weapon and the target would be the important factors. I would agree that if at some time cruise missiles were to be introduced within the NATO framework the existing political control over use would have to be retained.

    Industrial Capability
    Mr. Hal Millerasked the Secretary of State for Defence what arrangements he has made for his Department to assess the country's industrial capability for defence.
    The Minister of State, Ministry of Defence (Dr. John Gilbert): In conjunction with my right hon. Friend the Secretary of State for Industry, we from time to time review the capabilities of those industries that are involved in defence production.
    Mr. Miller: When did the last review take place? Is the Minister aware that there is widespread concern amongst defence contracting firms about the difficulty of maintaining, let alone replacing, existing plant?
    Dr. Gilbert: There is no simultaneous overall review of industry. Reviews take place from time to time of situations in individual industries. On the capabilities of our defence industry, all I can say is that the Ministry of Defence places only 10 per cent. of its contracts with non-United Kingdom firms.
    Mr. Pattie: Does the Minister feel that decisions to purchase foreign equipment without first ensuring reciprocal purchases from this country assist or hinder our industrial capability for defence procurement?
    Dr. Gilbert: One simply has to look at these matters on a case-by-case basis. Sometimes we try to get offset within a particular procurement, and on other occasions it is more appropriate to seek an offset by selling another country a completely separate system.

    NATO Defence Ministers
    Mr. Blakerasked the Secretary of State for Defence when he last met the other NATO Defence Ministers.
    Mr. Mulley: At the Nuclear Planning Group meeting in Italy on 11th and 12th October 1977. A copy of the communiqué has been placed in the Library.
    Mr. Blaker: In view of the more optimistic statements we have recently had from the Prime Minister and the Chancellor of the Exchequer about Britain's economic future, will the Government

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    now assure our NATO partners that they accept, without reservation, the agreed NATO target of an increase in defence spending of 3 per cent. per year in real terms?
    Mr. Mulley: As the hon. Member knows, the NATO aim of a 3 per cent. increase is to take effect from 1979–80, but reservations were made, on the one hand, for countries with difficult economic circumstances and, on the other hand, that where a country's expenditure was well below average it might be able to do better than 3 per cent. In the normal way, we shall be considering public expenditure for 1979–80 later this year, and this is one of the relevant considerations we shall take into account.
    Mr. Frank Allaun: Did not my right hon. Friend the Prime Minister last week make clear that we are spending well over our share of resources compared with other Western European nations? If that is the case, to go ahead at 3 per cent. for five years--a more than 15 per cent. increase—is clearly in conflict with that statement by the Prime Minister. I hope that the Secretary of State will stick to the Prime Minister's point of view.
    Mr. Mulley: I am obliged to my hon. Friend for letting me have his views on the matter. As he knows, the percentage of our GDP devoted to defence, almost all of it to NATO, is higher than that of most of our European allies. But this also depends on the size of the GDP. I am optimistic that, as a result of Government measures, we shall have a growth in our economy which will also have a bearing on these figures.
    Mr. Anthony Grant: At the last meeting, was the question of the cruise missile discussed? If so, did the Secretary of State urge that the NATO Alliance should have this weapon, since it is just about the most effective weapon that has become available to the West in the last decade? If not, why not?
    Mr. Mulley: In all the meetings of the Nuclear Planning Group, the United States Secretary of Defence gives a full report on the nuclear balance within the Alliance and in developments in the Warsaw Pact countries. In that context there was some discussion about new technology. However, it would be premature to form any judgments about the
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    rôle of the cruise missile because, as the hon. Member knows, it is still under development in the United States and there are still tests to be made—indeed, there is also controversy—on the various possibilities of its having conventional as well as nuclear uses.
    Mr. Watkinson: Was there any discussion of the mutual and balanced force reduction talks in Vienna? Does my right hon. Friend hold out any hope of development in that area, and is there any possibility of injecting some urgency into those talks?
    Mr. Mulley: No, Sir. Those talks were not discussed in the Nuclear Planning Group as they would be more relevant for the full meeting of Defence Ministers on conventional matters. But I share my hon. Friend's anxiety that we should try to make progress there. I welcomed, and have done so publicly, the forthright statements made by the Federal German Chancellor and others on the need, as we hope, for progress on the nuclear side and that we should make progress on the conventional side, too, towards arms control arrangements.
    Sir Ian Gilmour: In view of the humiliating rebuke that the right hon. Gentleman and the Government recently received from the Secretary-General of NATO, why did not the right hon. Gentleman succeed in persuading the Chancellor of the Exchequer to devote even one single penny of his mini-Budget to defence or the Armed Forces? Is this not just another example of the fact that the Government put defence right at the bottom of their priorities?
    Mr. Mulley: I am much impressed by the right hon. Gentleman's remarks, but I would be more so if I did not recall that, in the one year of 1973, he was party to three cuts greater than we have made. The NATO authorities have examined the basis of the cuts that we propose to make for next year and have agreed with us that they do the minimum damage to our contribution to the Alliance. As my right hon. Friend the Chancellor of the Exchequer has made clear several times—indeed, I gathered that it was the policy of the Conservative Party, although in a more extreme form—we are not yet in a position to relax the restraints on public expenditure.
    Sir Ian Gilmour: I know that the Secretary of State's case is very weak, but surely he does not have to try to buttress it by saying something that is quite untrue. He must know perfectly well that the Government's cuts are infinitely greater than those imposed by the Conservative Government. Will he conic clean and tell the truth?
    Mr. Mulley: We have gone into these factual matters and I showed in previous debates that, in real terms, in 1973 the Conservative Government exceeded in actual cuts those that we have made in the current year.

    Armed Forces (Pay)
    Mr. Croninasked the Secretary of State for Defence what preliminary arrangements he has made to increase the pay of the Armed Forces when the time is appropriate to do so.
    Mr. Goodhartasked the Secretary of State for Defence when he expects to receive the next report from the Armed Forces Pay Review Board.
    Sir Anthony Royleasked the Secretary of State for Defence what action he is taking to increase Service men's pay in view of the damaging slump in morale throughout the three fighting Services.
    Mr. Mulley: The Armed Forces Pay Review Body is responsible for recommending increases in forces' pay. It has already begun the work of collecting the necessary information on which to base a recommendation to take effect from 1st April next year.
    Mr. Cronin: While the Armed Forces must, like everyone else, conform to the Government's pay policy for the time being, will my right hon. Friend ensure that when they receive their next pay increase it will be the substantial one that they justly deserve? Furthermore, will he make sure that the Armed Forces are not penalised because they do not have trade unions or because they adopt an attitude of disciplined restraint and consideration for the public interest?
    Mr. Mulley: I am sure that the considerations my hon. Friend mentions are well worth stressing, because they are very important factors in the situation. But, as he says, the Armed Forces, like
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    other sectors, have to conform to Government pay policy, and, in particular, to the procedure whereby the Armed Forces Pay Review Body makes recommendations. These are due to be implemented on 1st April after 12 months.
    Mr. Goodhart: Is the Secretary of of State aware that many soldiers are paid less than the firemen whom they will probably be replacing in our cities next week? Is he aware of the widespread feeling that Service men have fallen badly behind in the last two years? Will the Armed Forces Pay Review Body be bound by the Government's 10 per cent. guideline in April?
    Mr. Mulley: As the Armed Forces Pay Review Body was informed at the time of the statement regarding future pay policy, it will be for it to make recommendations. For our part in the Ministry of Defence, we are supplying the Review Body with all the information we can so that it may form a judgment. I know that there is real difficulty about the question of comparability, which is very strongly felt in the Services.
    Sir Anthony Royle: Is the Secretary of State aware that there is grave danger of serious demoralisation throughout the Services at present, that his own people inquiring into Service pay have discovered that some officers are drawing social security and rent allowances, that there are officers in great difficulties in their own areas and that many of them, so it is reported in the Press, have been moonlighting? Will the Secretary of State comment on the fact that this is gravely demoralising many Service wives and Service families?
    Mr. Mulley: I appreciate, and I think we all understand, that there is strong feeling among the Armed Forces that their pay has lagged behind. However, as we all know from our constituency experience, many other sectors also feel that their pay has left them with serious financial problems. But it is totally untrue to say that any member of the Armed Forces is drawing social security benefit, because a condition of such benefit is that one is not in employment. A number are drawing rent and rate rebates, but I remember that when those rebates were introduced by the Conservative Government it was proclaimed that there should be

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    no question of anyone's being ashamed to do so. They are designed particularly to help very large families. Officers and other ranks with large families qualify for the rent and rate rebates. The numbers are about 10 officers and 6,000 men.
    I have no information on moonlighting. By definition, we do not have information about how many people do jobs on the side, but I suspect that the practice is not confined to the Armed Forces.
    Mr. Edwin Wainwright: Will my right hon. Friend take into account the fact that when a large number of people are unemployed there is a greater likelihood of young men and women going into the Armed Forces? Will he ensure that when full employment returns the rate of pay for people in the Armed Forces will not create such dissatisfaction that they will want to come out?
    Mr. Mulley: It is our object, as soon as conditions permit, to restore the full comparability of the military salary.
    Mr. Shersby: Is the Secretary of State aware that a senior aircraftman, married with two children, at RAF Uxbridge, in my constituency, earns only £56·57 per week gross and that after paying tax, rent, national insurance and RAF benevolent fund contributions he receives not more than £34 per week plus £2·50 child benefit? Is that the kind of payment that the Secretary of State feels is right and proper for a senior aircraftman whose job is an integral part of defending this country? If the right hon. Gentleman does not think so, will he do something about it—and do it quickly?
    Mr. Mulley: The hon. Gentleman will understand that it is for the Armed Forces Pay Review Body to determine these matters. I should be most grateful if he would let me have the details that he read out, together with any supplementary information he may wish to let me have privately about his constituents, because we want them brought to the attention of the Review Body.
    Mr. Loyden: In view of the statements made from both sides of the House about members of the Armed Forces not being eligible to join trade unions, and the great disability that this imposes on them, will my right hon. Friend now agree to open up trade union membership and begin
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    negotiations with the Armed Forces about pay?
    Mr. Mulley: I am not at all sure that that would solve our problem of dealing with the Armed Forces within the Government's pay policy. On the other hand, I have no objection in principle to the Armed Forces, if they are so minded, seeking such representation.
    Sir Ian Gilmour: The right hon Gentleman's ridiculously complacent answers will have done yet further damage to the morale of the Armed Forces. Is he definitely ruling out any interim settlement before next April? Does he realise that unless he takes the shackles off the Armed Forces Pay Review Body a 10 per cent. increase—which I understand is all it is allowed to recommend—will leave the Armed Forces about 30 per cent. behind comparable people in civilian life?
    Mr. Mulley: The right hon. Gentleman has enough experience to know that it would be most unwise to predict now what the Review Body might recommend in April. What we are doing is pursuing the matter of Armed Forces pay within Government pay policy, exactly as the right hon. Gentleman did in 1973 and 1974, when he required the Armed Forces to be subject to the then statutory incomes policy.

    Northern Ireland
    Mr. Farrasked the Secretary of State for Defence what steps he is taking to improve the living accommodation of soldiers serving in Northern Ireland.
    Mr. Gowasked the Secretary of State for Defence what proposals he has for improving the living accommodation of members of the Armed Forces serving in Northern Ireland.
    Mr. Mulley: Much effort and expenditure have already been devoted to improving, as far as is possible in field service conditions, the accommodation of Service men in Northern Ireland. There are, however, a few locations where we have to remain for operational reasons which could not, even by substantial expenditure, be brought up to the standards I would wish. These problem locations, which house about 5 per cent. of the force, are a matter of active concern.
    Mr. Farr: Does not the Minister agree that it is totally disgraceful that our soldiers in Northern Ireland, who are doing such a heroic job, should have to live in substandard accommodation at any time? Beginning with some of the more difficult areas where accommodation is worst, such as South Armagh, will the right hon. Gentleman ensure that their accommodation is brought not only up to standard but above it, which would be in line with the difficult and arduous tasks that our men are performing?
    Mr. Mulley: The first test of the accommodation for our Forces—one that I know they accept themselves—is operational. They must be in locations where they can quickly respond to security demands. In South Armagh in particular—as the hon. Gentleman mentioned —there are few places that provide adequate accommodation. Secondly, in a number of cases additional restraints of security have had to be put on the accommodation—for example, on making them waterproof—because there have been instances when they have been subjected to attack. Operational and security considerations must always prevail in matters of amenities, and the troops accept that. We recognise that the troops are in field service conditions, which by definition cannot come up to those which we should expect in peace time.
    Mr. Powell: Will the Secretary of State and the Government bear in mind that Army strength in Northern Ireland, from which these conditions largely arise, was a response to an emergency, however long-continued and however tragic? As the Royal Ulster Constabulary and the Ulster Defence Regiment constantly increase in strength, in confidence and in acceptance, will the Government keep their minds open to the adjustment of Army strength in Northern Ireland to the changing circumstances of the threat with which that strength is required to deal?
    Mr. Mulley: I am grateful to the right hon. Gentleman, because that is another aspect of the problem. While we have made clear that we shall keep as many troops as are necessary for security reasons in Northern Ireland, if—as we hope—the continuing improvement in security circumstances permits, we should
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    wish, subject to the advice of my right hon. Friend the Secretary of State for Northern Ireland, to reduce the permanent forces there. That is a consideration which makes it difficult to put up permanent barracks, particularly in locations where they may not be wanted in the future. Indeed, the nature of the security threat means that we have to change people from one location to another. However, we have already vacated six poor places of accommodation in the last year and we are constantly looking for ways of improving the bad conditions that are, I know, much resented by hon. Members.
    Mr. Litterick: Would not my right hon. Friend agree, however, that the simplest and certainly the cheapest way to improve the living conditions of the troops would be to remove them from Ireland altogether, as the majority of the British people now wish?
    Mr. Mulley: I agree that it would solve any accommodation problems if the troops were not there, but the problems that would be created in their stead would be much more serious. The Government are determined to provide Army support to the civil authorities for as long as that is necessary.

    Weapons Systems (Cost)
    Mr. Tebbitasked the Secretary of State for Defence if he will ensure that Parliament is given an equivalent amount of information concerning the costs of defence weapons systems to that which is available in the United States.
    Dr. Gilbert: It is the Government's intention to continue to be as forthcoming as possible in these matters, but each case must be judged on its own merits.
    Mr. Tebbit: Is the Minister aware that the United States Congress and taxpayers are told in considerable detail the costs of the defence equipment which is bought for the United States forces? Why are the British Parliament and taxpayer denied similar information about identical equipment when it is purchased from the United States for the British forces?
    Dr. Gilbert: There are many circumstances in which our position is different from that of the United States. First, the United States probably has a monopoly

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    position in supplying many types of equipment, which gives it a much greater bargaining position in world markets. We have to consider the position both of our customers, who are reluctant to have such information published, and of our suppliers when the information is given in commercial confidence.
    Mr. Robin F. Cook: Is my hon. Friend aware that I have in my hand the annual statement to Congress of procurement costs, which runs to over 130 pages of tabulated information? Why cannot our Minister be as forthcoming as the Pentagon in America and give us the information we need so that we may properly scrutinise his own decision-making?
    Dr. Gilbert: From time to time we give additional information, and my hon. Friend will be pleased to know that I have today approved the draft of a letter to the hon. Member for Tynemouth (Mr. Trotter) giving the annual operational costs of the different classes of ships. As regards development costs and actual procurement costs, it is very difficult to give those at an early stage in the procurement process.

    Through-deck Cruiser
    Mr. Pattieasked the Secretary of State for Defence, when he expects to announce the placing of the order for the third through-deck cruiser.
    Dr. Gilbert: I am not yet in a position to announce a decision.
    Mr. Pattie: But as the Government know that an agreement is required for more through-deck cruisers, would it not be more efficient and cost-effective to place a follow-on-order now with one of the yards where the work is being satisfactorily carried through, and where a need is already manifest for further work to be placed?
    Dr. Gilbert: I hope that it will not be too long before I take a decision, but we have not yet decided where the next order will be placed.

    BAOR
    Mr. Sainsburyasked the Secretary of State for Defence what was the pay, including local overseas allowance, in deutschemarks of a married sergeant with two children serving in the British Army
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    of the Rhine in October 1976 and October 1977.
    Mr. Mulley: The hon. Member will be aware that both pay and local overseas allowance are normally expressed in sterling and are never drawn entirely in deutschemarks. However, expressed in deutschemarks, the gross weekly pay including local overseas allowance of an average married sergeant with two children serving in BAOR was 549·36 DM in October 1976 and 532·77 DM in October 1977. This reflects a change in the Forces fixed rate of exchange on 1st November 1976.
    Mr. Sainsbury: Will the Secretary of State accept that to face Service men with an actual cut in their gross pay after a year of inflation both in Germany and in Britain will have a totally disastrous effect upon morale? Can he assure the House that he will take steps regarding the level of the local overseas allowance without waiting for next April?
    Mr. Mulley: I have already announced that there are to be no reductions in the level of local overseas allowance, which is calculated on the basis of comparison between the rate of inflation in Germany and the rate of inflation in this country, pending further inquiries and discussion during the next 12 months. Expressed in sterling, the local overseas allowance for the same sergeant was increased from £37·59 to £48·93, because the fall in the pound against the mark last autumn was very dramatic. Since only 70 per cent.. on average, of a soldier's pay is drawn in deutschmarks—his rent and so on are in sterling—I would not accept that any one has suffered a real loss, although I accept that the increase was offset by increased accommodation and other charges.
    Mr. Ronald Atkins: Does my hon. Friend agree that it would be greatly in the interests of this country if the whole of the expenditure relating to British Army of the Rhine were in sterling and not in deutschmarks?
    Mr. Mulley: If my hon. Friend's inference is that we should bring the soldiers back to this country, I must refute that. The presence of British Army of the Rhine is an important part of our NATO defence policy, and, as has been frequently said, we have no plans to reduce the size of BAOR except as, we hope,

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    agreements can be reached in the context of the Vienna discussions.
    Mr. Churchill: But is it not a scandal that men serving in the Armed Forces in British Army of the Rhine should be worse off in effective purchasing terms this year than they were last year? Will the Secretary of State give an undertaking, such as has been given in respect of police pay, that the Armed Forces Pay Review Body will be in no way restricted in the recommendations that it may make next April, while always bearing in mind that the Government have it in their power not to implement them fully right away?
    Mr. Mulley: I think it is understood that the Review Body is an independent body and that it will make such recommendations as it sees fit. It will be a question then for the Government, in the light of that report, to determine what policy should be pursued. Until we see the report, however, it is impossible to say what any reaction might be.
    Mr. Gwilym Robertsasked the Secretary of State for Defence what are the latest figures available for the number of British troops stationed in West Germany, the number of German civilians employed and the balance of payments cost of maintaining these troops in Germany ; what offset agreement has been arrived at with the West German Government ; and what further steps he is taking to obtain additional offsets from the West German Government.
    Mr. Mulley: British Forces Germany, which comprise BAOR and RAF (Germany), total some 66,000 men, supported by some 28,000 locally-employed civilians. We estimate that the foreign exchange costs of British forces in Germany in 1977–78 will be in the region of £540 million but the actual cost of our commitments depends on movements in exchange rates throughout the whole of the financial year. As my right hon. Friend the Prime Minister told my hon. Friend the Member for Sheffield, Heeley (Mr. Hooley) on 26th October, a terminal bilateral offset agreement was signed during his visit to Bonn on 18th October. Details of this are set out in Cmnd. 6970, which has been laid before Parliament by my right hon. Friend the
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    Secretary of State for Foreign and Commonwealth Affairs.
    Mr. Roberts: Would not my right hon. Friend agree that the offset agreement that has been reached is derisory and suggests that we are again being taken for a ride by the West German Government? Will he not accept from me that the only sort of offset agreement which is acceptable to the large majority of Members on this side of the House is one that would at least meet the great bulk of our balance of payments costs? Will he look at this matter again urgently?
    Mr. Mulley: As my hon. Friend knows, the negotiations were conducted by my right hon. Friend the Foreign Secretary, but I do not accept that it is a derisory agreement. In fact, I think it is a satisfactory outcome to a very difficult problem. In actual money terms, taking account of the rate of exchange, it provides in the current year, for example, £62½ million against the £13 million under the previous agreement, which ran from 1971 to 1976, and over the whole period of the three years represents in cash terms about 50 per cent. more than the previous agreement, which has now been renegotiated.
    Sir Ian Gilmour: In his final answer on Question No. 9, which also related to Germany, the right hon. Gentleman said something very important, whether he intended to or not. The Armed Forces Pay Review Body made it quite plain this year that it felt totally bound by the Government's pay policy. The right hon. Gentleman said earlier this afternoon that it would not be so bound this coming year. Did he really mean to say that? If so, we greatly welcome it.
    Mr. Mulley: I am resting myself on the basis of the letter that my right hon. Friend the Prime Minister sent to the Chairman of the Pay Review Body at the time the present pay policy was brought into being. I shall arrange for the right hon. Gentleman to receive a copy of that letter.

    Canberra Aircraft Accident
    Sir David Rentonasked the Secretary of State for Defence what is the cause of the long delay in announcing the result of the inquiry into the crash at Huntingdon on 3rd May 1977 of an RAF

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    Canberra aircraft causing loss of life as a result to the pilot and observer and three young children.
    The Under-Secretary of State for Defence for the Royal Air Force (Mr. James Wellbeloved): There is no doubt that the inquiry into this tragic accident has taken longer than I would have wished, and, indeed, longer than was expected. However, any inquiry must be painstaking and meticulous, and in this case, where the crew lost their lives and the aircraft was almost totally destroyed, the investigation by the board of inquiry was particularly difficult to conduct and it inevitably took time. It was necessary to reconvene it twice to take supplementary evidence which emerged later in the inquiry. But throughout the period the inquiry was progressed with the utmost urgency consistent with the need to ensure the accurate diagnosis of the cause. As I have told the right hon. and learned Member, the report has now been received, and I have had the opportunity to study it. I am considering with my right hon. Friend whether a further statement should be made to the House.
    Sir D. Renton: Is the hon. Gentleman aware that the long.; delay has greatly increased public anxiety about the cause of the accident? Will he give an undertaking that the fullest possible public statement will be made, when he is able to do so, which I hope will be soon. Meanwhile, can he give a further undertaking that the particular type of landing practice which was being followed when this tragic accident occurred is not taking place any longer and will not take place?
    Mr. Wellbeloved: In response to the right hon. and leaned Gentleman's first question, when I have had an opportunity to consult my right hon. Friend, either he or I will endeavour to give the fullest possible statement to the House on the whole of this accident. I deeply sympathise with the right hon. and learned Gentleman's constituents in the tragic occurrence they have endured.
    With regard to the use of the Canberra PR9, there is at present in progress a review of the basic flying patterns that have been in use at that air station for the last 10 years. We have, however, prohibited further right-hand visual circuits over the Oxmoor estate until such
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    time as we have further reviewed the Wyton and Alconbury air traffic procedures.

    Warships
    Mr. Wallasked the Secretary of State for Defend' how many British warships are now past their designed effective lives and in need of major refits or replacement.
    Mr. Duffy: There is no precise designed effective life for a warship. The date at which ships are phased out depends on a number of factors, including the condition of the ship, the performance of the new construction industry and the current assessment of the number and quality of ships needed to meet our requirements in the light of the threat.
    Mr. Wall: The assessment has been made that about 40 out of 180 of our warships are obsolete. Does not the hon. Gentleman agree that we now have the smallest Navy in our history and that, due to the Government's defence cuts, the rate of replacement is nowhere near overtaking the rate of obsolescence?
    Mr. Duffy: No, I cannot agree with the hon. Gentleman's assertions. The average age of the major units of the Fleet—frigates, submarines and above—is about 12 years. I should like to assure the hon. Gentleman that we have a modern and effective Navy and that a continuing and impressive programme of new construction, about which I could send him a letter, as well as modernisation will ensure that the fleet remains fully able to meet the tasks required of it.
    Mr. Newens: Can my hon. Friend give the House any idea what the total cost would be of carrying out the major refits and replacements for warships for which the hon. Member for Haltemprice (Mr. Wall) is asking? Would it not mean a vast increase in public expenditure, and is there not a blatant contradiction between the views of those on the Opposition Benches who call for tax cuts and cuts in public expenditure and the views of those who demand enormous increases in military expenditure?
    Mr. Duffy: It would not require a vast increase in public expenditure, but its absence would increase the level of

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    unemployment. Nevertheless, I shall repeat my letter to my hon. Friend.
    Rear-Admiral Morgan-Giles: With British shipbuilders on their knees for orders, would it not be sensible for the Government to order some warships now, and thus be sooner able to replace some clapped-out wrecks like the "Blake" and the "Tiger"?
    Mr. Duffy: I remind the hon. and gallant Gentleman that the present major new construction programme includes nuclear-powered Fleet submarines as well as the construction of five new classes of surface warships, including the new ASW cruiser—the first, incidentally, of a new class—" Invincible ", which was launched only in May this year. This programme, as I have said, is intended to maintain a modern and balanced Fleet.

    NATO Air Exercise
    Mr. Wyn Robertsasked the Secretary of State for Defence whether he is satisfied with the results of the recent NATO air exercise based on Upper Hey-ford.
    Mr. Wellbeloved: By testing the operational readiness of an Fill unit based in the United Kingdom, this United States Air Force exercise has made a direct contribution to the effectiveness of the NATO defences.
    Mr. Roberts: Will the Minister confirm that the discomfort caused by low flying from Upper Heyford, which I think is in the constituency of my hon. Friend the Member for Banbury (Mr. Marten), to my own was borne with fortitude by the majority of people on the ground? Can he also confirm that it is very unlikely that a similar extensive exercise involving low flying will occur again in the near future over the same areas?
    Mr. Wellbeloved: I cannot give an absolute undertaking in respect of the second part of the hon. Gentleman's question. There will be a number of exercises from time to time which will encompass the whole of the United Kingdom low-flying areas. I appreciate very much the forbearance of the people of this country and the people of Wales in the discomfort and inconvenience that low flying causes to them. But I must emphasise to the House and the country
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    that low flying is a vital part of the United Kingdom's defence and that without that exercise and training we would not be able to fulfil our duty to defend this country and the world.
    Mr. Roderick: Is my hon. Friend aware that, while my constituents and most of the people living in Mid-Wales have suffered inconvenience from low flying exercises, a new dimension has been added to the problem with the recent tragic accident? Will my hon. Friend now call off the exercise called Avon Express until a full-scale inquiry has been conducted into the need for, and value of, such exercises?
    Mr. Wellbeloved: I sympathise with my hon. Friend and his constituents, but, as I have already said, low flying and exercises of this nature are a vital part of our defence capability, and I cannot give him the undertaking that we should call off any future exercises. When we authorise exercises in low flying we take the utmost care to ensure that very strict controls are exercised by the command and the crews to avoid inconvenience to people on the ground.
    Mr. Marten: Does the Minister recognise the stoical way in which my constituents living near the airfield have borne the noise of continual flying over the last week? Does he realise that they do that because they realise that support of NATO is vital to the defence of this country?
    Mr. Wellbeloved: I recognise that, and I welcome the widespread support from the general public in the very difficult task that the RAF has to discharge in undertaking low flying. I assure those who do not appreciate this vital defence need that their complaints and representations are fully considered and that we take every step open to us to avoid inconvenience.

  PRIME MINISTER (ENGAGEMENTS)
  Mr. Silvesterasked the Prime Minister if he will list his engagements for 8th November 1977.
  The Prime Minister (Mr. James Callaghan): In addition to my duties in the House, I shall be holding meetings with ministerial colleagues and others.
  Mr. Silvester: As many of those meetings will concern wage claims in the public sector, would it be helpful if the Prime Minister were to consider making an announcement—in view of a wage settlement for the miners exceeding 10 per cent., for whatever reason—on whether other employees in the public sector who currently settle at about the guideline figure might reasonably be expected to come back for a second bite of the cherry after such a settlement?
  The Prime Minister: The miners' present pay settlement does not expire until the end of February or the beginning of March, and it would be wrong for us to anticipate anything about a settlement at this stage.
  Mr. Roy Hughes: In the course of his busy schedule of engagements, will my right hon. Friend look into the parlous nature of the steel industry? Will he and his colleagues give some consideration to restricting foreign imports of steel, which would certainly help the British Steel Corporation at this time?
  The Prime Minister: I am well aware of the difficulties of the steel industry. There is a problem about imports and exports at present. For example, there are interests in the United States which are pressing the United States Government to restrict exports of steel from this country to the United Stales. We must achieve a balance here and be very careful before we rush into action on these matters.
  Mrs. Thatcher: Will the Prime Minister take time today to reconsider the reply he gave to my hon. Friend the Member for Chingford (Mr. Tebbit) last Thursday, when he said that the family man on average earnings was as well off today as he was at the time of the last General Election? We all know that that just is not so. Would not the Prime Minister agree that the standard of living has been cut back by 5 per cent, in a year?
  The Prime Minister: The right hon. Lady is putting together two separate things. I quite agree that the standard of living has been cut back during the last 12 months. Indeed, I have said so on many occasions. But the statement that I made last Thursday is exact in every particular, and I have had it checked since.
  Mrs. Thatcher: Perhaps the Prime Minister would care to look at what he said as reported in column 40 of Hansard, when my hon. Friend put to him a direct question. My hon. Friend asked the Prime Minister "to tell the House"[Hon. Members: "Reading ".] I am quoting from the question to the Prime Minister. The question was put directly to the Prime Minister whether the average man,
  " with two young children, will be as well off now as he was at the time of the last General Election."
  The Prime Minister's reply was:
  "The answer is Yes ' ".—[Official Report, 3rd November 1977 ; Vol. 938, c. 40.]
  What the Prime Minister has now said is that his answer ought to have been "No ".
  The Prime Minister: I do not object to the right hon. Lady reading my words. I hope that she will go on reading them, and reading them in the country. I do not think I can take offence at that. What I said last Thursday was complete in every particular. It is for the right hon. Lady to run away and check her figures.

  TUC
  Mr. Arnoldasked the Prime Minister when he next expects to meet the leaders of the TUC.
  The Prime Minister: I met the General Council of the Trades Union Congress when I addressed the TUC on 6th September. Further meetings will be arranged as necessary.
  Mr. Arnold: When the Prime Minister next sees the TUC, will he remind it just how important it is that the benefits of North Sea oil should be used for strengthening Britain's industrial face and not for increasing public expenditure or public services?
  The Prime Minister: The next meeting of the NEDC in early December will be considering this matter, and, of course, that point of view will be expressed. It is certainly Government policy, although we hope to have more discussion about this, that there should be a very strong bias in favour of the industrial strategy and industrial regeneration of this country. But I do not think that we should rule out entirely some bonus to

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  either public expenditure or private consumption if it seems appropriate. This must be a question of balance in the end. The first priority, I agree with the hon. Gentleman, is the regeneration of British industry.
  Mr. Loyden: Will my right hon. Friend discuss with the TUC the use of oil reserves for the purpose of refurbishing the regions from an industrial point of view, and particularly regions of high unemployment, such as Merseyside, as it appears that none of the Government's policies is penetrating that problem?
  The Prime Minister: The first problem is to overcome inflation. That is the No. I priority. The other benefits will begin to flow from that. My right hon. Friend the Secretary of State for the Environment will be making a statement at the end of Questions, I understand, if he catches your eye, Mr. Speaker, about refurbishing industrial areas. Merseyside is a particular case and has, and will continue to have, special attention.
  Mr. McCrindle: As the Prime Minister compares the industrial situation this winter with the industrial situation of 1973–74, will he find any reassurance from the fact that at least he is not confronted by an Opposition prepared to support every last inflationary wage claim?
  The Prime Minister: What has happened, I believe, is that a general will has been mobilised in favour of the Government's policy, and I am not surprised that the Opposition actually follow that expression of public opinion.
  Mr. Ashley: Is the Prime Minister aware that the settlement with the police and the progress made with the power workers reflect very great credit on the Government's attitude, and that the Conservatives' attempts to exploit the present spate of industrial unrest reflect very great discredit on them and their attitude to the trade unions? The country should bear this in mind at the General Election.
  The Prime Minister: We are fighting a battle that is crucial, and I certainly do not reject or spurn any allies in it. Therefore, I make no attacks on anybody in the matter. I believe that it is vital, and I believe that so far the country is standing together on the issue. Everybody has his own particular interest, but we are an interdependent society—pretty well every-
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  body nowadays is a key worker, whoever he may be. It is our task as a House of Commons and as a country to mobilise the general will against the particular interest.
  Mr. Cartwrightasked the Prime Minister when he next plans to meet the TUC.
  The Prime Minister: I refer my hon. Friend to the reply which I gave earlier today to the hon. Member for Hazel Grove (Mr. Arnold).

  HEMEL HEMPSTEAD
  Mr. Corbettasked the Prime Minister whether he will pay an official visit to Hemel Hempstead.
  The Prime Minister: I have at present no plans to do so.
  Mr. Corbett: As my right hon. Friend is unable to visit, will he try to arrange to speak to my courageous constituent, Mr. John Prestwich, who is paralysed from the neck down and therefore relies upon electricity for life and yet telephoned me yesterday to urge that the Government should stand firm against the unofficial action of the power workers? While I recognise that the power workers have a sense of grievance, may I ask whether my right hon. Friend agrees that it would be better for them, for Mr. Prestwich and for everyone else if they were to use the proper trade union procedures, even if those procedures also need improving?
  The Prime Minister: I am aware that many who suffer, as well as the general public, are in favour of there being a broad acceptance of the general guidelines for moderate increases in pay and earnings this year. The Government will adhere to this policy as long as the policy maintains public support. Without public support, we cannot succeed. With it, I believe that we can succeed, and we shall endeavour to do so.
  I am grateful to my hon. Friend for what he said, because I think that the power workers have recognised the force of public opinion in this matter. I hope that they and their union, and, of course, the Central Electricity Generating Board, will get together to iron out whatever difficulties there may be on a tripartite

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  basis, provided that they can do so within the general guidelines, which I hope will be accepted by all.
  Mr. Tebbit: If the Prime Minister should change his mind and go to Hemel Hempstead, could I persuade him to come and visit my home in that constituency so that I could show him my file of answers from the Chancellor of the Exchequer? Those answers show conclusively that the man on average earnings with two young children was, by early summer of this year, some £8·70 a week worse off than at the time of the last General Election. The Prime Minister could then tell me in private, if he is afraid to say so in public, whether he was just flummoxed and got it wrong or whether he really believes the wrong answers that he gave me on Thursday.
  The Prime Minister: I should be very happy to have a cup of tea with the hon. Member. He is always clear in his criticism, even if he is not always accurate. I shall be glad to go along sometime. I do not promise that it will be next week. When I go I shall not have to take a huge volume of files. I shall just take one foolscap sheet that will flummox the hon. Gentleman once and for all.
  Mr. Cartwright: In view of the nation's improving financial situation, can my right hon. Friend offer the TUC any hope that some of the recent cuts in public services will soon be made good? Is there not a case for some selective relaxation of financial and manpower controls—in local government, for example—so as to improve employment opportunities and also to make good the falling standards of public service?
  The Prime Minister: My hon. Friend seems to have overlooked the fact that there was a relaxation the week before last to the tune of El billion next year, and "that ain't hay ". There will be £400 million going to the construction industry and £600 million going elsewhere. Therefore, there has been a relaxation ranging over a number of Departments.
  However, I should like to make one thing clear, about which I feel very strongly. Public expenditure is devised not as a means of giving employment but as a means of giving services to people.
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  It is upon that basis that we have to look at it.
  Mr. Crouch: When the Prime Minister meets the TUC and its leaders, will he ask them whether they will give him their full-hearted support in supporting his guideline of 10 per cent. for wage increases and not allow the unions, of which they are leaders, to put in grossly inflated demands, as is happening at the moment? I know of one case where the largest union in the country, the TGWU, has put in a demand of 42 per cent. to the oil industry.
  The Prime Minister: The TUC at its annual Congress undertook something voluntarily that is of very great value, namely, the observance of the 12-month rule. Full credit should be given to all the unions that are observing that 12-month rule, because it is enabling us to make an orderly return.
  As regards what the TUC should allow its unions to do, the TUC does not have control in these matters. The TUC advises unions, but unions take their own decisions. As we have seen recently, and it is part of the problem we have, it is not necessarily the leaders or officers of the unions who are putting in these pay claims. In the case of the fire brigades, it was the rank and file who decided what they wanted to do, despite the expressed view of their leaders. This is a problem for democracy as a whole. We have to give a firm lead, and we intend to do so.
  Mr. Mendelson: Although it is undoubtedly true that local government services are provided and their financing is designed to assist people in their daily lives, is it not equally true that, when the instruction was sent out some months ago that local authorities must cut expenditure, that was done on financial grounds and not because the services were unnecessary? Therefore, is it not correct now to send other instructions to the local authorities to restore those services? If the Government do not do that without delay, will there not be the inevitable consequence that more people will be made, unemployed this winter?
  The Prime Minister: I accept my hon. Friend's correction on that. It was done for financial reasons. However, let me also remind the House and my hon.

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  Friend that a year ago the complaint that was being made by both sides of the House was that local authorities were being extravagant in the use of manpower and they were being asked to cut down on it. Now, the pendulum seems to be swinging to the other extreme. I agree that there are some authorities which have used the financial restrictions in an unwise way and in a way that is designed to reduce services where they might not need to be reduced. Of course we want to see those services restored. My hon. Friend does not have to press me on the question of public expenditure. As regards the desirability of providing services for people, I stand fair square behind that

QUESTIONS TO THE PRIME MINISTER
Mr. Rifkind: On a point of order, Mr. Speaker. I tabled a Question to the Prime Minister for answer today asking whether he would visit the headquarters of the International Monetary Fund. The Question was accepted by the Table Office, but I was informed recently that it had been transferred to the Chancellor of the Exchequer. It appears on the Order Paper today as Question No. 48.
I had understood—indeed, I think the House had understood—that the Prime Minister was anxious to receive Questions of a detailed nature, rather than routine Questions relating to his engagements. This was a Question of important national interest, yet we find that. at the request of the Prime Minister, it has been transferred to the Chancellor of the Exchequer. May we be given some clear guidance on the Questions that the Prime Minister is prepared to answer?
Mr. Tebbit: Further to that point of order, Mr. Speaker. You were kind enough yesterday to make a statement on the practice that you intend to follow in allowing supplementary questions on substantive, and what you called indirect, Questions to the Prime Minister. Since then there has been this interesting new development that today's Order Paper shows that yesterday substantive Questions from the hon. Members for Newcastle upon Tyne, East (Mr. Thomas), Coventry, North-West (Mr. Robinson), Peterborough (Mr. Ward), Birmingham, Stechford (Mr. MacKay), and Edinburgh,
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Pentlands (Mr. Rifkind) were transferred by the Prime Minister.
The Question from the hon. Member for Peterborough was No. Q.3 on the Order Paper, so had he put down an indirect Question of the type that is rightly deplored by the Select Committee on Procedure, by yourself, and by the Prime Minister, he would have been able to question the Prime Minister. The fact that he put down a substantive Question has been used as a device for preventing the hon. Member for Peterborough from asking his Question.
Almost all the Questions on the Order Paper which the Prime Minister could reach today are of an indirect nature. Perhaps, Mr. Speaker, not only could you take this into account in deciding your policy towards supplementary questions, but, at some stage, the Prime Minister will let us know what sort of Questions he does dare to answer.
Mr. MacKay: Further to that point of order, Mr. Speaker. Many of us have taken note of the Prime Minister's wish to be asked substantive Questions, and I have tabled a Question asking him when he next intends to meet officers of the National Union of Mineworkers. That is something which, in view of the ballot of the mineworkers last week I should have thought was of national importance, and I was dismayed to find that the Question has been transferred to the Secretary of State for Energy. I am sure that Members on both sides of the House would appreciate guidance on how we can table substantive Questions without having them transferred.
The Prime Minister (Mr. James Callaghan): Further to that point of order, Mr. Speaker. Up to the end of July, 532 Questions were addressed to me, and I transferred 14. [HON. MEMBERS : "Which 14? "] I have attempted to help the House in this matter, but I have a feeling—and I shall offend certain of them by saying it—that some hon. Members are trying to make things as difficult as they can. [Interruption.] I do not resent that, but hon. Members must not mind, either, if I defend myself when that happens.
Questions will be transferred, because I cannot undertake to answer over the whole range—[Interruption.] There is nothing awkward about visiting the International Monetary Fund. One is given

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an agreeable lunch, and I should have a much more intelligent conversation than I would ever have with the hon. Member for Gillingham (Mr. Burden).
I cannot undertake to answer Questions covering the whole range of Government policy. I shall go on considering the matter. It might be that the easiest thing to do would be to go back to having a charade for 15 minutes—hon. Members merely putting down indirect Questions, and my giving the answers. That is a matter for you, Mr. Speaker. I do not mind, but when I try to go halfway to meet the Opposition and find this sort of reaction, it does not make me feel that some Members of the Opposition want to try to make this system work.
Mrs. Thatcher: The Questions that were transferred were direct, specific Questions to the Prime Minister, of the kind that we thought he wanted. Which criteria did he use to transfer Questions about unemployment and a personal meeting with the National Union of Mineworkers?
The Prime Minister: I am unable to give a clear answer to the right hon. Lady on these matters, but if I am to be questioned in this way every week I should prefer to go back to the old system and to transfer every Question so that my Question Time will consist wholly of "Whom shall I meet? ", "What are my engagements? "and other questions of that sort.
I cannot answer for the whole range of Government responsibility on these matters, and it is not reasonable to expect me to do so. I shall have to see what is the best thing to do. But from now on—and I shall say so now, Mr. Speaker, if it will help—I shall transfer every substantive Question that does not bear directly upon the responsibilities of the Prime Minister or the First Lord of the Treasury. Perhaps that will help.
Several hon. Members Several hon. Members rose—
Mr. Speaker: Order. There is no point in pursuing this argument across the Floor, because that will not settle it. Mr. Maxwell-Hyslop.
Mr. Maxwell-Hyslop: On a point of order, Mr. Speaker. To what extent is the Prime Minister's Office or the Table Office—I do not know which office is involved—entitled not just to transfer
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a Question but to alter its whole substance? Asking the Prime Minister whether he will go to the IMF is not the same as asking somebody else—the Chancellor of the Exchequer—not when the Prime Minister will go to the IMF. but when the Chancellor of the Exchequer will go to the IMF. That is an entirely different Question.
Mr. Speaker: At last there is a question I can answer. The hon. Gentleman knows that it is a very old custom—as old as I am—that when a Question is transferred it is put down to the Minister to whom it is transferred. That has always happened in my time.
Mr. English: On a point of order, Mr. Speaker. There must be some strength in the Prime Minister's case, and it is very simple. If he were always asked Questions within the responsibility of individual Ministers, no Questions would be directed to those Ministers. The criterion must be something different from that. That, surely, is the strength of the Prime Minister's case.
May I therefore ask you, Mr. Speaker, whether you will have a meeting with both the Prime Minister and the Leader of the Opposition to try to introduce some sense into the system? It is not sensible to have the charade to which my right hon. Friend refers. Nor is it sensible, on the other hand, to have a system whereby he is forced to answer Questions that should be answered by his colleagues. Could we not have a system whereby, for example, he answers Questions that deal with the responsibilities of several Departments, not just one?
Mr. Speaker: I am very much obliged for the hon. Member's help.
Mr. Cormack Mr. Cormack rose—
Mr. Speaker: Is the hon. Gentleman also seeking to help me?
Mr. Cormack: Yes, Mr. Speaker. Following what the Prime Minister said, I presume that all geographical questions, such as whether he will visit Hemel Hempstead, will now be transferred to the Department of the Environment.
The Prime Minister: In accordance with what we used to do in this House, that is exactly what would have happened.

INNER CITIES
The Secretary of State for the Environment (Mr. Peter Shore): With permission Mr. Speaker, I should like to make a statement on the development of Government policy for the inner cities.
In my previous statement of 6th April I announced the Government's decision to increase the Urban Programme, to assist the inner cities in grant-aided expenditure, from the existing level of £30 million to £125 million in 1979. Five partnership areas were then announced—in Liverpool, Birmingham, Manchester/ Salford and, in London, Lambeth and Docklands—and on 24th October I made provisional allocations to them of £50 million a year for a three-year period from the starting date.
I also told the House on 6th April that we would be giving further consideration to the case put by other authorities for assistance with their urban problems.
I have studied carefully all the evidence which has been put forward by some 25 authorities, and my colleagues and I have had meetings with most of the authorities concerned. We have reached these conclusions: outside London, the area of Newcastle upon Tyne and Gateshead stands out as having in sufficient degree the concentration, intensity and scale of problems to which partnership arrangements are directed ; accordingly I propose to offer a partnership to the authorities in this area. Inside London, the adjacent boroughs of Hackney and Islington stand out in a similar way, and I propose to offer a partnership to the authorities here as well.
I intend to make £5 million available immediately to each of the two new partnership areas out of the £100 million announced in the Chancellor's March Budget Statement. This is for inner-city construction works to be undertaken in this and the next financial year. I shall also be discussing with the new partnership authorities the basis on which they should plan for 1979 onwards.
In addition, I intend to make at least £1 million available to each of the seven partnership areas for 1978–79 for new projects of the traditional urban programme type and for other schemes, such as minor environmental works, that can
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be set in hand while inner area programmes are being prepared.
Outside the partnership areas we have identified a number of other authorities with inner urban problems which, while they do not justify partnership treatment, nevertheless merit special attention. These are i.e., North Tyneside, South Tyneside, Sunderland, Middlesbrough in the Northern Region.
Bolton, Oldham, Wirral, in the North-West Region.
Bradford, Hull. Leeds, Sheffield, in the Yorkshire and Humberside Region.
Wolverhampton, in the West Midlands Region.
Leicester, Nottingham, in the East Midlands Region.
Hammersmith, in London.
I intend that these 15 authorities should receive the powers to make loans and to declare industrial improvement areas set out in the White Paper, Cmnd. 6845.
In addition, I have concluded that up to £25 million should be provided from 1979–80 onwards from the Urban Programme to assist these areas. This would represent in total a six-fold increase in their urban aid and be a continuing commitment over several years.
Many of these authorities, and the Government, too, feel that their inner area problems can best be tackled through a comprehensive programme of action, and I shall therefore be inviting them to prepare their own inner area programmes in time for implementation from April 1979. Unlike in the partnership arrangements, Ministers and Government Departments will not be involved directly in their preparation.
I am well aware that many other authorities have urban problems in varying degrees. Individual projects will continue to be eligible for assistance under the Urban Programme as they are now. I can now announce that in 1978–9 I shall be inviting additional bids from authorities outside the partnership areas for new urban programme projects to a total value of £10 million. A circular inviting applications will be issued shortly.
As the House will know, the Urban Programme, rising, as it will, to £125 million in 1979, is in addition to the Government's major contribution through the

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main programmes of Departments, including the rate support grant.
The White Paper announced the Government's decision on IDC policy in London and Birmingham. The existing partnership areas in both these cities, together with the new partnership in Islington and Hackney, will in future take precedence, after the assisted areas and in front of the new and expanding towns, in consideration of applications for industrial development certificates for mobile projects coming forward from the relevant region. Furthermore, IDC policy will continue to be operated flexibly over the whole of inner London.
Finally, the additional local powers promised in the White Paper to which I referred earlier will be presented to this House, in the form of an Inner Urban Areas Bill, before the Christmas Recess.
Mr. Heseltine: Will the Secretary of State recognise that the wins that he is offering are so small, and are so spread over the years in relation to the scale of the problem itself, that he is giving a false impression in suggesting that they are any real solution to the problem? Will the right hon. Gentleman recognise also that the policies that he is pursuing of highly selective, centralised subsidy are diverting attention away from the need for policies which offer incentive and reward for investment in city centres, which tackle the problems of public sector land hoarding and which bring a new sense of urgency to our planning procedures?
Finally, will the Secretary of State recognise that there is a grave danger of adding to the patronage of Government. to the process to which he now seems committed, whereby individual towns or districts are being selected by him for preferential treatment without any known or objective criteria? How is he able to judge that the 15 cases he has announced today have problems of a different scale from those of the authorities that are still in the queue? Can he, therefore, publish the factual basis for his choice, so that all hon. Members whose authorities have not been selected shall know the method by which they can make successful applications?
Mr. Shore: I do not think that the tone of the hon. Gentleman's comments entirely reflects what I thought was a rather helpful debate on 17th July, in which the Opposition spokesman, the hon. Member for Birmingham, Hall Green (Mr. Eyre), gave a very broad welcome to what we were doing and simply urged us to make our efforts stronger and more extensive.
On the question of resources, £125 million a year is, in my view, what we can at present see our way to afford, but it is not, as I see it, the ceiling on what is needed by the areas concerned. However, I ask the hon. Gentleman to remember that that is a big difference from the £30 million a year which we inherited from the Urban Programme of his Government. I also ask him to consider all that he has said now against the background of his general complaints about the level of Government spending.
On the two other points that the hon. Gentleman raised, I assure him that a substantial part of this increased urban grant will be spent by the local authorities on broad support for industry and for environmental purposes. That is contained in our White Paper, and we have been consulting local authorities on this matter in preparation for the Bill which I hope soon to present to the House.
Finally, I take up the hon. Gentleman's question about the difficulties of making a judgment between the many different authorities with broadly similar claims. I do not believe that anyone has yet contested that the partnerships are, in a sense, almost self-selecting. Indeed, at least three of them arose out of studies set in hand by the right hon. Member for Worcester (Mr. Walker) when he was Secretary of State for the Environment. I do not believe that anyone will quarrel with that, or with the other partnership arrangements.
Of course, we shall give as much information as possible, but the Government are faced with a problem. We are only too willing to take the House into our confidence, to debate the matter, and to explain whenever the House wishes us to do so. But throughout all policies where an element of selection is required, whether regional policy or inner city policy, the question of drawing frontiers and making definitions is one that the

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Government must face and about which they must be responsible to the House.
Mr. Cledwyn Hughes: I appreciate that my right hon. Friend does not speak for Wales or Scotland, but can he say whether we may expect a similar statement from my right hon. and learned Friend the Secretary of State for Wales in respect of urban areas in the Principality?
Mr. Shore: I shall ensure that my right hon. and learned Friend is aware of my right hon. Friend's question. I expect that he will have something further to say about the urban programme in the Principality.
Mr. Stephen Ross: I assure the Secretary of State that we understand the urgency of dealing with the Urban Programme and therefore welcome the measures he has announced today. Can he tell us what monitoring will be undertaken to see that the money is properly and fairly spent, because there has been a feeling that London has had too great a share of it? Can he also hold out some hope for the rural areas which are in some parts becoming depressed? Is there some hope, through the rate support grant or some other measure, that the Department can offer to us in the coming months?
Mr. Shore: The rural areas have their problems and I do not seek to minimise them, but the character of those problems is clearly different from the problems of the inner cities. There are many different ways in which those problems can be eased, but, if the hon. Gentleman will forgive me, I would rather not be drawn too far along that path at present.
As regards monitoring, I believe that. particularly for the partnership areas, the monitoring of the carrying-out of the programmes is an important part of the whole exercise. We are, therefore, discussing with those areas effective arrangements to that end.
Mr. George Cunningham: Is the Secretary of State aware that, with only limited resources so far, Islington has been doing a great deal to improve the housing conditions of its people, some of which work he saw recently on site? Does he also realise that what we need now to back that up is a programme to pre-
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serve jobs in the inner city and that Islington Borough Council will express its gratitude to him for the obvious and helpful response that he has made to that request and will make good use of the arrangement he now suggests?
Mr. Shore: I am grateful to my hon. Friend. I believe that, on any serious judgment, Islington and Hackney deserve their place as a partnership authority.
Mr. Fletcher-Cooke: Will the Minister resist the temptation of regarding the dead centre of a conurbation as necessarily the worst hit? In talking about inner cities, does he realise that the outlying boroughs of Greater Manchester, such as Bolton, on any yardstick are just as badly hit as Salford and Manchester? In those circumstances, although we are grateful for the help to Bolton, would the Minister consider making that help a partnership agreement, because figures show that it is in just as bad a condition as Salford or the old centre of Manchester?
Mr. Shore: I understand the hon. and learned Gentleman's point, but one of the major factors to influence us has been the scale and intensity of the problem, and I do not believe that the problems of Bolton equal the problems which exist in the heart of our major conurbations. In a sense I accept his accusations, because it is true that I am concentrating more on the heart areas of the conurbations than on the outlying areas, but I believe that to be justified.
Mr. Urwin: Whilst I welcome my right hon. Friend's statement, and especially his second thoughts about the inclusion of Sunderland in this programme, will he accept that there will be some reluctance in Sunderland at the knowledge that it has been placed in the Second Division—like a football team—even though it has vitally important questions of high unemployment to resolve, together with the related question of stimulation of industrial development? Second, can my right hon. Friend give some consolation to authorities such as Durham County Council—if only an assurance that they will be taken care of in relation to rate support grant?
Mr. Shore: As my hon. Friend knows, I must not anticipate what I shall say about the rate support grant. As my hon.

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Friend also knows well, in terms of unemployment policy Sunderland is indeed in the First Division, and very near the top. It is a special development area. But the inner city problem is not simply an unemployment problem, although that is an important aspect of it. It is the combination of this and many other factors that has brought us to a specific inner city policy and has led us to make the distinction that we have made. I am glad to have been able to give some assistance to Sunderland, but I do not think that the scale of its problem matches that of the partnership areas.
Mr. Steen: Will the Minister agree that one of the things learned from the last 10 years of poverty programmes is that people should be consulted when they arc to be affected by decisions, before a decision is taken rather than afterwards? Why was it, therefore, that when the right hon. Gentleman came to Liverpool on Friday he talked about the big bureaucracies and ministerial committees rather than insisting that people, and the inner city communities, should be part of the process? Was he thrown off balance when he missed his train from London to Liverpool?
Mr. Shore: I met. the elected representatives of the city of Liverpool. The hon. Gentleman, whose contributions I have studied, had better make up his mind whether he is backing representative government at local and national level, or whether he sees urban area policies being conducted as a straight dialogue between Government and voluntary bodies and agencies of all kinds. I believe that voluntary bodies and other interests have a most important part to play at the local level, but it is not at the level of the partnership committees themselves.
Mr. Heifer: Is my right hon. Friend aware that most people on Merseyside will accept without question that voluntary bodies cannot solve the problem of Merseyside? Is he also aware that it is understood on Merseyside that its problems are quite different from those of Henley-on-Thames, although the hon. Member for Henley (Mr. Heseltine) perhaps does not understand that we have, for example, 12·1 per cent. unemployed, vast areas lying derelict, tremendous housing problems, and a lack of small
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businesses? All these things are understood perfectly on Merseyside. Therefore, the general attitude would be one of pleasure if the problems of Liverpool were only those of Henley-on-Thames. Will my right hon. Friend also consider the fact that many of us feel that £15 million over three years, with the type of problems that Liverpool has, is not sufficient? We shall need a much greater allocation. We shall certainly need a far more intensive programme of development of small businesses in the centre. We shall also need much more money to help solve our serious housing problems.
Mr. Shore: We allocated £30 million to Liverpool for the three-year period 1979–1982, following on the construction package. But I should like to emphasise that I do not see the boosted Urban Programme as being in any sense the main contribution made by Government.
May I make this point directly to my hon. Friend, because he represents part of the city of Liverpool. In the last year for which we have figures-1976–77 —the Government made contributions totalling £118 million to the city of Liverpool. Much of that went on the whole range of services, and included between £30 and £35 million on housing aid.
Several Hon. Members Several Hon. Members rose—
Mr. Speaker: Order. May I appeal to the House? Questions from now on should be directed to seeking any further information that hon. Members want on the statement. If they are brief and to the point, I shall be able to call some hon. Members who otherwise are unlikely to be called.
Mr. Mike Thomas: My colleagues and I in Newcastle upon Tyne—indeed, in the whole Northern Region—will be grateful for my right hon. Friend's statement. We are in dire need of the help that he offers, and the partnership between Newcastle and Gateshead is welcome. We appreciate his readiness to meet not only ourselves but others involved. We are grateful for his announcement today, and we are anxious that the expenditure of money involved —and, more importantly, the development between his civil servants and those who are to put constructive ideas into our programme, which has already begun

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—should start at the earliest possible moment.
Mr. Shore: I thank my hon. Friend and assure him that we shall try to get going with the Newcastle-Gateshead partnership at the earliest moment.
Mr. Alan Clark: The right hon. Gentleman has not even tried to answer my hon. Friend the Member for Henley (Mr. Heseltine), who asked what criteria are being applied in the dispensation of this patronage, and, in particular, how are the special projects to be evaluated and what guidance is he to give to local authorities prior to their submission?
Mr. Shore: We have debated the criteria in the House. We have referred specifically to loss of population, to loss of jobs, to the actual social composition of population in the inner city areas, and to a number of quantifiable and, to some extent, admittedly. difficult to quantify, social factors. We have discussed all these factors and we are prepared to give such information as we can. But I do not think that it would be fair to accuse us, as the hon. Gentleman has done, of considering these matters in any light and ill-considered way. We have done our best.
Mr. Faulds: On what possible basis can my right hon. Friend have come to the conclusion that Sandwell does not merit exactly the same tr,:iitment as he has announced for some of those areas needing.special attention? Is he not aware that we have exactly the same concentration in that area of inner city problems as many of the other areas that he has mentioned?
Mr. Shore: I understand my hon. Friend's point and his feeling, because Sandwell clearly has problems. The difficulty always at the margin is to decide those whom we can help as distinct from those whom we are not able to help. Sandwell was certainly considered carefully by us but it did not quite match the degree of need which we found in the areas that I have announced.
Mr. Anthony Grant: I welcome the right hon. Gentleman's relaxation of the IDC policy, but why will he not further relax the ODP policy, or, better still, abolish it altogether, because commer-
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cial development has as important a part to play in dealing with inner area decay as has industrial development?
Mr. Shore: We have relaxed the ODP policy. We raised the threshold to 30,000 square feet only two months ago, and, in addition, we have given, as it were, entirely new terms of reference to the Location of Offices Bureau.
Mr. Jay: While I welcome the spirit of my right hon. Friend's statement, is he aware that there will be surprise as well as disappointment at his exclusion from the London list of the borough of Wandsworth, which has the same problems as Lambeth, Hammersmith, Islington and Hackney? Can he tell us of any problems that those boroughs have that arc not also to be found in Wandsworth?
Mr. Shore: My knowledge and affection for the borough of Wandsworth is well known, and so it should be, because I live there. But I did not feel, on examining the criteria as fairly as I could, that it had the same intensity of need as I had already discovered in Hammer-smith, on the one hand, and in Islington and Hackney, on the other.
Mr. Charles Morrison: To what extent will the new inner city programme affect the prospects for development, both industrial and in terms of population expansion, of those newer towns which until now have been assumed to be expanding, such as the borough of Thamesdown?
Mr. Shore: I should like notice of a question relating to a particular area. In general, however as the hon. Gentleman will understand, we developed our inner city policy at the same time as we developed our revised policy towards the new towns. I have made statements and announcements to the House during the past few months covering the future of the new towns.
Mr. McNamara: Is my right hon. Friend aware that his announcement will be welcomed in Hull? Can he now give the House some indication of how this new urban scheme should be programmed, because he said it is to be left in the hands of the local authorities? What sort of time scale will there be. and what sort of aid will come from his

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Department to hard-pressed areas such as Hull to enable them to take full advantage of the offer which has now been made to it?
Mr. Shore: The partnership arrangements arc well in hand already. As far as the second group of authorities which I mentioned is concerned, we shall, I hope, be exchanging views with them in the near future. Beyond that, our main request of them is that they should draw up for themselves inner area programmes, and that will be the basis on which we shall start further studies.
Mr. Michael Latham: If I may be the spectre at the feast, is it not clear that throwing money al the problem has not worked in the past and is not likely to work in the future? Would it not be a lot better if the right hon. Gentleman did something to implement the report of the Select Committee on Planning Procedures, chaired by my hon. Friend the Member for Daventry (Mr. Jones), rather than just throwing more public money around?
Mr. Shore: It may well have something to do, say, with planning procedures as well. However, I hardly consider it to be throwing good money after bad. The plain truth of the matter is that this country, and this House, has not so far had a fully developed urban programme— an inner city programme. Insofar as we have one at all, this is due to the initiatives taken by the then Home Secretary, my right hon. Friend the present Prime Minister.
Mr. Loyden: Will my right hon. Friend accept, in spite of the churlish remarks with which his statement has been received by the Opposition Froat Bench, that these are the first positive steps that have been taken to deal with districts which have been selected as inner city areas? Will my right hon. Friend first bear in mind that the geographical criteria of inner cities ought to be left sufficiently flexible for areas of stress in other parts of those districts to be able to come within the scope of inner area action? Will the innovations and ideas for community industry flowing from the local people in such areas be taken on board and considered seriously as a way of dealing with industry and unemployment?
Mr. Shore: I assure my hon. Friend that we need the ideas and co-operation of the people living in the inner areas, and we must find ways of tapping the contribution which I know they can make. Flexibility in the definition of inner areas will be permitted, but it will be a restricted flexibility. I appreciate my hon. Friend's special interest and, following my visit to Liverpool on Friday, I was glad to find that the local authorities were including in their definition of the inner area there at least the dock area of Garston.
Mr. Geoffrey Finsberg: I think that in the last paragraph or two of his statement the Secretary of State made reference to IDCs and to inner London. Before he brings in the Bill that he promised, will he have another look at that definition, which is different from the definition of inner London that most of us recognise, for example in respect of the Inner London Education Authority? His definition, as put forward when we discussed the Office Development Act, excluded, for instance, the London borough of Camden, in parts of which unemployment has trebled over the last two and a half years. Will the Secretary of State at least see whether he can make his definition of inner London conterminous with inner London as stated in statutory terms?
Mr. Shore: I shall have a further look at that matter. However, I must tell the hon. Gentleman—who, of course, knows London as well as I do—that I believe that at present we are right to give this, as it were, intra-regional preference to the partnership areas in London.
Mr. Pavitt: Does my right hon. Friend recall that, following his previous statement, I pressed him on the inner city deprivation experienced by Willesden—most of it built by Queen Victoria, though not personally. Sixty-six factories have closed in the last six years and 50 per cent. of the population of Harlesden was born outside the United Kingdom. Would my right hon. Friend now see what more can be clone to help with the tremendous problems of that area?
Mr. Shore: I shall indeed look at the problems of Willesden, as my hon. Friend has urged me to do. I regret that, in the consideration that we gave to the various

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claimants, we were unable to include that district in the list that I announced.
Mr. Budgen: It occurs to me that one of the causes of Wolverhampton's problems is the regional policies which have been pursued by successive Governments and which have succeeded in driving economic activity away from the West Midlands. Does the Minister agree that it would be better fundamentally to reconsider these regional policies rather than engage in further interference by the State, and, indeed, counter distortion by subsidies?
Mr. Shore: Over a period of time all policies should be, and indeed are, reviewed. The problem, as we have found it in most of our major cities, is not the impact of regional policy in taking industry out. It is much more a problem of firms dying, as it were, in situ, and the failure to generate new growth in the area. In other words, I do not believe that industrial rundown in the major cities is the result of regional policy.
Mr. Cant: I agree with inner city policies, but may I ask my right hon. Friend whether the time has not come to back some of the winners among the older cities? I am referring to Stoke-on-Trent. Could not Stoke be given an industrial development site grant to supplement land reclamation? Should it continue to be penalised because of its low unemployment? Does my right hon. Friend propose to continue the policy of further penalising Stoke-on-Trent and Staffordshire by reducing the rate support grant to shire counties in order to help to finance his inner urban area plans?
Mr. Shore: My hon. Friend must not tempt me on the rate support grant question on this occasion, but he is right to refer to the important programme of land reclamation which has taken place in Stoke and in the area around, which has undoubtedly been beneficial. All I can say to my hon. Friend is that I very much hope that he and the city that he represents will continue to enjoy the success that they have already achieved.
Mr. Michael Morris: What assurance can the Secretary of State give to those county councils with new towns within their counties which are fast gaining the opinion that they are being milked to
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provide extra help for the inner city areas?
Mr. Shore: We have as tender a regard for new towns as we have for other areas of the country, but the one thing about new towns is that they are not part of the inner city problem.
Mr. Palmer: May I, as one who represents much of the inner part of the city of Bristol, ask my right hon. Friend how he now sees the needs of the city of Bristol?
Mr. Shore: I assure my hon. Friend that we looked very carefully at the problems of Bristol—and obviously there are problems. What I had to do, in terms of this statement and within the allocations of available money, was to establish priorities, and that is what I have tried to do.
Several Hon. Members Several Hon. Members rose—
Mr. Speaker: There are five hon. Members who wish to speak. I shall try to call them all, but it depends on whether they are brief.
Mr. Hal Miller: Can the right hon. Gentleman say whether the amounts mentioned for the partnership areas are grants, or merely permission to borrow? Can he also tell the House whether, in discussions with the partnership areas, attention has been paid to the fact that they are getting increased resources, and that they should not, therefore, export people to other areas?
Mr. Shore: I can hardly limit the export of people in this country—it happens to be a free country. I very much welcome the first part of the hon. Gentleman's question, because I want to make it clear that the sums of money that we are discusing are eligible for grant aid. That is the point. The normal rate of grant is, of course, the 75 per cent. rate of the urban grant.
Mr. Arthur Jones: The right hon. Gentleman has referred on a number of previous occasions, when talking about the inner city areas, to the private sector. How does he see that sector in the context of his announcement today? What are his thoughts on the artificial level of inner city land values?
Mr. Shore: On both those questions I shall have more to say when we debate

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the Bill which, as I said, I hope to present to the House before Christmas. The Bill will seek to enhance the powers of local authorities to assist industry in their areas.
Mr. Sainsbury: Will the Secretary of State accept that it is now more than ever apparent that however clear he may think the criteria are for identifying the areas to be selected for aid, there will be a great deal of disagreement about whether they have been fairly selected? Will the Secretary of State, therefore, consider helping to put everybody's minds at rest by ensuring that the monitoring programme to which he referred can monitor precisely the quantified objectives which he is hoping to achieve by each of the programmes to which he has referred?
Mr. Shore: We are thinking hard about what would be an effective monitoring system but one which, I hope, would not involve masses of paper work. I shall think further about that, and if I can report to the House on the matter I shall be only too pleased to do so.
Mr. Kenneth Lewis: Is the Minister aware that if this is new, fresh money, this proposal must be good? Can he assure us that when the rural areas come to negotiate their grant he will not say to the rural area county and district councils that they cannot have any extra because of the money that he has spent on this scheme?
Mr. Shore: That is an imprecise question, and I am afraid that, for fear of misinterpreting it, I had better say that it is not a question that I can reasonably answer.

INNER CITIES
  NEW MEMBER
  The following Member took and subscribed the Oath: Eric John Sever, Esq., for Birmingham, Ladywood.
ORDERS OF THE DAY

  DEBATE ON THE ADDRESS
  [FOURTH DAY]
  Order read for resuming adjourned debate on Question [3rd November].
  That an humble Address be presented to Her Majesty, as follows:
  Most Gracious Sovereign,
  We, Your Majesty's most dutiful and loyal subjects, the Commons of the United Kingdom of Great Britain and Northern Ireland in Parliament assembled, beg leave to offer our humble thanks to Your Majesty for the Gracious Speech which Your Majesty has addressed to both Houses of Parliament.—[Mr. Bradley.]
  Question again proposed.

  INDUSTRY AND COMMERCE
  Mr. Speaker: Before I call the right hon. Member for Leeds, North-East (Sir K. Joseph) to speak, I should tell the House that I have a very long list of hon. Members who have indicated that they will be trying to catch my eye. Yesterday two hon. Members took 49 minutes between them, and if that happens today it will repeat yesterday's performance of cutting out some hon. Members who wish to speak.
  I have selected the amendment on trade in the names of the right hon. Lady the Leader of the Opposition and her right hon. Friends.
  4.18 p.m.
  Sir Keith Joseph: I beg to move, at the end of the Question, to add:
  But humbly regret that the policies being followed by the Government as well as those outlined in the Gracious Speech will not enable industry and commerce to achieve the level of performance necessary to maintain, let alone to improve, the standard of life and social services.
  I am during my speech today to ask the Secretary of State who has now been in his present job for nearly two and a half years, I think,—
  The Secretary of State for Industry (Mr. Eric G. Farley): Longer.
  Sir K. Joseph:—five questions, and I hope that they are sufficiently central

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  to the subject of the standard of living and the employment of the British people for him to be able to answer them.
  The present position—I do not believe that there will be any disagreement on this between the sides of the House—is that we have many fine firms of all sizes from the giants through to the one-man firm both in manufacturing and in services. We have these fine firms despite the misunderstanding by Government, particularly the Labour Government, of the needs of industry. We have production that has been flat since the end of 1973 and as one encouraging factor we have an export volume that has increased more than import volume during the past few years.
  I suggest—I think that the Secretary of State will agree—that rising productivity is the source of an improved standard of living for any society and of competitiveness. The Prime Minister, in his speech at Blackpool a year ago, emphasised to the Labour Party Conference that employment in our society and a rising standard of living both depend upon our being internationally competitive. With that my right hon. and hon. Friends and I can thoroughly agree, and I hope that right hon. and hon. Members opposite also agree.
  We shall be competitive, and therefore have increased numbers of jobs, a rising standard of living and improved social services, to the extent that we are competitive in trade and industry, to the extent that our productivity rises, and to the extent that we encourage innovation. Innovation and competitiveness are the key to jobs and to an improved standard of living.
  I hope that this either is or can be made common ground between the two sides of the House, because nothing would be better for the future welfare of the people than that there should be common ground on the essential question of the management of the economy so as to enable private enterprise, and indeed the public sector, to produce the best results for consumers, savers and workers.
  The classic view about how to achieve rising productivity and innovation is that they flourish best in a framework of competition and of laws, taxes and services which are designed to encourage people to do in their own and their
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  family's interests that which is in the public interest—a framework which is designed to achieve co-operation within firms and competition between firms, a framework that has built into it safety nets, laws that, for instance, inhibit pollution or noise or, perhaps, Sunday trading or trading in hard drugs, a framework that contains laws which match the spirit of the times and services which are designed to look after casualties and to help people without diluting the incentives necessary to an enterprising society.
  In the last analysis, supply—and an increased supply of what people want is what we call growth—is a matter of individual initiative and effort. At best Governments only create the conditions for initiative and effort. I happily espouse the very last sentence of a book produced by the Secretary of State's own Department to which he contributed a foreword and which says that improvements in performance can be brought about only by action at the level of the boardroom, the office and the shop floor.
  We on this side of the House believe—I that a number of right hon. and hon. Members opposite believe this also —that this framework and this encouragement to people can best be achieved by allowing people to spend more of their own earnings, by allowing differentials to operate to encourage enterprise, effort, responsibility and skill, and by allowing the rewards of success to come through to those who, by a combination of character, skill and luck, are successful in creating jobs and wealth—wealth which helps them but which also helps the whole of society.
  The profit and loss competitive structure is, we believe, the framework best adapted to harness the self-interest of men and women to the public interest. But the Socialists do not in general seem to share this understanding. Historically, they found the free enterprise system ready to be milked and, very understandably, they set about milking it. But they did not, and do not, seem to understand the conditions necessary to keep the cow—if that be the animal that can be milked—of profitable, successful, competitive free enterprise in flourishing condition. Right hon. and hon. Members opposite and their predecessors have condemned free enterprise. denounced profits, stigmatised competition and exalted conflict.

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  The Leader of the House has in his previous incarnations been a leader of this school of rhetoric and denunciation. The general attitude and philosophy of Socialist writers—I am not for a moment impugning their sincerity or their belief at the time—has been, in the words of the late Herbert Morrison, that the problem of production is solved, that there is no problem of production, that the only problem that faces society is that of distribution. In the interests of allowing production to continue to be solved and in the interests of dealing with the problems of distribution, as they saw them, the Socialists have pushed the panaceas —so called—of nationalisation, of planning, of controls and, above all, of high Government spending.
  This afternoon we have had another example, as one of my hon. Friends said, of throwing public money at a problem when enormous amounts of public money have already been unsuccessfully and in vain thrown at that problem. The result of high public spending is high direct taxes, with all the consequences to which they lead. Now, over 13 years, for 10 of which the Socialists have provided government, the wage earners have had in real terms an average increase of 1 per cent. a year in real household spending power. That is despite a much better performance during three-and-a-half years of Tory government.
  So the Socialists have no coherent analysis or understanding of how the standard of living rises and jobs are created spontaneously in a free society if the right framework is created. Far from the problems of production having been solved, today, with production totally flat after three and a half years of Labour Government, the problems of production are worse than ever and supply constraints, inhibiting people at every level of income and education and activity from contributing more of their efforts, abound.
  We have now more unemployment under Labour and yet—I think that Socialist Ministers understand this—there is little scope for expansion without running into shortage of skills as well as worse inflation. If it is true—I think that the Secretary of State is bound to agree with this—that rising productivity is the source of an improved standard of living. the Socialists tend to give this fact very
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  little emphasis indeed in their speeches and their approach to the people and to the problems. In fact, by their rhetoric the Socialists seem to have misled themselves, trade union leaders and shop stewards into believing that there is some crock of gold out of which the standard of living and the social services can be improved.
  None of this would matter a jot if the Socialists were at the same time preaching to the people that they must make do with the existing standard of living, that we must forgo materialism. But, as we all know, the Socialists are constantly raising expectations for increased earnings, increased spending power, increased public spending and increased expectations in every field.
  It is true—I must accept this, otherwise the Secretary of State will rightly criticise me—that our productivity has internationally lagged for about a century. It is true that it has risen faster since the war than it did before the war. But the fact is that recently productivity has been rising, if at all, at a very dismal level.
  Between 1970 and 1973 productivity rose relatively sharply by historical standards in this country. During the last year of Tory rule in 1973 productivity—admittedly, there were other factors which have to be taken into account—rose by about 9 per cent. How much worse, therefore, is the Socialist performance over the 10 years out of the past 13 years in which they have formed the Government when I tell the House that our productivity has risen at less than half the rate at which productivity has risen in the five larger countries of the Common Market over the last 15 years?
  Is that surprising? After all, there are no incentives. Labour high spending has led to high deductions from pay packets, and the wage-earners are asked by Socialist Ministers to be content with a social wage—that is, with money being withdrawn from their pay packet to be spent on items which the individual wage-earners have not chosen and might not choose were they to have their own money. We live now with a new manifestation of the old truck, under which Ministers, not employers, decide how to spend the wage-earners' money.
  Why is there inefficiency in the use of labour—that is, low productivity? There

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  are, of course, notable exceptions. The whole of agriculture is remarkably high in productivity—amongst the top in the world. There are industries in this country, such as food processing and chemicals, to choose two, in which our productivity is internationally very respectable indeed. There are many firms—giant, large, medium, small—where productivity is high. But overall the results are all too clear.
  Let me give the House the table, which I draw from the last bulletin of the National Institute of Economic and Social Research, of what has happened to productivity in manufacturing over the past three years, since Labour came into office. In this country we have had an increase of under 3 per cent. in manufacturing productivity, output per man-year for men and women in manufacture. The United States of America has had a 10 per cent. increase over the same period. France has had a 10 per cent. increase, Italy a 12 per cent. increase, Japan a 14 per cent. increase and Germany a 15 per cent. increase.
  So let not any Minister say that our poor performance has been the result of the oil price increases. On the contrary, during the same period of three to three and a half years the productivity increases from which the standard of living, the jobs and the social services of the country flow have been four to five times higher in our most comparable industrial countries than they have been under Socialism here.
  Why has this been so? It is true that responsibility must in part fall on management. We have management of all qualities, from the outstanding through to the less than good. While management must take the responsibility, I hope that the House will remember that the wet blanket of high taxation has stifled initiative and effort, risk-taking and enterprise at every level of responsibility from the boardroom through to the floor cleaner in industry. It is not only that our capacity used is below potential in this country under the Socialist Government, but that the effort in the factories, in manufacturing and the service trades. is below potential capacity.
  Of course, there are devoted minorities, devoted individuals, devoted teams, devoted work forces, but time and again
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  in every establishment one comes across the attitude in management that it is not worth it, that the risk and effort are too much to be justified by the miniscule rewards left after high taxation and inflation. One comes across the attitude in middle management, from the foreman and from the operative, that the effort is not worth while for the same reason.
  On top of all this discouragement from Government action there is the attitude of the trade unions and shop stewards. There are some trade unions and shop stewards who are models of co-operation and understanding. There are individual firms that praise very highly the output, performance and productivity in this country. But, in general, there is on the part of many trade unions and shop stewards a hostility to, and a misunderstanding of, the processes of prosperity embodied in the free enterprise system and a lack of understanding of the common interest which makes high productivity in the interests of the workers of this country, the savers, who are now to a large extent the same as the workers, the managers and the consumers as well as the users of the social services.
  Mr. Tom Litterick: The right hon. Gentleman's last point is interesting, but it would be informative if he could explain how it is that the agricultural workers—who have indeed increased their productivity per man-hour, year in, year out, by more than virtually every other occupational group in the British economy—remain, in spite of his argument, the worst-paid occupational group in Britain.
  Sir K. Joseph: I pay tribute to the farmers themselves and to their entrepreneurial spirit despite the difficulties imposed by the Government. the green pound and so on. I pay tribute to the farm workers, who are not organised in mass obstructive battalions by trade unions and shop stewards. I pay tribute to both.
  Time and again, we see that where there is not—I must be careful or I shall generalise too far today —I think I should stick to what I have said—[Laughter.] I was about to say that the smaller the firm and the less the presence of trade unions, the higher tends to be the productivity and the benefit to the consumer. the social services and our society.

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  I am not looking to the Secretary of State for any plan to increase productivity on a national scale overall, because I believe that the NEDC, little Neddies, sector working parties, planning agreements and nationalised industries in themselves are useless instruments for this purpose.
  But I say to the Secretary of State that, in the rationalised industries for which he and his colleagues are responsible, he and his colleagues should be trying to set an example of rising productivity. They should he encouraging it everywhere by cutting the marginal rate of taxation. Above all, perhaps, they should be constantly expressing in their speeches not the outmoded obsolete class war rhetoric but the fact that higher productivity and co-operation between wage earners and good management is the way to a better standard of living, more jobs and better social services.
  Mr. Litterick: As in agriculture.
  Sir K. Joseph: In agriculture there is first class co-operation between farm workers and farmers, and that accounts for the high performance.
  Mr. Litterick: That is why so many,of them are on supplementary benefit.
  Sir K. Joseph: The hon. Gentleman knows that traditionally in the trade union movement the farm worker's pay is treated as the base on which all differentials are erected. As other trade unions raise their basic incomes, farm workers are always near the bottom because of that historic fact. As the House knows, many farm workers receive non-pay perquisites. They do not all receive them, and those who do receive them to a varying extent.
  I ask the Secretary of State, first, does he agree with the Prime Minister, does he agree with me and does he agree with all of us on this side that competitiveness is the key to employment, to the standard of living and to the social services? Does he agree that productivity and innovation are the key to competitiveness? That is my first question.
  The cumulative effect of obstruction by those trade unions and shop stewards who obstruct, and the discouragement,of enterprise by the high marginal rate of
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  tax and by the general hostility of the Socialist Party to the free enterprise system are bound to make us less competitive. If I had to sum it up in one sentence, I should say that the twin policies of over-man and over-tax are suicidal for the standard of living and the social services of this country. They will lower the standard of living. They will lead to fewer jobs, lower pensions, less for the disabled and less for the casualties of our society. The damage done by these twin policies of over-man and over-tax will more than offset the benefits of North Sea oil.
  From what does this industrial inefficiency, which some of us in an inaccurate verbal shorthand call over-manning, come? It does not come from any philosophy. Restrictive labour practices are not capitalist and they are not Socialist either. They are opportunist on the part of this Government, and they are defeatist because this Government do not understand how to create conditions which will lead to the creation of more jobs. That is why they are so passionate to defend existing jobs. Indeed, the Government are making the situation far worse by refusing to allow scope for the winners among our industrial and service firms, while overtaxing all of them in order to finance the losers in our economy.
  The way to raise productivity—I hope that the right hon. Gentleman will agree —is to use the wastage, which is considerable, in most of the nationalised industries and in many firms to de-man where there is overmanning, while simultaneously encouraging new firms and expansion of existing firms by cutting the top rates of tax to encourage the risk-takers, the job creators, to get into action.
  This is the way to increase productivity and, at the same time, to reduce unemployment. At the moment the Government are aborting the new jobs that could exist by all the Socialist obstacles that they have erected in the path of enterprise, particularly by the high rates of marginal taxation which make the risk-reward ratio so discouraging. Here, then, is the test. We witnessed last week a welcome move by the Socialist Government to try to encourage small businesses. Some things have been done that we thoroughly welcome. But many things remain to be done.

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  One thing above all remains to be done, and that is to cut the top rates of taxation. The way to help the poor of this country, paradoxically enough, is to release the talents of the job and wealth creators by cutting the top rates of taxation. We shall have more resources, more jobs and better social services if we emulate our neighbouring countries and do not burden the successful with such vicious and vindictive rates of taxation.
  I hope that the team of the Chancellor of the Duchy of Lancaster and the Under-Secretary of State for Industry will recognise the importance of cutting the top rates of taxation in the next instalment of what they do for small businesses. Indeed, the start-up—start-up is the technical phrase for the creation of new businesses—of businesses and the expansion of existing small businesses depend more for finance on the capacity to save of the entrepreneur himself, if he were able to save out of net income, and the capacity of those who might have high net incomes to invest in such businesses than on any other gadgets that the Government can contrive.
  Mr. Arthur Palmer: The right hon. Gentleman quoted, as I understood, France and Italy as models that we might well emulate. France and Italy have two of the largest Communist Parties outside the Soviet Union, which would not seem to show any great devotion to the principles of free enterprise.
  Sir K. Joseph: I did not quote them as examples. I said simply that productivity had risen three and four times as fast in those countries as in ours.
  My second question to the right hon. Gentleman, therefore, is, whether the Government will encourage the use of wastage in their own sector to raise productivity. Will they encourage new jobs by cutting the top rates of tax to motivate the risk-takers?
  The third subject which I believe is central to this debate is the level of profits. I shall not spend time justifying to the House the place of profits earned in competition in a free society, but I point out to the House that profits are almost catastrophically low in real terms. The
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  last figures 1 have are for 1975—I take my information from the DTI Gazette.
  In metal manufactures the net profit, at replacement cost after providing for stock appreciation, was under 1 per cent. In engineering, shipbuilding, vehicles and metal goods it was only just over½ per cent. In textiles, leather, clothing and footwear, it was 0·3 per cent., and even in total manufacturing as a whole it was 2½ per cent. I hope that the right hon. Gentleman will accept, as the CBI's graph in its conference document so vividly shows on page 37, the close relationship between net profit and investment. They follow very closely, one from the other.
  So, without going into the questions that I might raise—without pointing out that investment is not a panacea in itself. that we compare very well with other countries in quantity of investment but not in quality or in output from the investment installed—without embroidering on all those basic truths, which I could easily prove to hon. Gentlemen who doubt them, I limit myself to asking the Secretary of State whether he will agree that profits are far too low in real terms now and whether he will agree that even if they were to rise by 30 per cent. during this year or the next, they would still be at a catastrophically low rate in real terms—only at the level of about 3 per cent. overall in manufacturing.
  The fourth question I put to the right hon. Gentleman is about the spending of taxpayers' money.
  Mr. J. Enoch Powell: The right hon. Gentleman gave a series of percentages of profit. These are percentages of what capital?
  Sir K. Joseph: They are drawn from the capital in use from company accounts after replacements of assets at replacement cost and after providing for stock appreciation.
  With regard to the spending of taxpayers' money, the Secretary of State has presided over a great increase in public spending in the nationalised industries, in subsidies, in rescue schemes and in special schemes under both Industry Acts. He has tended to back losers rather than allow society to back the winners.
  It may well be sensible occasionally for money to be provided by the taxpayer to help a company genuinely to

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  become more competitive so that it can quickly become independent. Is there any evidence of that having happened with any of the companies that the right hon. Gentleman has tried to help with taxpayers' money? I grant him that in Ferranti—a rather special case—that may be true, but I should like to know whether there are any other examples.
  My right hon. and hon. Friends believe with me that rescues and subsidies do great harm because the expectation, or hope, of rescue tends to prevent companies putting their own house in order and they tend to create a pursuit of subsidy in firms rather than a pursuit of profit. They blunt competitiveness in that way. I believe that the Government are doing great harm by buying business abroad with the taxpayers' money, such as we are witnessing happening with ships in Poland and, as reported in the Press today, in India.
  It is generally bad for business to buy turnover. The cost is paid not only by the taxpayer but by people such as British seamen, who will find some of their merchant carrying transferred to Polish and, perhaps, to Indian ships on the backs of our own taxpayers' subsidies.
  The point I put to the right hon. Gentleman—and it leads to my fourth question—is that all these operations have a price. The Opposition want to know whether the right hon. Gentleman and the Government are aware how many jobs are lost by the taxes raised in order to provide subsidies. rescues and all the other operations for which the Government try to take credit. Jobs are lost elsewhere by the net effect of the taxes levied in order to increase Government spending. If it is not by increased taxes, it is by increased borrowing, which tends to raise the interest rate above what it would otherwise be.
  We ask the right hon. Gentleman and all Ministers to tell us not only how much a scheme will cost, but who pays and how many jobs will be lost as a consequence. It is the old question that Lenin used to put: "Who whom? "" Who pays?" in two senses—who finds the money and who loses his job? Although the jobs rescued are dramatically identified—a firm or an industry—the jobs lost
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  are probably just as numerous. They are spread invisibly through the economy so that they cannot be identified, but the remorseless increase in the unemployment figures, despite the spending of taxpayers' money by the Government, shows how ineffective are the rescues and subsidies.
  If the right hon. Gentleman tells us that things would be worse but for what the Government have done, I have to reply that he cannot possibly be sure of that, because he is weakening sound firms, often by higher taxes, to rescue unsound and precarious firms.
  The fourth question is whether the right hon. Gentleman will tell us, whenever he announces the expenditure of some public money, whence the money comes and how many jobs are destroyed? If his brief today contains yet another catalogue of public spending, will he tell us in each case how many jobs will be destroyed to find that money for public spending?
  It is natural that I turn now to the British Steel Corporation and to British Leyland. In connection with British Leyland I wish to state that I respect Sir Richard Dobson. I respect Michael Edwardes who has become Executive Chairman. I hope that the Government, the NEB and the new management will review the Ryder plan. I hope that they will decide to taper the amount of taxpayers' money going to Leyland. I hope they will back the new management and I ask them whether it is not now perhaps time to consider making British Leyland to a holding company so that the viable parts—there are some very successful parts of British Leyland—can be separated as business entities from the areas where there are heavy problems. I do not mean total independence at this stage, although that may come later.
  I hope that the right hon. Gentleman will tell us about British Leyland and about the British Steel Corporation where, in the new circumstances, it surely must be necessary to review the plan that was established under the Conservative Government and ratified, after a delay, by the Socialist Government. I hope he well tell us the prospects for the British Steel Corporation and for British Leyland and that he will tell us two things. Are the cash limits still as

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  they were for the British Steel Corporation? Are the taxpayers' money commitments still as they were for British Leyland? Will the right hon. Gentleman tell us whether the funds for investment in both those cases can be, and are being, raided for current expenditure on wages, earnings, overheads, and so on?
  I wish to draw those five questions together. I hope that the right hon. Gentleman will answer them all. I do not believe that the Socialist Party or the people have any perception of the steepness of decline in our competitiveness as manifested by our productivity. I do not believe that it is wise of the Government to use oil to support consumption while, at the same time, making us industrially and commercially less and less competive by their hostility to free enterprise when they cannot substitute anything better. Their hostility is manifested by excessive marginal rates of taxation, by a refusal to encourage the job creators, by backing losers with taxpayers' money, by making productivity lower by their own feather-bedding measures, and by the incessant stream of over-legislation and over-regulation.
  All these ingredients blunt our competitiveness, our standard of living, our jobs and our social services. They drown the benefits of oil, just as the benefits of North Sea gas have already been drowned and lost from sight.
  Nor can sound and sustainable jobs be created by the Government's present policies. Subsidies have to be paid for. As the subsidised sector grows, so the subsidising sector becomes more heavily burdened. The rush for rescue can swamp the lifeboat. Nothing is more important for the economy than common ground on this analysis, or one very close to it. Only a decisive change to a pro-enterprise, high-productivity innovating economy can reverse the downward trend.
  If the Socialists ignore these realities—[Interruption.] I hope that the Lord President will listen, because I remember warning him in the autumn of 1970 that, if his party won the General Election and put into practice the policies of higher public spending on which he was fighting that election, he, as Secretary of State for Employment, if he continued in that job, would find himself presiding over the largest increase in unemployment since
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  the war. He scoffed at me. I was right, so let the Lord President not ignore what I am saying now.
  If the Socialists ignore the realities, higher unemployment and a dismal growth in our standard of living will be the consequence for the British people, plus the bitterness that will come from disappointed expectations that the Socialists themselves have done much to create.
  4.55 p.m.
  The Secretary of State for Industry (Mr. Eric G. Varley): The House listened with its usual interest to the right hon. Member for Leeds, North-East (Sir K. Joseph). Speaking for myself, I look forward to the right hon. Gentleman's speeches, especially when he ranges into philosophical pronouncement, and today's speech was true to kind, and vintage stuff. I thought that he got into a little difficulty in trying to deal with the intervention of my hon. Friend the Member for Birmingham, Selly Oak (Mr. Litterick) on agriculture, and he ducked out of that fairly quickly.
  I, too, pay tribute to the magnificent productivity record of British agriculture and to the performance of our farmers and agricultural workers, but, objectively examined, what has helped to contribute to that is the kind of arrangements and financial dealings which the right hon. Gentleman so much despises. It has been done by subsidies, by interest-free loans, and by managed markets to a very great extent, and I find it extraordinary that the right hon. Gentleman has been led up the garden path in this way.
  Today the right hon. Gentleman did not say anything about controlling inflation and trying to bring down inflation. We know that it is traditional on the last two days of the debate on the Queen's Speech that the Opposition should take advantage of their amendments to try to lay before the House of Commons what they think should be the alternative policies. I am afraid, however, that there is one important question that they have failed to answer today. It is a question which has been most aptly published in a Conservative Research Department document of which, for greater accuracy, I have obtained a copy. It is called "Fifty Questions and Answers. "It costs 65p and contains 78 pages. It may be regarded as a bit steep in price, but it is well worth

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  having, if any of my hon. Friends are interested. I shall quote at random from some of its contents.
  Question No. 4 asks:
  " Haven't the Conservatives been thoroughly ineffective in opposition? "
  Hon. Members: Answer.
  Mr. Varley: I am coming to the answers. Hon. Members need not worry. Question No. 6 asks:
  " How will the Tories be able to put things right when they are so out of touch with ordinary men and women? "
  Question No. 8 is:
  "Why vote Conservative? Didn't they make a mess of things last time? "
  Question No. 36 is:
  "Why do the Tories always put up council rents?'
  But, first of all, and certainly the question that the right hon. Gentleman did not answer, is this one:
  " Do the Conservatives actually have any policies? "
  The answer is that they do not have any answers to these questions. [HON. MEMBERS: "Answer."] I have a whole collection of material that I should like to use if I had time to show that the Conservatives do not address themselves to these questions. They have been in opposition now for three years and eight months—exactly as long as they were in government from 1970—and throughout the whole of those three years and eight months they have shamelessly and thoroughly repudiated all their disastrous policies of 1970–74.
  The right hon. Gentleman made no mention today of matters for which he and his colleagues on the Front Bench were entirely responsible—the intervention policies and the good old Industry Act 1972, under which one could do all the things that the right hon. Gentleman now disparages. There was the nationalisation of Upper Clyde Shipbuilders and, I suppose for a different reason, Rolls-Royce. There was a whole series of matters that I could mention, but I shall not. However, I should have though that, with this new-found philosophy, the right hon. Gentleman would have been able to tell us toe ay exactly what an incoming Conservative Government would do.
  Mr. Terence Higgins Mr. Terence Higgins(Worthing)rose—
  Mr. Varley: I shall give way to the hon. Gentleman in a moment. I want to get on if I can, because I suspect that there will be a great many interruptions.
  From all that the right hon. Member for Leeds, North-East said today, the Opposition do not really believe in the industrial strategy. That is what he said. I do not know whether that goes for some of his right hon. Friends. It goes for the hon. Member for St. Ives (Mr. Nott), who is to wind up this debate. Whether it will go for the right hon. Member for Lowestoft (Mr. Prior) tomorrow, I do not know. I suspect that it will not.
  Mr. James Prior: Yes, it does.
  Mr. Varley: It does go, apparently. There has been instant consultation on the Opposition Front Bench, and they agree that, when it comes to the industrial strategy, they are opposed to it.
  Sir K. Joseph: The Secretary of State will find that in the document "The Right Approach to the Economy "a chapter on the industrial strategy in which we tear it to bits and in which my right hon. Friend the Member for Lowestoft (Mr. Prior), my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe), my hon. Friend the Member for Guildford (Mr. Howell) and I all agree. Surely the right hon. Gentleman has read the document.
  Mr. Varley: Yes. Frankly, although they criticise it, they neither tear it to bits nor repudiate it. Nor does it say that an incoming Conservative Government would still co-operate if they got the chance, as I understand it. The Leader of the Opposition has never said that. However, I shall come to that presently, because I want to demonstrate that there are inconsistencies between what the right hon. Member for Leeds, North-East said and what his right hon. Friends say.
  Mr. Higgins: The Secretary of State drew attention, rightly, to the fact that the present Government had been in power for almost exactly the same length

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  of time as the immediately preceding Conservative Government. Will he accept that under this Government, as against that previous Government, the rate of inflation has been almost double, that the rate of unemployment has gone up more than 50 per cent., and that, despite what the Prime Minister said today, the real standard of living has gone down, whereas it went up under the Conservatives by record amounts over the four-year period?
  Mr. Varley: I can also confirm that the hon. Member for Worthing (Mr. Higgins) was a Treasury Minister at that time, when the money supply was totally out of control and resulted in a great deal of the inflation that we have been trying to deal with since then.
  There is one aspect of the industrial strategy which the right hon. Member for Leeds, North-East has failed to take into account. I agreed with a great deal of what he said. He said that if we were really to improve international competitiveness and productivity it was not only what we did in the National Economic Development Council and the sector working parties but that it would be at the level of the shop floor. To suggest that we cannot have a forum through the NEDC and the sector working parties and to disparage them, as the right hon. Gentleman is doing, is not the view of the rest of British industry. It is not the view of the Confederation of British Industry. That body is completely behind the industrial strategy and wants to co-operate. I do not know whether the Opposition ever consult the CBI about it, but the right hon. Member for Leeds, North-East ignores some of the achievements which have come through the industrial strategy.
  Many of the Section 8 schemes that we are implementing under the Conservatives' Industry Act 1972 arise from and have their origins in the industrial strategy. They have triggered off about 750 industrial projects to the value of hundreds of millions of pounds—not necessarily Government money or taxpayers' money, but industry's own money. They have been used for industries like the ferrous foundry scheme and the machine tool scheme, and they will help transform those industries which have
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  been run down for so long. Yet if all these Opposition documents are examined, we get no answers from them.
  Sir K. Joseph: The right hon. Gentleman cannot assert, let alone prove, that most of that expenditure would not have occurred anyway and that most of those modernisations would not have occurred anyway if the Government had created encouraging conditions.
  Mr. Varley: If we examine some of the projects which have been brought forward under the selective investment scheme and the Accelerated Projects Scheme, it is clear that they would not have taken place—industrialists tell us that they would not have taken place—but for the industrial strategy and what we are doing.
  The speech of the right hon. Member for Leeds, North-East comes at the beginning of the fourth Session of this Parliament, and certainly I am still none the wiser about what his policy would be. I think that I understand some of the policies of some of his right hon. Friends. However, the basic question which the right hon. Gentleman posed fairly today is whether they themselves would intervene in industry if they had responsibility.
  In the present frame of mind of the right hon. Member for Leeds, North-East, I do not think that he would intervene. However, that does not go for some of his right hon. Friends. In fact, I do not think that Conservative Back Benchers have any idea. In some respects, they admit it, because in "The Right Approach to the Economy "they say:
  "The precise limits that should be placed on intervention by the State are reasonably the subject of debate within the Conservative Party."
  But while the Opposition have debates —and they have them on their Front Bench if today is anything, to go by—we have to deal with the problems. We know that, without State intervention and assistance, many of the pillars of private enterprise would never have weathered the recession—the worst recession since the 1930s. Whenever the Chairman of the Conservative Party comes to my Department or goes to the Department of Trade to see my right hon. Friend in his rôle as Chairman of the Radio Industry Council, he as good as acknowledges that.

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  It is the same in our approach to small companies. I have always believed the continuing prosperous existence of small firms to be essential for the country's future. This is demonstrated clearly by the fact that small firms employ more people than all the nationalised industries and central Government and local government put together. But, because of the difficulties of size, they have special problems which we fully understand, recognise and are doing something to help.
  The Labour Party has always taken this attitude to small firms—[HON. MEMBERS: "Oh ! "] But it has. The Opposition have very selective memories. I can tell them that it was the Labour Government who appointed the Bolton Committee and who followed up its recommendations. But we have not stopped at only those recommendations. Since 1974, we have introduced a host of measures to help small firms, including raising the ceiling on VAT, substantial concessions on capital transfer tax, the introduction of a counselling service, and the small firm:; employment subsidy.
  Our continuing concern has been highlighted by the study on measures to help small firms announced by my right hon. Friend the Prime Minister in September. My right hon. Friend the Chancellor of the Duchy of Lancaster and my hon. Friend the Under-Secretary of State in my own Department are conducting this study. A number of measures have been already incorporated and announced to the House by the Chancellor of the Exchequer in his statement on 26th October. They include tax reliefs, a new scheme to help firms develop overseas markets, and the extension of both the small firms employment subsidy and our counselling service. Other studies are in hand. My right hon. and hon. Friends are still continuing their studies into these areas, and in due course they will want to announce their conclusions to the House. These and other measures which the Government have already implemented will foster the right environment in which small firms may flourish further. There is no doubt that this in its turn will play a vital part in the recovery of our economy.
  There is another interesting question that I should like to pose to the Opposition, and I think it is fair to pose it
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  because the right hon. Gentleman asked me a lot of questions. What is the Opposition's real attitude to British Leyland? It certainly did not come out this afternoon. It is true that they voted against rescue two years ago, and they have expressed their doubts on many occasions, but here we come to the major differences on the Opposition Front Bench.
  The right hon. Member for Lowestoft sang a very different tune in an article in the Birmingham t a few days before the Ladywood by-election. I quote from the Birmingham Post of 16th August 1977:
  " It is rubbish to suggest that we would immediately cut the lifeline of State-assisted firms such as Leyland. They need help to get back on their feet. We are committed to finding a way to success for British Leyland for as long as its performance continues to justify it."
  That is what the right hon. Member for Lowestoft said when he was in Birmingham looking for votes in the Ladywood by-election.
  We are committed to helping Leyland achieve success. The recent ballot result is an encouraging development, although Leyland is still far from achieving the necessary objectives. I agree with what the right hon. Member said, and I believe that hon. Members would like to join me in wishing the new Chairman and Chief Executive of British Leyland, Mr. Michael Edwardes, great success in the task before him.
  Mr. J. W. Rooker: I support what my right hon. Friend has said, but will he elucidate the Government's position concerning National Enterprise Board money being used for working capital? I support to the hilt the State ownership of British Leyland, but I did not see it as the function of our rescue to pay the wages with that money. It was meant for new factories, machines and models. It is the customers' job to pay the wages at the end of the day. The arguments are the same as they were two years ago. There is great concern among the work force in British Leyland. They know that the moneys have had to be used for working capital. Is this to be allowed to continue?
  Mr. Varley: The reason that the National Enterprise Board had to pay in the £50 million in July was the very

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  damaging dispute in Joseph Lucas. For about 13 weeks the whole production line and all the models in British Leyland were severely disrupted. That was the reason for the measure that was taken, and a full statement of the reasons was given at the time. I want British Leyland to become profitable and to generate some of the investment that is necessary.
  Mr. Frank Tomney: Will my right hon. Friend agree that the problems are even wider than envisaged at present? If British Leyland is to have a future, it now has to look at its overseas prospects in terms of investment and trade. Volkswagen has just set up in Philadelphia a company to produce 200,000 vehicles per annum. That is a tremendous investment. We ought to be thinking in these terms before we develop the projected new Mini line. I do not believe that foreign firms will easily lose their share of the British market. The unions must look at this question in concert with the Government. There must be an empirical policy for investment.
  Mr. Varley: I agree with a good deal of what my hon. Friend has just said. I do not, however, go all the way with him in his criticism—if that is what it was—of the Mini programme. I think the Mini is essential for British Leyland's future, although at the end of the day it will be for British Leyland, in consultation with the National Enterprise Board, to inform the Government on how it envisages its development plan and its business plan. I want, and I hope the whole House wants, British Leyland to be a success.
  The right hon. Member for Leeds, North-East today still did not tell us what the Conservatives would do about the National Enterprise Board. A year ago we thought we knew because "The Right Approach to the Economy "was absolutely clear on the subject when it declared that
  " The NEB must be abolished."
  But again the right hon. Member for Lowestoft said something rather different in the Birmingham Post article. His version was:
  " we are committed to holding the firms now owned by the NEB until any hope of recovery is abandoned."
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  Therefore, the right hon. Member sees a very long-term rôle for the NEB.
  I am glad to say that today I am able to announce an expanded rôle for the NEB. The House will recall that in our guidelines for the NEB we gave it a specific job to do in the North and North-West. Offices have been set up in these regions and a useful start has been made. We have now decided that the right course is to build on the strength of the NEB, reinforcing the extensive work already undertaken by its regional directors in Newcastle and Liverpool. The NEB has made a careful study of the problems of these regions and has come forward with a range of measures which we believe will make an important contribution towards industrial development.
  The NEB will establish regional boards for the North-East and the North-West. These boards, under the leadership in due course of the NEB's new deputy chairman, will draw their members from trade unions, financial institutions, industrialists, and particularly those with strong local roots. Their task will be to decide on the NEB's investment in the regions. They will operate fairly and competitively, as the NEB guidelines require, providing flexible investment packages tailored to meet local needs.
  Mr. A. J. Beith: Does the Secretary of State recognise that in the nature of the kind of project that the NEB can support it can rarely be of help to the very scattered rural areas in regions such as the North-East and the North-West? Does he agree that the Development Commission will have to be able to work with the NEB on industrial development work for the rural areas?
  Mr. Varley: I know the work of the rural Development Commission. It does a fine job and there may be scope for expanding its rôle. We want to examine this matter closely within the Department. If the new regional boards of the NEB in the North-East and the North-West are to be a success, they will need to co-operate fairly closely, not only with the rural Development Commission, but with other agencies within the regions.
  Mr. Michael Grylls: As to the expanded rôle for the NEB, how much will this extra bureaucracy cost in money? How many extra

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  people will be needed in the offices for this?
  Mr. Varley: The cost will be infinitesimal in relation to the total expenditure of the NEB. It is impossible to calculate it at this stage. The hon. Member for Surrey, North-West (Mr. Grylls), is a severe critic of the NEB and comes to quite erroneous conclusions on occasion as to its rôle and activities. The expenditure on bureaucracy, as he describes it, will be tiny. I want to see effective organisations in the regions, and I believe that what I propose today will result in effective organisations.
  Mr. Higgins Mr. Higgins rose—
  Mr. Varley: I think that I should be allowed to get on, otherwise I shall take too much time in the debate, which has already been truncated.
  The two regions that I have just mentioned have important shipbuilding areas. We now have some idea of what the right hon. Member for Leeds, North-East would like to do about shipbuilding. He is opposed to the Government assistance in the shipbuilding areas. If I have followed him correctly, he is saying, in effect, that we can get rid of nearly all our shipbuilding industry. That is a dreadful thing to say about a country like ours which is a great maritime nation. On that basis we should sooner or later be the prisoners of overseas suppliers. I hope that those who work in the shipbuilding industry on Merseyside, Teesside, Clydeside and other similar areas will take note of what the right hon. Gentleman has said today.
  I know what the right hon. Gentleman is saying, but I am not sure about the organisational structure of the industry. I have examined closely what the Opposition are saying. The hon. Member for Henley (Mr. Heseltine), in those lamented far-off days when he spoke for his party on these matters, gave what we took at that time to be a very firm pledge. He said during the Third Reading debate on the Aircraft and Shipbuilding Industries Bill:
  " hon. Members should have no doubt that when we come to power we shall return these industries to the private sector as fast as possible."—[Official Report 29th July 1976; Vol. 916, c. 995.]
  That is not the case when I look at the speeches that have been made recently
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  by the right hon. Lady the Leader of the Opposition. I quote from a report in The Guardian of 2nd July, by Miss Hazel Duffy of the industrial staff:
  " On the day that the shipbuilding industry was formally nationalised, Mrs. Margaret Thatcher said that if the Tories were returned to power, there would be no swift moves to bring about denationalisation of the industry."
  Speaking to party supporters in the North-East, the right hon. Lady said:
  "I don't think we could do it in the early stages.
  I think we have very great problems to face in the economy."
  The hon. Member for Henley, in July of last year, wanted denationalisation of the shipbuilding industry immediately. The right hon. Member for Leeds, North-East does not want a shipbuilding industry at all and the Leader of the Opposition says that we need a shipbuilding industry and, what is more, that Conservatives would like it under nationalisation. The Conservatives ought to get themselves sorted out.
  Mr. T. W. Urwin: I am sorry to take time from my right hon. Friend's speech, but I wish to take him back to what he said a few moments ago. I thought that my right hon. Friend was about to develop his statement on the extension of the rôle of the National Enterprise Board in the Northern Region and in the North-West.
  My right hon. Friend will be fully aware that for a long time many of us have been campaigning for the establishment of a regional development agency in the Northern Region. Is my right hon. Friend entirely satisfied that the extension of the rôle of the National Enterprise Board in the Northern Region will adequately fill the industrial requirements of that region better than a regional development agency would do? Will my right hon. Friend be making a further explanatory statement about this move, because we really need to know how much additional investment there will be in the hands of the National Enterprise Board for this particular purpose?
  Finally, can my right hon. Friend say whether the expanded—
  Mr. Deputy Speaker (Mr. Oscar Murton): Order. The hon. Gentleman is asking a lot of questions.
  Mr. Varley: We have announced the measures—
  Mr. Urwin: On a point of order, Mr. Deputy Speaker. It was perhaps a long intervention, but it was at least relevant to what the Minister was saying in comparison with what is being said on the Opposition Benches.
  Mr. Deputy Speaker: Order. I must remind the House of what Mr. Speaker said about the large number of hon. Members who wish to speak in this debate.
  Mr. Varley: One of the reasons that I have today announced the extended rôle of the regional boards of the National Enterprise Board is to deal with some of the problems of the North-East, within Merseyside and, more broadly, the North-West. I shall certainly consider making more information available to my hon. Friend and other hon. Friends, as well as hon. Gentlemen opposite, if they think that it is necessary.
  I understand that the National Enterprise Board itself is taking some steps to publicise its own activities within those regions, but I shall undertake to meet any of my hon. Friends, if they want to go into this matter further, so that they may examine the prospects and possibilities for those regions.
  Before my hon. Friend's intervention, I was referring to the shipbuilding industry. So far our shipbuilding industry has weathered the international crisis remarkably well. I should have thought that the right hon. Member for Leeds, North-East would have paid tribute to that fact. Much of this success is due to the intervention fund—yes, if one likes, taxpayers' money—that we announced at the beginning of this year.
  With the support of that fund our industry took almost as many orders in the first nine months of this year as in the whole of last year and four times as many as in 1975. These orders are expected to provide about 13,000 man years of work in the shipyards and a similar amount in other supporting industries. The forthcoming Polish deal will give a major boost to the industry, and that would never have been possible without nationalisation.
  Mr. Norman Lamont Mr. Norman Lamont (Kingston upon Thames) rose—
  Mr. Varley: I do not think I can give way. I have already given way a great deal and another intervention will only prolong my speech.
  The right hon. Member for Leeds, North-East asked about the steel industry, another industry which is facing enormous problems. These problems have been caused primarily by the world recession—lack of demand and depressed price. There are no signs at the moment of an immediate upturn and we are therefore having to look very carefully at the British Steel Corporation's prospects.
  I know that many people are anxious about the Corporation's future. But I want to assure the House that we are proceeding in close consultation with both the Corporation and the steel trade unions and that no decisions have as yet been taken. However, I emphasise that we must consult fully those who work in the industry, and that is what is happening at the moment. It is because of this that we in the Department of Industry and those in the nationalised sector—that is why the Loyal Address mentioned it—attach so much importance to progress on industrial democracy ; in the aircraft industry where the first report of industrial democracy has just been completed, and was yesterday welcomed by the CSEU ; in the shipbuilding and steel industries, which will report to me on their progress by the end of the year ; and. above all. in the Post Office where on 1st January seven worker directors will take their place on the main board. I think hon. Members welcomed that when the matter was before the House earlier in the year.
  Sir K. Joseph: Will the right hon. Gentleman tell the House about the cash limits of the steel industry and whether they are to be changed?
  Mr. Varley: The cash limits this year remain exactly the same. There has been no change at all. The financial requirements of the British steel industry will have to be looked at next year in the light of the review that we are undertaking as well as all the other factors that will have to be taken into account. There are no changes whatsoever in these cash limits and we have no plans to change them. However, the financial requirements for next year will have to be looked at in the

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  light of the statement that I have just made to the House.
  I was trying to finish this prolonged and interrupted speech by referring to what we want to do to get workers much more involved in decision taking. The right hon. Gentleman and some of his hon. Friends have cribbed and carped again and again about lack of productivity and international competitiveness. They usually blame the trade unions and say that it is all because of their attitudes. If we are to improve industrial performance we must get workers much more involved in decision taking than they have been in the past.
  Sir K. Joseph: Incentives?
  Mr. Varley: Of course, incentives. But one of the biggest incentives that workers will be looking for is the role that they will have to play in the decision taking of these industries. I am sure that view is shared by some Conservative Members. That is why we have made it clear in our public statements that we want to see industrial democracy because it is only on the basis of efficiency, productivity and international competitiveness that we can create wealth. Here I agree with the right hon. Gentleman. We must create the wealth so that we can finance, expand and enhance our social services. Quite frankly, that is what we have been doing.
  The Opposition amendment today refers to the Government not being able to expand the standards of the social services, but the Conservatives really have a nerve if they imply that so far our industrial policies have not been able to sustain the social provision. The social provision, based upon our industrial policies, has not suffered under this Government. Either the Opposition are ignorant of the facts or they are deliberately suppressing or distorting them.
  The facts show that in our period of office the social services have expanded. Spending in real terms on health and personal social services has risen by 61 per cent. since we took Office, and a whole range of new benefits which it would not be appropriate for me to go into today have been introduced. Here again the Tories do not know what they are talking about, and their approach to social policy is as muddled as their approach to industrial policy. We shall continue with the policies that are gradually restoring, and
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  will restore, this country to the position of a major industrial nation. I ask the House to support these policies, and to reject the opposition amendment.
  5.31 p.m.
  Mr. Geraint Howells: Many right hon. and hon. Members will this afternoon refer to nationalised industries, to commerce, to unemployment and to the nation's economic ills, and quite rightly so. But I do not think that we shall solve our problems overnight. The only way to improve the economy of this country is to have a stable Government, and I believe that my colleagues and I have done a great job in that direction during the last six months.
  The majority of the electorate favours the agreement my party has with the Government. Therefore, I believe that over a period, given the stable Government the country needs, the economy will improve and we shall be able to solve our problems of unemployment. There is, therefore, no point in the Conservatives pressing for an early election.
  All sections of industry are doomed to failure unless we have a proper agricultural policy. Here I declare my interest under the traditions of the House in that I am a farmer. Agriculture is Britain's most important industry, and it is therefore fitting that it should be given its place in the Queen's Speech. I congratulate the Government on recognizing the need to aim for higher production in order to meet a greater proportion of our needs from our own resources. This is a most worthy aim and one that can be realised. But to bring it about the Government must take a number of practical steps to restore confidence to the industry and assure its long-term success. We in Britain pay more than £2,000 million a year for temperate foods.
  I am glad to note the Government's intention to reform the common agricultural policy. That is a matter on which the Liberals have been pressing the Minister for some time. I approve of the CAP in principle but feel that many of the systems it advocates are not only ineffective but wasteful when applied to British agriculture. Far too many directives involve bureaucratic interference on minor matters, that interference emanating from the CAP and causing unnecessary complications and ill will. I urge

  531
  the Government to press their colleagues in Europe to discard the intervention system. It is costly and wasteful and it denies the British public the right to buy the best, such as the best beef, when it is plentiful. The British consumer is justified in complaining about this.
  I have spoken to many European agriculturalists. They are coming round to our way of thinking about abolishing the intervention system and reintroducing the deficiency payments which operated in Britain for decades. It is wasteful to put best beef into intervention, to pay £50 or £60 per beast for keeping it there for six months and then to sell it off as manufacturing beef.
  Another sure way of restoring confidence in the industry will be to bring about a devaluation of the green pound. We can all see the short-term benefit of retaining the green pound at its present level, but that is being done at the expense of our long-term interest. In particular, it affects the beef sector which, if the value is upheld, allowing unfair competition from elsewhere, will steadily lose ground. That will lead to a serious shortage of beef in the 1980s. That is surely an expensive and disastrous situation.
  This brings me to one of the most important aspects of planning for the industry. It is absolutely essential to make long-term planning an inherent part of agriculture policy in order to avoid the frequent crises that arise from our present short-term arrangements. It happened this year in the pig industry. Now it is happening in the beef sector, and it may happen also in the dairy industry next year.
  The Liberals have been pressing the Government for some time to improve the availability of capital to the industry, and I am glad to see that our proposals are being seriously considered, as are our suggestions on tax reform, to aid the farmer in Britain.
  I should like to see more money spent on research into the problems of marginal and hill land development. Production in these areas could be vastly increased given the right scientific help and know-how. If we are to increase production let us turn our sights to the hills and uplands. There the potential is
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  great. We should help the marginal land farmer so that production may be increased by at least 100 per cent. over the next 10 years.
  There are also social problems on the hills and uplands. Unless the farmers on the hills and uplands recoup their costs they will leave, and once they go it will be very difficult to persuade them to return. It is a great pity that the Leader of the House has left the Chamber. Nevertheless, I am sure that the point will be made to him that we should have a debate on the livestock industry very soon—before it is too late.
  I turn to the question of the Milk Marketing Board. I read with interest that about 150,000 small producers may leave the dairy industry because, it is said, they are too small. It is a great pity that under the Treaty of Accession the Government of the day did away with the guaranteed price system. The dairy producers knew exactly what they would get for their milk in the years ahead under the old system, but now—
  Sir Stephen McAdden: On a point of order, Mr. Deputy Speaker. I understood that the reading of speeches was not allowed in the House. Although the hon. Member has been "noting with interest and dismay "he is still reading, and it is getting rather boring.
  Mr. Deputy Speaker: It is a well-accepted tradition that speeches must not be read but that use of copious notes is allowed.
  Mr. Howells: With respect, Mr. Deputy Speaker, I am afraid that hon. Members are worried that Liberal influence on this Government is so great that they fear for the prospects of their own party.
  Mr. Michael Marshall: On a point of order, Mr. Deputy Speaker. Are we not supposed to be debating industry? The Liberal Member is discussing agriculture, and he knows that there is no hope of getting a reply on agriculture.
  Mr. Deputy Speaker: The Chair was under the impression that agriculture is a part of industry. The hon. Member for Cardigan (Mr. Howells) must be allowed

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  to develop his speech in whatever way he wishes, within the rules of order.
  Mr. Howells: I agree with you entirely, Mr. Deputy Speaker. Agriculture is mentioned in the Queen's Speech and it is a very important matter. If the hon. Member for Arundel (Mr. Marshall) does not like listening to my views on agriculture it is up to him. We Liberals are worried about the food prospects for this country—
  The Secretary of State for Trade (Mr. Edmund Dell): It is true that the right hon. Member for Leeds, North-East (Sir K. Joseph) talked about milking cows in his opening speech.
  Mr. Howells: If I may continue, I hope that hon. Members on both sides will listen to my closing remarks. The Minister's main task must be to reform the common agricultural policy, and I urge him to persuade his European counterparts that if we are to live happily in the Community, it is essential that the CAP be made more flexible, effective, and acceptable to the British agriculture industry. We must convince our partners that over the past 30 years or so Britain has reaped the benefits of an excellent support system and guaranteed prices and we do not wish to do without them in the future.
  If the Government fail to do this, I cannot see how the Minister can maintain production at its present level, let alone get the industry to expand. My colleagues and I shall not support the Opposition amendment tonight. [HON. MEMBERS: "Surprise, surprise."] We believe that many Liberal proposals and policies have been accepted by the present Government. They have tried to solve the plight of the self-employed and of small firms, and in this we believe that the Government have taken the right step. We are delighted that the Government have accepted our policy on profit sharing in industry, and I hope that in the next year or two these policies will prove beneficial to both workers and employers. The Government commitment to reform the CAP and to increase production from the land is very welcome. Therefore, we shall support the Government tonight and not the Opposition amendment.
  5.43 p.m.
  Mr. Sidney Irving: I shall be brief, partly because a number of hon. Members are waiting to speak and partly because I do not intend to devote all my remarks to industry, and I hope that the House will forgive me for that.
  I want to express support for the measures in the Queen's Speech as a programme for the coming Session. It contains, in the main, the inescapable commitments entered into in the past, such as direct elections and devolution which must be completed, even if they are accepted by the House with varying degrees of enthusiasm.
  However, I am convinced that the economy is by far the most important thing—the overrding priority. It is a priority that we must get right— not just a temporary reflation for General Election purposes but the achievement of a period of sustained growth which has eluded this country since the war. I believe that this is what the Government are after and I am sure that nothing else will matter when the election comes.
  Central to the success of this is the pay policy, and no group of people should be allowed to wreck it. This means that the Government should have the support of all hon. Members in the difficult decisions that they are taking now and will have to take for some time yet.
  The only thing that disappoints me is that there is no reference in the Queen's Speech to the Co-operative Development Agency. In view of the efforts made to get the working party concluded and the report published, and the support given by the Prime Minister to this enterprise, it is difficult for the Co-operative Movement to understand why there has been no reference to the proposal in the Queen's Speech.
  In recent years there has been an increasing interest in the principles of co-operation and a recognition that these constitute a viable alternative form of public ownership which is relevant to the needs of our people. I hope that the Government will show some tangible proof of their intention to see that this proposal is the subject of legislation soon.
  On direct elections, the Prime Minister has fairly and squarely faced the House

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  with the true issues. The choice is either an election in May-June 1978 with proportional representation, or, if hon. Members insist on a simple majority, the elections will have to be postponed. Hon. Members, particularly Conservatives, will have to decide which is more important—direct elections or a simple majority system. I believe that when this is resolved there will be a majority for direct elections, for PR, and ultimately for the guillotine which is necessary to get the Bill through.
  Since the early summer there has been a remarkable development in the Labour movement's attitude to the EEC and our membership. The National Executive, the party conference and the TUC have all confirmed that Britain must stay in Europe, but there is to be an examination of certain problems. Even the most ardent enthusiast for the Community would be foolish not to concede that there are problems and that such an examination could be both constructive and beneficial.
  There has been an attempt to blame the EEC for most of the problems of the world economic crisis. I believe that this is wrong. If the EEC had not existed there would have been a much more significant move in this period of crisis to the catastrophic nationalist policies of protection of the inter-war years. There would have been no co-operation between European countries to resolve the problems afflicting us, and much less support for the under-developed world.
  I was pleased to see in the Queen's Speech the phrase:
  " Legislation will be introduced for the further development of transport policy to meet economic and social needs, including those of rural areas."
  This is a desperately urgent matter everywhere and especially in my constituency where, in addition to huge fare increases, there has been a decline in the services provided. A further serious decline is inevitable unless something is done.
  In Kent the county council, which already pays a smaller proportionate subsidy than a number of the Home Counties, has declined to increase the grant other than in respect of inflation. This means that the London County Bus Service, with a deficit of £1·5 million, will have little alternative but to close a depot and further to reduce its services—
  Mr. Clement Freud: On a point of order, Mr. Speaker. This was really a point of order for Mr. Deputy Speaker—
  Mr. Speaker: It is a point of order for whoever is in the Chair.
  Mr. Freud: My point of order is that I am surprised by the inconsistency of the Chair in not forcing the hon. Member for Southend, East (Sir S. McAdden) to make the point about hon. Members reading their speeches. After all, he did complain about my hon. Friend the Member for Cardigan (Mr. Howells) reading his notes.
  Mr. Speaker: Order. I am sure that what happened was that Mr. Deputy Speaker was referring to the copious use of notes. It is a formula which we use and which the House understands.
  Sir S. McAdden: Further to that point of order, Mr. Speaker. I did not complain to Mr. Deputy Speaker about the hon. Member for Cardigan (Mr. Howells) reading his notes. I complained about the fact that he was reading his speech —every word, comma, full stop included.
  Mr. Speaker: Order. The House must give me a chance. I did not have the pleasure and privilege of hearing the hon. Member for Cardigan (Mr. Howells).
  Sir S. McAdden: You are lucky.
  Mr. Irving: I am obviously the butt of an altercation about previous happenings. If I am keeping to my notes, it is to assist my mind in setting out as I said at the beginning of my remarks to be brief.
  I want to end on the note I was on when interrupted. The question of rural bus services, whether for the support of industry or the elderly, the sick, and those without cars, is of vital urgency. I hope that in the coming Session the Government will be able to do something to weal with this hardship by reorganising the finances of the National Bus Company to enable it to provide effective bus services in rural and other areas.
  5.52 p.m.
  Mr. Reg Prentice: I am grateful for having this opportunity to take part in this debate because one of the main reasons I decided

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  to cross the Floor of the House arose from my growing conviction that the relative failure of British industry compared with that in other Western countries was due in large part to the policies of the present Government, that this was a serious situation, and that it would become much more serious in the unfortunate event of the Labour Party winning the next election and carrying out further policies detrimental to industry which are in Labour's future programme.
  Many of us joined the Labour Party years ago because we wanted to see a better deal for the under-dog, higher pensions, better social services, a greater attack on bad housing, and better provision for the chronic sick and other deprived groups. But we have been forced to the conclusion—and I put this to Labour Members— that those countries which are now making a success of running a free enterprise system are doing more for their pensioners, homeless and chronic sick than we in Britain are doing, or are likely to do in the near future.
  At the end of a 12-year period in which our national output has risen only by a quarter and public spending has risen by two-thirds, everybody—including Labour Members—recognise that we have pretty well reached the end of the road in trying to deal with social problems by redistributive taxation. It is only by producing more wealth and in succeeding with the idea of a free enterprise society that we shall give better conditions and human dignity to the deprived in our society.
  I agree with the right hon. Member for Dartford (Mr. Irving) in his remarks about pay policy and on the need for no group to be allowed in the coming months to get away with the excessive use of industrial muscle to break that policy. When he spoke in the debate last Thursday the Prime Minister reaffirmed the Government's determination on those lines. If that is the case and if in the coming winter there are confrontations—and everybody must hope and pray that there will not be confrontations—and if the Government face up to them as a Government representing the whole community, I believe that the Government will deserve the support of Members on all sides of the House.
  Personally, I look back on the period 1972 to 1974 with great regret, and I have a sense of personal responsibility
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  since I occupied the Opposition Front Bench at the time. I feel that the Labour Party in retrospect should be ashamed of its attitude to the way in which the Conservative Government in those days tried to deal with these problems. But if the Government of the day face a similar situation, I believe that they deserve the support of the whole community. I refer to everybody across the political spectrum, not only the support of Opposition Members, but also the support of sponsored Labour Members in respect of trade unions whose members may be in dispute. Those sponsored Members will have a particular duty to put the national interest ahead of sectional interests and the spotlight should be particularly directed at them.
  I think that speaking, as I do, from the Opposition Benches, I am entitled to make at least one party political point arising from the present situation. What has been happening, and what may happen, destroys the myth that a Labour Government's relationship with the trade unions is somehow a guarantee of industrial peace and that a Conservative Government will lead to confrontation. The fact is that confrontation can occur between powerful unions and the Government of the day, no matter what that Government may be. If there ever were any truth—and I do not believe there was—in the myth to which I have referred, I think that it was destroyed by the failure of the present Government to obtain a phase 3 pay agreement with the TUC.
  If there are any tattered remnants of that myth lying around, I believe that they were destroyed by Arthur Scargill's victory in the mineworkers' vote on a productivity scheme. Mr. Scargill did not look with loving care at his Labour Party membership card, nor did he have great regard for the fact that the NUM is affiliated to the Labour Party. Perhaps we do not expect that from Mr. Scargill, but what is more serious is that the mineworkers as a whole, and by a substantial majority, took the same view. Therefore, I repeat that I hope we have heard the end of any nonsense that Labour holds the key to industrial peace.
  I turn to the more general subject of the performance of British industry. I wish to say how much I agreed with the analysis of my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph), who

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  opened the debate for the Opposition, and particularly with what he said about the relatively poor productivity of British industry in most sectors, though not all, when compared with other countries. It is an analysis that was recently supported by two articles in The Times, written by its editor, William Rees-Mogg. It was an analysis that was made industry by industry.
  I wish to quote two or three points from the second of those articles, which was published on 5th October. That article set out the facts that a Japanese steel worker produces 5½ tons for every ton produced by the British steel worker; that an employee of Pan-Am handles three times the traffic handled by an employee of British Airways; that in 1973 British Leyland produced 5·9 vehicles per man, while Renault produced 14·6 vehicles per man; that Dutch manufacturing productivity is twice the level of British manufacturing productivity and that the Dutch effort has risen two-and-a-half times as fast; and that in 36 productivity comparisons in industrial groups in EEC countries, Britain came bottom in 34. These are facts which should give deep concern to every Member in this House, and certainly to everybody who is concerned about the future of our country.
  Any exercise involving the apportionment of blame becomes complicated. Our people in all parts of industry and society should have fared better than they have been doing. Many of the causes of this poor performance are of a chicken and egg variety. Overmanning produces poor return on investment which, in turn, discourages investment, and low investment, in turn, means lower productivity.
  Many aspects of these problems cannot be solved by politicians. What we must do in this House. as far as we can in a non-partisan attitude—although there is a legitimate area for argument—is to identify those parts of the problem which are our responsibility and also to identify the interface between Government and industry and try to do something to improve our own performance in such a way as to help industry to produce better results.
  I believe that hon. Members throughout the House who have discussed these matters with people in industry, and par-
  540
  ticularly with managers at all levels in firms of all shapes and sizes, have had the same message loud and clear as I have had in discussing these matters. Those managers are saying to us, the politicians, that to some extent under all Governments, and particularly under a Labour Government, they have suffered from the fact that Parliament has legislated too much, controlled too much and taxed too much. The degree of complexity of the legislation that has been passed and the helter-skelter pace of change in these matters has been such that managers in large firms have found it extremely difficult to keep pace, while managers in small firms have found it totally impossible to do so. Not only that, but successive Governments have changed their policies on these vital matters so often—not only because of changes of Government, but because of new terms of successive Governments—that it has been impossible for managers to keep pace and profoundly difficult for them to plan ahead.
  We should see this problem against the information given in a recent survey conducted by the CBI on the planning requirements of management. A sample of 70 companies of different types showed that the average interval from the start of development of a new product to commercial production varied between two and a half and four years. We are talking about new products that might, after that interval, have a production run of 10, 15 or more years. Managers cannot make the necessary decisions if there is the degree of uncertainty from which they now suffer about the intentions of the Government in respect of legislation, controls and so on.
  I put that point to the House against a background in which the one thing that we in this country desperately need, if we are to achieve economic growth and reduce the level of unemployment, is the development of new products. That is because the redundancies that have taken place, in our old industries and larger firms are unlikely to be reversed, even if output goes up. Many larger firms are still overmanned and will need to shed further labour. If we are to have full employment, and that must come about through the maximum encouragement being given to new enterprises of all sizes, particularly among

  541
  small firms. If we are to achieve that, it is essential that we slow down the frantic pace of Government intervention and try to develop consistent policies that will stand the test of many years.
  An example of this can be given in industrial relations legislation. I choose that subject because it is one in which I have specialised in the House for many years, and I have helped to make the laws that have gone on to the statute book during the last few years—some of which I have campaigned for and supported. Ever since the Conservatives introduced the Contracts of Employment Act in the early 1960s, we have had a series of Acts on such matters as health and safety at work, industrial training, equal opportunities for women and racial discrimination. The Industrial Relations Act has come and gone, Employment Protection Act is on the statute book and there are other such pieces of legislation. Much of the legislation has been non-controversial and useful and has come to stay, but its total impact on the problems of employing people has been to put a burden on management, particularly the managers of small firms who are unable to employ specialists to advise them on these matters.
  I am asking not for a repeal of this legislation, but for a pause. The Government should recognise this need and should have said firmly in the Queen's Speech that there will be no proposals to implement the Bullock Report. It is quite clear, from the wording of the Gracious Speech, that there will not be a Bill on this subject this Session, but it would have been much better if the Government had buried that matter altogether.
  I believe in improving consultations and communications within industry, but not by massive legislation, not by imposing one rigid pattern of board membership on all companies over a certain size and, above all, not by legislating in such a way that there is blatant discrimination in favour of the trade unionists and against non-trade unionists. All that is wrong and it is recognised as wrong by the majority of people who have studied the matter—including many trade unions. Clearly the Bullock Report should have been dropped.
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  The Queen's Speech was almost a duplicate copy of the Gracious Speech of 12 months ago. That is a sign of the impotence of the Government, because they have had to bring forward again proposals that they brought forward 12 months ago and were unable to get passed into law. However, there is a danger that in this situation the Prime Minister, with his great flair for political stage management, will give the impression that this is all deliberate and that we are now going through a tranquil period. He may seek to use his own powerlessness to develop an appeal to the essentially conservative mood of the people of this country and to claim that this is, therefore, no longer a Government that believes in passing massive legislation and in interfering with private enterprise.
  To get the Queen's Speech in perspective, it is essential to look both backwards and forwards. In looking back, we should remind the country of the pace of legislation in this House between February 1974 and the summer of 1976. A great mass of legislation that was complex, hastily drafted, and expensive in money and manpower terms was pushed through this House with a majority of three, then by a majority of two and finally by a majority of one. It was not halted by any change of heart on the part of the Government or by the Lib-Lab pact. The most pertinent remark on that pact was made by the hon. Member for Rochdale (Mr. Smith)—in his capacity as the only Back-Bench Member of the Liberal Party—when on Thursday night he said, in speaking of the Liberal influence on the Government,
  " It is difficult to say owt about nowt' ". —[Official Report, 3rd November 1977; Vol. 938, c. 80]
  It was halted by the electors of North Walsall, Workington, Ashfield and Birmingham, Stechford, and by the fact that there is now a minority Government.
  It is even more important to look forward and to assess the kind of Queen's Speech that we could have been discussing had the Government gone to the electorate and won a majority. It is particularly relevant in the context of this debate to look at the effects of the potential Queen's Speech on industry and commerce, on employees in industry and

  543
  commerce, and on opportunities for school leavers looking for jobs.
  I should like to see everyone in this country carefully read the document "Labour Programme 1976 "and to read the policy commitments made by the Labour Party at its 1976 and 1977 conferences. They include, of course, a cascade of nationalisation proposals for the four leading banks, the seven leading insurance companies, and parts of the pharmaceutical, building and building materials industries. There is a sentence which says that nationalisation would extend to one successful company in every sector of industry and commerce, but it does not specify which companies. It therefore holds a threat over every successful company in industry and commerce and leads to multiplication of that uncertainty about the future which is one of the enemies of planning.
  Of course, it is not only a matter or nationalisation. The public expenditure proposals in that document add up to frightening figures. The document contains a whole list of proposed new boards and commissions for industry, for a stronger National Enterprise Board and for new State holding companies and so on. Some people, including some of my moderate hon. Friends opposite, have said to me that not all of this will go into the Labour Party manifesto. It will not, but anyone who has studied the record over recent years or who undertakes the painful duty of reading Clause 5 of the Labour party Constitution will recognise that a lot of it will, and that once it is there, a future Labour Government will feel bound to carry it out.
  If our industry and commerce are to survive, let alone prosper, it is vital that these extra burdens are not laid on their backs. Instead, it is vital that Governments, of whichever party, should try to create an atmosphere in which hard work, initiative and innovation are encouraged and in which people feel that it is worth while to earn productivity bonuses, acquire extra skills and apply for promotion. Only in such an atmosphere can our people prosper. Only in such an atmosphere can we give a better deal to the less privileged members of our society, pay retirement pensions that are consistent with dignity and put
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  much-needed resources into our health and education services.
  Unless we create that atmosphere, the new opportunities offered by North Sea oil and the other opportunities of the 1980s will be wasted. I beg and plead with hon. Members to consider these matters deeply and to vote for the amendment and against the increasing trend towards doctrinaire Socialism on the Government Benches.
  6.11 p.m.
  Mr. Arthur Palmer: It is by an accident of fate and by your choice, Mr. Speaker, that my speech follows that of the right hon. Member for Newham, North-East (Mr.Prentice). I have only this to say to him : those of us who have helped and encouraged him in his career and whose devotion to our country is as great as his find it painful to see him in his present position. I leave it at that.
  I wish to speak on a subject that might have been debated yesterday if Mr. Speaker had allowed the application for an emergency debate on the situation in the electricity supply industry. Since the House is now discussing industry, I feel it appropriate to say a few words on the situation and I declare my interest in the industry and my close connection with my union, that of the power engineers, in their new guise of the engineers' and managers' association.
  Recent events have once again demonstrated how fundamental electricity supply is to the life of a modern industrial society. Electricity is a utility, as are gas and water, but there is an important physical difference. Storage capacity for gas and water is limited, but there is practically no storage capacity for electricity. The product must be available at the moment it is demanded, and this factor makes nonsense of newspaper headlines that talk of the public being at the mercy of those who have the opportunity to throw a switch. Indeed, it is not technically accurate to talk in this 1895 way about the operation of modern high-voltage circuit breakers. Those who "throw the switches" are not the minority of power station attendants and industrial staff, who are engaged in industrial action against the advice of their unions, but the transmission, distribution and control staffs;

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  engineers who have a heavy responsibility for maintaining the stability of the nationally interconnected grid system as a whole. Like a man in a balloon, they must sometimes throw off some ballast in order to allow the voyage to continue.
  The output of some of the major power stations, mainly in the Midlands and the North, has been considerably reduced by the go-slow by a small minority of industrial staff. Similar counter-action would have had to be taken by the technical staff of the industry if the fault at the power stations had been mechanical or electrical. Failure to do so successfully would have produced for London the appalling experience recently suffered by New York, when that great city was blacked out for many hours.
  This brings me to my criticism of the Government, and 1 hope that it will be conveyed to the Secretary of State for Energy. I told his office that I proposed to say something on this matter in the debate today.
  Ministers have not said nearly enough by way of thanks and encouragement to the majority of electricity supply employees who are carrying on with their jobs and providing the 80 per cent. to 90 per cent. of electricity supply that we now have. It should be understood by the House and by the public that this has not been done without a massive effort, much of it by the supervisory and technical staff, who are also members of a trade union that is affiliated to the TUC, working all hours in difficult conditions to keep things going.
  I do not want to go into the internal politics of the electricity supply trade unions, except to say that the position of the technical staff in the industry is well understood by their fellow trade unionists. Indeed, Mr. Lyons, the general secretary of my union, also acts as secretary of the Employees' National Committee, on which all unions in the industry are represented.
  The position of the technical staff in case of a labour dispute has remained unchanged for 40 years. If a dispute is official, they stick to their own jobs. If a dispute is unofficial and against legitimate trade union authority, the maintenance of electricity supply is the primary part of their obligation to the public. I know that the industrial unions
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  would take precisely the same view if the technical staff initiated industrial action.
  I do not want to go into the merits of the claims of those employees who have been taking action, except to say that the claims are not unreasonable in themselves. We all hope that a solution will be found speedily, and the news tonight is good.
  The right to withdraw labour or services is fundamental to a free society. That right has existed throughout the 80-or 90-year life of the electricity supply industry—the first Electricity Acts were passed between 1882 and 1888—but it has hardly ever been exercised. That is why the public regard electricity as something that flows automatically through the mains and into the receiving systems, whether industrial, commercial or domestic. People regard it in the same way as they regard air: it is bound to be there—in this case at the touch of a switch.
  In a modern industrial society we have to find a solution to the problem of reconciling the right to withdraw labour with the vast difficulties that that right can cause in an economy that is becoming increasingly technically interdependent and interconnected. That is for the future. For the present, I suggest to the House that it is important that the whole weight of Government authority should be behind those who have grievances but who are still prepared to settle them by constitutional and peaceful means.
  6.20 p.m.
  Mr. Michael Marshall: I am grateful for the opportunity of speaking in this debate, and I particularly welcome the fact that we are going to talk about industry and commerce today.
  I want to turn to the problems of the British Steel Corporation and to look at those problems from the standpoint of the Departments of Industry and Trade. One is always a little hesitant about taking up the time of me Hove in speaking about a particular industry rather than taking the wide-ranging view which the debate affords, but I am sure that all hon. Members agree that the problems besetting the Corporation are so massive as to affect the whole course of our industrial future, in terms riot just of the way that the Government handle the

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  problems in the short term, but of the financial stability of the country.
  If we look at the situation from the trade angle—I am glad that the Secretary of State is in his place, because some of these matters were referred to during Question Time yesterday—the facts are simple and stark.
  There are three protagonists: the United States, Japan and the EEC, within which I include the United Kingdom. I want to sum up their general attitudes. The United States is taking a very tough anti-dumping line, but I believe that its views are so arbitrary as to be indefensible on logical grounds. For example, the imposition of a 32 per cent. duty on Japanese steel based on a notional domestic price assessed by American Government departments would not find support among anyone who looks at these matters seriously.
  Similarly, attempts to bring antidumping charges against this country have shown a certain wildness, so that, in addition to the charges brought against the BSC by National Steel, an independent steel company is being charged with dumping carbon steel sheets, although that company, which is very small, does not produce carbon steel sheets. These are some of the problems involved in an all-out anti-dumping war.
  The Japanese have shown some willingness in establishing voluntary quotas, but those have related principally to about a half-dozen leading Japanese companies, and there has been grave concern on all sides, which I think is understood, about the way in which smaller companies have been able to avoid those voluntary quotas. There is also evidence that larger companies have been able to get round the system by shipping hot rolled coil to Spain, which then finds its way as cold reduced sheet throughout Europe, including the United Kingdom.
  Within the EEC, the approach of the Industry Commissioner, M. Davignon, is highlighted this week, because he is in Washington attempting to persuade the Americans to go for the voluntary quotas approach rather than an anti-dumping war. I think that it is pertinent to mention that all those who met the United States steel workers' delegation, which visited the House last week, were
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  impressed by the fact that their union was clear that anti-dumping was essentially short-term, but felt that voluntary quotas was the best answer in the long term and that international agreement was a necessary pre-requisite for bringing some stability to international steel trade.
  What is the United Kingdom's stance? I do not think that there is any doubt that many people regard as very mild our anti-dumping attitude on steel. I think that some criticism must be accepted as well founded. I recognise that the Secretary of State and the Under-Secretary have been helpful in trying to keep informed some of those who take an interest in these matters, but progress has been limited. I am bound to agree with the Master Cutler in Sheffield, who recently said that when any market, such as tool steel, is reduced to 50 per cent. of its normal sales by 50 per cent. import penetration, that industry is in grave danger.
  The evidence that some of us have looked at shows very strongly that antidumping charges should have been brought much earlier than they have been. I accept that there has been some attempt by the Department to widen the categories of steel from non-EEC sources that are kept under review, but my first basic point is that we have to recognise that the Department of Trade should be applying anti-dumping charges as part of a clear-cut negotiating position leading to a longer-term agreement on voluntary quotas. In the sense of helping in the short term, it would be the most efficacious course to follow.
  In the longer term, the voluntary quota approach would benefit the British Steel Corporation but in the short and long term everything else pales into insignificance in the face of the appalling financial situation facing the Corporation.
  Here, again, the facts are stark and simple. There is massive over-capacity in world steel making, and even in Japan people are talking in terms of 40 million tons over-capacity, which is massively in excess of our total national output. In this country it is clear that there is overcapacity in steel rods and steel sheets. Right across the range, the British Steel Corporation is embarking on an investment programme of £6,000 million, which perhaps has increasingly little relevance

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  to the world steel pattern that we face. This is an appalling bind for the Corporation, the country, the Department of Industry, the Treasury and everyone involved in these decisions. To have a major corporation, either public or private, which is estimated to be losing money at the rate of £23 per ton is a disastrous course. Indeed, the Chairman of the British Steel Corporation has freely admitted that if it were a private concern it would either be with the liquidator or in the hands of a receiver.
  Yet the Coporation's problems are severely aggravated by the Government's actions. There is the Beswick plant situation—a compromise that has brought about the worst of all worlds. It has caused deep resentment among many in the industry. Only today the National Steelworks Action Committee visited the House. One of its members put forward an entirely sensible and moderate view about some of the problems facing the industry. The burden of the Committee's argument was not that it wanted to preserve existing plant and jobs, but that it wanted clear understandings about future investment. Attempting simply to carry on as before and to slow-time everything, which has been the hallmark of this Government's attitudes and policies, smacks of the worst kind of political compromise.
  If one looks at what is happening more widely in the Corporation, one is immediately impressed by the fact that the only way out of the difficulties must lie in radically rethinking the BSC's investment programme. We know of the round of talks going on between the Secretary of State, the British Steel Corporation and the TUC Steel Committee, and we know that the Lord President has been brought into the act. It is clear that the Secretary of State will soon have to make a statement to the House, because there is great unease, not only in the industry but outside.
  I hope that when the right hon. Gentleman replies to the debate tonight, he will seek advice and give a little more information than the passing reference we have had so far. It is very worrying that the Government did not see fit to make any reference to these problems in the Queen's Speech.
  Looking at the basic considerations that seem to be facing the Government
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  and the British Steel Corporation, it is right for some of us to try to steer through these alternatives and see what, if anything, can be done to reach some common ground.
  I suppose that the alternatives are generally conceded to be four in number. The first is to cut back the labour force to 208,000, something which, following the Finniston proposals—the agreement of January last year to reach international levels of manning—has run into the sands. We all understand why this is so. With the Government's record on unemployment it is extremely difficult for the trade unions and the BSC to reach agreement. The fact is that those manning levels are very high and present an enormous problem in terms of the operating costs of the Corporation.
  The second alternative is to close the Beswick plants, which at the moment are under a postponed threat of death. That may cost 20,000 jobs. The third alternative is to abandon the current investment programme, and the fourth alternative concerns capital reconstruction, writing off all losses, which in itself would be a complete admission of the failure of nationalisation over the past decade.
  Whatever may be said about the merits of those proposals, in terms of the cash bind on the Corporation they all have the same major disadvantage that they would provide no immediate relief. Certainly with the writing-off of losses the BSC would simply be further exposed to charges of subsidy, which is one of the main points of attack by the present American Administration.
  I turn to the three principles which ought to guide the Government in reaching decisions now, in the short term, because it is short-term relief that has to be applied at this point. The haemorrhage is too severe, too fast. Beyond that there is long-term planning to be done. My first suggestion is that the BSC and the TUC Steel Committee should make their main efforts in de-manning so as to raise productivity at the best plants rather than talk about the Beswick plants. In some sense that is an irrelevant argument. Cost is not a crucial factor here. The de-manning should be concentrated on those plants that have the best track

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  record and, apparently, the best market potential. This could include re- consideration of the whole philosophy of large plants versus small plants.
  It is no accident that at this time the mini-mill in this country is doing well whereas the large plant strategy, world- wide, is being increasingly questioned. It is said in the United States now that 20 per cent. of its capacity comes from the mini-mill. This is a trend of which BSC and the Government ought to take serious account. Equally, when we look at each of the Beswick plants threatened with closure it ought to be possible to consider its track record in good industrial relations. This is an entirely valid argument which was put to us earlier today. It is one which certainly ought to be applied on any reasonably sophisticated view of what is an operating cost and therefore what is the contribution to the Corporation's profitability.
  Further, when we are considering the question where the capital will come from, it should not be beyond the wit of this Government to look to the joint ventures that already exist within the Corporation—companies such as Round Oak, with a 50–50 split of public and private capital. The Government ought to seek to go into the market to get into joint ventures with individual steel companies here and on the Continent.
  I suggest that the Corporation's divisional track record has to be used as part of the criteria if further investment is agreed. Surely it is not unreasonable— I have heard hon. Members on all sides argue this—to take the view that the Sheffield division of the Corporation, which has been running at a profit while the rest of the Corporation is showing a loss, should have some account given to its success. I am told that in the past few years, on an investment of £300 million, accumulated profits of £140 million have been shown. That is the kind of success that ought to be reinforced.
  I do not believe that we are interested in root-and-branch condemnation of the Corporation. We are trying to identify those parts which can be made successful and aiming to see that that happens. If the Secretary of State continues to impose a social cost obligation, whether on the Beswick plants or whatever—and this is
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  the nub of my criticism of the Government—he should specify by written directives precisely what is required and he should seek, through the Treasury, to make reimbursement to the Corporation for these social decisions. Otherwise, how will the Corporation ever be in a position to be judged in a proper commercial sense? How will it ever be possible to remove the natural alibis that spring to everyone's lips when it can be said "We are having to carry out so many things for which the Government do not pay."?
  If he does this the Secretary of State should also remember, above all, that in imposing these tasks, in providing the social cost, there is a price to be paid in lost jobs elsewhere. My right hon. Friend the Member for Leeds. North-East (Sir K. Joseph) pointed this out in his opening speech. That point must come into this argument.
  There is the question of a decision on the Statement, when we hear it. What we want more than anything else is to he confident that we are not once more facing the smell of political compromise the kind of political compromise that will make the Beswick plant closures a sacrificial offering, with a few token sackings in management and a slow-down in the investment programme. If that comes forward we shall know that the Government are simply playing for time, hoping that North Sea oil will make things look better. This is an urgently crucial problem, to which the Government must address themselves. In doing so they must finally decide, in the context of international manufacturing, both public and private, whether they believe in a vigorous, alert and profitable industry or whether they continue with actions that make those objectives impossible.
  6.36 p.m.
  Mr. Harry Lamborn: I wish to speak with special reference to the need to bring industry back to our inner city areas. In doing so, I welcome the statement made in the Gracious Speech concerning the Government's intention to introduce a Bill to renew our inner urban areas and the statement by the Secretary of State on this subject this afternoon.
  There is no doubt that many of the problems in inner cities today arise from the imbalance which the policies of successive Governments and planning

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  authorities have created. The result has been that we have lost far too much of our industry from the inner cities and far too many of our young people who have left to seek employment elsewhere. In the years after the war it was necessary, in building to higher standards and lower densities, to move not only people but industry and jobs to the new and expanding towns. Industry flowed out of our inner city areas. Tragically, having started this progress, the wheels having been set in motion, it seems to have been beyond the wit of any Government or city authority since to stop the process.
  I speak with special reference to the problems of inner London. In my own borough of Southwark we have lost many of our large industries, and the problem has been accelerated as a result of the development of large container ships which cannot get up the Thames to the Pool of London. As a result we have lost our docks industry and my right hon. Friend the Member for Bermondsey (Mr. Mellish), for years known as the "dockers' MP ", is today almost a Member of Parliament without a docker. This is what has occurred in inner London boroughs such as Southwark.
  This has left us without industrial opportunities for our young people, while large industrial sites in vast areas of London's dockland stand empty. These could create employment opportunities for our young people. In Southwark the council has taken, on its own initiative, far-reaching steps to tackle the problem. To bring these steps to a successful conclusion it is essential to have the backing and support not only of the Government but of the Greater London Council.
  The London borough of Southwark is developing one of the major comprehensive commercial and industrial revitalisation schemes in Britain. It has created the largest land bank in inner London, owning over 400 acres of land with development sites available at the focal point of Britain's marketing area in South-East London. To tackle this task the council urgently requires the powers the Government's new measures and those contained in the Greater London Council (General Powers) Bill have to offer. The major development in this area is the new international trade mart and industrial estate in the Surrey Docks area. Essential to getting this project under way are the
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  guarantee powers contained in Clause 14 in the Greater London Council (General Powers) Bill. This is a measure which both the Greater London Council and the Southwark Council, in agreement, regard as essential in order to commence this scheme—a scheme which can make a tremendous impact on the London dockland area and, indeed, provide the basis for the revitalisation of inner London.
  I must confess that it has been suggested to me that there are, within the Government, forces which are averse to giving to the London local authorities the powers contained in Clause 14. I must warn the Secretary of State that this clause, which will enable London authorities to guarantee loans issued to owners and lessees of land to enable them to erect industrial and commercial buildings, is essential if these projects are to get off the ground. Certainly, all my inquiries indicate that without these essential guarantee powers the area of Surrey Docks, which has already been vacant for far too long, will stagnate for a further period. Londoners would certainly be gravely concened if, at a time when the Government were introducing legislation to transfer wide areas of responsibility to other regions of the country, London local authorities were to be denied the essential powers needed to commence the projects which are at present getting under way in dockland.
  Southwark and the inner London boroughs need all the powers contained in the Greater London Council (General Powers) Bill. We in Southwark are concerned at suggestions that the new administration in control of the Greater London Council intends to withdraw Clauses 8, 10 and 11 from the Bill, because we feel that these are all essential elements in the gigantic task which lies ahead in redevelopment of Inner London.
  Southwark Council has recently established a fund of £3 million to assist the development of industry and commerce, and the uses to which this fund could be put would be greatly enhanced if the powers contained in Clauses 8, 10 and 11 were retained in the General Powers Bill or introduced by the Government in their own Bill. Clause 8(1) would give to London local authorities a general power to make grants to owners or lessees of individual pieces of land in their area for the purpose of extension, alteration or

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  improvement of individual buildings or the improvement of facilities, supplies or services. There are a number of existing firms in the London area whose continued operation is jeopardised by their inability to obtain financial support for the purposes outlined in the clause.
  Evidence given to the Wilson Committee by both the CBI and the TUC has indicated the need for such powers, which would allow boroughs, where appropriate, to play an active role in improving industrial and commercial premises within their boundaries.
  The provisions contained in Clause 8(2) could play a vital role in assisting the inner London boroughs to tackle the tremendous problems with which they are confronted, whether such powers are obtained through the General Powers Bill or through Government legislation. This clause would be a vital weapon in assisting the inner London boroughs to tackle the problem with which they are confronted in bringing industry to the inner areas. It would provide boroughs with the opportunity of building advance industrial buildings for the purpose of attracting industry to the area or encouraging existing industry to remain. This would represent a valuable complement to existing powers, which are unduly circumscribed.
  Clause 10 is another weapon which is badly needed by inner London boroughs, and one which, I trust, the Secretary of State will ensure that they obtain through one avenue or another. This power would enable local authorities to guarantee rents of individual buildings and to guarantee payments to statutory undertakings for the provision of infrastructure and facilities. It is apparent that many developers are only prepared to trade with small firms if they can provide a guarantor or surety for the purpose of their leasehold covenants. With the provision of this clause it would be possible for Southwark and other London boroughs to use a fund such as Southwark has established to assist in establishing these small firms within the borough.
  Clause 11 concerns a limited power. It would enable local authorities to acquire securities in a company. The need for this power arises in connection
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  with a payment or loan made by a local authority to a company to enable it to perform a contract with the local authority. This power would give a measure of financial security to boroughs where they are using their purchasing power to support local firms by enabling them to advance money to a company to enable it to carry out the work.
  As I said in my opening remarks, I welcome the legislation which has been promised in connection with the problems of our inner cities. The problems of inner London are particularly acute. Many of them should have been tackled long ago. I trust that, at a time when this House will be actively seeking to devolve powers to other regions of the country, the Government will ensure that London boroughs have the powers and the weapons essential to enable them to tackle effectively the tremendous task ahead of them.
  6.50 p.m.
  Mr. Michael Spicer: I want briefly to return from the very important problems of Southwark constituency to the general question of the interventionist industrial strategy of the Government. The problem with intervention on behalf of someone is that, by definition, one intervenes against someone else, either because one is taxing him or because one is setting up State-supported competitor. I suppose that one could justify that strategy in the short term in the context of a casualty clearing operation—a phrase used by my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph).
  But, considering the likely long-term course of events over the next 10 years, for example, in the industrialised countries, that is a very dangerous strategy to pursue. The pace at which the requirement for labour in manufacturing industry is now declining is not yet generally recognised. I was recently on a trip to Japan. Whereas we, when talking of a productivity increase, speak, more in hope than in anticipation, of machines which use five people now but will use three, in Japan entire factories of people are being replaced by machines, by automation-control methods operated by two or three people in white coats. This poses the most horrific problems in terms of employment and of our competitive

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  position, and any Government must be extremely concerned about it.
  My problem in trying to assess the situation is that it seems to me that, if one is simply to counteract that kind of inevitable trend, one will either opt out of continuing to be a major industrialised country or one will simply be building sandcastles against the tide, wasting an enormous amount of money in the process. Therefore, certainly in the long term, if there is concern, as there is, in all quarters of the political argument about unemployment, with the threat of a magnitude of unemployment that we have not yet experienced, we must consider the situation in a manner totally different from the strategy of the Government.
  One must in the short term consider the sort of policies for encouraging investment which were mentioned by my right hon. Friend. Much more important than industrial strategy, in my belief, is education policy. We currently do not provide enough people for the skills which are still very much in demand. There is a great unsatisfied demand for skilled people. There is a shortage of skilled builders and skilled mechanics. There is a whole range of computer skills for which we are not providing in our education system.
  Again, one would like to see a much more flexible private sector housing policy, but in the absence of that we should be considering trying to make the public sector more flexible. I have many constituency examples of people wishing to take jobs in other parts of the country but being prevented from doing so by the inflexibility of the housing system. We should have some kind of national clearing house for people wishing to move from one area to another and who are renting public housing.
  Another example of what could be done was put perfectly by my right hon. Friend the Member for Newham, North-East (Mr. Prentice)—the reduction, or indeed the cessation, of the pace of the legislative burden on industry, which seems guaranteed to increase unemployment. There is a whole range of short-term remedies which are not being taken and for which the Government's industrial strategy is no substitute. In the long term, even these remedies are unlikely to be wholly successful, and I
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  believe that, if we are right in saying that the real problem lies in the long-term decline in requirement of labour for the manufacturing sector, we have to look for future employment to other sectors, particularly the service industries.
  In that context, the Government's interventionist policy is ridiculous. It is particularly absurd that where we have thriving industry in the services we should be discriminating and actually intervening against it in many cases through subsidies given to manufacturing industry and through taxation policy. In this way, we are intervening against one sector of our economy which in future will provide jobs.
  One of the ironies which I discovered in Japan is that, contrary to myth, it looks this year as if the British will be in trade balance with the Japanese. The trade balance is rather peculiar. This year, apparently, the Japanese will have exported to us £1 billion worth of manufactured goods and we shall have exported £½ billion worth of manufactured goods to them. But we shall have earned another £½billion through the services sector—insurance, for example.
  Mr. Dell: I am glad that the hon. Gentleman has been to Japan, but he should not believe everything that the Japanese statistics suggest about our net earnings on invisible account. It is nothing like the figures that they state, and. although there is a significant net surplus on invisible account, it still leaves us with a substantial current account deficit.
  Mr. Spicer: I do not know whether it would be in order to say that I got these figures from the British Embassy in Tokyo.
  There are two facets to services. First, they are heavy employers. Every service that one can imagine is labour-intensive. The second aspect about services is that this country is rather good at them.
  In both the short term and the long term, it is disastrous to embark upon a strategy of intervening to support all the industries which are going into decline. As I have said, there may be short-term reasons for trying to bail out particular casualties on humane, social and political grounds—one accepts that—but as a strategy it is a very foolish way of going about it. It would be much better to set

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  about it in the way suggested by my right hon. Friend the Member for Leeds, North-East, and that is one of my reasons for supporting the Opposition amendment.
  6.53 p.m.
  Mr. Stan Crowther: The hon. Member for Worcestershire, South (Mr. Spicer) appears to be opposing intervention in industry but to be in favour of intervention in housing, education and elsewhere. That is illogical. I suggest that the problem of declining manpower in manufacturing industry will be solved eventually by reducing the working week. But that is a subject for another debate.
  I was sorry that my right hon. Friend the Secretary of State for Industry was not able to be a little more specific about the Government's attitude to the future of the steel industry, which is a matter of very great concern to my constituency. I appreciate the support that the Government and the House have given to the British Steel Corporation in its capital investment programme—I remember that we sat up all one night during the last Session to put the necessary Bill through.
  However, I am unconvinced that the Government have yet fully grasped the desperate seriousness of the crisis through which the steel industry is passing—I use the word "passing" in a rather loose sense, because there is no evidence yet that the industry is coming out of the crisis. It appears to be stuck in the middle of it, and it is the worst crisis since the 1930s. It is not, as the right hon. Member for Leeds, North-East (Sir K. Joseph) appears to think, just a financial crisis.
  I suppose it would be easy for the BSC to get out of its financial difficulties by sacking 60,000 to 70,000 people and reducing its production targets to perhaps 15 million or 16 million tons a year, but that is not the real crisis. The real crisis is an industrial one, and not so much a financial one. I accept that the loss of £10 million a week is serious, but let us not forget that nearly half of it is due to interest charges that have necessarily been incurred because of the enormous amount of new investment that is needed just to catch up with our foreign competitors.
  What worries me most is that the Government are not implementing any
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  policies that are positively and directly aimed at stimulating demand for steel in the home market. There are many areas within which Government policy could have a considerable influence on steel demand. If we do not see an upturn in the home market in the fairly near future, we shall be in danger of finishing up with a large number of modern plants working half time or less.
  It is not part of my duty to anticipate the discussions that are to take place between the BSC and the trade unions on the future manpower requirements of the industry. I, as a Socialist and a trade unionist, do not want to see any plants closed, or any men made redundant anywhere in the country. But it is my duty to represent the interests of my constituency, and we have lost 8,000 jobs in the steel industry in the Rotherham area over the past 16 years—the great majority of them from two plants which now form the Rotherham works of the BSC.
  That was part of the cost of making the Rotherham works one of the most productive and profitable in the country. It was not easy for the trade unions or the community to accept sacrifices of that magnitude, but they were accepted because that was in the long-term interests of the industry and the country. The effect on the social fabric of the area has been serious. It is one of the main reasons why the level of employment that now applies to the country as a whole has been afflicting the Rotherham area for nearly 10 years.
  Even now we have not stopped the process. Another bar mill is to close in February, and my constituents are saying "Enough is enough. We have made all the sacrifices that we can stand." There is a widespread suspicion that BSC is deliberately shunting less profitable contracts to the more efficient works, such as Rotherham, and giving the more profitable work to less economic plants in order to spread the load and to disguise to some extent the difference in performance.
  I do not know whether that is true, but many of my constituents believe it to be so, and my advice to the Government and to the BSC—though I do not for a moment suppose that they will accept it—is "Put your money on the

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  record breakers ". The steel workers in my area have shown every possible cooperation in creating an efficient and profitable works. They have never yet let the industry or the country town, in peace or in war, and they are entitled to rather more support than the BSC sometimes appears to be giving them.
  I now turn briefly to another matter that is of some concern in my constituency, although the problem is of a very much wider nature. I was pleased to see in the Gracious Speech that it is intended to introduce legislation to amend the Companies Act. The Gracious Speech did not say what kind of amendment is proposed, but I hope that there will be a measure to prevent a recurrence of disgraceful recent events in Rotherham. I mention this, not because it is special, but because it is all too typical.
  A small firm known as Gummers Ltd. had operated in Rotherham for well over 100 years. It had a world-wide reputation for the excellence of its products It had a number of items, but it specialised in manufacturing valves for the water industry, and for other industries, too. One can find Gummers valves all over the world. It was a profitable firm until about two and a half years ago when it was taken over by a conglomerate group called Pentos Ltd., and it has now been closed down.
  The announcement of the closure was made without any consultation with the trade union concerned. A couple of weeks before that happened a notice had been put on the company notice board saying:
  " No decision has been made regarding the future of Gummers Ltd.",
  and it added
  " No preparations are in hand for the transfer of any of the Gummers products elsewhere."
  About a fortnight later the employees were handed a notice saying that the works would close on 23rd December and that part of the work would be transferred to another Pentos subsidiary in Birmingham.
  The works were closed eight weeks prematurely. That occurred on 28th October, which happened to be just five days before my hon. Friend the Member for Rother Valley (Mr. Hardy)—who also has constituents working at these works
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  —and I saw my right hon. Friend the Minister of State to discuss the possibilities, if any, of saving some of these jobs. The meeting had been publicised, but the works were closed, with those concerned being given 24 hours' notice.
  The group claims that Gummers Ltd., although it had been profitable up to 1975, had been making losses in 1976 and 1977. I am assured by the former managing director, who is one of seven senior executives of Gummers Ltd. who have been sacked or forced out by Pentos since it took over, that the company was forced to sell some of its products to another subsidiary of the same group at up to 40 per cent. below the proper market value. If that happens, it is not surprising that losses appear on paper.
  A lot has been said recently, including during today's debate, about the importance of small firms to our economy. I agree with all that has been said, but the greatest danger to small firms arises, not from policies followed by the Government, by local authorities or by trade unions, but from the activities of bigger firms which gobble up small firms, squeeze them and then toss them callously away. That is what happened to Gummers Ltd.
  When the right hon. Member for Leeds, North-East talks about companies being milked, he should understand that the most efficient and expert milkmaids in the world are big companies. This once proud and profitable company which carried the name of Rotherham all over the world has been thrown into the dustbin of history.
  I mentioned earlier that Rotherham has lost thousands of jobs in the steel industry. We lost them because that was part of the price of technological advance. The tragedy of Gummers Ltd. is a different matter altogether.
  The Under-Secretary of State for Industry (Mr. Bob Cryer): Will my hon. Friend accept that Gummers Ltd. is a sad case but, alas, is not the only example of what is happening? The Opposition complain about a fear of massive intervention, but the fact is that when such cases occur we often have not only Labour but Conservative Members asking the Government to intervene to try to save jobs and companies. Very often these are viable concerns, but because

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  they are involved in a wider financial group that is not viable they find themselves sinking with the whole group.
  Mr. Crowther: I am glad that my hon. Friend has made that point. I said that I mentioned this case, not because it was special, but because it is all too typical. The powers of intervention should be greater to enable the Government to prevent such things from happening. We have lost 230 jobs, not because technological progress has made the workers redundant, not because the workers' products are no longer needed, not because they could no longer operate economically, but because it suits the pockets of somebody who has probably never been near the firm that the works should be closed so that he can squeeze the last ounce of profit from it.
  Such an event must surely come into the category of what the right hon. Member for Sidcup (Mr. Heath) described as "the unacceptable face of capitalism ". There is a great need for legislation stipulating that any company which has taken over the works of another company and intends to close down those works and make the workers redundant, thus involving the taxpayer in the expense of contributing to the redundancy payments, should be required to justify its proposal to an independent tribunal on technological or economic grounds.
  The concept of unfair dismissal is now firmly established as part of our employment system. Yet nothing could be more unfair than throwing 230 people on to the scrap heap. They had no protection. I hope that the Government will give this matter serious attention—if not this Session, then next Session.
  7.11 p.m.
  Mrs. Winifred Ewing: I am sure it will not surprise the House if I start by referring to that part of the Gracious Speech which refers to the Bill to establish a directly elected Assembly for Scotland. This is part of a long story for the Labour Party. It may not be known to all hon. Members, but those who study history will not mind my reminding the House that for almost all of its existence the Labour Party has been committed to a Scottish Parliament. As late as 1957, when my late brother-in-law was the Labour candidate for Edin-
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  burgh, South, even he, as an official Labour by-election candidate, had that firm commitment on his election address. Transport House told him to remove the commitment, but he gave Transport House a choice—" Either allow me to leave it in my election address, or I will not stand as a candidate. "So in 1957 it was dropped.
  Ten years ago almost to the day I won the Hamilton by-election. The Labour Party is perhaps learning from its own history. It took the Labour Party 50 years to get one Member of Parliament into the House. When he lost his seat, the Press and other media said—so presumably did many hon. Members—" That is the end of that. "
  In the same way there has been a lack of understanding of the aspirations lying behind the success of my party in gaining over 30 per cent. of the vote in the October 1974 election—5 per cent. more than the Conservative Party. It is not worth quoting the figure for the Liberals because in Scotland they have virtually been written off.
  I congratulate the Government on proposing to introduce the Scotland Bill. I hope that it is not just one of a series of broken promises. There have been times when every Scottish Member has voted for such a Bill. The famous Tom Johnston, the most respected Secretary of State for Scotland of all time, was firmly committed to the concept of a directly elected Scottish Parliament with far more powers than will be contained in the Scotland Bill.
  I urge those on the Labour Front Bench to tell the Prime Minister that I congratulate him on bringing the Scotland Bill forward, but I have one or two cynical thoughts about the Prime Minister's sincerity and the sincerity of his colleagues.
  My first cynical thought arises from what happened last Session, when the Prime Minister failed to make the passing of the Scotland and Wales Bill an issue of confidence. We never received an explanation why, if this is such an important radical constitutional step—perhaps the most important constitutional step for two centuries—the Prime Minister did not get the Bill through when we know that he can get Bills through despite his present political situation.

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  Secondly, assuming that the Prime Minister and his colleagues are as sincere as they claim, what are we to think about the timing of the measure? We know that even if this House passes the Scotland Bill and the Wales Bill the House of Lords could delay them. It may be that the Prime Minister already realises that. With the power of the Prime Minister in the United Kingdom being far too great, with his enormous power to decide on the timing of an election, it may be that he could fulfil his sincere pledge to get the Bill through this House knowing full well that the Bill would not reach the statute book because he could time the election to coincide with the delay in the Lords.
  I seek assurances on this matter, because to me and my colleagues this is a serious proposition. Many hon. Members evince a great lack of understanding of my party and what it stands for. The best thing that could happen to secure my party's electoral success at the next election would be the Labour Party's failure to get the Bill through. We should be laughing all the way to the next election if that happened.
  My party has taken a constructive attitude, saying that a step in the right direction is a step in the right direction, that any improvement is any improvement. We have made a commitment to secure a directly elected Assembly at some time, although it is not quite what we want. We want this as a step in the direction leading to the dignity of self-government and international status. However, we are democrats we have said that we will work with the Government on the Bill and will table amendments thereto and hope that they will be selected for debate. We will accept the verdict of the people of Scotland. If after they have got their mini-Parliament without muscle, they are satisfied with that mini-Parliament—
  Mr. Deputy Speaker (Mr. Bryant Godman Irvine): Order. I ask the hon. Lady to look at the amendment which has been selected and which we are supposed to be debating.
  Mrs. EwingI understand that it is a tradition of the House that in the debate on the Gracious Speech it is permissible to speak generally. Industry and commerce and employment are also funda-
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  mentally affected by a step in the direction of devolution. I believe that my remarks must be regarded as relevant.
  The Liberal Party's attitude to the Bill is, with respect to the hon. Member for Cardigan (Mr. Howells), for whom I have a great personal regard, contemptible. When this great party of Home Rule has the chance of a Bill to secure a directly elected Assembly, it starts nit-picking and saying that, if it cannot get such-and-such concession here and a bit of PR there, it will not support the possibility of getting something as important as this on the statute book. So much for Liberal Home Rule-ism. The pact the Liberals have entered into has probably made it certain that they will disappear without trace in Scotland, so there is not much point in wasting breath on them, because why jump on to a dead body?
  We do not know what the attitude of the Tory Party is to the Scotland Bill. The right hon. Lady the Leader of the Opposition quickly skated over the matter last week and would not even allow an intervention in her speech, so little importance did she attach to this matter. Nine years after the declaration of Perth of the right hon. Member for Sidcup (Mr. Heath), the Conservatives are regurgitating and rehashing, deciding whether to abolish any commitment to devolution.
  It may interest hon. Members to know that I have learned what the Conservative policy is. I was on a television programme with the hon. Member for Aberdeen, South (Mr. Sproat). He categorically committed the Conservative Party to opposing the Bill every inch of the way. That is one clear-cut statement which we have had, though admittedly not in this House but on television, and I shall be interested to learn whether that is the policy of the Conservative Party, about which the Opposition are remarkably silent.
  After the next General Election, whenever it is, we shall find either that my party will have won a mandate for self-government by taking 36 seats and a majority of the votes or that it has not quite done that but still got a sizeable number of Members in this House.
  Mr. Deputy Speaker: I was under the impression that the hon. Lady was coming round to the amendment in due course. Although it may be that at some

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  stages in the debate on the Gracious Speech it is in order to discuss other matters, we are in fact concerned with an amendment dealing with industry.
  Mrs. Ewing: I shall sum up quickly on this point and then move on to other matters affecting industry.
  I warn the House that we shall hold the balance of power, if we are here at all, and that this should be taken seriously because it is obvious that the electorate will not give either of the parties a clear mandate.
  Mr. Tim Renton: Can it be that the hon. Lady is suffering from hubris, which is otherwise known as counting one's chickens before they are hatched? Is it not true that recent opinion polls in Scotland have shown that Scottish support for devolution is waning considerably? Recent figures that I have seen showed that, whereas 55 per cent. previously supported devolution, the figure is now down to 35 per cent. and that many people in Scotland have been put off by the Scottish National Party and its demands for independence?
  Mrs. Ewing: If the hon. Gentleman intends to take me on about opinion polls, he should do his homework. I am rather well up on opinion polls.
  Mr. Deputy Speaker: May I seek the hon. Lady's assistance and urge her to come to the amendment?
  Mrs. Ewing: Having given way to the hon. Member for Mid-Sussex (Mr. Renton), I think that I must be allowed to answer his question. If he refers to recent opinion polls conducted by The Economist and Systems Three, he will see that my party is comfortably positioned at 33 per cent. These figures are based on a larger type of sample from the ones which he has quoted. In any event, perhaps he should direct himself to a rather more interesting statistic which shows that, of the under-35 age group, we have 46 per cent. whereas the Tories have only 18 per cent. The message is there for the Conservative Party that the Tories in Scotland are dying off and that there will be only two parties left. They should think that over very carefully.
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  I turn now to one aspect of industry—the very important fishing industry. I welcome the statement in the Queen's Speech, so far as it goes—which is not very far—that new initiatives will be taken by the Government in regard to the reform of the common fisheries policy. I welcome this, but I should like some further information.
  What on earth can the Government do in the way of taking initiatives? Fishing is a vital industry and 65 per cent. of the European pond is provided by the United Kingdom, most of it in Scottish waters. We have a total inability to get justice for the industry because the United Kingdom has no right of veto left. That was given away in the Conservative Government's negotiations for entry. They made fishermen pawns in the game that they played, and they sold our fishermen down the European river. We have no right of veto. I cannot congratulate the Labour Government. When they renegotiated the treaty, they did not see fit to put fishing on the agenda.
  In my constituency, the fishing industry is vital. It is one of the most important industries in Scotland. It is an important one to the United Kingdom as a whole in that it provides fish mostly for human consumption, which is one of the most important sources of protein.
  We know that a 50-mile limit is necessary. Everyone now agrees about it, and I am one of those who go to Europe to try by persuasion, without any rights in the matter, to explain our position to the Germans, Dutch, Danes and the other members of the EEC. I try to put to them the social necessity of preserving the rights of the inshore fishing industry. In most cases, there is no alternative employment. It is a way of life in addition to being just a job. It creates a cultural way of life.
  The industry must have new initiatives, and they must be that the Government say to our EEC partners, "We insist on 50 miles exclusive control." That does not mean that no one else can fish within the 50 miles. The control must be by the coastal State. The Law of the Sea Conference has always agreed that only coastal States properly conserve fishing stocks.
  Unemployment in Scotland is running at about 180,000. Recently the Fraser of Allander Institute forecast that shortly

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  this would rise to the shocking figure of 200,000 out of a population of 500,000. What a non-achievement! I remember the right hon. Member for Kilmarnock (Mr. Ross) saying, when he was Shadow Secretary of State, that if unemployment in Scotland ever rose to 100,000 and he were Secretary of State for Scotland he would resign. I wonder whether he and his colleagues remember that boast.
  Scotland is one of the most socially deprived areas in Western Europe. People are living in houses which are unfit for human habitation to a most alarming degree. According to a Labour Government report, the Cullingworth Report, even if we build beyond the present rate of building, the slums will be with us until after the end of the century.
  I have some sympathy with the hon. Member for Rotherham (Mr. Crowther) about the state of the steel industry. I can remember just after the Hamilton by-election having a promise from the Government that there would be a tinplate mill and a galvanising plant in Scotland. Had that been done, we in Scotland could have had an integrated steel industry. We would not now be in the ludicrous situation of having unnecessarily to import steels which we could produce ourselves. That was another broken promise. I sympathise with some of the fears which the hon. Gentleman expressed on behalf of the steel industry.
  I now wish to say a word about the oil industry, which will not surprise the House. The policy of this Government—and from my reading I believe that the same would have applied had the Conservatives won the last General Election —is to make a mad grab to get this liquid gold out of the sea regardless of the cost to nearby areas. Apparently, it does not matter what social consequences are left behind. Again I have a certain constituency interest in this, in that I am what might be described as an oil Member, with a platform-building site in the constituency called Ardersier.
  We can contrast the policy of this Government with that of the Norwegians, who have a similar quantity of oil. The Norwegians are not grabbing to get it out quickly. They impose stringent conditions on the oil companies. They take a much bigger share from the oil companies. They make sure that there is
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  preference for jobs for Norwegian firms when contracts are given.
  The way that we are extracting oil at any cost and as quickly as possible is quite ridiculous. Many juicy contracts are given to anyone at all as long as the oil can be won. My party warned this House of the extent of the oil. It was laughed at by both the Labour and Conservative Parties, and our predictions were almost modest. No one ever admits that my party was right. We warned them not to build too many platform sites. We pointed out that this would mean only temporary jobs. There was no planning. There was no attempt to create proper infrastructure, housing and schools. In many cases, men were away from their families. Once again we have been proved right, fortunately, because in many cases these are short-term jobs.
  I pay tribute to the company in my constituency which adopted a different policy, using local firms and local labour as far as possible, setting up a fairly permanent work force. The majority of the shop stewards in the yard are members of my party, and the yard does not go in very much for industrial action. The people simply want to get on with the job. The record is such a good one that there is no problem about filling the order book. Nevertheless, the problem remains for other sectors of this very important industry.
  On the subject of small firms, I have a certain constituency interest, because 60 per cent. of the people in my constituency are self-employed. That is a very high proportion—quite different from the situation in many other parts of the country. In Scotland we have six times as many self-employed people as there are in England, and because of the imbalance of our population we find that the self-employed person is of extreme importance to rural areas. The self-employed clergyman, the shopkeeper and the small post office are absolutely vital to the survival of these areas. Unfortunately, too many burdens have been placed on the small firms.
  I disagree that the main problem is the big firm. This is not true in the situation that I am describing to the House. We do not have multiples making much inroad, because the small firms are the popular ones which give the good service. What is needed urgently is a simplified

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  system of value added tax. The 8 per cent. levy must be ended. The Conservatives introduced it at 5 per cent., and it was then raised by the Labour Government to 8 per cent. That must go. Similarly, the capital transfer tax must be reformed in order to protect the family firm, which is a very good stable unit on which to base society.
  I am glad that the Government have indicated in the Gracious Speech that they will introduce measures to assist small firms. They are certainly needed because of the bankruptcy rate in Scotland. Although much of the legislation is excellent from the social point of view, it has added up to a very crippling burden on small firms, many of which cannot employ a specific accountant of their own to deal with them. I ask that further details may be given on this aspect.
  I identify myself with the remarks of the hon. Member for Cardigan about reform of the common agricultural policy. That policy is nonsense. If the Community is enlarged, as seems likely, the CAP will become absolutely unworkable. Scottish farmers have always been highly efficient, producing as much as possible. Indeed, that is true throughout Scotland and England. But now we are suffering, and we are having to help inefficient farmers on the Continent to compete more effectively with our own farmers. That, in effect, is what we are doing. The agriculture industry must receive some benefit soon, because the pig farmers and hill farmers are suffering hugely. When I say that quickly, it does not lessen the importance of the hill farmer to the whole of the economy. It is from that source that our future cattle will be derived.
  There is no reference in the Gracious Speech to reform of the land law. As my party's view is that the agriculture industry should be based on small farms, it would be nice if we could see some indication occasionally from the Labour Government that they have come radical views on the fact that in Scotland we have some of the largest tracts of land owned by individuals or companies. Among them arc to be found some of the most wicked landlords, stepping right out of the pages of medieval history.
  The state of affairs persists, and the Forestry Commission is not encouraged by either Labour or Conservative Govern-
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  ments to use its existing powers of compulsory purchase in order to make sense of the forestry industry, which is largely undeveloped. The industry could have millions of acres added to it that are not suitable for farming but are suitable for forest. We should not have to import certain types of timber, because the type of timber we grow in Scotland grows faster than timber in Scandinavia. It grows at an ideal rate for the requirements of the Forestry Commission in Scotland. This is an area of total neglect, and I do not see anything very encouraging in the Gracious Speech about it.
  Many hon. Members who do not come from my side of the border have an almost persistent ostrich-like attitude to what is, after all, a national movement National movements do not go away because people might like them to do so. They will not go away just because many hon. Members have chosen to be ostriches. The national movement wishes to see self-government. It wishes to see powers of the purse.
  I counsel the Government, if they have a hand in framing the referendum question, to consider the following point. If the question is "Do you wish Scotland to run its own affairs?", or "Do you wish Scotland to have power of the purse?", there will be about a 90 per cent. "Yes ". If the emotional type of question is asked, there may be a different answer. Obviously, the framer of the question will have a great deal of influence.
  I reiterate that the national movement of Scotland will not go away. If the people of Scotland are satisfied with a mini-Parliament, that is what they will have. Although we shall go on protesting that they want more, if the Scottish people do not want more we shall not win elections after that. It is a simple matter of democracy. When the devolution Bill comes before the House, I urge the House to pass it, and to pass it quickly, so that there can be no question of the Lords delaying it.
  7.37 p.m.
  Mr. Tom Ellis: I do not intend to follow the speech of the hon. Member for Moray and Nairn (Mrs. Ewing). I think we shall have plenty of time during the debates on the two devolution Bills to talk to each other and

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  debate with each other across the House. I shall forgo that pleasure until that time.
  I thought that the hon. Member for Arundel (Mr. Marshall) made a thoughtful speech. Although I could not agree with all of it, I agreed with large parts of it. I agreed also with the analysis of my hon. Friend the Member for Rotherham (Mr. Crowther), except that, having made the same analysis as the hon. Member for Arundel, I felt that my hon. Friend then failed to grasp the nettle that had appeared following his analysis. I should like to emphasise some of the points that both hon. Members made, in particular concerning the steel industry.
  The track record of British industry since the war is not good. It is unsatisfactory and disappointing. If I were asked to name the biggest hindrance to our achieving a really competitive position in relation to other countries, I would say that it has been our inability, since the war, to overcome the problems of change. I find this particularly galling in the light of the slogans that were current in the 1960s. There were slogans about the technological revolution, and about dragging us kicking and screaming into the 21st century. Unfortunately, there has been a failure in this respect. It is very disappointing, and it is reflected in our industrial situation.
  As many people have pointed out, one obvious criterion is productivity. Our productivity in a vast range of industries does not compare with that of many of our competitors. But there have also been failures in other areas. There have been failures in regard to the location of industry, and in this respect I quote from the report of a Committee of the House which was published in 1975. It is the Report on Regional Development Incentives, Cmnd. 6058.
  The report says:
  " Had Scotland, Wales and Northern England secured 42 per cent."—
  that is to say, their proper share—
  " of national employment growth during the 1960s, they would have experienced a growth of 270,000; in fact their employment fell by 100,000. Of the deficiency of 370,000, 180,000 was attributed to developments within the services sector; 120,000 was attributable to the primary sector, largely arising from the disproportionate dependence on coal mining; and only 70,000 to the manufacturing sector. "
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  This loss of jobs was matched during the same period by an increase of 6 per cent. in employment in the South and Midlands of England.
  I make that point, along with productivity, as two examples of our failure in terms of industrial policy since the war. I do so in order to try to underline a general proposition which one or two hon. Members have hinted at during the debate, namely that when one approaches the whole question of industry and its problems one can go along two broad paths. There is the market economy approach, espoused by most Opposition Members—that the market itself will assess the efficiency of companies and that if a firm's productivity does not come up to a certain level, in due course that firm will go bankrupt.
  The other approach, favoured by many Labour Members, is that of central planning of the economy with the central decisions being made by Government in order to develop industry, and so forth. Those are the two purist views in practice, although I do not think that anyone would take a rigid purist position.
  Indeed, as we know, a great deal of planning goes on in private industry. The whole Galbraithian philosophy spells out the amount of planning that does go on in private industry.
  But a very important point that we must get clear in our own minds that if we fudge the whole thing in an attempt to come together from the two extremes we shall have the worst of all possible worlds.
  I believe that in many respects what has gone on in this country during the last 30 years has been a fudging of the question whether we are a free enterprise economy or a really determined planned economy, with all the determination and ruthlessness associated with that position.
  I should like to give one or two examples in order to make clear exactly what I am saying. I take the example of steel. A number of hon. Members, including my right hon. Friend the Member for Rotherham (Mr. Crowther) said that many people did not really appreciate what a desperately serious position the steel industry was in. The situation is desperately serious. If we were to produce steel at maximum capacity—about 27 million tons—we should be producing

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  at about 140 tons per man per year. But many of our competitors are producing 500 or more tons per man per year. That is a rock-hard fact. It has been known for a long time, although it was to some extent concealed in the 1950s and 1960s, when we were all dragged along by the great American engine. It was only when America went protectionist in 1971 and when the oil crisis came along that one began to appreciate the weakness of our steel industry.
  In 1972, when money was made available for the steel industry, the management of the British Steel Corporation was allocated £3.000 million to get on with the job of putting the industry right. I am reminded of the Chief of the Imperial General Staff who, during the course of a battle in Northern Africa during the war, said to Churchill: "Mr. Prime Minister, you must either trust your general or you must sack him. You cannot run his battle for him." What we have done in the steel industry is to try to half-run the battle and at the same time try to let the BSC run the battle.
  The nub of the problem was spelt out by the BSC in 1973. It was then said that there were 40,000 jobs to go, over the whole of Britain, over a period of 10 years. That was the problem. I would have thought that the Government could have tackled that problem. We had to tackle the problem in the coal industry, because that was forced upon us.
  However, the problem has not been tackled and the position remains today largely as it was in 1972. I am thinking of the big issues, such as competition between various steel plants, and so forth, which are largely unresolved. In the meantime the whole economic situation has become that much worse and the problem has become much more difficult to resolve.
  By not tackling the problem we are just building up more and more problems, and one can say, in a dramatic way, that inevitably Nemesis will come knocking at the door.
  The basic problem has been our failure intelligently to know precisely what we are doing. Do we have a planned economy, with all the consequences flowing from that, or do we have a free market economy?
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  I am glad to see that my right hon. Friend the Secretary of State is present. I would say to the Government that the nettle must be grasped, however difficult. What I am saying about steel applies to all sorts of other industries. I give another example, which does not come from Britain. I take an example from Mr. Stuart Holland's recent book in which he says that the richest area of France is the Paris region. It covers 2 per cent. of the land mass, has 19 per cent. of the population and 54 per cent. of the meso-economic capital.
  That situation has not come about because the French Government willed it or because of some maladministration; it has come about because of the French Government's impotence, in the same way that Henry Ford has gone to Bridgend not because the British Government wanted him to go there but because, as a multinational concern, Ford was able to choose for himself where to go. With regard to the location of that multinational branch factory the British Government and, indeed, any Government in Europe, were impotent. That is an important point to make.
  Ford came up with a number of reasons for the move. There were skills in South Wales, although I agree with several speakers that at the moment some of those skills are in short supply. Ford has moved to South Wales because, by and large, it is a low-wage economy. We must be intellectually honest with ourselves.
  The point I am making is that if the British Government, or for that matter the French, German or Italian Governments, wish to have a meaningful say in the destinies of their own peoples, the time has come when they can do it only in concert with other Governments in a particular community. The only practical Community on the horizon is the European Community. It is not, as yet, a real community but it is an embryonic community. I say that to many of my hon. Friends who pride themselves on their Socialism.
  Mr. Ronald Brown: My hon. Friend is not describing history; he is making it. The Ford plant was going to Dagenham, but for some mysterious reason it was taken

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  from Dagenham and put in Bridgend. We are still waiting to hear how that happened. By all means let my hon. Friend repeat history, but do not let him make it.
  Mr. Ellis: The rumour is that the Prime Minister had a chat with Henry Ford. I am not saying whether that is correct. But I shall not argue with my hon. Friend.
  The point I was making is that it is the meso-economic sector which is the price-setter and the other industries are the price takers. That is the crucial thing, and in this sector the national Governments in Europe are impotent. It is said that the history of the nineteenth century can be summed up as the forces of the Right outflanking the forces of the Left. The classic nineteenth century European nation State was set up to develop the capitalist system. As we come to the end of the twentieth century we risk once more saying that the forces of the Right have outflanked the forces of the Left. The development of industry has left the nation State behind, and it is now able to do things on an international scale and dictate to the nineteenth-century nation-State Government what it wants to do.
  I hope that where decisiveness is required, as it is on particular issues, it will be forthcoming. Anybody can decide to nationalise or denationalise an industry; that is an easy decision to make. But decisiveness is required to know when a practical and immedate problem arises and to know what to do about it—to know whether to tackle the problem or to fudge it. It seems that in far too many aspects of our industrial life we have fudged it.
  Take the aeronautics idustry. Eighty per cent. of the aeroplanes flying over Europe are made in the United States. The most successful European aeroplane is the Caravelle, of which 359 have been made. No Boeing aircraft has numbered fewer than 1,500. The lobbies have come to this House about the crisis in the steel industry. The time for the lobbies from Hawker Siddeley, near my constituency, is now, because the crisis will hit that organisation within 10 or 15 years unless we do something now.
  Because of our rigid approach we are failing to tackle the problems which are clearly appearing on the horizon for
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  industries such as aeronautics and computers. The Government must therefore abandon their role of trying to be sovereign in the economy and instead try to find some way by which they can become sovereign in partnership with the Community.
  Mr. Deputy Speaker (Sir Myer Galpern): I remind hon. Members that the winding-up speeches are to begin at 9 o'clock. There are roughly 70 minutes left, and at least 10 hon. Members are anxious to speak. My arithmetic is poor, so I shall leave it to hon. Members to work it out for themselves so that they may help each other.
  7.52 p.m.
  Mr. Kenneth Baker: I agree with much of the comments of the hon. Member for Wrexham (Mr. Ellis) about industry but I find his comments on recent history quaint. To say that in the history of the twentieth century there has been an out-flanking of the Left by the Right requires a certain suspension of belief in which I cannot indulge.
  It is interesting that in the debate the last person to use the phrase "industrial strategy" was the Secretary of State, and he used it about three hours ago. Hon. Members on both sides of the House have not used it because they have no clear understanding of the term. If one asked most Cabinet Ministers what they meant by "industrial strategy" a sort of dazed and witless glance would pass across their faces and they would say "I am rather late for my next appointment. Ask Eric." The right hon. Gentleman apparently keeps this secret to himself.
  I suspect that in practice the term means simply this: when exports go up the Government claim the credit for it, but when investment remains sluggish the Government blame the private sector.
  The debate gives us an opportunity to talk about the industrial strategy that Britain should be trying to follow over the next few years. It is generally recognised that the benefits of North Sea oil are only temporary. They give us a chance to run a bit faster but the objective remains the same—the creation of a strong economy.
  No one can possibly foresee which companies will be making what and to

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  whom they will be selling in 30 or 40 years' time after North Sea oil reserves have been depleted. One thing is certain, however. The industrial pattern then will be very different from that which exists today. We shall therefore pass through a period of major industrial change.
  I warn the House against the deceptive argument that somehow the development of the service sector will see an end to all our troubles. Personally I do not believe that. I am heavily involved in the service sector. I advise two companies in the fastest growing area of the service sector—the application of computer services. I know how quickly employment can be put on in these industries. But I do not believe that we should follow a strategy which proposes that we should contain and reduce the manufacturing sector and hope that the slack can be taken up by the service sector.
  Such an option is open to small economies such as those of Switzerland and, before the troubles, the Lebanon. But it is an unrealistic strategy for an economy with 7.5 million people employed in manufacturing industry. Perhaps I am rather biased in that direction because before I came to the House I was an industrial manager. I used to run and manage factories which made goods.
  I accept that we have the best retailers in the world, the best insurance salesmen in the world, the best banks in the world and the best people dealing with computer applications in the world. But all these categories have behind them a huge manufacturing base. The insurance companies need office equipment, which is manufactured. The goods in the stores have to be manufactured somewhere. The accounting equipment in the banks has to be manufactured, as does the hardware in the computer industry. I hope therefore that no one will harbour the illusion that a service-based economy will be able to take up the slack which would be created by an industrial change of that nature.
  There was an interesting article in The Times yesterday by the editor of the National Institute Economic Review.The final sentence in that article was as follows:
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  " the basic strategy of expanding domestic and foreign demand for British industrial products represents the ony hope of maintaining, let alone regenerating, British industry during the North Sea oil era."
  That is an unfashionable view, but it is one that I share.
  To a large extent our nation is based upon merchant converters. We do not have the raw materials. We have had to buy them in and convert them, by our wit and engineering skill, into goods that the world wants to buy.
  I turn, then, to the manufacturing sector in the United Kingdom. We should avoid the simpliste answers. The TUC believes that the basic answer is more investment. It believes that if money is thrown at industry somehow it will pull round. The Tribune Group believes that the manufacturing sector can be saved by import controls. I believe that it is now also supporting a low and a fixed exchange rate. I believe that that would be a disastrous policy. It would create an illusion of competitiveness which does not exist. British industry should not have to depend upon a low and false value of sterling in order to compete in the world, and if we are to compete in the world our success will depend on our productivity—the productivity of basic British industry not just on the factory floor but on the office floor, too.
  Profitability, productivity and investment are three totally interrelated factors. They are all part of the same chain, and if one is emphasised at the expense of the others, the chain will break. In my experience in industry, if a product were profitable, management would eventually invest in new plant and machinery. This would increase productivity, which would increase profitability, and that would lead to new investment. Most of British industry operates in that cycle and it would not be helpful to throw a great deal of money on to the investment side. From my own industrial experience I found that the sure way of knowing when a company was going downhill was when the team of managers came forward and stated that all that was needed was £100,000, £150,000, or a quarter of a million for new machinery and everything would be all right. Unless the business can make a return on the investment it will not, in my experience, be sufficiently profitable to survive in the long term.

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  The Government should show some understanding of the fact that that cycle exists and promote the cycle.
  The Government should try to remove the factors that are inhibiting productivity. I believe that there are three such factors. The first is restrictive practices. Do the Government have any view on these? We had the Donovan Report 10 years ago which said a great deal about restrictive practices and in an appendix to that report it suggested how these should be dealt with. But the Governmetn do not want to get involved. In this respect this Government out-Levites the Levites and pass by on the other side. They legislate for workers' rights, but when it comes to workers' responsibilities they leave that to industry. No Government can be totally blind to restrictive practices in industry. Nor should the Trades Union Congress on the union side.
  Again, one thing that I found very difficult in introducing productivity schemes was the multiplicity of unions with which one had to deal. It is physically exhausting to try to negotiate with 10 or 15 unions in order to get a productivity scheme through. That sort of thing wears down the enthusiasm of even the most enthusiastic managers.
  The second factor inhibiting productivity is the lack of personal rewards. One cannot introduce productivity schemes unless one can show the workers that they will earn a great deal more. The Government must concentrate on tax reductions—[Hon. MEMBERS: "Rubbish."] Hon. Members may say it is rubbish but we do need a reduction in the standard rate of income tax, which is the major disincentive. One can go into a factory and ask the workers if they will do overtime on a Friday night or Saturday. Very often they will say that of course they will come in if the employer will look after the tax. That is their way of saying that the standard rate of income tax is too high. I would like to see the standard rate fixed not at the present 34 per cent., nor at the rate of 30 per cent. which the Chancellor inherited, but at something more like 25 per cent. or even 20 per cent.
  The third inhibition to productivity is the fear that many people have of the effects of productivity—namely, unemployment and redundancy.
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  One thing that I welcome in the Queen's Speech is the Government's intention to introduce a special redundancy scheme for shipbuilding workers. I do not know the details, but it seems to me a sensible way of dealing with an industry that is going into a long period of decline, not only in this country but in the whole of Western Europe.
  However, that is no substitute for having a policy for shipbuilding. If the Government believe that they can deal with the problems of the shipbuilding industry by making a few workers redundant without giving any thought to closing yards, they are living in a deluded world.
  The hon. Member for Wrexham talked about the essential thing that must be done in the British economy in the next few years—namely, increasing productivity. Without that we shall never increase our competitiveness. The Government should invest both ministerial authority and political capital in trying to persuade both sides of industry that productivity is the essence of the regeneration of British industry and showing that they want that to come about. Productivity should not be looked at as an ingenious way of getting around the incomes policy or a means of driving a coach and horses through that policy when they cannot get a 10 per cent. settlement.
  We must have a regeneration of British industry and we must increase our competitiveness. I hope that the Secretary of State can be more convincing in replying than he was in his opening remarks.
  8.3 p.m.
  Mr. R. B. Cant: There was a very great deal in what the hon. Member for St. Marylebone (Mr. Baker) said. It is important for us to accept that in future—the next 20 years—the pattern of British industry will be totally different from what it is today. It is only the Japanese who know what sectors of the market they will exploit with expertise and cunning up to the end of the 1980s.
  I want to address my few remarks to an aspect of policy with which we do not deal enough in this House, regional policy. This will become more important in future because of devolution. In the

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  course of the devolution debates we shall have a great deal of information thrown up about the differences in living standards, about unemployment and money being made available in different areas, and, to some extent, this will be something of an eye-opener.
  This is an important debate because it is fairly obvious that there is growing up slowly and surely a grand debate about the oil revenues. Already sides are being formed between those who believe that the oil revenues in part should be dedicated to the reduction of income tax and a consumer boom, and those who believe that they should be devoted to increasing public expenditure and giving more money to industry through the National Enterprise Board. I have no doubt that a suitable coin-promise will be reached as time passes.
  Inevitably if we provide more and more revenue for, to coin a phrase, the regeneration of British industry, it must be decided which industries in which areas will get the money. These questions are looming on the horizon.
  I shall confine my remarks to considering how regional policy has worked in the past. We have reached a point where, without really thinking about it, we have a regional policy in which the procedures adopted and the methods of distribution are becoming damaging and, to some extent, almost totally ineffective.
  A House of Commons Trade and Industry Sub-Committee report four years ago voiced many criticisms of our regional policy. It outlined 10 areas of uncertainty. However, in the four Years since very little has been done. A lot has been done in detail, but far too little has been done to give point and purpose to our regional policy.
  I do not live in one of the assisted areas and I am sceptical because I doubt whether our regional policies are tied to job creation. Certain firms have received considerable amounts in grant. Pilkingtons received about £70 million for reducing 700 jobs. In my constituency a firm that is closing down has been given a grant of £2,250,000 out of £11 million investment and we shall lose 45 jobs. The number who will get jobs in the development area just up the road is only 25. That works out at £100,000 a
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  job, and clearly indicates that job creation is no longer an objective of regional policy but is, as it were, value added. I do not think that that was the original purpose.
  To take the matter from a different point of view, it is fairly obvious from the statistics that the Government favour highly capital-intensive job investments and grants. The statistics show that 40 per cent. of all the grants were for projects of over £1 million and that 40 per cent. of all the grants went to the nationalised industries—steel was one—and two large chemical firms. Neither firm increased it s manpower; indeed, both reduced it. My point is that when thinking of the future of industry in respect of regional policy, especially as we have abolished the regional employment premium, I believe that the Government should adopt a yardstick which might impose a limit on grants in terms of the number of jobs created.
  I go further and say that if resources are released by the adoption of this sort of policy, we should move to a much more flexible, selective, tailor-made type of regional policy which extends much more comprehensively over the whole country. This would involve a serious reconsideraton of the system of industrial development certificates. What we have as a consequence is a gross interference with the development and history of individual firms, but the situation is mixed up. On the one hand, industrial control is imposed by the Department of Industry through IDCs, and, on the other hand, control is imposed through planning controls, which is the responsibility of the Department of the Environment and local authorities. My personal view is that in many important areas IDCs are strangling economic growth. I live in an area which, despite the fact that it is one of the old industrial areas which was ravaged by capitalism, still has the pottery industry, which enjoys excellent employment prospects. However, we still have some serious problems, and yet we have a reserve of industrial land amounting to 0.7 per cent. of total stock. That is a ridiculous situation.
  We must carefully examine the question of employment in the context of regional policy. What exactly are we aiming at? Are we to develop the whole of our resources and to do something

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  about relatively backward industries which are in decline and which, relatively speaking, have no significant future? On the other hand, are we to consider this matter from the angle that we now have a surge in the labour force because of the large number of children leaving school and the low level of retirements—a distant echo of events as far back as the 1914–18 war?
  I conclude by giving a little commercial for my part of the world. It is time the Government stopped devoting large amounts of money to providing a future for those industries, which perhaps have only a modified future. It is time the Government began to do what we set out as an aim in our manifesto—if I may refer to that sacred document—namely, to start backing some of the winners. I refer, for example, to the pottery industry in my constituency, which has a massive export potential. The Government must not penalise areas because they manage, through their successes, to have a level of only 4 per cent. unemployment. Equally, if the Government are to lay more responsibility on local authorities and are to encourage them to do more to help industrial development, they should provide the money for infrastructure of various kinds.
  I should like to make a special plea to the Government—and this may not please some of my colleagues. I believe that the Government should declassify Cheshire, one of the most prosperous counties in the country. Cheshire finds itself cheek by jowl with Staffordshire, a county of only modest wealth. It is ridiculous that Cheshire, which became an intermediate area only because it was represented by three influential Tory Members of Parliament, should continue to derive this financial assistance.
  Finally, I ask the Government to think in terms of a West Midlands agency to look after the economic future of this important area. Do not let the people with all the muscle from the North-West and North-East get everything they want because their votes will be needed on the devolution measures. Do not forget the areas which have made a massive contribution in the past and which will do so in the future.
  8.17 p.m.
  Mr. Terence Higgins: My right hon. Friend the Leader of the Opposition at he opening of this debate last week said:
  " This year I have a feeling that I think must be shared by many, namely, that whether we look at the background or the remarks in the Gracious Speech, somehow we have been here before and we are going round the same course again."—[Official Report, 3rd November 1977; Vol. 938, c. 20]
  Only a few days earlier I had an almost overwhelming sense of déjà vu when I heard the Chancellor of the Exchequer say in his preamble to the mini-Budget:
  " The Government have made it clear that they aim at a steady and sustained expansion and are determined to avoid the risk of overheating the economy with the damaging consequences for growth, inflation and the balance of payments which we saw four years ago."— [Official Report, 26th October 1977; Vol. 936, c. 1437.]
  I think it is true that those precise words could equally have been used by Lord Barber when he was Chancellor of the Exchequer.
  Mr. Arthur Lewis: They were probably written by the same person.
  Mr. Higgins: That is probably true. In any event, those remarks require careful analysis. Since in many ways we are going round the same course again, it is important that at this stage, in the context of the Gracious Speech, we should consider what lessons should be learned from our experiences in 1970 and 1974. That period has not yet been adequately analysed—except perhaps by the Secretary of State for Trade.
  I felt it necessary to intervene in the speech of the Secretary of State for Industry to point out the difference in record in regard to the performance of the two parties, comparing the period when the Conservatives were in office and a similar period of time when the Labour Party was in power. Under the previous Conservative Government rates of inflation were almost half the figure reached by the Labour Government. We also know that the rate of unemployment since Labour reached office has risen by more than 50 per cent. We certainly know that the difference in our nation's standard of living is enormous. When the

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  Conservatives were in power, our people's standard of living rose faster than ever before, and under Labour it has dropped.
  The right hon. Gentleman the Secretary of State for Industry did not refute any of those figures, and indeed he could not do so, but he referred to the increase in money supply which took place in the period 1970–74 and suggested that that was responsible for the subsequent inflation which has taken place. But the House will remember that in the October the Chancellor said that everything was under control and that inflation would be down to 8·4 per cent. Therefore, let us look at these matters not in partisan terms but in terms of the record of both parties and what we were seeking to achieve.
  I believe that we were seeking the right objective and that it would be the right one now. The objective was a sustained rate of economic growth. We sought initially to take up the slack in the economy, and then, by a gradually increasing rate of demand, to increase output, productivity and investments until we had reached the limits of productive capacity and thereafter to increase demand only in line with productive potential. That was then, and is now, the right objective.
  My right hon. Friend the Member for Leeds, North-East (Sir K. Joseph) stressed the need for profits and a greater return on capital, but there are severe limits on how far one can achieve that without achieving economic growth and increases in markets, demand and profits. Therefore the objective that I have outlined is the right one. However, we must face the fact that there are grave difficulties in achieving it with regard to the effects on the balance of payments and in determining the limit of productive capacity. I wish to concentrate on those points.
  I refer first to the problem of determining the limit of capacity and the extent to which one should extend demand before easing it off in line with increased productive potential. There are a couple of points that need to be made. The previous Government and Treasury Minister did not take the view that the money supply was unimportant. On the contrary, it is of great importance. It was, none the less, true that money supply
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  increased too fast because of structural changes that were taking place. Credit control made it difficult because of arbitrage, and so it was difficult to know what the figures meant and what the money supply was doing. The official Treasury forecasts, which were on a Keynesian model, and the monetary models diverged widely because it was extremely difficult to know what was happening.
  There are always political restraints against the use of the rate of interest and the right course of action would be to isolate the mortgage rate from the rate of interest so as to ensure that the Government would have flexibility. In that context it is important to stress that the dangers of increased public expenditure would be less than the benefits that one would derive from such increased flexibility.
  We did not go off on a dash for growth. We intended to obtain sustained economic growth. If one looks at the figures at the end of 1973, taking into account the substantial cuts that were made in June and December of that year, it is clear that our objective was being achieved and that the rate of increase in demand was coming down into line with the rate of increase in productive potential. The composition of demand was on the right lines while the rate of increase in consumption and public expenditure was coming down. At long last, investment was going up. Both the aggregate and the composition of demand were moving in the right direction. It would be a serious mistake to suppose—and damaging to any Government that might be in power to perpetuate the view—that at the end of 1973 and the beginning of 1974 a stop of the traditional sort was inevitable. That was not the case. The measures that we had taken to correct any overshoot were adequate and economic growth could have been sustained had it not been for the miners' strike and the oil crisis.
  The danger is now that industry generally is still of the view that stop-go is inevitable and that, therefore, it ought not to invest. That is one of the problems that the Chancellor and the next Conservative Government will face if we try to achieve sustainable economic growth.
  It is extremely important to analyse the money supply problem correctly

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  partly because of the counter-inflation policy and partly because of the structural changes in the monetary institutions of this country. It was as a result of those two factors that the excessive increase in money supply was siphoned off into the secondary banking market and the property market. I fully accept that that had serious effects in terms of aggregate demand and that the effect of the increase in the money supply was effectively sterilised. Therefore, although the money supply was excessive, that does not mean that we had aggregate demand in excess at the time we left office. That is a crucial point that needs to be analysed carefully if we are not to fall into the same trap again. It is not necessary that we should do so because many of our difficulties then stemmed from problems that arose from the indicators for reasons that I have already mentioned.
  I turn to the balance of payments. Here we must recognise that the position has changed substantially since we left office, and I wish to comment on events that have occurred within the past few weeks. It is clear that the Government were pushed off their original policy of stabilising the exchange rate. I can well understand the reasons the Government pursued that policy. They wanted to avoid a sudden upsurge in the rate followed by a corresponding fall and a repetition of the crisis of a year ago. That inhibition is understandable. On the other hand, the Government were clearly concerned to avoid an increase in the exchange rate that would make exports less competitive and produce a corresponding increase in unemployment and lack of investment in industry.
  There is a point about which I am not clear and the Government have not said anything on this. Perhaps the Minister would enlighten us tonight whether the Government intend, after the exchange rate has settled, to maintain their policy of seeking a degree of stability in exchange markets. It might be useful for industry to know what the Government have in mind, and that point arises in the context of the amendment.
  We now have a difficult situation. There are still those who think that the exchange rate should be allowed to rise because that would have a beneficial effect on the cost of imports and on the rate of
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  inflation, and because that might be favourable in a pre-election period. However, others feel that the needs of industry, particularly export industries, are paramount, and that the rate should be allowed to fall to make industry more competitive even though domestic costs may rise. Others feel that the rate should be left roughly where it is.
  I am worried that there is a fundamental conflict between what the effect of North sea oil may be on the exchange rate and what the rate ought to be as far as the rest of industry is concerned. I do not believe that we have given sufficient attention to this problem—and I am glad to see that the Secretary of State for Trade is nodding his head —because if we find that the dominant factor is the flow of money across the exchanges, including North Sea oil, the exchange rate will appreciate and that will affect the profitability of our export industries, against a background in which industrial costs are rising twice as fast as those of our competitors. It will no longer be profitable to invest in export industries and to continue exporting. As long as that situation continues, we shall find that the non-oil sector will invest less and will become less productive in world markets. In the long term, that could be very serious.
  I am not suggesting that Ministers should make speeches trying to shake confidence despite the oil surplus and therefore reduce the exchange rate, but we should consider what steps ought to be taken to achieve an appropriate exchange rate, given the basic dilemma that I have outlined.
  I was astonished at the reply I received from the Chief Secretary yesterday to a question I asked about our obligations to the EEC in connection with outward exchange controls. He replied that he would let me have an answer as soon as possible. After the events of the last few weeks, I find it incredible that he does not know the position on this matter.
  Given the dilemma that I have posed, I think that the right course is to liberalise exchange controls. That will help to resolve the dilemma, but we must also consider what to do about oil. We could resolve this problem by leaving it in the North Sea, although that course has nothing else to recommend it. There is a

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  balance to be struck, and the proposition that we should invest the proceeds of North Sea oil abroad is one that perhaps ought not to be positively deterred. We might benefit from creating conditions in which this was not inhibited. We could, perhaps, repay our overseas debts more rapidly. The difficulty is whether we should make provision that would result in increased imports of consumer or capital goods.
  The suggestion made a few weeks ago by Mr. Sam Brittan that shares in North Sea oil should be issued to the public and that the dividends should be distributed much more and that the shares should be negotiable might do more to encourage a property-owning democracy than anything that has been done in the past 50 years. Of course, such a scheme would increase our import bill considerably, as would tax reductions, and that would create problems. However, I hope that the suggestion will receive more serious consideration than it has so far.
  It is important to use available resources to do all we can to encourage investment in British industry. It would be wrong to go on a wild public expenditure spree, because that would create the worst of all worlds.
  In a limited time, I have sought to cover a complex range of issues. I hope that what I have said will be construed constructively and will enable us to manage our economy better in future. There is a danger that we may get into something of a semantic snarl-up over the word "reflation". Some say that reflation and inflation are the same thing. I do not agree. If we are to raise the standard of living in this country and create a climate in which investment and initiative can be encouraged, we must be careful, at the level of economic management, in sorting out the lessons to be learned from past years and the immediate lessons of our experience in the past few weeks.
  8.33 p.m.
  Mr. Frank Tomney: I shall not comment in detail on the speech of the hon. Member for Worthing (Mr. Higgins), but I agree with what he said about the Government's not having outlined a strategic position or strategic policies for the future. The simply reason for this is that they cannot
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  do so The conditions do not exist to enable them to do any such thing.
  It is often said that there is nothing new under the sun, and the advantage of reaching my age is that although one cannot look forward very far, one can look back a long way. Ever since the time of Cripps I have heard arguments similar to those used today. The hon. Member for Worthing made a tactical economic speech, but he was not able to refer to any economic strategy, because he does not have one either.
  There was a time in British economic history when men shaped events. Now. events shape men. The hon. Member for Worthing mentioned two factors that occurred in 1974—the upsurge in Arab oil prices and the miners' strike. Neither was under the control of any politician or statesman. Governments could not have planned to avoid either event. Both confronted the Government of the day with the choice of total surrender or acceptance.
  One could not do much about the oil situation, but it turned the whole economic world topsy-turvy. Those who suffered the greatest penalty had the largest populations to sustain. That is why, when we start talking about strategy, we have to remember what my hon. Friend the Member for St. Marylebone (Mr. Baker) said a few moments ago—that our industry is based on 7 million industrial workers. It is not enough for the job we have to do. We virtually have to restructure the capital goods producing side of British industry. Anyone who has been employed in industry or knows anything about it knows that.
  I shall give one or two instances. There is now and will continue to be fierce international competition. We have passed the immediate post-war phase and have now reached the stage of capital retrenchment with nothing to retrench. except North Sea oil, as distinct from countries such as Romania, East Germany and the Soviet Union. If the Soviet Union decides that it can subsidise its economic effort in Africa to the extent of supplying arms, the Western economy is really in a spin.
  We must look at some of the factors involved. We cannot look at them alone. We have to look at them in the context of Europe. We put a banker in to restructure, refurbish and regenerate the

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  British steel industry, but there is a world slump in steel. Every steel-producing country in the world is over-producing steel, which is a prime commodity in manufacturing industry. A British consortium, which went after a large South American job, was told at what price to buy. It came back with some analyses—I do some cost analyses myself in what spare time I get—having made inquiries all round Europe to find the lowest possible steel price in order to win this contract. Eventually, it went to Mitsubishi and said that it was prepared to take Mitsubishi into the contract if it could obtain it. and the Mitsubishi company reduced the steel price by £18 million on a £300 million contract. That really begins to make one think of what we—not so much the Germans or the French—and, to a large extent, Italy are up against in this country in terms of productive power.
  The United States will now become a fiercer competitor for available capital industry throughout the world than it has been hitherto, because the Americans are suffering from the same problems as we are. In places such Algiers, Tunis, the Oman territories and Saudi Arabia, large international contracts are being contracted for, and Iron Curtain countries are in with national subsidies. They will obtain a contract and then try to buy the plans from the London companies which did not win the contract, and then engage multilingual labour to get the job done. This is going on all over the world.
  We have to restructure the strategy for British capital industry on that basis. That is a fearsome job. I am not as optimistic as some hon. Members who have spoken today. I think that the job is almost beyond us if we look at the pressure of resources on our economy. I have said before and fundamentally believe that this country will be overpopulated by 15 million people by the end of this century. Every innovation and new development of scientific technique in industry adds to that problem, and we cannot do anything about it.
  We cannot generate sufficient capacity to replace what we are losing. Our strategy cannot begin to apply until we can reach agreement where it is most urgently needed, with the trade unions and the investment market. I took the point of the hon. Member for Worthing
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  about investment and profits. It is true. There will not be investment without a reasonable return on capital. The exchange rate can be moved against us at any time by outside pressures—despite all the checks and balances—if people are so determined. There was a revaluation of 5 per cent. or so a week ago. We would have liked to hold the pound steady. I believe that it will rise further, We cannot stop it rising. I believe that those who were moaning about this, especially the CBI, need not have done so. There is still enough slack in productive industry to deal with this, if it is properly geared and organised.
  How do we organise? I probably know as much as anyone in this House about the trade union movement. I have long pondered on these problems. There is the difficulty of dealing with countless unions in wage bargaining procedures. How are we to restructure this? Every trade union leader, no matter how small his union, thinks himself the crown prince of his union. He will not be willing to surrender his job unless he is put in the top echelons of another union. The places are not always available.
  I beg the Minister not to disregard what I am about to say. When there is an amalgamation in industry and executives become redundant, they receive what are known as silver or golden handshakes. If we could get British industry organised on the basis of 20 unions it would be worth the Government's while to involve themselves and compensate the leaders of the unions which go under on the basis of industrial compensation. Without such a front there is little chance for us.
  At British Leyland, as one strike ends another begins. The same is true of Fleet Street. I have been a union official for a long time. I have come to the conclusion that if the country is to recover—and it will take a sustained effort, over 10 years at least, if we are to rebuild industrial jobs and uplift our present base of 7 million industrial workers to at least 10 million—we shall have to adopt policies of that nature.
  As I go about this new city, what do I find? Endless numbers of people on the streets. They are in the professions, law or medicine or whatever. All are gaffers. Very few are productive workers. Every one of those people is living on

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  the productive efforts of others. This is what gives rise to wage claims. Everything rests on the industrial workers. This is true of local government. I did not object to the cuts there. I took an objective view, although at Hammersmith we employed two town clerks at one time because we had not the heart to dismiss one of them. I could multiply that example 1,000 times. What is at stake is the restructuring of our whole financial and industrial life. The taxman can always take care of excess profits. That is his job.
  I believe that unemployment will rise to 2 million. If the figures goes beyond that, we shall not be able to control the situation in this country. It will be impossible to control it. Therefore, whatever we do, we had better form a strategic plan as quickly as possible. That must be done in conjunction with the interests of like nations, if possible.
  That brings me to my final point. I was dismayed when we offered the Soviet Union low-interest credit, at 5¼per cent. As a consequence of that, we now have to decide where to put the major effort of Great Britain's capital industry. There is really only one place where we can put it—China. There is nothing for us in India or Africa at present, but there will be in China. That is where the economic strategy plan should be pointed.
  We must consider the kind of things that we are up against, including West German industry. Volkswagen has set up a new plant in Philadelphia to manufacture 200,000 cars per annum, and we are thinking of restructuring our car industry to compete with that. We must have a long look at what we are to do at British Leyland. We must get some firm guarantees from the union people and shop stewards, and the fewer unions with which we have to deal the better it will be for the workpeople of British Leyland.
  That is the kind of strategic plan that I have in mind when I say that we have not even started to tackle the job that we have to tackle.
  8.47 p.m.
  Mr. Tim Renton: What a dreary fifth-rate speech we had this afternoon from the Secretary of State for Industry. As the hon. Member for Ham-
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  mersmith, North (Mr. Tomney) said, the Secretary of State certainly produced no new ideas about industrial strategy in this country in the years ahead. In view of the failure of Socialist industrial strategies in recent years, perhaps we should be grateful for that. However, at a moment when, thanks to the International Monetary Fund and the weakness of the dollar, we have a relatively strong currency, and in a year in which public expenditure is for once below expectations, and when thanks to North Sea oil we have prospects for a continuing balance of payments surplus, it is opportune to state some central needs for our economy in the years ahead.
  I judge that the first need is to encourage sustained growth of demand for British products both at home and abroad. How is that to be done? The second need is how to create that expansion of confidence from which an increase in industrial investment in Britain will emerge but which is not emerging at present. For both of these, I believe that a reduction in personal taxation is the key element.
  Thirdly, how do we achieve that reform in the wage bargaining process that events of this week and of last week must make seem essential? We cannot go on with the present process, in which major unions in private industry and in the public sector leapfrog each other in their wage claims. We must seek to reach a state in which major wage bargaining is done and in which settlements are reached with the major powers in industry on the same day in the year.
  Fourthly—a matter that many hon. Members have touched upon—how can we increase productivity? Fifthly, how do we maintain, as a trading nation, our commitment to free trade at a time when gross national product is growing at a much slower rate throughout the world, and when we are seeing increasing competition in manufactured products from many developing nations? How do we avoid the so-called Dutch disease in that, as a result of North Sea oil, we could fall into the same trap as the Dutch in having a relatively strong currency, a high rate of inflation at home and yet no increase in industrial investment? These are the things about which I should like to have heard more from the Secretary of State for Industry. We heard nothing about them.

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  The right hon. Gentleman told us, in relation to the crises in British Leyland and the British Steel Corporation, that he welcomed the commitment in the Gracious Speech to increased industrial democracy in the nationalised industries. So do I. But I assure him—I am sure that he knows it well—that having Bill Sirs or any other good trade union leader as a non-executive director of the board of the British Steel Corporation will not make a pennyworth of difference to the crisis which British steel faces.
  I remember the debate in July when the House passed the order to increase the borrowing limit of the BSC from £3 billion to £4 billion. I spoke then of the Corporation drifting to disaster. I was reprimanded by the Minister of State for Industry for using those words. Of course I was proved wrong. It was not drifting to disaster—it was, sadly, plunging to disaster, speeded on its way by the world recession in steel products.
  As my hon. Friend the Member for Arundel (Mr. Marshall) and the hon. Member for Rotherham (Mr. Crowther) have said, there is no easy solution to the problem which centres round too much capacity, too many people involved in the industry, and too much debt. The BSC, to my eyes, is a classic example of what happens to a nationalised industry when it is in competition with other nationalised or private industries throughout the world, where it is not in a monopoly position and when Governments of all hues dare not take the really difficult political decisions.
  I hope that now the Government, with the BSC management, will grasp the nettle and close down Shotton, Shelton and all the other uneconomic plants that have been kept open as a result of the Beswick review, that they will persuade one union to emerge to speak with strength for the whole of the industry rather than the existing 18 unions within the Corporation, that they will massively help retraining and mobility in order to assist workers, in, for example, North Wales to find other jobs, and that at the same time they will go ahead with the investment in major new plants, because it is only through that investment that, in the end, we may have a modern steel industry.
  The Secretary of State for Trade must explain how the Corporation, if it is to go ahead with its commitment, for
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  example, to the Port Talbot expansion, can keep within its cash limit of £950 million for this year. From the figures in the Financial Statement and Budget Report of last March, it is clear that at that time the BSC was planning to spend £900 million on its additions to assets and other capital requirements and was expecting a loss of only £50 million, hence the borrowing limit of £950 million. Now we read that its loss is expected to be not £50 million but between £500 million and £600 million. If that is so, and the capital requirements programme is to be maintained, the cash limit will have to be increased to about £1,300 million.
  One of the few other points of detail that the Secretary of State for Industry talked about was the addition of regional boards to the National Enterprise Board. I was interested in the comments of the hon. Member for Stoke-on-Trent, Central (Mr. Cant) when he cast some doubt on the efficacy of regional aids. I agree with him. We are spending about £500 million a year on regional policies, and yet there is very little evidence that this public money has gone any way towards diminishing regional disparities in this country.
  There is nothing unusual about that. Studies in Canada and Italy, where they have great regional problems, show the same, namely, that, in general, no matter how much money the Government disburse, it does not level out the differences between regions because there are so many other factors—notably human ones—that are not swayed by the public purse.
  I wonder, therefore, why the Secretary of State now suddenly attaches such importance, not only to regional policies and regional grants, but to creating these little Nebbies, these regional boards of the National Enterprise Board. As the hon. Member for Stoke-on-Trent, Central said, there is only one reason for it. It is a carrot to persuade Labour MPs from the North-West and North-East to vote for the devolution Bill for Scotland.
  Devolution is an irrelevancy. The only argument that I can see in its favour is that we shall have to listen somewhat less to the hon. Member for Moray and Nairn (Mrs. Ewing) if there is a Scottish Assembly. I am sorry that the hon. Lady is not here to answer that,

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  but that seems to be a specific advantage. There is no other clear advantage. Devolution is not relevant to the needs of Scotland. What Scotland needs is a housing policy, an employment policy and an industrial policy. There is no sign of any of those from the Government.
  What the Government offer the Scots is not jobs but an Assembly, saying "We do not know how you will create new jobs to take the place of the shipbuilders on the Clyde who will be phased out, or the steel workers who will lose their jobs, or the fact that Hunterston, the big new steelworks in Scotland, is not to be built ". The Government have no policy on those matters, but we have the promise of an Assembly. The Government are saying "Let the Assembly meet, and let it argue these problems out ". All that this Assembly will do will be to put Edinburgh in constant conflict with London. I can see no benefit from it.
  It is sad that at a time when there is promise ahead for this country, when North Sea oil can be of benefit to us, the Government are not coming forward with any ideas about how this new-found financial strength can be used. Instead, we have in the Queen's Speech a reference to a lasting improvement in industrial performance. What we do not know, and what we have not heard from the Secretary of State this afternoon, is how that lasting improvement is to take place. Instead, we see that the first item in the Queen's Speech is legislation on devolution.
  That is simple humbuggery. It is political chicanery on the part of the Government to ensure that they do not lose these vital Scottish seats, that they are not caught with their pants down north of the border when the election comes. It is for that reason that tonight I shall vote for the Opposition amendment.
  The Under-Secretary of State for Trade (Mr. Clinton Davis): Surprise, surprise.
  Mr. Renton: The hon. Gentleman says "Surprise, surprise ", but I am a man of great independence in these things. It is a matter of great regret to me that, at a time when North Sea oil holds out promise for us, the Secretary of State did
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  not seek to build on the words in the Gracious Speech about seeking to ensure
  " a lasting improvement in our industrial performance ".
  We should all like to see that lasting improvement come, but it will not come from commitments entered into by the Government to establish regional boards of the National Enterprise Board simply to persuade Labour Members from the North-West and the North-East that they should now support the devolution Bills. That is political chicanery of the worst possible order, and the Secretary of State for Industry, in committing himself to that, damns the credibility of his Government.
  9 p.m.
  Mr. John Nott: Earlier this afternoon my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph) concentrated his remarks on the competitiveness of British industry, our productivity, and what might generally be called our problem industries.
  The Secretary of State's reply, particularly on steel, was cursory, if not totally obscure. On steel my hon. Friend the Member for Arundel (Mr. Marshall) made an outstanding speech, as I think many hon. Members will agree, and I am sorry that the Secretary of State was not here to hear it.
  My hon. Friend was followed later in the debate by the hon. Member for Rotherham (Mr. Crowther), who said that he did not believe that the desperate crisis facing the steel industry, to which my hon. Friend the Member for Mid-Sussex (Mr. Renton) also referred, was fully appreciated by the Government. The hon. Member for Rotherham represents an area which has one of the most profitable divisions in the British Steel Corporation. I believe that the mill there is known as the Thryver bar mill, and is without exception the very best that we have. The hon. Gentleman pleaded that we should devote more money to the record breakers and suggested—I do not know whether this is accurate—that the Corporation is passing some of the less profitable work to the most efficient mills and sending some of the more profitable work to the inefficient mills. We were disappointed that we heard virtually nothing about steel from the Secretary of State.

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  Since the opportunity of commenting on trade affairs rarely arises in the House, and as the Secretary of State for Trade is to wind up the debate, I wish to make a few comments on the wider issues of the world economy and the prospects for trade, because for all the difficulties that we have in our steel, coal and shipbuilding industries, arid in British Leyland, it is the world economy that is likely to have an equally telling impact on prospects here, not least through the competition that our industries will face at home and overseas.
  The industrial strategy about which The Secretary of State waxed so eloquent was mentioned only once in the whole debate, and that was by the hon. Member for Hammersmith (Mr. Tomney). I do not think that any hon. Member knows what the industrial strategy is. May we one day have a debate? Clearly nobody on the Conservative Benches knows what the industrial strategy is all about. At one stage I was under the impression that it had something to do with backing success, but, as understand it,£500 million has either been committed to British Leyland or is promised to Chrysler. Neither of those firms, whatever might be said about their future, can he described as successful industries at present.
  On the trade issue, since the Downing Street Summit and its relatively optimistic tone I do not think that anything has arisen to give us any comfort. Inflation in the OECD countries has shown very little general improvement over 1976. Resistance to wage restraint is gaining force, not just in Britain, but in many other Western countries.
  Growth is likely to be in the 2 per cent. to 4 per cent. range, and that is well below the rate of 5 per cent. expansion which OECD itself considers to be necessary to reduce unemployment. Only the other day, the London Business School pointed out that industrial production in the OECD countries was running at 9 per cent. in 1976 and 4·8 per cent. in 1977, and it estimated that it would be 2·6 per cent. in 1978. Industrial production seems to be going down towards near-stagnation in the OECD. Investment, even where demand arises, does not seem to be responding to higher demand.
  The cause for that malaise almost certainly lies in the very large fall in the
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  rate of return on capital when measured after tax and when adjusted for inflation. It is happening not just in this country but in all OECD countries. This is compounded by the dramatic change in relative prices caused by the oil crisis.
  The conclusion has to be that, even if the Chancellor of the Exchequer pursues optimum policies—and we know the likelihood of that—the outlook for inflation, growth and investment is poor in the OECD countries generally and certainly not as good as is sometimes indicated by Government spokesmen.
  What is worse, the prospects for growing world protectionism are substantial. There is no doubt that tariffs and non-tariff barriers appear to be going up rapidly against our exports all over the world.
  Given the likely gain to our overseas payments position from North Sea oil—to which my hon. Friend the Member for Worthing (Mr. Higgins) referred—which amounts to between £4 billion and £6 billion on our current balance, it is probable that the exchange rate will be acting to reduce further still the profitability of British industry both from increased competition in the domestic market from imports and also more competitive prices and protectionism overseas.
  This gives ground for no small cause for concern, given the figures which my right hon. Friend the Member for Leeds, North-East mentioned that we have now a rate of return in British industry, when adjusted for inflation and depreciation at replacement cost, of about 2·5 per cent. In many industries the rate of return, adjusted for inflation, is nil.
  My hon. Friend the Member for Worthing talked about exchange rate policy. There is a range of options open to the Government, but virtually the only one which is not open to them is the one that they took. There is no way in which the parity of sterling can be held at a level that denies the existence of North Sea oil, simply because the capital inflows would wreak havoc with the money supply and domestic inflation. Anyhow, our allies would not allow us to build up massive reserves of the kind for which the Secretary of State for Trade is constantly criticising the Japanese.

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  Should sterling be held at a level which enables our payments to balance by the repatriation of foreign funds and the reduced competitiveness of our industry, or should we allow sterling to float cleanly with our payments balancing mainly by the investment overseas of our own domestic funds? That was the point made by my hon. Friend the Member for Worthing. This would tend to reduce the parity to a lower level than it would otherwise be and would ensure that our manufacturing industries were kept more competitive.
  I ask the proponents of exchange controls and greater public investment in our industry—a policy promoted by many in the Labour Party—to think through the proposition. First, the Exchequer proceeds of North Sea oil will not be very large. They will be between £2 billion and £3 billion only. Even if the Whitehall bureaucracy were able to pick winners—we have seen its attempts at that one has only to look at the oil platform saga, which was a perfect example of Whitehall picking winners—it is not the winners who will have any problem in finding capital in the market, as the Wilson Committee will surely say; it is the losers.
  If confidence is to return—as I believe it will in due course, when the Labour Government have departed the scene—there will be very real problems when bank advances start to move forward again, because private industry—and the Government want private industry to invest—will be squeezed out if we have a borrowing requirement of £8 billion.
  The Exchequer proceeds of North Sea oil should be deployed in reducing the borrowing requirement so that interest rates for the private sector generally would be lower than they would otherwise be. That was, I think, much of the burden of what my hon. Friend the Member for Worthing was saying.
  I do not believe that capital outflows would be very great if we reduced exchange controls. Many major firms are already investing overseas, but smaller companies would be encouraged to develop overseas markets. Those in the trade union movement who are concerned about the loss of jobs in the United Kingdom
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  were we to lower exchange controls—and I can understand how they arrive at that view—should look at the example of American industry, which has benefited dramatically from overseas investments. British subsidiaries operating overseas in faster growing markets than the United Kingdom tend to be captive customers for British exports, and all the lessons of American investment overseas show that investment overseas and exports go hand in hand. I also believe in the abandonment of exchange controls on portfolio investment, but that is a wider issue, and I leave it there.
  I do not think that the Government have any option about the floating of sterling. My own belief—I hope I am wrong—is that we are moving into another period of monetary instability in the world, caused by the American demand for oil and to some extent by the increasing difficulty of the less-developed countries in meeting their debt obligations. The former is the major influence, but the combination of the two is likely to lead to the sort of instability which occurred in 1972 and led up to the Smithsonian settlement.
  There are now$350 billion held overseas, according to the Bank of International Settlements. This is three times the amount of overseas dollars that were swanning around in the world in 1972, and there are a further$100 billion held in American Treasury bills. I believe that there is every possibility of a resurrection of monetary instability, and then the Government will have no option. The exchange rate will have to float freely, since it will be the only way of accommodating capital movements. Stability for British exporters and British industry will be best maintained by a cleanly floating rate rather than one manipulated by the Bank of England.
  The Secretary of State might well agree with the point that I wish to make about protectionism. It is that tariffs and quotas are not the cause of protectionism but a symptom of it, in spite of all the invective about the evils of tariff protection and the desirability of consumer choice within domestic markets, and the need to provide the stimulus of competition. Some of us are even told by our wives that they want to buy cheap Eastern skirts that fall to pieces in three weeks, rather than good British textiles. We

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  hear all these arguments against tariffs and quotas, but none of them actually goes to the root of the problem.
  Those who constructed the post-war world order at Bretton Woods always realised that international monetary affairs, international investment and trade were all one, and could not be separated. If one leg is knocked out of this three-legged stood, as has happened in the international monetary field, in the end the whole structure will collapse and crumble.
  The crucial issue that faces the world today is to recognise that it is not bilateral trade agreements—of which the Multi-Fibre Arrangement is a very good example— that are leading to protectionism in the world. What we have to look at is the massive surpluses on the part of the surplus countries, and the instability in our international monetary system.
  In my view the principle causes of protectionism are, first, an inability to create a new, sensible international monetary order—following its collapse in 1972 —and, second, the whole proliferation of State subsidies, political pricing, discriminatory taxation and the regulation of internal markets which is practised in every country but, in particular, by COMECON.
  I believe that we should have taken a much more vigorous line on the Tokyo round. The Americans should have taken a more vigorous line on the Tokyo round. The Tokyo round however would only be of transitory significance if the most powerful economic nations persistently refuse, or are unable, to impose upon themselves a sounder and more disciplined international monetary order. That means either cleanly floating or fixed parities with agreement before they are changed.
  I leave that aside. No doubt the House will be glad to hear that, but we seldom have the opportunity of debating these matters in the House.
  I now come on more closely to what has arisen in the debate, which has been a bit of a knockabout, but not too much so. It is understandable that Parliament should always be concentrating on our problem industries and that we should always be looking inward on our own domestic problems. We have had such
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  a debate on steel today, but the fact is that we also have many industries, partly but not wholly in the commercial sector, which are equipped to benefit from a regime of real freedom and greater convertability on the exchange rate of the kind which my hon. Friends are recommending.
  In the manufacturing sector, food manufacturers and the chemical, soap and detergents, electrical, mechanical engineering and aerospace industries have all increased their exports as a proportion of total production. Most of them have pushed down import penetration levels, although our average share of world markets for manufactured goods has diminished and import penetration has increased.
  Of course, there are many of our manufacturing industries that have made substantial progress and that would benefit from a greater regime of freedom with regard to the exchange rate and less bureaucracy in the manner in which they operate overseas.
  Mr. Dan Jones: Does not the hon. Gentleman have some sympathy with the textile industry, which has suffered so much at the expense of imports?
  Mr. Nott: I happen to believe—this is a controversial view—that in a year or two the British textile industry will show itself to be among the most competitive in the world. The fact is that Courtaulds is the world's largest textile exporter at present. The textile industry has been through an extremely difficult period, but my belief is that within a year or two it will emerge as one of our most profitable and successful industries.
  The most prominent successes in our country have been the service industries. That cannot be denied. I am thinking of banking, insurance, shipping, professional services and agriculture. I wish to say a few words about agriculture, since the subject was raised earlier. All the facts suggest that if these industries were given greater freedom to compete in the world they have the capacity, the talent and the will to do so. The fact is that the gross exports of our service industries today—shipping is one—now amount to £14,000 million against gross exports of goods of £25,000 million. There is not that much difference with regard to our

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  balance of payments. The record of these industries is outstanding.
  My hon. Friend the Member for St. Marylebone (Mr. Baker) rightly said that it is no use imagining that the service industries will take up all the slack provided by greater productivity in manufacturing industry. I agree with him. I do not think anyone disputes that fact. As my hon. Friend the Member for Worcestershire, South (Mr. Spicer) said, however, in a very good speech, we always seem to be interfering in manufacturing industry and very often that intervention acts contrary to the interests of the service industries, which have had a magnificent record and have done as well in the world markets as manufacturing industry, on aggregate, has done badly. That is an area to which we should pay more attention.
  The debate has touched on the question of agriculture, and that gives me an introduction to a number of points that I wish to make. I had not intended originally to refer to the subject, but since the hon. Member for Birmingham, Selly Oak (Mr. Litterick) mentioned it I include it in my speech with pleasure.
  At a fringe meeting at the Labour Party conference the Under-Secretary of State for the Environment, according to a report in the Farmers Guardian—I do not know whether the Prime Minister takes that paper; I take the Farmer's Weekly, but this is a very good newspaper—said:
  " I don't think you can trust individual farmers to maintain the long-term fertility of the land. "
  So this is what social democracy is all about. If farmers cannot be relied upon by the Labour Party and social democrats to maintain the long-term fertility of the land, who will do it? Will it be civil servants in bowler hats? The Prime Minister has more experience of shovelling muck on his farm than has any civil servant in Whitehall. That, then, was the authentic voice of the social democrats, and that is why, with a Labour Government, we shall never have an efficient economy in this country.
  We then had an argument about farm workers' wages. It is interesting that the Chancellor and the Cabinet have been busy until last week holding down the price of sterling to enable our unsuccess-
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  ful manufacturing industries to compete in world markets while the same Cabinet is maintaining the green pound at an artificially high level so that the German and French farmers are heavily subsidised to compete with our most efficient industry. That is a perfect example of Labour Party policy.
  The Secretary of State for Industry said that farmers received interest-free loans. Will he tell us what they are? He also said that farmers were heavily subsidised. I can tell him, in his total ignorance of this matter, one of which I have a limited part-time experience, that the farmers would be only too delighted if the Government would abolish every food subsidy and if they could then receive the same prices as their counterparts in Germany and France.
  Why are farm workers' wages low? It is because the other costs to British farmers are the same as those faced by the Germans and the French, but the British prices are up to 30 per cent. lower. If that is the case—and it is the Government's responsibility—how are we to pay farm workers more money?
  Take the question of the nationalisation of the banks and insurance companies. The clearing banks are too centralised and are becoming bureaucratic. They may already have the feeling of creeping nationalisation about them. But how are we to make them less centralised and give more discretion to local bank managers, which is what is needed? Do we nationalise them? The Prime Minister does not endeavour to argue this point; he simply says that the nationalisation of banks and insurance would be an electoral albatross. He does not attempt to argue that it would be a disaster for the country, because he knows that three-quarters of his party are in favour of it.
  I refer to the admirable speech of my right hon. Friend the Member for Newham, North-East (Mr. Prentice), who had some very interesting things to say about the little book setting out the Labour programme. In that book one sees every kind of nationalisation, not just in a few industries.
  If the truth be known the Prime Minister is engaged in a tewt. The term may not be familiar to the teachers, university lecturers and polytechnic instructors on

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  the other side of the House, one of whom shortly will follow me in this debate, but to military men—and we have a few of them on this side of the House—the word "tewt" is familiar. A tewt is not a twit; a twit is a Liberal who prefers his parliamentary salary to his principles. A "tewt" is a tactical exercise without troops, and that is much practised these days by the Chiefs of Staff.
  We owe it to the Leader of the Opposition for reminding us that it has taken 50 years of Socialism to replace the Board of the Admiralty with the Board of the Inland Revenue as the most powerful institution in modem Britain.
  The symbol that this Government should hold aloft is that of tax collector holding high the hammer and sickle. That is what Socialism, as we have it, is all about. This symbol should be captioned by the phrase "Back to work with Labour ".
  If we talk about troops, the Prime Minister certainly has them, in a political sense. I do not think that the Foreign Secretary has many—he arrived by pat-patronage, and will depart hastily into oblivion. Some politicians have troops and some do not. Those who do not, have to demonstrate outside the gates of Grunwick in order to gather troops from the working classes. Those without troops go to Grunwick, and those who have them do not need to do so.
  The Prime Minister has troops, and he has been engaged in a lifetime of manoeuvres. Where have they gone, all his troops? The troops have been sent on leave. When the Government want to be popular rather than politically committed they bring the Chancellor of the Duchy of Lancaster out of his cupboard in Eaton Square, dust him down and stand him on parade, where, in a mechanical fashion, he announces as Government policy the amendments tabled by Conservatives to capital transfer tax in 1974. This is Government policy for small businesses. Yet we tabled 40 amendments to the 1974 Finance Bill on capital transfer tax, so why do the Government not publish these as their policy for small businesses?
  If the Leader of the Liberal Party believes that he is holding back the hordes of advancing Socialism he misunderstands his role. To the rest of us
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  he is simply the caretaker engaged on a temporary basis by the Prime Minister to keep the barracks clean until the drunken rabble arrive back from their leave to plunder our liberty and prosperity—and every liberal principle—should they win the next election. That is how we see it.
  The Prime Minister, skilled in manoeuvres as he is, will have to increase and speed up the repayment of money taken out of the pockets of the British people, speed up the transfer from productive employment to temporary employment which goes with it, and cut inflation much faster from its peak of 25 per cent., although these are all heralded as triumphs of Socialism.
  When I watched television last night I felt that the British people well knew that Government Ministers and supporters were outside the gates of Grunwick with the rabble. If Labour wants to win the next election, they should do something about those Ministers and supporters in this House who are joining with that lot there.
  I refer finally—in the 30 seconds or so that are at my disposal—to our amendment. It was drafted by my right hon. Friend the Member for Leeds, North-East and by the Chief Whip. Therefore, I can recommend it wholeheartedly to the House. Whatever it may purport to say, I think that our amendment makes one thing absolutely clear. After several months away from this Chamber, whatever the amendment may say, we are voting tonight for the first time for a considerable period—and voting to demonstrate that we have no confidence in Her Majesty's Government. It is on that basis that I ask my right hon. and hon. Friends to join me in the Division Lobby.
  9.31 p.m.
  The Secretary of State for Trade (Mr. Edmund Dell): No doubt the final few minutes of the speech of the hon. Member for St. Ives (Mr. Nott) sought to conceal, but failed to conceal, the total lack of Opposition policy on the subject matter which they tabled for debate.
  The hon. Gentleman ended by saying that the amendment was tabled to show that the Opposition had no confidence in the Government. It might have been tabled to enable the Opposition to reveal

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  their policy on industrial and commercial matters. The fact is that they have failed in that respect. I shall come shortly to the attempt made by the right hon. Member for Leeds, North-East (Sir K. Joseph) to state the Opposition's policy on this subject, but certainly the hon. Member for St. Ives made no contribution to that end. I shall deal with his remarks about trade—and I agree with him that we have too few opportunities in this House to discuss that subject.
  The right hon. Member for Leeds, North-East began by saying that there was a need to find some common ground on industrial and commercial policy, and indeed there is. Complaint has been made time and again about changes in policy by one Government after another involving the repeal of legislation, the introduction of new methods within a given time scale, with not enough industrial development being devoted to building up this nation's productivity. That complaint has been made on many occasions, but on this occasion the right hon. Gentleman said that he was seeking common ground. However, his speech today revealed no attempt to establish such common ground.
  Undoubtedly we can agree with certain things said by the right hon. Gentleman. We tried to establish some common ground by building on some of the things which the Conservative Government did when they were in power—things which they now perhaps regret, such as the Industry Act 1972. We agree with the right hon. Gentleman on the need for higher profitability and on the need for incentives, innovation, lower direct taxation and competitiveness. [HON. MEMBERS: "Oh."] Yes, we agree with those things. But the question is whether that constitutes a policy for this country's industrial and commercial affairs. Is it credible as a policy?
  The right hon. Gentleman admits that productivity in this country has lagged compared with our major competitors for 100 years—going back to a period when there was no question of any lack of profitability or of incentive. The right hon. Gentleman made that kind of speech when he was trade spokesman in the late 1960s, but when he was faced with the responsibilities of office from 1972 to 1974 he departed entirely from the philo-
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  sophy which he argued in the House today and which he has dealt with on many occasions outside the House.
  We have never forgotten the way in which the Tory Government argued that philosophy during the late 1960s and then came into office and, faced with the problems that any Government might face at a time of crisis, reversed every word of the industrial policy on which they had obtained office. We remember how investment grants went out and regional development grants came in, how the Industrial Relations Corporation was abolished and the Industrial Development Unit established.
  We need some common ground on industrial and commercial policy, but we shall not find it on the basis of the oversimplification which the right hon. Member for Leeds, North-East provided by way of a Conservative industrial policy. The right hon. Gentleman rebuked us this afternoon, following the statement of the Secretary of State for the Environment, saying that we should not throw money at problems, but he should be the last person to tell us not to throw money at problems. I remember the way he came to the House time and again to throw money at one problem after another within his responsibility.
  It has been barely referred to during the debate, but the amendment refers to the standard of living in this country. It makes the extraordinary claim that the Government's policies will not maintain, let alone improve, the standards of living and social services in this country. Accepting, as the House must if it has any regard to the realities of the industrial policy and the emptiness of the right hon. Gentleman's statements, absolutely nothing has been provided by the Opposition today by way of explanation of what they would do to maintain or improve the standard of living.
  Are the Opposition proposing a reflation such as that which they engaged in between 1972 and 1974? Could they do more in government to promote world trade expansion? The hon. Member for St. Ives referred to the importance of demand from overseas. Would the Opposition really be in a position to do more than we have done to help world trade expansion and the level of industrial profits? Could they reverse rapidly

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  the secular decline in industrial profits? The right hon. Member for Leeds, North-East has made a great deal of this point, but little was done when the Tory Party was in government in 1970 to 1974 to reverse the secular decline in the rate of industrial profits in this country, and the Conservative Government did not face the sort of economic depression that it has been the fate of this Government to confront throughout our period of office.
  We have assisted industrial profits. For example, we introduced the stock appreciation scheme which has had the effect over the past three years of reducing taxes that would otherwise have been paid by companies by about £3 billion over three years. We have reduced interest rates. Interest rates are now lower than when the Opposition left office. We have continued the system of depreciation allowances, and the incomes and pay policy that has operated during the two previous pay rounds has given industry greater certainty about pricing policy than it could otherwise have had.
  We now hope that there will be an increase in the rate of industrial profits. In any case, it will be an increase assisted by the fact that we expect to experience in 1978, for once, a rather faster rate of economic growth than that which most of our European competitors will probably enjoy in that year.
  Industrial profits are not the whole story. There is no lack of finance for investment and no crowding out. Investment will be influenced by the expectation of sustained and profitable demand. Likely profitability on new investment, rather than existing rates of profits, will lead to investment.
  A number of hon. Members have asked what assistance North Sea oil will provide for industrial expansion. Its main assistance will come from the provision of a buffer for our balance of payments to enable us to experience, for once, a steady rate of expansion that will encourage investment and profitability and will lead to an increase in our standard of life.
  No one on this side of the House can deny that there has been a fall in the standard of life in this country. This has been due to the oil price increases which were more difficult for us to deal with because of the situation that existed when we took office—with a balance of pay
  614
  ments deficit, rising inflation and the money supply problems to which the hon. Member for Worthing (Mr. Higgins) referred.
  The standard of living fell in 1976 and the beginning of 1977. It has now stabilised, and I believe that it should begin to rise.
  Mr. Higgins: Does not the right hon. Gentleman accept that the fall that has taken place has been much larger than it would have been if we had not experienced the wage explosion under the present Leader of the House which created such diabolical inflation?
  Mr. Dell: Inflation was rising very fast when we took office. I do not believe that cuts in the standard of living have been greater because of the reasons that the hon. Gentleman suggests. The cut in the standard of living has ceased; indeed, the standard of living is probably once again beginning to rise.
  Mr. Peter Tapsell: Can the right hon. Gentleman explain how it is that he is talking about a cut in the standard of living when the Prime Minister assured us just the other day—and again today—that the average family had not suffered any cut in its standard of living?
  Mr. Dell: The hon. Gentleman should read exactly what the Prime Minister said.
  We should now be able to increase the standard of living of the people of this country, first, because of the economic growth that we expect to achieve—and I can give a number of reasons why that should be possible. The first is North Sea oil and the assistance that it will give to our balance of payments and the additional resources that it will provide. However, those additional resources are not adequate in themselves to provide anything but a relatively small increase in our standard of living. The major increase must come from industrial production and productivity.
  We must not waste these resources. I was surprised to hear the right hon. Member for Leeds, North-East accuse us of wasting North Sea gas and the resources that accrued to this country from that gas. They were wasted under the last Conservative Government. By the time they came into power, 88 per cent. of

  615
  households were supplied with North Sea gas. Yet we still had a crippling balance of payments deficit before the oil crisis. The Conservative Government wasted the North Sea gas resources.
  The second reason why we can now expect an increase in our standard of living is the expansion of our overseas earnings from the export of goods and services. The volume of our exports is and has been increasing rapidly. The hon. Member for St. Ives said that we have many excellent industries in this country. Indeed, these excellent industries are contributing to a substantial expansion in the volume of our exports—about 9½ per cent. in the volume of exports in the first nine months of this year compared with the same period in 1976.
  Mrs. Winifred Ewing: Is the right hon. Gentleman satisfied with his Government's policy in regard to the speedy extraction of oil and the way in which they have dealt with the oil companies, which is in direct contrast with the skilful, stricter way in which the Norwegian Government have dealt with the oil companies and are having a much slower rate of extraction, for the benefit of all the people living in Norway?
  Mr. Dell: Yes, I am satisfied with the way that the Government are dealing with the exploitation of the oil reserves Our volume of world trade in manufactured goods has increased during 1977. We have moved into current account surplus. Our gross income from invisibles is substantially up. In banking, consultancy and tourism, evidently we have provided the right environment to encourage an expansion in the volume of our exports and in our invisible income. This, again, is a reason why we can now expect an increase in the standard of living in this country.
  The hon. Member for St. Ives said that overseas investment provides a captive market for British goods. I wish that were always true. Unfortunately, it sometimes provides an alternative source of supply for British customers overseas. Therefore, it is not the unrelieved benefit that he suggests.
  I wish to turn now to the international dimension, just as the hon. Member for St. Ives turned to it. This is especially relevant to this debate, because of the
  616
  contribution that international trade can make to demand in this country. We have tried to encourage co-operation in dealing with world economic problems. We have tried to avoid a contraction in trade through protectionism. That is why we agreed with the OECD trade pledge. That is why we attempted at summit meetings to agree targets for economic expansion which countries would adopt and adhere to collaboratively. In this way we hope to encourage demand at home and abroad, which would take the world and this country out of the recession.
  It has to be accepted that the cooperation that has been experienced is a good deal less than perfect, which is perhaps inevitable when all nations are in difficulties, as they are at the moment. We have tried to keep trade channels open, although we have provided protection to specific industries to meet problems created by imports, as have all nations faced with the sort of problems that we have been facing during the last few years.
  I must say to the right hon. Member for Leeds, North-East that in present circumstances a purist attitude to international trade would lead to a collapse of the whole trading system. The right hon. Gentleman said that we are backing losers and protecting jobs that will have to go. Indeed, he compares us in this respect with certain market economies with which he drew favourable comparisons as against ourselves. Those market economies of which the right hon. Gentle- man spoke are doing exactly the same as us. They are protecting jobs in view of the great difficulties which they face in their countries. The hon. Member for St. Ives said something interesting which confirms—this is evidently true in his judgment as well—that Governments are as bad at selecting yesterday's industries as they are at selecting tomorrow's industries.
  I was interested to hear what the hon. Member for St. Ives said about the textile industry. On the principles of the right hon. Member for Leeds, North-East, it seems that we should abandon protection of the textile industry, abandon what we are doing for the steel industry and abandon the restraint agreements we have with Japan. On his argument we should leave it to the open market to determine

  617
  which jobs must go. I ask the Opposition—after all, we have had repeated encouragement from many Conservative Members to take a hard line with the Multi-Fibre Arrangement—do they disapprove of the hard line we are taking? Are they willing to open markets in the course of the multilateral trade negotiations? In present circumstances, certain industries will be preserved only by our interfering with the market.
  Mr. Dan Jones: Will my right hon. Friend give me one second to ask him a question about textiles? Is it a fact, in relation to that important industry which has been almost desolated in North-East Lancashire, that we are determined to follow burden-sharing to its logical conclusion and to the benefit of Lancashire?
  Mr. Dell: There is within the current Multi-Fibre Arrangement a burden-sharing system which will be continued in principle. The details may change within the new arrangements which we hope now to make. We hope to do more than that and to provide our textile industry with a rather more satisfactory level of protection than it has had until now.
  My right hon. Friend the Member for Dartford (Mr. Irving) referred to our membership of the EEC. We have been using that membership constructively in trade policy terms to ensure success for our industries in areas where we are currently under attack. Our membership has provided us with the ability to achieve a better balance in the formulation of trade policies as against the United States, certainly better than any individual country of the Community could achieve.
  Because of the co-ordinated policies of the Community, we have been able to take, within the Multi-Fibre Arrangement, a strong lire, of which my hon. Friend the Member for Burnley (Mr. Jones) evidently approves. We have helped the European Community to agree a mandate which provides for a tough position against disruptive low-cost textile imports. We have taken this line because we have found that the present restraints under the agreement, as it currently operates, have not been adequate during the time of recession.
  This tough line in the bilateral negotiations now proceeding has been reinforced by the Commission's emphasis, which I welcome, on the need for unilateral action
  618
  by the Community if these bilateral negotiations do not succeed in achieving the Community's objectives. That is an essential element in our negotiating position, without which we would not be prepared to go along with the mandate.
  The hon. Member for St. Ives referred to the Tokyo Round and accused us of not having taken a sufficiently vigorous line during the negotiations. It was impossible, until the Carter Administration came in. to take any line on the Tokyo Round other than to deal with technical preliminaries. Since then these negotiations have been going ahead. They have been going ahead in a different world situation from that which existed in 1973 when the Tokyo Round was first launched. They have gone ahead in an atmosphere in which the outlook for the open trading system is very much worse. Nevertheless, we want to see a successful outcome to the Tokyo Round.
  The United States Government have insisted in the importance to the United States, in resisting protectionist pressures in the country, of a successful outcome to the round. We have, therefore, not ruled out the agreement that has been informally and tentatively arrived at between the Community and the United States negotiators for a 40 per cent. reduction in tariffs in two stages. However, this would be acceptable to us only on certain conditions, which must be clearly stated. First, there is a need for major reductions in high American and Japanese tariffs. In other words, we want harmonisation of tariffs and not just reduction of tariffs. We shall want conditionality in the second stage in the proposed 10-year period of tariff reductions—in other words, the kind of link to world economic conditions for which we asked but did not secure as a result of the OECD trade pledge.
  Above all, however, we need the adequate safeguard—not just Article XIX—to be used to protect this country's industry, if necessary, against aggressive attack. It is pointless, if, in order to take action against one source that is creating difficulties for our industry, it should be necessary to take action against all sources. Also, we shall want to see the United States come into line on dumping and countervailing provisions of the existing GATT code, because the United States must understand that, although we recognise that they have political and economic

  619
  problems and we are ready to assist in that respect, we, too, have political and economic problems which they must recognise.
  That brings me to the question of steel, which I want to mention in its international context. This matter was raised by my hon. Friend the Member for Hammersmith, North (Mr. Tomney) and by the hon. Member for Arundel (Mr. Marshall). There is, of course, a very deep recession in world steel because of excess capacity. We have taken considerable steps to protect the steel industry of this country. The hon. Member for Arundel criticised us for lack of action. Perhaps I may quote to him the director of the British Independent Steel Producers Association, who said earlier this year of action taken by the Government:
  " The catalogue of action is not unimpressive. "
  Again I quote,
  " The Government is fully engaged in applying available remedies where justified. "
  So we have taken action to protect this country's steel industry in the difficulties that it would face.
  But we now face a specific problem in the United States, and it is necessary, particularly if they wish for a successful outcome from the multilateral trade negotiations, that the United States should now avoid precipitate action which would damage the prospect for a successful MTN. It would have a major effect on other suppliers—for example, the United Kingdom, which has a deficit with the United States
  I do not think that either I or the Government would regard a policy of aggressive anti-dumping action as an adequate or appropriate response to present problems in the steel industry,
  particularly as the United States does not at present adhere to GATT provisions on anti-dumping and countervailing codes. The United States took such precipitate action in the matter of special steels, and I hope that it will be avoided this time. Discussions are currently taking place. This is a problem which needs to he tackled with understanding. We look to the United States for a sensible and statesmanlike approach to this problem, just as no doubt they would expect us to adopt such an approach in the matter of the Multi-Fibre Arrangement.
  I turn finally to the amendment once again. The right hon. Member for Leeds, North-East suggests in the amendment that the policies that we are conducting will not serve to maintain, let alone to improve, the standard of living in this country. In the conduct of economic policy in this country we have advantages which are possibly denied to the Opposition. First, there are our relations with the trade union movement. [HON. MEMBERS: "Oh."] Secondly, there is the fact that much industrial management and much financial management in this country does not want to exchange the current Government, despite our Socialist horns, to which reference has been made, for the theological irrelevancies and nostrums of the Tories. Finally, we have the advantage of having before us the example of Toryism in office between 1970 and 1974 of how not to conduct economic policy.
  I hope that the House will reject the amendment.
  Question put, That the amendment be made:—
  The House divided: Ayes 270, Noes 302.

  Division No. 1]

  AYES

  [10.00 p.m.

  Adley, Robert

  Body, Richard

  Carlisle, Mark

  Aitken, Jonathan

  Boscawen, Hon Robert

  Chalker, Mrs Lynda

  Alison, Michael

  Bowden, A. (Brighton, Kemptown)

  Channon, Paul

  Amery, Rt Hon Julian

  Boyson, Dr Rhodes (Brent)

  Churchill, W. S.

  Arnold, Tom

  Braine, Sir Bernard

  Clark, Alan (Plymouth, Sutton)

  Atkins, Rt Hon H. (Spelthorne)

  Brittan, Leon

  Clark, William (Croydon S)

  Awdry, Daniel

  Brocklebank-Fowler, C.

  Clarke, Kenneth (Rushcliffe)

  Bain, Mrs. Margaret

  Brooke, Peter

  Cockroft, John

  Baker, Kenneth

  Brotherton, Michael

  Cooke, Robert (Bristol W)

  Banks, Robert

  Brown, Sir Edward (Bath)

  Cope, John

  Bell, Ronald

  Bryan, Sir Paul

  Cormack, Patrick

  Bennett, Sir Frederic (Torbay)

  Buchanan-Smith, Alick

  Corrie, John

  Bennett, Dr Reginald (Fareham)

  Buck, Antony

  Costain, A. P.

  Benyon, W.

  Budgen, Nick

  Critchley, Julian

  Berry, Hon Anthony

  Bulmer, Esmond

  Crouch, David

  Biggs-Davison, John

  Burden, F. A.

  Davies, Rt Hon J. (Knutsford)

  Blaker, Peter

  Butler, Adam (Bosworth)

  Dean, Paul (N Somerset)

  Dodsworth, Geoffrey

  Johnson Smith, G. (E Grinstead)

  Raison, Timothy

  Douglas-Hamilton, Lord James

  Jones, Arthur (Daventry)

  Rathbone, Tim

  Drayson, Burnaby

  Jopling, Michael

  Rees, Peter (Dover & Deal)

  du Cann, Rt Hon Edward

  Joseph, Rt Hon. Sir Keith

  Rees-Davies, W. R.

  Durant, Tony

  Kaberry, Sir Donald

  Renton, Rt Hon Sir D. (Hunts)

  Dykes, Hugh

  Kershaw, Anthony

  Renton, Tim (Mid-Sussex)

  Eden, Rt Hon Sir John

  Kilfedder, James

  Rhodes James, R.

  Edwards, Nicholas (Pembroke)

  Kimball, Marcus

  Rhys Williams, Sir Brandon

  Elliott, Sir William

  King, Evelyn (South Dorset)

  Ridley, Hon Nicholas

  Emery, Peter

  King, Tom (Bridgwater)

  Ridsdale, Julian

  Evans,Gwynfor (Carmarthen)

  Kitson, Sir Timothy

  Rifkind, Malcolm

  Ewing, Mrs Winifred (Moray)

  Knight, Mrs Jill

  Roberts, Wyn (Conway)

  Eyre, Reginald

  Knox, David

  Rossi, Hugh (Hornsey)

  Fairbairn, Nicholas

  Lamont, Norman

  Rost, Peter (SE Derbyshire)

  Fairgrieve, Russell

  Langford-Holt, Sir John

  Royle, Sir Anthony

  Farr, John

  Latham, Michael (Melton)

  Sainsbury, Tim

  Fell, Anthony

  Lawrence, Ivan

  St. John-Stevas, Norman

  Finsberg, Geoffrey

  Lawson, Nigel

  Scott, Nicholas

  Fisher, Sir Nigel

  Lester, Jim (Beeston)

  Scott-Hopkins, James

  Fletcher, Alex (Edinburgh N)

  Lewis, Kenneth (Rutland)

  Shelton, William (Streatham)

  Fletcher-Cooke, Charles

  Lloyd, Ian

  Shepherd, Colin

  Fookes, Miss Janet

  Loveridge, John

  Shersby, Michael

  Forman, Nigel

  Luce, Richard

  Silvester, Fred

  Fowler, Norman (Sutton C'f'd)

  McAdden, Sir Stephen

  Sims, Roger

  Fox, Marcus

  MacCormick, Iain

  Sinclair, Sir George

  Fraser, Rt Hon H. (Stafford & St)

  McCrindle, Robert

  Skeet, T. H. H.

  Fry, Peter

  Macfarlane, Neil

  Smith, Dudley (Warwick)

  Galbraith, Hon T. G. D.

  MacGregor, John

  Smith, Timothy John (Ashfield)

  Gardiner, George (Reigate)

  MacKay, Andrew (Stechford)

  Speed, Keith

  Gardner, Edward (S Fylde)

  McNair-Wilson, M. (Newbury)

  Spence, John

  Gilmour, Rt Hon Ian (Chesham)

  McNair-Wilson, P. (New Forest)

  Spicer, Jim (W Dorset)

  Gilmour, Sir John (East Fife)

  Madel, David

  Spicer, Michael (S Worcester)

  Glyn, Dr Alan

  Marshall, Michael (Arundel)

  Sproat, Iain

  Godber, Rt Hon Joseph

  Marten, Neil

  Stainton, Keith

  Goodhart, Philip

  Mates, Michael

  Stanbrook, Ivor

  Goodhew, Victor

  Mather, Carol

  Stanley, John

  Goodlad, Alastair

  Maude, Angus

  Steen, Anthony (Wavertree)

  Gorst, John

  Maudiing, Rt Hon Reginald

  Stewart, Ian (Hitchin)

  Gow, Ian (Eastbourne)

  Mawby, Ray

  Stokes, John

  Gower, Sir Raymond (Barry)

  Maxwell-Hyslop, Robin

  Stradling Thomas, J.

  Grant, Anthony (Harrow C)

  Mayhew, Patrick

  Tapsell, Peter

  Gray, Hamish

  Meyer, Sir Anthony

  Taylor, Teddy (Cathcart)

  Grieve, Percy

  Miller, Hal (Bromsgrove)

  Tebbit, Norman

  Griffiths, Eldon

  Mills, Peter

  Temple-Morris, Peter

  Grist, Ian

  Miscampbell, Norman

  Thatcher, Rt Hon Margaret

  Grylls, Michael

  Mitchell, David (Basingstoke)

  Thomas, Rt Hon P. (Hendon S)

  Hall, Sir John

  Moate, Roger

  Thompson, George

  Hall-Davis, A. G. F.

  Monro, Hector

  Townsend, Cyril D.

  Hamilton, Michael (Salisbury)

  Montgomery, Fergus

  Trotter, Neville

  Hampson, Dr Keith

  Moore, John (Croydon C)

  van Straubenzee, W. R.

  Hannam, John

  More, Jasper (Ludlow)

  Vaughan, Dr Gerald

  Harvie Anderson, Rt Hon Miss

  Morgan, Geraint

  Viggers, Peter

  Haselhurst, Alan

  Morgan-Giles, Rear-Admiral

  Wakeham, John

  Hastings, Stephen

  Morris, Michael (Northampton S)

  Walder, David (Clitheroe)

  Havers, Rt Hon Sir Michael

  Morrison, Charles (Devizes)

  Walker, Rt Hon P. (Worcester)

  Hawkins, Paul

  Morrison, Hon Peter (Chester)

  Walker-Smith, Rt Hon Sir Derek

  Hayhoe, Barney

  Mudd, David

  Wall, Patrick

  Heath, Rt Hon Edward

  Neave, Airey

  Walters, Dennis

  Heseltine, Michael

  Neubert, Michael

  Warren, Kenneth

  Hicks, Robert

  Newton, Tony

  Weatherill, Bernard

  Higgins, Terrence L.

  Nott, John

  Wells, John

  Hodgson, Robin

  Onslow, Cranley

  Welsh, Andrew

  Holland, Philip

  Oppenheim, Mrs Sally

  Whitelaw, Rt Hon William

  Hordern, Peter

  Page, John (Harrow West)

  Wiggin, Jerry

  Howe, Rt Hon Sir Geoffrey

  Page, Richard (Workington)

  Wigley, Dafydd

  Howell, David (Guildford)

  Parkinson, Cecil

  Wilson, Gordon (Dundee E)

  Howell, Ralph (North Norfolk)

  Pattie, Geoffrey

  Winterton, Nicholas

  Hunt, David (Wirral)

  Percival, Ian

  Wood, Rt Hon Richard

  Hunt, John (Ravensbourne)

  Peyton, Rt Hon John

  Young, Sir G. (Ealing, Acton)

  Hurd. Douglas

  Pink, R. Bonner

  Younger, Hon George

  Hutchison, Michael Clark

  Prentice, Rt Hon Reg

  Irving, Charles (Cheltenham)

  Price, David (Eastleigh)

  TELLERS FOR THE AYES:

  James, David

  Prior, Rt Hon James

  Mr. Spencer Le Marchant and

  Jenkin, Rt Hon P. (Wanstd&W'df'd)

  Pym, Rt Hon Francis

  Mr. Michael Roberts.

  Jessel, Toby

  NOES

  Abse, Leo

  Atkinson, Norman

  Bennett, Andrew (Stockport N)

  Allaun, Frank

  Bagier, Gordon A. T.

  Bidwell, Sydney

  Anderson, Donald

  Barnett, Guy (Greenwich)

  Bishop, Rt Hon Edward

  Archer, Rt Hon Peter

  Barnett, Rt Hon Joel (Heywood)

  Blenkinsop, Arthur

  Armstrong, Ernest

  Bates, Alf

  Boardman, H.

  Ashley, Jack

  Bean, R. E.

  Booth, Rt Hon Albert

  Ashton, Joe

  Beith, A. J.

  Boothroyd, Miss Betty

  Atkins, Ronald (Preston N)

  Benn, Rt Hon Anthony Wedgwood

  Bottomley, Rt Hon Arthur

  622

  623

  Boyden, James (Bish Auck)

  Grimond, Rt Hon J.

  Morris, Alfred (Wythenshawe)

  Bradley, Tom

  Grocott, Bruce

  Morris, Charles R. (Openshaw)

  Bray, Dr Jeremy

  Hardy, Peter

  Morris, Rt Hon J. (Aberavon)

  Brown, Hugh D. (Provan)

  Harrison, Rt Hon Walter

  Moyle, Roland

  Brown, Robert C. (Newcastle W)

  Hart, Rt Hon Judith

  Mulley, Rt Hon Frederick

  Brown, Ronald (Hackney S)

  Hattersley, Rt Hon Roy

  Murray, Rt Hon Ronald King

  Buchan, Norman

  Hatton, Frank

  Newens, Stanley

  Buchanan, Richard

  Hayman, Mrs Helene

  Noble, Mike

  Butler, Mrs Joyce (Wood Green)

  Healey, Rt Hon Denis

  Oakes, Gordon

  Callaghan, Rt Hon J. (Cardiff SE)

  Heffer, Eric S.

  Ogden, Eric

  Callaghan, Jim (Middleton & P)

  Hooson, Emlyn

  O'Halloran, Michael

  Campbell, Ian

  Horam, John

  Orbach, Maurice

  Canavan, Dennis

  Howell, Rt Hon Denis (B'ham, Sm H)

  Orme, Rt Hon Stanley

  Cant, R. B.

  Howells, Geraint (Cardigan)

  Ovenden, John

  Carmichael, Neil

  Hoyle, Doug (Neison)

  Owen, Rt Hon.Dr David

  Carter, Ray

  Huckfield, Les

  Padley, Walter

  Carter-Jones, Lewis

  Hughes, Rt Hon C. (Anglesey)

  Palmer, Arthur

  Cartwright, John

  Hughes, Mark (Durham)

  Pardoe, John

  Castle, Rt Hon Barbara

  Hughes, Robert (Aberdeen N)

  Park, George

  Clemitson, Ivor

  Hughes, Roy (Newport)

  Parker, John

  Cocks, Rt Hon Michael (Bristol S)

  Hunter, Adam

  Parry, Robert

  Cohen, Stanley

  Irvine, Rt Hon Sir A. (Edge Hill)

  Pavitt, Laurie

  Coleman, Donald

  Irving, Rt Hon S. (Dartford)

  Pendry, Tom

  Colquhoun, Ms Maureen

  Jackson, Colin (Brighouse)

  Penhaligon, David

  Concannon, J. D.

  Jackson, Miss Margaret (Lincoln)

  Perry, Ernest

  Cook, Robin F. (Edin C)

  Janner, Greville

  Phipps, Dr Colin

  Corbett, Robin

  Jay, Rt Hon Douglas

  Price, C. (Lewisham W)

  Cowans, Harry

  Jeger, Mrs Lena

  Radice, Giles

  Cox, Thomas (Tooting)

  Jenkins, Hugh (Putney)

  Rees, Rt Hon Merlyn (Leeds S)

  Craigen, Jim (Maryhill)

  John, Brynmor

  Richardson, Miss Jo

  Crawshaw, Richard

  Johnson, James (Hull West)

  Roberts, Albert (Normanton)

  Cronin, John

  Johnson, Walter (Derby S)

  Roberts, Gwilym (Cannock)

  Crowther, Stan (Rotherham)

  Johnston, Russell (Inverness)

  Robinson, Geoffrey

  Cryer, Bob

  Jones, Alec (Rhondda)

  Roderick, Caerwyn

  Cunningham, G. (Islington S)

  Jones, Barry (East Flint)

  Rodgers, George (Chorley)

  Cunningham, Dr J. (Whiteh)

  Jones, Dan (Burnley)

  Rodgers, Rt Hon William (Stockton)

  Davidson, Arthur

  Judd, Frank

  Rooker, J. W.

  Davies, Bryan (Enfield N)

  Kaufman, Gerald

  Roper, John

  Davies, Denzil (Llanelli)

  Kerr, Russell

  Rose, Paul B.

  Davis, Clinton (Hackney C)

  Kilroy-Silk, Robert

  Ross, Stephen (Isle of Wight)

  Deakins, Eric

  Kinnock, Neil

  Ross, Rt Hon W. (Kilmarnock)

  Dean, Joseph (Leeds West)

  Lambie, David

  Rowlands, Ted

  de Freitas, Rt Hon Sir Geoffrey

  Lamborn, Harry

  Ryman, John

  Dell, Rt Hon Edmund

  Lamond, James

  Sandelson, Neville

  Dempsey, James

  Latham, Arthur (Paddington)

  Sedgemoro, Brian

  Doig, Peter

  Leadbitter, Ted

  Selby, Harry

  Dormand, J. D.

  Lee, John

  Sever, J.

  Douglas-Mann, Bruce

  Lestor, Miss Joan (Eton & Slough)

  Shaw, Arnold (llford South)

  Duffy, A. E. P.

  Lever, Rt Hon Harold

  Sheldon, Rt Hon Robert

  Dunn, James A.

  Lewis, Arthur (Newham N)

  Shore, Rt Hon Peter

  Dunnett, Jack

  Lewis, Ron (Carlisle)

  Silkin, Rt Hon S. C. (Dulwich)

  Dunwoody, Mrs Gwyneth

  Lipton, Marcus

  Sillars, James

  Eadie, Alex

  Litterick, Tom

  Silverman, Julius

  Edge, Geoff

  Lomas, Kenneth

  Skinner, Dennis

  Edwards, Robert (Wolv SE)

  Loyden, Eddie

  Small, William

  Ellis, John (Brigg & Scun)

  Luard, Evan

  Smith, Cyril (Rochdale)

  Ellis, Tom (Wrexham)

  Lyon, Alexander (York)

  Smith, John (N Lanarkshire)

  English, Michael

  McCartney, Hugh

  Snape, Peter

  Ennals, Rt Hon David

  McDonald, Dr Oonagh

  Spearing, Nigel

  Evans, Fred (Caerphilly)

  McElhone, Frank

  Spriggs, Leslie

  Evans, loan (Aberdare)

  MacFarquhar, Roderick

  Stallard, A. W.

  Evans, John (Newton)

  McGuire, Michael (Ince)

  Steel, Rt Hon David

  Ewing, Harry (Stirling)

  MacKenzie, Rt Hon Gregor

  Stewart, Rt Hon M. (Fulham)

  Faulds, Andrew

  Mackintosh, John P.

  Stoddart, David

  Fernyhough, Rt Hon E.

  Maclennan, Robert

  Stott, Roger

  Fitch, Alan (Wigan)

  Macmillan, Rt Hon M. (Farnham)

  Strang, Gavin

  Flannery, Martin

  McMillan, Tom (Glasgow C)

  Strauss, Rt Hon G. R.

  Fletcher, Ted (Darlington)

  McNamara, Kevin Madden, Max

  Summerskill, Hon Dr Shirley

  Foot, Rt Hon Michael

  Swain, Thomas

  Ford, Ben

  Magee, Bryan

  Taylor, Mrs Ann (Bolton W)

  Forrester, John

  Mahon, Simon

  Thomas, Jeffrey (Abertillery)

  Fowler, Gerald (The Wrekin)

  Mallalieu, J. P. W.

  Thomas, Mike (Newcastle E)

  Fraser, John (Lambeth, N'w'd)

  Marks, Kenneth

  Thomas, Ron (Bristol NW)

  Freeson, Rt Hon Reginald

  Marshall, Dr Edmund (Goole)

  Thorno, Stan (Preston South)

  Freud, Clement

  Marshall, Jim (Leicester S)

  Thorpe, Rt Hon Jeremy (N Devon)

  Garrett, John (Norwich S)

  Maynard, Miss Joan

  Tierney, Sydney

  Garrett, W. E. (Wallsend)

  Meacher, Michael

  Tinn, James

  George, Bruce

  Mellish, Rt Hon Robert

  Tomlinson, John

  Gilbert, Dr John

  Mendelson, John

  Tomney, Frank

  Ginsburg, David

  Mikardo, Ian

  Torney, Tom

  Golding, John

  Milian, Rt Hon Bruce

  Tuck, Raphael

  Gould, Bryan

  Miller, Dr M. S. (E Kilbride)

  Urwin, T. W.

  Gourlay, Harry

  Mitchell, Austin

  Varley, Rt Hon Eric G.

  Graham, Ted

  Molloy, William

  Wainwright, Edwin (Dearne V)

  Grant, John (Isington C)

  Moonman, Eric

  Wainwright, Richard (Colne V)

  624

  625

  Walker, Harold (Doncaster)

  Whitehead, Phillip

  Wise, Mrs Audrey

  Walker, perry (Kingswood)

  Whitlock, William

  Woodall, Alec

  Ward, Michael

  Willey, Rt Hon Frederick

  Wool, Robert

  Watkins, David

  Williams, Rt Hon Alan (Swansea W)

  Wrigglesworth, Ian

  Watkinson, John

  Williams, Alan Lee (Hornch'ch)

  Young, David (Bolton E)

  Weetch, Ken

  Williams, Rt Hon Shirley (Hertford)

  Weitzman, David

  Wilson, Alexander (Hamilton)

  TELLERS FOR THE NOES

  Wellbeloved, James

  Wilson, Rt Hon Sir Harold (Huyton)

  Mr. James Hamilton and

  White, Frank R. (Bury)

  Wilson, William (Coventry SE)

  Mr. Joseph Harper.

  While, James (Pollok)

  Question accordingly negatived.
  Main Question again proposed.
  It being after Ten o'clock, the debate stood adjourned.
  Debate to be resumed tomorrow.

  WOOLTON VALE ASSESSMENT CENTRE
  Motion made and Question proposed, That this House do now adjourn.—[Mr. Snape
  10.20 p.m.
  Mr. Eddie Loyden: It is with some sadness and, indeed, anger that I ask the House tonight to listen to an Adjournment debate. The events which have taken place over the last six or seven weeks—and even in in many instances prior to that—are, indeed, a reflection of the fact that notice was not taken of the demand which had been made for an inquiry into the affairs at the Woolton Vale Assessment Centre. I believe that if that request had been conceded and an inquiry had been accepted at that time, much of what has followed at the centre could well have been avoided. Certainly much of the bad publicity that the centre has attracted could also have been avoided.
  The effect of the publicity upon Woolton Vale Assessment Centre at this stage is immeasurable and I believe that it will be some time before any degree of confidence returns to the centre. I am mindful of the damage that could continue to be done if the matter is not the subject of close investigation and inquiry into all the allegations which have been made about Wootton Vale.
  I think that we all recognise the sensitive and sometimes difficult task facing those who have the responsibility for young people at these centres. There is not always the provision of facilities to deal adequately with the task with which they are confronted. Indeed, it has been said by the Director and Chairman of the Liverpool Social Services that the Woolton Vale Assessment Centre is inadequate in terms of buildings and facilities to meet the needs of care assessment and demand. It is only fair to say that steps have been taken to build a new centre in some 12 months to two years. This centre will, I understand, replace Woolton Vale.
  I consider those arguments to be quite valid and justified. I cannot accept, however, that the building of a centre in one to two years' time should be used as an excuse to ignore the many complaints and
  628
  allegations which have been made about Woolton Vale.
  I have a letter from a former placement at Woolton Vale which indicates quite clearly that this is not a matter which has been in existence only for the last weeks or months. The letter was written in April 1976 by a former employee who had a brief placement at Woolton Vale at that time. He said in his letter to me:
  " It would be an understatement for me to say that I find my brief experience working at Wootton Vale is disturbing. Clearly the building is outdated. More suitable facilities would have to be sought, and I believe that a purpose built establishment is being provided long after the need arose. Notwithstanding this, young and disturbed children continued to be victims of the conditions and the regime within this establishment, and this would be for the next two years. Perhaps I could draw your attention to the regime which still operates within the terms of the Home Office rules applicable to remand centres, and of course Wootton Vale was a remand centre in the past. For instance, official visiting is similar to that of detention centres or prison and all children are searched by staff after visiting. I believe it was the practice that all incoming and outgoing letters be read. During my placement I felt like a gaoler and spent most of the day locking and unlocking doors."
  That gives some indication of the inadequacies of the building. What is of more concern is that 12 or 18 months later a number of complaints arose from parents, and others, about other practices at Woolton Vale.
  As my hon. Friend will know, a submission has been made by four Liverpool city councillors, and members of the social services committee, to the Ombudsman about examining allegations of cruelty and maladministration by members of the staff. In spite of the pressures that have been placed upon those responsible for the running of this centre there has been a constant resistance to any form of inquiry. Indeed, it is my view that had this Adjournment debate not taken place this evening, the last meeting of the social services committee would have continued to adopt that attitude towards the question of an inquiry.
  I am somewhat disturbed by the fact that notice about this Adjournment debate was transmitted to the city of Liverpool, and its officers, before I myself knew that the debate was taking place.
  I do not accept that all of the allegations which have been made—some probably exaggerated—are to be accepted on

  629
  face value. That is one of the reasons why an inquiry was seen as the only answer to the problems that face those who occupied and those who ran the Woolton Vale Centre.
  I could go into detail on a number of cases, but time does not permit me to do so, nor would I want in any way to cut across the decision that has been taken about an inquiry. I want to come back to that in a moment. I understand that at this point in time the social services committee has decided to refer the matter to the Ombudsman. It is, however, my view that the terms of reference of this inquiry ought to be spelled out. I hope that my hon. Friend will be able to tell us more about the form which this inquiry will take.
  Mr. Anthony Steen Mr. Anthony Steen (Liverpool, Wavertree)rose—
  Mr. Loyden: I believe that unless the inquiry is a full-scale inquiry there will remain upon this place a stain that will make it ineffective as a centre for the period that lies ahead.
  I do not accept that the question of a new centre should be used as an excuse for not acting now, because there is a mixture of boys at the school ranging from what could be described as young criminal elements to those who in all probability have committed the one crime of absconding or absenting themselves from school, or being abroad at night, or any of those minor offences and misdemeanours. It is the degree of control that is required for the former which imposes a great deal of strain and stress on the latter.
  I believe that the Government's object in setting up assessment centres was to give an opportunity to those responsible for children in care to make an assessment of their problems and to make some provision for their future on a longterm and more permanent basis. It appears to me that the present position in Woolton Vale simply does not allow for that to take place.
  I do not believe that the provisions at the moment are sufficient to carry out, for instance, education of those children who need it and the care which is referred to in the statutory instrument as being the basis on which a. relationship in these homes should be built.
  Mr. Steen: I support the hon. Gentleman's request for an inquiry. Is he aware that a constituent of mine has been subjected to acts of violence and herself has complained about violence in this home? Is he aware, further, that I, too have been asking for an inquiry in this case?
  Mr. Loyden: I am aware of the individual case which the hon. Gentleman raises, and I am sure that he will be pursuing it with his customary vigour. However, my concern at this stage is not with individual cases. My concern is about the circumstances as a whole at the Woolton Vale Centre.
  I believe that this House should be disturbed to learn that, under legislation passed by this House, children are placed in a situation of the kind prevailing at Woolton Vale. When we in this place pass Acts of Parliament, we should ensure that the provisions necessary to implement the intentions of the legislation are available to those in local government and so on who are supposed to run these places in accordance with those Acts.
  However, the main question here is that of the allegations which have been made about the violence which allegedly was endemic in the place over some considerable time. I believe that there has been a great deal of stress and strain placed on members of the staff, but again that does not remove the responsibility for dealing with the problem as expeditiously as possible.
  The complaints which have been enumerated are of a very serious nature. Allegations of violence by the head against children have been made. I agree that there is conflicting evidence about the seriousness of those actions. Nevertheless, there is sufficient doubt in the minds of people that conduct of this kind is going on at Woolton Vale.
  As for the staff, at the beginning of all the publicity they played a somewhat low-level role. Since then, however, they have recognised that the only way in which this could be cleared up to the satisfaction of all concerned is by an inquiry, and they have themselves drafted a petition, signed by 25 or 26 of them, calling for such an inquiry. In my view, it is a pity that the same sort of response was not there when the saga of Woolton Vale began.

  631
  It is my view that, if the Woolton Vale Centre continues in being without the necessary inquiry to which I have referred, not only will the Centre be undermined but ultimately it will undermine the entire concept of centres throughout the country. As each of these places is exposed in the way that this one has been, assuming that there are other similar cases, the concept of child care and assessment as a whole will be undermined. I am sure that that is not the Government's intention.
  Is the present position satisfactory? We have been told that the local authority has now referred the matter to the Ombudsman. But it is not certain that the Ombudsman will want to carry out the inquiry, and therefore the situation may remain unresolved.
  I believe that responsibility lies with the Secretary of State in these circumstances and that the evidence must be collated. I accept the valid criticism that much of the evidence which has been drafted and collated has been fragmented by the various groups gathering it, but I believe that it is not an impossible task to gather evidence of specific incidents of maladministration. From that would come a formidable report to compel the Secretary of State to investigate the affairs of Woolton Vale.
  The matter reached a peak over the publicity given to the use of a cell in Woolton Vale. I visited the Centre shortly after the Press publicity had drawn attention to the matter. Some of the Press statements made about the cell were exaggerated, and were a misrepresentation, to some extent, of the true position.
  However, I was appalled to see the sort of arrangements that had been made for separating children for various reasons, and as part of the general control plans. There was a room, absolutely bare and sparse, with the exception of a mattress on the floor and a toilet in another corner. Even the flushing mechanism for the toilet was outside the room. Apart from these two items there was no other piece of furniture or equipment in the room, which had a cell-like door through which observation could be kept, as in prisons.
  The lights were operated from outside the cell, and I understand that this is also
  632
  for observation purposes. There were two lights, one red and one white, and during the night the red light was used so as not to disturb the sleeping boy or youth. When the boy wanted to use the toilet he rang a bell for the officers to come around and flush it. I doubt whether an officer can be found to dash around and flush the toilet every time the bell rings. This sort of thing creates an environment which is, in many ways, worse than in an adult prison.
  This cell is used not only for isolation—there may be occasions when headstrong boys need control—but also for punishment. The reason given for this is that it has the privacy required to carry out punishment. It was one such incident that brought the matter to light and caught the attention of the Press. One of the boys concerned in such an incident was the cause of the beginning of the whole investigation. He complained to his parents that he had been punished in this way. There is evidence that parents' complaints are disregarded, and that when boys are found with marks or weals on them, some reason is given about falling in a football match or fighting with other boys. I am not saying that every word uttered in criticism of Woolton Vale is factual and cannot be challenged, but I say that there is sufficient disturbing evidence that cannot be disregarded by the local authority, the social services committee or the Secretary of State.
  I could go on for a long time giving chapter and verse of the cases I have heard about and of reports and statements by parents in regard to acts of violence and maltreatment in this remand home. In one case a boy was locked up in isolation, and it was alleged he had been a brain-damaged child at the age of six. I hope that the Minister will not suggest that that is the right way for young child offenders to be dealt with. If that kind of practice continues, I believe that it will make hardened criminals out of the children in these centres.
  I believe that there is a responsibility on the Secretary of State to carry out a full inquiry into Woolton Vale and that he should not shrug off responsibility by saying that in two years' time there is to be a new centre. How many boys in that period will be damaged, perhaps irreparably? How many others will be set on the course of a hardened criminal

  633
  in that period? The responsibility is ours, and the Secretary of State should grasp the opportunity to carry out an inquiry and see to it that whatever new building follows the present building is equipped to serve the purpose for which it is designed—namely, to deal with young child offenders in Liverpool.
  10.42 p.m.
  The Minister of State, Department of Health and Social Security (Mr. Roland Moyle): I am pleased that my hon. Friend the Member for Liverpool, Garston (Mr. Loyden) has raised this matter on the Floor of the House because he has been following it assiduously with my right hon. Friend the Secretary of State and has discussed the matter with my Department. I apologise for the fact that the Liverpool Corporation knew before my hon. Friend that he had been granted an Adjournment debate. I do not know the facts, but I assume that once my Department was informed that my hon. Friend had the Adjournment debate, it thought that he knew that, too, and, out of professional courtesy, it informed the Liverpool Corporation.
  The matter my hon. Friend raises is of special concern to everybody who is concerned with young people, particularly when they are away from their parents and in the care of local authorities. I am happy to see that the Liverpool City Council has made its concern apparent. It is a concern which my right hon. Friend the Secretary of State and I share.
  It looks as though the allegations will be subject to another inquiry of an external nature. Therefore, I shall not go into the allegations in detail, although, if time permits, I shall try to outline them.
  Woolton Vale is an observation and assessment centre, with 53 places, and concentrates on boys of the more difficult type in the age group 12 to 18. Other boys are held in less, onerous conditions because they are more amenable to treatment.
  The building is inadequate and is one of Mr. Gladstone's old, converted residences. It makes it difficult to carry out adequate supervision, and therefore a replacement is being built at Fazakerley to take 88 boys. There will be a secure unit, for which the Department has
  634
  approved a grant of £97,500, and it will open in November 1978.
  The inadequacy of the centre, however, is no excuse for ill treatment or inadequate care of boys. The allegations that have given rise to the present demands for an inquiry concern chiefly one youngster of 15, who was in the centre following appearances in court for offences, who was caned in the separation room of the unit and about whom it is alleged that he was seized by the throat by staff and on another occasion frightened by tales of haunting. There is another allegation that two other boys were set upon and assaulted by boys in the presence of and with the active concurrence of staff, and there are also allegations of ill treatment and assault by staff on other boys.
  In addition there has been one incident concerning members of staff. Police were called in after a complaint made by one of the women on the staff. According to the Press, she had been assaulted by one of the male members of staff. A case against him was brought to court on 18th October, but it was not proceeded with. The man agreed to be bound over and the judge agreed that the case should be allowed to lie upon the file. He described the incident as having been horse-play which had got out of hand and, although it was a humiliating experience for the woman concerned, he thought that it would be quite wrong to allow the full panoply of the jury proceedings to be instigated in the case.
  The allegations were considered at meetings of the adoption and special services sub-committee of the city council's social services committee and came before the committee at its meeting on 2nd November. The committee decided to recommend to the council that a further independent inquiry should be set up. My information differs from that of my hon. Friend. I understand that the proposal that will come before the full council on 9th November reads:
  " That the Committee considers it desirable that an inquiry, completely independent of the City Council,"
  —that is important—
  " should be held as soon as possible into the various allegations made about the conduct of Woolton Vale; and accordingly, as complaints of maladministration have already been referred to the Local Government Commissioner, urges him, in the event that no statutory inquiry is ordered by the Secretary of

  635
  State, to accept those complaints and undertake an investigation into them and into any other matters which might come to his notice during the course of the investigation and which seem to him proper to be enquired into in the context of the allegations made."
  I see no cause for the Secretary of State to intervene in the case, at least at this stage. The council is clearly concerned to get at the facts and it will entrust the matter to the Local Government Commissioner. The Commissioner has powers under Section 26 of the Local Government Act 1974 to investigate any such complaint of injustice in consequence of maladministration in connection with action taken by or on behalf of a local authority.
  It is entirely for the Commissioner to decide whether he can act and how far he can extend his inquiries. He has not yet taken that decision. Matters that he could look into include, among many other things, a failure to observe rules, and malice towards the person concerned. Several local authorities have themselves endorsed the referral of complaints to the Local Government Commissioner. I understand that the city council will be considering this proposal tomorrow and the Commissioner has still to decide whether or not to accept the reference. As the hon. Member knows, we have of course been in close touch with Liverpool over this case and my regional social work service officers have visited Woolton Vale and are aware of the difficulties experienced in running the centre.
  The Secretary of State has powers to institute an inquiry under the Local Government Act 1972 and the Children Act 1975. These are, however, very much last-resort powers.
  636
  If the Commissioner did not exercise his discretion in favour of an inquiry, it would be possible for the city council to set up an independent inquiry, and our experience is that reports from such inquiries have generally commanded full acceptance from the responsible bodies concerned. I think it best that these matters should be dealt with locally by the responsible authority, if at all possible.
  Mr. Loyden: Does my hon. Friend accept that an ultimate decision by the Secretary of State cannot be ruled out at this stage?
  Mr. Moyle: We shall have to see how the dispute goes, but I cannot rule out anything at this stage.
  In the unlikely event of the Commissioner not agreeing to the request of the city council, the best conclusion would be for the council to set up an independent inquiry. The Secretary of State and I would have to be satisfied that the inquiry was truly independent and was capable of making an independent assessment of the problem.
  My hon. Friend asked in his first letter, which we received on 24th August, whether we would consider closing Wool-ton Vale. I must confess that this is a course of action that—
  The Question having been proposed after Ten o'clock and the debate having continued for half an hour, Mr. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
  Adjourned at ten minutes to Eleven o'clock.

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Preamble
The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Derby.
The Earl of Rosebery—Sat first in Parliament after the death of his father.
The Lord Dowding—Took the Oath.

AID TO BOLIVIA
Lord CHALFONT: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what is their present policy governing aid to Bolivia.
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, my right honourable friend the Minister of State for Overseas Development is exploring the possibilities of providing capital aid to Bolivia for health projects. This would be aimed at supplying the needs of the poorest sectors of the community. We are continuing to provide an important programme of technical co-operation to Bolivia.
Lord CHALFONT: My Lords, I am grateful to the noble Baroness for that reply. Can Her Majesty's Government say upon what grounds the £19 million project for aid to the Bolivian mining industry was cancelled?
Baroness LLEWELYN-DAVIES of HASTOE: Yes, my Lords. I know of the noble Lord's special interest in Latin America. As the House knows, I answered this question fairly fully previously. Always on questions of aid the Government take into account, as one of the factors in their decision, the question of human rights; and this project was in the end decided against because of the human rights position of the Bolivian tin miners.
Lord BARNBY: My Lords, arising out of that, may I ask the noble Baroness a question? While it is understood that the global amount of aid to be given is determined, can she indicate how intermittent amounts to particular countries, reported from time to time in the papers, receive any review, and in what way and by whom?
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, by whom: originally by the Minister for Overseas Development, and of course ultimately by the whole Cabinet. We keep these matters under constant and very careful review, and in my view Her Majesty's Government succeed extremely well.
Lord BROCKWAY: My Lords, is the Minister aware that many of us appreciate the fact that aid is continued for health in Bolivia but denied where human rights are denied in the mining industry?
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, I thank my noble friend.
Viscount MONTGOMERY of ALEMEIN: My Lords, would not the noble Baroness agree that projects should also be considered which have ultimate benefit for United Kingdom trade and therefore for employment in this country?
Baroness LLEWELYN-DAVIES of HASTOE: Yes, indeed, my Lords. Capital aid of the kind which I have suggested for health projects would be tied to British goods and services.
Lord CHALFONT: My Lords, I do not want to continue this discussion too long, but may I ask the Government what was the major evidence upon which they decided that human rights in the mines in Bolivia were being denied by the Bolivian Government? From where did that evidence come?
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, without making too detailed a reply, it came from many sources, including the Churches, and there was all sorts of evidence including, of course, the report of which the noble Lord will have heard, by the National Union of Mineworkers.

NUCLEAR DETERRENT POLICY
2.40 p.m.
Lord BROCKWAY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they have reached a decision on whether a nuclear deterrent should be maintained when the four Polaris missile submarines become ineffective in the 1990s.
The MINISTER of STATE, FOREIGN and COMMONWEALTH OFFICE (Lord Goronwy-Roberts): My Lords, the Government have no plans for a successor to the Polaris force which has many years of effective life ahead of it.
Lord BROCKWAY: My Lords, is it not the case that a decision will have to be reached at least within the next two years, and that in view of that fact some consideration must be given to the problem? Will the Government, when they consider this problem, remember that there are the hopeful SALT talks and the United Nations General Assembly meeting on disarmament next year, which is to be followed by a world disarmament conference, and not take a decision which is premature, misconceived and dangerous?
Lord GORONWY-ROBERTS: My Lords, I would agree. Her Majesty's Government will, as always, take full account of the considerations that my noble friend has described, especially the last one that they must not take misguided and hasty decisions in this field.
Lord CARRINGTON: My Lords, will the noble Lord accept that when the next Government take their decision it will not be based upon hope but on reality?
Lord GORONWY-ROBERTS: My Lords, I think I said that Polaris had many years of effective life ahead of it. Probably the next alternative Government will be postponed even beyond the life of Polaris.
Baroness WARD of NORTH TYNESIDE: My Lords, will the noble Lord bear in mind that we could do with a great many more Polaris submarines? Can I have an answer, please?
Lord GORONWY-ROBERTS: My Lords, I think we have enough just now.
Lord SHINWELL: My Lords, while it is desirable to take note of the SALT talks, and a lot of other talk that goes on—really much of it rubbish and in no way associated with reality—would it not also be wise to take note of the massive demonstration we have seen on television this week of the military strength of the USSR? Ought we not also to take note of that?
Lord GORONWY-ROBERTS: My Lords, I can assure my noble friend that we do take note of the facts which he has described. Equally, I should like to assure him that there are certain developments in the arms control and disarmament fields these days which are highly encouraging.
Lord BROCKWAY: My Lords, may I ask the Minister whether he recollects that President Carter has expressed the hope that nuclear arms production will be reduced to zero? Is he aware that in the Labour Party Manifesto, on which this Government were returned, the statement was made that the Labour Party would embark on "no new generation of strategic nuclear weapons"?
Lord GORONWY-ROBERTS: My Lords, my answer to my noble friend was an answer to the latter part of his question. As to his reference to President Carter, we share his hopes and we are co-operating to realise those hopes.

WIDOWS' MATERNITY BENEFITS
2.43 p.m.
Lord BANKS: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether a woman widowed during pregnancy is entitled to both maternity grant and maternity allowance if she would have qualified for both of these had her husband lived.
Lord WELLS-PESTELL: My Lords, a woman confined of a posthumous child of her husband is entitled to a lump sum

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maternity grant if the contribution conditions are satisfied by either her own or her late husband's contributions. The husband's death would not prevent the mother from qualifying for a maternity allowance, which can be paid only on her own contribution record; the allowance cannot be paid in addition to any widow's benefit to which she was entitled, although she could still receive any earnings-related supplement for which she qualified with her maternity allowance.
Lord BANKS: My Lords, is the Minister aware that that reply, for which I thank him, will nevertheless cause considerable concern, because it implies that a woman who has lost the support of her husband's earnings will receive less benefit than a woman who continues to enjoy them? Would not the noble Lord agree that the widow's benefits replace in part the husband's earnings and derive from his contributions, while the maternity allowance replaces in part the wife's earnings and derives from her contributions? Would he not further agree that, in the circumstances, the one should not be offset against the other?
Lord WELLS-PESTELL: My Lords, I cannot think of an instance where it is possible to bring up a benefit to what one might regard as average earnings. So far as the widow is concerned, the widow's allowance, which is given for the first 26 weeks—known as a resettlement benefit—is, I admit, considerably higher than the widowed mother's allowance; but this is to enable her to readjust to what is a very difficult situation following the death of her husband. However, for the first 26 weeks she receives £24.50, together with £8.40 per week for the child and, for that matter, for any other children she may have.

COMMONWEALTH DEVELOPMENT CORPORATION BILL [H.L.]
2.46 p.m.
The LORD CHANCELLOR (Lord Elwyn-Jones): My Lords, I beg to introduce a Bill to consolidate the enactments relating to the Commonwealth Development Corporation with corrections and minor improvements made under the Consolidation of Enactments (Procedure)
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Act 1949. I beg to move that this Bill be now read a first time.
Moved, That the Bill be now read 1a.—(The Lord Chancellor.)
On Question, Bill read 1a, and to be printed.

LOCAL GOVERNMENT (SCOTLAND) BILL [H.L.]
Lord STRABOLGI: My Lords, on behalf of my noble friend Lord Kirkhill, I beg to introduce a Bill to amend the law relating to the valuation and rating of lands and heritages in Scotland occupied by certain public utilities and bodies and by certain undertakings; to make further provisions with respect to payments to the Commissioner for Local Administration in Scotland and his officers; to postpone the repeal of the Burgh Police (Scotland) Acts 1892 to 1911 and of certain local statutory provisions; to make minor amendments to the Countryside (Scotland) Act 1967 and the Local Government (Scotland) Act 1973; and for connected purposes. I beg to move that this Bill be now read a first time.
Moved, That the Bill be now read 1a.—(Lord Strabolgi.)
On Question, Bill read 1a, and to be printed.

PRACTICE AND PROCEDURE: SELECT COMMITTEE
The LORD PRIVY SEAL (Lord Peart): My Lords, I beg to move the first Motion standing in my name on the Order Paper. This Committee was first appointed on 19th July 1976 and a second report was published on 26th July last. The Committee has work in progress and will wish to consider any proposals which the House of Commons Committee may make affecting both Houses. I hope the House will agree to its reappointment.
Moved, That a Select Committee be appointed to consider the practice and procedure of the House and to make recommendations for the more effective performance of its functions.—(Lord Peart.)
On Question, Motion agreed to.

BILL OF RIGHTS: SELECT COMMITTEE
Lord PEART: My Lords, I beg to move the second Motion standing in my name on the Order Paper. Noble Lords will recall that the House agreed to the establishment of a Select Committee on a Bill of Rights when the noble Lord, Lord Wade, moved the Motion for the Second Reading of his Bill. The Select Committee was appointed on 17th May and still has a number of witnesses whom it wishes to hear. I hope the House will agree to the Committee's reappointment.
Moved, that a Select Committee be appointed to consider whether a Bill of Rights is desired and, if so, what form it should take.—(Lord Peart.)
On Question, Motion agreed to.

COMMITTEE OF SELECTION
The CHAIRMAN of COMMITTEES (Lord Aberdare): My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That in accordance with Standing Order No. 60 a Committee of Selection be appointed to select and propose to the House the names of the Lords to form each Select Committee of the House (except the Committee of Selection itself and any Committee otherwise provided for by Statute or by order of the House) and that the Lords following together with the Chairman of Committees be named of the Committee:

Lord Privy Seal (L. Peart),

E. St. Aldwyn,

L. Banks,

L. Byers,

L. Carrington,

L. Collison,

L. Drumalbyn,

L. Garner,

B. Hylton-Foster,

B. Llewelyn-Davies of Hastoe,

L. Wigoder,

That the Committee have leave to report from time to time.—(Lord Aberdare.)
On Question, Motion agreed to.

ADDRESS IN REPLY TO HER MAJESTY'S MOST GRACIOUS SPEECH
2.50 p.m.
Debate resumed on the Motion moved on Thursday last by Lord Ponsonby of Shulbrede—namely, That an humble Address be presented to Her Majesty as follows:
"Most Gracious Sovereign—We, Your Majesty's most dutiful and loyal subjects, the Lords Spiritual and Temporal in Parliament assembled, beg leave to thank Your Majesty for the most gracious Speech which Your Majesty has addressed to both Houses of Parliament."
Lord CARR of HADLEY: My Lords, the gracious Speech contains a number of proposals in the economic and industrial field which are indeed unexceptionable; in fact, they are proposals which, I am sure, all of us can positively welcome. I am sure that this is something for which we are all grateful. We can all agree, for example, that the main objectives in this field should be, as the gracious Speech says,
"the speediest … return to full employment",
as well as, "a sustained growth of output". We can also all agree that the highest priority should be given to cutting inflation. I think we can also all agree on the need to promote industrial training, because already, even in this period of very severe, indeed intolerable unemployment, there are shortages of certain types of labour which will represent even greater danger of bottlenecks once production begins to expand again, if, as we hope, it soon does.
But I believe that the question we must ask ourselves is whether the Government's present and projected policies will in fact achieve these admirable objectives. This is the question which we need to examine in today's debate, and I will try to start this examination. There is no doubt that the policies adopted by the Government a year ago have transformed for the better the country's economic position, and we unreservedly welcome that fact. But I believe that in doing so we are entitled to comment, at least in passing, that these policies were adopted by the Government only under compulsion from the International Monetary Fund; and the same

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policies had been strongly and consistently urged on the Government by the Opposition in another place, and in this Douse, for at least a couple of years before that; and, if only they had been adopted much earlier, much of the pain and grief through which we have passed, and are still passing, could have been avoided.
I also welcome at least in principle—indeed, in practice—most of the Chancellor's proposals in his mini-Budget two weeks ago, while at the same time entering the caveat that the relaxation of income tax needs to go much further, but that the increases in public expenditure on non-capital items need to go no further at all in real terms.
We also welcome in principle the decision to let the pound float upwards, but we are bound to say that the timing of his action was, in our opinion, deplorable. It ought to have been taken much earlier and ought to have been accompanied by a substantial relaxation in exchange control, because if that had been done, the threat to the control of our money supply, and the danger of too much hot money coming into the country, would never have arisen; at least, it would never have arisen to anything like the extent to which it has. So this decision ought to have been taken much earlier, but to take it finally, just two days before the result of the miners' ballot, was surely craziness of an order new even to this Government.
I cannot go along with those who believe that British industry can be kept competitive only by perpetual creeping devaluation of the pound. In the long run, this is a policy of despair, and even in the short run recent history does not show that the policy has been an outstanding success. But having said that, let me also say that we do not want a yo-yo pound. What we want is a pound whose exchange value is stable over a long period of time, but stable with a natural strength which leads to a tendency for its value to edge upwards, rather than downwards. This, we believe, is the vital requisite for industrial recovery which underlines the need for the first priority to be given to cutting the rate of inflation, because in anything but the short run the pound is bound to collapse downwards if our rate of inflation is significantly higher than that in other major industrial countries. Thus, in our
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opinion, it follows that it is essential for the Government to continue the main lines of the firm and prudent financial and fiscal policies imposed by the IMF a year ago.
So to sum up at this point, we genuinely welcome the Government's policies over the past year and the results that they have achieved, and we welcome the objectives for the future. But we are bound to say that since 1974 the Government have really been acting like a mad surgeon, who first breaks his patient's legs in order later to show what a good bonesetter he is. At least we are thankful to have come to the bonesetting stage. But we cannot forget that it was this Government's own actions which broke the nation's legs in the first place.
So, we have to look ahead, and while, I repeat, welcoming the improvement which has taken place, I cannot help now coming to what we see as a much more gloomy side of the picture. The financial aspect of our economy has been transformed for the better, but, as I said in commenting briefly on the Chancellor's announcement a fortnight ago, the underlying industrial position, the position of the real economy, is still in very had shape and is the cause for grave concern.
In judging this position let me take the three main objectives chosen by the Government themselves in the gracious Speech as the key indicators of success or failure; namely, unemployment, the level of production, and the rate of inflation. I will take first unemployment. The seasonally adjusted figure of unemployment excluding school leavers—and I stress that—is still now about two and a half times as great as it was when this Labour Government took office in March 1974. In our view, the present level of unemployment is a scandal and a disgrace to any Government. It is quite intolerable, particularly among younger people, and action must be taken to deal with it. To be successful that action will mean substantial further changes in policy by the Government, to which I shall come a little later on in what I have to say.
I will now take the second indicator, that of industrial production. This is still virtually stagnant, and stagnant at a level which is actually lower than the

35
level of production achieved in the first quarter of 1974 when we had the three-day week. That is scarcely credible, but it is true. Not only is production lower than in the first quarter of 1974, but productivity (that is, the output per person employed) is also lower now than it was then, when for about half of that first quarter we had only a three-day week. This seems incredible. It is incredibly bad.
Now let us look at the third indicator; that is, inflation. Even though inflation is now falling, it is still very high. It is much higher here than in most other major industrial countries, and it is much higher than when this Government came to office in March 1974. Perhaps now one understands why I described the Government as a mad surgeon.
These, though, are the grave problems we have to face, and they give no sign at all for any optimistic thinking that we are on the verge of a golden era of prosperity and national strength. I put a very high value on the contribution to our economic well being of the financial services industry in this country, and indeed of other service industries. They can grow in the future, and they ought to be encouraged to grow further. It ought to be a major purpose of Government policy to encourage these earners of huge invisible exports—as we, rather strangely, choose to describe them—to make an even bigger and more vital contribution to our economy than they do at the moment, and have done for at least a century past. So, for example, policies on exchange control, on overseas investment, and on taxation should all be consciously, deliberately geared to encourage the international financial services sector of our economy.
Quite contrary to the prejudices of at any rate some trade union leaders, all these international activities are a source of security and prosperity to everyone in this country—yes, to everyone in this country—and not to just a few narrow sectors or circles of people in the City and places like that. It is vital to the future employment and prosperity of our country that Britain's activities as an international financial centre should be further encouraged and strengthened so that they can contribute even more.
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However, having said that, I am equally sure that we shall not get back to full employment and to soundly-based prosperity in this country unless we can also put new vitality and, above all, new growth and new competitive power into British manufacturing industry. This regeneration of our manufacturing industry is, I fear, going to be a much longer and much more difficult task for any Government than the regeneration of the country's financial position has been over the last year, vital though that is. Furthermore, this industrial regeneration is not going to be achieved by woolly talk about an industrial strategy. It is going to be achieved only by hard practical attention, sustained over a long period with consistency, in order to deal with a number of underlying practical industrial problems. I want to devote the rest of what I am to say today to dealing with just a few of those problems.
First of all, personal incentives. The rates of British income tax and the structure of the tax system are now a severe burden and a severe disincentive to people at all levels of pay in this country, from the top down to the bottom, and we must reduce taxes on earnings and savings to levels comparable to those which exist in other major industrial countries. So we welcome the reductions just announced by the Chancellor: indeed we do. But we also have to point out that they are a very small start down a long road which we need to travel pretty urgently; because even now the main personal tax allowances are much smaller, and the rates of income tax at each income band are much higher, in real terms, than they were when Mr. Healey first became Chancellor in March, 1974. Indeed, a letter from Mr. Healey to Sir Geoffrey Howe on the 21st October—only a fortnight ago—showed that in order to restore the levels of personal allowances and income tax rates at different bands, in real terms, to the position left by the last Conservative Budget of April 1973 would mean income tax reductions amounting to about £5,000 million a year. It would need reductions of £5,000 million a year to bring back our income tax burden, in real terms, to where the last Conservative Government left it—and that, we were well aware, was still not competitive with the income tax burdens suffered by all those who work in industry and elsewhere in other countries.

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So while we welcome the little step which has been taken, if we are going to regenerate the British manufacturing economy we must press for much further progress down this road as a matter of great urgency and in spite of great difficulties and the making of sacrifices in other areas. We are of course glad, as I drew to your Lordships' attention a fortnight ago, that Mr. Healey now publicly admits the important connection between high levels of income tax and high levels of unemployment. Because he now recognises that connection, he has at last put his previous income tax policies into reverse. About time, too, but only after great damage has been done to levels of employment and to the prosperity and investment levels of British industry; and, as I have just said, we still have a very long way to go before we put ourselves on an equal footing with other countries in this vital respect.
I come second to the need for more productive investment—probably the industrial need in this country about which, in principle at least, there is more unanimity than there is about anything else. But this, too, is a matter for hard practical realism, and not for political prejudices, because it is the key to a return to sustainable full employment and is therefore vital to the major objective of the gracious Speech. The political prejudices which I suggest we have to get out of the
way are really two. First of all, we have to stop the nonsense talk about a deliberate investment strike in British industry—because it is nonsense talk. Secondly, we have to get rid of the idea of the need for the Government to direct investment because there is supposed to be a shortage of available funds for productive investment, principally, apparently, owing to too much of the funds available going into other uses, such as property, service industries and overseas investments. This, too, is nonsense. There is a plentiful supply of funds for productive investment available for British industry; a plentiful supply and a plentiful variety of channels through which those funds can flow with more efficiency than they do, probably, in any other industrial country in the world.
What is lacking is not the supply of funds or the channels for them to flow through: what is lacking is the demand for the funds from industry. So we must create a higher demand for new productive
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investment, and for this I suggest a number of things are necessary. Companies must see an adequate demand for their products. No company will invest for the future unless it can see a growing demand for its products both at home and overseas. Companies must not only see a demand for their products: they must also see the possibility of being able to meet this demand at prices which will show a reasonable level of profitability compared with long-term interest rates. If real profit on
investment is to be only 2 or 3 per cent. net while the cost of new long-term finance is to be 10 to 15 per cent., of course there will be very little new investment. People would be mad, generally speaking, whether they be a public enterprise or a private enterprise, to invest in face of those prospects. So that is one hard practical reality: create the markets and make sure that industry is able to sell at prices which allow the satisfaction of those markets to be profitable for an efficient operator.
The second hard practical reality is that companies must be able to make much better use than many of them can today of their existing capital equipment. The more one looks into British industry the more one realises—and this comes out of all sorts of reports from Government Departments, from the "think-tank" and other sources—that on the whole (with, of course, many honourable exceptions) we in this country make poor use of the capital equipment we have, compared with other countries. This is partly a matter of manning scales compared with those in other countries, and it is partly a matter, I think, too, of the number of hours for which our machinery is kept working each week. We in Britain need a much wider use of at least the double-shift system of operation; and I suggest that our motto in this country should be: "Work people for shorter hours and work machines for longer hours". This could make a major contribution to both our unemployment problem and our efficiency of production. I believe that this question of manning scales, and above all this question of the greater development of double-shift working, which can be done without too many unsocial hours problems—it is very different from 24-hour, round-the-clock working—is one on which the Government ought to take a major initiative with both

39
the CBI and the TUC; and both the CBI and the TUC should, in turn, be giving a very strong lead on these matters to their respective memberships.
The third hard practical reality in this realm of investment is that companies will not show much confidence in investing for the future unless the Government can convince them of two things. The first is that the Government are determined to get the British inflation rate down to the levels of other industrial countries, and to keep it there, and are not just keen on cutting inflation in spurts and in relaxing the battle when Elections draw near. The second is that British Governments will no longer subject industry to the wild fluctuations of policy to which it has been subjected for much of the last 30 years. I deliberately say, "much of the last 30 years" because I am prepared, as a member of my own Party and as a Minister over periods, to take blame with noble Lords opposite and the Party opposite for the wild fluctuations of stop-go in the general economic management sense and of detailed Government policies on taxation and regional policy, as well as in many other fields, which we have imposed on British industry in a way which has not been done to the industries of other major industrial countries in the postwar era.
So, my Lords, I want to stress the third hard practical reality if we are to raise the rate of productive investment in the future. I suggest that, if we have a will in this country to achieve this, none of the three hard practical realities to which I have drawn attention need be a matter of Party political controversy. I believe that, if we have the will to make things better, they are substantially matters on which we could get a broad consensus of agreement which could transcend switches of Governments at General Elections. I believe that we need to do so.
The third major, fundamental problem to which I turn is the need to encourage small firms. Medium-sized firms down to really small ones make a major contribution to the total national output and to employment in this country. I did not have time to find the source of some figures that I wanted to quote in order to show the proportion of our total
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employment in this country's manufacturing industry which is in companies with 500 or less employees; but it is a very substantial proportion indeed. I guess that it could be 50 per cent., or even more, of our total employment. It is certainly a high proportion. So this is a very important sector in which to restore full employment and get that sustained growth in national output which is outlined in the gracious Speech.
Therefore, we welcome the Chancellor's measures of two weeks ago to give some relief to small firms and we also welcome the promise of further measures to this end contained in the gracious Speech; and those welcomes are wholehearted. Once again, we cannot help drawing attention to the fact that this is another of those pretty well near death-bed repentances. It is no good the noble Lord the Leader of the House shaking his head; for he and I were in another place in 1974 and he will remember the debates, though perhaps not quite as well as I remember them because I had the onerous job of being Shadow Chancellor at that time. Over and over again it was impressed upon Mr. Healey, the new Chancellor, that the measures he was taking would clobber small industry and small firms in particular—and did they not do so? So we welcome the bone-setting now going on while still deploring the bonebreaking in 1974–75.
My Lords, the fourth fundamental problem to which I wish to draw attention is the need for pay restraint. Of course, we ought to be aiming, like most other successful industrial countries, for a high-pay, high-efficiency economy. But we cannot suddenly get to their level of pay, and we shall not get there at all if pay increases continue grossly to outstrip improvements in national productivity. Pay restraint is vital, therefore, both to our long-term objective of raising our standards of living and also to our need to cut inflation.
In the short run, the Government must be firm in maintaining their 10 per cent. guideline as the maximum permissible increase in earnings and they must do so not least in the public sector of the economy. I want to take this opportunity of assuring the Government that they can count on the support of the Opposition in seeking to achieve this objective. For

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that reason I shall, admittedly with some difficulty, restrain myself from making any comments at this stage on certain of the current pay claims which carry with them great danger to us all. I believe in the old tradition which I remember when I first entered Parliament in 1950: we did not enter into debate on those sort of things while the claims were in a very explosive state. I regret the loss of that tradition in another place over the last 10 years or thereabouts.
In the longer term, on pay restraint policy, I believe that the Government must take their own strong initiative, along with the TUC and the CBI, in seeking to work out radical improvements in the British system and practice of collective bargaining. For the last 10 years at least, under Governments of both major Parties, we in this country have alternated between periods of rigid pay policy which cannot, and ought not to be, sustained for more than a short time and other periods of British-style free collective bargaining which equally, under Governments of both major Parties, have proved to be unsustainable for more than a very limited period because of the gross cost inflation and other problems which British-style collective bargaining now produces.
Other countries seem to manage their affairs in this respect better than we do. Why, I wonder? Perhaps I may be permitted briefly to remind noble Lords of something which I said in the debate on 7th July last year, when we were debating the Government's then recent White Paper entitled The Attack on Inflation. Having then asked myself the same question, I told your Lordships that I did not believe that it was because British trade union leaders or their rank and file members were less knowledgeable, or less patriotic or less responsible than their opposite numbers in other countries. I said that I believed that our troubles were of a different nature; that they stemmed partly from institutional reasons connected with the actual manner and method of government in this country; but that another very important reason, for which I do not blame the unions or management, is that we have a peculiarly old trade union structure which, because of its age, is peculiarly inappropriate to the modern conditions in which we now operate. I said that the old trade union structure is coupled with old-fashioned attitudes and procedures
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throughout British collective bargaining to which employers contribute just as much as trade unions and that we should never, in my view, be able to remain competitive with other countries in terms of our inflation rate and, at the same time, enjoy free collective bargaining unless and until we reformed our union and industrial relations structures and policies.
I believe that to be profoundly true. I believe that that is a fact which will not go away and which will remain with us and hamper our country until we deal with it. We must start work urgently on making radical improvements in our free collective bargaining system. This, I believe, is a joint task for the Government, the CBI and the TUC, but one in which the Government must take the initiative without delay and not leave it until every summer at a crisis point, when another period of pay policy, statutory or voluntary, is coming to an end.
My Lords, a few months ago—I expect your Lordships noticed it—the Confederation of British Industry published a discussion document on this very subject. I do not expect noble Lords in every part of the House to agree with all of it; I do not agree with all of it myself; but it is the most constructive attempt that has yet been produced by anybody in this country at a basis for discussion, a starting agenda, for tripartite talks on this subject. I believe that it needs to be taken seriously. If, for any reason, the discussions cannot start on that basis, then I beg the Government to produce their own discussion document which they think is a basis on which these talks can start; for until we start in this area we shall be failing to tackle one of the hard, practical problems holding back the regeneration of British manufacturing industry.
Fifth, and last, I come to our problems of industrial relations. I welcome the promises in the gracious Speech to encourage profit-sharing and undertake further consultations on industrial democracy with a view to producing proposals which should command general support. This is very encouraging compared with the original attitudes leading to and flowing from the Bullock Committee Report. But I do not believe that we shall get much benefit from either more profit-sharing or more industrial democracy

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unless we also tackle some other major flaws in our industrial relations in this country.
In many sectors of industry and in many individual companies—indeed, in the majority—our industrial relations are peaceful and constructive. But in some large, critical sectors of British industry our industrial relations record is appalling. A great deterioration set in at the end of the 1950s and it has never been corrected. I think that we have to look at this problem and understand the nature of it. Apologists say, "But our record in Britain is not so bad as in many other countries." In terms of working days lost per thousand employees it indeed is not all that bad, and it is better than most.
Baroness LLEWELYN-DAVIES of HASTOE: Hear, hear!
Lord CARR of HADLEY: I say "Hear, hear" with the noble Baroness; but, my Lords, we suffer from something different: we suffer, as virtually no other country does, from very large numbers of small strikes, which are usually also unofficial and most of which take place almost at the drop of a hat. This is immensely disruptive.
I always recall the words of the late Ray Gunter when he was Minister of Labour in the Labour Government in 1967, almost 10 years ago, but for a few days, to today. Referring to a big strike in the American motor industry which he was asked to compare with our strikes here, he said (at column 35 of the Commons Hansard on 13th November, 1967):
"When Mr. Walter Reuther brings his men out on strike in the American motor car industry, they have had at least three years' peace. No one has broken a contract. When he takes them back there is another three years in which they can plan and wait. The dilemma of British industry is continuous interruption of production lines. No one knows when it will strike next".
That type of strike does enormous damage to the continuity, reliability, quality and every other aspect of British industry. We must get down to tackling it.
In the middle 1950s, year by year we had approximately 600 strikes of this kind in the whole economy other than in coal mining. By 1969 that number had risen from 600 to almost 3,000. In 1970
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it rose to nearly 4,000. It then fell; but in 1976 it was 1,700, three times as high as the middle 1950s. In the first 18 months of this year it was almost 1,600. I do not think any of us are in much doubt about what has been happening in September, October and the first part of November, So this matter cannot be neglected.
My Lords, what are we to do? The urgent needs are simple to define and it is worth briefly defining them. We need to improve our system of collective bargaining as I have already mentioned. That is fundamental to our strike position as well as our pay restraint policy. We need to deal with the problems posed by multi-union situations—a major cause of ferment and competitive leapfrogging in wages in British industry. We need to deal with the recognition and closed shop problems. We need to improve the content of individual collective agreements. We need to learn how to do better in honouring agreements once they have been made, perhaps by developing the use of conciliation and arbitration—arbitration at least to deal with disputes about the interpretation of agreements.
It is silly to have strikes about what an agreement means. It may be inevitable to have a strike when one is trying to make a new agreement and cannot do so. We are almost unique in the world in having strikes instead of going to arbitration about the meaning of an agreement which has been made. We also need, in this and other ways, to limit the use of strike action to really major disputes and not minor ones. The Donovan Royal Commission appointed by a Labour Government, the Labour Government's proposals, In Place of Strife, and the Conservative Government's proposals contained in the Industrial Relations Act, were all directed to these ends. All have either not been implemented or have been largely rejected. But the problems will not go away. It is all very well to reject one lot of remedies; but it is not all very well to put no alternative remedies in their place.
What is it that other countries do in these matters? I do not want to give a long history and I will not do so; but take the case of Sweden and the other Scandinavian countries, of West Germany, France, Belgium, Holland, America and Canada. In every one of those countries

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collective agreements are legally enforceable. In almost every one of those countries strike action becomes lawful only when certain processes, either mediation, delay or taking secret ballots, have been gone through. In every one of those countries but one the closed shop is illegal. The one exception is Sweden where the Swedish equivalent to the TUC lays down that its member unions must operate open shops; so in Sweden, too, the closed shop is effectively banned.
In all these countries unorganised groups of workers are given no legal immunities such as they possess in this country. Even fully organised and recognised trade unions do not have legal immunities from civil action such as trade unions do in this country. We may not wish to copy these countries; we appear to have rejected their methods. We ought not to pass off too easily the fact that we are unique in not having these arrangements; and we are also unique in having this vast number of disruptive, small, unofficial strikes. Those are two situations which may or may not be connected, but whether or not they are, we will have to tackle them. I am in no doubt that we should tackle them now, on a one by one basis.
We should again ask Government to approach the TUC and the CBI to try, on a voluntary basis, to arrive at how we should learn better to keep agreements. We should try to arrive at a code of practice—forget the law for a moment. We should then try to get them to tackle the similar problem of a code of practice for dealing with multi-union shop situations; and then recognition problems; and then closed shop problems; and then picketing problems; and so on. Let us now, if we have tried and chosen to reject other methods, work on a point by point basis, seeking voluntary agreement to each of these problems one at a time. Until we start this we shall not regenerate British manufacturing industry.
My Lords, I have trespassed on your time in trying to outline some of the major real problems which, regardless of Party politics, have to be faced in this country if our aim concerning manufacturing industry is to be achieved. Until we tackle these problems on a hard, realistic, practical basis, seeking as much consensus as we can between one Party and another,
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we shall not regenerate British industry, nor shall we deserve to do so. I believe the whole British public, regardless of their personal political allegiances, are longing for the British Government to give such a lead.
3.29 p.m.
Lord PEART: My Lords, I thought the latter part of the noble Lord's speech gave a constructive approach to matters which affect our country. In other words, he spoke in a serious vein about the need to improve industrial relations. Here, I am with him. No one can blame any Party in this field. The noble Lord said quite rightly that this situation has been with us for over 30 years. Successive Governments, whatever their political complexions, have not solved this problem. This is a challenge which the Labour Government will have to take up. If the Opposition in the other place and elsewhere are as constructive as the noble Lord it may well be that we can achieve considerable improvements in this important section of our economy. We need to have good industrial relations.
Of course, all of us do not wish men to strike at the drop of a hat: we deplore it. On the other hand, there are often good reasons for it, and we forget this. After all, sometimes we may have bad industrial relations which may be the fault not only of the men but of the management as well. All must take the blame, and anyone who has studied carefully the history of industrial relations in our country must accept that conclusion. However, I am grateful to the Tory Party today for registering a much more constructive approach than we have had on previous occasions. I am sorry the noble Lord used such strong language in saying that the Government had acted "like a mad surgeon". In that part of his speech I thought he was behaving like a gloomy undertaker. Even the lights were dim then: now there is brightness and light and I hope I can respond to some of the arguments that he has put forward.
I would only say this to your Lordships. It is particularly appropriate that our debate today should be on both economic and industrial affairs, because the attainment of our economic objectives is not possible without a sustained improvement in our industrial performance, and

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I believe that the noble Lord expressed such sentiments in his speech. He praised the Government. I have found no sting in the attack today. I think it is the weakest criticism I have ever known in a debate where Parties are divided and where talk of a General Election has been in the air. I shall not argue about that now but, as I said, I think that the latter part of the noble Lord's speech was in a different vein and so I do not need to answer some of the charges that he made. It is important that our economic policies should be successful because of the effect they have on the economic environment in which our industries have to operate.
It is easy for this to be overlooked when we consider the great changes we have seen in our financial conditions and our external payments position. We have had to give priority to the establishment of economic and financial conditions in which our industries can thrive. Since the House debated the gracious Speech last year, your Lordships have seen some remarkable improvements in our financial circumstances—one cannot deny that—improvements which offer our industries a real opportunity to emerge from the recent period of stagnation, low investment and falling living standards. I would say only this to the noble Lord: I cannot accept that all was well just before the Labour Government came in. In 1954 the period of a
Tory Government was never marked with much confidence in the future. On the contrary, we now see a different situation, even though we have had our difficulties. We have emerged from, as I said, a period of stagnation, low investment and falling living standards.
In the past year my right honourable friend the Chancellor of the Exchequer has introduced four sets of measures, including the March Budget. These adjustments—including those announced on 26th October—reflect our response to changing circumstances. They do not represent any change either in our objectives or in our strategy for attaining them. I remember many noble Lords a year ago praised the policy and the strategy which were being pursued by the Prime Minister and the Chancellor of the Exchequer. I can remember that praise was given from the Cross-Benches and different parts of the House: even Conservative
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noble Lords praised the courage and the purpose of our policies.
It is difficult today to recall the sense of gloom and foreboding which permeated your Lordships' debate on the gracious Address last year. There had been significant withdrawals of sterling from London and our official reserves had fallen to a level
which could not finance a continuation of these withdrawals. As your Lordships know, the exchange rate for the pound had fallen almost continuously since March. Sales of gilts had stopped and it was quite widely supposed that the Government deficit could only be financed by an inflationary expansion of the money supply. Interest rates had been raised to a level which if continued would effectively deter investment. Minimum lending rate was 15 per cent. The current balance of payments was still in substantial deficit and showed little improvement since the previous year. Our temporary standby credit was due for repayment at the end of the year and we had yet to hold our discussions with the IMF to obtain a new line of credit. Money supply appeared to be surpassing the Chancellor's target and was thought by some to be out of control.
The Government were urged in some quarters to make draconian cuts in public expenditure, which could only have added to unemployment and savaged the education, health and other services. We tried to pinpoint the Opposition on what cuts in expenditure they would propose. We never had anything specific but only a general assertion. Finally, the rate of inflation was rising again, fuelled by the frequent depreciations of the pound and by a series of bad harvests at home and abroad. Fears were expressed in this House and elsewhere for the continued existence of our institutions and our democracy.
Your Lordships will recall that the Government did not hesitate to apply the necessary remedies, which were endorsed by the IMF. As far as financial conditions were concerned they worked rapidly and effectively—so effectively that we are now facing a new set of problems posed by the very success of our policies. Last year we were concerned about the outflow of money from London and the apparently continuous fall in the value of sterling. Today we are concerned at the inflow of money into London despite a fall in

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interest rates, with minimum lending rate down to 5 per cent. The exchange rate for the pound recovered at the end of last year and remained steady until July but has since then been rising, with the consequence that we are losing some of the competitive advantage in export markets which was a beneficial side-effect of the falling pound last year. I do agree with the noble Lord that we must try to achieve a measure of stability in this field: I do not dissent from that.
Some of our critics felt last year that the money supply was out of control because of excessive Government borrowing to finance excessive spending. Having seen the effective operation of cash limits applied to Government spending and of Government measures to keep within its limit for money supply, your Lordships will, I am sure, recognise that today the main threat to the money supply comes from the massive inflow of funds into London. The main worry last year was the inadequacy of official reserves to finance the outflow of funds from London. Discussion now concerns these massive movements of funds in recent months which are in part speculative and therefore potentially disruptive.
One striking improvement in our affairs is the virtual elemination of the current external deficit as a factor restricting our ability to stimulate the expansion of our economy. Our current external account was very nearly in balance over the first nine months of this year and was in substantial surplus in the third quarter. North Sea oil has played an important part in the improvement but so also has the success of our exporters both of goods and services.
But the most important improvement in our conditions is the long delayed break-through in the fight against inflation. I am not gloomy here. The effects of last year's depreciation and poor harvests have been fully absorbed into retail prices. And since the spring the retail price index has been rising at less than 10 per cent. a year. We are still reaping the benefits, in terms of a falling inflation rate, from the pay limits which held the rise in average earnings during Phase 2 to 8 per cent.
This would not have been possible without the co-operation of the trade union
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movement and the common sense of employees throughout the country. This was displayed at a time of painful adjustment to our reduced national income
which had fallen as a consequence both of the oil price rises of a few years ago and the recent recession. The Jeremiahs, who feared for our institutions last year, certainly would not have expected them to survive such a painful adjustment. It is a source of great pride to the Government that, during this most difficult year in the recent history of our country, we have been able to maintain intact our essential social services and to safeguard the real purchasing power of State retirement pensions and benefits paid to the sick and the unemployed.
Unfortunately, in the harsh world of economics everything has its cost. The cost of our successes—in the fields of financial stability, external balance and decelerating inflation—has been paid in terms of depressed domestic demand, and therefore stagnant production and high unemployment. With tight pay limits and limits on public spending, economic growth could only be slow. In the event, it turned out to be slower than had been expected throughout the industrialised world. It was possible, however, in the March Budget and the July measures, to add some fiscal stimulus to demand without breaching the limits set on credit expansion and public spending and thus giving impetus to renewed inflation.
Fortunately, we have now reached the point at which our economy is broadly in internal and external balance, where we are living within our means and there is no further painful fall in living standards in prospect. We are now able to look forward to a sustained period of steady growth which will bring us improving standards of living, the means for providing better public services, and a reduction in the appallingly high level of unemployment.
This is the prospect before us, provided that we do not give way to calls for Government spending far beyond our means, or for pay rises which can lead only to another bout of inflation and stagnation. It is in the context of the opportunities now open to us that the latest measures announced at the end of last month should be viewed.

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Your Lordships will have studied these measures and will forgive me, I am sure, if I allude only to the main features of them.
Lord HARMAR-NICHOLLS: My Lords, will the noble Lord allow me to intervene?
Lord PEART: My Lords, I intended to make a short speech. The noble Lord will himself be making a speech, and I do not want to have a prolonged discussion. I am always courteous, but if the noble Lord insists it will lead only to my making another debating point.
Lord HARMAR-NICHOLLS: My Lords, if the noble Lord will allow me—
Several noble Lords: Order!
Lord HARMAR-NICHOLLS: My Lords, we are debating the Queen's Speech which will, to some extent, decide the destiny of the country. The noble Lord has given a glowing description of our present situation, and I merely wanted to ask him whether he agreed or disagreed with the points made by the Governor of the Bank of England, when he spoke at the banquet the other evening, which are the opposite of what the noble Lord has said.
Lord PEART: My Lords, that is another question. Anyhow, I was not at that banquet. All I am saying is that that is the prospect before us, provided that we do not give way to calls for Government spending far beyond our means, or for pay rises which can lead only to another bout of inflation and stagnation. It is in the context of the opportunities now open to us that the latest measures announced at the end of last month should be viewed.
As I have said, your Lordships will have studied these measures and I shall allude only to the main features. They do not represent a change of course, but they do provide a correction for the shortfall in the public sector borrowing requirement which had become apparent. There is an uncommonly wide measure of agreement among economists, that there is headroom to expand demand and
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activity within the guidelines of our policies for bringing down the rate of inflation.
The raising of the personal allowances in calculation of income tax acts very quickly, as noble Lords know, to raise personal incomes and spending, and therefore to stimulate activity. On the other hand, it does not prejudice any of the options open to the Government at the time of a spring Budget. Like previous tax cuts, it raises real take-home pay without raising industrial costs and therefore threatening jobs. The October measures will take a further 900,000 of the lower paid out of liability for tax. The Government felt that it was only right that people on retirement pensions should also benefit from the general improvement in our economic situation. Noble Lords will, I am sure, welcome the £10 Christmas bonus, the temporary tax relief on this month's uprating and the raising of the age allowance in calculating tax.
The announced increases in public expenditure for 1978–79 are, of course, accommodated within the agreed limits set on public sector borrowing. I recognise that some noble Lords are apprehensive at any mention of an increase in public expenditure. But a good deal of the increases in public spending for 1978–79 had already been announced: the increases, for example, in the child allowance and the extension of eligibility of free school meals.
The most important new addition to expenditure is the £400 million for construction. I do not think that this was stressed or mentioned by the noble Lord, Lord Carr. This has the advantage that it will provide jobs in the sector of the economy worst hit by unemployment and will, to some extent, revive public capital spending which took the brunt of the expenditure cuts announced last December, and which were for that reason widely criticised.
I should like to draw noble Lords' attention to the measures in the recent package which are designed to help small firms. The noble Lord, Lord Carr, talked
about his Party's attitude. I can only say that I have always, even in another House, been a strong supporter of small firms making their contribution. I know of this from my own experience

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in a very distressed area which later became a development area, and I also know how many of these small firms provide considerable activity in the regions. I publicly welcomed the Bolton Report which examined this subject. So that there is nothing
between us on that issue. We believe that small firms should be helped, and I am glad that the Chancellor has been praised by industry for these measures.
These firms represent something like one-fifth of our economy; they play an important part, both in the provision of jobs and in the introduction of new products and processes. We cannot afford any reduction in the numbers or vigour of firms in this sector. It is for this reason that modifications have been introduced which reduce their liability for corporation tax and capital transfer tax. The Government are also considering further measures to encourage the development of small firms.
All these measures have been adopted in order to assist our economy to realise its undoubted potential for growth over the coming year. We cannot be satisfied with our progress in financial markets, in balancing our external account, or in bringing down the rate of inflation, until it is reflected in a sustained growth in consumption, investment, production and employment. We do not delude ourselves that this can occur, unless our industries are able both to hold their present share of markets at home and abroad and to improve upon it. This is unlikely to occur, unless we are at least as successful as our competitors in checking the rise in our costs.
On the other hand, real wages in this country are below those paid by many of our competitors and there is in many industries plenty of scope for improvements in productivity. Increases in labour costs, which are fully financed by parallel increases in productivity, are of course compatible with our objectives of full employment and a lower rate of inflation. Increases in labour costs which, however, breach the Government's guidelines can only hinder us, or even prevent us from reaching our objectives.
It is for this reason that the Government have made it clear that they have no intention to print money in order to finance
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pay settlements, either in the public or the private sectors, which are clearly in breach of their guidelines. The majority of the people in this country are aware of the painful consequences over the past three years of the pay explosion of 1974. They do not want to suffer any repetition of that experience. The Government will continue to take whatever measures may be necessary to maintain the steady recovery of the economy.
3.50 p.m.
Baroness SEEAR: My Lords, before I knew the date of this debate I had agreed to chair a committee at five o'clock this evening. Subsequently, I have to go to Brussels. As a result, I apologise, especially to the Leader of the House, for the fact that I shall not be able to be here for the winding up.
We on these Benches are glad to give our support, if qualified support, to both the long and the short term plans outlined in the gracious Speech and to the indications, so far as they are clear, of the Government's long term economic and industrial strategy. The short term deals with the all-too-familiar problems of inflation and unemployment, matters which are linked and which must be seen as two aspects of one problem. Too often, it is suggested that steps should be taken to deal with unemployment even if there is a risk of increasing inflation. To those people I would say that, whatever short term gain in employment may be achieved in that way, the long term damage to employment prospects resulting from failure to control inflation far outweighs any temporary or partial gain that might be made in the short run.
The question of the control of inflation brings us immediately to pay policy. So far, we are very glad that the Government have reaffirmed in the gracious Speech their determination to maintain the pay policy that was previously outlined. The 10 per cent. overall average figure is, I suppose, as low a figure as we could have hoped to achieve, but the fact remains that even that figure is inflationary, with an aspiration only—and probably an optimistic aspiration—of a 3½ per cent. growth rate. So it is essential that that 10 per cent. should be seen as an average, not as a minimum. Yet in the discussion which is going on up and down the country

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the old traditional industrial relations arithmetic seems to be emerging—the arithmetic which in the field of industrial relations has always said that an average equals a minimum. That is the talk that is going on at the present time. I appeal to noble Lords on both sides of this House to use the influence which they undoubtedly have in both trade union and management circles to see that the pay policy averages 10 per cent. or even, if possible, less.
May I stress in particular the management side in the making of this deal, for it is my observation—and noble Lords will have observed this, too—that there is already an indication that some managers are taking the line that the term "productivity deal" can be used very usefully to overcome the difficulties of containing wage demands. It is even murmured, and I think there is some ground for believing this to be true, that
if there is a break in the pay policy it may well come from the management side even more than from the trade union side. I stress this point because there are many people in your Lordships' House who are in a position to influence this matter and to bring home to managements that whatever they may gain in the short term by the easy settlement of a pay claim, both they and the country stand to lose far more by giving way too easily to claims of this kind.
This is one reason why we are particularly glad that the Government have included encouragement for profit sharing schemes in the gracious Speech. We have always wanted profit sharing schemes, although for quite other reasons, because we believe that they are an essential part of good industrial relations. But there is a very specific reason why profit sharing schemes, to be treated as a form of productivity agreement, are particularly suitable and particularly to be encouraged at present. A pay-out which comes as a result of the application of the value added or profit sharing scheme is made after the money is earned; it is not included in the initial assessment of the cost and does not have a cost increasing effect. It is the only form of productivity deal which can be genuine because it
can come only after the result has been achieved and not in anticipation of it. For this reason, we would urge the Government to take steps to see that these schemes are given
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encouragement, not so late as next April when all the pay deals which are immediately important will have been settled, but even earlier, if they can find any way in which this can be done. Otherwise I gravely fear that there will be a spate of so-called productivity deals which will not be productivity deals at all. They will be reached by collusion between management and trade union representatives and the result will be that the final earnings figure will rise very considerably above 10 per cent.
The problem of pay settlements and of the control of inflation is not just a problem for this year. The
noble Lord, Lord Carr of Hadley, referred to the need for the reform of industrial relations. This is important but, inevitably, it is somewhat long term. We have to ask ourselves now what is going to happen when the 12-month rule passes away. Unions are accepting the 12-month rule for the present round, and this means that most of the agreements will have been entered into by Easter, or shortly after. What will happen then? That is the question which we should be dealing with now, for plans for claims in 1978–1979 will already be generating in the minds of the trade unions.
In all the discussion that has taken place we have spoken of 10 per cent. and of the 12-month rule, but I have seen very little suggestion that anybody has a coherent plan regarding what will come after the 1977–1978 round of pay claims. Yet what will be the good of holding down to 10 per cent., even if we do, if immediately after that there is a kind of free-for-all which enables pay to rise again by 15, 16 or 17 per cent? Of course, the Government have the power to link this question with fiscal policy and to say that the additional relaxation of taxation which we all want to see will be dependent upon and will be adjusted according to the way in which pay settlements are made in the 1978–1979 period.
I urge upon your Lordships' House that attention should be given now to what is going to happen in 1978–1979. We are living far too much from year to year. We are beset by the idea of the annual pay round. We need institutions to deal with it, we need a policy now and we need to educate the public as to why this policy must go on. I have asked

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before in your Lordships' House and I ask again now that the Government should give their attention to a much more intensive education of the public in what is at stake. There are very welcome signs that the public at large has learned the lesson of inflation, but whether that lesson will stick and whether the full implications of the control of inflation in terms of what is required in an incomes policy have gone in, I very much doubt. An intensive and prolonged campaign is needed to ensure that people really have grasped what it is about. We need continuing control over incomes, not just something which controls them for the next 12 months.
Therefore, we are asking the Government what plans they have, what discussions we can have, what part "Neddy" can play and what is the Government's approach towards synchro-pay and, indeed, the CBI proposals put forward by the noble Lord, Lord Carr of Hadley. We very gladly congratulate the Government on the stand that they have so far taken about pay claims, but may I say from these Benches, as has been said in another place, that the support of this Party is entirely conditional on the Government maintaining their stand over pay claims. We are in this agreement with the Government primarily because we believe this is the best way to hold down inflation in this country, and if the Government falter in facing the challenge of either the public or the private sector then that support cannot be continued.
From the problem of inflation to the problem of unemployment and particularly, perhaps—though it is the subject of debate on another occasion—to the problem of youth unemployment. Of course we welcome what the Government have said in the gracious Speech in regard to the promotion of improvement in the employment field and we are glad to know that the Manpower Services Commission has developed detailed plans for seeing that action is taken throughout the country to create greater opportunities for employment. However, may I say—and I can fully believe that some of the reports in the Press may not have been altogether well founded—that, in the question of the generation of new employment opportunities, co-operation at the lowest possible level of all interested groups is of the very greatest importance. This cannot be
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a bureaucratic exercise. I believe there is great anxiety, a great deal of good will and a great deal of expertise among managers, trade unions, careers officers, educationists and young people themselves who are intelligently organised to look at this problem; and whatever is done through the Manpower Services Commission must surely be done with the greatest local co-operation at the lowest possible level that can be organised.
Your Lordships may have seen in the Press doubts expressed as to whether in fact the manpower services programme is going to be handled in this way. I would ask the Government for an assurance that unorthodox measures of utilising or tapping that good will and that knowledge will be adopted; perhaps in particular that young people themselves should be associated, through their organisations, in the campaign to get more jobs available for young people. Perhaps the Government will give us an answer on that point.
The question of unemployment also leads to the problem of the small firm. As has been said by other speakers today, the small employer can generate new jobs very quickly; not only is he a generator of jobs but he is a generator of ideas. Both sides of the House have paid tribute to the importance of the small employer. I am bound to say that under both Governments the position of the small employer has deteriorated. The Conservative Government had ample opportunity to do something about promoting the issue of the small employer, and so have the Labour Government. The noble Lord, Lord Carr, spoke of the numbers of persons engaged in small enterprises but in fact our showing is far worse than that of any of our competitors. It is a great source of strength to the German economy that they have a very large sector of small businesses because that is where the ideas and the training come from. I do not wish to make a Party point—yes, I do wish to make a Party point: it was as a result of pressure from the Liberal Party that attention was paid to the small business. Otherwise why is it only happening now? The state of the small business has been becoming a scandal for a very long time and, as the noble Lord knows, this was one of the points which the Liberal Party in another place pressed very strongly on the Prime Minister, both

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in regard to taxation and in regard to the development of a programme for the assistance of small businesses. I should be glad if the noble Lord the Leader of the House would acknowledge that this is in fact the situation. I think he agrees that it is in fact so.
To turn from the immediate short-term problem of employment and—
Lord TAYLOR of GRYFE: My Lords, before the noble Baroness, Lady Seear, leaves the matter of the small businesses, which has been discussed at great length today, will she develop the point of discriminating between small businesses which are inefficient and small businesses which lead to innovation? Are we not in danger of generalising about small businesses without analysis of the problem?
Baroness SEEAR: My Lords, I believe the answer to the noble Lord is in another part of the gracious Speech, which I am delighted to see there and to which I was going to refer in a few moments. It is the belated conversion of the Government to a policy of competition. If we have a competition policy our inefficient small businesses will not in fact survive. That is the way to ensure that the small businesses are innovative, because if they are not innovative they will not be there.
To turn to the long-term strategy, the indications in the gracious Speech are not as clear here as they are in relation to short-term plans. In the desire to generate jobs there is a danger that the Government will fail to recognise what can be the only hopeful long-term strategy, which surely is to ensure that our resources are concentrated in those activities which will produce high profits and high value added in the manufacturing activity; out of the profits so generated we can pay for the services that we all want, both the public and the private services, which have had to be cut in recent years. To find a job anywhere, even if it increases our already excessive over-manning, is simply a recipe for spreading the poverty even wider than it is spread at present, while what we want to do is to generate and to spread the wealth.
So if the Government will accept that this is what is needed, then the consequences of this must be spelt out in detail and the details will not please a
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great many people. The fact remains that we are supporting a great many businesses which are over-manned; we are keeping in being a great many enterprises which in the long-run interest of the economy and of employment ought really to go out of business and the resources ought to be used elsewhere. The approach of encouraging employers to find jobs for people even if they do not really need to employ them may be a necessary short-term procedure but it is a very dangerous one in the long term. It is high time that we got down to the problem of how we are going to have a real transformation of our wealth producing process so that we generate the wealth for the services that we want.
I would go along with the noble Lord, Lord Carr, when he says that what we want is technically efficient industry using its machinery far better. What a good answer it is to the unemployment problem if you employ people for short hours on a shift basis on highly expensive but highly useful machinery which is highly wealth generating! That is the direction in which we ought to be going. Then you can indeed put two people on one job and gain by doing so. That is the direction n which we ought to be going. Too much of the talk at the present time is in regard to finding jobs anywhere, whether they really need to be done or not. That is all right as a short-term expedient, but let us start working now on the long-term transformation and in that long-term transformation we have to put the greatest possible emphasis on the need for a more skilled and knowledgeable labour force.
In our programme for young people we are trying to find work experience for them. But work experience does not necessarily increase their skill, and the one thing that is quite apparent as we look at international figures is that the lower the level of one's skill the higher the likelihood that one will be unemployed. That is the point we must take on board, and what is needed is a drive to intensify the level of skill. In Germany every youngster who does not go for higher education goes compulsorily to get some kind of training. We do not do this, and our unemployment figures will stay with us whatever the Government do in regenerating the economy unless we raise the level of skill. So the regeneration of industry that we need requires an

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intensive campaign to see that we reduce to the absolute minimum the number of people who have not got the skills or knowledge which will be marketable in the economy of tomorrow.
That brings me, finally, to the issue of competition policy. Of course we were glad to see in the gracious Speech that the Government were preparing plans for an intensification of competition policy. It is long overdue. On these Benches we have for years fought to have a more effective attack on monopoly, and to see that competition can become a really effective instrument for making a more competitive and better use of resources in this country. I very sincerely hope that that part of the Queen's Speech will not be relegated to the end of the queue; that the other very important matters in the Queen's Speech will not push it out; that it will not be one of those things the Government hope to be able to attend to if they have time and sadly find at the end of the day that time was not available. If they are going to be so busy in another place—and I hope they are—with the important matters of devolution and direct elections to Europe, would it be impossible to start the discussion of competition policy in your Lordships' House, to make here a beginning to the regeneration of British industry that we all so want to see?
4.12 p.m.
Lord GREGSON: My Lords, it is with considerable deference and humility that I rise for the first time to speak in this historic and essential place, your Lordships' House. Having spent the whole of my working life in manufacturing industry, I think it would be expected that I should comment on the industrial aspects of the present economic position. I apologise if I repeat in a somewhat different way some of the points made by previous speakers.
It is now universally recognised that for at least the past two decades the wealth-producing manufacturing industry in this country has been shrinking relative to other activities. Whether it is measured by relative employment, by export performance or by import penetration, they all tell the same story. If this situation is added to the structural effect on unemployment patterns of fewer and fewer
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people producing more and more goods with more and more capital investment, then without the wealth being generated by manufacturing industry to employ people in service industries there must inevitably arise what we now have; namely, an unacceptably high unemployment level.
During the past 12 months I have had the opportunity of considerable discussion with the European Commission and with other industrialists in the Common Market countries. I believe there is now genuine concern regarding what is considered the structural nature of unemployment within the industrialised nations of the world. Countries like Germany and even Japan are devoting a considerable amount of their effort to studying this problem and looking for the solution. There are, however, two specific aspects where the position in the United Kingdom differs both from our partners in the EEC and from other industrialised nations. First, the product base of British industry has shrunk over the past few years at an alarming rate, particularly when related to the expansion of the product base of Germany and Japan. It would be all too easy to list the products that are no longer made in this country, but I think the situation is obvious and no doubt all noble Lords can think immediately of goods that used to be made in this country and are no longer made here. I would, therefore, urge the Government to consider expanding considerably their efforts to encourage product development in all its forms, whether it is a product by process or a product by manufacture.
Secondly, there is the equally alarming increase in import penetration. While this is somewhat allied to my first point, especially when you consider product obsolescence, there are many other aspects such as labour costs, dumping, et cetera, which have to be considered. Again I do not think I need quote statistics; I think we are all somewhat depressed by reading about them month by month. I would urge the Government to set up a special unit to study all the aspects of import penetration and to encourage import replacement by all means possible. It may be good individual company policy to apply the latest dictum of management jargon—that is, to reduce your product range and increase your market penetration—but without indigenous replacement of the discontinued

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products there must be a vacuum for imports to fill.
I should also like to join previous speakers in welcoming the Government's study of, and possible further assistance to, small businesses, which make a large contribution to manufacturing industry in this country. I am also convinced that in many cases they are best suited to reduce the time-scale of product development and make the quickest response to import replacement. My Lords, I thank you for your kindness and courtesy in listening to my brief contribution.
4.17 p.m.
Lord MANCROFT: My Lords, I know your Lordships would join with me in congratulating warmly the noble Lord, Lord Gregson, on his authoritative, professional and commendably short maiden speech. He spoke with authority and professionalism, but perhaps he will be surprised if I say that what appealed to me most was when, in his opening sentence, he referred to your Lordships' House as essential. Possibly he was not present at the Labour Party Conference at Brighton; nor was I. He may however have heard the numerous jokes made against your Lordships' House and in particular, against "backwoodsmen" like "Lord Littlehampton". But he will take it from me, I think, that it is the essence of your Lordships' House that people like him, with his lifetime of experience in industry, can come here and give us the benefit of that experience without rancour and with factual support. When I say that I hope we shall hear him frequently again this is no cliché, because too often, if I may say so without being pompous, a few noble Lords come here, make a maiden speech and are next heard 36 years later. I hope the noble Lord, Lord Gregson, will become a regular, and as brief a speaker as we have heard this afternoon. We congratulate him warmly on his maiden speech.
My Lords, I will take up one or two of the points he made in the course of my own remarks, which I will try to make, if not as short as his, at least not too long. I should like to talk on only one point, industrial relations, upon which every previous speaker has touched. A few days ago the Economist published a
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review of a book on the Grunwick dispute, by a distinguished writer on economics, Mr. Joe Rogaly. The opening paragraph contained this sentiment. "We have", said the reviewer, "become obsessed with industrial relations". My Lords, one never knows in which cheek the Economist places its tongue, and here once again I declare myself defeated. Of course we are obsessed with industrial relations. The Government have rightly, put into the forefront of the gracious Speech their determination to combat inflation, and what greater effect on inflation has anything than industrial relations. On the very day that the gracious Speech was delivered in this House one could note—apart from the television scandal, no fewer than 15 industrial disputes, and they are increasing daily giving hardship to the whole of our population, particularly to the old and the sick. And today we had the first symptom of something which I regard as dangerous. People are asking: "How can we hit back, how can we, the defenceless, hit back against these all-powerful unions?" I understand that, and I would particularly understand it if it were my wife lying on the operating table when the lights went out. However, it is a dangerous, though understandable, sentiment for us to have to experience. When all is said and done, it is up to all of us to support, if we possibly can, the Government in their attack upon inflation.
There are half a dozen references in the gracious Speech to industrial relations. Therefore, if I am obsessed I am at least in good company. First, the Speech says:
"My Ministers will continue to work in close co-operation with the Trades Union Congress and the Confederation of British Industry".
I agree. If they had said that they would try to work in closer co-operation I should wish them even better, but still I wish them well. That is vital.
Secondly, it says:
"Further consultations will be held on industrial democracy, with a view to producing proposals which should command general support".
If they had put it in more vulgar language and said, "Bullock is dead", I should have been happier. I think that that is what they mean but they do not actually dare say it. What was good in the Bullock Report is not new and what is new is not

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good. Any firm worth its salt is already doing the good things that the Bullock Report recommends.
Thirdly, there is mention that amendment to company law is overdue. No one will quarrel with that, particularly as our entrance into the EEC has changed the whole of our attitude towards company law. I should like to ask the noble Lord the Leader of the House to bear in mind that the two previous company law Bills were introduced first into this House to the great advantage of those Bills. That might very well be a means by which your Lordships might help the noble Lord to make what I am sure is an excellent Bill even better.
My Lords, I am worried about the next reference. It says:
"There will be a review of the legislation and institutions governing competition policy, to see that this makes its maximum contribution to improving industrial efficiency".
For woolly incomprehensibility that paragraph deserves an entry in the Guinness Book of Records. It cannot have been drafted even by a politician, certainly not by a civil servant. I suspect that it was drafted by a computer and a somewhat demodé one at that. What on earth does it mean? Does it mean that we are no longer to see nationalised industries, like the Gas Board, with huge showrooms on one side of the street, in competition with the electricity boys, with huge showrooms on the other side of the street? Surely it cannot mean that? Can it mean that the competition which is inherent in the whole system of
private enterprise has now been preferred to the dead and clammy hand of nationalisation? The noble Baroness, Lady Seear, said that she did not want to make a political point. I, also, do not want to make a political point. However, if I did, this is what it would be: "Look who's talking!"
My Lords, the next matter concerning industrial relations which has been touched on, I think by every speaker so far in the debate, is the question of small firms. Both the noble Lord, Lord Carr of Hadley, and the Leader of the House, Lord Peart, referred to it. Something like 6 million people are involved in small firms in this country and the Government are quite right to give them thought. Their contribution to the wellbeing of our economy is quite disproportionate
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to their size. They could contribute even more if it were not for two handicaps. First, they are crippled by penal and vindictive taxation. Secondly, they are unable properly to reward those who have put their backs into making those firms successful.
From whichever way you look at the figures, the history of small firms shows one aspect clearly. Small firms are capable of a higher productivity than bigger firms and they nearly always enjoy better industrial relations. The bigger companies all too often have been a recipe for lower productivity and unimaginative political relations. I say "all too often" because sweeping generalisations are dangerous. I would be disloyal if I were to say "always" because I was for eight years an executive director of Sir Isaac Wolfson's Great Universal Stores, which no-one would describe as a small business. Nor would anyone describe Sir Isaac Wolfson as a commercial dilettante.
Then there is Marks and Spencer. We enjoyed the speech of the noble Lord, Lord Ponsonby, who moved the humble Address. He is now chairman of the London Tourist Board. For 10 years I was president of the London Tourist Board. I expect that by now the noble Lord has come across a letter in the files which gave us considerable pleasure. The letter was from a Japanese tour operator who was bringing a party on a round-the-world tour from Japan. He said that he regretted they would have only a few days in London, but nevertheless they wanted to see all the standard sights—Westminster Abbey, the British Museum, the Tower of London, Marks and Spencer and so on. That also gave pleasure to Marks and Spencer. Shortly before that, the American magazine Fortune—a publication of great commercial authority—stated that it regarded Marks and Spencer as the best commercial enterprise of its kind in the World. That, incidentally, is a view shared by Marks and Spencer.
I remember listening to the noble Lord, Lord Sieff, shortly before he became a Member of your Lordships' House, speaking at the ill-fated Twenty-Club, where a shoddy disaster occurred some weeks ago. I wish there had been a dictaphone on the table when Lord Sieff was speaking. He was asked to what particular facet he

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attributed the success of his great company. Being in the same line of business myself I awaited his reply with interest. I thought he might mention accurate budgeting, quality control, sharp margins or some such. He paused, however, for a minute and said, "Well, I have worked for a long time in Marks and Spencer. I have never heard anyone else who has worked in Marks and Spencer ever speak ill of Marks and Spencer." My Lords, there is a profound truth in that, and those of us who are interested in industrial relations wish that we heard the like of it more often. I wish that we heard that sense of pride more frequently expressed.
I was horrified during the recent GPO troubles at Grunwick. A firm of which I am chairman is next door to that factory and we suffered similar postal troubles. One of the postmen appeared on television and said: "It used to be a matter of pride to work for the old GPO, but now if I go into a pub and there are strangers there, I don't like to let the lads know how I earn my living." That is a terrible thing to have to say.
On the opening day of this debate the noble Lords, Lord Carrington and Lord Byers, made cheerful fun of the voting on the motion at the Labour Party Conference at Brighton calling for the abolition of the House of Lords. That may have been light-hearted, but far too often we see votes on the important matters being won by tiny minorities. I have only some slight experience of trade union affairs. However, there sit opposite many noble Lords who have spent their lives in the cause of the trade union movement with authority and distinction. Thirty years ago, however, I was appointed the independent chairman of the Joint Advisory Council of the carpet industry. When I finished my stint, to my pride and pleasure I was made an honorary member of the Power Loom Carpet Weavers' and Textile Workers' Association. I was given their badge. I was never allowed to vote on anything, though I was asked to subscribe to the sports fund. Noble Lords opposite, with much greater experience than can lend their voices with authority at this particular time. They will be listened to throughout the trade union movement and far further afield. The sobering influence that they can
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give by bringing facts and not theories to those who are puzzled and confused by what is happening at present would be of immense value.
My Lords, I have dwelt only upon the matters concerning industrial relations which are mentioned in the gracious Speech. I should like, however, to turn to one matter which is not mentioned but which I should very much like to have seen in that Speech. I should have liked to see the remark:
"My Government will seek to give management a better chance to manage".
Much criticism is levelled against management, as of course criticism is levelled against trade unionism. That criticism is both equally fair and unfair. Of course management—and I speak as a manager—is far from perfect, and we have much to do to put our house in order. But, unfortunately, good news is no news; it is had news that is always news. Many of the things that are said about management in this country come from prejudiced or doubtful sources. The prejudiced source is often that source which is initiated by our rivals abroad who have an interest in denigrating management in this country for the benefit of their own commodity.
We also have a great deal of criticism from economic gurus and theorists who are probably incapable of running a fried fish shop—I withdraw that remark and apologise because I now remember that I said it once before and received an indignant letter from the National Fish Friers Federation, whose headquarters is at Leeds, pointing out that a fried fish shop is an extremely difficult shop to run and that I was welcome to try my hand at it provided I put a certain amount of hard cash on the counter beforehand. I believe it was my noble friend Lord Carr of Hadley who referred to "mad surgery". He will possibly remember the Marx brothers film in which Groucho introduced Harpo to a circle of friends as "my friend the amateur brain surgeon". There are too many amateur brain surgeons in commerce giving us instruction on how to put management to rights.
I should like to offer one or two suggestions as to how management could be helped. More than anything else management wants the chance to deploy its workforce to the best advantage of

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management, the firm, the shareholders and the workers. At the moment there are far too many shackles. In industry today it is as difficult to get rid of a fool, a lazy man or a crook as it is to reward a really hardworking man or woman who is prepared to put his or her back into it.
Secondly, we would wish to have the right to deploy new machinery and new methods without bringing an industrial crisis immediately round our heads. Several speakers in the debate so far have referred to the need for the introduction of new capital and new investment. Certainly that is true, whether it is investment from within or from without. The balance sheet facing anybody thinking of introducing new investment capital into a British company today is an interesting document. It is full of good news and bad news. Let me remind noble Lords first of the bad news.
Our strike figures are appalling. It is no good saying that they are worse in Ruritania or some such country. Those countries possibly can afford to have strikes; we cannot. Our economy is competing with Italy and with Southern Ireland to get off the bottom of the league tables. We are the only Western country to have suffered a fall in the standard of living, and for the fourth year running it looks as though our industrial growth will be close to zero. That is the bad news and I blame neither labour nor management for it. We are probably both to blame just as we will both take credit for the good news of which I should like to remind your Lordships.
For the first time in many years this country is earning its keep. The International Monetary Fund has expressed almost unflatteringly startled approval at the progress we are making. North Sea oil is contributing in a gratifying way to the stabilisation of our economy. I only hope that it is not also contributing to the subsidisation of our economy. Foreigners are putting money into our industry, though the brain surgeons may say that this is dirty money. Nothing venture, nothing win—we cannot be that fussy. To translate it into commercial language: Confucius, he say: "Man waste much time standing with mouth wide open waiting for roast duck to fly in". Anybody will invest in British enterprise, in British companies and in British organisations now if they
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see the chance of a return on their money, if they see that the company with which they are concerned, or with which they wish their hard cash to be concerned, is not bedevilled by bad industrial relations which will inevitably result in bad workmanship, bad delivery dates and bad after-sales service.
From reading the gracious Speech, I think that Her Majesty's Government are at last learning the facts of commercial life, and I congratulate them. They no longer seem to think that "profit" is a dirty word. They no longer seem to think that private enterprise is an ideological conspiracy. If the economic conditions which the Government seek to create enable us to carry out all that the Government have put into the gracious Speech, there will be no one better pleased than I to think that the Government have at least seen the error of their ways—and, my Lords, about time too!
4.36 p.m.
Lord LEE of NEWTON: My Lords, I should like to join with the noble Lord, Lord Mancroft, in congratulating my noble friend Lord Gregson. My noble friend reminded us that his background is in industry, as indeed is mine. I assure him that the more we hear from people who, like him, have a practical knowledge of the problems that face us, the better it will be for all of us. I also noticed, as did the noble Lord, Lord Mancroft, that my noble friend Lord Gregson referred to the House of Lords as being essential. I know just what was in my noble friend's mind. He had probably noticed, as had I, that quite a number of those who lend their aid to eliminating the House of Lords and to wrecking the Government's programme, played an outstanding part in wrecking the Government's programme in the Commons last year. For that reason, for the very first time we in this House are to deal with the devolution of Scotland and Wales and the elections to the EEC.
It would appear from the lack of criticism of the content of the gracious Speech that in general all Parties have found it satisfactory. I believe that the same applies to the Chancellor's interim Budget. The general feeling seems to be that although we should all like a little more in the way of tax relief, the dangers of doing more at this particular moment are too great

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and therefore on balance the Budget is just about right.
These days we hear much about the need for more open government. There has been a remarkable and welcome change from the situation which existed 30 years ago. Then Hugh Dalton had to resign over giving a journalist five minutes' notice of what he was about to do in an interim Budget. We now have the situation in which Chancellors can give six months' notice in public and it is considered quite lawful. I am all for the remarkable change towards open government. The Chancellor has made it clear that next April's actions will be conditional on increases in income being contained at around 10 per cent. I hope that it works out around that figure, though I shall be very agreeably surprised if it does.
The proposals for limiting increases in income and for reducing inflation are dependent upon a limit on what we pay ourselves. It follows that those who disregard such warnings—I care not who or what they are—are deliberately playing with fire, in the sense that they cannot at the same time demand no limit on the increases they are to receive while prating about their efforts to bring down inflation and unemployment. The two things just do not go together. Indeed, one gets tired of some of the moaning we hear about price increases from people whose own actions make such increases quite inevitable.
I believe that the Government are doing a great deal of work in their efforts to bring unemployment down. I have considerable doubts, indeed, about the ability of any one nation now to escape the consequences of a world slump by its own actions, necessary of course as such actions are. During this year we have had meetings of presidents and prime ministers of the great manufacturing nations. They have agreed on the need for expansion but, so far as one can see, very little, if anything, seems to have happened in this particular field.
In May of this year, I suggested that the ILO itself should be invited to study such issues as the length of the working week, the age of retirement, and related issues of that type. I was told then that the prime ministers and presidents were having their conferences and something
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would happen. Now that we have seen the resignation of the United States of America from the ILO—a decision which I consider to be a terrible mistake—I believe that our own Government should take the initiative in calling a conference of the Western industrial nations to begin an analysis of this problem. It cannot be done by the efforts of individual Governments alone. Certainly no one nation will face the need for these radical changes for fear of pricing itself out of world markets, so it seems that very little or nothing is being done. Now that new techniques are producing more capital intensive and less labour intensive industries, it is surely time for an international effort in that direction.
While it is quite clear that the incomes policy of the last two years has played the major role in reducing the level of inflation, the fact is that while the nation is certainly hoping for further relief from income tax in six months' time, we have now thrown away the mechanism by which so much of our improvement has been effected. That mechanism, although not statutory, was made possible by the Social Contract between the Government and the trade union leaders, which was afterwards endorsed by Congress.
Prior to the chaos of 1974/1975, the leading figures among the trade union leaders were opposed to an incomes policy but, having looked into the abyss of that period, they courageously changed their minds and did what they could to assist one to come into being. At their conferences this year, those trade union leaders were turned down and the Social Contract was spurned in favour of a return to the rule of the jungle in the form of collective bargaining. So we now face the position in which the Government have no statutory powers and no voluntary agreement, apart from the 12-month rule. When they attempted to impose the 10 per cent. guideline upon firms such as James Mackie in Northern Ireland, the CBI opposed such actions, yet both the CBI and the TUC demand Government action to reduce inflation.
I want to follow the noble Lord, Lord Carr, in some of the matters he was analysing as regards collective bargaining. With the attitude which the CBI and, indeed, in part, the TUC have taken up in opposing the Government in trying

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to get the 10 per cent, limit accepted, I want to say to both of them, "Now that you have made it clear what you will not support, perhaps you will tell us quite as clearly that which you will support". The House may have noticed that on several occasions I have tried to discover the position of the Conservative Party on this vital matter. Following what the noble Lord, Lord Carr, said today I want to do it again. My efforts have failed in the past, so I have been doing a little research.
Speaking on the BBC television programme Nationwide during April, Mrs. Thatcher told us that a Government led by her would seek to end Government intervention in this field. She said:
"I want to see a good deal of dispersal of power so that the people back in the factory and on the shop floor can take the decisions that affect them".
She called for an end to wage bargaining at national level and a return to bargaining at the factory level. She said:
"I believe that you have to have more responsibility on the shop floor, because then you will see a better wage deal and better productivity".
Sir Geoffrey Howe went a bit further. He managed to box the compass completely in a speech to the Institute of Directors at Norwich last September by describing the attempts of the Government to interfere in the present round of pay bargaining as, "dishonest, unjust, improper and misleading". On those grounds, he opposed action against Mackie and people of that kind. He then emphasised that the Conservative Party supported the concept of restraint in pay bargaining on the basis of a 10 per cent. increase in the national bill.
What does this amount to? He was saying in other words, "We demand large reductions in taxation. We give a very high priority to reducing inflation. We support a 10 per cent, limitation on income increases—providing you do nothing to make these things possible of achievement."
This is not good enough. I take it that, following the events of 1974/1975, there can be no doubt—and I should like to be interrupted if anybody disputes what I am going to say—that some kind of Government control over the global figure of incomes increases is a prime
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condition for the ability to govern, and that any Government must either devise a means of doing so or get out. Is there any contrary voice on that?
Lord CARR of HADLEY: My Lords, may I take the noble Lord back just a sentence or two to what he said about Mrs. Thatcher and Sir Geoffrey Howe and the attitude of my Party? He failed to realise that one of the things that concerns us is the lack of even-handedness in this area. Why clobber Mackie and do nothing to Ford? What do you do in the public sector compared with the private sector? Why does all the weight fall on employers and none on unions? There is a lack of even-handedness here. I agree that it is a difficult field, but it is the lack of even-handedness that troubles us most acutely.
Lord LEE of NEWTON: My Lords, I did not notice any protest from the Conservative Party over the Ford question. I do not believe that there is any lack of even-handedness in the reactions to employers and trade unions. I should have thought that, if anything, the Government received a worse deal from the unions than from the employers at the moment. I believe for my part—and I have never hidden this—that an incomes policy based on the ability of the economy to meet its provisions without stoking up inflation is the most sensible method of dealing with the problem. Again, Mrs. Thatcher made it clear that she would not accept the so-called Government interference which is implicit in such a policy.
The only alternative of which I am aware is the Milton Friedman type of acute squeeze on the money supply, which would reduce the number of jobs available and would thus multiply the unemployed. If noble Lords opposite want to deny that that is the choice of their Party, they had better tell us what other policies are available to them, because quite frankly I do not know of any. As a method it is pretty callous, and it is certainly not open for use by a Labour Government for it would wreck this movement beyond any hope of repair at all, far worse than 1931 ever did.
Those critics who argue that the Government are, in effect, using an incomes policy for which they have no statutory

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power are quite right. It is also true that they are striving to upset the very worst effects of the return to the jungle of collective bargaining—effects which all parties say should be avoided at all costs. To those members of the labour and trade union movement who are joining in the criticism, I would say that the Prime Minister gave the right answer when he said at the Labour Party Conference, "Back us or sack us". I wish him success in his policy.
There are some people for whom one has great sympathy, namely the obvious victims of collective bargaining whose position makes it difficult to use the power which they undoubtedly have. I am thinking for instance of the firemen. Their pay is lower than it should be when one takes into account the grave risks of their job. A percentage such as the Government are seeking as a short-term policy will, I hope, keep that position vis-à-vis the others; of course they can make no advance. Yet I am fairly sure that their low rate of remuneration is because of the responsible attitude they have always taken rather than go on strike.
On more than one occasion, I have suggested that what was called by some trade union leaders "an
orderly return to collective bargaining" was not going to be easy because, in marked degrees, those leaders do not possess the power to enforce it. The noble Lord, Lord Carr of Hadley, said, in effect, that we must have radical changes in the structure of collective bargaining in this country. Unfortunately, he did not go on to tell us what those radical changes should be, although I appreciate that he spoke for a long time and could not deal with everything. The noble Lord went on as did the noble Baroness, to discuss the large number of small unofficial strikes which take place. I agree with both of them; this must be tackled.
Perhaps I may be allowed to revert to what Mrs. Thatcher calls "the return to bargaining at the factory level". I do not know why she uses the phrase "return to" because many of our key industries have no history of bargaining at factory or local level, in particular for wages; I agree that they have for fringe benefits, but not for wages. I also agree that the practice of factory bargaining for wages is
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now spreading, and with some very bad results. That is a subject to which I shall refer, but national wage negotiating has for long obtained—in railways, steel, coal mining, agriculture, for the merchant seamen, in local government and for millions of people within the Wages Council industries.
I think the right honourable Lady is confusing national bargaining with arrangements between Government and the TUC, which are a very different issue from national bargaining between industries. In any event, every Conservative Prime Minister since the war has supported discussion between the TUC and the Government of the day. It seems to me, therefore, that Mrs. Thatcher has a false impression of what constitutes national bargaining. I do not know whether she is getting all her advice from that genius who told her that one could cure a strike by having a referendum about it. It would probably take two months to get the referendum ready and I am wondering whether it would be deemed to be antisocial activity if the chaps went back to work before the referendum. This is a serious matter which the right honourable Lady might care to look into.
In my view, the great issue which we shall have to
face is that, with the development of mass production techniques, we have now reached the stage at which a strike of 30 or 40 people can stop many thousands of workers who have no grievance. Indeed, it could be argued that it is this kind of fact—that 30 or 40 people can stop a huge number of people—which is in large degree responsible for many of the small stikes to which Lord Carr was referring, because it gives enormous power to a very small number of people. Those involved do not accept that they have any responsibility for the consequences they create—for the great number of people who lose their ability to work.
Consider the strike that has just finished at British Oxygen. It was an unofficial strike which stopped many thousands of people in a wide diversity of industries. This is typical of the problem Lord Carr was discussing. National and regional full-time trade union officials must accept responsibility for the victims of such strikes and they have to do what they can to end this victimisation. I put it to noble

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Lords that the real problem we are discussing in this sense is the complete divorce of power from responsibility in the trade union movement which is the root cause of much of our present difficulty and I believe that that is the key to which we must direct our attention. I was hoping that the noble Lord, Lord Carr, would develop his speech along those lines, but unfortunately he did not.
At national level, when there is a dispute, we have the TUC, ACAS, the Ministry of Employment machinery to deal with disputes. Those are not available to splinter strikes called when workshop bargaining breaks down and official trade unions disown the strikers. In other words, they begin something and they are in a blind alley immediately; there is no next stage. This is the main reason which leads them to attack the public rather than try to find some way to get a solution of their problem.
I suppose that the outstanding illustration of what I have called the divorce of power from responsibility is to be seen at Leyland Motors. I know of many highly responsible shop stewards at Leylands, but they are not, it seems to me, in charge of the policies which are pursued at that factory. I was pleased that the vote of the Leyland employees went in favour of a single bargaining unit for the Motor Division, as against the splinter bargaining which has obtained for so long. Many noble Lords will be as conversant with industry as I am. I had to do a lot of negotiating in engineering and I cannot think of any product in the engineering industry more simple to get a successful bargain about than a motorcar; solve six problems and you have solved the lot, whereas in some of the great general engineering factories we have thousands of problems, yet we manage to get an agreement. Therefore I have never understood what happens in the car industry.
The vote which took place was a triumph for the workforce over utterly unrepresentative shop stewards who sought to retain their power by retaining a set-up which is crazy by any standard of workshop organisation. It was of course the third occasion this year when the line which the stewards
tried to carry out was shown to be against the thinking of the members. The first was when they tried to organise a day's strike throughout the whole of
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industry against the third stage of the incomes policy. Then they were going to have a great march on this place by hundreds of thousands of people, but it was a complete flop. Then they tried to organise a head-on clash with the Government with a demand for a 47 per cent. increase backed by an immediate strike, and again the workers defeated their efforts. As a former convenor of a huge factory, I would certainly have resigned if I had been guilty of such a misreading of the opinions of my members, although I have not noticed any of these chaps doing anything of that kind.
Another issue which must be looked at is that trade unionism is now being obtained on the cheap. If one takes the levels of increases in incomes as against the increases in dues to the trade unions, there is no comparison. This is important in the sense that there are not sufficient full-time trade union officials carrying out the declared policy of the trade unions and working in co-operation with their executive councils and national committees. That of itself gives the opportunity for spurious bargaining at factory level.
Therefore, I believe that the trade unions must examine themselves. I go with the noble Lord in saying that the Government must come in at some stage. But I think that the British trade unions must now analyse what has happened in what I have described as power being divorced from responsibility. I know the engineering unions better than I know others. I was appalled at the insults and the disgraceful attitude at Leyland when Hugh Scanlon tried to get a solution of the strikes which were going on there. That could not have happened some years ago. Shop stewards are within the jurisdiction of district committees and executive councils. There would have been a wholesale withdrawal of credential cards had that happened even a short time ago. I believe that the unions must now examine this dichotomy. They must also look at the reason why they cannot get sufficient full-time people to be on the job—I say this because, as the noble Lord knows, time is of the essence in all these matters—in order to affect a situation which can lead to disputes and strikes long before it gets to that stage. We have permitted cheap trade unionism to supervene in a

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rather silly way. In passing, I wonder how many noble Lords know of the research departments in the United States of America which deal with trade unions. They are glorious institutions which can analyse the technicalities of their industries, perhaps far more efficiently than employers. There is nothing of that type in British trade unionism.
I am sorry to have spoken for so long, my Lords, but I believe that here is the key to what the noble Lord was talking about. There must now be a demand that where trade union officials, elected by the membership as a whole, have been bereft of the power which those unions should possess, there must be a wholehearted attempt to get it back. So long as the kind of organisation which is typical of Leyland is allowed to be retained we will not get back to that position.
5.2 p.m.
Lord ROBBINS: My Lords, speaking from the Cross Benches I should like to echo the congratulations which have been given to the noble Lord, Lord Gregson, for his impressive and down-to-earth maiden speech. I can assure him that his remarks harmonise well with the traditional atmosphere of this Chamber, and I hope very much, as I am sure all noble Lords do, that we shall hear from him frequently in the future. I have an apology to make before I enter upon my theme. An engagement made some months ago, which I am unable to repudiate, may mean that I have to leave the Chamber before the debate comes to an end. I deplore that. I do not think that in 18 years in this House I have ever before been guilty of such a misdemeanour, and I promise your Lordships that I shall try not to be guilty again.
I will not follow the noble Lord, Lord Lee of Newton, in his highly expert and extremely thought-provoking discussion of the structure and tendencies of collective bargaining. Rather I want to revert to the themes which were developed by the noble Lord, Lord Peart, in his opening remarks from the Government Front Bench. I wish that I shared the buoyant confidence which appears to inspire the noble Lord. I personally find the present position an extremely perplexing one. I find it more difficult
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than almost ever before in my lifetime to peer into the tendencies of the situation in which we find ourselves. I do not know whether to be optimistic or pessimistic. I can see arguments on each side.
First, needless to say, I agree with what the noble Lord, Lord Peart, said about the comparison between our position today and our position 12 months ago. Surely there can be no question that in several fundamental respects the position has greatly improved. One thinks of the reduction in public sector borrowing requirement. Incidentally, I find it extremely difficult to understand the oscillations in the orders of magnitude which have been revealed just recently. I think that that is a gratifying circumstance. I think that it is a gratifying circumstance that so far the money supply has remained within the limits agreed between the Government and the IMF. I find it moderately gratifying that the rate of price increase is now slower, and that the balance of payments is becoming favourable. On all these matters there can surely be no caveat at the claims which the noble Lord made in his opening remarks.
Nor would I wish to dispute his claim that the principles of policy which have been enunciated by
various members of the Government in the past few months have been courageous and realistic. I call to mind speeches by the Prime Minister, to the tendency of which, I presume, every right-thinking Member of this House would subscribe. I confess that I found it a little difficult to follow the noble Lord the Lord Privy Seal in his claim that there has been no application of brakes, that there has been complete continuity of policy throughout the tenure of office of the Government which he represents. I found that somewhat of an over-statement.
Holding the balance as evenly as a Cross Bencher can, I must say that I welcomed the admission by the noble Lord, Lord Carr of Hadley, that he would not be willing to claim that his own Governments in the past have been entirely immune from criticism, have been entirely immune from the suspicion, which some of us entertained, that some of the responsibility for the current deplorable state of inflation rests on that side.

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Having up to now expressed very substantial agreement with the tone of remarks of the Lord Privy Seal, I must confess that I am unable to share his confident expectation that we are now set fair to recovery. I confess that I am unable to share the feeling of general optimism which was diffused throughout the majority of opinion in this country up to a few days ago. Let us suppose that our present policy is successful, and let us suppose that by next spring the rate of inflation is reduced to 10 per cent. per annum. I confess that I am surprised that people should view such a state of affairs with any degree of complacency. I find the rate of inflation of 10 per cent. per annum a terrifying rate. I find it a terrifying rate comparatively. It will still be in excess of the rate of inflation of our chief industrial competitors. If it is not reduced still further, then any advantage that we may have reaped by the comparative under-valuation of the pound sterling will very speedily pass away.
But I also find it is a terrifying figure, foreign competition and all that apart, from an absolute point of view. It may very well be that there are some sections of the community which, with the 10 per cent. guideline as regards average earnings, can, roughly speaking, keep pace with the deterioration in the purchasing power of money. But there are other members of the community who cannot. It may even be that there are such members of the community in your Lordships' House. I do not think that you can exaggerate the extent to which the current deterioration in the value of money is lowering, not merely the economic wellbeing of quite important sections of the community but also the general moral tone of our society, and is spreading cynicism and division among the members of it.
Will this guideline be achieved? I certainly would not stand here and argue that it will not, but I certainly do not think that at this stage we can take it for granted. The 10 per cent. guideline was, after all, supposed to apply to earnings. I have the suspicion that some people think that it applies to rates, which, of course, as the Chancellor has explained, have to be considerably below 10 per cent. if his objective is to be realised; and I thoroughly agree with the noble Baroness, Lady Seear, who reminded us that, in industrial relations, averages tend to
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be minima. All that may be wrong, but, in any case, at the present time there are some claims outstanding which are wildly in excess of the guideline, and certainly if they were granted, or if you struck an average between the guideline and the claims, we should speedily see the disappearance of our hopes for the slowing down of the inflation, and the strength of the pound would certainly be eroded.
This brings me to the question of the rate of exchange—a hideous question. Here I cannot help thinking that the difficulties of the situation have been to some extent elided in much otherwise well-informed discussion, and, personally, I must confess to real sympathy with the complexities of mind of those having the momentous responsibility of advising the Government in this matter. Needless to say—I hope I need not say it—if the strength of the recent demand for sterling was due solely to the expectation of a solid surplus in the balance of payments, I should decidedly have no objection to a rise in the rate of sterling. Doubtless such a rise would embarrass export industries other than those responsible for the surplus. Nevertheless, I should regard the balance of advantage to the community to be positive from such an appreciation. I certainly do not subscribe to the view that the rate of exchange should be kept low in order to protect export industries, other than oil.
However, the situation is not nearly as simple as that. The recent excess demand for sterling has doubtless been due partly to the prospects of an improving balance of payments, but it is obviously partly speculative, in anticipation of appreciation, and (what is not sufficiently emphasised in the technical discussion) partly due to the prolonged weakness of the dollar. That side of the situation can quite easily turn adverse with very disturbing effects on expectations in our own economy—an adverse turn which would certainly need a strong reserve to cope with it. Certainly, if current fears regarding the tendency of pay claims were to prove well founded, the strength of sterling at the rate prevailing till recently might easily wither away.
In the last analysis I agree with the proposition of the Governor of the Bank of England at the Mansion House banquet, at which I regret to say the noble Lord

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the Lord Privy Seal was not present. I agree with Mr. Richardson's proposition that adherence to monetary targets designed to diminish inflation must be one of the paramount objectives of policy. Let me say at once that this is not—I repeat, not—because I think that the movements of the money supply are the sole cause of inflation. I contend only that adequate limitation of the money supply is essential to cope with other causes. I admit that, personally, I would have hoped that there were other ways to cope with the excess supplies of foreign currency. I should not have been adverse to more relaxation of the exchange control to offset this inward movement.
I do not think such movements as British investment abroad, let alone the use of money to repay the massive debts that we have contracted abroad and which have to be paid off in the first half of the 'eighties, would be contrary to the national interest. But, besides that, as the situation built up, I will confess to your Lordships that the thought did cross my mind that some regulations preventing the inflow affecting the money supply, regulations, perhaps, of the kind practised to some extent in Germany and Switzerland, some segregation of deposits of that sort, would not be out of order. But these are complicated, expert matters. I am prepared to believe that in this respect I may have been wrong in underestimating the difficulties. At any rate, I am wholeheartedly behind the insistence of the government of the Bank of England that keeping to the money supply target is very important; so that if, for technical reasons, there was no other way of maintaining this objective, I agree that floating was incumbent. But I do not think we should deceive ourselves in this connection. If the rate of inflation moves up again, a higher rate of exchange will not be with us for long—and that is not a circumstance which causes me any gratification whatever.
The PARLIAMENTARY UNDERSECRETARY of STATE, DEPARTMENT of the ENVIRONMENT (Baroness Birk): My Lords, before the noble Lord sits down—he said he will not be here later for the winding-up and he asked a number of questions—may I say that I was not sure whether he was optimistic or not. I should point out that when my
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noble friend (who was not here when the noble Lord was speaking) was, himself speaking, he did show optimism, which the Government are entitled to feel, but did not show any complacency. What he was saying was that the 10 per cent. rate of inflation was a decrease compared with inflation in the past and that we were able to get it down because the earnings in Phase 2 were held at around 8 per cent. I feel that it would be a great pity if the noble Lord, who is a distinguished economist—and I know he recognises that economics is not an exact science—were making his projections, which he appears to be, on a basis of pessimism rather than of giving the Government the benefit of an optimistic doubt.
Lord ROBBINS: My Lords, I hope that I do not stand truly reproached by the noble Baroness. I certainly did not intend any discourtesy to the noble Lord whose buoyancy of expectations inspired in me, as I listened, a certain temporary glow of comfort. I really do not know how to reply to the inquiry by the noble Baroness, Lady Birk, concerning the general tendency of my observations. I opened my speech by saying I found it more difficult to peer into the future than ever before in my lifetime. I really do not know whether, if she were to threaten me with a gun, I should be able to say that I was at this moment optimistic or pessimistic.
5.24 p.m.
Lord AUCKLAND: My Lords, those of us who recall the gracious Speech of two Sessions ago may well, in comparing it with this one, use a musical connotation: the storm scene in Beethoven's Pastoral Symphony, at that time, compared to the delightful final movement of the scene by the brook, this time, where all is relatively quiet. If I may use a Scottish connotation, having a good deal of Scottish blood in me, I would describe this as a rather "canny" gracious Speech. There is much in it for which we should give credit; there is a good deal in it which relative simpletons like myself cannot quite fathom out; but no doubt, as the Session progresses, we shall be able to understand a little bit more about what it means. Ministers are always under a great difficulty when speaking to the gracious Speech because in four

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days a great many questions are asked and a great many statements are made; and if they were to reply satisfactorily we should be here until Doomsday.
I should like to add to the congratulations that have been extended to the noble Lord. Lord Gregson, for a most restrained, sensible and valuable maiden speech, borne out by his tremendous experience in industry. His further contributions will be very much welcomed. I should like to say a few words about the construction industry. Here I declare a very minor interest as a non-executive director of a very small construction company which has had its struggles but which, over the last two years, has managed to acquire a number of orders. The construction industry employs per capita more than any other industry in this country and, of course, the £400 million which has been injected by the Government into the industry is very welcome so far as it goes.
I do not want to press the noble Baroness too hard on the gracious Speech but there are one or two questions which I think are important. Perhaps her Department could study the answers to them, because the industry is very worried about some of the implications of this grant. For example, how will the grant be distributed? Will the small construction industries be considered—and many of them have been in dreadful trouble, for reasons which are not difficult to fathom, over the past several years—or will the very large industries get the lion's share? One of the difficulties at the present time is that so many of the real experts in the industry are operating a kind of brain drain, are going to the Middle East or elsewhere, because of conditions over here. The blame for this cannot be entirely laid at the feet of the present Government. I think we must be fair here: all Governments have a certain responsibility for this situation.
There is also the question of training for the future. Will this £400 million be sufficient to attract young people for training purposes into what is a very vital industry; or are we going to have a further brain drain here? Over the years we have had more bankruptcies in this industry than in almost any other. It would be a crying shame if the smaller businesses engaged in the construction
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industry—and there are many facets of the industry which concern small businesses—suffered at the expense of the very large companies. As has been said in this debate, a small business—and I have worked in a small business all my life in the City of London—can, generally speaking, produce a more efficient product and enjoy better labour relations. Labour relations in the construction industry have, on the whole, been relatively good compared with a number of other industries.
Then there is the question of safety—another very important point. As a vice-president of ROSPA, I must declare a non-financial interest here. We now have the Health and Safety at Work Act, and I hope that this will be applied very rigorously, not only to those who hold key positions but to those who are undergoing training in the industry. The export record of the industry is excellent and one only has to read the Financial Times each Monday to see the achievements which the construction companies—and, notably, the smaller ones—make and contribute to our exports.
I should like to say this about small firms in general since much mention has been made of these. Of course I agree that small firms do not like to cry wolf and, just because they are small, expect a Government to adopt a "lame duck" policy towards them. They must be taken on their merits, and, generally speaking, these merits are considerable. Having also worked for a time in the field of management consultancy, I know—we all know—the value of communications, and in small firms these work admirably. For very obvious reasons this is not always the case in a very large company. It is so often lack of communication between the boardroom and the shop floor or the managing director's office and the typists' pool which leads to, if not industrial unrest, dissatisfaction.
I think perhaps we are overfed with some of the implications of industrial unrest. It hardly needs me or any of your Lordships to adumbrate upon the
present very serious situation within the power industry, within the firemen's dispute, coalmining and elsewhere. It would be wrong and out of order to express views in this House while negotiations are continuing. From this House we wish those who are engaged

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in these negotiations Godspeed to get things back to normal. But there is one form of industrial unrest which is creating very real cause for concern, and that is on the railways. I am bound to make this point as one who has commuted on the Southern Region of British Rail since 1954: why is it that at five o'clock on a Friday evening two Southern Region stations are completely closed down because of one disciplinary problem? It is not so much the inconvenience to the general public—that is a serious and grave point here—but it is the publicity which this naturally gives—and particularly publicity outside this country. Incidents like this, which are short in duration but which cause great inconvenience, also create a great deal of exaggeration and the situation becomes out of proportion.
It is very clear that the economy as a whole is showing at least an underlying upturn. For this some credit should be given to the Government. They are now suffering from some of the headaches and problems from which the previous Government suffered. If the Government continue to stand firm on the guidelines which they have laid down by Statute, it is essential that they should receive support from all Parties and all persons in this country.
5.38 p.m.
Lord SPENS: My Lords, first I want to refer very briefly to the recent Jubilee celebrations which are mentioned in the first paragraph of the gracious Speech. We have all enjoyed this year of Jubilee and I believe that all of us who remember it have seen glimpses of that spirit of comradeship which we last saw during the war. It is a great pity that there does not appear to be any indication that Her Majesty's Government are trying to extend that spirit into the future. At the same time, throughout this year we have been plagued with the spectre of ever increasing unemployment. Who would have thought of a Labour Government, brought up on the basic policy of full employment, apparently accepting the inevitability of continuous unemployment of over 1 million people? Is that not how one interprets the paltry paragraph in the gracious Speech which says:
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"My Government will continue to take action to reduce high unemployment through manpower measures and to promote industrial training"?
Surely this places a very low priority on the battle to get rid of unemployment.
We have been plagued with strikes and go-slows. I do not need to refer to them any more because almost every other speaker has done so today. We have been plagued by that very nasty face of trade unionism, the mass picket—attempts through sheer numbers of bully boys to trample over small businesses, the who result being that it is the police only get hurt. We have been plagued by the fact that large businesses are ready to lay off hundreds, even thousands, of workers at very short notice because something or other has disrupted their production programmes, whether it be a strike or a lack of orders. We have been plagued with the utter failure of many large businesses to communicate quickly enough with their employees over future plans which will affect the very lives of those employees. This lack of communication has been the cause of several strikes.
We have been plagued with a Government which in the past had so grossly mismanaged the economy that foreign bankers had to be called in to put the brakes on the spending spree. I was quite staggered this afternoon to hear both the noble Lord the Leader of the House and, a little later, the noble Lord, Lord Lee of Newton, referring to the 1974 explosion of wages as if it were something that had happened in another world and that they had no responsibility for it. Surely it was the same Government that allowed the wages explosion to happen, and we have all suffered as a result. We have reached a state where a reduction, however small, in the rate of inflation is treated as though prices were actually beginning to fall. I think that point was made by the noble Lord, Lord Robbins. Only a few days ago my wife said to me: "Why is everyone getting so excited about prices? They are still all going up." Yet the Press seem to think that something wonderful has happened.
We have been plagued by the multitude of petty powers exercised by too many "little Hitlers" and "little Napoleons" who continually try to stop us from doing what we want to do, whether they be planners, persons with extraordinary

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powers of entry into our houses and offices, or just officials who automatically say "No" without giving any real thought to our problems. Many of these petty powers are enshrined by the multitude in recent legislation and in the regulations based on that legislation.
My Lords, I have given you seven modern plagues to take the place of seven of the plagues of Egypt. The plagues I am writing off were those relating to frogs, lice, flies, murrain on cattle, boils, hail and locusts. Thank goodness, modern science and technology have made it impossible for such plagues really to affect us! But we are left with three out of the 10 plagues of Egypt which do have a little effect today. First, the river of blood could come true very soon. If mass picketing goes on, the blood that will run will probably he that of the police and of innocent bystanders. Then there is the three-day blackout of the sun. We have not had quite that, but we have had something very like it. The slaughter of the first born, while not so devastating as it was in Egypt, if aimed possibly at the hereditary Peers in this House, could cause some little effect.
The big question now is: Do we want to rely on Moses to lead us into another 40 years of trials and postponements always until tomorrow of the joys and pleasures we think we deserve today—another 40 years of huge unemployment, strikes and all the rest of the modern plagues? There is no indication that Moses knows how to get rid of any of these plagues. Or do we entrust ourselves to the magic wand of the Good Fairy and hope for a miracle to solve our problems? If only she would give that wand a very small shake to show that she knows some of the answers to our 20th century problems, we should be much happier.
Surely it is time for all of us to get together, irrespective of Party, in the work of planning and, to switch metaphors, of planning a 20th century Magna Charta. I was encouraged not by anything in the gracious Speech but by references made by the noble Lord, Lord Carr of Hadley, by the noble Baroness, Lady Seear, and by the noble Lord, Lord Lee of Newton, to the thought that some kind of long-term planning has to be undertaken to help us to get rid of these modern plagues. We know who are the 20th century barons.
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They are not here, except perhaps for one or two. They are the people in all walks of life who have too much power to wield and who wield it to the detriment of everyone in order to obtain a temporary advantage for themselves and for their members. As a fitting finale to the Jubilee year, I should like to see the establishment of some kind of planning agreement between the Parties to tackle these longterm problems.
I should like to put the following suggestions for incorporation into the new Magna Charta. First, the treatment of the workforce by firms must not just be as of an ever more expensive cost to be reduced wherever possible, but as a long-term and valuable asset in which the firm has invested. That would get rid of the plague of lay-offs just because of a temporary shortage. It might also get rid of the plague of failure to communicate with the workforce. Secondly, the introduction, as hinted at by the noble Lord, Lord Carr of Hadley, of a permanent three-day week for labour while machines work for six days: in other words, double the labour force everywhere but make productivity play a much greater role than it is allowed to do at present. That would get rid of most unemployment. Thirdly, I suggest the complete revision of taxation, to do away with the present appalling disincentives of PAYE and, to a lesser extent, the capital gains and capital transfer taxes. I believe that PAYE is the worst disincentive ever to be imposed upon us, and it has been the cause of a lot of unrest and complaint by millions.
Fourthly, and most important of all, I suggest a Bill of Rights to limit, if not to abolish, the right to strike; to limit very drastically the powers of today's "little Hitlers" and to limit the powers of any minority Government. By that I do not mean a Government which have lost their majority in the other place, but a Government which represent only a minority of the people in this country. It would limit the Government's powers to force upon an unwilling majority the sort of legislation to which we have been subjected lately.
My Lords, you may say that all this is pie in the sky because we could never pay for it. But with the use of the revenues

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from North Sea oil and from the unemployment fund, if that is no longer to be needed, I believe that such a scheme could be properly financed. However, the plans for it must be made quickly and now, before Government have frittered away our North Sea oil revenues. We have such an opportunity today; it may be our last chance to preserve our democracy. Let us not miss out on this chance just because it does not fit in with any Party's short-term policies. Let us, for once, sacrifice Party political gains in the hope of achieving something better for the coming generations in the 1990s.
5.51 p.m.
Lord HARMAR-NICHOLLS: My Lords, it was with feelings of some personal relief that I heard the opening words of the noble Lord, Lord Spens, who has just spoken. I thought, until then, that I would be the only one who was marginally critical of the speech of the noble Lord the Lord Privy Seal today. But it would have been very unfair if I had been the only one, because my personal regard for him is such that I have all the qualifications to be president of his fan club, whenever it is formed. But, today, I do not think that he really did a great service.
The noble Lord, Lord Robbins, whose speech was perhaps the most honest one we have had today and, certainly to my mind, the most effective, went so far as to say that he could not share what he called the "buoyant confidence" of the Lord Privy Seal. That is as far as the noble Lord, Lord Robbins, went. I have to go further than that because, while the noble Baroness, with all her skill and charm, stepped in to defend the Lord Privy Seal even before he had been attacked, to say that he had not shown personal complacency, I should have to say to the noble Baroness that whether or not he intended complacency—and I accept her word that he did not—the words he used today and the general context of his speech were such that they could only fertilise complacency in others. When the report of the speech is read, I think they will recognise some justice in what I have said.
What did the noble Lord the Lord Privy Seal do? How did he present his case? It really was an upside-down kind
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of appeal. He went to great trouble—and nobody could disagree with this—to say that, compared with 12 months ago, when things were dismal and dangerous in almost every field to the point of near disaster, they had very much improved. He quoted evidence, evidence which I accept and which it is right to have on the record. But 12 months ago his Government had been in power for two years. It is what they had done for two years which had brought about that dismal phase, compared with which he was able to talk about the great improvement. I thought that my noble friend's simile about breaking a leg in order to show how wonderful you are as a bonesetter was absolutely proved by the words of the noble Lord the Lord Privy Seal in his speech today.
But the part that disturbed me was the one sentence which I took down. When he was asking us to applaud what the Government had done, he said, in relation to the change which he said had started 12 months ago, that their policies had been endorsed by the International Monetary Fund. We know perfectly well, and so does he, that the policies recommended, indeed insisted upon, by the IMF were the absolute opposite of the policies that had been pursued for two years. The very idea of suggesting that they had endorsed the kind of policies that had brought us to that position was not a fair statement of the situation.
The reason why I dared to interrupt him—and it is very difficult to interrupt in your Lordships' House, which is perhaps a good thing; but the Order Paper says that we are having a debate on the gracious Speech and a debate means that one reacts to what is said, as distinct from reading a prepared paper that the midnight oil has helped one to get through—was that the noble Lord was giving the impression that this inflow of hot money was a wonderful thing from every point of view, and that it was likely to last.
Lord BALOGH: My Lords, may I interrupt? It is very difficult.
Lord HARMAR-NICHOLLS: My Lords, I shall quote the noble Lord in one moment. Perhaps he could just have patience, because I am going to agree with the noble Lord and I want to bring

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him in as a witness to support what I want to say. So perhaps he would like to interrupt me when I have used his words in support of my case. It will not take a minute. I want to remind the Lord Privy Seal of a quotation which I happen to have with me—I did not know that I would use it—which is that at,
"…the Lord Mayor of London's annual dinner for our top bankers and businessmen last night, a significant warning emerged.
"It was delivered by Mr. Gordon Richardson, Governor of the Bank of England, in the presence of Chancellor Denis Healey, on the day which brought forth a worrying increase in money supply.
"In the five weeks to 21st September the money stock rose by £920 million, around 2¼ per cent.
"… the situation gave no ground for complacency 'rather it emphasises the need for a sharp weather eye on present and possible future developments and the exercise of nice judgment'."
That is what I gather the noble Lord, Lord Robbins, was saying, too, but that was not the impression given by the Lord Privy Seal, who I am delighted to see is back in his seat. Nor did he heed his noble friend Lord Balogh, who is going to interrupt me in a minute, who very wisely put this to the Lord Privy Seal on 26th October when the Statement was made on the last little Budget of the Chancellor. The noble Lord, Lord Balogh, asked:
"… does my noble friend not think that relaxation of exchange control on the basis of hot money flows is rather hazardous as was shown in 1951–55 and 1959–61 et cetera? When shall we learn that we should distinguish between real improvement and seeming improvement? "—[Official Report, 26/10/77; col. 1228].
Very wise words showing very great caution, which apparently the Lord Privy Seal did not take to heart if one looks at the tone of his speech today in presenting his version of the position.
Lord BALOGH: My Lords, I think that it is better to have hot money in, than hot money out.
Lord HARMAR-NICHOLLS: My Lords, the noble Lord likes to back his horses both ways, but on this occasion his first throught was very likely the better one. I hope that the advice he gave in that question will be taken to heart by this Government and any other Government. That is really an addition to what I had it in mind to say on the gracious Speech, when I asked for my name to be
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put on today's list of speakers. I really wanted to continue the question that I put to the Lord Privy Seal on 26th October, when he was repeating the Chancellor's Statement. What I said to him in that question was:
"… is the noble Lord aware that the sluggishness in industrial development at the moment is less due to the supply of funds than it is to do with the general feeling that employment regulations make it almost impossible for management to manage? He mentioned in the Statement that the Chancellor of the Duchy and the Treasury were looking into these matters together. Have they the power to look into this question as to how much employment regulations are the cause of quite a bit of the unemployment that we are facing?"
The noble Lord the Lord Privy Seal said:
"…I would not necessarily accept that, but I will look at the point and have a word on this matter with my right honourable friend the Chancellor of the Duchy".—[Official Report 26/10/77; col. 1228.]
So that the first question I want to ask him is: has he put that to the Chancellor of the Duchy of Lancaster, and has he had any reaction? Is there any suggestion that there is any force at all in the point I made that, however attractive the easier funds at the moment may be, that will not really encourage the investment and the general buoyancy of industry and business generally that we need if, first, we are to get rid of this unemployment; and, secondly, we are to put this country back, higher in the league than it stands at the moment? If the noble Lord has put the point to the Chancellor, perhaps we may be told later on. If not, I should like to add the reasons why I put that question to him when he repeated the Chancellor's Statement. I put it because I often wonder nowadays why people undertake the responsibility and risk of owning and running their own businesses.
When I first started my businesses, which have been reasonably successful, 40 to 45 years ago, the conditions and general climate were such that you could have some confidence that you would be able to run your businesses in your own way and give your own views without overburdening intervention by Government or anybody else and with a reasonable chance that you would be able to keep a reasonable amount of the profits you might earn in order to develop your businesses. I often wonder now why people undertake the risk and responsibility of taking on their own businesses.

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I worked out three reasons why people do it. The first, undoubtedly, is the commendable and natural urge to be one's own boss. The second reason is the self-confidence which makes people believe that their extra effort will result in giving them more money and, consequently, a higher status in their neighbourhood as a consequence of their material success. The third reason why I think that they do it is the hope and belief that they are founding an enterprise, however small, which their children, or anybody else whom they nominate, can perpetuate or benefit from. I should have thought that was a fairly reasonable reason why people undertake this risk and mortgage themselves and their possessions in order to be responsible for starting and running a business. However, over recent years, particularly over the last four years, each of these reasons has been under attack to the point of being undermined. It has been under attack deliberately by some people who are extreme in their political views. If I may remind my noble friends on the Front Bench, it has also been under attack from the wishy-washy pink outlook of some of our Conservative Administrations over recent years.
Lord PARRY: My Lords, will the noble Lord give way at this point?
Lord HARMAR-NICHOLLS: Certainly, my Lords.
A noble Lord: No, my Lords.
Lord PARRY: My Lords, I am advised that I should not intervene. However, I feel that I have been invited to do so, and I must ask the noble Lord whether or not most small businesses have been killed off by large businesses rather than by the intervention of Government?
Lord HARMAR-NICHOLLS: My Lords, that may be an extra reason. However, I was outlining the particular reasons that I in my business life have found to be most relevant. I have never been frightened of the big competitors because they are big and therefore have access to greater funds and of not being able to have my share of what was going in my particular field of business, because they never had the force of law, the force
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of creating a monopoly. But Government intervention has those things. I have no say about what my telephone bill will be because of mismanagement. I have no say about what my tax will be and no say at all about what the cost of nationalised industry supplies, which I must have, will be.
I am not frightened of competition, nor would anybody with any guts and any ambition at all be frightened of the big boys. However, I am frightened of the effect which Government intervention can have because it is unfair intervention. That is why I gave the three reasons. First, you take on the job because you like to be your own boss, but today it is an impossibility to be your own boss. Today you are the servant of so many bureaucrats in both central and local government. They have the power to walk in, examine your books and insist on your being a tax collector. They settle your wage rates and leave you in a position where your employee can walk out on you with a day's notice, whereas you have to give him at least a month's notice; and even when you do that you risk the charge of unfair dismissal.
The point I should like the Lord Privy Seal to pass on to his right honourable friend, whether or not it is well based, is the general image—certainly in small and medium-sized businesses and possibly in big ones, too—that the tribunals dealing with unfair dismissals are not, by and large, fair. The feeling is that too often a solicitor is the chairman—too often a solicitor who has not been a success in his own line and that is why he is available to be chairman. Next there is the employer's representative who, as is so often the case in our country, is inarticulate and who does not seem to take detailed interest. Then there is the trade union representative who does take a professional interest in the employee and who is usually very articulate and very keen, and who does his homework. As a result, you do not get the feeling that the tribunal decision is as objective and impartial as you do when a case goes before the law courts, where you have the chance to put your defence and call your witnesses in a traditional way.
I suggest that this problem ought to be looked into if the Government want medium and small-sized businesses to

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have sufficient confidence to borrow money to invest and expand so as to employ more people. All of these points together make the phrase "being your own boss" an absolute mockery.
Regarding the profits that are made in order to improve your general position and give you the satisfaction of knowing that you are being a success, the impossibility of making a net profit today in small businesses is driving people out of private business ownership. More than any one thing, as has already been mentioned, are the tax levels. Then the cost of electricity, telephones and the points I have mentioned, including the training levies you have to pay, are all outside the control of the operators of the business and make financial success almost unattainable in many instances, however efficient a person may be in his own trade.
The third reason—the incentive to take a risk because you feel you can pass on to your children or to the people whom you nominate—has been undermined. Capital transfer tax has killed that inducement stone dead. There are 800,000 small businesses in this country which come under that heading, and a terrific proportion of the 800,000 at this minute would wish to invest more money in their businesses and expand them. This means that they could take on extra people. It' there are 800,000 such businesses, they have to take on only one extra man, if they have the confidence to do so, and the unemployment list is halved, big though it is today. Whatever the reason for dissent that the noble Lord may give, the feeling that you are not going to be able to pass on this business, if it is a success, to the people you nominate is one of the biggest disincentives to the kind of encouragement that we want today.
I outline these points for the Lord Privy Seal only because they are ones which have to be taken into account, quite apart from making the borrowing of money more attractive and making the funds available. These are general feelings regarding the lack of being in control. My noble friend Lord Mancroft described this problem perfectly. He was absolutely right from the point of view of the people who are in a position to help the unemployment problem. You must alter the atmosphere and give management the feeling that they are going to be left to
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manage. At the moment that is not being done and that is not the feeling that is abroad.
Baroness BIRK: My Lords, the time!
Lord HARMAR-NICHOLLS: My Lords, the noble Baroness never likes to hear me make a speech. Every time I have spoken in a debate she has drawn my attention to the clock. I can tell the time. I also have noticed that little thing there, showing length of speech. But if something is entitled to be said I feel that it ought to be said, and I do not believe that we ought to be coy about it. It is because people who hold my point of view have been too coy in the past and have not been prepared to go on to the witness stand that the Party to which the noble Baroness belongs has been able to get away too often with very near murder. Having said that, I hope that my message will be passed on to the right quarters and, more important, that something can be done about it.
6.10 p.m.
Lord RHODES: My Lords, I listened to the noble Lord, Lord Spens, criticising the Government and, while agreeing with some of his strictures, I must say to him in all seriousness that one of the tragedies of the present day is that there is no real credible alternative Government in sight, even on the far horizon. With regard to the speech made by the noble Lord, Lord Harmar-Nicholls, on the subject of the small businessman, may I say that there is more humbug being talked about the small businessman today than ever before. I do not think anyone could appreciate what it is like to run a small business until they have sold their car on a Thursday night to help to pay the wages on a Friday.
What I wish to say to this Government is this: show some real reaction to the small businessman by doing something about the shocking injustice for men who have forged their own businesses and who, because of age, have sold and retired from those businesses. They have taken the due reward of what they have done in their lifetime. What they have received is their savings and they have been eroded by inflation and, to cap all, they are subject to the imposition of a swingeing 10 per cent. extra tax. For goodness' sake, give the

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present generation of small businessmen some indication that you are not going to penalise them when they retire. That is all I have to say on that particular subject.
Our early Industrial Revolution gave us a start on everybody else. It gave us notions of grandeur; it enabled us to build a Navy and to build an Empire. Empire preferences feather-bedded us for imports and exports, and meanwhile our manufacturing base became eroded. Invisible exports filled the part of the gap created by the erosion, but now we have North Sea oil. I reckon it is very unfortunate that the realisation about our eroded industrial base has coincided with the most unusual recession that I have experienced in a long life. All the recessions since the war have been lulls between more and more capacity to clothe, feed and service an ever-increasing world population. Of course, every now and again we have had a cutback to discipline the way in which the economy was being run: a mild credit squeeze, a guideline or two, and, hey presto! on to the next Budget with a mild reflation. That familiar pattern of filling up spare capacity and then a bit of confidence to invest that came nearly at the top of the boom, and more unused capacity at the next recession. This time 20 per cent. of British industry is unused.
There are certain very different additional factors which prevent a simple solution on the old-established orthodox lines. We have UNCTAD and a hundred organisations clamouring for a better deal for the poor nations, the Third World, North and South, black and white, insistent and demanding, and then we have OPEC—a phenomenon that we never thought we should have to face. In retrospect it makes one wonder how on earth the Western multinationals held the oil producers in thrall for so long.
What are the big debates which arise out of this? The first one is this: Is our present economic system capable of meeting the challenge of the day? Everyone has that question at the back of his mind; doubt on this is continually being expressed. The people on the Left are forever making promises to the workers that, with just a little more movement to the Left, there will be more bounty and better times ahead. We are told that the
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rich are getting richer, the poor poorer. The spivs and stars spring up into public prominence overnight—money, money, money, more money, for God's sake more money! That is what you see every time you open your paper in the morning. It is materialism gone mad. Until we really believe in what is good for us politically we can whistle for improvements in industrial relations; we can whistle for the tolerance needed to get us into the 21st century without disaster. People become enthusiastic about what they think and what they do if it can be demonstrated that there is no better way of doing it. If we cherish the freedoms, hard won as they have been, that we have got, there is no better proven way than the system we have; and I will tell you why.
It never seems to be brought out in argument these days that you can have a capitalist and a non-capitalist dictatorship but you cannot have a democracy without a fair amount of capitalism. When you look around the world, if you can tell me one good democracy that is not also a capitalist country I should like to hear of it—and, moreover, the system has been eminently successful. What can we do to catch up on our eroded industrial base? Short-term, long term, investment for efficiency is the only antidote to devaluation. Just as a strong currency—and let people mark this—is the only antidote to inflation. We shall never make any progress with regard to inflation until the currency is strong and until industry in this country is able to face up to the competition that that implies. Can we weather this politically until our industrial base becomes efficient, or are we in for massive remits from North Sea oil to bolster up steel, cars, Drax—you name it?
Then there is the big one that everyone is questioning and everyone is anxious about: What are we going to do with North Sea oil revenues? It has not been mentioned so often this afternoon as I had hoped; indeed it has hardly been referred to. There is no doubt that as long as oil production remains high the exchange rate will float upwards and come to rest at a point which reflects the balance-of-payments surplus generated by North Sea oil. But the other point is that alongside that is the question of "non-oil" balance of payments, which is at the

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crux of the whole of our modern debate. This is the point which can reduce our unemployment. Let nobody forget it. The whole of our situation, with our present inefficiency, lack of productivity, the lack of investment we have heard so much about this afternoon, lack of investment in the latest technical equipment, the high exchange rate, means that most of our goods could of course be overpriced in other markets. These are the thoughts of a comparatively (shall I say?) modest student of the times, but one having had a background as a manufacturer, which has been a discipline.
The next stage to this argument is: How do we make certain that North Sea oil leaves us something to live on once the oil has run dry? This problem is not just concerning this country; it is concerning every single oil producing country in the world—and I have been to several during these last two years. They are all at it. They are all buying machines against the day when their oil runs out. I went to Venezuela last year. They are up to the neck in it, buying know-how and machines from all over the world. Have we not seen the results of all this in Iran? It is worldwide. It would do our ordinary folk good if they could go overseas and see what is going on, because that is where you are going to get your cheap competition from. They have cotton mills, woollen mills, steel mills; and they are starting from scratch. They are not like our steel industry carrying 44,000 people too many. I hear on very good authority that you could close up the whole of our steel industry—and that it would pay the country to do it—and pension the workers off. Well, that is a smart state of affairs, if that is true!
Everyone in the world agrees that oil, this great gift of nature, should be used to build a brighter future for everyone and not be wasted in jam for today. But how many people are qualified to give an interpretation that makes sense about this? We want to hear more from the people who can. Being interested in this, I went to Sweden and had a stay there in the Recess, just as I have been to Germany on several occasions during the summer to have a look to see what is happening. Sweden—mentioned by Lord Carr this afternoon—is the most sophisticated nation in the world in terms of modern
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science and modern technology. What do we find? They believe that the problems have been too big for the business and the unions to settle for themselves. They, too, feel that the problems have grown much deeper than ever before; and when strictures are made about our Government today, it wants to be understood that this is the most difficult situation that has ever been encountered in industrial Britain.
The basic problem with Sweden is lack of competitiveness. They are accustomed to exporting 60 to 70 per cent., in some cases 90 per cent., of what they produce. But their unit costs of labour have gone up far higher than they have here. From 1974 to 1976 they went up by 60 per cent. So they have had three kroner devaluations this year. This is the country which has been held up as a model to all the industrialised world. Everything in Sweden is going to depend on the unions, and the unions in Sweden understand the political implications and the economic implications better probably than unions anywhere else in the world, perhaps excepting Germany. They know what the situation will be if what they get is not earned.
This is accompanied by loss of productivity. In the 'sixties productivity rose by 8 per cent. per annum,. From 1970 to 1974 it dropped to 6 per cent. Productivity in Sweden is now 1 per cent. It is causing a lot of worry, because they know that high efficiency gives high standards of living and a high level of social justice. And yet in Sweden 12 per
cent. of the productive capacity is idle. They have made it very expensive to shed labour, so they try harder to get the orders. They are victims, too, of the tax and the welfare system converging, so reduced incentives to work increase voluntary absenteeism. That is the gloomy side of Sweden. But what I admire about the Swedes, unions and management alike, and Government, is that they do not see any alternative to the present system in the West, and despite the fact that they are in difficulties at the moment they have the confidence to go ahead and invest in the latest equipment.
I want to say this in conclusion. The argument is going on under three heads about North Sea oil revenue. Some say: "Let us have a great balance of payments surplus and the rapid repayment of debt." Others say: "Let us tipple the money into

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the National Enterprise Board and get everybody efficient again over the next 10 years." Then there are those with the liberal ideas, to spend it, in the hope that when you spend it it will generate enough activity to mop up the unemployment. I want to draw this fact to the attention of the House, that unless you do your efficiency investment first there is no hope of mopping up any labour later on.
It may be that we shall compromise on these three ideas about what we should do with North Sea oil. I would urge the Government to make a compromise between the first two, the repayment of our debt and the use of the National Enterprise Board and other media to increase our efficiency by the introduction of better machines. May I suggest this to the Government. You have your little Neddies who are the people in touch with industry at grass roots. Why cannot you bring in now a scheme that little Neddies report the number of machines in their own particular industries which are 10 years old or more, and gradually introduce a system whereby there are no machines in the manufacturing industry more than five years old. It will take 10 years to do it, but if we can set off with a plan of that sort it will give confidence to thousands of people in this country that the Government know what they are about.
6.30 p.m.
Lord DAVIES of LEEK: My Lords, it is always most interesting to follow my noble friend Lord Rhodes. From his vast experience as an individual in manufacturing and in the textile industry which was of vital importance to us from the 19th century right up to today, I have learned quite a lot from him in private conversation. I am sure that the other place and this House has done so from time to time. At least he tries to awake the spark of reality.
I have thrown my speech away. You will be overjoyed to know that my speech will take six minutes. That will please the House more than anything else. I have heard a good deal of talk, but I do not think that anyone has read the gracious Speech. The speakers have all said what the Government must do. However, the gracious Speech says:
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"My Ministers will continue to work in close co-operation with the Trades Union Congress and the Confederation of British Industry".
Did the House expect a diagram of that during this debate? We shall have an opportunity during the next 12 months to draw a diagram of that co-operation and, I should hope, make constructive suggestions from both sides of the House. I shall refer only to a couple of points, but the Gracious Speech goes on to say:
"Continued encouragement will be given to the efficient production, processing and distribution of food "—
thank God for that—
"with the aim of meeting a greater proportion of our national needs from United Kingdom agriculture. My Ministers will seek improvements in the operation of the Common Agricultural Policy".
I do not want to sit down tonight without mentioning the small farm. I do not mean the small farmer; I am referring to a farm with a small acreage. That is small enterprise, and no Government have done more for small enterprise in agriculture than British Labour Governments from 1945 up to today. Britishagriculture as neglected by the Conservatives and by the financiers. There has always been this dichotomy. "Dichotomy" is a wonderful word: I have heard it used here I think three times today. I repeat, there has always been the delicious dichotomy between the high-falutin', sharp-shooting, bumping, tough financier and the poor agricultural worker or the small entrepreneur in a textile factory like that of my noble friend Lord Rhodes. We have applied today 19th century language, 19th century so-called axioms, to 21st century problems. I have written a couple of booklets on oil and I have knocked around the parts of the world where they produce oil. We used the expression: "They were beggars sitting on a tin of petrol, the rags of their poor behinds beating their brains out because they had no chance to think that they were exploited". The capitalist countries of the world could drag on the oil. They did not care much about the people searching for the oil. The Darcy Corporation did well, but for the people who lived there it was all finished.
I am glad that my noble friend mentioned the North and South problem, the Lomé Convention and the East and West problem. We can no longer get the raw

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materials at the prices at which we received them in the past. We must face that situation. Consequently, the old-fashioned enterprise that helped to make Britain great and which had a place in the gambit of human information, namely, the smaller capitalist enterprise, can no longer work. We have now invented State capitalism. We push money in. Noble Lords may ask about pushing money in. In the last two years we put more money into small enterprise than dear old Tommy Lipton had tea leaves. Damn me, the Government cannot get the statistics right because the Treasury will not employ accountants. We cannot trust the Treasury' statistics. Every time we have statistics baled out here, who is the authority for them? Who is the authority for the white books? About two years later they say that they were £2,000 million wrong. I am not making this up. This has happened. We must start to put the House right. If we have 21st century methods of production we must not depend too much on computers. Computers give the wrong answers if the people working them are daft enough to put in the wrong questions. We seem to be living in a society where we apotheosise a machine. Whatever system of society we go into we still depend on human know-how. We must learn that or perish.
Thus I make a plea that when we apply the Common Agricultural Policy we keep alive British agriculture and the opportunity of the small farm. Small is beautiful. Russia learned the lesson and I have been around its huge farms. Our most productive farms in Britain are still in many cases those that have small acreages. I do not want to lose that initiative.
I turn to my own people, the miners. I come from farmers and miners. If you want miners to cut the new coal seams then the industry must be made attractive. For heaven's sake, do not let us make mistakes such as the right honourable lady made on the television the other night. The productivity of the collier today is higher than ever, but his production is lower. I have said this before in the House. When I was a youngster there were 60 pits in the Rhondda. Now there are two. Therefore, if your production goes from 2 cwt. to a ton a shift and instead of 60 pits you have only two, your production must go down. Somebody
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does not seem to have grasped that elementary fact.
We shall have a delicious time ahead of us discussing the wonderful hopes of this Labour Government or any Government in a transition period. I know that if we cannot get a sense of decency, the elimination of greed and much more of the spirit of comradeship and working together that we had during the war, this country will lose its greatness. However, I have enough faith that whatever Government wins the next Election the people by then will have learned that we must work to make Britain great again, whatever the Queen's Speech may contain.
6.40 p.m.
Viscount AMORY: My Lords, when a distinguished Welshman says that he will throw away his notes, I do not believe that it makes the slightest difference, especially when the agreeable subject of debate is a small farm on which 1 know the distinguished noble Lord, Lord Davies of Leek, spent a good deal of his distinguished youth.
It goes without saying that there has been a dramatic improvement over the past year in some of the very important features of our financial situation, especially in the external sector. As was mentioned earlier, we are at present just about paying our way. If that is not so then the noble Baroness who is to wind up the debate will correct me. The Chancellor of the Exchequer is entitled to his share of the credit for this because after, I think, many of us feel, an unfortunate start, he has over the past 15 months or so been pursuing a commendably consistent policy in his priorities. Credit is also due to the skill and steadfastness of the governor of the Bank of England, Mr. Gordon Richardson.
Our short-term problems are relieved but our national performance, by any test, is still deplorably weak. The current rate of inflation is still dangerously higher than that of our competitors; our level of unemployment is sadly high with a tragic waste of human resources; and, most serious of all, is our very low level of productivity compared with that of other countries, our competitors. I say "most serious of all" because I suppose that that is the basic cause of the greater part of our poor national performance

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and is likely to be the most intractable of our problems. Overmanning seems to be a besetting national malady.
When we invest in more up-to-date capital equipment too often we do not seem to reap the benefit that others reap from it. My noble friend Lord Mancroft made that point. I believe that much of our relative overmanning is due not to national laziness, far less to bloody mindedness, but to a constitutional and traditional incapacity to believe that our ways are wrong or unreasonable. This handicap of low productivity, with its twin aspects of the human attitude and low investment, will take a long time to put right. Of the two, the human attitude will be the more intractable. Until we can begin to improve our productivity we have no valid ground whatever for expecting a higher standard of living.
North Sea oil has enormously improved our balance of payments situation, but, as I think is now generally recognised, it is a depleting asset. As has already been said, that windfall must be used for debt repayment—a point which I believe the noble Lord, Lord Rhodes, made—and for long-term investment so that our competitive capacity is strengthened and not frittered away in consumption.
Some people seem to believe that we can secure competitiveness by a continuous process of currency devaluation. That is a policy of despair and a recipe for continually falling standards of living. Again that is a point which the noble Lord, Lord Rhodes, made with great force. The only correct policy is to bring our level of efficiency up to that of our competitors. Nothing more than that need he done, but that must be done. That, too, is the only solution which is consistent with our national self-respect. We know in our hearts that over recent decades efficiency has been less respected than it should have been if we were serious in seeking a higher standard of living. Indeed, as a motivating force it has become almost something for which to apologise. Somehow we must get that fatal enervating infection out of our bloodstream.
I doubt whether it can be economically right indefinitely artificially to hold down the exchange value of sterling for fear of becoming uncompetitive. I doubt whether it is worth my while making this
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speech because the noble Lord, Lord Rhodes, seems to have made it just now. He must really stop nodding his approval. Of course, it depends whether there is a continuing pressure on the market for a higher value. If there is, then artificially to hold down
seems to be a confession of weakness and had for confidence in us overseas. A flood of short-term money, as I well know, can be highly embarrassing, and it is always worth remembering that, however fast short-term money comes in, it can and often does go out still faster, and always at an inconvenient moment.
The reduced public sector borrowing requirement from an extremely high level is most welcome, and I am sure will be helpful. Tight control of the money supply—and the control over the past year has been firm—is absolutely essential if the fires of inflation are not to be restoked. So I hope that control of the money supply will be tightly maintained. The published monetary targets must also be a good thing. The current downward trend in internal inflation, from again a disastrously high level, is enormously important, but we still have a long way to go because we now need not only to get down to the level of our competitors but down to well below their level if we are to recover ground. Anything which slows down or halts that trend will, of course, be disastrous.
Phase 2 has been generally adhered to though at the price of reduced differentials, and the harmful effect of narrowing differentials is now showing itself in certain directions. In our policy for recovery taxation has a very big part to play. As I think is now becoming generally agreed, direct taxation on earnings and income must be drastically reduced, if necessary at the price of increasing indirect taxation. I believe that the Chancellor of the Exchequer is now converted in principle to this, though how far he will have the courage to go I do not know. But reductions must be applied at all levels and to all kinds of income. It is not a question of the Chancellor of the Exchequer giving away more money but one of taking less away from us. One goes on saying that, but when right honourable gentlemen get to the Treasury it is extraordinary how often they love talking about giving things away. I was always very fond of giving away things which did not belong

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to me, but eventually I was brought to a state of order and discipline over that. The movement in the direction of lower taxation of earnings must be accelerated.
It is not yet possible to predict the rate of increase in wages and salaries that will take place over the next 12 months. One would think that the Chancellor of the Exchequer's average of not more than 10 per cent. is the absolute maximum that can be absorbed without reaggravating inflation. It looks as though there is a danger that that 10 per cent. may well become the minimum rather than the average and that a good many so-called productivity schemes will be called in aid, many of which from past experience are unlikely to justify that term. If the average increase is higher than 10 per cent. I believe that the noble Lord the Lord Privy Seal would agree that more inflation and more unemployment will be the price we shall pay. It is fashionable among some economists to say that a higher rate of wage and salary increases than is justifiable will aggravate unemployment but will not directly exacerbate inflation. I doubt whether that is so. I believe it would aggravate both problems directly.
What about the tragic problem of unemployment? Sadly, I do not greatly believe in what is called deliberate job creation or widespread Government intervention. Even when they do create jobs it may be a palliative, but often sustainable productive jobs are not created. Higher employment in production and services depends more than anything on that psychological climate called confidence—not confidence in a boom, but confidence in sufficient stability to offer a good chance that efficiently conducted enterprises, both big and small, are likely to have the opportunity of earning a profit after tax, and through that profit to ensure the continuation and growth of the venture. I thought that my noble friend Lord Harmar-Nicholls quoted one immensely impressive statistic, among others, if I got it right. He said that if every small business in the country had productive work for one more employee it would halve our present rate of unemployment. To me that was a dramatic proof of how important small businesses are.
Unless there is such a climate, businesses big and small will simply not find it
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justifiable to risk borrowing to invest or taking on more employees. As has been said, it is now an expensive business to face all the obligations of taking on employees. Therefore, the Government's main role must surely be to create such a climate. The most effective way of doing that is by holding inflation at bay and maximising incentives by reducing direct taxation.
Inflation still remains the first enemy to conquer. That calls for three disciplines; the discipline of income restraint; the discipline of eschewing the printing press, and the discipline of restraint in public expenditure so that there may be sufficient resources left for the creation of wealth in the private sector. Our future depends on whether we are capable of exercising these disciplines. We have a wonderful opportunity now and some hope that we may have learnt some of the lessons we had to learn.
I have said several times in your Lordships' House that we shall make economic progress only when our
main economic priorities are supported by all the political Parties. The harsh pressure of events has ensured this coming about to a greater extent than seemed likely a few years ago. It would be a tragedy
if such progress as has been achieved were, through impatience or lack of self-discipline, to be thrown away. At the moment there are some incipient signs of renewed confidence in Britain overseas. Let us see that this confidence is justified. In the words of the Governor of the Bank of England in a recent speech, let us
"encourage by approbation and reward the skills and productivity of all who, in their myriad different functions, create the national wealth".
6.53 p.m.
Lord JACQUES: My Lords, I speak in admiration of the Government's stand against what could be a rising tide of cost inflation. It is a policy which will bring turmoil and carries with it great risks, but it is a bold and statesmanlike policy. Free collective bargaining is an attractive phrase, but sometimes the freedom is a different kind of freedom; it is freedom to extract from the community a monopoly value. The community, therefore, has a right to a voice. Furthermore, if the parties to the free bargaining are unable to get agreement and there is

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industrial action, it is not only the employer and the employees who suffer but also the community, and it should at all times have a voice. In today's circumstances those with the muscle set the pace; the weaker try to follow and inevitably there is inflation, and, as on five occasions in the post-war period, we have had to have a temporary incomes policy. If this country is to have any future at all as an industrial nation it must find a way of having a permanent incomes policy which is flexible, and which is acceptable to the community as a whole as fair and reasonable.
There is an understandable tendency in human affairs to postpone difficult decisions, especially if there are resources available which will tide things over. Let us not fritter away our bounty from the North Sea in simply buying time. That is a great possibility which we must avoid. The alternative of a greater reliance on the control of money and credit is no longer available to us in this day and age. The consequences of such a monetary policy are not acceptable to the community. Furthermore, such a policy would not achieve the objects for which it sets out; unemployment fosters a loss of human values which cannot be measured in money.
This is now understood by people in all walks of
life and in all political Parties. They see unemployment as the most demoralising of all social conditions and consequently, in so far as that is a consequence of a strict monetary policy, it is quite unacceptable to the community. Furthermore, in these days a strict monetary policy which would bring unemployment would encourage militancy, and result in overmanning to a far greater extent than it would discourage the demand for higher wages. It would also bring us bankruptcies of the worst kind. The smaller firms in our economy are the seedbed of the economy. They are frequently overstretched rather than inefficient. They could be caught with insufficient cash flow and forced to liquidate or sell out at a bargain price.
For these reasons, put as briefly as I can put it, I believe that a monetary policy is no longer, in present-day circumstances, an alternative to a permanent incomes policy. I believe—and I think
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here I am in agreement with the noble Lord, Lord Carr of Hadley—that our first priority should be to attempt to reverse the tendency towards industrial anarchy. Industrial anarchy not only undermines our economic performance and discourages investment; it also threatens our democracy because anarchy is the greatest enemy of democracy. It is that which brings us dictatorship either of the Right or of the Left.
I would advocate that we should have a simple and short code of practice in industry dealing with only two things: the recognition of trade unions and, secondly, the conduct of their members after recognition. I should like to see it prepared by the Government, I would hope in consultation with the TUC and CBI. I would go further and hope that they might get their agreement. I should like it to be approved by Parliament and, if all that was possible, I should like to see that stated in bold letters on the front of the code of practice.
I am of course aware that such things as the recognition of trade unions was dealt with in the Employment Protection Act. As the House will be aware, I have very good reason to know that. I could even name the sections concerned. But I regard that as the background; something that could be referred to by the lawyers and by the officials. I want a code of conduct which will be simple—something which will be understood by the worker, and something which would be seen by the worker to be balanced and fair.
It would be in two main parts, the first dealing with the right of trade unions to enrol members, the right of those who are enrolled not to be victimised and the right of the trade unions to negotiate on behalf of their members. That I would put quite plainly. In the second part I would state that I expect conciliation before strike or any other industrial action, and to show to the workers that it was fair and not just postponing the evil day, I would limit the period of conciliation to one month; if at the end of one month the conciliator had not been able to settle the dispute, he would then issue a report which would be brief and simple, so far as that is practicable. A copy of that report would go to all the employees and not only to the employer, union and media. It would

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go to the whole of the staff concerned, and therefore they would have an opportunity of seeing it. If, then, they wanted to take industrial action, let them take a ballot, and after the balloting we can say that we have done all we can, and they may take their industrial action. We cannot prevent the right to strike, but we can insist on there being adequate consideration before a strike. That is all that I would attempt to do.
I appreciate that many questions arise. First, for example, would this code of conduct apply when it was an unofficial and not an official strike? I would say Yes; anything which inconveniences the public is deserving of some action, and if it is unofficial then it is quite clear that the first conciliation must be between the union and its members, so the sooner we start the better. Then there is the question: Should there be sanctions? I am not one to advocate either imprisonment or fines in industrial affairs. Experience shows that it would not work. However, I bear in mind that our professional associations—doctors and solicitors—are charged with the responsibility of discipline within their ranks. I know that they are in a somewhat different position in that they have a monopoly in their professions; nevertheless, I believe that associations of employers and trade unions could, if the wish were there to enforce greater discipline, get that discipline without the need for any mandates on the part of the State.
I appreciate that on all sides of the House I will be thought to be a little naive. I can only say that in my long experience in management I have found that on occasions it pays to be naïve. I am therefore content to be naïve, but anybody who thinks I am naïve I invite to put up an alternative proposition.
The Earl of GOWRIE: My Lords, I enjoyed the noble Lord's speech and listened with great care. However, he might care to know that most of the provisions he has so sensibly enunciated appear in the code of practice of the Industrial Relations Act.
Lord JACQUES: That may be so, my Lords, but what I am after is something quite different; I want a short and simple statement, not something for the lawyers and trade union officials but something
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that the worker will understand and which, above all, will deal with the two issues I mentioned. Show that it is fair and balanced, show that his organisation in a union will be welcomed but, having gained that concession, show that he has then to act fairly as a member of that union. That, I think, is not in that code.
7.4 p.m.
Lord HAWKE: My Lords, it is rather difficult at this stage to think of something that has not already been said, but I will do my best. In the last corresponding debate on this subject I asked for less Government borrowing, cheap money and some protection for British industry. All those three things have to some extent come about. One subject that has not really been mentioned this afternoon is cheap money and I would recall a reminiscence to show how important that can be. Not many months ago I had to look at a scheme for replacing some machinery in a textile plant, the existing machinery having been in the plant for a very long time. The calculation was that the new machinery would pay its way, but not by much of a margin. It would he run with fewer people, which meant that it would create more unemployment, but the interest on capital for the new machinery was infinitely greater than on the old, which had been written off for nothing. Thus, any decrease in the price of money would naturally make a great difference to calculations of that sort, and those are the calculations which are being done by manufacturers every day throughout industry.
At present the Government are fighting a rearguard action against price increases which have come to be called inflation. All sorts of theories have been advanced for this phenomenon and all sorts of remedies proposed, including that of the money supply, though I agree with the noble Lord, Lord Jacques, in that I have never been convinced that the money supply had much to do with it. For many years I have believed that the domestic price level was heavily influenced, if not dictated, by the price of energy and when one considers what the price level has had to compete with in recent years—the quadrupling of the price of oil, the devaluation of the pound and the EEC agricultural policy—it is no wonder that prices have been rising, and I only fear

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that we have some more adjustments to face. In facing price adjustments the Government have, by restricting purchasing power, succeeded in creating a large number of unemployed, and while I believe the situation is not quite as bad as the figures suggest, the level is unacceptable and is a menace to the future of democracy.
There are, in my view, three main reasons for this situation. The first is that the Government policy of income restraint has, of intent and through the taxation system, resulted in a progressive reduction of the purchasing power of the better off. I know that egalitarianism is the life-blood of Socialism, but surely they can see how shortsighted this has turned out to be. To pick on those who have skill of hand or brain has been a most shortsighted policy. I get a great deal of cynical amusement watching trade union leaders professing Socialism while at the same time leading their members in agitation and strikes against the erosion of differentials caused by Socialist egalitariansim. There will be no fall in unemployment until purchasing power increases, and this should particularly apply to the purchasing power of the better off, which means those skilled in hand and brain.
The second reason is that we are a nation of shopkeepers. Our traders are expert at scouring the world for foreign goods which appeal to their customers through novelty or price. The third is the industrialisation of so many countries, particularly in the Far East. In this connection, Japan has been with us for 50 years but we now have Korea, Taiwan, Singapore, China and Hong Kong, all prepared to pour cheap goods on to our markets if we let them. How can a heavily unionised country like ours compete with these new industrial complexes? They have no planning delays. They have cheap capital. They have cheap labour. There is a queue to get into a factory, and anybody who loses his job in the factory has to go back to the land; an there is no dole.
We have lost the motor-cycle trade. Our shipbuilding has gone virtually down to nothing. Much of our electronics has gone. Textiles are in a bad way, and so is the footwear industry. The field
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widens every minute. Furthermore, I believe that there is nothing to stop the Japanese, and in due course the Koreans, from putting our motor industry out of action. If I could see Messrs. Jones and Scanlon leading the workers at Leyland at 7 o'clock every morning, singing the company song, and raising the company flag, I might feel differently about that.
Last time I spoke on the subject of more protection for British industry I seemed to have a little result. Thank goodness! the EEC is tending to take the lead now, and collectively we are in a good position to act to secure the prosperity of all of us. But we must, at the same time, have collective policies to provide our respective populations with purchasing power; otherwise, we shall never make any inroad on unemployment.
7.11 p.m.
Lord WALSTON: My Lords, I propose to deal solely with a narrow but, I think all noble Lords would agree, not unimportant aspect of this general debate on the economy and on industry; it is the problem known broadly as industrial relations. Many noble Lords have referred to it, and the noble Lord, Lord Jacques, in particular gave us much to think about, and I must say that I agree wholeheartedly with what he said. But should like to go on from there, and remind your Lordships of a comment made by the noble Viscount, Lord Amory, when he brought to our minds, quite rightly, the point that the human aspect is the most important of all in this matter. I feel that we must give far more attention than has been given in the past to the actual human contacts between what should be the various partners in industry, the various facets of industry. I have in mind the contacts between the board of directors, the owner, the manager, the floor manager, and the workers themselves. They should have their direct contacts with each other, and an understanding of each other, rather than matters being referred from a committee of shop stewards to a committee with a personnel manager, and so on, where it ceases to be a personal question between ordinary individuals and becomes a stylised, bureaucratic, almost ritual, dance.
There are two particular aspects of industrial relations which are of very

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great importance. One of them is that which so many of us are talking about and thinking about at the present time; namely, strikes, industrial disputes, and the time lost by these means. The other is the point quite rightly raised by the noble Lord, Lord Carr of Hadley, of the very great importance of making better use of the capital equipment that is already available. In very many cases of course we need more investment; but many industries, large and small, could produce much more than they are producing at present if they made proper use of the investment already placed in their industry.
I do not want to exacerbate any political feelings that there may be in the debate, but I must say that I was somewhat surprised that the noble Lord, Lord Carr, should have gone on, in talking about this question, to say that the Government should take a major initiative here. I agree with him that this is enormously important, but surely it is a matter where industry itself, where the workers and management—above all management—must take the initiative and cannot just sit down and look to the Government to do something about it. It is essentially a problem of management.
In making these remarks I am reminded of a visit I paid many years ago, when I was at the Board of Trade, to one of the large motor car factories in Coventry; in fact, it was the Jaguar factory. It was a very fine factory, with many acres of very good buildings, with magnificent machine tools, and with a huge investment turning out a fine product. I asked the workers how many hours they worked in their factory. They replied:
"At the moment we are doing 35 hours a week, but when the demand goes up we get up to 40 hours, and we may even get 44".
I asked:
"Do you never work night shifts to make these cars?"
They replied:
"No. People don't like working night shifts very much in Coventry".
Surely that is one of the reasons for our absymally poor industrial performance in the motor car industry. We have the investment there. We have the expertise. We have the designers. But we cannot turn out the cars fast enough. The reason we buy foreign cars is because we cannot
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buy English cars, unless we wait six months, or in certain cases two years, for the better ones. But if the people in Coventry—it may be different now, though I rather doubt it—and those in other factories throughout the country worked longer hours, not unsocial hours, but six to eight hour shifts, properly arranged throughout the day, the production could be double the present figure. But that can be done only through good industrial relations, through the proper contact between management and labour; not through committees, but through the understanding, the personal human understanding, of what the problem is, what the difficulties are, and what the rewards are.
I believe that the same goes for industrial disputes or strikes. In my opinion it is not primarily a question of money, of high wages, or anything of that kind. One has only to look at my own industry, the agricultural industry, which on the whole has been one which, over the years, has had the lowest rate of pay in the whole country, and which has had the best record of industrial relations, and a complete absence of strikes. One may also care to look at my own region of East Anglia, a region which has an average wage level of about 7½ per cent. below the national average, but which last year lost only 20,000 hours through industrial disputes; that is about one-sixth of the national average on a per head basis.
I believe that agriculture and East Anglia have this record, of which all of us associated with both the industry and the area are justifiably proud, for two reasons. One is that it is an area with agriculture, which is an industry of small units—and we have today heard much about the importance of small firms—and in general we have very few factories employing more than 2,000 or 3,000 people. The other reason is that we are free of the old tradition of antagonism between master and man; we are free of the old industries of the Midlands or docklands, with their appalling labour conditions of the 19th century, and even the early part of this century. Those traditions die very hard.
But it is in our new industries, in our new areas, and above all in those industries which are small and where the contact is close between the people who have built up that industry, who have created it,

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and those who have helped create it on the shop floor or wherever it may be, where one gets the best industrial relations. I am not saying that it is only in small industries that one gets this. There are certain industries—of which Imperial Chemical Industries is one; indeed, the petrochemical industries as a whole—where labour relations are good, where output is good and where strikes are few. So it is not simply a question of being small, of having close personal contact. All I am saying is that it is easier in those industries, and we should learn from them, as should our big industries, too. But our big industries with the bad records should learn, above all, from the big industries with the good records. They should see how they manage their personal problems, their human problems. It cannot be done simply by employing a personnel manager; it can be done only by a complete mixing of all levels of those who are engaged in production, from the boardroom all the way down to the lowest employee on the shop floor.
There, I believe, my Lords, is where we should make our great effort: not the Government (because, quite frankly, I do not see what the Government can do in this kind of thing) but industry itself; the unions, the CBI, the employers, looking on each other, not as opposing camps across a table but as people talking as human beings to the individuals doing the job. If we can achieve that, I believe that our small industries and our big industries, too, will be able to make staggering increases in production from which all of us will benefit.
7.21 p.m.
Lord DOUGLAS of BARLOCH: My Lords, the economic position of this country certainly appears to have improved considerably during the past year, but there is still a very long way to go. We have not yet reached the stage at which the rate of inflation has come down to a single figure, although this was promised quite a long time ago, and I do not know when we shall reach even that point. But that is by no means the end at which we should aim. If the rate of inflation was 9 per cent., it would take only eight years before the price level had doubled,
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or, to put it conversely, before the purchasing power of money had fallen to half. That is certainly something which would be very detrimental, although not so detrimental as the present situation. I hope that the Chancellor of the Exchequer and the Government will do everything they can to reduce inflation more quickly than hitherto.
Inflation is one of the things which are keeping back industrial development, which make foreign trade difficult. I see that when the pound floated upwards a little recently a number of people suggested that this was going to diminish our capacity to export. I cannot understand this argument at all. It is true, I suppose, that if somebody contracts to export goods at a certain price and delivery does not take place for some months, or perhaps a year, the foreign buyer may be able to buy the sterling he requires to settle the bill at a lower price than he would have contemplated originally; but that is not a gain to this country. It is a gain to the foreign purchaser, not to us. Indeed, it is a loss to us, because the money which the manufacturer receives here will purchase less than it would have done at the time he made the goods. He has to provide for depreciation, not merely in his machinery but in the value of money, and this involves a higher demand for working capital.
This means that every business transaction is handicapped. In a state of inflation nobody is able to foretell what the future will be, and therefore every business transaction is handicapped by a sense of uncertainty and insecurity. As I say, this upsets the whole basis of accountancy. I doubt whether the accounts of many companies in this country show what provision has been made in order to cope with the need to provide for the depreciation in the value of money. I believe that a great many businesses are running at an illusory profit which does not really exist when you come to consider what the cost of replacing machinery and other assets will be in the future. This is a very serious matter indeed, and it wants most serious consideration. I therefore hope that we shall make a great deal more progress towards reducing the rate of inflation.
While we are thinking about this I should like to say a word about the proposal which was put forward recently

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by Mr. Roy Jenkins in favour of a European currency. Of course, this is something which every country will look upon with the greatest suspicion, because they distrust one another when it comes to matters of this kind and feel that they want to manage their money themselves without any intervention.
But there is a great deal to be said for the idea. It does not mean that each country would abandon its own currency. What it really means, as I understand it, is that there would be a common European currency which would be managed with a view to maintaining the stability of its purchasing power. If that were so, I am sure that people would be very happy to conduct transactions in such a currency, and that it would be advantageous. In the long run, it would possibly provide a means of dispensing with individual currencies within the EEC completely and of providing one common currency for all transactions, internal or external. The advantage of this to trade and industry would, in the long run, be enormous, and I therefore hope that it will not be looked at from an insular, prejudiced point of view, but will be seriously considered. It will no doubt take time to achieve it, but it is an objective which is well worth pursuing. More than that, my Lords, I do not propose to say this evening as the hour is getting late.
7.30 p.m.
Lord BALOGH: My Lords, I want to congratulate not only the maiden speaker, the noble Lord, Lord Gregson, but also the noble Lords, Lord Lee of Newton and Lord Jacques, on two of the most impressive speeches I have heard in this House on a question which is of the utmost importance, namely incomes policy. I think that the difficulties and also the experience which came out of these speeches was most noteworthy and I very much hope that my right honourable friends in another place will take due account of it.
I cannot congratulate the noble Lord, Lord Carr of Hadley, on his speech. I am sorry that he is not here but I am going to deal with it and no doubt the noble Earl will duly convey my sentiments. He wanted to wage war on unemployment and on inflation and he somehow got mixed up also with wanting to have a
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stiff monetary policy. You can have one or the other; but it has been very difficult until now to combine them all in one package. Having completed the sixth dozen of my years, I thought that I could not be astonished, but I was astonished by the noble
Lord. Lord Carr, because he spoke as if these things had not already happened before, as if he were looking into a new situation. But this is the awful thing about the post-war history—and not only the post-war history but the history of this country since 1873. I think it was some time in November when the term occurred, the Viennese crash, which ended the supremacy of this country in industrial matters. The proposals that he put forward have also been tried. We were here before. He pretended that Governments have interfered all the time; but what about the period of 1951 to 1963? And what about 1970–71? The proposals which we heard not only from him but also from the noble Lord, Lord Mancroft, are vieux jeux, déjà vu. They are very boring because we have been here before.
The other matter which astonished me—and here I must declare an interest for I am still connected with the British National Oil Corporation—was that I had the impression that he was complaining that we are being too severe with the oil companies. I cannot discuss policy because of the Addison Rules, but I can discuss the factual information. The fact is, of course, that the oil companies have a better deal in this country than in the last little Arab sheikhdom. I was Minister at that time and I take full share of responsibility for it; but we ought to see facts as they are and not facts as they are related, ill-advisedly. His advice usually amounted to, "Do not resist rape; enjoy it."
BNOC, unlike some people have lately suggested, does not function as an authority; it does not try to duplicate the Government. It is an agency by which the nation can slowly and surely acquire expertise in seeing that the oil companies give us our due. I must warn noble Lords opposite that you cannot play with this very much, because if you play with it, if you do not develop it, if you do not treat it like a tender plant, you are going to be increasing all the difficulties we are trying to avoid by using the oil sensibly

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and with care. Nor do we want overhasty exploitation of the oil. That leads me already on to fields on which I am not supposed to tread.
Noble Lords opposite have talked about restraint on incomes, on wages; not directly but indirectly. As my noble friend Lord Jacques has said, they wanted to get at unemployment in an a-personal manner so that they cannot be blamed. It seems to me that this is not something that can be played twice. It has been played once and failed.
I now turn to a question which, surprisingly to me, has not been treated at all fully in this debate. This is the balance of payments. We have heard—and, of course, the financial journalists have been putting it about, I do not know whether briefed or unbriefed—that we ought to liberalise the export of capital. It was suggested that here are awful people who are preventing wonderful investment abroad. In order, so to speak, to give a balanced picture, we ought not to forget that since 1960, more than £13 billion were exported by this country on the basis of a surplus which was less than £1 billion; so that if one talks about severity of exchange control, all the people who know about it can only smile. There has been no exchange control of a ferocious character. It seems to me that we would do very well to remain where we are in this matter and not to experiment.
I now turn to the overall account of the balance of payments which is of extreme importance. Here, as one noble Lord opposite pointed out, we have had a miraculous transformation of the situation. This miraculous transformation was caused not by our export surpluses in the overall balance of payments; it was caused entirely by fear. In this case they did not fear us; they feared the Americans. I think this is not a basis on which one ought to do anything at all and I fear that we have not learned our lesson. The City ought not to be the beneficiary of British Government policy at the cost of industry. It seems to me, at any rate, that the financial newspapers and certain of the speeches, especially from the other side, have been tending to show that sort of favour to the City against industry.
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In the last forecast, the Treasury is expecting a surplus; but that surplus will be entirely due to oil. In the non-oil imports, there is still a great deal of difficulty. As far as I can make out the import penetration is expected to increase. These calculations are, of course, rather fallible, as I shall point out in a minute; and, as far as I can make out, the Treasury is expecting a very much higher rate of increase in manufactured imports than in manufactured exports. This will be of course covered by the oil revenue; but is that sensible? Is it not necessary to use oil revenue now so that we should be able to stand on our own feet and decide what to do? From this point of view, I regret the decision to free the pound, not so much because exchange fluctuations of 2 per cent., 3 per cent. or even 4 per cent. are decisive for our import/export point of view, but the security, the certainty and decisive lack of suspicion on the part of the investor is extremely important. We had a possibility of stabilising the currency at about £1·73/£1·74 to the dollar and we ought to have stuck by it.
This leads me to my last point. I am afraid that the Government have been led by the black magic of the monetarist school to rely too much on mechanical gadgets to develop their policy. There are two weighty objections against this. The first is that one never can tell what those figures are or will be. In the case of the public sector borrowing requirement, we have come down from £14 billions to £6½ billions in one year. That is a colossal sum, and to have as the main criteria that figure is hazardous. I shall say no more, but in my private capacity I would say something else. Then there is this famous affair of the money supply. First of all, nobody knows how the volume of the money supply is arrived at. This noble House consists of very intelligent and extremely enlightened noble Lords, but I do not think they will know that foreign deposits in sterling do not count in the money supply. Are there any takers, my Lords? But, of course, as soon as it is re-lent and therefore appears in an English account as a borrowing, then it goes into the money supply. To have this as a fetish—I cannot say it is a golden calf, it is a paper calf—to adore it and, like Mr. Micawber, to say that if it is less than 9 per cent. it is terrible and if it is more than 13 per cent. it is even more terrible,

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is foolish. It seems to me that to be led to policies which, from a social point of view, can only make the situation more difficult is rather regrettable. I hope very much that those counsels who have been advocating this policy will not prevail.
7.44 p.m.
Lord ROCHESTER: My Lords, I will not follow the noble Lord except to suggest to him that it seems to me that the noble Baroness who is present on the Front Bench—as she will no doubt shortly demonstrate—is no less enlightened than any of the noble Lords who are present. May I from these Benches join with other noble Lords in congratulating the noble Lord, Lord Gregson, on his maiden speech and on the admirable clarity and brevity with which he expressed himself from his considerable industrial experience.
I want to deal with two or three of the major points in the Queen's Speech on the industrial side and, in doing so, comment on one or two of the things that have been said by noble Lords during the course of the debate. The first relates to the overriding need which is recognised in the gracious Speech for a reduction in the rate of inflation. That has obvious implications in terms of an incomes policy. Whatever our views on the extent to which there should be a statutory element in that policy, it seems to me that, having listened to practically the whole of the debate, there has been general agreement on this much at least: that everything possible needs to be done to adhere to the overall average increase in earnings of 10 per cent.
I feel that how far we succeed in that endeavour will depend a great deal on the extent to which the Government as employers are seen to be standing firm in the public sector. I join with the noble Lord, Lord Jacques, in welcoming the stand which the Government have appeared to take, more particularly in the past week or two, in that sector. From these Benches I should like to assure them that, if they continue to act in that way, they will find us their staunch supporters. Even in the past few days there seem to me to have been hopeful signs of a response to that stand, both from the power workers and—much more significant—from the public at large.
I join with the noble Lords, Lord Carr of Hadley and Lord Lee of Newton, and
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my noble friend Lady Seear in hoping that in our very proper concern over immediate pay problems we will not lose sight of the need for a longer-term incomes policy ready for implementation not later than the beginning of the next pay round, whichever Government are then in power. This means that preparations need to be begun now by Government, employers and trade unions under the aegis of the National Economic Development Council, and in a way which will involve Parliament.
Preparations need to be made to do a number of things. None of these things represents original thinking on my part. First, to determine what as a nation we can afford by way of increases in wages and salaries. Secondly, to determine broadly how such an increase is to be distributed; for example, by way of some uniform percentage increase or in some other way, not shirking the very difficult problem to which the noble Lord, Lord Lee of Newton, referred of relativities between one industry and another. Thirdly, as has already been suggested by the CBI—and the noble Lord, Lord Carr of Hadley, had this in mind at one point—there needs to be some compression of the pay round, as far as possible to synchronise settlement dates and to see that they are related in point of time in some way to the main Budget statement.
Fourthly, progress needs to be made in reducing the number of pay bargaining units at each level in companies and plants so that increasingly they comprise employees who share a common interest. I do not believe these are all pipe-dreams, for they can all be achieved within that essential condition for affecting any lasting change; namely, that you start from where people are and not from where you think they ought to be. I suggest that at least in the case of the last two points I have mentioned these propositions have been recently demonstrated to be feasible, at least in principle, on a small scale within British Leyland. The noble Lord, Lord Lee, made a reference to that point when he was talking, as he put it—and I took down his words—
"of that divorce of power from responsibility that is sometimes evident within trade unions".
May I take this opportunity also to say how much I welcomed the honest way in which the noble Lord, Lord Lee, referred to the need, as he saw it, for trade unions to engage in some self-examination.

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I should also like to say how much I welcomed the intervention of the noble Lord, Lord Jacques. Talking on a somewhat similar theme, he wondered whether he would be thought to be naive—I thought quite the reverse—at the point where, as I understood it, he was talking about the possibility of introducing some code of practice which would have to do, first, with the recognition of trade unions and, secondly, with their conduct after recognition. It seemed to me those were both very valuable suggestions. They both concerned trade unions and they both came from the other side of the House. For that reason it seemed to me they had all the more force. I hope that noble Lords will feel encouraged to follow up those suggestions in some way they think suitable. I would also express the hope that the Government will give to them the attention they deserve, coming from such authoritative sources.
I should like next briefly to welcome wholeheartedly the promise that has been made in the gracious Speech, that
"Further consultations will be held on industrial democracy"—
that is, as is well known, a subject in which my Party takes a close interest—
"with a view to producing proposals which should command general support."
In a debate which I was privileged to introduce in your Lordships' House almost immediately after the publication of the Bullock Report at the beginning of this year, I expressed the view that it was imperative for a consensus to be found on this question. I believe it is very important that those of us in all parts of the House who share this view should do what we can to support each other. Perhaps I can best do that by saying how much I agree with certain sentences which appear in a report on industrial participation coming from a body called the 1972 Industry Group, of which I believe the noble Lord, Lord Gregson, was a member. It was chaired by the noble Lord, Lord Houghton of Sowerby, and it comprised industrialists and senior executives who support the Labour Party.
The noble Lord, Lord Houghton, has told me he is sorry that he cannot be here, because I had given him notice
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that I was going to mention this point. But if he were here, the noble Lord, Lord Houghton, would be too modest to mention this himself and so perhaps I might quote the sentences that I have in mind for him:
"It follows that the system adopted should start from what we have already, and should build on this in a way that is not too far ahead of public opinion. It is no use, either of the "sides" in industry or in politics (the CBI, or the TUC or the Conservative, Liberal or Labour Parties, or anyone else with a share in political power) insisting on their ideal solution if that ideal involves a massive and controversial change which will not get general public acceptance."
I do not agree with the particular solution which is then put forward by that group, but I feel that the basic philosophy put forward in those sentences I have taken the liberty of quoting is the right one. What we now need to secure is the maximum amount of progress that is consistent with the national consensus of which I have spoken.
If I may briefly suggest what form it seems to me legislation should take, I would hope no later than the next Parliamentary Session, it should be limited, largely enabling rather than mandatory, and flexible enough to allow experiments under differing company conditions. It seems to me also that the Companies Act should be amended in a way which obliges directors of boards to do what all enlightened boards do already, namely, operate in the interests not only of shareholders but also of employees and of the community at large.
It might even prove possible to secure agreement to another amendment of the Companies Act, one which would enable experiments to be carried out under which employees generally, along with shareholders, could play some part in the election of directors to boards, subject to the prior establishment—and it seems to me this is of vital importance—of suitable sub-structures. We on these Benches would certainly feel that if that were to be the case those sub-structures should take the form of works councils or committees, but that at the very least there should be agreed participation procedures below board level.
Next, following the consultations promised in the gracious Speech, there should be financial inducements for the establishment of profit-sharing schemes—

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some reference has already been made to that today—and the setting up of small businesses including, in appropriate cases, co-operatives, not least to help in finding fruitful employment for young people who are now unemployed. That subject has also been touched on by a number of speakers in the debate. I believe that some progress along some such lines as these might command broad general support; but progress of some kind there needs to be. We cannot stand still, for if we do there will again, if not sooner then later, be a danger of measures being introduced which will gravely damage industrial stability and performance.
Finally—and here I think I speak for my noble friends—we would support the intention expressed in the gracious Speech to introduce a Bill to provide public funds to finance payments to redundant shipbuilding workers. Such a measure seems to me to be clearly needed to help in the restructuring of that industry and to do something to bring about a reduction in the overmanning which is all too prevalent in that industry. Plenty of references have been made during this debate to the question of overmanning. I would hope also that the Government would consider extending this principle to other industries which depend on public money. I have in mind, for example, the steel industry where, according to The Times last Saturday, the existing agreement on voluntary wastage which was reached in January 1976 has reduced the labour force by only 2,200 to 208,000—only one-tenth of the manpower reduction which was first sought. I personally hope that any arrangements of this kind would be so framed as to encourage the retirement on a voluntary basis of older people—again, so as to help indirectly in alleviating this continuing problem of unemployment among younger people.
In general, then, we on these Benches welcome—indeed, we take some pride in having, we believe, played some part in its formulation—a legislative programme which in the industrial field shows more signs of consensus politically than any in recent years. We congratulate the Government on having in this way helped to provide the conditions in which there are now better prospects of an improved industrial and economic performance in our country.
8.1 p.m.
The Earl of GOWRIE: My Lords, if there were any doubt that the Lib.-Lab. pact were not functioning, it would be dispelled, I think, by the fact that we now have three wind-up speakers, where formerly we used to have two. In terms of verbiage this is inflationary, but we on these Benches, in spite of the pact, always enjoy listening to the noble Lord, Lord Rochester, and so we have no complaint on this score. I am delighted to see, incidentally, that the noble Lord the Lord Privy Seal is attempting to make amends to my noble friend Lord Harmar-Nicholls, by changing into a black tie. I only hope that he is going to dine with the Lord Mayor tonight, and receive a little more economic wisdom than perhaps we heard from him today.
From these Benches, we want to congratulate the noble Lords opposite who moved and seconded the Motion for a humble Address as well as the maiden speaker, the noble Lord, Lord Gregson. Where Lord Gregson was concerned, I agree with my noble friend Lord Mancroft in congratulating the noble Lord on his maiden speech on calling our House of Parliament an essential. But I feel a little frustration at the same time. When are Labour Prime Ministers going to create a few Socialist Peers? As I listened to impeccable Tory orthodox speeches in the first half of this debate, about money supply and the rest, I felt a little depressed. But I found towards the end of the evening the glimmerings of a Socialist case from the noble Lord, Lord Balogh, and also, to a slightly lesser degree, from the noble Lord, Lord Jacques, and the noble Lord, Lord Lee of Newton.
I was myself honoured to be quoted by the noble Lord, Lord Parry, when he seconded the Motion moved by the noble Lord, Lord Ponsonby, even if I feel obliged to thank him with a little pedantry. He referred to James Russell Lowell whom he quoted as an American slave poet. He was not that; he was America's Ambassador to the Court of St. James. Had he been a slave that would not have made him any less good an ambassador but simply ahead of his time. Pedantry apart, the passage which the noble Lord quoted,
"Once to every man and nation
Comes the moment to decide",

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indicates that, while he discovers some return to self-confidence after the appalling economic cliffhangers of the last four years, he is well aware that we have quite a long way to go before we reach the happy isles notwithstanding our efforts to resist the Gulf from washing us down. I am afraid that, like the noble Lord, Lord Robbins, I myself remain somewhat pessimistic about our economy in the 20-odd years that are left to us of the 20th century. As someone put it recently, the light at the end of the tunnel may be an on-coming train. But I agree with the noble Lord, Lord Parry, and with James Russell Lowell that the future is indeed in our own hands for the shaping and we would not be here, we would not be bothering with frustrations and inhibitions as well as some of the joys of Parliamentary life if we did not think there was something we could ourselves do about it.
For the sake of brevity and I hope clarity we may look at our political economy in the short run, the middle distance and the longer term. The short run is at present a confusing spectacle with the competitors running around the place in different directions rather like the Dodo's race in Alice. Our currency is safe and with it our financial stability. In my view, and in spite of our industrial difficulties on the incomes front, the pound will continue to rise if it is allowed to and if what may be called the fallacy of export competitiveness is not allowed to prevail. I think that there are happier signs that in the economy at large if not in Whitehall's temples of wisdom exports are under criticism and scrutiny if not yet under attack. If you make the right goods and if you make them well, if you are conscientious over your deliveries and the service you offer your markets, the edge of pure price competitiveness is less keen, less relevant than is often thought. I think the noble Lord, Lord Balogh, disagreed with me there but I can call into aid the remarks made by the noble Lord, Lord Rhodes. The German motor industry maintaining its figure in spite of the almost continual revalution of the mark is a notable instance. I am even optimistic about Concorde in this regard, though I of course acknowledge that you have now to write off its development cost as so much water or perhaps I should say so much first growth claret under the
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bridge. But where high technology is concerned—and surely the Foreign Secretary, Dr. David Owen, is right when in a recent speech he saw this as the crucial export sector for a Britain faced with increasingly high labour costs—the product's concept and its reliability are what count.
Our currency, then, appears safe for the foreseeable future, and for that relief much thanks. Thanks to whom? —not, in my book, to the Chancellor who made it noisily clear to the Labour Conference of last year that he had no alternative but to bow to the IMF's terms if the flight from the pound were not to produce a bigger disaster in terms of unemployment and recession in this country than anything even dreamed of in the thirties. The IMF loan was conditional on the adoption by the Chancellor of policies initiated by the last Government in December 1973 in response to the fourfold increase in oil prices after the Yom Kippur war.
Similar policies were adopted to a greater or lesser degree by every advanced industrial economy since that time except ours and by every sensible Finance Minister except ours, except Mr. Healey himself. So no thanks to the Chancellor or the Government, but thanks rather to the IMF for bringing the Government to their senses, by driving a rather harder bargain in monetary terms than has in fact proved to be necessary. Academic economists are divided—and when are they not?—as to the relative importance between the monetary measures which we urged and which the IMF imposed and the role of North Sea oil in the recovery of the pound. My own view is that this is something of a chicken and egg conundrum. The oil helped confidence but it does not of itself attract the foreign money which presently accounts for our immensely high reserves. The presence of the latter is surely easily accounted for. There is nowhere else for the money to go.
President Carter's immense congressional difficulties—" Oh for the touch of a vanished Lyndon! " we could say—in getting his energy policies through mean that even as American industry's productivity picks up her balance of payments deteriorates. On that point at least I am glad to find myself in agreement with the noble Lord, Lord Balogh. So curtains

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for the time being for the dollar. Switzerland has shut her doors and West Germany and Japan are doing their best to shut theirs to foreign money. Where better then for the money to go than to a Britain, presided over by a weak Government on whom policies of an impeccably orthodox and Conservative character have been imposed and whose oil wealth and therefore improved balance of payments will for some years yet counteract and mask her fundamental economic weakness?
So bully for foreign money, my Lords, but not so bully for our urgent needs and our attempt to correct these same fundamental economic weaknesses, and to correct them before rising unemployment and the inevitable breakdown of incomes policies cause the Government, whichever Government of whichever political Party are in power, to wheel out the printing presses once again. For make no mistake: Governments do not print money because they have not read their Professor Friedman or because they like the crackle of all those crisp new notes; they do so from the usual human mixture of unselfish and selfish motives. They fear and detest unemployment and the human misery and political instability which it brings.
What I am trying to say is very simple but also very chilling. The relative financial stability in Britain at the present time has been bought at the expense of rising rather than maintained or falling levels of unemployment. Since these levels will engulf a generation of young people who have been brought up in an atmosphere of high material expectations and low reverence for traditional authority, Britain is, in my view, facing a nasty political explosion, no matter what Party is in power. The liberal-democratic consensus which the noble Lord, Lord Parry, mentioned in seconding the Address and which, whatever our harsh words across the Floor of the House, still prevails, will not survive for very long with 1¾ to 2 million people unemployed. What are we going to do about them?
At this late hour and with not very many people in the Chamber, may I, just for a brief moment, take off my official Opposition hat and step, metaphorically at least, on to the Back-Benches. Concern for unemployment is not fundamentally a Party matter, although I cannot resist
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mentioning in passing that since the last war Labour has consistently achieved higher levels of unemployment than the Conservatives, and that the years 1947, 1969 and 1976 should be engraved on every social democratic heart. But two wise men, one Conservative and one Labour, have recently, it seems to me, addressed themselves to this problem. They are my noble friend Lord Harlech and the Foreign Secretary, Dr. David Owen. A third wise man, my noble friend Lord Hawke, to some degree echoed this point in the debate this afternoon.
I should like your Lordships to hear what uncomfortable words both of these thoughtful men have uttered, absolutely independently of each other, so far as I know, in the very last month. Here is what one has said. In the context of taking a hard look at the traditional post-war belief that ever-increasing freedom of trade will benefit us he says.
"The doubts can be expressed simply as follows. Freer trade was desirable in a period in which the international market was limited in size and complexity and when, with the exception of the USA, it operated among like-minded nations of equal industrial power. This period is past. The industrial power of countries is far more diverse and this divergence is likely to grow. The industrial power of certain Asian countries and even of developing countries has introduced new tensions into the system. This means that in Britain's case we have become less competitive and the comparative advantage we gain from low wage costs in relation to our European neighbours is of no avail when confronted by imports from Taiwan and Korea, let alone Japan".
Here I quote the passage from the other wise man:
"For some years Britain and other advanced industrialised countries have had to face competition from the less developed nations in areas of low technology like textiles and footwear. This kind of competition is liable to grow fiercer but, increasingly, competition is moving into areas of medium and even of high technology such as ships, steel, cars and electronics. The example of Japan, now in the first rank of advanced industrialised economies, shows what can be done within a comparatively short space of time, starting from the launching pad of an under-industrialised economy with a pool of cheap labour. Other countries, such as Taiwan, South Korea, India, Iran and Brazil, are either already following a similar pattern or could do so in the very near future".
To sharpen the point, I will not say which passage is the Foreign Secretary's and which my noble friend's, but my noble friend Lord Harlech, being necessarily more free in what he can say, adds that

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Britain, probably within the European Economic Community context, must reconsider her attitude towards selective and flexible import controls. The Foreign Secretary, while hinting at the same solution, stresses, rather, the high technology industries which I mentioned in connection with his name earlier and which are less vulnerable to developing world competition. Yet be it noted, my Lords, that high technology industries are not usually labour intensive. It surely is something for us to take notice of when a centre-Right member of the Labour Party and a centre-Left member of the Tory Party both come into line with Left oriented TUC thinking, although the TUC, xenophobic as usual, miss the European dimension which makes their thinking credible.
I have spoken about the short run—our improved financial position—and the long term: the poor prospects for our political economy imposed by the human cost of such improvement and by the developing and competitive nations. Let me close with the middle distance—the immediate future whose character will be determined by the choices we make now and which we are assembled in Parliament to make. If we make the right ones, we will surely go a long way towards seeing that the next 20 years are rather less morally and culturally debilitating than the last 20. I say " choices", but there is really only one choice. We have to increase real industrial production in this country, as speaker after speaker in this debate has said.
A good commentator in The Times said recently that British economic policy since the war has really been all about trying to shuffle inadequate resources around in a society which seemed incapable of resolving the problem by expanding its resources. If this is true—and I think it is—how can we increase production? Common sense suggests that there are only two ways: making it worth while in money terms for people to produce more and making it uncomfortable, or less worth while in terms of their standard of living, for them to produce less. The one side of the equation means higher real wages and also, of course, to some degree higher prices. The other side of the equation means a lower
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social wage, lower taxation and far greater differentials between those in work and those who, perhaps through no fault of their own, none the less depend on the social wage. Of course this is less than absolute justice and of course it is unpleasant and uncomfortable. It sounds, even to me, not just like Toryism but harsh Toryism.
But the plain fact of the matter is that, even if a Labour Government were returned for another term, they would, in my view, be forced to choose between the flight from investment and from our currency, which a simple shuffling around of diminishing North Sea oil resources would bring, and increasing incentives towards production by cutting taxation in real terms. No one in this country is fooled by Mr. Healey's recent cuts, for they are not cuts in real terms. Under the last Conservative Government taxation was too high; public expenditure was also too high to stimulate real production. However, as my noble friend Lord Carr of Hadley said, Mr. Healey would now have to cut a further £4,000 million off personal income tax to restore even that relatively unsatisfactory position which he inherited in March 1974. Even to approach this figure would require a fundamental change of strategy.
Cutting taxation will be intensely unpleasant for politicians of both Parties. Look how unpleasant recently elected Tory councillors, who swept in after all on a platform of cutting public expenditure, are finding it as the crunch comes. But the alternatives to real cuts are continuing inflation and the squandering of diminishing assets, or a statutory incomes policy which both political Parties and the trade unions—and even in February 1974 the electorate—seem to have repudiated. Or yet again, as the Left would wish, the more or less complete collectivising of the country along Eastern European lines. There are no other options.
In an interruption the noble Baroness spoke as if getting down the rate of inflation to, not even 10 per cent., but an approximation of 10 per cent. was something of a triumph. I challenge the noble Baroness to produce one significant settlement in the last three months which has in fact been below 10 per cent. As the Chancellor has told us, there have to be substantial settlements below 10 per cent.

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for even the 10 per cent. average to be achieved. So come Labour Governments, come Conservative Governments or even some Lib./Lab. or Lib./Con. salad of a Government, there are no other options.
As the noble Lord, Lord Robbins, warned us 10 per cent. may be hailed by Governments as success, but that is not successful; it is still terrifying. What is really happening is that Britain is in the process of moving, with much muttering and grumbling from all sections of society, from a low wage, cheap food, high benefit society with low unemployment levels, to a high wage, dear food, lower benefit society with high unemployment levels. We are doing so—witness pay policy trouble with firemen and police and civil servants as well as with miners and power workers—whether we want to or not. What we must also do is grasp the implications of this move and adapt our political economy and its institution accordingly. It seems to me there are some signs that we on this side of the House have a slow, belated, glimmering awareness of what is taking place. There are dangerously few signs that the Labour Party, in Parliament if not altogether on the shop floor, has any such awareness at all.
8.23 p.m.
Baroness BIRK: My Lords, certainly one area has been demonstrated this afternoon and this evening where our productivity is extremely high, and that is in the production of glum and gloom. This seems to have run through the whole of this debate with a certain amount of grudging welcome to the Government's policy and, I must say to be fair, from all sides of the House the odd wonderful spark of independent and wholehearted approval which was extremely warming.
I found the contribution of the noble Earl, Lord Gowrie, extremely pessimistic and also, at times, some of his arguments to be rather contradictory. I wondered whether he had got hold of that mad surgeon's wife—I am sorry, I should have said " knife " not " wife"; I shall consult Freud tomorrow!—that his noble friend Lord Carr was wielding so heavily earlier on. It seems to me that the time has gone almost between one Budget and another. This has all taken so long that I feel we are due for another Budget at any moment.
A noble Lord: Probably we are!
Baroness BIRK: Some hours ago, my Lords, my noble friend the Lord Privy Seal outlined our problems and successes, and in particular the successful handling of the financial side of the economy over the last 12 months. I felt that this caused some dismay in some quarters, although to be fair it was very much welcomed in others. I agree with my noble friend Lord Balogh that it is nonsense to treat the money supply as a golden calf, or even as a paper tiger, but I think he will agree that the Conservative Government demonstrated the folly of ignoring it altogether. The pound is now floating and I respect the reservations expressed by the noble Lord, Lord Balogh, too much to tangle with him about them. Large appreciations in the pound would make industry uncompetitive, but I do not believe that the present small increases would have that effect. What we cannot do is to keep the pound low to shield an underlying industrial weakness which still persists.
We also have to remember that the cheapening of imports will ease the pressure of wage demands and in this way will help trade union negotiators. It would also lower the cost of raw materials, and the cost of the raw materials in manufacturing industry is still dropping in " a highly encouraging manner", which is a quotation from today's issue of the Financial Times.
In an extremely interesting and authoritative maiden speech on which I join in the congratulations of other noble Lords, the noble Lord, Lord Gregson, suggested a special unit to study the aspect of import penetration. This aspect is considered by NEDC Sector Working Parties who are prescribing remedies and the Government have undertaken to support them. So this is not something that is just being ignored. What the strong pound does is to help against inflation, and success against inflation, which has quite naturally dominated a great deal of this debate, helps the pound. Inflation is dropping fast this autumn, and in fact has been less than 10 per cent. since April.
In the last two and a half years tremendous progress has been made in this country. It is not only in the last 12 months, but in the last two and a half

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years. The rate of increase in earnings is in single figures; the rate of increase of retail prices will also soon be in single figures and that is a dramatic improvement in the country's prospects. No grudging words can take that away. Also, as my noble friend Lord Rhodes pointed out, it is true that inflation is by no means a British phenomenon. We see it all over the world. The counter-inflation policy has worked; it has been the most remarkable achievement since the War and I agree entirely with my noble friend Lord Lee of Newton that an incomes policy such as this is the most sensible way of dealing with these very great problems.
If I may say so to the noble Earl, Lord Gowrie, it is hardly surprising that in the third year of a pay policy it is extremely difficult to sustain that policy. Tensions will arise and that is what is happening at the present time. Never in the economic history of this country have we had the situation where there has been a third year of pay restraint which it has been possible to keep going without the kind of conflicts we are getting and which we have seen erupting in various ways over the last few days and which possibly will erupt in the future. This type of eruption is quite different from rocking the whole system and one cannot compare the situation now with what it was even in 1974 at the end of the last Conservative Government. I think what we all have to do is to " keep our cool " and not confuse excitement over negotiations or pre-negotiations with the result when it comes.
One of the things which we seem to have lost is our capacity to celebrate victories. We have achieved a considerable victory in this country against tremendous odds. This is not the same thing as sitting back complacently. I would be the last person and the Government and my noble friends share this view—to say that we can afford to do that or indeed have the right to do it. We have not. We must not waver now. We have to hold to the Government's 10 per cent. overall earnings guidelines; this is essential to counter inflation and unemployment.
The noble Earl, Lord Gowrie, was talking about figures—and as a matter of fact I have them with me from an article in the Financial Times today—but he must also distinguish between pay agreements
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as such and the productivity deals which are allowed and are permissible under the present pay policy. It is also true, as the noble Baroness, Lady Seear, pointed out, that one has to watch very carefully that these are genuine productivity schemes. She also, quite rightly, put the responsibility on to management as well as on to the unions. It is true that if earnings rise much further the prospects for improvement in employment and in our living standards will deteriorate and all our sacrifices will then have been in vain. Nevertheless, I believe the British public has grasped these points. Indeed, while the pound was dropping the penny was dropping too. Massive and repeated support for the Government's guidelines is shown in the public opinion polls all the time.
The experience of the last decade has taught us all—and other noble Lords referred to this—that there is no solution through high money settlements. There is danger in giving way on special cases, and we all have to agree that there are some very special cases, but we could not give way on them unless everyone were to accept that they really were special. This is exactly what we saw as far as the police are concerned, and nurses and other people whose work cannot be assessed in terms of productivity. Special cases therefore are always at other people's expense.
What I would agree immediately is that our tremendous weakness lies in our industrial output. The noble Viscount, Lord Amory, was absolutely right when he said that this is the most serious problem of all, and this is a point on which I would agree with what the noble Lord, Lord Carr, said. But this is not a recent phenomenon. This has a very long historic causation. The basic problem of our economy is the performance of industry and output per head. It is not really just a question, I think we all know, of investment that is available. The last four years, in addition to our own national problems, have seen a world recession and financial instability added to them. These have without any doubt worsened our performance and added immensely to our problems.
The announcement today of the setting up of the North-East and North-West Industrial Development Boards to stimulate employment and industry in those

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areas seems to me to be a practical if rather specific way of trying to stimulate employment in these areas. The greater the problems the greater
the need to act together. Both sides of industry, I would like to believe, are increasingly aware of this. The record of the trade unions over the last 12 months has been especially good, and there is no sign of the TUC backing down on the 12-month rule which is absolutely crucial to our pay policy. I think also in particular of the contributions of the trade union leaders in NEDC and the responsibility shown by so many workers on the shop floor. Increasingly they are conscious of the common longterm interest and I believe that this is being echoed by management.
My noble friend Lord Jacques made an extraordinarily constructive contribution when he spoke about a code of practice worked out in consultation with the CBI and the TUC. Many noble Lords referred to industrial relations. My noble friend Lord Walston, talking about the need for the bad to learn from the good in industrial relations, I thought put it extremely well. The noble Lord, Lord Carr, the noble Lord, Lord Mancroft, and many others also referred to them, as did the noble Lord, Lord Rochester. The Government policy is closely concerned with achieving what is needed, which is co-operation and not confrontation. This means expansion of conciliation services through ACAS at the moment, the diagnosis of problems through the NEDC Working Parties and also finding a generally acceptable form of industrial democracy. I agree with everyone who has indicated how enormously damaging it is to let the national potential of this country be thrown away in disruptive disputes. We are all in it together. I cannot agree with the noble Lord, Lord Spens, who talked about a Bill of Rights which I think would include making strikes illegal. It seemed to me, if I may say so, to be more a Bill of Wrongs than a Bill of Rights.
But it is equally important that management should be able to deal flexibly, energetically, responsibly and professionally with the problems of industry. This is not something that always comes automatically. It calls for better management education, and a great deal of effort has gone into this by the Government and the professional institutes. What is
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needed is a broadening and deepening of management understanding. This is particularly essential since the manager who understands the society in which he works as well as the firm or industry in which he works is both going to find his task easier and be more successful at it.
The noble Lord, Lord Mancroft, made his own original addition in his own inimitable way on what he would have liked to see in the Queen's Speech to help management to become more effective. I would say that there is a great deal that management itself can do. I think there is a great deal more that the CBI could do if it were more prepared to listen and to advise about effective management, rather than criticising the Government and expecting the State always to take the lead. I am not knocking by any means all that management does and can do in Britain, because it does a great deal and it does succeed.
Our problem is not that we cannot produce but that our average factories are not up to the standards of those of the best of our factories. The noble Viscount, Lord Amory, was quite right when he spoke of being able to compete with our competitors, and the noble Lord, Lord Carr, and my noble friend Lord Walston were also absolutely right when they said we could probably in many cases make much better use of our equipment and machinery than we are doing at the moment. I would not dream of understating this problem, because it is a very great problem of which we are all aware. But I must point out that other countries have problems, too. For instance, car producing countries like Germany, Japan and Sweden have serious difficulties, but they do not seem to have our innate masochism and do not advertise them quite so much as we do.
Our task is not one that can be completed overnight; it will take years. There is no question of members of the Government feeling that everything is all tied up in a happily produced package. What we are saying is that we have a sound base, we believe we are on the right road but that it is going to be a long haul. As the noble Lord, Lord Rochester, pointed out, the long-term is just as important as the short-term. Many noble Lords, including the noble Lord, Lord Auckland, saw that we have an upturn and a much sounder base on which to build.

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North Sea oil will make this a smoother and easier operation. In spite of the things that have been said about it—and I certainly would not trespass on the authority of my noble friend Lord Balogh—we must not forget that without North Sea oil the fundamental problems of industry would still have to be solved and with greater difficulty; and, what is more, we should have to be going about them in the same way. North Sea oil is not only a great help, but it is essential that in something as important as this to the whole core of our industrial, economic and even our social life the Government should have a large stake. The plans that appear to have been floated for the future as to what the Tories would do with BNOC frighten me to death and I think are absolutely wrong so far as the nation is concerned.
The tax concessions in the Finance Act and the October measures have improved incentives for both sides of industry. I think that the noble Lord, Lord Hawke, must agree that this increases the purchasing power which he says ought to be increased. I remind the noble Earl, Lord Gowrie, that in the Dodo's race in Alice in Wonderland there were prizes for all. Our tax concessions have meant that everybody has got something. But tax concessions are not the whole answer. Alone they would lead us into exactly the same difficulties which brought expansion to a halt in 1973 under the Tory Government. They did not find that cutting taxes was the answer to the problem. Therefore, this is only one part of the matter.
What is needed is a consistent and steady climate provided by the Government, one where the structure of taxes and investment aids for industry is not being chopped and changed. At the end of last month the Chancellor announced the first conclusions springing from a study of small businesses. These have been welcomed generally; they had rather a peculiar welcome, I thought, from the noble Lord, Lord Harmar-Nicholls, but he has a very engaging originality of his own. Everything that he said was not being done is, in fact, being done. Small businesses are being helped through CTT, corporation tax, and there are other ways of aiding them. Noble Lords can imagine that if we had not done anything about small businesses the noble Lord,
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Lord Harmar-Nicholls, would be the first to say, "Why are you not doing something about small businesses?"
My noble friend Lord Davies of Leek with his usual marvellous flow of rhetoric talked about the " delicious dichotomy " of the small farm. He and the noble Lord, Lord Walston, reminded us that business includes agriculture as well as industry. We also have our invisible exports. I sometimes think that perhaps they are so invisible they get overlooked. In tourism and finance we have had tremendous successes. The City of London and New York are the leading financial centres of the world. The net overseas earnings of the City doubled between 1973 and 1976 to £l½ billion. At the same time the net earnings from travel and tourism, in which I take a particular interest, rose from nil to £600 million. These must not be forgotten. Indeed, I know that they will be much welcomed by the noble Lord, Lord Mancroft, who has played such an active part in London tourism.
I turn to unemployment which is the heart in the emotional and human sense and the worst tragedy of the lot. Like other general problems of our economy, it reflects the world recession. There are now about 16 million unemployed in the industrialised countries of the world. If one started taking in the third and fourth world, the figures would be too horrible even to contemplate. What is needed is a major co-ordinated world effort to expand the stronger countries' economies, and the Government are in the lead in urging this. As our financial situation strengthens, so we can play our part.
No one, and certainly no Labour Government, can be complacent about the present level of unemployment. I found it extremely odd that the noble Earl, Lord Gowrie, in order to make what he felt were his own individual remarks about unemployment had to take off his Front Bench hat and put on a Back-Bench hat.
The Earl of GOWRIE: My Lords, may I correct the noble Baroness, Lady Birk. I was not taking off my Front Bench hat to make remarks about unemployment. I was taking it off in order to look at what two people, one a Labour member, the

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Foreign Secretary, and the other a friend of mine, a Tory, had to say about import controls. That is another matter.
Baroness BIRK: My Lords, I still find it extremely odd. I am quite prepared to say what I think about unemployment and still keep on my Front Bench hat and my Minister's hat, even where there are differences of view, and that is certainly not in the brief from which I am reading. There is a tremendous problem of unemployment. It is perfectly true that unless we have economic growth and growth in wealth, with increased technology, the trouble is that unemployment is likely to rise. I do not think that the solution that has been offered by noble Lords opposite about having machines working six days a week and people three days a week is the answer, unless one is changing very drastically the whole structure of our society and taking an entirely different approach to education, leisure and everything else.
Lord CARR of HADLEY: My Lords, I am sure that the noble Baroness, Lady Birk, does not want to get it wrong. I was not suggesting that. I was suggesting a much wider use of a double shift system, which is very different indeed and which has worked very successfully in many factories.
Baroness BIRK: My Lords, 1 was not referring to the noble Lord, Lord Carr of Hadley. There are other contributions that made the point, but not in that way.
Nevertheless, as the economy has improved during the year, we are now able to inject more money into the areas where it would help most and principally, as
was pointed out, especially by the noble Lord, Lord Auckland, into construction. In March, May and July a total of £230 million was provided. The most substantial help now is the extra £400 million in 1978–79 which was announced in October and which should create 30,000 jobs. We shall be announcing the details of the allocation of this sum shortly so that the authorities can go ahead with commissioning the work and help the industry as soon as possible. I do not believe that this will deter people from coming into the industry, because there will be only a certain amount that can be absorbed at a time. Therefore, there will
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have to be a rather slow build-up. Coupled with the public sector and public money going in, we hope, of course, to see at the same time an expansion in the private sector so that one feeds off the other.
Unemployment is affecting almost all sections of society and it is especially serious among those manual workers who form the mass of our working population, and indeed, of the Labour movement. Incidentally, the reason unemployment was so high in 1947 was that the troops returned and when they left the Army they were unemployed. That is the answer to the noble Earl, Lord Gowrie, as regards the figure which he put forward. I believe that he grumbled that we were not being political enough on this side. I personally believe that there is a difference in attitude towards unemployment between our two Parties. I do not mean that I think that the Tories sitting opposite are saying, "We like to see people unemployed". I do not believe that at all. However, I believe that if you take, as many do, what we can call for brevity the monetarist theory, then this must imply a great number of unemployed—more unemployed than we have at present.
There is still the lingering feeling that if there is the feel of unemployment at the end of the line, then the carrot and the donkey work very much better. I do not think of unemployment simply as an abstract set of economic relationships. That is how it is thought of by some Conservatives, I do not say all, and there are individuals who do not think that way. However, there is a difference between the social and human approach and the economic approach. It is a hallmark of our Government's whole approach that we do not see a strong economy as a desirable thing just in the abstract. We see it as a tool for social ends. A strong economy is needed to avoid the social damage of unemployment, to provide resources for the disabled, the deprived and the sick. A strong economy can abolish poverty at home and help abolish it in the world.
For better or for worse, we are an aspiring society: we want the material rewards of a strong economy. We must be honest and say that people in this country now are not prepared to do without them. Yesterday's luxuries have

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become today's necessities. This materialist approach may be offensive to many people, but it is nevertheless something that we must accept is here. The Government are trying to provide the economic, social and cultural balance that makes up a society that is compassionate and believes in the quality of life, but they cannot succeed without the participation of everyone—and I mean everyone. In this last Budget we have managed to squeeze not a great deal, but some extra money for the arts, mainly for the buildings of national museums and galleries. They have not been left out even in this very difficult time. We must join together to build the strong economy we need if we are to be a nation at peace with ourselves.
The LORD CHANCELLOR: My Lords, I beg to move, That the debate be now adjourned until tomorrow.
Moved, That the debate be now adjourned until tomorrow.—(The Lord Chancellor.)
On Question, Motion agreed to, and debate adjourned accordingly.

UNIVERSITY OF LONDON BILL [H.L.]
The Chairman of Committees acquainted the House, That (pursuant to the Resoltion of the 26th July last) the Bill had been deposited in the Private Bill Office, together with the declaration of the agent: Bill presented; read 1a; and deemed to have been passed through all its remaining stages: Bill sent to the Commons.
House adjourned at ten minutes before nine o'clock.