Sitting of 28 January 1982

Preamble
The House met at half-past Two o'clock
PRAYERS
[MR. SPEAKER in the Chair]
PRIVATE BUSINESS
  GREATER LONDON COUNCIL (GENERAL POWERS) BILL
  Lords amendments agreed to.

  HUMBERSIDE BILL [Lords] (By Order)
  Order for Third Reading read.
  To be read the Third time upon Tuesday 2 February.

  LLOYD'S BILL (By Order)
  Order for consideration, as amended, read.
  To be considered upon Wednesday 3 February at Seven o' clock.

Oral Answers to Questions
  NORTHERN IRELAND

    Constitutional Reform
    Mr. Marlowasked the Secretary of State for Northern Ireland if he will make a statement on communications between officials of his Department and officials of the Government of the Republic of Ireland.
    Mr. Michael McNair-Wilsonasked the Secretary of State for Northern Ireland on how many occasions in the last 12 months Ministers from his Department have met Ministers in the Government of the Republic of Ireland.
    Mr. Flanneryasked the Secretary of State for Northern Ireland what is his policy towards contacts at ministerial level between his Department and members of the Government of the Republic of Ireland.
    The Secretary of State for Northern Ireland (Mr. James Prior): Communication between the two Governments is mainly through the usual diplomatic channels. But Ministers of my Department meet Ministers of the Republic of Ireland whenever necessary to discuss matters of mutual concern, and officials of the Northern Ireland Office and the Northern Ireland Departments similarly communicate with their opposite numbers in the Republic, as they have for many years past. There have been six meetings at ministerial level in the past 12 months, not counting that which my right hon. Friend the Prime Minister had with Dr. FitzGerald in November 1981, which I attended. I will be meeting Senator Dooge in London tomorrow.
    Mr. Marlow: Will my right hon. Friend make sure that the Irish Government know that Northern Ireland is, and he intends that it should remain, part of the United
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    Kingdom and that he would neither wish nor permit any loosening of the ties between the Province and the rest of the United Kingdom?
    Mr. Prior: Both Dr. FitzGerald and Mr. Haughey have on numerous occasions made it clear that they recognise that any change in the constitution of Northern Ireland can be carried out only with the consent of the people of Northern Ireland. That remains the position of Her Majesty's Government as well.
    Mr. McNair-Wilson: Does my right hon. Friend agree that one of the best ways of removing anxieties in Northern Ireland about the purposes of the ministerial meetings or of the Anglo-Irish talks would be for Her Majesty's Government to press upon the Government of the Republic the need to introduce some meaningful extradition arrangements for those accused of acts of terrorism in Northern Ireland?
    Mr. Prior: My hon. Friend is right to stress that point. My right hon. and learned Friend the Attorney-General met his opposite number on 25 November and discussed what further measures might be taken to ensure that terrorists do not evade prosecution for crimes committed in one country by fleeing to another. This issue is being considered further by the two Attorneys-General.
    Mr. Flannery: Did I understand the Secretary of State to give an assurance that, whichever party emerges from the forthcoming election as the next Irish Government, the talks will continue? Does the right hon. Gentleman agree that such talks are in the interests of peaceful relations between the people of Ireland and that nobody, no matter how deep his feelings about unity, should be allowed constantly to raise the question in such a way as to prevent the talks from continuing?
    Mr. Prior: My understanding is that, whichever Government might come into office in the Republic, the talks will continue. It is equally clear that the more open and the more understanding those talks are, the fewer misrepresentations there will be in the North. I must stress again that these talks are about economic and security matters, not constitutional change.
    Mr. J. Enoch Powell: What reason has the Secretary of State for assuming that he is made aware of all the communications that pass between officials of his Department, officials of the Irish Government and officials of the American embassy in Dublin?
    Mr. Prior: Because I am the Secretary of State for Northern Ireland in Her Majesty's Government and because I have more confidence in my officials' integrity than has the right hon. Gentleman.
    Mr. Soley: Does the Secretary of State accept the Opposition's view that those talks are important and should continue, whichever party takes over in Ireland, whether they are on the lines of the Conservative Government's policy or on the lines of the policy that we support, which is a united Ireland with the consent of the minority?
    Mr. Prior: Those talks are an important part of trying to bring about a better understanding of the economic and security problems in Northern Ireland, which are also of great importance to the Republic of Ireland. However,

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    they are best seen if they are recognised as being in the context of the United Kingdom and not solely of the Republic of Ireland and Northern Ireland.
    Mr. McCusker: What stage have the talks between officials in the Department of Commerce and the Department of Energy in Dublin reached with regard to Kinsale gas? Does the Secretary of State expect a prolonged delay in reaching agreement as a result of the present situation in the Republic?
    Mr. Prior: As the hon. Gentleman knows, the meeting took place in December between my hon. Friend the Minister of State and the Deputy Prime Minister of the Republic. It is now a matter of the officials continuing with the discussions. I hope that they will not be delayed by yesterday's events. It is important from the point of view of the gas authorities and other energy interests that we should reach an early decision on the matter. I hope that there will be no delay. If I receive any further information, I shall let the hon. Gentleman know.

    De Lorean Car Co. Ltd.
    Mr. Cryerasked the Secretary of State for Northern Ireland if he is satisfied with the current voting rights of the Government directors in the De Lorean Car Co. Ltd. of Dunmurry.
    The Minister of State, Northern Ireland Office (Mr. Adam Butler): Under the arrangements agreed by the previous Administration, the Northern Ireland Development Agency is represented by two nominated directors on the board of the company. In view of its minority shareholding the agency does not have voting control.
    As I informed the House on 19 January in reply to a question from my hon. Friend the Member for Epping Forest (Sir J. Biggs-Davison)—[Vol. 16, c. 115]—it is the Government's intention that such matters as the board's membership should be included in the proposed independent consultants' survey. In this regard I can now inform the House that my right hon. Friend the Secretary of State has appointed Coopers and Lybrand to carry out this survey and report within 14 days. I must stress that nothing in the Government's present words or actions should be taken as committing any further Government assistance or comfort to the De Lorean companies. The directors of the company have told my right hon. Friend that in continuing to trade they will not incur any credit that they cannot meet.
    Mr. Cryer: Does the Minister agree that, with the massive public contribution to the company, there should be a majority shareholding on behalf of the taxpayer? Does he accept that the two directors, who watched £9 million go to Lotus Cars via a Panamanian company and proposed a bonus of £400, 000 to the directors only last month, should be replaced? Is it not a disgrace that, after contributing £83 million, the taxpayer does not even own the cars? The only way of providing future jobs in that important area of the United Kingdom is for there to be public ownership under the National Enterprise Board. Does the right hon. Gentleman accept that that private enterprise venture appears to be a rip off for the directors and a potential disaster for the workers?
    Mr. Butler: It was the Labour Administration, of which the hon. Gentleman was a member, that made the
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    arrangement with Mr. De Lorean. If that Government, with their philosophy on nationalisation, were not prepared to take a majoriy shareholding, the hon. Gentleman will not be surprised if I do not agree with his first proposition.
    Mr. Kilfedder: Is it not remarkable and scandalous that the De Lorean company, which is in such financial jeopardy that it is seeking more taxpayers' money, should have provided Mr. De Lorean with first-class travel by Concorde to New York and back for one meeting and first-class travel for seven directors from Belfast to New York for one meeting, at a total cost of £15, 000? Will that matter be investigated?
    Mr. Butler: The hon. Gentleman must appreciate the importance of the board meetings of the two companies. They were called at short notice to consider some important points that were put to Mr. De Lorean and other directors by my right hon. Friend the Secretary of State.
    Mr. Fitt: Does the Minister agree that the attraction of building that new industry in Northern Ireland was that it would provide a ray of hope for a constituency that has had many unemployed for many years? Is not the fact that this Administration have continued to give support to that undertaking a vindication that the right steps were taken by the Labour Administration? Does the hon. Gentleman recognise that a dreadful sense of insecurity is felt by every employee in that company? The employees do not know from one week to the next whether their jobs are safe. Will he reach a conclusion as quickly as possible so that the workers may lose that dreadful sense of insecurity?
    Mr. Butler: The hon. Gentleman rightly speaks with feeling about the anxieties of the workers at the plant. I understand that the management will meet the unions this afternoon and tell them whatever it can about the present circumstances. I assure the hon. Gentleman that we shall treat the matter with all speed in the interests both of the workers at the plant and of the public stake that has been put into that company.
    Mr. Alan Clark: Has not my hon. Friend, and his predecessors, been warned consistently by hon. Members on both sides of the House about the commercial prospects of that enterprise and the financial integrity of Mr. De Lorean? Is he aware that Mr. De Lorean boasts openly in New York that he has a headlock on the British Government and that they will always pay up in the end? If my hon. Friend wants to use taxpayers' money on job creation schemes in Northern Ireland, would it not be better to find a way of doing so without subsidising the extravagant lifestyle of many American con men?
    Mr. Butler: I do not believe that my hon. Friend appreciates either the success of the company in producing a car from a green field site or the commercial acceptance of the car on the market. The company has been hit hard, in the same way as Ford and General Motors, by the sudden and unexpected depression in the car market in the United States. I shall not comment on the word "headlock", but Mr. De Lorean can be in no doubt about the Government's view following two meetings with my right hon. Friend.
    Mr. Concannon: Is the Minister aware that unemployment in Northern Ireland is more than 20 per cent. and that in the area where the factory is situated it is 50 per cent? We have received dreadful news today that

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    Mackie's and Sons Ltd. is laying off 500 workers in that area. That is not a laughing matter. I am concerned not about Mr. De Lorean, but about the 7, 000 workers who are involved, directly or indirectly, in the firm. I hope that some of my hon. Friends share my concern. Is the Minister aware that the Opposition deeply regret the projected redundancies in De Lorean, which have resulted mostly from the collapse of the American car market? I think that he will agree that some misconceived utterances at the end of last year have not helped to serve the credibility of the whole operation. Does the hon. Gentleman accept that the fight to save De Lorean is symbolic not just for Mr. De Lorean, but for the 7, 000 workers and jobs now and in the future in Northern Ireland?
    Mr. Butler: I am certain that, in their original decision, the Labour Administration put special weight on the factors to which the right hon. Gentleman referred. Even then there was high unemployment in West Belfast. It was for that reason that we felt it right to provide more funds for loan guarantees to bring the car to launch. That point will continue to be taken into account when we take a decision on the consultants' report. There is a point beyond which we cannot go. We have an acute responsibility to the taxpayers for the way in which the money has been used. We must take that into account as well as the situation of the workers and the unemployed in the Province.

    Liverpool-Belfast Ferry
    Mr. Parryasked the Secretary of State for Northern Ireland if he will make a further statement on the future of the Liverpool to Belfast ferry service.
    The Under-Secretary of State for Northern Ireland (Mr. David Mitchell): I understand that Irish Continental Line, who intend promoting a new company to be registered in the United Kingdom, have been having detailed discussions with trade union representatives and the two port authorities. Other potential operators remain interested. I am hopeful that a new service will shortly be established on a commercial basis.
    Mr. Parry: I welcome what the Minister said, but will he assure the House that this ship will sail under a British flag and be manned by British seamen, and that priority in employment will be given to the seamen who were made redundant following the closure of the P and O ferry? Will he also maintain close contact with the National Union of Seamen?
    Mr. Mitchell: I understand that ICL intends to promote a new company registered in the United Kingdom. The ships will fly the British flag and employ NUS members. The decision as to which seamen will be employed is a matter for negotiation between the company and the men.

    Constitutional Reform
    Mr. Arnoldasked the Secretary of State for Northern Ireland if he will make a statement about constitutional development in Northern Ireland.
    Mr. McNamaraasked the Secretary of State for Northern Ireland if he will make a statement on his recent discussions with the leaders of the Northern Ireland parties.
    Mr. Winnickasked the Secretary of State for Northern Ireland if he now intends to propose any new constitutional plans for Northern Ireland.
    Mr. Stephen Rossasked the Secretary of State for Northern Ireland whether he proposes to initiate discussions on the possibilities of establishing an elected assembly in the Province and with whom.
    Mr. McCuskerasked the Secretary of State for Northern Ireland if he will indicate the timetable he would like to work to in his efforts to restore devolved government to Northern Ireland.
    Sir John Biggs-Davisonasked the Secretary of State for Northern Ireland when he will announce new constitutional proposals.
    Mr. Prior: I am anxious to see some responsibility for their own affairs restored to the people of Northern Ireland through their elected representatives. I am currently discussing with local political parties means of transferring power that would be broadly acceptable to the whole community. The discussions that I have held have been very valuable, and they are continuing. No final decisions have yet been taken, but I recognise the need for action.
    Mr. Speaker: I propose to call first the six hon. Members whose questions are being answered.
    Mr. Arnold: Will my right hon. Friend confirm that the four main political parties in Northern Ireland are still committed to the principle of devolution? Is it his impression that there is now sufficiently broad agreement among the political parties to enable him to introduce legislation to further that objective?
    Mr. Prior: The answer to the first part of my hon. Friend's question is "Yes". The answer to the second part is that I am not yet in a position to say that that is a fact, but it would be in the interests of all the political parties if it were.
    Mr. McNamara: If no final decisions have been taken, will the Secretary of State on this occasion give an undertaking that no final decisions will be taken on education policy, particularly in connection with the training of teachers, before there has been a proper discussion of the matter? Does he agree that it would be sad to muddy waters of good will by taking precipitate decisions on the future of denominational teacher training in the Province without the full consent and support of the denominations involved?
    Mr. Prior: No final decisions have been taken on the matter. We continue to have talks with the various parties involved. We are well aware of the sensitivity of the matter.
    Mr. Winnick: Does the Secretary of State accept that, to gain the confidence of the minority community, it will be necessary in any new constitutional plans to have schemes which are basically acceptable to it and for which its spokesmen have argued for a long time—for example, power sharing? Before plans are finalised, does the right hon. Gentleman intend to discuss constitutional developments in Northern Ireland with the new Irish Government when they are duly elected?
    Mr. Prior: Any new arrangements must make adequate provision for the interests of the minority. This is a matter for the British Government and the people of

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    Northern Ireland. We have friendly relations with the Republic, and we shall therefore keep that country informed from time to time. However, it is our decision, and we must decide in our own way.
    Mr. Ross: I welcome the Secretary of State's initiative and determination to press on with these discussions. Can he give us some idea of the time scale? When does he expect to be able to present definite proposals to the House?
    Mr. Prior: I am grateful to the hon. Gentleman for what he said. I wish that I could give an idea of the time scale. It will depend entirely on how the talks go. It would perhaps be better if we took a little longer and more care about the way in which we put forward the proposals. There is still some way to go before I could be confident of putting forward proposals to the House.
    Mr. McCusker: Is the Secretary of State aware that, inadvertently or otherwise, he is creating a momentum towards the restoration of a devolved Assembly in Northern Ireland? Such a momentum will be hard to contain. If it does not lead to a satisfactory conclusion, it will lead to further alienation and disenchantment in the community there? That being so, will he ensure that any proposals that he puts forward are soundly based and have a clearly laid out procedure and timetable for transferring power from the Northern Ireland Office to the newly-elected body before any election takes place?
    Mr. Prior: I shall do my best to fulfil those conditions. I recognise that there is now a momentum in Northern Ireland towards some form of devolved Administration. That momentum has been created not entirely by myself, but by the wish and desire of the people of Northern Ireland, who believe that the time is now ripe for that to happen.
    Sir John Biggs-Davison: In all that he does, will my right hon. Friend make it apparent that the union is to be consolidated and not eroded? Otherwise, terrorism will be encouraged, loyalty discouraged, and new suspicions aroused about the Anglo-Irish exchanges.
    Mr. Prior: It is as much a matter of the Unionists themselves making clear their views as anything that I can say to them. I believe that the union will be best maintained if there is a growing recognition among the people of Northern Ireland that they should have a devolved Government in which there is adequate provision for the interests of the minority.
    Mr. Fitt: Does the Secretary of State recall the sad experience of the election to, and subsequent report of, the Constitutional Convention which we have already had in Northern Ireland? It was permissible for all the parties to seek election to the Convention and for each to seek a different mandate. Having been elected on different mandates—some for and others opposed to power sharing—they went to the Convention and found it impossible to get off the hook on which they had firmly placed themselves during the election. Therefore, in any election to an Assembly or Convention, will the Secretary of State lay down the guidelines on which people are to be elected so that they do not create unnecessary hooks from which they subsequently find it impossible to get off?
    Mr. Prior: If the House permits, I shall try to lay down adequate guidelines to prevent the sort of situation to
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    which the hon. Gentleman alluded. However, when it comes to an election, I cannot say that people will not get themselves on hooks which they might later regret.
    Mr. Amery: I await my right hon. Friend's definitive statement on what he proposes for Northern Ireland, but is he aware that newspaper reports of his intentions have caused great anxiety among Conservative Members and, I dare say, others elsewhere? Is he further aware that we do not see the relevance of these proposals, as described in the press, to the security situation? Would it not be better, as a first step, before seeking to impose a devolved Government on Northern Ireland, to allow it to have the same local government authorities as we have in this country?
    Mr. Prior: Frankly, I do not believe that the same conditions for local government exist in Northern Ireland as exist here. The people of Northern Ireland are asking for a form of devolved Administration. Of course these are matters for discussion, but if we are to return to the people of Northern Ireland responsible politicians who will not go in for the extremism of the past few years, it is essential that they have political responsibility as soon as we can arrange it.
    Mr. Concannon: Is the Secretary of State aware that the Opposition are pleased that he has outlined his intentions today? However, will he go further and say whether he has a specific timetable in mind and—more important—whether, after publication of his proposals, the House will have a chance to debate and comment on them before he proceeds further?
    Mr. Prior: I am certain that all parties in the House will wish to have discussions on such difficult matters. I shall do all that I can to ensure that a widespread and wide-scale debate takes place. I hope that hon. Members do not believe that it is an easy business or that I have a panacea for the problems of Northern Ireland, because that would be asking too much.
    Several Hon. Members rose—
    Mr. Speaker: Order. I shall call one more hon. Member before we move on.
    Dr. Mawhinney: Does my right hon. Friend accept that broadly based proposals for constitutional change in the devolving of power to a Northern Ireland Assembly would be most welcome, but that its chances of success may be impaired unless the Government also consider the problem of 24 per cent. male unemployment in the Province and the need to do something to alleviate that distressing postion?
    Mr. Prior: The prime need is an end to the violence in Northern Ireland. The measures that we could propose for political responsibility would help towards that end, but until there is an end to violence, and until we get political responsibility back into Northern Ireland, it will be difficult to achieve increased economic activity or prosperity. That is one of the three parts of the tripod to which we must pay attention.

    Security
    Mr. Molyneauxasked the Secretary of State for Northern Ireland if he will make a statement on the security situation.
    Mr. Kilfedderasked the Secretary of State for Northern Ireland if he will make a statement about security.
    Mr. Prior: Since I last answered questions on 3 December there have been seven deaths associated with terrorism, one of them a member of the security forces. A small number of others have been injured, some seriously. There were no deaths caused by terrorists in December, the first such month for 10 years.
    The House will wish to congratulate the security forces on their hard work and dedication. Since 3 December, 99 people have been charged with terrorist-type offences. In 1981, 918 persons were charged, including 48 with murder and 72 with attempted murder. This is the highest number charged in any year since 1977. Finds of firearms, ammunition and explosives were all higher in 1981 than in 1980. In the case of explosives, more were found in 1981 than in any year since 1976. Terrorists still present a serious threat, and we must keep up the pressure aimed at bringing them to justice before the courts.
    Mr. Molyneaux: The Under-Secretary of State said in the House on 15 December that the Secretary of State had vigorously met the security challenge by introducing the spearhead battalion. On that same day the Secretary of State assured my hon. Friend the Member for Londonderry (Mr. Ross) that the spearhead battalion would not be withdrawn for the time being. What has happened in the interval of five weeks to reverse that decision and to cause the withdrawal of the spearhead battalion, unless it is intended that it should be replaced by something equally effective?
    Mr. Prior: The GOC and the Chief Constable told me that they believed that the spearhead battalion was no longer required. It is available to return at short notice if needed, but, as the House knows, we have in many ways strengthened the operations of the Ulster Defence Regiment during the intervening period and the numbers of the Royal Ulster Constabulary are being steadily increased.
    However, I can assure the hon. Gentleman that if at any time the presence of the spearhead battalion is requested—the name "spearhead" suggests that it should come in and go out again—or if I believe that there is a need for it, the battalion will go back.
    Mr. Kelfedder: It is right that the security forces should be constantly congratulated on their courage and their success, but does not the right hon. Gentleman recognise that the figures that he has given will bring no comfort to those who have been mutilated or to the relatives of those who have been murdered by the IRA in its vicious campaign of sectarian violence, which is still continuing, especially along the border? Can we now have sufficient military activity along the border to wipe out the thugs?
    Mr. Prior: There is a constant need to improve the policing of the border areas. I hope that further progress can be made on that. Some of the murders that I reported in my statement this afternoon were what one might term the results of internecine warfare and were not directly related to anything else.
    Mr. Fitt: Does the Secretary of State recognise that it is essential that those who are charged with terrorist offences should be brought before the courts and either convicted or exonerated at the earliest possible moment?
    Is the Secretary of State aware of a particular case that exists, whereby an RUC special branch detective was charged with the murder of art RUC sergeant in Cushendall in county Antrim and that other policemen, who were named in a deposition when the matter was first brought before the courts, are still on duty after it was said in the courts that they were acting in collusion with terrorists? Will the Secretary of State inquire into the circumstances of an acceptance that policemen who have been named as acting in collusion with terrorists in Northern Ireland, whoever the terrorists may be, can remain on duty?
    Mr. Prior: I shall certainly consider the point that the hon. Gentleman raises. The period between charges being brought and cases being heard is far too long. We must do everything that we can to reduce that period, which is a continuing worry to me.
    Mr. Dickens: Can the Secretary of State think of any circumstances whereby the British Army might be completely withdrawn from Northern Ireland within the next few years, as that is the ultimate wish in the minds of many British people?
    Mr. Prior: I would have thought that for as long as Northern Ireland remains part of the United Kingdom it would always be right that some troops should be stationed there. However, I hope that by increased political responsibility that is acceptable to the community as a whole—that is important—the amount of terrorism and violence would be so reduced that the Province could be left in the safe hands of the Royal Ulster Constabulary.
    Mr. Concannon: Why are troop dispositions for Northern Ireland bandied about in the press? We know the psychology of certain people tin Northern Ireland and one can see that only as an open invitation to them. Does the Secretary of State agree that it would be better if those matters were not bandied about, either here or in the press?
    Mr. Prior: I agree entirely with that. It is remarkable that the news about the spearhead battalion leaving Northern Ireland seems to have reached the press this morning. It would be better if the spearhead battalion could enter and leave Northern Ireland without anyone being aware of it, except the terrorists.

    United States of America
    Mr. Adleyasked the Secretary of State for Northern Ireland if he will make a further statement on the plan for a ministerial visit to the United States of America to counter the misrepresentation there by sympathisers of the Irish Republican Army of the situation in Northern Ireland.
    The Under-Secretary of State for Northern Ireland (Mr. Nicholas Scott): There are at present no definite plans for a ministerial visit to the United States of America, but my right hon. Friend expects to go there in the spring or early summer. Any other such visits will have as part of their purpose the explanation of the Government's policies in Northern Ireland and countering the misrepresentation to which my hon. Friend refers.
    Mr. Adley: While thanking my hon. Friend for that reply, may I ask whether he is aware that the hon. Member

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    for Fermanagh and South Tyrone (Mr. Carron) appears to have broken the American immigration rules with impunity and yet is sought after and féted by some influential American politicians? Does that not make the journey to which my hon. Friend has alluded urgent? Will my right hon. Friend, when he visits the United States of America, try to speak to the American people in a language that they can understand and tell them that if the majority of people in Northern Ireland wish to choose their own constitutional arrangements with the rest of the United Kingdom they should be free to do so, as the majority of the people in Puerto Rico are free to choose their constitutional arrangements with the rest of the United States?
    Mr. Scott: I am sure that my right hon. Friend will have heard my hon. Friend's view about the line that he should take when he goes to the United States. Incidentally, I am also convinced that the antics of the hon. Member for Fermanagh and South Tyrone (Mr. Carron) will have done something to awaken the American public as a whole to the problems that we face.
    Mr. J. Enoch Powell: Will the Government bear in mind in this connection that the principal threat from the other side of the Atlantic to the peace of Northern Ireland does not come from the Irish-American community in the United States, but from the State Department and the Pentagon?
    Mr. Scott: No, I cannot accept that.

    Unemployment
    Mr. Dubsasked the Secretary of State for Northern Ireland how many people are currently unemployed in Northern Ireland; and what were the comparable figures for 1980 and 1979.
    Mr. Adam Butler: At 14 January 1982, 113, 337 people were registered as unemployed. In January 1980 and 1979 the comparable figures were 66, 182 and 64, 055 respectively.
    Mr. Dubs: In the light of those depressing figures and the news of redundancies at De Lorean and Mackie's, does the Minister see any prospect of a reduction of unemployment in Northern Ireland during the life of the Government?
    Mr. Butler: Yes.
    Mr. Soley: Are not those figures a devastating indictment of the Government's policy? Given that the Government recently put £90 million into Northern Ireland, claiming that it would be a great boost when it simply put right the cuts made in previous years, will the Minister tell his colleagues in the Cabinet that if it is of advantage to boost public expenditure in Northern Ireland, the same applies to the rest of the United Kingdom?
    Mr. Butler: It is correct that £90 million beyond what was previously planned has been made available to Northern Ireland in the next financial year, but it came out of the total resources available to the nation. That money will be put to good use in a number of ways, and it is estimated that it will provide some 9, 000 training and job opportunities beyond what there would otherwise have been. I hope that the House will welcome that.
    Mr. McNamara: In view of the controversy about investment in De Lorean and the number of jobs created
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    there and elsewhere, would it not be in the interests of the House if the right hon. Gentleman's Department produced a budget statement showing the amount of investment in De Lorean and the savings that it achieved in unemployment and other social and welfare benefits for employees at De Lorean and elsewhere and also showing the cost per head of population for the damage that has been or may have been done as a result of terrorism in the Province, so that we may have a better picture of the effectiveness or otherwise of that policy?
    Mr. Butler: I shall be happy to answer a question on the first point if the hon. Gentleman puts one down.

    Local Government Reform
    Mr. Nicholas Wintertonasked the Secretary of State for Northern Ireland when he proposes to bring forward proposals to reform local government in Northern Ireland in order to make it more effective and meaningful.
    Mr. Prior: As I told the House on 29 October, this is an issue on which I must tread cautiously. It must be considered in the light of the growing desire in the Northern Ireland political parties for some form of devolved administration for the Province as a whole.
    Mr. Winterton: I am grateful for my right hon. Friend's response and for the initiatives that he is taking in Ulster, but does he agree that urgent progress is required if the people of Northern Ireland are to have any trust in the Government's integrity? Does he further agree that the best form of progress would be to restore to the people of Northern Ireland effective and meaningful local government in which those who are elected are accountable to the people whom they represent for the decisions that they take?
    Mr. Prior: I appreciate my hon. Friend's point, but he will know that it is not possible to treat Northern Ireland exactly like any other part of the United Kingdom. That is precisely, the argument about local government. We should, of course, like to see more powers restored to local government, but a number of questions have arisen about the attitude of local government itself to the minority communities. I believe that it is better to seek to restore a level of devolved administration to the Province as a whole. That would then make it more possible for further powers to be restored to local government.
    Mr. Stephen Ross: Will the right hon. Gentleman accept that Liberal Members believe that his priorities are right and that he should not restore powers to local government before he has dealt with the question of overall administration? But will he ask his right hon. Friend the Secretary of State for the Environment to restore powers to local government in England that the Government are busy taking away?
    Mr. Prior: I have enough problems in Northern Ireland without worrying too much about England at the moment.
    Mr. Stanbrook: Is it not clear from what we know already that devolution in Northern Ireland will serve only to intensify the differences among the people there? What excuse can there possibly be for the Government not to introduce the one missing element—an upper tier of local government—and thus give the people of Northern Ireland the benefits of the system of Government that the rest of us enjoy?
    Mr. Prior: The reason is that, regrettably, it would merely intensify the problems that already exist. If I am to achieve any solution—and goodness knows that is hard enough—to the problem of trying to bring the people together, it would be senseless to pursue something that I am already told in no uncertain terms would have the reverse effect.

  PRIME MINISTER

    Engagements
    Mr. Dormandasked the Prime Minister if she will list her official engagements for 28 January.
    The Prime Minister (Mrs. Margaret Thatcher): This morning I presided at a meeting of the Cabinet and had meetings with ministerial colleagues and others. In addition to my duties in the House I shall be having further meetings later today.
    Mr. Dormand: What action does the Prime Minister propose to take following the pantomime in Brussels earlier this week? Does she agree with the Foreign Secretary's statement that the problems of the Common Market will be with us for several years? Is it not now abundantly clear that the political and economic shackles that this country has with such a narrow and introspective institution should be investigated? Will she publish a Green Paper setting out the alternatives to it for this country?
    The Prime Minister: With regard to the last part of the hon. Gentleman's question, the answer is "No". Secondly, I believe that it is in this country's interests to stay in the Common Market, particularly for those areas that are seeking inward investment and are likely to attract companies to their areas provided that we remain in the Common Market.
    With regard to the problems of the mandate, we shall try to take the studies forward. As I said in my statement to the House, it is absolutely vital that we reach agreement on parts of all three chapters together and that we do not agree on any one matter without each and every country being satisfied that it has a reasonable deal.
    Sir John Langford-Holt: Will my right hon. Friend take time to consider the plight of citizens of this country who have lost their jobs without compensation under the iniquitious trade union and labour relations legislation of 1974 and 1976, for no other reason than that they exercised their human rights and declined to join a trade union?
    The Prime Minister: My hon. Friend rightly draws attention to the disgraceful legislation passed by the Labour Government, which meant that people could be sacked without compensation from jobs in which they had given satisfactory service for years merely because they refused to join a trade union. My right hon. Friend the Secretary of State for Employment has considered this, especially following judgments on the matter, and has decided to introduce in his new Bill a provision to enable the Secretary of State to pay compensation to those who lost their jobs as a result of that legislation during the period of 1974 to 1980. I believe that that will be extremely welcome, not only to those who have suffered but to the vast majority of people in this country who will feel that justice has at last been done, and it took a Tory Government to do it.
    Mr. Foot: Will the Prime Minister say, rather than considering how to reply to planted questions, whether the Cabinet this morning gave any consideration to the plight of the unemployed, the number of whom has grown so huge under the Conservative Government? Will the Government restore the cut of £13 per week being imposed on the families of so many of the newly unemployed?
    The Prime Minister: We had an excellent Cabinet this morning and a very useful discussion. The right hon. Gentleman will be interested to know that we considered that it would be right to continue with the broad strategy that the Government have followed hitherto, and in particular, that it was essential not to put at risk the object of reducing inflation as that is one of the best ways to achieve recovery and the prospect of new, genuine jobs.
    With regard to the specific point raised by the right hon. Gentleman, I take it that it is related to earnings-related supplement, which ceased on 2 January in relation to new claimants. I remind the right hon. Gentleman, as I have pointed out before, that only one in five of the unemployed were entitled to earnings-related supplement.
    Mr. Foot: As for the right hon. Lady's "excellent Cabinet" this morning, we shall await the usual leakages to see whether her claims are correct. Did the Cabinet study this morning's headline in The Times— [Interruption.]. I know that Conservative Members do not care about what is happening to the unemployed, but we do. The right hon. Lady and her Cabinet are responsible for the headline, which states:
    "Benefit for jobless at 1951 level".
    In other words, the right hon. Lady has pushed down unemployment benefit for many of the unemployed to a lower level—compared with the wages of those in work—than at any time since 1951. When will she rectify that? If she cannot stop unemployment rising, can she not at least show some compassion for the unemployed?
    The Prime Minister: Unemployment benefit is roughly double what it was in 1951. That is a fact. The supplementary benefit safety net remains to safeguard the position of the worst off.
    Mr. Dubsasked the Prime Minister if she will list her public engagements for 28 January.
    The Prime Minister: I refer the hon. Gentleman to the reply I gave some moments ago.
    Mr. Dubs: Has the right hon. Lady seen the reports that the World Bank is to reduce its lending to underdeveloped countries as a result of the American Government's actions? Given the Prime Minister's statements in Ottawa, Melbourne and Cancun, will she convert those statements into action and increase our aid programme to underdeveloped countries, in order to make up for the World Bank's deficiencies?
    The Prime Minister: The IDA No. 6 agreement, concluded in 1980, provides that any shortfall in the contribution made by the United States of America puts a corresponding limit on the use of contributions available from others. We have made our contribution in full, but only a proportion of it can be used during this period We cannot increase our aid, because we have already made the full contribution to the IDA. Developing countries are anxious to have not only aid, but trade.
    Mr. David Steel: Without entering into the political debates of a neighbouring State— [Interruption]—would

    999
    it not be appropriate, today, for the Prime Minister to express a word of appreciation to Dr. FitzGerald and his Government in Ireland for their constructive approach to relations between our countries? Would it not be appropriate to reaffirm that we are determined that that should continue, regardless of which Government are elected?
    The Prime Minister: The right hon. Gentleman is absolutely right in one respect. We continue to work with the Government of a country. We express no view as to the particular Government. We shall continue to work under the agreements that we have reached.
    Sir Anthony Meyer: Will the Prime Minister find time today to congratulate the Italian Government on the brilliant operation that has resulted in the liberation of General Dozier? Was any help forthcoming from the Government?
    The Prime Minister: I am happy to respond to my hon. Friend's invitation and to congratulate the Italian Government on the release of General Dozier after an excellent operation. I congratulate them, and we are all thrilled that he has been found fully alive— [Laughter]—and has been restored to his family. [Interruption.] I am sorry, but I do not regard this as in any way a laughing matter. It is a great relief that he has been found alive and has been restored to his family.
    Mr. Pavitt: Will the Prime Minister's meetings with her ministerial colleagues include one with the Secretary of State for Social Services? If so, will she discuss with him the turmoil into which the medical profession has been put by the alteration of the Abortion Act by back-door methods? As a result, while consultants come under one order, the two general practitioners required to certify a case come under a different requirement. Should not that anomaly be resolved, and should not something be done to enable the Act to operate as originally intended?
    The Prime Minister: I am aware of the hon. Gentleman's point, but I am not familiar with the details. I shall draw that issue to the attention of my right hon. Friend the Secretary of State.
    Mr. Winterton: Given that the Government's objectives in renegotiating MFA 3 have not been achieved within Europe, that the industry believes that that might cost some 30, 000 jobs and that my right hon. Friend has a magnificent record on standing up for British interests in Europe, what action does she intend to take to ensure that the interests of the textile and clothing industry—which employs about 630, 000 people—are preserved and that the United Kingdom's best interests are served within the context of our membership of the EEC?
    The Prime Minister: As my hon. Friend knows, we have always fought strenuously for a new, good MFA in general terms and in relation to the bilateral agreements that would be reached under that. We shall continue to fight, because we fully appreciate that the textile industry must have some protection under such agreements.
    Mr. Skinnerasked the Prime Minister if she will list her official engagements for 28 January.
    The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.
    Mr. Skinner: Is the Prime Minister aware that, quite apart from the one in five of the unemployed who are
    1000
    losing earnings-related supplement worth about £13 a week, many disabled people, including the miners in hospitals in the Glasgow area, are losing their earnings-related supplement? Does the right hon. Lady realise that the nurses looking after those miners have been asked by the Government to take an 8 per cent. cut in wages? The Prime Minister should not tell us that there is not enough money in the country when the Duke of Westminster and his cronies can pick up a hospital site on Hyde Park Corner for £23, 000, when it is really worth £20 million.
    The Prime Minister: I shall respond to the hon. Gentleman's three questions. He referred to the coal miners and particularly, perhaps, those injured in the Cardowan colliery. Although miners injured in the accident will not be able to claim earnings-related supplement, the benefits of the industrial injury scheme are available to them in exactly the same way as they are to other workers. Injury benefit is payable for six months at the rate of £25·25 for a single person and after that beneficiaries can become entitled to long-term disablement benefit and the various supplements.
    The nurses have put in a claim, which will be dealt with in the Whitley Council. I remind the hon. Gentleman that the Government have paid the nurses money which, in a way, was withheld by the Labour Government because of the reference to the Clegg Commission. The Labour Government told them to refer their pay claim to the Clegg Commission. We honoured that agreement and, as a result, the nurses' pay bill is 76 per cent. above the bill when we came to power.
    My hon. Friend the Under-Secretary of State, for Health and Social Security, the hon. Member for Hampstead (Mr. Finsberg) has already given a full answer about St. George's hospital. The whole site was allocated to St. George's hospital at a peppercorn rent for decades. It seems reasonable to honour an agreement to return it. Of course, the hon. Gentleman might not agree with honouring legal agreements.
    Sir John Biggs-Davison: As we are to have £1 and 50p coins, will the First Lord of the Treasury spare a moment to suggest to those involved that we should restore or invent dignified names for them, in this land of sovereigns and crowns?
    The Prime Minister: The proposition is very attractive in theory, and I look forward to receiving such suggestions from my hon. Friends.
    Mr. Alfred Morris: Is the Prime Minister aware that DHSS Ministers have now ceased to operate the job release scheme in respect of employees, even disabled employees, in the Department? Is it not disgraceful that Government employees should be denied the advantages of a scheme that Ministers commend to other employers? Will the Prime Minister now instruct DHSS Ministers to reverse their decision forthwith?
    The Prime Minister: Public employees are treated on the same basis as those in the private sector. The essence of a job release scheme is that a person aged over 62—as the age will be in February—can be released with an early pension on retirement, provided that his job is filled by a person on the unemployment register. That regulation applies to Government service staff as well as to the private sector.

Official Report and Order Paper (Correction)
Mr. Speaker: Before I call the business question, this may be an appropriate moment to inform the House that the Editor of Hansard has written to me to apologise for the fact that yesterday's Hansard records the right hon. Member for Chesterfield (Mr. Varley) moving an amendment different from the one that he actually moved. I realise that this is an embarrassment to the right hon. Gentleman and to his right hon. and hon. Friends. I apologise on behalf of Hansard.
[The amendment should read as follows:
"condemns Her Majesty's Government for pursuing economic policies which have brought about more than three million unemployed and destroyed major sections of British industry; and calls for radical action in line with Labour's 'Plan for Expansion' to create jobs, revive industry, and regenerate the British economy".]
I also wish to draw the attention of the House to the fact that there is an error in the text of the Opposition motion down for discussion today. There is a printing error in line 3. The word "not" has been inserted. Once again, we can only say that this is a human error, for which we apologise. I leave the matter there.

Business of the House
3.31 pm
Mr. Michael Foot: Will the Leader of the House state the business for next week?
The Lord President of the Council and Leader of the House of Commons (Mr. Francis Pym): The business for next week will be as follows:
MONDAY 1 FEBRUARY—A debate on the first report from the Select Committee on Energy, Session 1980–81, on the new nuclear power programme, House of Commons Paper No. 114, and the relevant Government observations, Cmnd. 8317.
TUESDAY 2 FEBRUARY—Second Reading of the Coal Industry Bill.
Remaining stages of the New Towns Bill.
Motion on the House of Commons Disqualification Act 1975.
WEDNESDAY 3 FEBRUARY—Remaining stages of the Local Government (Miscellaneous Provisions) Bill.
Motion on the Electricity Service (Finance) (Northern Ireland) Order.
The Chairman of Ways and Means has named opposed Private Business for consideration at 7 o'clock.
THURSDAY 4 FEBRUARY—Supply (11th allotted day): There will be a debate on an Opposition Motion on the need to improve the lot of the elderly.
FRIDAY 5 FEBRUARY—Private Members' Bills.
MONDAY 8 FEBRUARY—Second Reading of the Employment Bill.
Mr. Foot: Will the right hon. Gentleman tell the House when the Government expect to bring forward legislation to assist the Greater London Council with the problems that arise from the court judgment which interferes with the policies of providing for the transport needs of elderly people? It would be more helpful than the legislation that the Government propose for Monday week—the so-called misnamed Employment Bill, which is another vicious Bill to attack the trade unions. We had hoped that the Government would have come to their senses, even at this late hour, and would have tried to set aside that and all kindred measures.
Does not the right hon. Gentleman consider it deplorable that the Government are cutting the standard of living of some of the poorest people in the country, including pensioners? There was some discussion a few moments ago about the cuts that are being imposed on the unemployed—cuts that are fiercer than anything that has been done for a long time. We believe that the Government should have provided the time that the Opposition are providing on Thursday for discussion of that essential subject.
Mr. Pym: Regarding the Bill relating to London Transport, my right hon. Friend the Secretary of State told the House last week that legislation is being prepared on certain aspects of the matter. The Bill will be introduced as soon as it is ready.
As the right hon. Gentleman knows, the Employment Bill is the culmination of a process of discussion, involving a Green Paper last year and a White Paper in the autumn. The Bill has been published today and it will be given a Second Reading on Monday week.
As the right hon. Gentleman said, the Opposition have chosen to debate next Thursday one aspect of social

1003
security benefits. Of course, there will be other opportunities later in the year—at Budget time and later—when other aspects can be debated.
Several Hon. Members rose—
Mr. Speaker: Order. Before I call any other hon. Member, I make an appeal to the House. Many hon. Members hope to participate in the main debate, so I hope that hon. Members will ask only essential business questions.
Mr. J. Enoch Powell: In view of the massive amount of detail that is involved in Tuesday's motion regarding House of Commons disqualification, will the Leader of the House see whether he can place in the Vote Office, or render otherwise available, an explanatory note showing the origin of the proposed changes so that their nature is easily apprehensible by hon. Members?
Mr. Pym: The origin lies in the House of Commons Disqualification Act 1975, but I shall certainly consider the right hon. Gentleman's representation.
Sir William Clark: Will we have time before the Budget to debate the Scott report, which will affect the country's finances, and have the Government yet reached a decision on it?
Mr. Pym: The Government have not yet reached a decision. It is unlikely that we shall debate the matter before the Budget. I am aware of my hon. Friend's interest in the subject and I have it in mind.
Mr. George Foulkes: Is the Leader of the House aware that we have been waiting for some time for an announcement about an increase in the death grant? Is he further aware that I and other hon. Members were promised an announcement before Christmas? That promise was broken by the Government. Will the right hon. Gentleman give a clear indication whether we shall have an announcement before the debate on the elderly next Thursday?
Will the Leader of the House further state, in the light of the way in which the Solicitor-General for Scotland resigned over the issue of a statement in the press before he made a statement in the House, how the statement on the front page of The Guardian today got there, and whether he will be looking into the matter? That article contains a clear unequivocal statement, before a statement has been made to the House, of what will happen to the death grant.
Mr. Pym: I do not know how any story gets on to the front page of The Guardian. There is nothing for me to look into there. I shall consult my right hon. Friend the Secretary of State for Social Services about the matter that the hon. Gentleman has raised. Obviously, the hon. Gentleman may have an opportunity to raise the matter when we discuss the Bill tomorrow.
Mr. John Stokes: In view of the recent report that three people out of 10 in this country cannot do simple sums and that a large majority cannot even read a railway timetable, does not my right hon. Friend consider that time should be found to debate education next week, and in particular for a return to the teaching of the three Rs in schools?
Mr. Pym: The House may be able to find an opportunity to debate education soon, although I do not think that such a debate is likely to have an immediate effect on the capabilities of most of the pupils. Nor, unfortunately, do I believe that the ability to read a railway timetable will be particularly helpful today.
Mr. Allan Roberts: Will the Leader of the House consider arranging an emergency debate on law and order? I know that we have had one recently, but there is now a crisis facing police authorities throughout the country. They are being asked by the Government to make swingeing cuts in their budgets—in some cases, up to more than 30 per cent. For example, Merseyside has been asked to make a cut of 19 per cent. in its police budget. Is not that ridiculous from a party that claims to be the party of law and order? Is not search and detection, for which we need policemen and police budgets, a greater deterrent to crime than severity of punishment?
Mr. Pym: I do not accept the hon. Gentleman's remarks, which I think are extraordinarily unhelpful. I do not intend to find time for a debate on the subject in the near future. There are other ways in which it could be raised if certain hon. Members so decided.
Mr. John Wells: Will my right hon. Friend find time in the near future for a debate on the problems of the gipsy and caravan-dwelling population, for two reasons? First, it is an unsuitable subject for an Adjournment debate, because legislation is required. Secondly, the present unsatisfactory position occurs because the present legislation was Private Member's legislation, and we need a Government statement and a Government Bill.
Mr. Pym: I cannot find time in the near future, but I can assure my hon. Friend that my right hon. Friend the Secretary of State for the Environment is aware of the problems to which he refers, and they are very much in his mind.
Mr. Nigel Spearing: Is the Leader of the House aware, with respect to the London Transport bill, that because of the combined effects of the fiduciary duty to ratepayers and the Secretary of State's more recent clawback requirements it may be necessary for the Greater London Council, in order to keep within the law, to put another 50 per cent. on fares in the summer, thus trebling the present fares, unless legislation permits it to do otherwise? Will the right hon. Gentleman please look into the matter and pass it to the Secretary of State for the Environment, to ensure that the long title of the Bill enables the Government to make it a part of the forthcoming legislation?
Mr. Pym: I shall convey what the hon. Gentleman has said to my right hon. Friend the Secretary of State for the Environment, who has been helpful in telling the House about the proposed legislation. I think that I am right in saying that in the same statement my right hon. Friend said that in his view it was unnecessary for there to be a further rise in fares this summer.
Lord James Douglas-Hamilton: Will my right hon. Friend consider having a foreign affairs debate, in which hon. Members who are interested in the changing situation in Poland can take part?
Mr. Pym: I was glad to be able to arrange a foreign affairs debate before Christmas, when that subject was

1005
covered. I know that for various reasons it was, unfortunately, truncated. I do not think that there will be another opportunity in Government time in the near future, but the anxieties about Poland and the importance of that issue to the Western world are clear to every hon. Member.
Mr. Donald Coleman: I should like to return the right hon. Gentleman to the question of the death grant and to refer him to early-day motion 181.
That this House calls upon her Majesty's Government, without delay, to raise the death grants substantially to meet the continuing high level of inflation which the Government's policies have failed to reverse.
In view of the concern that has long been felt in the House and outside about this problem and its effect upon people, will the right hon. Gentleman please arrange for a statement next week, before the date on Thursday, by the Minister concerned?
Mr. Pym: I cannot promise a statement, but I can assure the hon. Gentleman that the matter is under active consideration by Ministers.
Mr. Nicholas Winterton: I make no apology for returning to a matter which I raised with my right hon. Friend the Prime Minister a short time ago. When will my right hon. Friend the Secretary of State for Trade or my hon. and learned Friend the Minister for Trade make a statement about the Council of Ministers discussions on 25 January about the multi-fibre arrangement and the bilateral agreements that go with it, bearing in mind that Carrington Viyella has just closed two mills in Lancashire, making about 700 people redundant—the mills are closed for ever—and that Tootal Limited has closed a mill at Strines, making about 600 people redundant? Will my right hon. Friend tell the Government of the desire of the House to have an expression of their position on the bilateral agreements and the MFA, bearing in mind the direct employment implications?
Mr. Pym: My right hon. Friend the Secretary of State for Trade and other Ministers have been forthcoming in keeping the House informed about the development of the negotiations. My right hon. Friend the Lord Privy Seal referred to them yesterday. There is to be another meeting of the Ministers concerned in a fortnight. There will probably not be an occasion or a statement before then, but I shall have it in mind after the next round of the negotiations.
Mr. Gerard Fitt: I wish to draw the attention of the Leader of the House to early-day motion 188, in the name of the hon. Member for Antrim, North (Rev. Ian Paisley).
[That this House calls on the Secretary of State for Northern Ireland to set up a public sworn judicial enquiry into the 'Kincora House Scandal' as only by this action can justice be done and be seen to be done.]
Does not the right hon. Gentleman agree that it is necessary that there be a full, open public inquiry into the case, which is causing grave concern in Northern Ireland? In the absence of a full public debate on the subject, the hon. Member for Antrim, North may be able to allege that allegations already made in the Press in Ireland and elsewhere are being used as a smear campaign. Therefore, in everyone's interest, will the Leader of the House agree to a debate on the subject?
Mr. Pym: I should have difficulty in finding Government time for such a debate, but I shall convey to my right hon. Friend the Secretary of State for Northern Ireland what the hon. Gentleman has said.
Mr. Anthony Beaumont-Dark: Does my right hon. Friend agree that law and order was one of the most important issues facing the country at the last general election? Now that we have the new grant-related estimate, does he accept that many areas, such as the West Midlands, are gravely concerned about the possibility of a reduction of 1, 000 in police numbers and that our inner areas are at the same risk as those in London. Therefore, if my right hon. Friend cannot find time for a debate, will he at least see that an early statement is made, so that we keep the essential promise that law and order will remain paramount and that the police force will not be weakened, whatever other sacrifices are made?
Mr. Pym: I can give my hon. Friend the assurance that for this Government law and order remains an extremely important issue. We know that the British people as a whole are very keen that it should be maintained at all costs. My right hon. Friend the Home Secretary is determined that the improvement in the size of the police force and the other ways in which we are battling shall continue, and it is not in his mind that that improvement should be lessened in any way.
Several Hon. Members rose—
Mr. Speaker: Order. I shall call those hon. Members who have been rising all the time, but I hope that the House will agree with my confining myself to those hon. Members, so that we can then move on.
Mr. Les Huckfield: Has the Leader of the House seen early-day motion 164, signed by 56 of my hon. Friends?
[That this House condemns the British Railways Board for its failure to honour the Advisory, Conciliation and Arbitration Service agreement to pay all footplate staffs a three per cent. increase from January 1982; deplores its tactics in deliberately breaking off productivity negotiations and then blaming ASLEF; declares its total opposition to the railway management's attempts to divide the railway trade unions by offering to pay members of the National Union of Railwaymen but not ASLEF; and calls for the immediate payment of the agreed three per cent. as the best means of settling the present dispute.]
Has he also seen early-day motion 185, signed by 23 of my hon. Friends?
[That this House, like the General Council of the Trades Union Congress and the National Executive Committee of the Labour Party, endorses the statement of Mr. Len Murray that British Railways should forthwith honour its signed agreement, which is specific and unconditional, to pay the footplatemen the three per cent. balance of the pay increase which it was agreed last August should be paid to all British Railways employees; believes that the British Railways Board is at fault in failing to pay the balance of the pay award, and in failing to use established machinery to find acceptable methods of improving productivity machinery which provides.full scope for negotiations on all issues; and, if those do not produce an agreement to involve independent arbitration.]

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Both motions are about the rail dispute. As it appears that the dispute could now be about to enter its third week, do the Government intend to provide any time for a debate on it?
Mr. Pym: No, Sir—not at the moment, at any rate.
Mr. Dick Douglas: Will the Leader of the House take some time to study the Official Report of the proceedings in the Standing Committee dealing with the Oil and Gas (Enterprise) Bill? If he studies the Official Report of this morning's sitting he will see that progress is likely to be frustrated by the absence of information which should be forthcoming from the Secretary of State for Energy—namely, the memorandum and articles of association of the proposed company, Britoil. Will he prevail on the Secretary of State for Energy to make those papers available to the Committee as expeditiously as possible, so that we can make progress?
Mr. Pym: I am not aware of what happened in that Committee this morning. It is not normal for the Leader of the House to answer questions about a Committee that is sitting, but I am sure that my right hon. Friend the Secretary of State will note what the hon. Gentleman said.
Mr. Alfred Dubs: When will the Second Reading of the Canada Bill take place?
Mr. Pym: As soon as I think that the circumstances are right for me to arrange that business. Clearly, that position has not yet arisen.
Mr. Guy Barnett: Has the right hon. Gentleman's attention been drawn to Early-Day motion 178?
[That this House deplores the decision announced by the Under Secretary for Health and Social Services to close the School for Dental Therapists in 1983; deplores the unprecedented behaviour of the honourable Gentleman in announcing the decision during his reply to an adjournment debate on the future of the school on 21st January; and calls on the Secretary of State to consider the arguments advanced in the debate before coming to a final decision, and, when he has made it, to make an oral statement to the House.]
What is the right hon. Gentleman's comment about the Government's announcement of the closure in response to an Adjournment debate? Does the right hon. Gentleman recognise the need for the Secretary of State responsible to make a statement about it in the House, so that he may be questioned on it?
Mr. Pym: I do not know that it would now be appropriate for my right hon. Friend the Secretary of State for Social Services to make a statement. The hon. Gentleman might wish to raise the matter in an Adjournment debate or in some other way.
Mr. Robert Parry: When does the Leader of the House expect the House to debate the White Paper on racial disadvantage? Is he aware that only yesterday dozens of people, including many young coloured people, were evicted from Liverpool town hall by the police for opposing massive cuts in voluntary organisation funds? Does he recall the reasons for the riots in Toxteth?
Mr. Pym: There have been some opportunities already this Session for that subject to be raised. I cannot see my way clear at present to find time for another such debate, but I shall keep the hon. Gentleman's representations in mind.
Mr. John Silkin: I do not think that the Leader of the House fully understood what my hon. Friend the Member for Greenwich (Mr. Barnett) was talking about. Is he aware that hon. Members would be grateful if he would look into the matter? A statement on Government policy was made at the end of an Adjournment debate initiated by my hon. Friend. If the right hon. Gentleman examines the matter, he may find that this is a practice that he would not wish to see continue.
Mr. Pym: Yes, I am of course prepared to look into the matter.

BALLOT FOR NOTICES OF MOTIONS FOR MONDAY 15 FEBRUARY
Members successful in the ballot were:

Sir Frederick Burden

Mr. David Crouch

Sir Walter Clegg

Hon. Members: All Tories—shame.
Mr. Speaker: Order. The procedure is quite unbiased. Hon. Members must live in hope. [Laughter.]

BILLS PRESENTED
  EMPLOYMENT
  Mr. Secretary Tebbit, supported by Mr. Secretary Whitelaw, Mr. Chancellor of the Exchequer, Mr. Secretary Younger, Mr. Secretary Edwards, Mr. Secretary Jenkin, Mr. Secretary Biffen, Mr. Secretary Lawson, Mr. Michael Alison and Mr. David Waddington presented a Bill to provide for compensation out of public funds for certain past cases of dismissal for failure to conform to the requirements of a union membership agreement; to amend the law relating to workers, employers, trade unions and employers' associations; to make provision with respect to awards by industrial tribunals and the procedure of the Employment Appeal Tribunal; and for connected purposes And the same was read the First time; and ordered to be read a Second time tomorrow and to be printed. [Bill 56.].
  TRANSPORT
  Mr. Secretary Howell, supported by Mr. Secretary Nott, Mr. Secretary Younger, Mr. Secretary Edwards, Mr. Leon Brittan, and Mr. Kenneth Clarke presented a Bill to make provision with respect to the disposal by the National Bus Company and their subsidiaries of property, rights and liabilities; to make provision for and in connection with the exercise of certain statutory functions with respect to the testing of vehicles generally and the testing and plating of goods vehicles in the private sector and to make new provision for vehicle-testing in connection with certain international conventions; to make new provision extending and amending the law with respect to fixed penalties for certain road traffic offences and the procedure to be followed and the punishments available in cases where fixed penalties apply; to amend the law relating to goods vehicle operators' licences with a view to controlling the operation of goods vehicles on environmental grounds; to give the Secretary of State certain powers in relation to harbour authorities in the interests of national defence; and to make further miscellaneous amendments of the law relating to road traffic (including provisions relating to the testing and fitness of vehicles): the same was read the First time; and ordered to be read a Second time tomorrow and to be printed. [Bill 57.].

SCOTTISH AFFAIRS
Mr. Speaker: I shall put the two motions together.
Ordered,
That the matter of youth unemployment and training in Scotland being a matter relating exclusively to Scotland, be referred to the Scottish Grand Committee for their consideration.
Ordered,
That, in the course of their consideration of the matter of youth unemployment and training in Scotland, the Scottish Grand Committee may meet in Edinburgh on Monday 15th February at half-past Ten o'clock.—[Mr. Pym.]

Orders of the Day
  SUPPLY
  [1OTH ALLOTTED DAY]—considered.
  SUPPLY

    Economic Policy of the Government
    3.53 pm
    Mr. Peter Shore: I beg to move,
    That this House believes that the Government's deflationary economic policies are the prime cause of the massive decline in output and the massive rise in unemployment from which the United Kingdom has suffered since May 1979; and that it is only through a major and planned expansion of production and demand that the nation can be put back to work.
    Mr. Speaker: I have selected the amendment in the name of the Prime Minister.
    Mr. Shore: I listened, like others, to the speeches made yesterday by the Secretary of State for Employment and his right hon. Friend the Secretary of State for Industry. I am sorry that they are not present for this debate. Given the depth of the economic crisis in which we are now so firmly fixed we on the Opposition Benches thought, as we considered the likely announcements of this week, that a further and wider debate was required. It was essential, we felt, that the Chancellor of the Exchequer, who shares with the Prime Minister the responsibility for the overall economic strategy of the Government, should be forced to give his explanation of the disaster that has overtaken us and that hon. Members should hear his remedies, if such exist, for the future.
    At the heart of the debate is the fact of mass unemployment, the analysis of its causes and duration, and the role of the Government in dealing with it. I shall refer first to the magnitude of the present employment disaster. One in eight of our work people is now without a job. Like a contagious disease, unemployment has spread throughout the whole country, visiting every region, town and community throughout the land.
    The worst affected area, Northern Ireland, has nearly one in five out of work. Even the most favoured area, London and the South-East, has a figure of one in 11 jobless. Most worrying of all is the exceptionally high concentration of unemployment among the youngest age groups of the working population. Of the 16 to 24-year-olds, no fewer than one million are out of work. Of those aged between 20 and 24, over 21 per cent. are out of work.
    The political, social and psychological consequences of the appalling experience through which so many of our young adults are now living are incalculable. What has happened, as I have stated on previous occasions, cannot be described as a shake-out of labour—that is, the maintenance or improvement of output with a sharply reduced and much more productive labour force.
    The Government claim that there has been an improvement in productivity in recent months. That is true compared with a year ago. However, that improvement is outweighed by the facts that I shall relate. Output per worker last summer—the latest figures relate to the second quarter—was 2frac12; per cent. lower than in May 1979. That is for the country as a whole.
    Mrs. Elaine Kellett-Bowman rose—
    Mr. Shore: That is true. The hon. Lady should hear the full story. The last thing that I want to do is to put facts before the House that cannot be agreed. In October—a slightly later figure than the second quarter—productivity per person in manufacturing industry, as distinct from the whole economy, for the first time reached the level that prevailed in May 1979, but manufacturing output in the same period has fallen by 17 per cent. Our gross domestic product is 7 per cent. less than it was in May 1979.
    Most disturbing of all is the fact that our competitiveness in relation to overseas countries has declined by 35 per cent. since the right hon. and learned Gentleman took over the reins at the Treasury. When he and his colleagues go round the country, as they have done during the past week, exulting over the fact that in the last three months there has been an improvement in our unit labour costs that surpasses that of our overseas competitors, they completely ignore the massive decline in competitiveness that this country has sustained.
    Mrs. Kellett-Bowman rose—
    Mr. Shore: I shall not give way.
    After nearly three years of economic policies that, according to the Government, would change the whole course of British economic history for the better, the nation has been substantially impoverished, with record unemployment, a demoralised work force, enforced idleness and alienation among a large number of our young people, smouldering discontent in virtually every section of the nation and the most unpopular Government on record since polls began.
    Do we stand, after all these setbacks, at a point where we can look forward with confidence to increased output and falling unemployment? No one believes in any such prospect—not even the Chancellor of the Exchequer, and certainly not the Secretary of State for Employment who, in innumerable interviews, as well as in his speech yesterday, has repeatedly been forced to accept that unemployment will get still worse.
    The Government's forecasts of the economy for 1982 are that GDP will rise by 1 per cent. The forecasts show that there will be no increase in consumer expenditure, no increase in Government expenditure and no increase in manufacturing investment. There is hope of some increase in exports and some change in the rate of stock building. The Government still expect double figure inflation at the end of this year—1982. One has only to consider the forecast increase of 1 per cent. in GDP, of which up to one half of 1 per cent. will be due to North Sea oil production, to realise the implications for unemployment in Britain later this year.
    Not the least disturbing of the figures in Tuesday's unemployment statistics was that the underlying rate of growth in unemployment is once again about 40, 000 a month. If productivity is rising at 2 per cent. or more, as the Government assert, by this time next year we shall have between 3¼ million and 3¾ million registered unemployed in Britain. I do not think that the House or the country can safely contemplate the continuation of our present misfortunes.
    I turn now to the major question of analysis, the cause of this appalling collapse—and it has been an appalling collapse—in our economy. We contend—and we state it in our motion—that the deflationary economic policies
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    pursued by the Government are the prime cause of both the massive decline in output and the massive rise in unemployment.
    The Government have almost as many defences against this charge as they have economic Ministers. The first line of defence, is, of course, the one with which we are all too familiar: the selection of incomplete and misleading statistics designed to give the impression, if only for a moment, that, far from the economy declining, it is actually progressing and improving. I shall not deal with those matters today. They are the small change of the debate that has taken place on the Floor of the House. I can only believe that those figures are cobbled together basically to improve Conservative Party morale in the country and to assist the Prime Minister in her difficulties every Tuesday and Thursday.
    The more serious defence—or at least one of the more serious defences—was that advanced by the Secretary of State for Employment in his speech yesterday. I apologise for referring to his remarks in his absence, but I had thought that, as this debate was so close to the one that we had yesterday, he would be here. According to the Secretary of State, the principal problem facing the Government is world recession—caused by the doubling of oil prices in the past two years. This faced the oil importing countries of the OECD with major balance of payments problems that they sought, wrongly, to resolve by deflating demand in their own countries. Consequently, taking the OECD area as a whole, unemployment rose from 16·2 million in 1979 to 24·3 million in 1981, and it is expeced to rise to 26 million during this year. In other words, unemployment rose by 50 per cent. between 1979 and 1981, and may well rise in the OECD area to 60 per cent. during the course of this year. The right hon. Gentleman's suggestion is that Britain's experience is no different from the rest of the OECD area and, therefore' we should not complain because unemployment has risen here, too.
    Mr. Ian Lloyd: The right hon. Gentleman mentioned the OECD. Would he care to comment on the fact that in the very interesting OECD report on the future, which was published before my right hon. Friend came to office, the whole of the present scenario is exactly as forecast? If so, why does the right hon. Gentleman attribute the blame to the Prime Minister?
    Mr. Shore: I shall make that plain to the hon. Gentleman in the course of the next two or three minutes. I shall deal with precisely that point. He must have realised that I was preparing the ground to do just that.
    As I pointed out, the whole of the OECD area has suffered since the second oil shock in the way that I have described. I was saying that the right hon. Gentleman's suggestion yesterday was that there is nothing to complain about in Britain because others have experienced the same thing. But we do complain, and we have every right to do so, first, because while the second oil shock of 1979–80 has been a major constraint on international trade and on international employment, the first oil shock of December 1973–74 was still more severe and damaging.
    Oil prices did not double at the end of 1973 after the Yom Kippur was—they quadrupled. This massive event happened precisely eight weeks before the March 1974 general election returned a Labour Government. Not one word of acknowledgement of the difficulties that this event

    1013
    posed to the then Labour Government has ever crossed the lips of Conservative Members. They ignored it. They insisted that the difficulties were due entirely to the then Labour Government.
    Without at the time having one drop of British oil, and in spite of having inherited a very large balance of payments deficit from the last year of the previous Conservative Government, the Labour Government managed to contain the increase in unemployment, although it rose to 1·3 million in 1979. The increase in unemployment after the first oil shock was broadly in line with the increase in unemployment that affected all the OECD countries in the same period from 1973 to 1979. For the record, unemployment in the OECD area in 1973 was 9 million and it was 16 million in 1979—an increase rather greater than that which followed the second oil shock to which I have referred.
    There are two reasons why the right hon. Gentleman's and the Government's explanation simply will not do. First, while the increase in unemployment throughout the OECD area since the second oil shock in 1979 has been 50 per cent. as I have described, in the same period unemployment in Britain has increased not by 50 per cent. or 60 per cent. but by 130 per cent.—from 1·3 million to the appalling 3 million that we are discussing today and discussed yesterday.
    So, whilst on average unemployment in other countries has increased, in this country, under this Government, unemployment has risen twice as fast as it has elsewhere. We now have the distinction of being, of all the major industrial countries, the one with by far the highest unemployment rate.
    There is another reason why this excuse of the second oil shock will not work, and the House knows it. The great difference between Britain in 1974 grappling with the quadrupling of oil prices and Britain in 1979–80 grappling with the doubling of oil prices is that in 1974 there was no British oil at all, whereas in 1979·80 Britain—through the exertions of a Labour Government and industry in those interim years—had become totally oil self-sufficient, and indeed, was a substantial exporter during 1981. Of all the countries in the OECD area, Britain alone is oil self-sufficient.
    Just as the first oil shock was a disaster for Britain with vast increases in costs, the second oil shock—coming at a time when Britain was oil self-sufficient—was a reinforcement—or it should have been—not a diminution of our economic strength. Yet this Government, by their unimaginable bungling and doctrinal absurdities, to which I shall shortly turn, have managed to turn this asset into a liability and to inflict upon the people of this country the greatest economic devastation they have known for more than 50 years.
    Is there any other oil-producing and exporting country in the world which has not been enriched, first, by the quadrupling and, secondly, by the doubling of oil prices during the last eight years, except Britain under this present incompetent Government? Imagine what would have been done had this great benefit of North Sea oil been discovered in the territories of France, Germany or Holland, or, indeed, of any other country than one subjected to lunatic policies of economic management.
    What other explanation is there? What other explanation can the Government offer for the plight of our nation? They say that it is due to massive wage and salary payments which have greatly increased the relative unit
    1014
    costs of British goods and services. Our costs have certainly increased. They increased in 1979 when the Government were formed. But far from arresting the increase, the Government, through their deliberate policies of pushing up prices and abandoning all price restraints, not to mention their doubling of value added tax, greatly increased wage and salary inflation not only in 1979 but in 1980, as well as during the greater part of 1981.
    Under any other Government but this one the increase in our relative unit labour costs would have been accompanied by a compensating downward movement of the exchange rate to bring us into line with our competitors. Not only did that not happen but, by deliberate Government policy, interest rates were increased to levels never before reached in peacetime. Inevitably, as money was sucked in from abroad, the pound sterling rose to such a level compared with other currencies that British exports became hopelessly uncompetitive in terms of foreign currency while foreign imports into Britain became cheap in terms of sterling.
    Instead of the pound sterling adjusting downwards to compensate for the increase in domestic costs, it was deliberately driven upwards so that we became even more disastrously uncompetitive than we would otherwise have been. That is the explanation. Although no Conservative Member has denied it, we are 35 per cent. less competitive today than we were two and a half years ago.
    Mr. Terence Higgins: Does the right hon. Member agree that wage increases have had something to do with that loss of competitiveness?
    Mr. Shore: Yes, and I have admitted it. I am sorry that the right hon. Member for Worthing (Mr. Higgins) did not take the point that I was making. For the first time, not only has the exchange rate in a floating exchange rate world failed to take account of the relative increase in Britain's costs, but Government policy has pushed the exchange rate up further to compound and make worse the loss of competitiveness from which we have suffered.
    We come to the real folly—the heart of the matter. Why did the Government operate high interest rates, pushing up the minimum lending rate from 12 per cent. in May 1979 to 17 per cent. in 1980? Why did they maintain interest rates at such a level the the pound actually reached nearly $2·40 a year ago? Why are the Government even now reluctant to operate in any way to bring down the exchange rate, although we have lost in terms of competitiveness as I have already stressed? We know the answer.
    Sir William Clark: Will the right hon. Gentleman give way?
    Mr. Shore: I shall not give way at the moment. Let me give my explanation. There is no point in interrupting an argument. It should be heard. Then the hon. Member can reject it if he wants to do so. We know the answer. It has been set out in a hundred speeches by the Prime Minister and her colleagues and it has been embodied in two Red Books—the Financial Statements for 1980–81 and for 1981–82 for all who care to study them.
    According to the Government, the root of all evil is inflation and it can be dealt with only by controlling the money supply, and, further, the control of the money supply as defined—is it still defined thus?—in terms of sterling M3 can best be achieved by establishing a target

    1015
    rate and then adjusting the price of money by putting up interest rates to discourage any excess borrowing beyond the laid down limits.
    From 1979 onwards, the British economy has been confined within the framework of money supply targets; 7 to 11 per cent., in 1980–81, 6 to 10 per cent. in 1981–82, 5 to 9 per cent. in 1982–83 and 4 to 8 per cent. in 1983–84. Together with this marvellous instrument of control over inflation the Government have pursued their other target of a steady reduction in public expenditure and an accompanying reduction, as they hoped, in the size of the public sector borrowing requirement.
    Like the money supply, the PSBR was programmed to fall progressively from 4·75 per cent. of GDP in 1979–80 to 3·75 per cent. in 1981 and down to 1·5 per cent. in 1983–84. The damage that has been done to our country, to its industry and to its people by the pursuit, however unsuccessful, of these two ludicrous monetarist targets is the principal explanation for the appalling collapse of the British economy. The money supply targets, while never achieved, have nevertheless led to sustained high interest rates, which have affected the competitiveness and costs of all British firms which need to borrow from the banks, and at the same time have held up far beyond its proper competitive level the value of the pound.
    The pursuit of public expenditure economies in a period of recession has led to the butchering of real community programmes and at the same time to a massive increase in the least productive, though inescapably necessary of all forms of Government expenditure: the maintenance of millions of men and women in enforced idleness.
    Unemployment pay, supplementary benefits, the loss of tax revenue, the loss of national insurance contributions and the loss of contributions through taxation of goods purchased are now costing the Government, according to the latest report of the Manpower Services Commission, no less than £12, 500 million per year.
    When I spoke to the House in the debate before Christmas, I focused my remarks principally upon the fallacious doctrine of the money supply. In particular, I drew attention to the confession of one of Britain's leading monetarists, Dr. Budd, who, with the wisdom of hindsight—that is, after unemployment had risen by well over 1·25 million and after about 15 per cent. of industry had been wiped out—realised
    "that the Government was making life unnecessarily difficult for itself, the economy and the company sector by pursuing, albeit slightly halfheartedly, a target for the money supply which was misleading."
    I do not intend to go over that ground further today.
    I want to turn to that other pillar of Government economic policy—the public sector borrowing requirement. Although, as with the money supply, the Government have been unable to achieve the target reductions in borrowing and in public expenditure which they had set, nevertheless the persistent assault on public expenditure and the increasing costs of the recession, which public expenditure cuts only help to intensify, have led the Government into a continuing and downward spiral in that important sector of the national economy that they directly finance.
    As with the money supply, so with the public sector borrowing requirement, we enter a strange world of monetarist dogma.
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    Why should the Government be worried and indeed obsessed by the size of their borrowing requirement? The rational reply is that any Government should be concerned about their borrowing requirement if they are competing with other sectors of the economy for scarce human, technical and capital resources. If we were near or at the full employment level, as we were from 1945, with one or two exceptional years, to 1973, it would obviously be foolish for a Government to engage in large-scale borrowing rather than taxation to finance their own expenditure. In fact, Governments did not borrow throughout those 30 years of full employment in any way that even attracted attention.
    It has only been in the past eight years—that is, precisely in the years since the first oil shock produced in Britain, as it did in the rest of the industrialised world, substantial unemployment—that Governments have been driven to stimulate their economies, because they felt they had no choice, through deliberate counter-recession policy by increasing or maintaining public expenditure without covering the totality of their requirements from current taxation. No one in his senses can say that resources in Britain are under pressure, that there is a shortage of people, a shortage of plant or a shortage of capital. On the contrary, as we all know, there is not the slightest danger of physical crowding out.
    What are the Government worried about? They maintain that there is a danger of financial crowding out. By this they appear to mean that if the Government seek to borrow substantial sums of money to stimulate the economy they will drive up interest rates because they will be borrowing in competition with private industry and commerce.
    There is no evidence whatsoever that this has happened or, indeed, needs to happen. Indeed, it is inherently implausible, since the need for Government borrowing to finance expenditure during a recession arises only when private industry is itself, for the very same reason of recession, making only light use of the capital market. It may be driven, exceptionally, to the banks to ward off bankruptcy, but that is a different matter.
    Of course, it is not only the domestic competition for money that has to be watched. Large sums of money are moving around the international community, and their attraction is inevitably to those currencies and countries where interest rates are high and, or exchange rates are likely to appreciate.
    If one wanted enormously to complicate the task of borrowing, one would do exactly what the Chancellor of the Exchequer did in the summer of 1979—abolish all exchange controls and make it possible for the great mass of British resident capital to flow freely to any country to finance whatever project the controllers of British resident capital believed would bring them the greatest returns. Has that not happened? But that is a wholly self-inflicted wound.
    No serious evidence of financial crowding out has been offered since 1973, when substantial Government borrowing became a feature of the economic scene. The right hon. and learned Gentleman, who solemnly assured us in 1980–81 that ruin would follow if we exceeded a borrowing requirement of £8 billion—we all remember it—ended the year, owing to his miscalculation, with a public sector borrowing requirement of £13 billion, and he financed it at levels far below the level of his own MLR.

    1017
    What makes the whole argument absurd is that we in Britain define our public sector borrowing requirement in a special, uniquely British way. In all international statistics, general Government borrowing is recorded and excludes—except in the United Kingdom—the borrowing of publicly owned industries. In both the OECD and the EEC figures which are collated for either quarterly or six-monthly purposes, the British borrowing requirement is put on the same basis as other European and Western countries.
    The House may be interested to know that the United Kingdom is not at all exceptional. Its general Government borrowing as a percentage of GDP during the past four years—1978, we were there; 1979, in which we had half; and 1980–81—fell substantially below that of Japan. It was higher than in Germany in the first three years but lower in 1981. It was about one-half to one-third of the deficit run by Italy. In 1981 and prospectively in 1982 it will fall behind that of France.
    Much rubbish is talked about the terrible burdens of borrowing and the appalling size of the national debt. The House will know that the total public sector debt—the national debt—as a percentage of the gross domestic product has fallen steadily since the war.
    Further, and highly relevant to the past decade when substantial Government borrowing has taken place for the first time since the war as a counter-recession instrument, the public sector debt as a proportion of the GDP has not increased but has continued to fall. In 1970 it stood at 104 per cent. of our GDP, in 1979 it was down to 71·4 per cent., and in the estimates that I have seen for 1981 it will have fallen to 63·6 per cent. So there is no danger of our national debt coming out of line with the growth of national wealth as measured in terms of GDP.
    To insist therefore that the public sector borrowing requirement should, irrespective of the depth of the recession and of the massive resources of machinery, money and people standing idle, be reduced year by year until the perfect bliss of a balanced budget is reached is more than mischievous nonsense. It is a deliberate attempt to bring about unemployment and to deepen the recession.
    I spent time on the public sector borrowing requirement for one reason only. It is, with the money supply target, the principal weapon of deflation that the Government have deliberately used on the nation. Such doctrines must be exposed and defeated if we are to turn our minds and energies to the real problems that face our people. Heaven knows, the real problems and constraints are large enough without the self-imposed constraints that arise from the exploded dogmas of monetarism.
    The real constraints and restraints are, as they have been for years past, long before the present vocabulary of economic discussion was invented, how to achieve in this island of ours a satisfactory balance of payments, consistent with a high level of employment, how to achieve a satisfactory growth rate in a world of fast changing industry and technology and how to contain it with an endemic tendency in our institutional structure towards inflation. How are we to keep inflation in order and bring it down to single figures, which we may at least find tolerable?
    Those problems, enormously exacerbated as they have been in the past three years of misrule, will need a major effort by the Government, industry, the trade unions, and, indeed, the whole community. If we are, as our motion
    1018
    puts it, to put the nation back to work, we shall have to make the expansion of our economy and the creation of jobs the overriding priority.
    Mr. John Browne: I agree with the right hon. Gentleman's last statement. The question is: how? Will gaining customers cause a healthy expansion of the economy, or should it be by Government deficit financing to buy and supply synthetic and therefore highly inflationary and in the long term costly, jobs?
    Mr. Shore: As the hon. Gentleman well understands, if he could just get away from the fever of recent debates, it is both. We must have a strong and sufficient demand to make use of our capacity, machinery, plant, factories and work people. We must have that. We must be competitive too. Costs matter enormously. Anyone who says that all that he is interested in is demand and not costs is deceiving the House and the country. We should be concerned with both. If we are to put our nation back to work, we must give that matter top priority.
    The Budget on 9 March gives the Chancellor and the Prime Minister the opportunity, if they have the wish and the will to seize it, to begin to escape from the intellectual straitjacket in which their blind pursuit of dogma has so far held them.
    I say this now, and I say it particularly to the so-called wets—both those who remain inside the Cabinet and those who have been expelled from it—as well as their spiritual allies, the Social Democrats and the Liberals.
    Mr. Arthur Lewis rose—
    Mr. Shore: My hon. Friend draws attention to a problem—the scarcity of SDP Members. Again. I apologise to the House. I try to be courteous and punctilious in these matters, but I had assumed that the right hon. Member for Crosby (Mrs. Williams), who spoke for the party—whatever it is—would feel it right to take part in this debate on the economy in which she participated yesterday. I am bound to make remarks about her propositions in her absence which I should much prefer to do if she were here.
    It is no good imagining that a small, uncontroversial and oh so moderate reflationary package will meet the great crisis that has developed. The decisions already taken by the Government for 1982–83—the public expenditure proposals presented last December, together with the increase in national insurance contributions—are, on any realistic calculation, deflationary. The level of activity in the economy in so far as it is influenced by public expenditure and social service taxation will be lower in 1982–83 than it has been in 1981–82. I hope that the Leader of the House has taken that fact in. It is important.
    The Government told the House that they were increasing public expenditure this coming financial year by about £5 billion over what they had originally planned when they presented the Budget last March. But that is no comfort to anyone, since it was their intention at the time of the previous Budget to carry out a further and substantial deflation of public expenditure. The concession of £5 billion is entirely in money terms.
    Mr. John Browne rose—
    Mr. Shore: It means that, at best, the level of public expenditure will be the same in 1982–83 as it was in 1981–82. I say at best, because the inflation assumptions

    1019
    on which the calculations were made were clearly false. They rely on a Government target rate of inflation well below the prospective rate of inflation revealed to the House in the Government's short-term economic forecast published at the same time as the public expenditure White Paper. Further, since then the unrealistic 4 per cent. per annum increase in public sector pay, which was a central part of the Government's calculations about public expenditure, has been thrust aside by the local government manual workers and many other public sector workers.
    In addition, because of the deepening effects of recession, the subsidies that have to be paid to maintain essential and underused community services, together with the direct and indirect costs of higher than expected unemployment, add to the expenditure total needed simply to achieve no change in public expenditure in real terms in 1982–83 over 1981–82. I calculate—I shall be interested to know whether anyone on the Government Benches challenges this—that about a £6 billion increase in spending power is needed, over and above a neutral Budget, for 1982–83 to be no more and no less deflationary than was 1981·82.
    The figures that we heard yesterday lacked all plausibility and conviction—I fear not for the first time. I do not believe that the figures and calculations are fully understood. Not for the first time the Cabinet wets are being taken for a ride by the Treasury. The same applies to the oh so moderate wets outside the Cabinet in all parts of the House.
    The right hon. Member for Crosby—[HON. MEMBERS: "The right hon. Lady is hiding."] That glimpse of a well-known face is welcome. I repeat for the benefit of the right hon. Lady and her hon. Friends that an increase in public expenditure of £6 billion, which I understand is her proposal, and an increase in the PSBR of £3 billion, will not go far towards her aim of reducing unemployment.
    A substantial injection of purchasing power is needed in 1982–83 over and above what has been available in 1981–82.
    Mr. Browne rose—
    Mr. Shore: If we were talking only of a PSBR of the size of the outturn that the Chancellor achieved in 1980–81 —6 per cent. of GDP—and if we sought just to repeat that in 1982–83, due to inflation we should be talking about a figure of about £16½ billion.
    Mr. Browne rose—
    Mr. Shore: A PSBR of that size would still be a PSBR as conventionally defined in the United Kingdom, including the investment expenditure of all publicly owned industries.
    Mr. Browne: I am grateful to the right hon. Gentleman for his patience. From June 1979 to November 1981 the GDP fell by 8 per cent. Meanwhile, money supply measured on an M3 basis rose by 40 per cent. The reflation has been going on all the time. The inflation rate is measured now at between 11 and 12 per cent. If the right hon. Gentleman were to add his £6 billion, what inflation rate would he expect to see?
    Mr. Shore: That is precisely the difficulty of communicating in the House today. Strange doctrines have gripped and obsessed so many minds. I believe that the
    1020
    House rationally undertstands, and would want to talk about, the fact that the real economy has declined by 8 per cent. That matter should concern every hon. Member. We should primarily target our thoughts to how to change that. The hon. Gentleman then says that it is a bit of a problem, as we have had an increase in money supply of 40 per cent. His assumption is that there is a crucial and exact connection between the money supply and the rate of inflation or the fall in GDP. At the best the connections are indirect. They are precarious. They exist vividly in the mind of and are expressed eloquently only by one person in the House, the right hon. Member for Down, South (Mr. Powell), who I am glad is remaining in his seat.
    Mr. J. Enoch Powell: That is bad luck. I had been holding back with almost as great patience as the right hon. Gentleman.
    The right hon. Gentleman calls for an injection of £6 billion more of demand—he will correct me if I am mistaken. He will not inject it by raising it in taxation. Presumably he will not raise it by borrowing it from elsewhere in the economy. Will he be clear with the House what the mechanism is for injecting the £6 billion of extra demand?
    Mr. Shore: I must once again resist the right hon. Gentleman's invitation to commit myself to a specific total of what I believe— [Interruption.] No amount of jeering will make me do so. It is too silly for words.
    I was taking that as an illustrative figure. That is the point. Of course I would borrow it. I have said that again and again. In a recession it makes sense to borrow. If hon. Members do not understand that fact, I am afraid that they have not lived through— [Interruption.] I repeat, borrow.
    The argument then arises about the impact of particular borrowing rates on interest rates. We have been around that course already. I do not intend to return to the argument on this occasion, although I will on others.
    I want to say something specific about what I believe the Labour Party would do on its return to power. The first and obvious thing is a major increase in public expenditure. It so happens that it is among the nationalised industries that some of the most important and exciting technical developments are taking place in the British economy. I refer to telecommunications, broadcasting, oil, gas, coal, public transport, aerospace and the airways. Clearly a large element of our economic development will come from these industries.
    The Secretary of State for Industry (Mr. Patrick Jenkin): Is the right hon. Gentleman aware that the Government, in every year that they have been in office, have consistently invested more in telecommunications than was invested in any year by the Labour Government of which he was a member?
    Mr. Shore: The right hon. Gentleman should know that he is talking about one of the most powerful growth industries in the world. To say that it has been growing in the past four years is to say no more than that it has been growing every year for the past 20. It is the pace of growth that matters, not that British Telecom is just managing to grow despite the absurd EFLs and other restraints, and the denial by the right hon. Gentleman's predecessor of the £500 million bond with which it wanted to expand its capacity only last year.
    Sir William Clark rose—
    Mr. Shore: I shall not give way, because I have some regard for the House and I must continue.
    Because of past investment and their own enterprise, productivity in the publicly owned sector has grown at a faster rate in the past two decades than it has in the private sector. We want it to be able to continue. Given the right encouragement, British Telecommunications could today be changing the face of the community, not only by modernising existing exchange equipment, but through its first and primary task of putting telephones in every house in the land. Today 65 per cent. of the nation have telephones in their homes. In the future, the telephone will become just as much a part of the basic equipment of every household in Britain as is the supply of gas and electricity or, for that matter, the television set.
    Mr. Patrick Jenkin: rose—
    Mr. Shore: That will transform the lives of millions of people.
    Sir William Clark rose—
    Mr. Speaker: Order. It is clear that the right hon. Gentleman will not give way. I remind the House that those who want to speak will be sorry later, because there is a long list of Privy Councillors and other Members who wish to speak.
    Mr. Shore: I am not even saying anything controversial. I am simply outlining the important point that here is a major sector of growth in the British economy which could and should go ahead in the interests of expansion and of reducing unemployment.
    Sir William Clark rose—
    Mr. Shore: Then there are our energy industries. There is the continued development of our coal industry—a major resource for this country—and the important potential developments in combined heat and power systems and coal gasification. As for the gas industry, if the Government could, if only for one moment, have taken their minds off the prospect of private plunder at the expense of this great, nationally owned resource, they would have actively backed and started upon the gas-gathering pipeline in the North Sea.
    The failure to carry through that project is an appalling example of the waste of our precious energy resource. It is, moreover, a major political error, as the previous Lord Privy Seal might recognise. If the North Sea gas-gathering pipeline had gone ahead last year, as it would have done but for the animosity of the Secretary of State for Energy and his colleagues, a great alternative supply of gas, combining Norwegian and British reserves in the North Sea, would have been available not only for our own use but as a reserve and as considerable assistance to our neighbours in Western Europe. It would be better for France and Germany to know that there was an alternative supply of gas available from the North Sea rather than from the Soviet Union.
    There is also the question of public transport, which is in need of a major advance. In Britain there is an urgent need for the updating and development of our urban transport systems. I am talking not about fares, but about the rolling stock and the layout and equipment of our stations, both the suburban lines and the tubes that serve London and other cities.
    It is not only in the nationalised industries that opportunities for nationally advantageous investment
    1022
    exist. There are other parts of our infrastructure that cry out for investment. The arguments are well rehearsed and I need not repeat them. Clearly there is no lack of worthwhile projects for an increase of public investment to give a real and genuine return.
    Nor is there a lack of prospects of uses for increased public current expenditure. Public expenditure increases will not be enough and our major concern must be to restore the competitiveness of British industry in relation to its overseas rivals—a competitiveness which, in spite of all the boasting of the Government, has suffered dreadfully and will continue to suffer unless there is a change of policy.
    We must have a major attack on the unnecessarily high costs of British industry. In every substantial debate that the House has had I have urged a reduction in the national insurance surcharge. I did it three times last year and I do it again now. I have also urged—and I repeat it—the need for an energy pricing policy that will make certain that we are at least as competitive in fuel prices as other countries, particularly in those industries that are heavy fuel consumers.
    The most important single thing that we can do to restore our competitiveness is to allow the exchange rate of the pound to reflect the real competitive strength of British industry. The pound is too high. It has to come down to a level where British manufacturers can fight their Continental and other rivals on equal terms. I fully understand the danger of inflation which will then be created. It is a challenge that we must meet and overcome with the aid of a tax policy, a price policy, and a national understanding, to which reference has been made, with the trade unions. All those are measures which any serious Government would wish to consider urgently and to take action upon this coming year with the prospect of their having an immediate and growing effect.
    We need, as we do, to think beyond this year. We have to think about the lifetime of the next Parliament. It is this that brings into focus measures to improve the underlying performance of British industry, genuine measures to improve the supply side of the economy. The Government and monetarists have entirely misappropriated the words "the supply side" of the economy. To them it simply means a competition, a tax relief regime under which the forces of private enterprise are, as the present Secretary of State for Education and Science would have put it, galvanised into new and effective productive efforts by the prospect of profit and the spur of competition. This is a myth of the market, which has been exploded again and again.
    We need to enter into a serious dialogue with the major corporations, which play so large a part in our total manufacturing output and export. Only two days ago I read an article in the Financial Times on the corporate policy of the British Oxygen Company. It had just paid out the second tranche of a £250 million sum to acquire the American company Airco, which is one of the United States leading producers of industrial gas. A few days before that BOC had announced that a new plant to manufacture graphite electrodes would be sited not in Consett, county Durham, as the group's unions and many others had previously thought, but in South Carolina.
    It would be wrong, without full knowledge and detailed consideration, to judge the wisdom of any investment decision. However, I assert that such decisions affecting the location of British-owned firms, not merely in different

    1023
    parts of Britain, but world-wide, are a matter not just of company interest but of national interest. We must know and we must share in the planning of strategic company decisions.
    We must restore the control over capital movements that the Government, in so lighthearted a moment, threw away just two years ago. We cannot accept that the great financial institutions, the insurance companies and the pension funds, which increasingly control the collective savings of people at work throughout Britain, can transfer the savings of British employees outside the country and invest them in the industries or products of our rivals overseas. We shall bring back exchange controls and seek to operate them in broadly the same sensible way in which they were operated from 1939 to 1979.
    There is no easy way ahead. On that one point we can agree. However, in the past three years we have suffered such a major setback to our prospects that only the most radical and determined national effort will serve to retrieve our fortunes. We are prepared to undertake that effort. This is not a time for touching the tiller and making swerves in economic management or for moderate adjustments to the PSBR. It is a time for decisive and bold economic decisions and for the nation to give its overriding priority to its greatest problem, which is mass unemployment and the continuing decline and collapse of British industry. Those are the policies and the aims that we are pledged to pursue.
    4.52 pm
    The Chancellor of the Exchequer (Sir Geoffrey Howe): I beg to move, to leave out from "House" to end of the Question and to add instead thereof:
    "this House endorses Government policies to reduce inflation and improve output and competitiveness, and so create better prospects for employment, on a lasting and sustainable basis.".
    There are two reasons for welcoming the debate. The first is that it gives my right hon. Friends and myself the opportunity to listen to the suggestions made on both sides of the House, which will have to be taken into account in shaping my Budget later this year. I intend to say something about the position that we have now reached our aims for the future, and the limits on our freedom of manoeuvre in shaping that Budget. I look forward to hearing what other hon. Members have to say.
    The debate also gives me the opportunity, which I take with enthusiasm, to lay to rest one or two of the many astonishing allegations with which the right hon. Member for Stepney and Poplar (Mr. Shore) inflated his indignation somewhat beyond the capacity of his argument to sustain it.
    Yesterday we debated the harrowing toll of unemployment. I make no complaint that at the outset of his speech the right hon. Gentleman focused our concentration on those grim statistics because they represent real hardship and despair for many of our fellow citizens. However, I complain about the right hon. Gentleman's repeated habit of dealing with the matter by heaping crude abuse on the Government and repeating that the Government's policies have been designed deliberately or wilfully to bring about the unemployment figures. Such allegations do nothing but harm to his reputation and to the reputation of the House, and fall far short of what the people are entitled to expect.
    1024
    It is astonishing to contemplate the conflict between the right hon. Gentleman's blithe and reckless disregard of any form of financial discipline and the attitude of those who in the last Government of which he was a member, unlike him, were directly responsible for the management of the economy. As on every other occasion, he came before us today talking about monetary policy and the control of public expenditure, as if those things were strange doctrines with which he need have nothing to do.
    However, I must tell the right hon. Gentleman that the right hon. Member for Leeds, East (Mr. Healey), the deputy leader of the Labour Party took pride throughout his time in Government in asserting that since the war no Government had given such priority as he had to the performance of monetary aggregates.
    The right hon. Member for Stepney and Poplar suggested that the concept of money supply targets arrived on the scene for the first time in 1979. As he well knows, however, it arrived at the behest of the International Monetary Fund in 1976. It was only when those targets were put in place and the Government were obliged to take control of their economic policies that the economy made a faltering start in the direction of recovery.
    The charge that the right hon. Gentleman sought to support by such reckless arguments is that the loss of competitiveness, hence output and jobs, in recent years has sprung only from the rise in the exchange rate and the Government's emphasis on monetary policy. That charge commands little credibility. People who think about those things realise—because it is plain to them from their experience—that unemployment, a tragic symptom is the consequence of long-term and deep-seated economic problems that have beset the country for a long time. There is no foundation to the charge advanced by the right hon. Gentleman.
    It is plain that British industry has been suffering from the consequences of a serious loss of competitiveness. It is plain that that is a significant cause of the job losses that we have seen. It is plain that part of those causes lies in the rise of the sterling exchange rate, but there are factors which have caused that, which the right hon. Gentleman must try to understand.
    By no means all the appreciation in the value of the £ sterling occurred under this Government. Once the Labour Party adopted the right policies under the direction of the International Monetary Fund, sterling started its long climb from the low point of $1·55½ that it reached under the previous Government's policies.
    The right hon. Gentleman did his best to explain away the impact of the 1979 oil price shock. There are several ways in which that affected the economy of this country. The 1973–74 oil price change was an increase from $2·70 per barrel to $10·70 per barrel. The right hon. Gentleman was right to say that that was a four-fold increase. It is an increase of $8. However, the 1979 increase was from $13 to $31 per barrel—a factor of two and a half. It was an increase of $18, and two and a half times as many dollars as the previous shock. Coming when the world economy had scarcely recovered from the first shock, that second massive blow struck economies around the world that were already weakened and had not recovered.
    There were two effects. First, there was a massive impact on inflation around the world and on demand for the products of this and every other manufacturing country. Secondly, by that time we had become more self-sufficient in North Sea oil. The impact on this country of

    1025
    the 1979 oil price shock was bound to exert massive upward pressure on sterling, which it was beyond the power of any Government to resist.
    The right hon. Gentleman seeks to complain that we abolished exchange controls, yet the abolition of exchange controls was one of the key measures taken to challenge that rise in the sterling exchange rate. The right hon. Gentleman threatens to reintroduce controls over all sorts of direct investment in this country and over the direction of investment by companies based in this counry. If that is the policy to which his party is committed, it is calculated to repel rather than to attract investment.
    Mr. Frank Hooley: If the value of North Sea oil had this impact on the value of sterling—which is fair—why did the Chancellor of the Exchequer find it necessary to make a huge increase in interest rates?
    Sir Geoffrey Howe: Because it would have been foolish to allow the supply of money to get out of control, and it was a perfectly necessary part of economic control. In fact, the real price of oil has fallen to some extent since the third quarter of last year. Some of the pressure has ebbed away, and sterling is now back, in effective terms, close to the level at which it stood when the Government came to office.
    Mr. Shore: The Chancellor of the Exchequer has conceded the point and accepted the charges that we made against him. He is saying that Britain became massively uncompetitive because, as he admitted, the value of the pound rose. His excuse was that he could do nothing about it. When it was properly pointed out that by raising interest rates he made the position worse, he said that he had done so because he wanted to keep his money supply target. The Chancellor of the Exchequer must think more deeply about what he says and does.
    Sir Geoffrey Howe: The right hon. Gentleman must understand that it was necessary to have interest rates at that level to raise the money that was being borrowed by the Government at that time. Those were all components of the equation. That step was an additional reason, not for the prescription that he recommends, which is to go on expanding borrowing on a larger scale, but, on the contrary, to reduce that borrowing. Today, the right hon. Gentleman offers by way of answer to that situation a policy, even from today's levels, of deliberate depreciation of the currency. He should know from his experience that, while that might bring some short-term benefits to the competitive position of industry, it carries with it an immediate and substantial inflationary risk and, more than that, serious medium-term and longer-term disadvantages.
    All too often in the past, the decline in the value of the currency has served only to mask the underlying problems, rather than to remedy them. If we are to be honest, the real cause of the loss of competitiveness that has taken place was the huge growth in labour costs, culminating in the peak explosion of labour costs, over which the right hon. Gentleman and his right hon. Friends presided, and the massive pay explosion that they left behind them.
    The right hon. Gentleman comes to the House today and says that one of the central pieces of his party's policy would be the search for a national understanding which would enable him to deal with those problems. There is
    1026
    nothing wrong with the pursuit of national understanding, but the right hon. Gentleman was notably unsuccessful in achieving it himself. It was he, as Secretary of State for the Environment, who presided in that capacity over many of the troubles that contributed to the winter of discontent. It was he, in that capacity, who authorised the establishment of the Clegg commission, which ticked away like a huge explosive time bomb as the Government came to office. He left a huge blank cheque behind him. The Government honoured that blank cheque that the right hon. Gentleman left behind.
    The explosion was only the culmination of a decline in the value of the currency throughout the period of the previous Government. Between 1974 and 1980, the money value of domestic output grew by 160 per cent., but the real volume of output grew by only 7 per cent. That is the reason why, over the same period, the labour cost of every unit of output more than doubled.
    At the same time, our international competitors were not so foolish. While our unit labour costs were being doubled, in America they rose by only one third, and in West Germany by only one sixth. In Japan they did not rise at all. Britain experienced, as a consequence, low growth and high unemployment. West Germany has had high growth and low unemployment, although that is now changing. The Japanese outstripped us all.
    Despite the temptation to follow the extravagance of the right hon. Member for Stepney and Poplar, I shall not argue that this ruinous loss of British selling power—this self-inflicted destruction of British jobs—was all the fault of the Government of the day. If we as Members of Parliament are to be effective representatives of our people, we must acccept that this was to a large extent the culmination of a process which has been gathering momentum for many years. Sadly, for far too long, that process was concealed while world prosperity, and with it our living standards, continued to rise. However, all the time the long decline was gathering pace.
    Our share of world trade in manufactures fell by more than a third. Between 1973 and 1979, growth in our manufacturing produtivity fell to about 1 per cent. a year. Manufacturing costs were rising and competitiveness was falling. Unemployment had been rising through all those years to ever higher levels. Overmanning had for far too long concealed the true scale of unemployment, until it was exposed by the oil shock of 1979.
    It has fallen to this Government to undertake the task of trying to reverse that long process. We have not been content to address ourselves only to the symptoms; we have been determined to treat the disease itself. Our principal task has been to halt and reverse the rise of inflation. We recognise, as do all responsible Governments, that it is only when inflation and inflationary expectations have been curbed, that we can hope to create on a sustainable basis the conditions for economic growth and for fuller and secure employment.
    Mr. Geoffrey Robinson (Coventry; North-West): I want to take up the question of the performance of the British economy in this crisis, compared with the crisis that faced the Labour Government. The right hon. and learned Gentleman has not been honest with the House or explained how the Labour Government more or less held their own in the previous crisis in terms of manufacturing output and employment. Under the stewardship of the right hon. and learned Gentleman, we lost eight times

    1027
    more of our manufacturing output than the OECD average—using the OECD's figures—and unemployment increased three times. That must have some bearing on the Government's policies.
    Sir Geoffrey Howe: Employment and output were adversely affected under the previous Government during the last oil crisis. One of the dominant reasons why unemployment had not been affected in a similar way—although it doubled under the previous Adminisration—is that huge sums of money were being spent to preserve, in fossilised conditions, heavily overmanned plants which were just able to survive at public expense throughout those years, but which were quite unable to survive when the real storm blew in 1979.
    The Government are making substantial progress on inflation. Over the past 30 years, the average inflation rate has been higher under each successive Government. Between 1951 and 1964, the figure was 3 per cent. a year. From 1964 to 1969, it was 5 per cent. a year. Between 1970 and 1974, the figure was over 9 per cent. Under the Labour Government, the figure was 15 per cent. If the Government maintain the progress that has been made over the past 18 months, with price rises now at about half the level reached at the peak of 1980, we shall be the first Government in 30 years to achieve a lower average level of inflation than their predecessors. We shall have been the first Government to reverse that malign trend.
    Of course, the Government must take account of the international environment in which we have to operate. That environment is tougher than at any time in the past 30 years. The world environment accepts no excuses for poor performance. The unity of view among the Governments of the major industrial countries on the priorities for economic policy is remarkable, and was recently acknowledged by the OECD. There is a shared recognition of the need to sustain the fight against inflation, of the need for firm fiscal and monetary policies. There is a shared determination and confidence that 1982 will see modest but soundly based growth and further progress on inflation. Our forecast of 1 per cent. growth next year is in line with what the OECD expects for its members as a whole.
    High interest rates are a new worldwide phenomenon. Throughout much of the 1970s, interest rates were lower—sometimes much lower—than inflation rates. They have now become positive worldwide, even in countries such as Germany and Switzerland, whose performances on inflation have been relatively good. As my right hon. Friend the Prime Minister reminded the House on Tuesday, and my right hon. Friend the Secretary of State for Employment said yesterday, last year unemployment rose in all our major competitor countries, apart from Canada. This year, further increases are expected in them all, apart from Japan.
    Elsewhere, the rate of increase in unemployment is accelerating. In Britain it is slowing down. This year, the OECD expects unemployment in both the United States and Germany to rise by one fifth. In West Germany in 1980 unemployment rose by about 200, 000 and in 1981 by about 500, 000. The House must reflect that a world in which an economy as strong as West Germany's can suffer a rise in unemployment of that scale and speed is one that would surely punish self-indulgence and self-delusion.
    1028
    The year 1981 was one of tremendous turbulence in international and domestic financial markets. One lesson that every country must learn from that experience is that international investors will remove their money quickly and without hesitation from any country that shows signs of financial laxity. The need to maintain a firm hold on the country's finances has been made crystal clear. If Governments ignore that lesson, markets will quickly enforce it through the exchange rate and interest rates.
    I do not hide from the House the fact that there are hazards in the path ahead. The most obvious of them is dollar interest rates. We strongly support the determination of the American authorities to combat inflation. High inflation in any major trading country is a threat to all. That applies with particular force to the most powerful free economy of all. America is responsible for the world's major trading currency. However, fiscal and monetary policies must march in tandem to that goal. I am bound to tell the House that it is not clear that in America they are doing so. We hope that details, shortly to be published, of American budgetary proposals will reassure us on that point.
    The bonds of friendship that link us with the United States of America, and our strong support for the President's objectives, enable us to make our views clear to the American Administration on such issues. We have urged upon them—with our European friends we shall continue to urge—the need to take account of the impact on exchange rates of divergent fiscal and monetary policies. We could not simply ignore the inflationary implications of a sharp depreciation in the pound resulting from rising American interest rates. The recovery of the European economies from the recession could be delayed.
    Against that background, there are still some who say that since the course of interest rates in Britain is bound to be affected by what happens to interest rates in America, we might just as well let our borrowing level go hang. That is the attitude adopted by the right hon. Member for Stepney and Popular.
    Dr. Jeremy Bray: When the Chancellor of the Exchequer is lecturing President Reagan and Secretary of the Treasury Regan, will he adopt an air of humility and disabuse Secretary Regan of the delusion from which he apparently suffers, that the Chancellor knows how to control the money supply? He gave evidence to Congress yesterday that somehow they could learn that from the Chancellor.
    Sir Geoffrey Howe: I am grateful to the hon. Gentleman for drawing attention to that unsolicited tribute to the British Government. Secretary of the Treasury Regan did say that.
    The common bond is that in Britain, as in America, West Germany and any other major Western economy, the level of public sector borrowing is a crucial component in the level of interest rates. For that reason, I attach importance to it here, just as I do in the United States of America. That is why the attitude of the right hon. Member for Stepney and Poplar is so astonishing. He demanded not only a modest Social Democratic reflation, but a massive and yet to be specified Socialist reflation—billions undreamt of, uncounted and designed to increase money demand. It is a foolish attitude for him to adopt. Until the right hon. Gentleman learns that he

    1029
    cannot behave with such irresponsibility, he is unlikely to make a sensible contribution to economic debate in the House.
    About as logical a proposition is that if we have a weather forecast of snow which is not fully reliable, we might just as well leave our overcoats at home. But the impact of what happens to interest rates internationally goes on top of what we do to interest rates at home. Our interest rates had to rise in the autumn, as rates rose around the world, but if we had not been exercising financial restraint they would have risen from an even higher starting point. One's overcoat cannot stop the snow, but it will certainly stop one freezing when the snow falls.
    For much of last year, British industry was successfully protected from the full impact of high American interest rates. For the year as a whole, relative to American rates, our rates fell. The average for the year was 3 per cent. below American rates, whereas in the previous year it was 2½ per cent. above them.
    Mr. Douglas Jay: If international interest rates forced up our interest rates with such damaging effects, does that not show the folly of getting rid of exchange control a year ago?
    Sir Geoffrey Howe: The right hon. Gentleman should know that, in today's conditions, exchange control is no safeguard against the impact of international monetary conditions on domestic interest rates. I remind him that throughout the period of 1979, when I abolished it, Britain had the entire apparatus of exchange control at its disposal, but that did not stop international markets passing judgment on the Labour Government. It did not save the pound from declining to $1·55. Exchange control was no defence in those circumstances. The abolition of exchange control has contributed to a relaxation of the sterling exchange rate.
    I have described the basic problems of economic decline with which we are dealing and the progress that we are making in regaining competitiveness while defeating inflation. There are now clear signs that public attitudes are changing and that Britain accepts that inflation, low competitiveness and low productivity are the real enemy, whose defeat is the key to continuing increases in prosperity. More and more, people are realising that no employee, whether in the public or private sector, is automatically entitled to a pay increase of any particular amount. They realise that money must come from somewhere and that it must be earned. They understand that we cannot afford to repeat the disasters of earlier years, when incomes increased 20 times faster than output. Days lost through stoppages last year were lower than for 15 years. Wage settlements in the private sector have so far been at about 4 per cent. to 6 per cent., which is substantially less than the previous round. If we are to keep up the pace of economic recovery and improve the prospects of employment, those settlements must be modest.
    That is why both sides of the House should support the drive to curtail pay increases in the public sector, as well as in the private sector, to what can be afforded. Britain must maintain a conscious effort to keep unit labour costs down, because only in that way can industry find the resources for new investment and jobs. It is important to bear that factor in mind when we talk about higher investment in nationalised industries. The right hon.
    1030
    Member for Stepney and Poplar spoke eloquently and briefly about the scope for investment in British Telecom, but in that industry, as in every other nationalised industry, it is important that higher investment should be matched by better performance and productivity.
    Mr. John Golding: Is the Chancellor aware that during the past three years the Government have required repayments from British Telecom, when instead that company needed to borrow money? That has been harmful to employment and to the development of telecommunications.
    Sir Geoffrey Howe: The investment programme of British Telecom was reduced in successive years under the Labour Government. Under the Conservative Government, it has been increased in each successive year. The investment programme now runs at about £2·1 billion. That expansion of its investment programme was authorised last year. The hon. Gentleman intervened in yesterday's debate. I understand his interest in the matter, but, as the House was told yesterday, and as the chairman of British Telecom has told those who work in the industry, one of the main restraints on further success and investment in that industry has been the failure to control a rapid rise in costs. I speak from memory, but I believe that they have been rising about twice as fast as one would expect.
    Mr. Golding: I am not speaking from memory. There was a requirement to repay £173 million in 1979, £178 million in 1980 and £73 million in 1981. That requirement to repay is proving harmful to the development of telecommunications in Britain and is endangering jobs throughout the sector.
    Sir Geoffrey Howe: The telecommunications industry has rightly presented us with scope for massive profitability and technical expansion. If it is an industry of that quality, it is in no sense surprising that it should be required to follow the same pattern as many other industries and be largely self-financing in its investment programme. Being presented with an industry that offers this tremendous challenge, my right hon. Friends, the successive Secretaries of State for Industry, expanded its investment programme on the scale I described.
    The truth is—I hope that the hon. Member for Newcastle-under-Lyme (Mr. Golding) will get the message home—that the real danger to the success of that investment, let alone its expansion, is if the industry fails, through insufficient self-discipline in management and at all levels in the organisation, to get control over its own costs.
    Another case in point is the railway industry. The Government have all along been ready to play a full part in helping modernisation on the railways, but on one condition; provided that that goes hand-in-hand with improvements in efficiency. Two of the rail unions recognise the need to work with the British Railways Board in precisely that fashion. However, given the blatant refusal of ASLEF to recognise that there must be a link between pay and productivity, that productivity is vital to the future of the railways, it must be right for the board to take the stand it has and for the Government to give it full backing. We must all be much encouraged that the general secretary of the NUR took a very similar line.
    Mr. Allen McKay: On the question that the right hon. Gentleman has just raised, does he not

    1031
    recognise that there are differences of opinion between British Rail and ASLEF and that those differences have caused the problems? ASLEF will go along with the productivity deals but it must be in the form of an agreement reached between British Rail and ASLEF through ACAS. There were two different documents setting out two different opinions. It is the differences of opinion that are causing the problem, and British Rail's stubborn refusal to get on with solving it.
    Sir Geoffrey Howe: It has been my experience that the Floor of the House of Commons is not the best place to try to resolve an industrial dispute. [HON. MEMBERS: "You raised it"] I shall carefully respond to what the hon. Member for Penistone (Mr. McKay) has said. If ASLEF is prepared to go ahead with the productivity part of the bargain, so much the better—well and good. The tragedy that has come back to Britain time and again is that the resolution of such disputes should not be resolved by discussion, negotiation and analysis, but should be left, as Mr. Sidney Webb said,
    "to the arbitrament of industrial warfare."
    That is the tragedy and what the people of Britain so much regret.
    Mrs. Shirley Williams rose—
    Sir Geoffrey Howe: I will not give way again. Despite all that, our task is to sustain and build on the foundations that we have laid. This year we expect modest but soundly-based growth, as do most outside forecasters.
    Some forecasters have said that our forecast of a 1 per cent. rise in output is unduly pessimistic. There is a good prospect of a further fall in inflation by the end of the year. Profit margins are likely to recover but, as I explained, much depends on continued sense and moderation about pay.
    The unemployment statistics will probably be the last to improve, but the deceleration we have seen in recent months is likely to continue.
    My forthcoming Budget will be designed to maintain the process of steady recovery. We shall continue to create the conditions for sustained economic growth. We have not sought, despite the advocacy of the right hon. Member for Stepney and Poplar, and we shall not seek to stimulate growth directly by pulling the levers of monetary demand. It has not been the lack of potential markets which has been at the root of our economic problems. After all, there has been no shortage of demand over the last decade. Over the past 10 years money spending in Britain rose 20 times as fast as output. The country is now starting to put that right and I aim to assist that effort on 9 March.
    That was the purpose indeed of last year's Budget. I instruct the right hon. Member for Stepney and Poplar to look back at the reactions of a year ago, because at the time of that Budget, it was the unanimous opinion of right hon. Gentlemen opposite that, by increasing taxation to pay, at least in part, for higher public spending, I would plunge the economy into ever deeper recession. They did not mind the spending—they were all for that and wanted more of it—but they did object to the Government's unwillingness to finance it by major increases in borrowing. Our view was different. We believed and still believe that if we contained the scale of public borrowing, the country would benefit from lower interest rates than it
    1032
    would otherwise experience and that that would be of greater benefit to manufacturing industry than the alternative combination of higher borrowing and interest rates.
    Mr. Shore: What was the index of industrial production in March 1981 and what is it today? Would the right hon. Gentleman also tell us what the unemployment figure was in 1981 and what it is now?
    Sir Geoffrey Howe: I shall react to the right hon. Gentleman's points shortly. At the time of the Budget, the right hon. Gentleman reacted by saying that it offered
    "at best stagnation and, more probably, a renewal of decline".—
    [Official Report, 11 March 1981; Vol. 1, 000, c. 911.] He was wrong. He was echoed by the right hon. Member for Stockton (Mr. Rodgers) who thought that it
    "set back the timetable for rebuilding Britain out of depression and despair."—[Official Report, 12 March 1981; Vol. 1, 000, c. 1039.]
    What happened was that the recession stopped very shortly after that and the turn-round came precisely as we said it would.
    We predicted a steady recovery and we now have it. The right hon. Member for Stepney and Poplar sought, in his own speech, to brush aside the figures. In the third quarter of last year, less than six months after the Budget, GDP increased by over ½ per cent. Industrial and manufacturing output rose by 1 and 2 per cent. respectively. Engineering and construction orders picked up well—by some 17 and 10 per cent. respectively since the second half of 1980. The rate of de-stocking has fallen sharply. Private sector housing starts last year were some 40 per cent. higher than in the second half of 1980.
    Exports are now doing strikingly well and non-oil export volumes in the last four months of 1981 were 3½ per cent. up on the average of 1980. More overtime is being worked and is up almost a fifth in the three months to November. Short-time working is sharply down and registered vacancies are up. Manufacturing competitiveness is now improving—it rose by at least 10 per cent. over the course of 1981. Industrial profits rose by 10 per cent. between the second and third quarters of the year, while output per head in manufacturing was up 10 per cent. in the third as compared to the fourth quarter of 1980. The rate of increase in unit labour costs for the past 12 months is below the average of the major OECD countries.
    We are clearly moving in the right direction. The right hon. Member for Stepney ad Poplar may not like those facts but he must accept them and recognise their importance. The country is winning the battle. The recovery is starting to move ahead. We have always made it plain that it will be a long process, as I said earlier. Sadly, to the regret of hon. Members on both sides of the House, the course of unemployment will turn later than any of the others.
    Mr. Shore: The right hon. Gentleman has been good enough to give those figures, but will he now tell the House the unemployment figures?
    Mr. Speaker: Order. The Chancellor is not giving way.
    Sir Geoffrey Howe: I am determined to do all that I responsibly can in my Budget to maintain the progress that is now apparent to everyone except the right hon. Member for Stepney and Poplar.

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    We have laid secure foundations and we intend to continue sensibly building on them. That would be right for growth, right for inflation, right for employment and right for the country. That is why I ask the House with confidence to reject the motion and support our amendment.
    Mr. Speaker: Before I call any Back-Bencher, I make one final appeal to the House to remember that there is a very large list of hon. Members who would like to speak.
    5.28 pm
    Mr. Tony Benn: When the Chancellor of the Exchequer's speech is cleared of its jargon, it amounts to telling the country that the levels of unemployment that we now have will remain and will get worse and that nothing can be done to meet the major need of our people, which is to return to full employment as quickly as possible.
    Although I place little importance on the public opinion polls, there is no doubt that the desire to return to full employment is our people's major desire, and nothing would do more to meet the needs of the old and young, women and men, the black community and the poor than to return to full employment.
    It is not convincing, with respect to the Chancellor, for him to give us the argument that he detailed at great length, because the House and the country know that unemployment is the major instrument by which the Government's policy is being carried through.
    I do not believe, and never have, that the Cabinet is monetarist in an ideological sense. I believe that the Cabinet has resolved that the slump and the recession and the circumstances in which the Government came to power allow them to follow a political strategy which can be concealed under the guise of fighting inflation. Certain parts of the Chancellor's speech brought this out. He said, for example, that a new note of realism had entered into wage bargaining. When decoded, that means that if 3 million people are out of work wages can be cut without causing strikes because workers will be afraid to take industrial action in case they lose their jobs.
    The first item of the Government's strategy is not a fight against inflation, in which they have had little success, but the use of the dole queue and the statute book to prevent organised workers even from sustaining their present standard of living. In that, the Government are much assisted by the media, which present the miners as heroes this morning because there has been a pit accident, but as wreckers two weeks ago because they were holding a ballot to seek a wage increase to keep them abreast of inflation. Whether it is the refined distortion of The Times, the vulgar abuse of the popular papers or the pious bias of the BBC, the Chancellor and the Government have the media working with them to undermine the role of organised labour.
    The second purpose of the Government, which has also emerged clearly, is not to cut public expenditure—and they have not succeeded in doing so—but to undermine those public services which are financed by public expenditure. That is a very different matter, but it is the Government's real objective. The cuts in the National Health Service are very attractive for the Government—
    Mr. Tristan Garel-Jones rose—
    Mr. Benn: The hon. Gentleman must allow me to develop my argument, then I shall give way. The capacity
    1034
    of the Health Service to meet need is running down. That is exactly what the Government want in order to build up private medicine, in which they profoundly believe—
    Mr. Garel-Jones rose—
    Mr. Benn: I am about to explain how, in the Government's own terms, their policy is succeeding.
    Sir Geoffrey Howe: I should like to ask the right hon. Gentleman two questions. First, does he not find it a shade difficult to argue, for example, that we are cutting the fabric of the Health Service when The Guardian reported the other day that real expenditure on the Health Service was growing faster than under any previous Government? Secondly, and more important, why, on the right hon. Gentleman's analysis, should a Government elected to power by the votes of the people set about doing all that the people cannot possibly want? That is a crazy analysis.
    Mr. Benn: I am glad that I have stung the Chancellor into response. Many members of the Conservative Party now believe that the policies being pursued will destroy the Government, so it is hardly credible to argue that the Government are popular. It is clear from the Government's speeches and actions that the Welfare State built up by previous Governments and supported by Harold Macmillan and others is being deliberately undermined in order to build up a private health service in Britian. The same is true of education.
    The Government's third objective—and this is entrenched in their legislation—is to undermine the public sector by the sale of assets built up by those who work in that sector and by public money.
    Mr. Tim Eggar: Will the right hon. Gentleman give way?
    Mr. Benn: No, I shall not give way. I made a great mistake in giving way to the hon. Gentleman last time.
    The fourth objective of Government policy is to widen the gap between rich and poor. That has been achieved by the wage cuts to which I have referred, the benefit cuts announced in Government statements, the tax handouts and the savage increases imposed on council house tenants, which are all part of the same policy.
    From the Prime Minister's point of view, however, the policy in which the Government believe has been a triumphant success. It is no use appealing to Cabinet Ministers to think again, because they are succeeding in the policy in which they really believe—to discipline labour, to cut its wages, to undermine the Welfare State, to increase the gap between rich and poor and to privatise public assets.
    If I were the Chancellor, I should have only two anxieties on that score. First, when the right hon. and learned Gentleman unveiled the strategy to his supporters in the last election, he overlooked the fact that in addition to undermining the trade union movement, an objective shared by his supporters, the policy would at the same time do serious damage to British industry, and, secondly—this is where the wets in the Conservative Party come in—that it would likely lead to a Conservative defeat. Apart from those anxieties—the fact that British industry is being so badly damaged as to weaken the Conservatives' support in the business community and Conservative Members' fear that they will not be re-elected—from the Government point of view the policy has been a triumphant success.

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    Unfortunately, it has been ruinous for the country and its prospects, as my right hon. Friend the Shadow Chancellor made clear.
    How do we achieve a return to full employment? That is what people listening to the debate want to know. They are not interested in merely rhetorical attacks— [Interruption] I am not engaged on any such attack. They are not interested in who can manage this system best. I have listened to nine Prime Ministers over 32 years in the House and I have served in Governments who have tried to handle the problem in the past. The old remedies have not worked.
    It is from that starting point that the House must consider what to do. We have seen many modest acts of reflation of the kind that the SDP advocates. The dash for growth instituted by Mr. Maudling resulted in disaster. A short burst of growth is achieved, but the capacity is not there to meet it, bottlenecks occur, imports pour in, the balance of payments goes wrong and the IMF comes in and stops it if it goes too far. That is one attempt which has been made. Various methods of import restraint have been tried, with import deposits and various other schemes, none of which has solved the problem. Devaluation, too, was no solution.
    Pay policy, which I believe was strongly advocated by the right hon. Member for Crosby (Mrs. Williams) yesterday, has been regularly tried and has regularly failed. It has been rigid and unfair and has brought down more Governments than almost any other single issue. It brought down my right hon. Friend the Member for Huyton (Sir Harold Wilson) in 1970, the right hon. Member for Sidcup (Mr. Heath) in 1974 and my right hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) in 1979. To believe that a pay policy will save the economy and industry now is absolutely to misread the history of the past 30 years.
    If we had a proper pay policy, extending from the Prince of Wales to the pensioners, we would be a salaried nation in which everyone was entirely regulated by legislation. But no one who knows anything about the industrial process believes that one can abstract the business of wage negotiation from the business of production. That is why the Chancellor's statement about ASLEF was so singularly stupid. ASLEF represents highly skilled drivers [Interruption.] Hon. Members laugh, but every inter-city train is worth £500, 000. The safety of millions of people depends upon those drivers and it reflects no good upon a Cabinet Minister to speak of them as though they were wreckers of the economy. That is no basis on which to solve the problem.
    Nor has anybody recently had the courage to say that the Common Market will solve the problem.
    Mr. Garel-Jones rose—
    Mr. Benn: I sat through all the debates when we discussed Common Market membership, which was supposed to solve our problems by the international free movement of goods and capital. We were going to find investment in the British economy. There was supposed to be a surge of such investment. What has happened is that we have paid more for our food. We are pounded by imports from our strongest competitors. We are taxed from Brussels and we have lost control of our own affairs.
    Mr. D. N. Campbell-Savours: My hon. Friend rejects incomes policies. Will he accept that a Labour Government cannot operate unless it has an agreement with the trade unions on the distribution of wages?
    Mr. Benn: I am talking about party policy. My hon. Friend should not speak about my policy. The TUC and Labour Party conferences last year clearly rejected the policies that have failed, which are normally described as a pay policy. I believe that it was advocated yesterday that we should have a statutory pay policy. I have sat in so many Cabinets elected against pay policies, which have introduced them and been broken by them, that I advise my hon. Friend not to ask us to follow that course again.
    All these policies, which have been tried by people of good will—I am not doubting anyone's integrity—in the many Governments since 1951, when Labour was defeated, have failed to deal with the fundamental problems of British industry and of the creation of wealth in our society. We are entitled to discuss on the Floor of the House—and the country expects us to discuss—how to find 4 million jobs in Britain. That is the true requirement. We have 3 million unemployed, a lot of concealed unemployment and more people are coming on to the labour market. Therefore, 4 million jobs are needed if this country is to create wealth and then distribute it fairly. That is the enormous problem that is not dealt with in normal party arguments.
    At the end of the war we brought people back—I agree with my hon. Friend the Member for Bolsover (Mr. Skinner), who compared the Government with the German high command—in great numbers from the Services and put them into industry without the terrible unemployment that followed the 1918 armistice. Any hon. Member who thinks that we can create 4 million jobs within the lifetime of another Parliament without looking fundamentally at what would need to be done to achieve that is misleading his electorate.
    I believe, as my right hon. Friend the Member for Stepney and Poplar (Mr. Shore) said, that the first requirement is to accept, as the central objective of Government policy, the restoration of full employment, combined with the will to achieve it. I must stress a point that has been touched on by the Front Bench. Such a step cannot be achieved without the conscious planning of our own resources to meet our needs. The restoration of a serious planning role in the return to full employment alone makes that objective credible. I do not mean by that only national planning or "Whitehall knows best". I am talking about a completely different concept— [Interruption.] I shall be briefer if the House will listen.
    From the municipalities such as London, Sheffield and Leeds, which are now beginning it, to the place of work, up through the regions of England, to Scotland and Wales to the national level, there must be massive investment in industry and in services that are now desperately undermanned. What is wrong with the National Health Service is that it is undermanned. The educational service is undermanned.
    Mr. Tom Ellis rose
    Mr. Benn: The hon. Member for Wrexham (Mr. Ellis) should consult his constituents before he purports to represent people who voted for him in another capacity. We require public initiatives. Whether they be in the form

    1037
    of municipal enterprise, co-operatives or a discussion about the way in which the public sector can create jobs and meet needs, that is the only way that we can hope to return to the desired employment figures. Of course, that will mean more training, earlier retirement and a shorter working week. Above all, it means that the Government will have to use oil revenues, to control the use of credit, to channel savings, to cut defence, to reimpose exchange controls, to plan our trade and to extend common ownership. The operation is one of such magnitude that bribing and bullying business men, which has been the stock in trade of interventionist Ministers—I have been one for longer than anyone else—will not be an adequate response to the size of the task facing us.
    We must release our people's talents by restoring to trade unions the full and proper rights that they need to perform their tasks. In addition, we must repeal the new and forthcoming anti-union legislation. We must develop strong trade unions that have an active role in job creation, because the expansion of industry and the services is an integral part of the return to full employment.
    We must open up the workings of the Government because one body has been in power throughout our years of failure. I refer to the Treasury and to Whitehall. I do not say that their advice is always more acceptable to Ministers now than it was to me, but the steady flow of Whitehall advice on how to run the economy has been shielded from the public view by the Official Secrets Act, so that we are denied knowledge of how that system of advice works. Leaks are supposed to be a substitute for it. A Minister makes a speech that is unintelligible to the ordinary listener, who then reads that the Minister is really warning the Chancellor of the Exchequer that the Budget will have to be better than might be expected.
    Everything is done by means of leaks and briefings. We do not know the nature of the advice that plays such a major part in the shaping of successive Government policies. I refer not only to the Treasury and Whitehall, but to the Bank of England, which, although publicly owned, is no more accountable to us than an offshore island moored in the Thames with extra-territorial rights.
    We must recognise that if we are to ask people to accept the difficult things that must be asked if the policy is to succeed, we must accompany that request with a lifting of the stranglehold of privilege from much of our society. The other place regularly discusses overmanning, without realising what a comic idea that is in that Chamber. Sir Michael Edwardes would close it in 24 hours if he were responsible for its operation.
    In education, health and the distribution of wealth we run an unequal society. That inequality is unjust. Those who have the power that goes with inequality also have the power to stultify investment and development. Anyone who does not believe that should ask those who live in the parts of Scotland where landowners have held back development, because they own the land and can do so. The same is true of the General Electric Company and other big companies.
    We must break free from the Treaty of Rome, because none of these things can be attempted while we are controlled by Brussels. We must try to re-inject some decent values into our society and allow them to be publicly discussed, together with the alternatives that I have mentioned. It is no good talking about full employment or having endless debates about unemployment unless we can convey to the British people that there
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    are those in the House, on our side, who believe it to be a major and central task. We must set objectives that can be realised only by a democratic challenge and unashamedly Socialist programme. I believe that the alternatives—the monetarism of the Government or the shabby, secretive, centralised corporatism of the SDP—are no way forward.
    Mrs. Shirley Williams: Before the right hon. Gentleman completes his speech, will he address himself to what he would do about inflation? He has talked about it as if it would have no effect. He knows, as well as I do, that when there was no incomes policy in 1974 and 1975 incomes went through the roof and inflation became impossible to control.
    Mr. Benn: The right hon. Lady and I, until less than 12 months ago, served on the national executive committee of the greatest socialist party in the world. The only difference between us was that she got there through the trade union section of the vote and I got there from the constituency section. We served in Cabinets together. She succeeded in persuading the Cabinet that pay policy was right for the Labour Government. She was not the only one who argued for it but like the Tory Government, the Labour Government were smashed by it. One of the objectives of policy must be that one sustains public support. The pay policy in which the right hon. Lady believed then brought us down and brought her down and brought into power a Government who did not believe in it.
    There could be nothing more inflationary than the mass unemployment that we now have. If we try to replace the monetarist policies by a pay policy, we shall not win the majority to carry through. The right hon. Lady has shared enough experiences with me to know what a disastrous failure the policies that she advocated were.
    There is no longer any point in arguing about who can manage welfare capitalism best, because we have all tried and success has slipped through our fingers. The British people want a new deal that is democratic, fair and just. They want full employment, and neither this Government nor any bunch of wets can offer it to them. I believe that our best hope lies in the people whom we seek to represent in this House of Commons.
    5.52 pm
    Mr. Maurice Macmillan: I listened enthralled and amazed to the speech of the right hon. Member for Bristol, South-East (Mr. Benn). We have been asked to be brief so I shall not deal with the arguments that he put forward, largely because they seem to be almost totally irrelevant to any of the problems that we are now facing.
    While listening to the right hon. Gentleman I was taken back in memory and imagination to the days of my youth, and almost to my childhood. He seemed to have brought together in one speech all the Utopian panaceas which later experience has taught us are a concealment for an ever-increasing and encroaching power of the State at the centre. Those ideals sound so good. They sounded quire good even when the Fascist and Nazi Governments put them forward before the war. They sounded good when I was naive enough to listen to what the Communist Party put forward—I was tempted to listen to it in my youth. They sounded splendid, and in many ways they are splendid, but experience has shown that they do not work.
    Mr. Benn: The hon. Gentleman should know that those ideas, in a more radical form than I was able to present them today, were contained in his father's book of 1938, "The Middle Way". They were then absorbed by the Conservative Party and, in fairness, led it to a great election victory in 1939. It is a gross abuse of the privilege of the House to suggest that arguments that found support at various times in his own family should be compared to the policies of Hitler, Mussolini or Stalin.
    Mr. Macmillan: It may be unfilial to ignore a book by one's parent, but it can hardly be a breach of privilege.
    My right hon. and learned Friend the Chancellor of the Exchequer is getting much practical advice—not from Opposition Members—but most of it is contradictory. Most hon. Members are worried about his Budget judgment. Some think that he will go too far and reflate too quickly. Others think that he will not go far enough or fast enough. I share those worries, and I have two more. I fear that he will not give enough consideration to the longer term. If he does not, he will have less excuse than usual, because for once the longer-term requirements are wholly consistent with the short-term needs. We are not now faced with the problem of finding the right balance between them, with the risk of damaging the future in order to save the present. That danger is not so great now.
    My other fear is that my right hon. and learned Friend will underrate the importance of starting—and where it has already started, continuing—concerted action with other countries, both in the EEC and OECD, on matters such as bringing down interest rates. I believe that such cooperation with overseas countries is necessary to sustain the domestic policies that he will have to bring forward.
    I hope that on this side of the House we all agree, if not on the advice that we would give to the Chancellor, at least on the fact that what is needed is help to private industry. That should be a priority. The sort of help that he should give will be valuable both in the short term and in the longer term.
    There is a second point of policy on which I hope all Conservative members can agree—looking at and dealing with public spending in order to restore the balance between capital and current account spending. The CBI recently produced a chart showing the enormous increase in current spending and the sharp and considerable drop in capital investment over the last year or two. I go further than some of my right hon. and hon. Friends. In so far as it is necessary to borrow more for the purposes of making genuine investment, the effect on the public sector borrowing requirement is far less damaging than merely borrowing more to continue to sustain high levels of unemployment through unemployment benefit and current account spending.
    The other longer-term effect would be to restore another balance, which is important. About 60 per cent. of the national effort is now directed into providing non-marketable goods and services, and only 40 per cent. is directed into the marketable sector. More Government spending on capital, rather than current, account would help to redress this balance. It would also give immediate relief to industry by providing markets.
    I do not agree that there is full scope to do this by reflation yet, because of the danger of increasing imports and because of the likely inflationary effect. However, I hope that as manufacturing industry becomes more competitive and as our exports continue to do well it will
    1040
    be possible to take some action on markets for the future with our colleagues in the European Community and the OECD. We should consider the effect of one foreign competitor on our import markets, not only in the United Kingdom but in the whole of Europe. We should consider making a European approach to Japan, because of Japan's privileged position in having no defence expenditure, to see whether we can achieve more agreement on the Japanese penetration of European markets and on removing the non-tariff and other methods that she uses to prevent the reciprocal sale of European goods in Japan.
    I want the Government, first, to help in providing markets initially by public investment and later by negotiating through the EEC with Japan. That will be to try to protect not British markets against the greater efficiency of our competitors, but European markets against Japan, with the lesser burdens that she is carrying as a result of not being responsible for any defence costs.
    Secondly, the Government can help by cutting industrial costs. In thinking of the Budget, the matter that comes to mind is the national insurance surcharge, but there are other considerations. One is nationalised industry prices. I think that I am right in saying that the rate of inflation in the prices of private sector goods and services is now an annual 5 per cent. or so, while the comparable public sector figure is about 18 per cent. If the private sector is so successful, despite its costs being put up by nationalised industry prices, I hope that my right hon. and learned Friend will examine the impact on inflation of very high public sector prices, including energy costs.
    Here again there is an international aspect. It is important for the future that all the OECD countries should continue to pay the real world prices for energy. If they do not, there is a danger of creating again the sellers' market in oil that has done us so much harm. Over the past two or three years the OECD countries have to a certain extent moved away from Middle East oil. As a result, the world price of oil came down in 1981, but part of the process of keeping it down is the paying of a realistic price for energy in all industrial countries. That means international agreement, particularly within the EEC, not to reduce the end price of energy to industry in one country and not in another.
    One of our biggest industrial costs is now interest rates. I hope that the Government can continue the good work that has been started and that they will continue to seek international attempts to hold down the rate of interest. Such a process could be extended to exchange rates. As a first step, I should like us to join the European exchange rate arrangements. I do not say that that would be any good on its own. Of course it would not, but we should not be in a position to extend the system unless we were in it. Therefore, we should do everything possible, including joining the European monetary system, to put exchange rate mechanisms on a wider basis.
    It is ridiculous that it should be so difficult since, both in interest rates and exchange rates, the real going level is governed by at most five or six currencies, including that of the United States. It is depressing, to say the least, to hear my right hon. and learned Friend and others rightly remind us, with a sense of fatalism, how dependent we are on what happens to the United States economy. I hope that the Government will not simply say "We are dependent, and cannot do anything about it." The other European countries with powerful currencies, the central bankers and Finance Ministers of Europe, the United States and

    1041
    perhaps Japan, working together, could do something about the problem, which damages all sophisticated economies without helping anyone. That is another element in industrial costs where the Government could help.
    I hope that the Government will do everything possible to prepare for the future. Some of my suggestions would help in the future as well as in the present. More needs to be done in training, including preliminary training. I believe that more skills, especially new skills required on the upturn of our economy, will be needed very soon. It is also necessary to provide better, updated methods of training and a modern equivalent of the old apprenticeship schemes.
    The employment of youth is still to some extent hampered by the Employment Protection Act, by high juvenile wages and by too low a differential between the very skilled and the semi-skilled man at the end of a training period. l hope that the Government will consider those factors as well.
    Perhaps the most important matters are training for the new industries and what should be done about the older ones, including the dying ones. I do not believe that employment in many manufacturing industries will be significantly increased over the next few years. That is partly because of their saleable level of output will be reached with many fewer people at work. We should try to provide an early retirement scheme in declining industries and those which are not progressing, to match the intensified training schemes for school leavers and young people coming into industry. If we are to run down the manpower on one side without causing hardship, we need that sort of early retirement scheme. At the same time we should concentrate on building up skills for the future in the newer, rising industries where they will be needed.
    We should also examine the planning attitudes in many parts of the United Kingdom. Unemployment is rising in the South-East and is at a level unusual for that part of England. I do not believe that the increase will be stopped so long as southern and south-eastern counties follow policies of no new development and no new industry, and where the structure plan incorporates a policy of nil development, as in Surrey.
    I have tried to be reasonably brief in describing a package that I think could start creating more real jobs without being over-expensive and without starting merely cosmetic schemes. Such a package could decline and sustain the recovery that the Government claim has been started. If it has started, it is still fragile and it could do with bolstering by Government policies.
    If my right hon. and learned Friend follows such ideas, it will not leave him much room for a more conventional stimulation of the economy through tax reductions across the board. My proposals would not, however, require him to eat all his own words or to reverse his policies. I hope therefore that the ideas put forward on these lines by some of us today will receive sympathetic consideration.
    6.10 pm
    Mr. Richard Wainwright: Not for the first time, I wish that the right hon. Member for Farnham (Mr. Macmillan) had opened for the Government today.
    I believe that a number of hon. Members from both sides of the House consider, like me, that the debate is overdue. For several months the Government's financial policies have been adrift. Their erratic, zigzag course has
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    been the source of great confusion. Some of the confusion has been concealed by a smokescreen of misleading Government statements, but the screen has not been complete.
    The Select Committee on the Treasury and Civil Service for example, after examining the Chancellor of the Exchequer twice on his public expenditure statement at the end of last year, and after also hearing his officials, passed this verdict. It said that the evidence received
    "must throw doubt on the underlying Strategy as it was promulgated at the time of the Budget in 1980. We therefore believe that the time has come for a major re-statement of the strategy, so that Parliament and public may be fully informed of the economic ojectives which the Government now have set."
    The incoherence of Government financial policy is of particular importance with a Government who proclaim that their policies can work only by changing the expectations of the public. How are those expectations to be changed by so many self-contradictory and obscure signals? No wonder the local government manual workers, water workers and other large bodies of workers in the public sector have cocked a snook at the Government's message that pay increases must be kept down to 4 per cent. No coherent financial message has come from No. 10 or No. 11 Downing Street for a long time.
    As regards the smokescreen, it would take an age to refute all the economic nonsense which has recently come from the Government. I shall refer to one extraordinary myth because it was repeated again today—that other advanced countries are deflating in the way that the Government have done. In an article in The Guardian earlier this week, Christopher Huhne, its chief economic leader writer, produced a table which clearly shows—and this has been presented by several sources—that in the past three years Britain's fiscal stance has been three times as restrictive as the stance of the other big developed countries—Canada, United States, France, Japan, West Germany and Italy. The idea that there must be recovery because businesses will eventually need to replenish stocks and because trade cannot continue with empty warehouses or shops with empty shelves, is proclaimed as a sustainable recovery.
    The awful net result for all who want to make a serious attack on unemployment, whatever our different recipes, is that the deeper the decay in our productive national assets is allowed to go, and the longer that obsolescence is allowed to creep in, the more cautious the rigorous application of a lasting remedy has to be. That is unfortunate and tragic. The obvious reason for caution is that if the productive part of the economy has been allowed to decay, a huge, sudden reflation is bound to produce the most serious bottlenecks, as we have witnessed on several occasions in this country since the war.
    Only yesterday the right hon. Member for Crosby (Mrs. Williams) gave detailed evidence that there is already a serious skill shortage in some parts of the electronic engineering industry. This is a frightful challenge. There is a temptation, as the nation's productive capacity worsens, to throw more and more money at the problem. An intractable problem—I wish that the TUC would recognise this—is that the risk of serious bottlenecks and overheating is increased by the continued decay.
    I hope that the Chief Secretary will consider an audit of the physical state of the assets in the public sector. No one knows how much of the mothballed capacity will be of the slightest use when orders at last come flooding in

    1043
    and demand is increased. Mothballing, with luck, may keep out the rust, but no mothballing known to man can stop obsolescence. That is the great danger.
    The situation calls for reflation conducted with the greatest skill. It is no answer to adopt the broad approach and to talk of throwing billions at the problem. What is needed is a careful, detailed policy designed, so far as possible, to avoid bottlenecks. This means working through small firms to some extent. It means a great deal of regional decentralisation. Whitehall can never know the full dangers of imposing too much on a temporarily crippled industry.
    The first year of reflation, Liberals believe, will have to be spent largely on accelerated training, tooling up, and a deliberate policy of temporary employment subsidies to industry in order to start to get people back to work. When people have been unemployed for longer than six months, the Government should provide a subsidy of up to £70 a week to the employer, under strict conditions, to take them on and get them back to work.
    There is also a need for a firm announcement of major capital projects—not all of them centrally designed—on which suppliers can rely in the succeeding years. We believe that many regionally inspired projects, encouraged by the Government, could be of incalculable value to our infrastructure. It is intolerable that people living in industrial cities such as York and Gloucester should have sewage floating feet deep in their streets for days on end. This happens every three or four years in York. A good, regionally planned flood prevention scheme could give its citizens a civilised existence and give its industry some continuity. That is an example.
    Mr. Richard Needham: Why does the hon. Gentleman think that in the first year of a reflation a subsidy of £70 to encourage people on the dole back into work will not simply by used by employers as a method of substitution? In the first year of reflation, will they not take people back anyway? Why is there a need for subsidy?
    Mr. Wainwright: I tried to explain, evidently with singular lack of success in the case of the hon. Gentleman, that in the first year of the reflation, there will not be available all the skilled people necessary. There will not be all the modern plant necessary to get production going on a fully economic basis. To give some relief from unemployment it will be necessary to have an artificial scheme of a strictly temporary nature. We believe, after investigation, that that is inevitable if the country is not to be kept waiting until its patience is intolerably stretched.
    I wish to revert to the matter of capital projects. We do not accept—this may be a big difference between ourselves and the Labour segment of the Opposition—that these need be confined wholly to public funds. Many references have been made in the House and elsewhere to United Kingom pension funds investing abroad. No pension fund wants to invest heavily abroad. Its pensioners have to be paid in the currency of this country. Therefore, other things being equal, pension funds have a strong preference for sterling investment.
    This country has been such a desert for investment, apart from Government paper, for so long that pension funds have been obliged to look abroad for outlets for their investments. We believe that, quite voluntarily, and
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    without any suggestion of going back to exchange control, many of these capital projects could be partly privately financed. We hope that the Chief Secretary tonight will have something positive to tell us about British Telecom's excellent proposals for a Buzby bond, which seems to be held up because of the Government's infatuation with trying to privatise large sections of British Telecom.
    Mr. Robin F. Cook: The hon. Gentleman has given us an insight into his suggestions on capital projects and I am sure we would not wish to let them pass as if they were peripheral remarks. Did I hear him say that he would not contemplate a return to exchange control? If that is what he said, does he not appreciate that it would be impossible for him to aspire to the lower interest rates, which is another feature of the alliance policy, because then he will be at the mercy of the higher rates of whichever country in the world that money is going to?
    Mr. Wainwright: That is irrelevant to interest rates. Let me say at once, speaking personally, that any suggestion of exchange control by the EEC ought to be carefully examined. I do not think there is any question of that being necessary at the moment. In any case, I am not in a position to say that the trick could be worked. Certainly the high interest rates that we have suffered over the last few years, as the hon. Member for Edinburgh, Central (Mr. Robin F. Cook) well knows, have been the direct product of the Government's infatuation with the money stock and not—as they have tried to put out—as a result of high borrowing.
    On the fiscal side of reflation, we make no claim to originality. The matter has been canvassed in this House already this afternoon and we believe that priority should be given to the eventual abolition of the national insurance surcharge. I should like to see the whole provision struck off the statute book so that no Labour Government, if we ever again have to bear with one, will be tempted to bring it back and revert to the infatuation that they had for it during the life of the last Government.
    Not only is the national insurance surcharge an attack on employment, but it would also, if it were remitted, or better still abolished, increase the profits of industry available for modernisation. Abolition would help to reduce prices and, indicentally, local rates, because local authorities pay the surcharge like other employers. It would help our exports. I should have thought that it was wholly in line with the Government's preaching that we must look after the goose that lays the golden egg and pays for all our benefits.
    If the state of the books, when they are revealed on Budget Day, suggests that it would really be extremely difficult to go the whole hog all at once and abolish the surcharge, our suggestion is that it should be abolished regionally. For example, all the regions which at this date have double digit unemployment should lose the national insurance surcharge burden altogether; and in the remaining regions—about one third of the people employed in this country—the surcharge should be finally abolished the year after.
    The other aspect on which I want to touch briefly is the essential condition for this reflationary policy to work. This is where we on this Bench part company from the official Opposition and with the Opposition party led by the right hon. Member for Bristol, South-East (Mr. Benn),

    1045
    namely, that there must be the shield of an incomes policy that has the democratic authority of Parliament. The right hon. Member for Bristol, South-East was very eloquent in describing the shipwreck of all previous incomes policies, but he did not carry his analysis to the proper lengths by explaining that not one of the failed incomes policies had ever been put to the people of this country in a general election. All of them, furthermore, were U-turns and broken promises on what that Government had put to the people at the election that they had won.
    Our view is that we must continue—and indeed my party has done so in all four recent general elections—to make this explicit to the people: that if they elect us we shall execute an incomes policy which will have, for use in the last resort, sanctions authorised by Parliament.
    Mr. Frank Hooley: I do not think that the hon. Gentleman is quite accurate. My recollection is that in the autumn of 1974 the Labour Party presented to the electorate the concept of the social contract. Whether the hon. Gentleman agrees with that or not, that was a pay policy from 1975 to 1978 which, by 1978, had reduced inflation to single figures, increased investment and increased output. That policy was based on the policy of the social contract which Labour explicitly put to the electorate.
    Mr. Wainwright: I cannot agree with the hon. Member, because the social contract, which I remember very well being introduced, because I was in the House, was, in our view—and we said it at the time—an act of appeasement outside of Parliament, and largely behind Parliament's back, in which the Government of the day made a very had bargain. In return for giving trade unions privileges, which, for the most part, we believe they no longer require, the Government achieved a grudging temporary restriction on pay. That is not the way that we want to do it. It is not the way that it should be done in a parliamentary democracy.
    In closing, may I explain why from this Bench we intend to vote tonight both against the Labour motion and against the Government amendment? The right hon. Member for Stepney and Poplar (Mr. Shore), the Shadow Chancellor, has always proved himself a master of analysis, but when he came to positive measures and proposals, as usual he showed himself to be twice a prisoner: first, a prisoner of his national executive, and, secondly, a prisoner of the record of his Government. The fact is that the ambiguous but very sketchily produced Labour plan for reflation, because it fails to meet the necessity for an incomes policy will not do the trick. It will simply once again give the British people cause for disillusion and might, indeed, help to bring about the downfall of our democracy. The Labour plan is deficient in that respect, as well as being too sketchy fully to understand. We intend to vote against their motion, and for reasons which I hope I have already made plain we shall vote against the Government amendment.
    6.28 pm
    Mr. J. F. Pawsey: I hope that the hon. Member for Colne Valley (Mr. Wainwright) will forgive me if I do not follow him too far down the road that he was treading. Certainly he came up with two imaginative ideas: the lay-off scheme; and the national insurance
    1046
    surcharge which he was suggesting should be dropped for those regions which had more than 10 per cent. unemployment.
    I should like to make a brief comment on the speech of the right hon. Member for Bristol, South-East (Mr. Benn). I am sorry he is not in his place. His Utopia, his vision, is certainly not mine; and I do not believe that it is the vision of the majority of the British people.
    The Opposition's motion refers to the "massive rise in unemployment" and suggests that it is due to the Government's deflationary policy. That is a simplistic view. The reasons for unemployment surely are much deeper and greater than those so far mentioned this afternoon. First, there is a major world recession, which has been fuelled by the massive increase in oil prices. That point was touched on by the right hon. member for Stepney and Poplar (Mr. Shore) in his opening speech. Britain is still a great trading nation, and clearly we cannot be insulated against the effects of what is happening to countries round the world. As oil prices increase, so more of our gross national product is spent on the purchase of oil, which leaves less for the purchase of manufactured goods. Surely, this basic truth is responsible for the major world recession. There is also the unhelpful and at times bloody-minded attitudes of trade unions with their insistence on overmanning—
    Mr. Arthur Lewis: On a point of order, Mr. Deputy Speaker. I have raised this matter before and I do so again, and I ask that you perhaps seek the views of Mr. Speaker on it. We give privileges to Privy Councillors. They ate always called when they wish to. Four Privy Councillors have spoken and left the House. Mr. Speaker said that it would be difficult to call everyone who wishes to speak. Back Benchers do not get much chance. Surely, at least one of those Privy Councillors should have had the decency to stay in the House. I ask you, Mr. Deputy Speaker, to draw this matter to the attention of Mr. Speaker. Not one of the Privy Councillors who spoke has remained to listen to other speakers.
    Mr. Deputy Speaker (Mr. Bryant Godman Irvine): I am certain that Mr. Speaker will see the Official Report tomorrow.
    Mr. Pawsey: I was condemning the trade union's policy of overmanning and their outdated practices. The print unions are a prime example of the reluctance of trade unions to change customs and practices. Workers at British Leyland accepted robots for welding and paintwork; they even accepted a low pay award; but when it came to altering the length of the tea break they went on strike.
    Other problems arise with demarcation disputes. Above all, there is our national habit of paying ourselves mote than we earn. In addition, productivity is only now beginning to catch up with levels of our major competitors. For example, productivity at Talbot in my constituency has increased by about 40 per cent. Despite that massive increase, productivity there is only now beginning to reach the level of our major Continental competitors. That is one of the problems that has bedevilled British industry or so long.
    I should like to quote from the Herald Tribune of Thursday 15 October last year, in which interesting comparisons are made between production in Germany and at Halewood. It showed that, despite the fact that there

    1047
    are in Halewood 10, 040 employees and in Germany 7, 700, the German worker produced one third more motor cars, using basically the same equipment.
    Another problem is weak and sometimes poor management, which frequently abdicates control of plants and factories. That is a memorial to the soft option. The roll call of casualties ranges from Alfred Herbert to Hoover, and every hon. Member could add more.
    One of the principal reasons may be Government interference. I am referring to interference by Governments of all colours and persuasions. For example the insistence on industrial development certificates during the 1960s and 1970s guaranteed the decline of the motor industry and prevented the building of new plants and factories in areas with a tradition for motor building. It also prevented the building of new factories and plants in areas where there were sub contractors.
    It was that policy that took Rootes to Linwood Unfortunately, we have lost that factory, but those of us who lived in the Midlands during that period forecast it. The decision to go to Linwood flew in the face of geography. I accept that the Scots are renowned for their engineering techniques, but the production of motor cars calls for something more specialised—a degree of knowledge in mass production. Sadly, that tradition was lacking at Linwood.
    Again, taxation policies ensure that the profits made by companies are effectively taxed out, leaving inadequate funds for re-equipping and re-tooling. It is about time that hon. Members understood that it is from today's profits that we get tomorrow's jobs. If we forget that, we shall move even more into industrial decline. That is one reason why I hope that, when the Chancellor examines his Budget options, he will resist any temptation to reduce private taxation and will instead reduce industrial taxation, whether that be by lowering die national insurance surcharge or reducing the level of corporation tax.
    Interest rates must also be part of the equation of Government interference. Interest rates are still too high and act as a millstone on further investment. All in all, it is time that Governments recognised that the running of a business or an industry is best left to business men and industrialists who understand how business and industry work. Too often the effect of Government interference is to worsen the situation. All businesses are different. The way in which legislation impinges on one business will be different from the way it affects another.
    When we compare Britain's employment figures with those of other nations, there are at least two important points to be taken into account if we are to compare like with like. We should understand the size of the black economy, which undoubtedly distorts the real employment figure. The journal Fiscal Studies for March 1981 estimates that the size of the black economy is between 2·3 per cent. and 3 per cent. of the gross national product. That is between £3·2 billion and £4·2 billion—a substantial amount. Other authorities—for example, Sir William Pile—will argue that the figure is substantially higher. Whichever figure one takes, the size of the black economy is one reason why employment figures look so bad when compared with those of other nations.
    If we compare our unemployment figures with those of Germany, there is another distinction: the differing attitude in the two countries to overseas workers. Our
    1048
    policy is one of straightforward immigration and integration. Germany and other Continental countries have guest workers. In Germany the guest workers are sent home if unemployment rises. I put it to the House that those guest workers act as a buffer against the number of unemployed. Therefore, it is important that we compare like with like. That has not always been done—either in yesterday's debate or today.
    Yet another reason for the growth of unemployment is the remarkable assault—I use that word deliberately—on the British home market by the Japanese. It is estimated by the Ford Motor Company that by 1985 Britain will lose 71, 000 jobs as a direct result of Japanese competition. The total job losses in car manufacturing countries in Western Europe as a result of Japanese penetration is estimated at 560, 000. The Japanese motor industry is the largest and most efficient in the world. It has become the largest volume producer of passenger cars with an output totalling well over 7 million units. That output is still growing. As the market for cars remains virtually the same, the percentage being taken by the Japanese increases.
    The job losses I have quoted relate only to the motor industry. Hon. Members will recall as well as I can what has already occurred in the motor cycle, television tube and optical industries. There are many others too. The assault continues and grows. It certainly does not diminish. I acknowledge what my right hon. Friend the Member for Farnham (Mr. Macmillan) said when he touched on this very point. He was entirely right to do so.
    It is noteworthy that other EEC countries are able by various means to protect their industries against the Japanese. The United Kingdom continues to abide by the rules. We continue to play cricket while others are playing a different and more serious game.
    The time has come when we cannot afford to take such a benign view of Japanese competition. We should remember the adverse balance of trade, which is now at well over £1 billion. We should recall that the Japanese have little interest in purchasing manufactured goods. Their main interest is in oil, raw materials, and food. Until we wake up to the Japanese threat, jobs will continue to be lost.
    The Government should commence action on two specific fronts. We should insist that the Japanese take a larger amount of British exports, or, alternatively, that they increase their investment in the United Kingdom.
    The increasing pace of technological change is a further cause of job losses. The week before last I visited Rolls-Royce in Coventry. I met the joint shop stewards committee and management. It was pointed out to me that the introduction of high technology in the factory would increase productivity in certain areas by 60 per cent. Here are two related and important points. Obviously, the introduction of the technology will result in redundancies. That is accepted by the trade unions.
    That shows clearly the wind of change that is blowing through so much of our trade union organisation. It is accepted that an increase in productivity is necessary if companies, industries and the country are to remain competitive. The unions will accept new technologies, even though in the short term they may result in redundancies. That is one example of the realistic attitude being increasingly displayed by so man British workers.
    I attach one rider. Those who may lose their jobs through the introduction of high technology should receive inducements to facilitate its introduction. I pay tribute to

    1049
    my right hon. Friend the Member for Farnham, because he mentioned this point. The inducement should be financial or, better still, in the form of improved training to assist such people to earn a living in an alternative trade or industry. They accept that a more productive Britain is a more profitable Britain. A more profitable Britain is a working Britain.
    It is sometimes implied—we heard it yesterday, and perhaps we heard tinges of it again today—that the Government welcome unemployment. That is as extraordinary as it is untrue. There are no votes in unemployment. The Government are doing their best to tackle the problem. They have set up enterprise zones and improved the job relief scheme. I hope that the scheme will signpost a way to reduce the retirement age for men, although I recognise how costly such a measure would be. The short-term working supplement is another measure designed to help industry and maintain employment.
    The new training initiative recently announced by my right hon. Friend the Secretary of State for Employment will do much for young people leaving school. In its first year it is expected to provide places for 300, 000 young people at any one time and to cost about £1 billion. This will surely help our young people to receive the training that is so necessary for later life.
    Another imaginative concept is the enterprise allowance scheme which is currently taking place in Coventry and elsewhere. I hope that the experiment works and that it will be extended to many other areas. Also, about 1, 500 new companies have received loans of about £52 million in the past six months. These are a small number of the positive things that the Government have endeavoured to do to tackle the problem.
    Despite all the assistance, it is a mistake to believe that only the Government have the answer to unemployment. So much could be done by the ordinary man and woman. For instance, before a purchase is made, one should ask what the country of origin is and, where possible, buy British. Too often we purchase a foreign item when there is a British equivalent. Sometimes it is felt that to be good it must be foreign. For some extraordinary reason, we denigrate ourselves, our efforts and our products. A concerted programme of buying British would save more jobs than all the Government intervention measures put together. We should remember that fact the next time we buy foreign goods. When we buy foreign goods, we export jobs from Britain.
    Yesterday, the right hon. Member for Chesterfield (Mr. Varley) specifically mentioned the West Midlands. By coincidence, I received a booklet which relates to the West Midlands produced by the CBI. It sent a questionnaire to ask which companies had developed entirely new products. About 50 per cent. answered "Yes", 76 per cent. had modified existing products, 75 per cent. increased the product range, 71 per cent. were engaged in process innovation, 68 per cent. had diversified markets, 49 per cent. had expanded exports, 71 per cent. had introduced more flexible working and 67 per cent. had restructured management. The Midlands region is adapting and should not be written off, as the right hon. Gentleman endeavoured to do yesterday.
    That is all good news, not just for the West Midlands but for Britain, and not just for companies but for those who are employed in them. The title of the booklet is
    1050
    "Winning Through". That is what the Government are doing and that is what the country is doing. We ate winning through.
    6.49 pm
    Mr. Robert C. Brown: The hon. Member for Rugby (Mr. Pawsey) will forgive me if I do not entirely follow his speech, but I take him up on one point. I understand that he has a Ford Granada which I suggest is manufactured in Cologne. The hon. Gentleman does not seem to be interested in taking up that point. I seem to have struck home.
    Mr. Pawsey: The hon. Gentleman may be right. A Ford Granada is an improvement on the car that I used to run, which was a Volvo. This weekend I am trying a Range Rover. [Interruption.] I hope to practise what I preach, despite what the hon. Member for Coventry, North-West (Mr. Robinson) or others may think.
    Mr. Brown: The bulk of Volvo parts are produced in the United Kingdom. A Ford Granada is a step in the wrong direction.
    I make no apology for speaking parochially about unemployment in the Northern region—the county of Tyne and Wear, the city of Newcastle upon Tyne and my constituency, in that order. The Northern region paved the way in the Industrial Revolution for the United Kingdom's prosperity. I do not claim that we therefore deserve special consideration, but it is monstrous that we have been treated in the way that we have been over the years, and particularly over the past 33 months, by the Government.
    Currently, 222, 200 of our people, or 16·4 per cent., are unemployed. Worst of all, 142 school leavers are chasing each vacancy notified to careers officers. That is a most damnable statistic, even in a country that has 1, 300, 000 more people unemployed now than in May 1979. Unemployment is costing about £13, 000 million a year, which is a tragedy. I hope that the Chief Secretary will reflect on that figure and consider what could be done if the Government returned to a regional policy. Under the previous Secretary of State for Industry, who was responsible for regional policy, it was forgotten.
    Last December 88, 062 people were out of work in Tyne and Wear. That was l6·2 per cent. or one in six people. Last year unemployment in the county increased by 15, 049, or 21 per cent. Since the Government came to power in June 1979 the increase in unemployment in the county has been 37, 899 or 76 per cent. Last year 14, 274 people were declared redundant in Tyne and Wear, which brings the total of redundancies in. the county since the Government came to power to 36, 331. The majority of jobs lost have been in manufacturing. During the recession, 17·4 per cent. or one in six of the county's manufacturing jobs have gone The Chief Secretary should reflect on that fact.
    Tyne and Wear has the second highest rate of unemployment among metropolitan counties, second only to Merseyside. Currently, the rate is one and a third times higher than the national average. Contrary to what my hon. Friend the Member for Eton and Slough (Miss Lestor) said yesterday, male unemployment predominates. It is 73 per cent. of the total. In the past year 75 per cent. of the increase has been among males.
    Among the Tyne and Wear districts, unemployment is highest in Sunderland, at 18 per cent. and South Tyneside

    1051
    follows with 17·9 per cent. There, nearly one in every four men is out of work. In November 1981 it was estimated that 11, 355 young people were in the youth opportunities programme, but despite the increased number of places, unemployment among young people has increased by 40 per cent. in the past year. It was 5, 200 in December.
    In December there were only 1, 785 job vacancies in the whole county. For every vacancy there are 49 jobless people. The situation is considerably worse in isolated pockets. For example, last September almost 400 general labourers in shipbuilding and engineering were unemployed, for every one vacancy. Last October 48, 000 or 54 per cent. of the unemployed had been out of work for over six months and 28, 916 or 32 per cent. for one year or more. For young people under 24, 13, 163 or 49 per cent. had been unemployed for six months or more and 5, 006 or 19 per cent. for one year or more. Those figures are scandalous.
    I deal next with the city of Newcastle upon Tyne. I shall use the December figures, as I do not have the figures for January. They will be even worse. In December 21, 937 people were unemployed. In December 1980 the figure was 17, 855, which means that in a year there was an increase of nearly 23 per cent. That is in one great city.
    The continued high level of unemployment has caused a savage rise in the number of long-term unemployed. In the country as a whole the number of people out of work for six months has risen from 560, 000 to almost 1½ million in the past two years, which is an increase of 163 per cent., which compares with the overall increase in unemployment over the same period—which God knows is bad enough—of 119 per cent. More recently, the proportion of unemployed who have been out of work for more than a year has risen even more savagely. In October 1980 they comprised 19·4 per cent. of the total. By October 1981 the percentage had risen to 26·3.
    Similar increases are all too evident in Newcastle. The number of unemployed rose from 4, 600 in October 1980 to 7, 100 in October last year. As a proportion of all the unemployed in the city, that represents a rise from 26·7 to 31·5 per cent., which is much worse than the national average.
    The city council recently carried out an extensive survey into the situation in the east of Newcastle upon Tyne. I wish that that had happened in my constituency, because I could have sought an Adjournment debate and done some justice to it. I am surprised that the hon. Member for Newcastle upon Tyne, East (Mr. Thomas), who represents the SDP, is not here and has not been in the past two days. He could enlighten the House on the state of play in his constituency, where the survey carried out by the city council revealed that in the Walker ward there is 34 per cent. unemployment among males. A host of information arises from that survey and, as I am sure the hon. Member's constituents will be, I am disquieted to find that not a murmur has come from the hon. Member about the awful situation in his constituency.
    Mr. John Horam: The hon. Gentleman is making an attack on my hon. Friend the Member for Newcastle upon Tyne, East (Mr. Thomas). My hon. Friend's record is extremely good, particularly in relation to saving the contract for Parsons. The hon. Gentleman should know about that, as he was also
    1052
    involved, although my hon. Friend took the lead in a move that saved hundreds of jobs under the Labour Government. It was the Labour Government who penalised Newcastle upon Tyne, East.
    Mr. Brown: I am happy to accept that I and my Tyneside colleagues, including the now SDP Member for Newcastle upon Tyne, East, played a considerable part in saving many jobs at Parsons. It was not the exclusive work of the hon. Member to whom I have been referring.
    There is only one answer to the problem of unemployment, but it will not be followed as long as this discredited Government cling to office. We must have an alternative economic policy that will include a massive job creation scheme in the public sector and through the public sector to the private sector. For example, in Tyne and Wear we have thousands of jobless construction workers and a terrible housing situation, with no fewer than 12, 000 people desperate for houses.
    Last week I tabled a number of questions, the responses to which would have been relevant to the debate. It is remarkable how Ministers on the Treasury Bench on receiving a number of questions the replies to which could have been relevant in such a debate, give a holding reply such as "I shall reply to the question as soon as possible." I have no doubt that tomorrow I shall receive "Pursuant to your letter of" replies from Ministers.
    The Under-Secretary of State for Transport was one of those who was good enough to give me an answer. Last week I asked him
    "whether, in view of the level of unemployment among construction workers in Newcastle upon Tyne, he will immediately bring forward the construction of the western bypass for the city of Newcastle upon Tyne?"
    He replied:
    "The scheme is already being prepared as quickly as possible. If all goes well, work could begin in 1985."— [Official Report, 26 January 1982; Vol. 16, c. 322].
    It has been my luck to live on the line of the route of the proposed bypass all my life. It is within my knowledge that the whole of the route of the proposed Western bypass has been in public ownership for at least 50 years, since the scheme was first actively discussed. A number of houses will have to be demolished, but they have been purchased, so there is no problem of the acquisition of land or anything else. Why on earth, with all the land there and no question of delays for land acquisition or the purchase of houses, or anything like that, does it take five years to prepare the scheme?
    There are two major separated junctions involved, and if we talk in terms of a two-lane motorway, once one has been designed on virgin land, all the others have been designed. I cannot accept that it will take another three or four years to design and start that road. It could be started within weeks rather than years, thereby providing some added work for the construction industry.
    People are waiting for, nay demanding, houses in Newcastle. Hundreds of my constituents live in council houses which badly need bringing up to modern standards. Regrettably, the city council can do nothing about them, because of a lack of finances. Those are the things to which the Government should be directing their mind with a view to reducing unemployment.
    7.5 pm
    Sir Ian Gilmour: The hon. Member for Newcastle upon Tyne, West (Mr. Brown)

    1053
    made a parochial speech and rightly said that he made no apology for doing so, but as I do not come from his parish I make no apology for not following him in his extremely interesting and detailed speech.
    Although the right hon. Member for Stepney and Poplar (Mr. Shore), the Shadow Chancellor of the Exchequer, tried to denigrate it, there has been a good deal of good news about the economy lately. There have been the past year's trade figures, which show that we have an enormous surplus. There have been signs that the pay round is going satisfactorily, which suggests, as my right hon. and learned Friend the Chancellor of the Exchequer said earlier, that the inflation rate should be lower than is currently forecast. There has been the slight recovery of industrial production, although the decrease in November means that the news here is less unequivocally good than it is elsewhere. There have been the striking recent increases in productivity and the guarded optimism of Professor Burns in the past week and the perhaps rather less guarded optimism of my right hon. and learned Friend the Chancellor this afternoon.
    As against all that good news there has been the dreadful unemployment figure, but it seems to me that the improvements elsewhere in the economy give us the opportunity to tackle the problem of unemployment. My right hon. and learned Friend said this afternoon that the rise in unemployment was slowing down. I hope that my right hon. Friend the Chief Secretary will deal with this, because I am not sure that that is so.
    I wish to examine adult unemployment, not because youth unemployment is not importan—it is—and not because my right hon. Friend the Secretary of State for Employment has produced an excellent training scheme, as he has, but because that is the true method of getting at an underlying trend. The unemployed adult total rose between June and November of 1981 by 212, 000, that is, by 40, 000 a month. In December, if we include the elderly people who took advantage of the scheme to go off the register, the figures were 17, 000 and 21, 000, that is 38, 000. In January they were 47, 000 and 5, 000, making 52, 000 in all. That was obviously increased by the bad weather.
    That means that there has been a fairly consistent rise of 40, 000 a month since the middle of 1981. I am not sure where my right hon. and learned Friend saw a decline coming from. There does not seem to be any evidence of a change in trend since the middle of the past year. That is borne out by the Government's economic forecast of an increase of only about 1 per cent. in output this year. The revalorisation of duties and income tax, which costs the Chancellor about £1 million, is assumed in that forecast. I do not know whether the Chief Secretary will be able to clear up that matter. Perhaps he will also say whether Christopher Huhne was right to say in The Guardian that the Government would have to inject £2 billion in spending power merely to make the Budget neutral.
    Taking into account the expected increase in the supply of labour, the prospective rise in output, which is so much lower than has been necessary in the past in order to keep unemployment constant, might not slow down the morease in unemployment and is unlikely to reduce the rate to below 20, 000 a month. With adult unemployment seasonally adjusted at 2, 829, 000, the figure for adult unemployment will be well over 3 million this time next year on current Government policies. Presumably the "headlines" figure will be much more than that.
    1054
    Some people have urged a reflation of £2 billion to £3 billion. In my view that completely mistakes the magnitude of the problem that we face. I agree with Mr. Sam Brittan on that, although not necessarily with the rest of his conclusions. A reflation of £2·5 billion would be about 1 per cent. of the gross national product. That would lead to an addition of output of barely 1 per cent. a year later. According to the ready reckoners based on the Treasury model, a 1 per cent. increase in output should lead to a decrease in unemployment of only about 100, 000 18 months later.
    Therefore, people who talk about a reflation of about £2·5 billion are using the wrong numbers. To pursue policies that will still lead to over 3 million unemployed next year is not dealing with the problem of unemployment, but running away from it.
    We must give the unemployed some hope. If one is 16 or 18, it is not encouraging to be told that the problem will begin to be solved towards the end of the Parliament after next. At that age, that period seems like a lifetime. We must give the young and all unemployed people the belief that things will get better; otherwise, we are running serious risks. We all know that the Government are not indifferent to the plight of the unemployed, but unless they act, their concern will not be understood.
    Therefore, more is needed. There must be special measures to reduce unemployment. There must be a greater expansion of the economy than £2 billion or £3 billion. I am not engaged in a silly auction of numbers, but I am trying to make a valid evaluation of the sum of money that will be sufficient to make unemployment fall substantially in 1983.
    Last October I put forward a package costing about £5 billion. Time has moved on since then, inflation his moved on since then, and unemployment has become worse than it was then. Therefore, I have no doubt that what I said at that time now needs slight additions.
    First, my package included the abolition of the national insurance surcharge, which my right hon. Friend the Member for Farnham (Mr. Macmillan) advocated. Secondly, I proposed the adoption of the special employment measures suggested by Professor Layard for reducing unemployment, to which the hon. Member for Colne Valley (Mr. Wainwright) referred and which Mr. Sam Brittan put forward this morning. The size of the problem is so great that unless one has special measures to deal with unemployment there will be small effect on the register. Professor Layard's scheme is estimated to produce about 500, 000 jobs, at a cost of about £1 billion.
    Thirdly, I proposed a reduction of interest rates, and, fourthly, joining the EMS. The fifth proposal was for extra capital spending of at least £500 million. However, because of the present state of the construction industry, which has been badly squeezed and which is not import-intensive, that sum should be increased.
    That package was, and is, designed to reduce unemployment and to help industry by reducing industrial costs. My right hon. and learned Friend the Chancellor of the Exchequer emphasised the importance of that. We ace faced not just with the tragedy of unemployment, but with a deplorable waste of real resources.
    Mr. Raymond Whitney: I understand that the package will cost about £5 billion. My right boa. Friend rather quickly passed over the idea that we also wanted low interest rates—
    Sir Ian Gilmour: I am coming back to that.
    Mr. Whitney: I am grateful to my right hon. Friend.
    Sir Ian Gilmour: As I have told the House before, the package was put through the Treasury model with satisfactory results. It produced favourable results for all the true objectives of economic policy. Output was increased, employment was increased and prices were lower than they would otherwise have been. In other words, according to the Treasury model, expansion does not produce inflation, but lowers it. A much bigger package that I put through the Treasury model also has beneficial results in all those respects.
    Of course, my package is at variance with the medium-term financial strategy. I confess that that does not worry me. We now have 3 million unemployed. If the medium-term financial strategy envisaged 3 million unemployed, it should not have been adopted. If it did not envisage 3 million unemployed it should now be abandoned.
    I recognise that a reflationary fiscal package would increase the PSBR and the quantity of money, but I do not accept that there is any necessity for interest rates to be higher because of that. If the national income and private savings were fixed, higher gilt-edged sales would cause interest rates to rise. However, as the national income and, with it, private sector savings would be increased under my proposals, there is no reason to suppose that interest rates would have to be any higher. That line of reasoning is fully confirmed by the Treasury model, which shows that those reflationary measures could be taken with no need to increase interest rates and without any substantial dealing in financial markets, including foreign exchange dealings by the authorities.
    Mr. Arthur Lewis: I can point out to the right hon. Gentleman and the Government where at a stroke they could put the matter right. Last week I asked how many hotel and catering workers from foreign countries were allowed to come here and work on permits. I was told that there were about 8, 000. I asked yesterday how many hotel and catering workers were unemployed in Great Britain. I was told that there were 16, 000 in Greater London and 116, 000 in Great Britain. There is no question of considering public money or inflation. We should stop those people from coming here, when we already have 116, 000 unemployed hotel and catering workers.
    Sir Ian Gilmour: The case that I put forward has not been answered, although my hon. Friend the Financial Secretary to the Treasury made a speech about it. The Treasury's system of ideas, which presumably it believes in, showed that my proposals would produce all the desired results. So far, no answer has been given.
    That brings me back to the good news that I mentioned at the beginning of my speech. Now is the time to cash in on what has been achieved. With productivity rising fast, now is the time to increase production. After all, rising productivity and static production spell more unemployment, so fiscal policy should allow production to expand. Our large surplus is yet another reason for doing so. Therfore, we must use what is going well in the economy to alleviate what has been going appallingly badly. The situation that we now face is extreme. Unless we act, it will become even more extreme.
    The proposals that I have put forward are a moderate response—not all too moderate, as the right hon.
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    Gentleman might say—and a modest first step to make things better. They are the bare minimum. Faced with the enormity of the problem, the country will not be fobbed off with mere tinkering. Much more is needed, so I hope that even at this late hour the Government will recognise the need to act now.
    7.21 pm
    Mr. Geoffrey Robinson: I am glad to have been called to speak in this debate, and to have the opportunity to follow the right hon. Member for Chesham and Amersham (Sir I. Gilmour), whose proposals I wholeheartedly welcome. Labour Members can honestly say that we have admired the integrity and the courage with which he made clear his disagreement with policies when he was a member of the Cabinet, and from the position that he now occupies. He is a considerable influence in his own party. He does not flinch from modifying—and in so doing, coming nearer to our policies—the ideas that he previously put forward.
    I shall address my remarks to what I consider is the heart of the motion. The deflationary economic policies of this Government have caused
    "the massive decline in output and the massive rise in unemployment."
    Those two facts were so amply demonstrated in the opening speech of my right hon. Friend the Member for Stepney and Poplar (Mr. Shore), that I shall need to sharpen up only two areas of the statistics that he gave. If the Minister can confirm those statistics when he winds up, it will be greatly to the advantage of a naturally much fuller House to realise fully the size of the disaster that this Government have brought upon themselves and the country.
    The two sets of statistics that I hope will be confirmed are the official statistics, as I interpret them from the OECD figures, which show that while our manufacturing production has declined during the period of this Government by no less than 12·6 per cent., the average of the rest of the OECD countries has declined by only about 1·6 per cent. In other words, our factor of decline in manufacturing has been eight times that of the average of the OECD. While the average rise in unemployment for the OECD countries has been 31 per cent., in the United Kingdom it has been a disastrous 104 per cent. If those two figures are confirmed as accurate, as I believe they are, the case for the motion is made. There is no doubt that this Government's policies are at fault. There is no other way in which one can explain the disparities in the magnitude of the differing performances of countries which are similar to our own, even though we have greater weaknesses in certain vital areas than they have. There is no way in which a threefold increase in unemployment over the average and an eightfold decrease in the level of manufacturing production can be explained.
    We must ask ourselves: what will the Government do about it? The right hon. Member for Chesham and Amersham put forward moderate and tentative proposals for a change in strategy. From what the Chancellor of the Exchequer said this afternoon, it looks as though the medium-term financial strategy is to be kept more or less intact. We have a ridiculously restrictive financial stance. According to the latest figures in December 1981, in the OECD economic outlook, our PSBR deficit will be equal

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    to 1·4 per cent. of GNP. That is lower than the Japanese, and much lower than the average for the OECD as a whole, which is 2·4 per cent.
    What else are the Government planning to do? Faced with deflation in their PSBR strategy, it must inevitably follow that they are planning to cut and are cutting Government expenditure. The latest figures that we have for general Government expenditure in the first two quarters of 1981 are the lowest ever on record. In the first two quarters of 1981, with the country already in the grips of a world recession, compounded by a domestic-led reflationary recession, the Government choose to have the lowest level of general Government expenditure in recorded history—that is according to the latest figures published in Economic Trends.
    Does it therefore surprise any right hon. or hon. Member that, while those are the figures for the public sector, the capital expenditure for manufacturing industry, on which much of the take-off that has been predicted is bound to be based, are estimated in 1981 to be the lowest since the early 1960s? Thus, we have a policy of restriction, cuts, and deflation, which is to continue, with the inevitable consequence that there will be more unemployment and lower production than we could achieve.
    We did hear some good news. I shall come to that in a minute. I thought that it could justify the sort of Budget that the right hon. Member for Chesham and Amersham and I would support. I agree with him that there would be just grounds for doing so. I admired his sleight of hand in proposing that, so good was the good news, that we could now embark on a planned and sustained expansion. The truth, of course, is that the bad news is so bad that there is no alternative, if the bad news is not to get worse.
    What about new companies, for example? The Government have said a lot about their plans for new companies. The hon. Member for Rugby (Mr. Pawsey) referred to the various grants, the guarantee loan schemes, the microprocessor scheme, and other tinkering measures. Nevertheless, the past two years show a record number of liquidations. The Government have managed to double liquidations. I have read nothing about the doubling of new companies or about the doubling of the output of small companies.
    What have we heard about production in the United Kingdom, as opposed to making comparisons with other OECD countries? Such comparisons can be misleading, and do not bring home the real impact of what has happened here. During the period of office of this Government, up to May of last year, manufacturing output declined by no less that 18·4 per cent. At the risk of boring the House, I shall repeat that figure: output declined by no less than 18·4 per cent. Since that time, it has increased by 2·2 per cent. Will the Chief Secretary, or whoever is to reply to this debate, tell us—there is no point in trying to press the Government on unemployment, because they will give no forecast in that connection—that the Government's policy for output will get us back to the level that it was when they came to office? That would be quite an achievement—to get back to the point from which they started. But to do that, they will have created perhaps 3½ million to 4 million unemployed. The right hon. Member for Chesham and Amersham warned us not to be too certain that this modest rise in production will continue unabated.
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    What has been the cost? At a national level, it is costing £12½ billion. That is more than the whole of the PSBR, about which everyone is so worried—that is, the PSBR with the capital projects included in it, from which our future wealth and employment must come. It is equal to £4, 500 for every person that we keep on the dole—every one of the 400, 000 construction workers who are on the dole, while 1 million or 2 million bricks stand idle.
    However, unemployment, disastrous and inexcusable though it is in terms of the waste of resources that it inevitably implies, is not just a matter of statistics and costs. There is also the human aspect. In the West Midlands we have seen an increase of 178 per cent. in unemployment during the Government's term of office. In my constituency last summer only 15 per cent. of those who left school got permanent jobs. Nationally—it is a statistic that must not be treated as such but as a human tragedy—25 per cent. of those aged between 16 and 25 have been out of work for one year or more. It is a lost generation. It will not forgive the Conservative Government, nor it will forgive entirely the previous Government. Those young people could have expected something better of their Government than either party provided. Certainly, they have nothing to expect from the Liberal Party or from any SDP-Liberal alliance.
    I am glad to see my right hon. Friend the Member for Bristol, South-East (Mr. Benn) in the Chamber. I agree with him about the awesomeness of the task that we face to find jobs for 4 million unemployed. We must think not only about tinkering with the economy, reducing interest rates, introducing national insurance surcharges and investment grants. I am sure that the Treasury has plans in hand, as does the Department of Industry, to stimulate the economy.
    Some Government at some time must come to a historic compromise with our trading partners and with the trade unions. My experience in industry was that if one could guarantee sustained and increased output and if one could carry on a sustained dialogue with the work force, the wages problem was not so significant because one could talk about a sustained growth in wages. The trade unionists did not wish to outstrip the rate of growth, provided that the output was modest and sustained. The critical and quintessential preconditions to obtaining such a sustained rise in output are a massive public works spending programme and some understanding with our trading partners, within and without the EEC, that we need some protection for long enough to rebuild those industries that have been allowed to fall into disrepair. A Labour Government with a strong mandate and a firm majority could carry out that historic mission.
    7.32 pm
    Mr. Richard Needham: I hope that the hon. Member for Coventry, North-West (Mr. Robinson) will forgive me if I do not follow him down that path. I am sure that he will be glad to hear that one of the greatest and most expensive pleasures in my life was to drive a car with which he had some association many years ago. Unfortunately, that is no longer possible, for reasons that I shall outline when I turn to my proposals on the Budget.
    I wish to refer to some of the comments made by the right hon. Member for Crosby (Mrs. Williams) yesterday, when her animus towards the Secretary of State for Employment got rather the better of her. She said:

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    "He is introducing a youth training scheme that is essentially cosmetic. He has seen apprenticeships decline by 25 per cent. while the Government have been in office, apprenticeships that were not replaced by any effective skill training scheme. The youth training scheme is not that. It is a one-year, cosmetic attempt to take young men and women off the unemployment rolls and to give them nothing resembling a real skill or qualification. One does not receive that in one year of a cobbled together, cheap scheme."—[Official Report, 27 January 1982; Vol. 16, c. 922.]
    It is unfortunate that the right hon. Lady should have used such terminology, because it will do untold damage to the chances of the scheme being successful if youngsters believe that her comments are correct.
    It is worth pointing out that the training element of the youth opportunities programme, with which the previous Administration were associated, cost £500 for each place per year. The training element in the scheme being introduced by my right hon. Friend is £2, 000 for each trainee per year. The scheme bears no relation to what has gone before. It is only fair to point out that when the right hon. Lady was a Minister in the previous Administration, in 1978 she, with the right hon. Member for Chesterfield (Mr. Varley) and others, wrote a document called "A Better Start in Working Life". The opening paragraph stated:
    "At present, over 200, 000 young people leave school each year at 16 and take jobs where no further education or planned training is available."
    The Labour Government had as much time as could reasonably be needed to introduce the sort of scheme about which the right hon. Lady has complained. What did she do during her time in Government to ensure that youth wage rates were sensible? What did she do to persuade the trade unions to move towards the modular training, to which she referred yesterday? What did she do to ensure that those young people received worthwhile training before they went to work? The answer is that she did virtually nothing. To take it out on the Government for the faults for which she was as responsible as anyone else, and to undermine the Manpower Services Commission's attempts to try to get the scheme off the ground, is disgraceful. I hope that she will come to the House and make it plain that that is not her intention.
    I understand the Chancellor's dilemma about what he can propose on 9 March. His fear, as he is no doubt advised by those quiet and careful men in the Treasury, is that, if he increases the PSBR by too much, it will increase the pressure on the exchange rate. At the point in the cycle when economic growth restarts he will no doubt be advised that if the PSBR increases too much the effect of sentiment will be to lead to a fall in the pound. If the pound falls, interest rates must rise and the Government will not be able to produce a package between now and the election that will give them a chance of re-election. That is the sort of advice that he has been given, and he has probably also been reminded constantly that it is possible that American interest rates might rise dramatically. If they do, that will make matters even more difficult for him.
    If American interest rates rise substantially, the size of the PSBR will not matter, because we must follow suit. The Chancellor can, to some extent, discard that argument. Furthermore, when, due to the civil servants' dispute last summer, he ran out of money, he raised £6, 000 million in the market. That did not have an obvious effect on interest rates.
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    Therefore, it is reasonable for the Chancellor to do more than he is advised by those who sit unknown in the offices in Whitehall. Just as I and my colleagues try to understand his problems, perhaps he will try to understand the problems of private industry. It is easy for politicians to talk about a lack of competitiveness. It is usually decried by politicians who have never spent a day on the shop factory floor. However, it is not so easy to do something about it when one is in industry. Many of the problems faced by the private sector result from the overshoot in sterling. In private industry, it is impossible to deal with an exchange rate of $1·80 one day and an exchange rate of $2·40 the next. One cannot de-man that quickly, reequip and produce that fast. It is impossible to make up such a fluctuation. As the CBI stated, taking 1975 as a base, halfway through last year we lost competiveness to the tune of 50 per cent., and even now, with the decline in sterling, we have still lost competitiveness to the tune of 35 per cent.
    However good the productivity figures are, I must tell the Government that there are some caveats. A CBI letter on the productivity figures, written to me today, said:
    "you will see that output per person employed for the third quarter of 1981, for the whole economy, is 112·1 compared to 111·7 in the second quarter of 1979. In other words, very little progress has been made in productivity over this period. It is roughly the same for manufacturing industries. Output per man-hour did increase from 111·2 to 115·1 over this period, but this has to be seen against the loss of real capacity which British industry has suffered by shortening the working week in response to unemployment."
    That is the CBI's view. I think it is perfectly legitimate to talk about restrictive practices and overmanning, but it is not fit to lay all the blame at the feet of British industry for not putting it right over the years.
    Perhaps the Chief Secretary will tell us in winding up the debate something about the miscalculation on the monetary base which, again, some private advisers have mentioned. The advisers, and one in particular, blamed the contraction of the monetary base on the severity of the depression and the overshoot of sterling. If that is true, I do not see how private industry can be held to blame for it.
    What could private industry have done about the appalling increases in public sector prices? It is not fair to blame private industry for them. My concern is that increasingly—I agree with the right hon. Member of Bristol, South-East (Mr. Benn)—the private sector of industry, in which I have been involved since I left school, starts to believe that the Government do not understand the world in which industry must operate. If that is the case, it may not end in such a happy outcome for the success of the Government's policy as the right hon. Member for Bristol, South-East thinks. However, it would be a disaster for the Conservative Party if we lost faith and touch with the private sector.
    Therefore, I urge the Chancellor to ignore the more pessimistic advice that he receives from his gurus and to take as his guideline and star the CBI budget plans which are reasonable, sensible and achievable. At least, they can add to growth and do something for employment and get the economy to move in the right direction with, it seems to me, a minimum of risk.
    I say bluntly to the Treasury Bench that the Budget on 9 March may be the Government's last chance to restore their credibility in most sectors of the manufacturing base.

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    My second point concerns the plight of the long-term unemployed.
    Mr. John Stokes: My hon. Friend the Member for Chippenham (Mr. Needham) knows that I greatly admire him. He represents a largely agricultural constituency whereas I represent a wholly industrial one. The contrast I find is that whereas it is true that some, perhaps rather peevish, managers and entrepreneurs disapprove of the Government policies, many sensible manufacturers and managers support them. Above all, the man on the shop floor understands the reality of the situation to a remarkable degree and he would disagree with a great deal that my hon. Friend said.
    Mr. Needham: I am sorry that I cannot agree with my hon. Friend. In many ways, I wish that my constituency was mainly agricultural. Agriculture and agriculture-related industries in my constituency employ only 7 per cent. of the labour force. It has within it one of the most foremost engineering companies, which supplies British Rail and many other manufacturing companies, and there are also the five companies I started when I left school. I hope that I am being neither peevish nor petty but realistic in how my work force and I see the difficult world we live in.
    Returning to the cost of the long-term unemployed, particularly the Government's present proposal, I hope and pray that it is only a present proposal not to uprate unemployment benefits and short term supplementary benefit by 2 per cent.
    The loss of earnings-related supplement affected 42 per cent. of those receiving unemployment benefit. There were arguments this afternoon about whether that figure was one in five, but it was 42 per cent. The 5 per cent. abatement of unemployment benefit has distorted the ratio between that and short term supplementary benefit, so that now unemployment benefit for a married man with no children is £33·40 compared with £37·75 on short term supplementary benefit. The result is that more people are being driven out of unemployment into the short term supplementary benefit, thereby increasing the PSBR.
    The time has come for the Government to tell us—hopefully tonight—what they propose to do about the abatement of the 5 per cent., now that they have fixed a date for bringing these benefits into tax.
    My right hon. Friend the Secretary of State for Industry, the former Secretary of State for Social Services, in Committee on the Social Security (No. 2) Bill, said:
    "as the unemployment benefit comes into tax, so the rationale for the 5 per cent. abatement ends. It is an interim scheme in lieu of taxation. One will give way to the other."— [Official Report, Standing Committee B, 30 April 1980; c. 526.]
    Will it? When unemployment and short term supplementary benefits come into tax, they will raise £300 million in the year 1982–83 and £475 million in a full year. That is more than sufficient to make good the abatement and the 2 per cent. shortfall in unemployment and short term benefit.
    On the 2 per cent., I have always comforted myself that at the end of the day the Government will back the safety net. The Supplementary Benefits Commission, in its annual report for 1977, said:
    "Life is hard for everyone who depends on supplementary benefit but it is hardest of all for the unemployed. The pensioners, the sick and disabled and one-parent families tend to be slightly better off, and they tend to have more persistent people speaking for them."
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    Since my time in the House, I hope that I have always spoken on behalf of the long-term unemployed, who very often have not been represented as they might have been.
    My right hon. Friend, the then Secretary of State for Social Services, wrote to me on 16 June 1980 and said:
    "Furthermore, the fact that we are maintaining the supplementary benefit safety net means that we are protecting the poorest—this is surely the answer to accusations that we care little for the social consequences of our actions".
    In his Budget Statement on 26 March 1980, my right hon. and learned Friend the Chancellor of the Exchequer said:
    "Again, any civilised society should provide a safety net
    below which a poor person's standard of living should not fall." Later he said:
    "clearly, no action we take should be at the expense of the really weak and needy."—[Official Report, 26 March 1980; Vol. 981, c. 1458.]
    The long-term unemployed are the "really weak and needy". Their position compared with other people on benefits has become consistently worse. In 1971, when unemployment benefit was on an index of 100, retirement pension was 100, ordinary supplementary benefit 97·4 and long-term benefit 103·6. In 1981, unemployment benefit was 100, retirement pension 130, ordinary supplementary benefit 103·7 and long-term supplementary benefit 130·1. These people have specifically and remorselessly found themselves worse off.
    Most or many of the unemployed are those most likely to lose their jobs once more when they find work on the "last in, first out" principle. Therefore, they will not have much in the way of redundancy pay, and now that their earnings-related supplementary has been removed they will suffer.
    As I understand it, those in work who received little or nothing in the last pay round feel somewhat aggrieved. The answer to their problem is index allowances and not to reduce the level of benefit to the unemployed. No opinion poll that I have seen has shown that argument to carry much weight among the public at large. If anything, the opposite is the case. They want the unemployed to be treated properly, because many of them are frightened that sooner or later they, too, may be unemployed.
    Mr. W. Benyon: Does my hon. Friend agree that Treasury Ministers' minds might also bend towards the plight of those who are caught in what is called the invalidity trap and find that, because invalidity benefit is higher than the lower rate of supplementary benefit, they never reach the higher rate of supplementary benefit? The position of the disabled unemployed, who must he the worst off in society, must also be rectified.
    Mr. Needham: My hon. Friend is absolutely right Furthermore, the long-term unemployed are not entitled to long-term supplementary benefit.
    The cost of restoring the 2 per cent. to unemployment benefit would be one tenth of 1 per cent. of employee contributions. I appreciate that my right hon. Friend the Secretary of State for Social Services probably began with a request from the Treasury to cut his budget by £1 billion and, having knocked that down to £65 million, may rightly feel aggrieved when people, such as me, do not give him credit for that achievement but complain about this fairly insignificant amount.
    It is not insignificant, however, to those who—perhaps insignificantly—feel that in the Tory Party we stand in the shadow of people such as Lord Shaftesbury. For us, it is

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    a matter of the deepest and most important principle. We cannot and will not allow the poorest of the poor—the long-term unemployed—to become any poorer.
    7.51 pm
    Mr. Barry Sheerman: I do not intend to take the time of the House for very long. It is important to speak in such an important two-day debate on the economy. The two days have really been one continuous day, albeit on two motions.
    I congratulate the hon. Member for Chippenham (Mr. Needham) on one of the better and more compassionate speeches that I have heard from the Conservative Benches for a long time. However, his speech did not fit in with the general tenor of Government policy. Indeed, I have been disturbed over the past few days by the way in which the present Government seem not only to be out of touch with ordinary men and women but to have a positive dislike of them.
    Reading through the report of yesterday's debate, I found a catalogue of excuses from the Government as to why Britain is in trouble and why we have 3 million unemployed. I shall list some of those excuses. The first, which we have heard many times, is that there is a world recession. We have been told that often by the Secretary of State for Employment. A second is that we suffer from a continuing lack of productivity, from restrictive practices, inefficiency and overmanning. Another is that we have suffered a tremendous rise in oil prices. Furthermore, Governments have interferred too much.
    A little further on, we find that the Government believe that British industry is guilty of poor product design, poor marketing, slow delivery, high costs, inflexible use of manpower, poor industrial training and poor goods and services. One need only look at this catalogue of the deficiencies of the British people to understand that the Government have no responsibility for the 3 million unemployed, for the dreadful conditions suffered by so many of every hon. Member's constituents and the real poverty which stalks the towns, cities and countryside as never before remembered by the House. If members of the Government would get out of their chaffeur-driven limousines they would see the sheer misery and poverty which now exists.
    One does not have to look at the statistics produced over the past two days. One must look at the haggard faces of men and women who do not know where the next meal is coming from or whether to buy the new pair of shoes for their son or daughter to go to school in or to pay the rent to understand the dreadful poverty that is being suffered.
    It ill becomes any Government to make excuses. We live in a parliamentary democracy—I am extremely glad of that—and it is an answerable and responsible democracy. People elect Governments to govern—to do something about the condition of ordinary British men and women. The electorate expect results. They do not expect to be told, "Sorry chaps, you have given us such a tremendous problem, you are bad managers and awful time keepers, you do not produce the right products and anyone in his right mind will buy a foreign car, television or whatever." That is precisely what the Secretary of State for Employment was telling us yesterday. The country does not expect a Government to list our deficiencies. We
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    expect them to govern. They are expected to produce a programme for the economic and social rebirth of the nation.
    I do not for a moment wish to play the parochial card and say that my constituency is worse off than any other. It is, perhaps, a microcosm of the country. It is neither the worst nor the best. According to yesterday's figures, unemployment rose by 2·1 per cent. to 12·9 per cent. during last month. One might say that that is only a little above the national average, but let us look at the picture more closely. Let us look at my constituency as one of the key industrial towns of the country. It is well situated for transport and has a long tradition of highly skilled people. It does not have the problems of South Wales, where I used to live for a long time, with its tremendous dependence on heavy industry, coal and steel. Nor does it have the same problems as many parts of Scotland and the North-East or, indeed, the tragic problems of Northern Ireland.
    If there is no future for industrial development, if goods cannot be produced profitably, or employment provided, in West Yorkshire and Huddersfield, how can one hope for industrial development in any part of the country except perhaps the South and South-West? If any Government tell the House, "We have given up trying to provide employment for all our people and we will only make people move down to the South and West", that is the end of the government of Britain.
    The other side of the coin in my constituency is a diversified industry. The woollen textile industry has been hammered—130, 000 jobs have been lost in the lifetime of the present Government. Huddersfield had an unemployment rate of 3·4 per cent. when I was elected. The decline in the town has been disastrous. There was some false ferocity yesterday about the announcement of 3 million unemployed but, as I have often said before, it is forgotten that as unemployment gets worse the kinds of people who become unemployed have rather different skills, and length of service and the effort and additions that they were making to their firms' product and the national product are different.
    When such a situation exists in Huddersfield, we are in very dark days. Recently, I visited one of the largest ICI plants in the country—in Dalton, in my constituency. I do not wish to be merely anecdotal, but to make a point. When I asked the management of that large organic dyestuff producer how production was going, I received the reply that it was increasing and that the company had done a little better in the past six months. I asked which areas the company sold to and I was told that the firm had always been very much export-oriented and that it was selling far more than previously to Korea, Taiwan, Hong Kong and to that part of the world.
    Hon. Members know only too well that those dyestuffs are produced for the textile industry. I asked about the tremendous market that the company had always had in Britain. That market has not risen at all. It has reached an all-time low and there is no sign of it picking up. Behind that statement lies the reality of the nonsense of the Government's boasts about "good news". If the speeches made in the House in the past two days are the good news, Heaven help us when we hear the bad news. That is one of the worst "good news, bad news" jokes that I have ever heard.
    In my constituency, the bad news is that in the past two and a half years we have not seen much more efficient firms, people learning to be more productive or time and

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    job sharing. Huddersfield has never had highly unionised workers or high rates of pay. No one who has studied the economic history of the textile industry can show me any textile worker who has got fat working in a mill. Hon. Members should consider the history of the general level of wages in West Yorkshire. Many good firms producing the best worsted, cashmere and camel hair in the world have gone to the wall. They used to serve overseas markets well, but the Government's economic policies, the succession of Budgets, the way in which interest rates have been forced up, the change in the value of the pound and the Government's changes of mind have bankrupted many good business. Hon. Members should drive past the empty mills and the boarded-up windows of West Yorkshire. Those firms will not return.
    In many ways the engineering industry is in the same boat. David Brown tractors is not in my constituency but many of my constituents work there and it has faced dire days. All those great exporting industries in my constituency that have records of efficiency, productivity and industrial relations second to none have gone, never to return. I hope that I have shown what the microcosm of my constituency says about the Government's policies.
    I spent many years as a university teacher. As a Member of Parliament I do not specialise in education and I do not often take part in debates on higher education. Budgets make a contribution, but the Government's longterm strategy can be seen and identified in the activities of the Ministries. If those Ministries' work does not mesh together, Heaven help the infrastructure of Britain. The situation in Britain is crazy. With more unemployed young people than ever and a bulge in the number of young people coming up to university age and with the Government's dreadful policy, which seems to beg all reason, university places are being cut by 20, 000 per annum and will be cut by 44, 000 places by 1984. Those places will never return. Those young men and women will never gain the skills to become top managers and to put Britain into a competitive position with Germany, Japan, France, Italy and so on. Those skills will be lost for ever.
    When statistics are thrown at me, I usually stop listening. However, it may seem glib to talk about 20, 000 places, but hon. Members should work out what that means in their constituencies. In Huddersfield, 150 people will find that their children cannot go to university next year although they would have been able to go this year. That is unfair and the kids will know it. They have been deprived of opportunity and of the chance to make a longterm contribution to Britain's national wealth. How can a Government defend sacking one in six university teachers? That will cost a lot of money in handshakes and early retirement pay. It is nonsense to sack them when we want such teachers to teach young people.
    I have some inside knowledge of this issue. During the final speeches in last night's debate I was sorry to hear a Conservative Member say that we did not need social studies. I hope that some Conservative Members will look at Rolf Dahrendorf's contribution last night, which was printed in The Times this morning. He pointed out that economists, mathematicians and those undertaking business studies come under the heading of social studies. Those people of the highest quality have a contribution to make throughout our national life.
    The university nearest my constituency, Bradford university, is closing between nine and 14 departments on
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    the university's technical side. The Prime Minister always says that engineering is being protected, but it is not. It is receiving slightly less abysmal treatment than some other subjects. If the textile department is closed at Bradford university there will be one such department left in Leeds. What hope does that give to the infrastructure of the textile industry, if there is nowhere to teach graduates or undergraduates? I could take more time and show that the textile industry is in trouble and that the Government are depriving young people of every age, skill and ability of the opportunity to gain the training necessary to bring that industry back into national and international prominence. That is economic madness. We shall pay a terrible price in the years to come.
    Many of us realise that five years is not a very long time in politics. What the Government are doing, at a stroke, will be reflected for a long time in the scars on our families and on society. It is the bare minimum to talk in terms of a substantial reflation when there are 3, 000, 000 unemployed. Those 3, 000, 000 are being paid far more than we receive in total oil revenues. In the 1960s we often spoke about those oil revenues as the wealth that would enable us to re-equip British industry and make it competitive with other countries.
    We know what has happened in the last two and a half years. Those oil revenues have gone to the dole queues, not to new investment in British industry. If they have not flown into the dole queues, they have flown abroad for investment which provides jobs for people who do not live in this country. I do not believe that I am a hard-line ideologue, but I believe in a diverse and flexible response of Government intervention. If that is not accepted as a tool of reflating the economy, of getting the economy working in the right sectors and providing jobs in the right regions, it is an abdication of Government control and parliamentary democracy.
    I believe in a package. Yes, I believe in an incomes policy. Many of my right hon. and hon. Friends may not agree with me, but it is inevitable that any Government who want to govern have to have an incomes policy, as well as a reflationary package, if they are not to be inflationary. We must have selective import controls. It is nonsense to watch our car and textile industries—industry after industry—being ruined by competition that we cannot match in the short term. Japan is dumping in this country cars, motor cycles. televisions, and many other sophisticated industrial goods.
    It is a sad reflection on this country when we allow it to become more like an under-developed country—a country that exports raw materials such as oil, and imports sophisticated manufactured goods. If that is the road that we are on, surely we need a package of an incomes policy, selective import controls, control of interest rates, enterprise allowance schemes and Government intervention as a flexible response. It should be applied in a pragmatic, not a doctrinaire, way. That is the way in which we should move in order to save this country and its future.
    Mr. Deputy Speaker (Mr. Bernard Weatherill): remind the House that there are less than 50 minutes before the wind-up speeches begin, and that many hon. Members have been sitting in the Chamber all afternoon waiting to speak. I hope that hon. Members will bear that in mind when they time their speeches.
    8.13 pm
    Mr. Jocelyn Cadbury: I listened with great interest to the hon. Member for Huddersfield, East (Mr. Sheerman), but I cannot agree with his analysis of the recent high level of unemployment in this country. It is facile to blame our level of unemployment on two and a half years of Conservative policies. The 3 million unemployed are the victims of Britain's industrial weakness, which goes back over many decades. It is useless and wrong to blame any single group, whether it be management, the unions or the Government. Surely the blame has to be spread around equally. To some extent we are all to blame for what has happened.
    In 1950, the United Kingdom had a 25 per cent. share of world trade. Now our share is only 8 per cent. That is where the jobs have gone. They have been lost to our overseas competitors. Why has that happened? It has happened because over a long period we failed to raise our productivity at the same rate as our competitors, but during that period we continued to award ourselves larger wage increases than they did. That is brought out by the fact that from 1975 to 1980 Britain's labour costs rose by 88 per cent. per unit of output. In the same period labour costs in Germany rose by only 17 per cent., and in Japan they did not rise at all.
    Not only productivity has caused the problem. In the past, British goods have not been—with glowing exceptions—of high enough quality, and they have not been well enough designed. We have not been aggressive enough in selling them and we have not delivered them on time. Those are some of the reasons why we have serious problems now.
    It is not surprising that this country should have been the first to be hit by the world recession. Our industry, out of all the countries in the industrialised world, was the weakest. We were bound to be the most severely hit. However, it is important to note that other European countries, and the United States, have also been hit by the recession. Not only are there 2 million people out of work in France and 1·7 million unemployed in Germany, but the rate of increase of unemployment in Germany is higher now than in this country.
    I believe that under the present Government British industry has begun to tackle the causes of our previous poor performance. In the West Midlands, where I come from, there is evidence that management is at last beginning to manage again and that trade union members are accepting changes in working practices that would have been unthinkable five years ago. At British Leyland, in my constituency, productivity has risen by between 25 and 30 per cent. over the last 12 months. The Longbridge work force has been particularly successful. Whereas in 1980 it took 17, 000 men to produce 132, 000 cars, in 1981 14, 000 men built 234, 000 vehicles. That has been achieved by a series of factors—a dramatic reduction in unofficial strikes, which have in the past plagued the Longbridge factory, and major improvements in the flexibility of working, so that an electrician no longer has to summon a plumber if there is a piece of piping in his way. He can now move the piping himself.
    The result of those improvements across the whole country, together with the moderation that we have seen in wage settlements, meant that unit costs rose at a slower rate in this country last year than in any other industrialised country, including Japan. That cannot just be brushed
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    aside, as the right hon. Member for Stepney and Poplar (Mr. Shore) attempted to do. That is a major achievement. It is the way forward.
    Although great progress has been made, let us not underestimate what industry has had to endure in terms of increased industrial costs for many reasons over the last few years. Unlike Opposition Members, I do not attribute all the bombs that have been dropped on industry to the present Government, although in certain circumstances the Government could have mitigated the effects of some of them.
    One of the reasons to which I referred is a world recession, which has hit exports. In my constituency many companies traditionally dependent on the motor industry made great efforts to move away from that dependency into exporting world-wide. They were savagely hit by the world recession.
    Another reason is the rise in the value of sterling, which my hon. Friend the Member for Chippenhan (Mr Needham) mentioned. I believe that during 1980–81 the high value of sterling did a great deal of damage to exports and to companies in this country. For example, it virtually wiped out our sports car industry. British Leyland totally lost this market in the USA.
    Thirdly, a continuing sharp rise in energy costs had serious consequences for the heavy energy users—industries such as steel, chemicals and paper.
    There has also been a continuous steep escalation in the cost of public sector services. The managers of companies in my region feel strongly about this. They have made great efforts to hold back on costs, keep wages down and improve productivity, but they have no choice but to absorb the continuously increasingly inflationary costs of the services that they must buy from the public sector. This underlines the need for the Government to continue their efforts to open up the public sector to competition, to reduce the size of the public sector and to reduce the numbers of Government staff, all of which are a burden on the private sector.
    Finally, there is the rate burden. In my region there is great bitterness over the extent to which rates have risen and over their imposition on local industry. In many instances the rates have risen as a result of unnecessary political gimmicks, such as the scheme in the West Midlands to subsidise bus fares.
    Some councillors have poured scorn on the complaints of business men and have said that rates are a small factor in industry's costs. In fact, the total rate burden on the company sector is £5½ billion—more than the total profitability of that sector—so it is not a small issue, but a major one.
    Industry has done remarkably well, in view of all those adverse factors. Having worked in two large United Kingdom companies, I think that the cold douche effect of the first two years was probably necessary to push managers and work forces along the road to international competitiveness. But the shock treatment cannot be applied indefinitely. The real rate of return in British industry is dangerously low, at only about 2 per cent. The CBI calculates that if nothing is done it will rise to about 3 per cent. this year. That is not enough.
    Companies need more profitability if they are to invest heavily enough in new plant and in research and development to be able to keep ahead in the areas in which they already have a lead and to catch up in the areas in which they have fallen behind. The research and

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    development programmes of many British companies are woefully inadequate, yet our industrial future must lie in high-technology sectors, as we face increasing competition in basic industries from the low-cost countries of the Far East.
    We should not forget that despite last year's excellent performance United Kingdom labour costs are still about 35 per cent. worse than our competitors were in 1975. Therefore, I ask my right hon. and learned Friend the Chancellor for an industrial Budget this spring which will bring about an investment-led recovery in the economy.
    I wholly accept the need to continue the fight against inflation. I am aware of the constraints that this places upon my right hon. and learned Friend, but there are risks attached to any policy. On the one hand it would be folly to consider injecting into the economy the gigantic sums advocated by the Labour party. That would launch us back along the way to hyperinflation and high interest rates, which would undermine the whole objective. On the other hand, if my right hon. and learned Friend opts for a neutral Budget the likelihood is that the gross domestic product will grow by only I per cent. that is within the margin of error, so it could mean no growth at all.
    The risk is that industrial production will remain flat and profits will not rise enough to enable companies to invest, to become competitive and to create new jobs. The objective must be to choose a programme that will have the minimum effect on inflation and the maximum effect on output.
    I suggest to my right hon. and learned Friend a package similar to that advocated by my right hon. Friend the member for Farnham (Mr. Macmillan), involving three main elements. First, and most important, the employers' national insurance surcharge should be reduced by 2 per cent. In a full year that would cost the Exchequer £1·9 billion, but, because of the time that it would take to implement it, in 1982–83 the cost would be about £1½ billion.
    I refer to the ENIS because a reduction in it would be the single most effective and immediate way of reducing industry's costs, raising profitability and helping industry to become more competitive. When we were in Opposition we rightly criticised the right hon. Member for Leeds, East (Mr. Healey) for introducing this appalling tax. It is a tax on jobs and exports. If one had set out deliberately to design a tax calculated to kick industry in the teeth, one could not have come up with a better answer. The tax must be reduced.
    Some people have devised extraordinary and eccentric arguments to demonstrate that reducing the ENIS is not the best way to help industry. The most insidious argument is that employers would dissipate in wages increases the money that they were given back. I do not believe that. I have been involved in negotiating wage increases, and I know that such negotiations are decided not by a single element but by a whole range of factors—what the chap up the road is earning, the level of unemployment and so on.
    It is a philosophy of despair to suggest that British management is incapable of taking a long-term view of what is best for its businesses and that it is unqualified to make the wisest use of the resources at its disposal. I disagree totally with that argument. I support a reduction in ENIS.
    A reduction in ENIS would benefit companies large and small in a roughly equal manner. It would be fair to
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    everyone. It would tend to reduce industrial costs and reduce inflationary pressure. Unlike cuts in the basic rate of income tax advocated in some quarters, most of the money given away would be spent within the United Kingdom economy.
    Another part of the industrial package that I advocate is an increase in spending on capital projects of £500 million during the coming year. I am not in favour of launching into major glamour schemes such as the Channel tunnel. Such schemes have so long a lead time that they would have little impact on jobs in the next year or two. I advocate an increase in spending on more modest projects that will yield a reasonable rate of return and prove a permanent benefit to the country's infrastructure. In the Midlands, for example, there is an urgent need to complete the motorway network. There is need of a good road to East Coast ports for our exports.
    The programme that I advocate would give a lifeline: to the sorely depressed construction industry and lead to a swift increase in jobs.
    Thirdly, I urge the Government to do more to help industries that are intensive users of energy. Ft is impossible for a steel manufacturer who is paying 30 per cent. more in electricity costs in this country to compete with manufacturers in Germany and France with their cost advantage. A scheme was introduced by the Government last year to give some relief to intensive users of electricity. It did not go far enough. In the short term, a more imaginative electricity tariff needs to be introduced to enable industries such as the steel industry to meet foreign competition.
    One of the Government's fundamental objectives must be to bring about the long-term regeneration of British industry. Despite the depredations of the recession, industry is now emerging in better shape to compete in world markets. The key to the success of the forthcoming Budget—a Budget that is critical to the ultimate success of the Government's entire economic strategy—is that businessmen are given confidence and respond positively. I believe that a package such as the one that I have outlined and such as that suggested by my right hon. Friend the Member for Farnham would give industry confidence to invest and lead to a permanent strengthening of Britain's industrial base.
    8.27 pm
    Mr. Derek Foster: the hon. Member for Birmingham, Northfield (Mr. Cadbury) must forgive me if I do not follow him along the route that he took. He is a member of a party that came to power in 1979 bleating that Britain was over-taxed, over-borrowed, over-paid and over-burdened by the State, and that the fault rested with the pursuit of Socialism over many years and the pursuit of equality. The remedies offered by the Conservative Party included squeezing inflation out of the system. At that time, according to the gospel, it was possible to ignore wages and there could be free collective bargaining. All that was needed was control of the money supply, and after 12 months, 18 months or two years, there would be no problem.
    According to the new Conservative Government, it was also necessary to cut public expenditure, but that could be done painlessly because there was so much waste in the fleshpots of the public sector. It was said that if that waste were eliminated there would be no need to reduce services. That, it was claimed, would help us cut our borrowing and

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    reduce interest rates. It was also necessary to cut taxation, they said. The British people had become lazy and feckless because there was no incentive for them to work. If the British people were given back their money, that money would fructify in their pockets, while all the entrepreneurs, according to the last leg of the policy, would be galvanised into activity. That was the Conservative Government's view.
    Nothing like that happened. Inflation, far from being squeezed out of the system, rocketed to 22 per cent. following the doubling of VAT, and it has not yet fallen to the level that the Government inherited. Public expenditure has been a story of suffering and pain. Following regular bruising Cabinet battles and swingeing cuts in services, such as education and social services, and cuts in benefit to the poorest—it should be remembered that 5 million people in the United Kingdom live in poverty—public expenditure has actually increased as a percentage of gross domestic product, according to the Red Book presented by the Chancellor of the Exchequer at the time of his Budget. Money has been diverted from essential services. Where has it gone? After all this pain of cutting public expenditure, the money has been diverted into funding unemployment, which is costing us about £13½ billion a year.
    Look at the record on taxation. By increasing VAT, by failing to index tax allowances, by increasing national insurance contributions, by forcing up the rates, by increasing charges for services, the burden of taxation has actually increased. My hon. Friend the Member for Blackburn (Mr. Straw) has produced figures, which have not so far been denied, as I understand it, by the Prime Minister or by the Chancellor, which show that the average family now pays £35 a week more in taxes than in 1979.
    When we look at the galvanised entrepreneurs, what we see is that there has been a record, unprecedented increase in bankruptcies. They have been caught between high inflation and high interest rates and they have gone out of business at an unprecedented rate.
    If we consider output, we see that manufacturing output fell by 20 per cent. in the first two years of this Government. That was the most severe slump for over 50 years. It was a bigger reduction than even between 1929 and 1931. There has been some improvement, but manufacturing output is still 17 per cent. below the figure of 1979. I remind the Chancellor that 800, 000 people lost their jobs in manufacturing industry during that period. Jobs are still 17 per cent. below the level of 1979 in manufacturing industry.
    In these past two days there has been much talk of the good news. One would not want to deny the Government some comfort there, but somehow they have not mentioned that industrial output actually fell last month—it also fell in November—by 1½ per cent. If it had not been for North Sea oil, the figure would have been much higher than that.
    When one looks at the employment figures, one gets all the bad news at once, does one not? There are now at least 3 million people out of work. That is the registered figure. When we look at the underlying increase last month, we see that it was more than 47, 000. The underlying trend of the last few months has been an increase of 40, 000 a month, or about half a million a year. The Secretary of
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    State for Employment in his statement yesterday admitted that we needed to create about 200, 000 jobs a year to cope with demographic trends.
    It is not inflation that has been squeezed out of the system, but output and employment. Nowhere else in Western Europe has there been a comparable loss of jobs and output. Certainly in no other oil-rich nation has there been this kind of experience.
    There has been talk of the international recession. I should like to quote the article to which the hon. Member for Colne Valley (Mr. Wainwright) referred in relation to OECD figures. It says:
    "Britain's fiscal stance has on average been three times as restrictive as the stance of the other Big Seven developed countries".
    That gives the lie to the assertion that we have been following policies similar to those abroad.
    Those policies have been flagrantly wasteful. We are paying £13½ billion in unemployment benefit. The Manpower Services Commission has calculated that £10½ billion worth of output has been lost during this period. I understand that £8½ billion of capital investment has gone overseas since exchange controls were abolished.
    It is not just Labour Members who criticise Government policies. The Select Committee on the Treasury and Civil Service produced a report on 16 December. In paragraph 46 it said:
    "In view of the emphasis which the Government originally accorded to the Strategy and to certain particular targets, notably those for the money supply and the Public Sector Borrowing Requirement, it is a surprise to the Committee to find a lesser emphasis being currently given to these items. The evidence we have taken in the course of the present enquiry indicates a marked lack of certainty in relation to these targets, which is in strong contrast to the position of eighteen months ago. This makes it difficult for the Committee to measure and assess the position which the economy has now reached, and must throw doubt on the underlying Strategy as it was promulgated at the time of the Budget in 1980. We therefore believe that the time has come for a major re-statement of the Strategy, so that Parliament and public may be fully informed of the economic objectives which the Goverment now have set."
    I remind the Chancellor that that Select Committee has a Tory Chairman and a Tory majority.
    Not only is there no alternative, but there is no strategy. I suppose that if one has driven into a tunnel or has tunnel vision there is no alternative. One can go on or turn back, or stand still like a scared rat. The Chancellor shows all the signs of being a man with tunnel vision in a maze. The Government say that there is no alternative, but the Select Committee says that there is not even a strategy.
    What are the alternatives? The Liberals have offered £9 billion over three years, which they say will amount to £3 billion extra borrowing. The wets are recommending reflation of between £3 billion and £5 billion, depending on the degree of moisture. The SDP has offered £5 billion reflation. None of these alternatives addresses import penetration, nor do they address the underlying problems of competitiveness and low productivity. Government strategy, for all its faults, at least attempted to address those important problems although I think that they are wrong-headed and damaging.
    What of Labour policies? Any serious alternative must address at least four things: unemployment, to which I give top priority, reflation, import penetrations and, taken together, competitiveness and low productivity. Of course there must be a substantial reflation of the economy. We are talking in terms of £8 billion to £9 billion. This must be pursued through public sector investment, the

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    electrification of the railways, investment in British Telecom, which will provide the basic network for the information technology industries of the future, British Gas and the North Sea gas-gathering pipeline, housing, where there are so many great needs, and the sewerage system. The last two will provide many jobs in the construction industry, where 400, 000 are unemployed.
    The reflation must be combined with economic planning. I do not apologise for using the phrase. The planning should include a positive industrial strategy pursued by a national enterprise board and a national investment bank and by proper planning agreements both at local and national level.
    Alongside that we need a proper and reinstalled regional development policy. I come from the North. I am avare that the regional development as been dismantled over the past two years. The number of industrial development certificate approvals issued over the past two years shows that clearly.
    Economic planning must continue by the management of trade. It is inconceivable that we should allow import penetration to continue at the level of the past few years. We can negotiate with our trading partners, even though there are trading difficulties with GATT. We can negotiate about an increasing level of trade and restrictions on import penetration. We shall be talking about a rising level of imports—although we want the level of imports to remain lower than exports.
    It is impossible to have a credible alternative economic strategy without a counter-inflation strategy. This is where I disagree with my right hon. Friend the Member for Bristol, South-East (Mr. Benn). In my opinion we must consider how to reflate the economy without allowing all the reflation to be dissipated either in inflation or through import penetration. I cannot conceive how we can have credible reflation without a prices and incomes policy. We should restore exchange controls, because £8½ billion going overseas to make our competitors much more efficient than ourselves is intolerable.
    There are 874, 000 long-term unemployed people, and that is the most tragic problem of all. Many are in the North and in my constituency, where job prospects are diminishing daily. What is happening to them? Their benefits have been reduced. They have been hounded by the DHSS fraud squad. They have no confidence in the Chancellor with the tunnel vision and none in the Kamikaze pilot of Chingford.
    8.43 pm
    Mr. Terence Higgins: There is an air of unreality about economic debates which take place shortly before the Budget. My right hon. and learned Friend the Chancellor of the Exchequer suggested that we should express our views. I am glad to have an opportunity to make one or two comments.
    Arithmetic may turn out to be less important than rhetoric, and the need to reappraise the economic concepts involved in the management of the economy may turn out to be more important than either.
    One fundamental point is absolutely essential to the Budget. It is a mistake to believe that we should give priority to unemployment and curing it rather than to inflation and curing it. Unemployment will be reduced permanently only if inflation is tackled first. That is the basis on which this debate and the forthcoming debate on the Budget should proceed.
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    The right hon. Member for Stepney and Poplar (Mr. Shore), opening for the Opposition, made one of the best speeches that I have heard him make for a long time, but it was fundamentally misconceived. He advocates massive reflation, and he came close to quantifying it this afternoon. He would make up the deficit between taxation and public expenditure by borrowing, but he does not have the slightest intention of covering the borrowing from the non-bank public. He would borrow the money from the clearing banks, so there would be a multiplier effect and an astronomical increase in the money supply, which would inevitably have a traumatic effect on the exchange rate.
    I disagree violently with many of the right hon. Gentleman's arguments on the exchange rate, but it is not arguable that the effect on the exchange rate of such a policy could be other than a massive depreciation in sterling with, in turn, a massive increase in import prices and, therefore, inflation. We should be straight back in the old inflationary spiral, with, in the long term, even worse effects on the unemployed. That is a simple but profoundly true argument.
    The right hon. Member for Crosby (Mrs. Williams), in a television programme last night in which I was glad to take part, put forward the SDP policy to reduce unemployment by 1 million in two years. It would have a gross cost in terms of extra borrowing of £5·6 billion and a net cost, allowing for unemployment pay and so on, of £2·3 million. That is an incredible statement. I have great respect for the right hon. Lady, and I am astonished that she believes that the British electorate and particularly the unemployed are sufficiently gullible to believe that that can be anything other than a pre-election bid. The arithmetic does not work.
    Mr. Horam: The right hon. Gentleman sets up an Aunt Sally. Suitable measures could perhaps take 1 million off the dole queue in two to two and a half years. But that goes much further than the £5 billion to £6 billion inflation that we are talking about. It is a quite separate matter.
    Mr. Higgins: I recorded the programme and shall be delighted to show it to the hon. Gentleman. It will be available upstairs. The right hon. Lady said exactly what I have described, not what the hon. Gentleman slates. It is a good thing to have the matter on the record. It gives us an idea of the policies that we can expect from the Liberal-SDP alliance.
    The nature of the present increased unemployment is fundamentally different from that which we have previously experienced since the war. Higher exchange rates, interest rates and so on have caused a massive reduction in overmanning. The Leader of the Opposition earlier this afternoon said that the Employment Bill that we are proposing to introduce next week is misnamed. If ever a piece of legislation was misnamed, it was the Labour Government's Employment Protection Act.
    For the reasons that I gave, employers will not readily take on again those whom they previously employed, so the opportunities significantly to reduce unemployment in the next two to three years are limited. I fear that this applies to the policies advocated for reflation by some of my hon. Friends.
    The reality now, in terms of the impact of reflationary measures of unemployment, may be that a reflation of £1 billion, £2 billion, £3 billion, or perhaps even more, is

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    similar to the old-fashioned fine tuning that we used to see. I do not think that the effects of changes of that kind will be significant in terms of unemployment. They could be so in terms of output, for the reasons I have mentioned. There is a great potential for an increase in productivity at the moment.
    My right hon. and learned Friend the Chancellor has a dilemma. It is that, while that arithmetic is in many ways degraded by the situation I have described, rhetoric is dangerous for him. We have tended to become caught on catch-phrases—"There is no alternative", "No U-turns" and so on. It is therefore extremely difficult, when my right hon. and learned Friend comes to his Budget, to make a speech which, even through the arithmetic will make some improvement for output although not much for unemployment, will be interpreted as a U-turn, with serious effects on the exchange rate and inflation. He has an extremely difficult task.
    My right hon. and learned Friend is right, as I have already told him, to stress the advantages of long-term policies. He is also right to stress that the adoption of a medium-term financial strategy does not mean that the economy will go down and bump on the bottom for ever and that it is our intention that economic growth will be resumed.
    I will not recapitulate the arguments I have put forward on previous occasions about the relationship between the rate of change in the money supply and inflation—the changeover from a decrease in real money supply to an increase. I have deployed those arguments before and my right hon. and learnd Friend is familiar with them. It means that we have some important policy points which need to be spelt out in the forthcoming Budget.
    The report of Select Committee on the Treasury and Civil Service on the autumn review drew attention to two facets of policy which need clarification. One is the question of the definition of the money supply and its quantification, and the other is the question of the relationship between the monetary aggregates, however defined, and the exchange rate and the rate of interest.
    It is essential that the policy on the second—the relationship between the monetary aggregates and exchange rate and the rate of interest—should be clarified. The Chancellor may find himself in four situations. Six months go we had a major reversal of policy when the interest rates were raised in two large steps as a result, in large measure, of a potential fall in the exchange rate. The Government were right to take that action, because, if the exchange rate had continued to fall, there would have been serious results in terms of unemployment, investment and the economic attitudes with which we are concerned.
    Although the Chancellor was right to do that, he still has a basic dilemma because both the monetary aggregates and the exchange rates are important. We could have a situation where the monetary aggregates are moving in a satisfactory way and the exchange rates are satsfactory. If that continues, we may be able to cut interest rates. However, we could have a situation where the monetary aggregates and the exchange rates are going in the wrong direction. In that case, one has pressure to raise the interest rates. We could have a situation where the monetary aggregates were all right, but the exchange rate was not.
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    For the reasons that I have mentioned, and the history of six months ago, in those circumstances one tends to raise the interest rates.
    The difficult problem would be when the monetary aggregates are unsatisfactory and the exchange rate is all right. In those circumstances, I seem to glean from what my right hon. and learnd Friend said this afternoon that that probably meant that the pressure on the interest rates should be upwards rather than downwards. If that is so, there is a danger that we might become uncompetitive, and it would probably be more desirable that interest rates should be downwards rather than upwards.
    I suspect that the old Biblical saying that one cannot serve two masters is the reality. We may have to choose between concentration on monetary aggregates or on the exchange rates. It will be important to clarify that in the Budget speech.
    The second point in the Select Committee's report was on the definition of monetary aggregates. As has been said, we found ourselves in a dilemma because M3 was not mentioned in my right hon. and learned Friend's November statement. It is important to look at the range of monetary aggregates. The Chancellor has a difficult decision to make between now and the Budget whether to stick to M3 with all its imperfections or to go for targetry on a broader basis.
    I believe that it is still tremendously important to stress the PSBR, because, if we are to lower interest rates, it is absolutely essential that the Government should borrow less. I thought that the right hon. Member for Stepney and Poplar was extraordinarily naive. He seemed to think that when one had a PSBR, it did not matter how much interest one paid. One must pay the rate of interest that is sufficient to finance that if one is to keep control of the money supply.
    Mr. Eggar: Will my right hon. Friend give way?
    Mr. Higgins: I am sorry. I cannot give way to my hon. Friend, with whom I have the pleasure to serve on the Select Committee, as I do not have much time to make my speech.
    It is essential to continue to stress the PSBR. Looking at the overall picture, we see that there is a choice to be made between tax cuts and getting public sector borrowing and interest rates down. My present preference is in favour of putting considerable emphasis on control of the PSBR and keeping interest rates down rather than making tax cuts. If there are to be tax cuts, they should be devoted to reducing industrial costs more than anything else.
    My right hon. and learned Friend referred to the crucial role of American interest rates. Those of us who have spent some time in the United States—I spent some weeks there this summer—cannot help but feel that there is an extraordinary sense of déjà vu. The Americans are going through the same experience that we have had over the past two years in almost every respect. Because there is more of a dichotomy between the Federal Reserve Bank and the Administration, it is difficult for the Americans to cut interest rates. That is having a severe effect on Europe. For that reason, my right hon. and learned Friend was right to say what he did this afternoon. I hope that we can make the strongest representations to the Americans about the effect that their actions, for understandable reasons, are having on the whole world economy, which are flowing back to the American economy. I back my right hon. and learned Friend on that.

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    I dealt with the PSBR and the effect on the money supply with regard to input. However, there is also the effect on the money supply of excessive lending. That was one of the other reasons why interest rates went up a little while ago. The way in which the Bank of England operates at present is strange. Two years ago, when we were told that the money supply was important, money was pumped in to keep down interest rates. Now we find that private company bills are being bought on a massive scale and that the Bank of England is lending direct to the private sector at the same time as we are complaining that everyone is borrowing too much. That is paradoxical. Perhaps we should have an explanation of what is happening.
    Industry has been supported by the clearing banks over the last two years. However, a great many industries have borrowed in order to finance their losses over that period and keep in business. That means that if expansion begins, they will face a difficult problem because they will be gearing between loans, on the one hand, and equity, on the other. It will be a tight situation. They will then find that they do not have the finance to expand because they have already pre-empted their borrowing resources to keep in business.
    That raises a serious problem. If adjustments are not made in macroeconomic policy, the implication is bound to be that, when the recovery starts, private industry will not have the money that it needs to finance its expansion.
    We have had a series of economic debates over the past two and a half years about monetary policy. The important thing is that the supply side of the economy has improved greatly with regard to the reduction of overmanning and the potential increase in productivity. However, it is now essential to look at the longer term and encourage investment. Otherwise, that temporary improvement in the supply side of the economy will not be sustained in the longer term.
    A considerable time ago I said that there was an important distinction between what I described as a true monetarist policy of a reduction in public expenditure public borrowing and interest rates, and what I called a phoney monetarist policy, meaning a failure to control public spending, public borrowing, and high interest rates. In both cases, it is possible to control the money supply, but there is a tremendous distinction between the two different concepts. As a result of the understandable political pressures which have built up over the past two years and the immense difficulties that my right hon. and learned Friend has faced in cutting public expenditure—I fully realise the difficulties—I fear that it will no longer be feasible to make a further substantial cut in the level of public expenditure sufficient to get to the first of those two positions. In that sense—the chance of achieving the Policy that we would have liked—we have reached the end of the road. If that is so, it is absolutely essential that my right hon. and learned Friend, in his Budget speech, should reappraise the foundations of our future policy.
    There has been a transformation of British industry over the past two years. In many ways, it can be highly beneficial and can form the policy and make clear the foundation for sustained future progress of the economy on a sound basis. But we need now to look forward, beyond that transitional phase, to the longer-term future. Therefore, I hope that my right hon. and learned Friend, in his Budget, will satisfy the various conditions that I have outlined and carry us forward to further progress.
    9.1 pm
    Mr. John Horam: On a point of order, Mr. Deputy Speaker. The leading Labour spokesman on economic affairs spoke for no fewer than 59 minutes when he opened the debate. No doubt his colleagues will take his full half hour to wind up the debate for the Opposition. The Government have had their say, and no doubt they will have a winding-up speech also. We have heard supporters of the Government. We have heard reasonably moist wets and extremely damp wets. We have heard supporters of the official Opposition, and critics of the official Labour Party line. We have heard from the various factions of the Labour Party. However, Mr. Deputy Speaker, you have not seen fit to call any spokesman from the Social Democratic Pary. That gives the public some idea of the difficulties that we are up against, especially when we are continually told that we have no policies. I want to register that fact.
    Mr. Deputy Speaker (Mr. Ernest Armstrong): I understand the frustrations of a number of hon. Members who have tried to catch my eye. However, the length of speeches is not a matter for the Chair.
    9.3 pm
    Mr. Robert Sheldon (Ashby-under-Lyne): I have pleasure in following the speech of the right hon. Member for Worthing (Mr. Higgins). I believe that I qualify for any old boys' reunion that the Treasury and Civil Service Sub-Committee might see fit to have at any time in the future. Its work has helped the House greatly. I hope that the technicalities in which it sometimes indulges, and has indulged, will inform the House, and not always frighten it.
    A Cabinet meeting was held this morning to discuss economic strategy. I must tell those members of the Cabinet who wish to influence the Chancellor of the Exchequer that I believe that their success will be rather limited. They will have received—they always do—a large amount of paper from the Chancellor of the Exchequer, and a variety of views will have been expressed. The political situation will have been mentioned, and aspects of the Budget touched upon. Some Members will have called for a few billion pounds reflation—some will have called for more, and some for less. Some will have said, "Stick to current policy", whatever that might be. Some Members will have called for a national insurance surcharge reduction, and some will have called for income tax threshold increases. The Prime Minister will have told the tale about a particular manufacturer who has increased productivity by 10 per cent., and another who has received an export order for several million pounds. The Chancellor of the Exchequer will have promised to take all these views into account, and the Cabinet will have been fooled again.
    The Cabinet will have been fooled not because we have an astute Chancellor of the Exchequer or a dominant Prime Minister but because of the very rules of secrecy that permit only two Ministers to decide upon the Budget—the Chancellor of the Exchequer and the Prime Minister. They do so under conditions that resemble a battle in which the enemy are their Cabinet colleagues. The real question that they should have asked this morning is why such secrecy is necessary.
    There was a time, before the days of inflation, when changes in Customs and Excise duties were made much

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    more rarely than they are today and, with a certain amount of foreknowledge, money could be made in the market. Today, price rises to take account of inflation are continual. Customs and Excise duties changes are frequently announced well in advance and are frequently leaked. As the Treasury is one of the few Departments in the Government that still holds its secrets on budgetary matters, any leak is intentional. Nor is the need for secrecy valid for value added tax changes. Even there, for administrative reasons, notice is required several weeks in advance. Income tax changes can also be notified well before the date on which they are to be implemented. So there is no need for such concealment. The secrecy in the discussion of those matters is preserved for one purpose only—to present a fait accompli to the Government and to Government Back Benchers.
    The only secret weapon that the Chancellor of the Exchequer enjoys is the secrecy itself. When, in the Budget, he inevitably gives a little here and a little there, not so much in one area and not so much in another, he can claim that he has taken account of all the representations made to him when, in practice, he has done nothing of the sort. He has preserved his prerogative, which is to spring fiscal surprises upon his pliant colleagues. When we consider such matters we must be aware that the Chancellor is in the same position as if there were no Cabinet meeting at all.
    In all the economic debates that we have—there have been quite a few during the past year—we share one important point of agreement on both sides of the House. That is the importance that we attach to the rate of growth, although we may accord different priorities to it. For example, the Prime Minister believes that growth can come only after inflation is cured. The right hon. Member for Worthing (Mr. Higgins) also said that. My difficulty is that I am never sure at what level of inflation the growth can be resumed. Is the rate to be 7 per cent., 5 per cent., 2 per cent. or 10 per cent., which was the rate when the Government came to office? Perhaps one day we may be informed of the economic policy that is being followed by the Government.
    If we consider the Memoranda on Monetary Policy and Public Expenditure published by the Treasury and Civil Service Committee on 19 February 1980, we see that, in a letter that he wrote to the Chairman of the Committee, the Chancellor of the Exchequer said:
    "The main objectives of the Government's economic strategy are to reduce inflation and to create conditions in which sustainable growth can be achieved."
    No one is estimating the reduction of inflation to much below 10 per cent. next year. Does that mean that economic growth will not be resumed because, under the definition that the Government may employ, inflation will not have been conquered?
    If the Government say that they have conquered inflation at the level of 10 per cent.—the rate they inherited—why was economic growth not continued when they came into office? Why have we gone through the agony of the past three years?
    Of course everybody is in favour of reducing inflation. Many countries have high inflation together with a high rate of growth, and many a low rate of inflation and rate of growth. The Government's simplicities in connecting
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    low inflation with high growth are not apparent in the many countries that we might consider when examining that closely.
    If the Chancellor is to retain some respectability for his argument, he must answer this question: if the connection between inflation and growth is valid, why, when inflation in the United Kingdom was much the same as in other countries, did we have much lower growth rates in the post-war years than obtained in other countries, particularly in Western Europe? The truth is that the Government have a policy of sorts—by deflation—to reduce inflation but no policy for growth.
    The Government had a simple solution in 1979; monetarism would reduce inflation and once that was under control, the long-term growth could follow. That was spelt out in speeches by the Prime Minister and the Chancellor.
    Therefore, the entire running of the economy was structured around the symbol of sterling M3. In those happy days of innocence, the Government introduced the medium-term financial strategy. So certainly did they believe in the iron laws of monetarism that they held that they produced a year-by-year timetable to record with great precision the achievements of their economic strategy.
    Sterling M3 was going to decline to 9 per cent. in the first year, 8 per cent. in the second year, 7 per cent. the third year and 6 per cent. the fourth year. It was similar to a railway timetable for a ghost train that never ran. Many people who believed it in the past now fail to believe in it. However, a few brave souls still believe in that theory. Four of them are in the City of London university and there are others who believe, as a result of sterling M3 rising, that instead of inflation falling it will go through the roof because of the increases in money supply in the past few years.
    Instead of the 9 per cent. level coming in the first year, it was 16 per cent. Instead of the 8 per cent. level in the second year it was 17 per cent. and instead of the 7 per cent. rate this year, although we do not know, it could well be 15 or 16 per cent. We await the figure with interest.
    Considering those who still believe in the great and splendid sterling M3 theory, including the good Professor Hayek—the Prime Minister's mentor—who writes from an address in Zurich, it becomes similar to a parody from "Private Eye". He urged the Government on to ever greater inanities, more and more deflation, faster and faster, and to get rid of the pseudo-Socialists in the Conservative Government. We know that his arguments are beginning to fall on deafer and deafer ears because the Government are ceasing to believe in them. Hardly had the Financial Secretary to the Treasury, now the Secretary of State for Energy, time to escape from the Treasury than the PSBR elbowed out sterling M3 on the prayer mat of Conservative ideology.
    When the right hon. Member for Chesham and Amersham (Sir I. Gilmour) talked about the medium-term financial strategy, he was right when he said in his noble and distinguished speech that if that strategy had envisaged 3 million unemployed it should not have been accepted, and if it did not, it should now be dropped.
    Sterling M3 has indeed been dropped and phase 2 of the Government's economic policy, which effectively concentrates upon the public sector borrowing requirement, has begun. That policy says that if the Government borrow more, industry must borrow less—the crowding

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    out theory which, oddly enough, was repudiated by the present Financial Secretary in a useful debate on interest rates.
    The hon. Member for Birmingham, Northfield (Mr. Cadbury) and a number of others, including my hon. Friend the Member for Bishop Auckland (Mr. Foster), the hon. Member for Rugby (Mr. Pawsey) and my hon. Friend the Member for Huddersfield, East (Mr. Sheerman), called for an industrial budget. We look forward to seeing what notice the Government will take of such representations from all parts of the House.
    The Government's current policy is becoming unintelligible. The House owes a great debt to the Select Committee on the Treasury and Civil Service, to which, as its report shows, the Government's policy is also unintelligible. The report states:
    "In view of the emphasis which the Government originally accorded to the Strategy.… it is a surprise to the Committee to find a lesser emphasis being currently given to these items. … This makes it difficult for the Committee to measure and assess the position. … and must throw doubt on the underlying Strategy".
    The report therefore called for
    "a major re-statement of the Strategy, so that Parliament and public may be fully informed of the economic objectives which the Government now have set."
    Everybody is now asking for that, because nobody really knows what the Government's objectives are. Sterling M3 is being treated like a member of the Politburo who disappears, whose entry is excised from subsequent editions of the Soviet encylopaedia and who thus becomes a non-person. Such is the case of dear old Sterling M3. The Chancellor did not once refer to it today, nor did he refer to it in his statement in December. One has only to read the evidence of the able and loyal civil servants who appeared before the Select Committee, as well as that of the Chancellor of the Exchequer, who also appeared, to see the extent of the economic muddle that the Government are now in. The underlying strategy is now subject to doubt, as expressed by the Select Committee. The reality is that there is no strategy in the sense in which it existed three years, two years or even one year ago. The Government's policy is now pure, unalloyed deflation.
    When one considers the effects of deflation, one sees its attractions for the Government. The whole point about deflation is that it reduces purchasing power. Normally, it reduces the level of imports and increases exports because the markets involved are normally available to manufactureres only as a result of the decline in home trade demand. Following that, pay demands are reduced, overtime falls and unemployment increases. Those are the so-called benefits of deflation.
    Deflation has occurred in the past, and we understood, although we did not accept, the reasons for its introduction. There were balance of payments crises and difficulties in meeting the bills of overseas creditors. That is not the position today. Because the pound is strong as a result of our oil, and we are saving £10 billion per year by not having to import oil, the balance of payments problem, which was the constraint in the past, has now gone and people thought that deflation and its consequences would also have gone.
    The Government have concerned themselves greatly with the attack on waste in the public service, but in the areas upon which they have concentrated—saving a few civil servants here and another few people there—they have ignored the far greater waste which results from their
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    own activities. For example, they have wasted the £6 billion annual revenue from North Sea oil because they have not used it to provide any assistance to British industry and the jobs that it could create. They have wasted much of the £8 billion a year that is largely going to portfolio investment overseas and which has trebled over the past few years. That will help forward investment, factories, and those countries that are competing against us. Instead of going into British investment it has gone into overseas investment by private institutions of one type or another.
    The Government have wasted £13 billion to £14 billion a year—or part of that sum—because of the high level of interest rates with which they have to fund their new accretions to the national debt. That debt interest is expected to grow. In response to a question, the Treasury and Civil Service witnesses said that it was expected to grow year by year. That is something which the people of Britain have to suffer not only today, but for years to come, as stock that will reach redemption in the next century comes to fruition. The people at that time will be paying for the Government's errors and waste. They are wasting much of the money on interest payments on the very gilt-edged stocks that are being bought by overseas buyers.
    Sir William Clark rose—
    Mr. Tim Eggar rose—
    Mr. Sheldon: I have not dealt with all the waste that Conservative Members ought to be concerned about. The Government came to office determined to cut waste in central Government. They have been guilty of the greatest increase of waste that this country has seen. They have wasted the talents and resources of many of our manufacturing companies due to the increasing number of bankruptcies and liquidations. Most important of all, this Government, dedicated as they are to an attack on extravagance, are guilty of the greatest waste of all, the £12½ billion price of unemployment, and the lives of 3 million of our citizens, whose existence is impaired by what is being done to them. We shall reverse that crime. We shall carry out the adequate and sensible reflation set out by my right hon. Friend the Member for Stepney and Poplar (Mr. Shore).
    Sir William Clark: In his opening speech, the right hon. Member for Stepney and Poplar (Mr. Shore) advocated an increase in the public sector borrowing requirement of something over £6½ billion. The Government are borrowing £10½ billion at a high rate of interest. If that borrowing requirement increased by another £6 billion or £6½ billion, would the interest rate go up or down?
    Mr. Sheldon: The hon. Gentleman fails to understand that people lending money naturally want to know what it is for. If it is for consumption, that is one thing; if it is for sensible investment which will provide a return, that is another. If clients are not advised on that basis the adviser is doing them a disservice. It all depends on the type of investments that are pursued. The hon. Gentleman is obsessed with the actual amounts. It was only just over a year ago that the Chancellor of the Exchequer informed the House that he had made a mistake about the PSBR, and had to borrow £5 billion more than previously announced. I do not recall any great clamour or any great difficulty in

    1083
    funding that. He had no good reasons. He wanted the money to increase unemployment pay. There is a world of difference between borrowing of that kind and borrowing for the expansion of industry in order to get a sensible return on the money.
    Sir William Clark rose—
    Mr. Sheldon: The hon. Gentleman had his chance and he fluffed it. The right hon. Gentleman's opening speech was a wholly inadequate Front Bench speech, which showed that the only quality that he brings to this Despatch Box is his belligerency. We must deal with the point that he made on oil. He said that the fact that we were producing our own oil is the cause of our economic decline. That is impossible to accept. The increase in oil prices led to a reduction in the amount of money flowing in western countries. As a result, the world trade increase faltered for a few years. However, our oil is a clear benefit to us. We are unique among the industrial nations of the world. During the lifetime of this Administration we have had the full measure of that benefit. Before 1979 the revenue amounted to only several hundred million pounds a year, but the Government suddenly had a windfall of £6, 000 million. We are the producers of such wealth.
    I do not know any farmer who complains about the high price of potatoes. As oil producers, we should not deplore the high oil price, but benefit from it. It is not a disadvantage to us. However, it was a disadvantage in the lifetime of the Labour Government and until a few years ago. North Sea oil has been kind to the Government and has given them substantial sums, but they have failed to make use of it in expanding industry and providing the employment opportunities that were open to them. The Labour Government faced acute problems as a result of the fivefold increase in oil prices, but the Tories have received a windfall in the doubling of oil prices.
    Mr. Eggar rose—
    Mr. Sheldon: At the beginning of this Parliament the Secretary of State for Trade said that the country would face three years of unparalleled austerity under the Tory Government. He is a man of attractive candour, but even he underestimated what we are having to endure. In three years unemployment has increased from 1·3 million to over 3 million and the situation is worsening all the time. I know that the Chancellor of the Exchequer has an odd view of the recession. He says that it has come to an end, although he expects unemployment to increase and industrial production is still 15 per cent. lower than in 1979. It might be more sensible if the right hon. and learned Gentleman was to bring his language into line with that of his colleagues.
    Clearly there is a recession. Those of us who live in the regions know, weekend by weekend, what is going on. In my area, one firm in four has closed in the past two years. It is not necessarily the least efficient firms that close. It is those that have invested that are in the greatest difficulty. They borrowed from the banks to expand and had sensible and long-term prospects, but they find that the Conservative Government have inflicted great damage on them. In the sad, growing and miserable list of business failures, we see further evidence of that. The number of
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    insolvencies has increased from 4, 537 only two years ago, to 8, 600. The number has doubled in two years. The number of bankruptcies has also doubled.
    The Financial Times of Monday 11 January shows that there has been a 130 per cent. jump in business failures among engineering and metal firms. In the textile and clothing industry, there has been a 129 per cent. jump in business failures, and in retail and wholesale distribution there has been a 124 per cent. increase in business failures. In addition, there was a 110 per cent. increase in failures in the furniture and upholstery trade.
    Those small firms were supposed to receive great attention and consideration from the Government. What has happened to them? they have gone out of business. Many of them have no cause to thank the right hon. and learned Gentleman or the Government.
    People are now beginning to question this Conservative Government as they come up to their fourth year in office. The question being asked is, "What do the Tories stand for now?" People are now in a position to judge, and they are now preparing to judge not on expectations, hopes or dreams, but on what the Government have achieved. They have achieved a level of inflation that has risen from the level that they inherited, tax increases that have risen for everyone except the very rich, disturbances in our cities and cuts in our universities, on which one day our economy will depend. They are seeing a reduction in the number of houses built, the decay and deterioration of services and a record number of bankruptcies nd liquidations. That is what this Conservative Administration have stood for, and what people will come to understand and never forget.
    9.31 pm
    The Chief Secretary to the Treasury (Mr. Leon Brittan): This debate takes place in the aftermath of the announcement of this week's unemployment figures. The detailed reality in a particular region that lies behind those sad figures was reflected in the information given by the hon. Member for Newcastle upon Tyne, West (Mr. Brown). As a Member of Parliament representing a constituency in the same part of the world, I could give comparable information from a slightly different part of the region.
    I assure the House that the hon. Gentleman and I are at one in regarding that information in the same sense and spirit. Plainly, there is a wide divergence between us as to the cause of what the hon. Gentleman so graphically described and what the cure for it should be. The Opposition's analysis of that, reflected in the motion, is that the Government's policies are the prime cause of the fall in output and unemployment, and that only through a major expansion in demand can the nation be put to work. We share the objective, but in our view the analysis is false, and therefore the prescription misguided.
    I do not believe that the historical facts that are needed to support such a proposition have been adduced correctly. The history of Britain's economy for the best part of a generation has been one of a steady increase in inflation and unemployment. There has not been a shortage of demand and a shortage of money in the economy. The inflation rate has continued rising with each new trade cycle, and unemployment has risen with it. The real cause of today's unemployment was rightly identified in yesterday's debate as the steady loss in competitiveness in the British economy. My hon. Friend the Member for

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    Rugby (Mr. Pawsey) put that clearly in his speech. Of course, if unit labour costs rise in this country over a very long period, compared with those of our overseas competitors, we are bound to price ourselves out of the world markets and attract imports to meet the needs of our people.
    That is not a surprising analysis. It is factually based on what has happened in the economy. The right lion. Member, for Stepney and Poplar (Mr. Shore) said that when one looks at the second cause of the present high levels of unemployment—the world recession—one finds that Britain's level of unemployment is higher than that of some of our competitors, but one has to go back to the first cause of that unemployment. If we add together the world recession and our unique legacy of a steady loss of competitiveness, the figure will be so high.
    As my right hon. Friend the Member for Worthing (Mr. Higgins) said, it is nothing but a fallacy to believe that an expansionary policy can enable a Government, by providing money, to create jobs and produce a sustainable recovery. The risk of money of that kind simply going into prices and imports, and not into outputs is the history of the past few years.
    Mr. Shore rose—
    Mr. Brittan: If the right hon. Gentleman will allow me to come to the substance of his argument he may well find cause to intervene.
    The right hon. Gentleman says that in present circumstances we can safely reflate to the tune of about £6 billion. That is an extraordinary proposition. He says that it does not matter what happens to the public sector borrowing requirement. When pressed, he candidly confessed that the answer to the question of how the expansion would be financed was that he would borrow the money.
    The right hon. Gentleman also says that that would have no effect on interest rates, that we can safely borrow huge sums without worrying about interest rates. The reason that he gives is that whereas in the past the PSBR may have provided legitimate and proper cause for anxiety, and therefore a constraint, in today's circumstances it does not matter, because the resources of the economy are not under pressure, and therefore an increase in borrowing will not lead to an increase in interest rates.
    I do not think that that is a correct analysis. The situation that we face is shown by, for example, the large increase in bank lending that has taken place in the past few months. That increase shows that there is a demand for money in the economy and that it is not true that the Government can safely increase the level of their borrowing without having any impact on interest rates.
    A number of hon. Members referred to the history of last year. The PSBR was indeed higher then than we would have wished. My right hon. and learned Friend the Chancellor of the Exchequer took action in his Budget last year to reduce it. As a result of that action, which was bound to be unpopular at the time, he was able to reduce interest rates, and it was possible for British interest rates to stay below international levels for many months. It is impossible not to conclude that the reason was precisely the reduction in the amount that the Government were borrowing in the PSBR. Therefore, there is a relationship between the PSBR and interest rates.
    Mr. Shore: There may be a relationship, but what is in dispute is whether the Government, by increasing their borrowing requirement, exercise a major and decisive effect upon the level of interest rates. Hon. Members—those who turn their minds to the matter—will know from the experience of recent years that there is no such direct correlation. In 1980-81 the Chancellor, without wishing, borrowed 50 per cent. more than he had budgeted for and reduced interest rates from 17 to 12 per cent. at the same time. So why does the Chief Secretary talk such nonsense?
    Mr. Brittan: I cannot help thinking that on being pressed on this matter the right hon. Gentleman was being a tiny bit equivocal—and that is putting it charitably. First, the right hon. Gentleman would lead us to believe that there is virtually no relationship between the PSBR and interest rates. Then he says that there is no direct relationship, or that there is a certain relationship but he cannot quantify its extent. The proposition does not appear to have been refined sufficiently to make it usable. It conflicts with the facts.
    The right hon. Gentleman referred in his intervention to the reduction in interest rates to 12 per cent. by my right hon. and learned Friend. That reduction was made—the last part of it—in the course of, and as part of, a Budget specifically designed to reduce the PSBR compared with what it would otherwise have been. But it was the Budgetary measures that made it possible for interest rates to come down into line with the market, rather than against the way the market was going.
    The right hon. Gentleman goes further. Not only does he say that the PSBR can safely be expanded without any threat to interest rates, but that the exchange rate can safely be reduced. Indeed, part of his policy is to reduce the exchange rate. Apart from the effect of direct borrowing, which history shows is contrary to what the right hon. Gentleman said, there is absolutely no question but that a reduction on the exchange rate, which I assume the right hon. Gentleman commends and specifies as part of Labour Party policy, would lead to an increase in inflation. The right hon. Gentleman does not qualify it or say what the inflation will be. Nor does he say by how much the exchange rate should fall. But if that were to happen, and if inflation were to rise as a result of the fall in the value of the pound, it is clear that that, in turn, would lead to higher interest rates.
    The right hon. Gentleman is putting forward en extraordinary proposition. He is commending a package which would have a comparatively small impact in unemployment in the short term, but which would almost certainly have a substantial effect on interest rates and probably a substantial effect on inflation too.
    The right hon. Gentleman does not leave it there. His package goes a great deal further, he has much more to offer. He offers the restoration of exchange control. He should reflect on what would have happened to the value of the pound if exchange control had not been abolished.
    Apart from the attractions of the restoration of exchange control, the right hon. Gentleman went on—in a passage in his speech that I regarded as extremely sinister—to say that his package of measures involving controlling the overseas investment by British firms. In other words, if, for commercial reasons, British firms wanted to invest overseas, they would not be allowed to do so.

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    Does the right hon. Gentleman believe that an economy that is run on that basis will attract foreigners to invest in Britain? Does he believe that that is a recipe for the continuation of inward investment? It is clear from everything that the right hon. Gentleman said that his recipe for increased expansion and spending, leading to higher interest rates and, thereby, to inflation, is the classic recipe of Left-wing parties, which can only be associated with all the apparatus and trappings of a seige economy and all that flows from the restriction of economic freedom. It involves, if one is talking about interest rates, a continuous increase in the debt that we, as a nation, would be incurring. The right hon. Member for Ashton-under-Lyne (Mr. Sheldon) also referred to that, but he did not draw the conclusions that I would draw.
    Throughout the 1970s the debt interest that the Government had to pay rose steadily. In cash terms it has risen from £2 billion to perhaps £15 billion this year. It has risen at a faster rate than inflation. It has risen at a faster rate than the rise in the national income. It has risen at a faster rate than public expenditure as a whole. That has been a matter of concern to Chancellors of the Exchequer of both parties. Now it casts a long shadow forward well into the next century. We must try to slow up this inheritance that we are passing to the next generation.
    Gross debt interest this year is likely to cost as much as the whole of the National Health Service. It is a fantastic figure—£250 a year for every man, woman and child in the country. To suggest policies that would lead to higher interest rates and add still more to that cumulative burden seems not only irresponsible today, but profligate tomorrow.
    The right hon. Member for Stepney and Poplar has to be careful in what he says about the economy, because he is so plainly outflanked by the right hon. Member for Bristol, South-East (Mr. Benn). The right hon. Member for Bristol, South-East has been candid in stating his wish—there is no reason why he should not put forward his view—to reconstruct our whole society on a completely different basis. I do not wish to follow him down that path either intellectually or, still less, literally. The right hon. Member for Stepney and Poplar, in the fervour with which he commends his present policies, should look backwards as well as forwards. It was not ever thus in the Labour Party. The position is strange.
    When my right hon. and learned Friend the Chancellor of the Exchequer presented his last Budget, it was denounced at the time as being contractional, likely to add to the recession and likely to delay recovery. I remember vividly—I was comparatively new to the Treasury—being told that if the proposals were implemented they would lead to a further fall in output and a further move downwards of the economy.
    The right hon. Member for Stepney and Poplar has been proved wrong. The stream of indicators that have been proclaimed and announced from the Dispatch Box and elsewhere, and also by independent commentators over recent weeks, make clear and beyond doubt that, in terms of output and in terms of the movement of the economy, we are moving forward.
    The right hon. Gentleman and his hon. Friends complain of the pace at which we are moving. When unemployment is the last indicator to move in the right direction in the upward cycle of the economy, it is
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    understandable that there should be those who wish to accelerate the pace. When one sees the figures showing increases in gross domestic product, in manufacturing production, in industrial production, in construction output and in engineering orders, one may quarrel about the pace and make legitimate points about the low level from which the upturn comes, but that we are moving in the right direction is incontrovertible. That has been the consequence of the Budget that my right hon. Friend introduced last year.
    Mr. Shore: The right hon. and learned Gentleman must realise that the complacency with which he has repeated these alleged achievements has resulted only in trivialising this debate. We are talking about 3 million people unemployed in Britain. What he has said to the House tonight is at the margin of the problem. We are talking about whether the economy has grown by ½per cent. When will he face the problem?
    Mr. Brittan: The right hon. Gentleman is utterly and totally misguided in what he has had to say, because if he is engaged is a serious discussion about which of the alternative policies is likely to lead to an improvement in the economy, and if he and his hon. Friends deliver themselves of statements to the effect that the Budget introduced by my right hon. and learned Friend will depress the economy, he must listen, however disagreeable it may be to him, to the plain facts and figures that show, not an extravagant boom—[Interruption]. The right hon. Gentleman purports to be a serious student of these matters. It is up to him whether he wishes to address his mind to the issues, but it plainly shows a movement upwards.
    I can quote to the right hon. Gentleman another example that might, and should, be more congenial to him, but, as I shall show in a second, it probably is not. When he held high office, he was a member of a Government who in 1975–76 and 1977–78 cut expenditure by 8·5 per cent. in real terms. That is what they did. The bulk of that cut was in capital expenditure. That is what the right hon. Gentleman's Government did. What is more, the strange thing was that at the time a large number of commentators sympathetic to the Left-wing cause said that that was a terrible thing to do, that it would depress the economy and that it was no way out of the problems that the right hon. Gentleman and right hon. and his learned Friends were facing.
    The strange thing is that unemployment fell. When the right hon. Gentleman was forced by the International Monetary Fund to take the action that he did, it worked. It worked because it was—
    Mr. R. C. Brown rose—
    Mr. Brittan: I am sorry, I shall not give way. [Interruption.] I am sorry, but I cannot give way.
    Mr. Brown rose—
    Mr. Speaker: Order. It is clear that the Minister is not giving way.
    Mr. Brittan: I saw what happened when the Labour Party was forced to accept the IMF's prescription. I notice the right hon. Gentleman the Leader of the Opposition shaking his head. I must be fair—he was moving his head. I was not quite sure whether he was shaking it or just moving it.

    1089
    I noticed with great interest an article in the last issue of the New Statesman. It is extremely revealing about what we have heard from the right hon. Member for Stepney and Poplar, because what he said was this:
    "Checking through back issues of the New Statesman recently I found that I had let a whole year slip by without reminding myself and my readers of the most disgraceful thing said in recent years by a Leader of the Labour Party. It was James Callaghan's sentence of death passed on Keynesian economics."
    We now come to the quotation which to Labour Members is too painful to bear repetition. They do not like it, but it is very good and it is true. After quoting the right hon. Member for Cardiff, South-East (Mr. Callaghan) saying that the option of spending one's way out of recession could no longer exist, the author of the article went on to say:
    "It is worth recalling that statement, not just as a salutary reminder that it was a Labour Government that first injected monetarist policies into economic policy making, but because I have recently come across another of the more effective rejoinders to Mr. Callaghan's ideas."
    There follows a quotation from the Leader of the Opposition, in which he said:
    "The methods are, for a start, the same as we have seen succeed in all major industrial countries throughout the post-war period. Keynesian reflation has proved its effectiveness too often to be dismissed by the Government's ignorant and silly jibes."
    The author points out that there has been a complete transformation and that there is a contrast between what the Leader of the Opposition is saying today and what his party did in office at the one time when it was compelled to take action which actually worked. That is the reality.
    If the Leader of the Opposition and his colleagues want to ask today what it is that we can do to ensure that the gentle, limited, moderate but nonetheless real revival of the economy, which is gradually starting, proceeds on a realistic and sound basis, I do not find it difficult to answer that question. The answer is that by continuing the downward pressure on inflation and reducing costs we will succeed in bringing about the improvement in the economy that we are seeking.
    The encouraging realism in pay, to which reference has already been made, can continue. If it continues, the recovery may well be faster than had previously been predicted. At last people are learning an important lesson which has, sadly, been an extremely painful one for the British economy. It is that it is not only possible to price oneself out of a job, but, that it is possible to price oneself into a job.
    The steady stream of settlements by people who have learnt that lesson is likely to do more for the economy than all the heady rhetoric of the right hon. Gentleman and his colleagues. Again and again the British people are showing themselves to have more sense than those who purport to lead them. [HON. MEMBERS: "Oh!"]
    Mr. Speaker: Order. There are just two minutes left for the Minister.
    Mr. Brittan: The right hon. Gentleman may jibe, but the British people have more sense than to listen to those who purport to lead them—the Leader of the Opposition and his colleagues. People have the sense to follow what is commended by those who lead them at present. The way forward by means of continued gains in productivity will not be assisted by the kind of inflationary package put forward by the Opposition. It will be assisted by measures such as those introduced by my right hon. Friend the Secretary of State for Employment, which will continue
    1090
    to improve the competitiveness of the economy by reducing the rigidities and damage caused by an antiquated industrial relations system, stifled by the depredations of the closed shop and damaged by a series of restrictive practices which are gradually going out of our system only because of the resolute action downward on inflation.
    The easy way out offered by the right hon. Member for Stepney and Poplar is no way out at all. The continued measures that the Government are taking in the direction of sanity are the ones that will lead the British people forward to a well-based, soundly founded economic recovery.
    Question put, That the original words stand part of the Question:
    The House divided: Ayes 205, Noes 298.

    Division No. 53]

    [10pm

    AYES

    Abse, Leo

    Faulds, Andrew

    Adams, Allen

    Field, Frank

    Allaun, Frank

    Fitch, Alan

    Anderson, Donald

    Fitt, Gerard

    Archer, Rt Hon Peter

    Flannery, Martin

    Ashton, Joe

    Foot, Rt Hon Michael

    Atkinson, N.(H'gey)

    Ford, Ben

    Bagier, GordonA.T.

    Forrester, John

    Barnett, Guy(Greenwich)

    Foster, Derek

    Barnett, Rt Hon Joel (H'wd)

    Foulkes, George

    Benn, Rt Hon Tony

    Fraser, J. (Lamb'th, N'w'd)

    Bennett, Andrew(St'kp'tN)

    Garrett, John (Norwich S)

    Bidwell, Sydney

    George, Bruce

    Booth, Rt Hon Albert

    Golding, John

    Boothroyd, MissBetty

    Graham, Ted

    Bray, Dr Jeremy

    Grant, George(Morpeth)

    Brown, Hugh D. (Provan)

    Hamilton, James(Bothwell)

    Brown, R. C. (N'castle W)

    Hamilton, W. W. (C'tral Fife)

    Callaghan, Jim (Midd't'n&P)

    Harrison, Rt Hon Walter

    Campbell, lan

    Hart, Rt Hon Dame Judith

    Campbell-Savours, Dale

    Hattersley, Rt Hon Roy

    Canavan, Dennis

    Haynes, Frank

    Cant, R. B.

    Heffer, Eric S.

    Carmichael, Neil

    Hogg, N. (EDunb't'nshire)

    Carter-Jones, Lewis

    Holland, S.(L'b'th, Vauxh'll)

    Clark, Dr David (S Shields)

    HomeRobertson, John

    Cocks, Rt Hon M. (B'stol S)

    Homewood, William

    Cohen, Stanley

    Hooley, Frank

    Coleman, Donald

    Howell, Rt Hon D.

    Conlan, Bernard

    Hoyle, Douglas

    Cook, Robin F.

    Huckfield, Les

    Cowans, Harry

    Hughes, Mark(Durham)

    Craigen, J. M. (G'gow, M'hill)

    Hughes, Robert (Aberdeen N)

    Crowther, Stan

    Hughes, Roy (Newport)

    Cryer, Bob

    Janner, HonGreville

    Cunliffe, Lawrence

    Jay, Rt Hon Douglas

    Cunningham, G. (IslingtonS)

    John, Brynmor

    Cunningham, DrJ. (W'h'n)

    Johnson, James (Hull West)

    Dalyell, Tam

    Johnson, Walter (Derby S)

    Davidson, Arthur

    Jones, Rt Hon Alec (Rh'dda)

    Davies, Ifor (Gower)

    Jones, Barry (East Flint)

    Davis, Clinton (Hackney C)

    Kaufman, Rt Hon Gerald

    Davis, Terry (B'ham, Stechf'd)

    Kerr, Russell

    Dean, Joseph (Leeds West)

    Kilroy-Silk, Robert

    Dewar, Donald

    Kinnock, Neil

    Dixon, Donald

    Lambie, David

    Dobson, Frank

    Lamborn, Harry

    Dormand, Jack

    Lamond, James

    Douglas, Dick

    Leadbitter, Ted

    Dubs, Alfred

    Leighton, Ronald

    Dunnett, Jack

    Lewis, Arthur (N'ham NW)

    Dunwoody, Hon Mrs G.

    Lewis, Ron (Carlisle)

    Eadie, Alex

    Litherland, Robert

    Ellis, R. (NE D'bysh 're)

    McCartney, Hugh

    English, Michael

    McCusker, H.

    Ennals, Rt Hon David

    McDonald, DrOonagh

    Evans, loan (Aberdare)

    McKay, Allen (Penistone)

    Evans, John (Newton)

    McKelvey, William

    Ewing, Harry

    MacKenzie, Rt Hon Gregor

    1091

    McNamara, Kevin

    Short, Mrs Renée

    McTaggart, Robert

    Silkin, Rt Hon J. (Deptford)

    McWilliam, John

    Silkin, Rt Hon S. C. (Dulwich)

    Marks, Kenneth

    Silverman, Julius

    Marshall, D(G'gowS'ton)

    Skinner, Dennis

    Marshall, DrEdmund (Goole)

    Smith, Rt Hon J. (N Lanark)

    Marshall, Jim (Leicester S)

    Snape, Peter

    Martin, M(G'gowS'burn)

    Soley, Clive

    Mason, Rt Hon Roy

    Spearing, Nigel

    Maynard, Miss Joan

    Spriggs, Leslie

    Meacher, Michael

    Stallard, A.W.

    Mellish, Rt Hon Robert

    Stewart, Rt Hon D. (W Isles)

    Mikardo, Ian

    Stoddart, David

    Millan, Rt Hon Bruce

    Stott, Roger

    Mitchell, Austin(Grimsby)

    Strang, Gavin

    Morris, Rt Hon A. (W'shawe)

    Summerskill, HonDrShirley

    Moyle, Rt Hon Roland

    Taylor, Mrs Ann (Bolton W)

    Newens, Stanley

    Thomas, Dafydd(Merioneth)

    Oakes, Rt Hon Gordon

    Thomas, DrR.(Carmarthen)

    Orme, Rt Hon Stanley

    Thorne, Stan (PrestonSouth)

    Palmer, Arthur

    Tilley, John

    Park, George

    Torney, Tom

    Parker, John

    Varley, Rt Hon Eric G.

    Parry, Robert

    Wainwright, E. (DearneV)

    Pendry, Tom

    Walker, Rt Hon H.(D'caster)

    Powell, Raymond (Ogmore)

    Watkins, David

    Prescott, John

    Weetch, Ken

    Price, C. (Lewisham W)

    Welsh, Michael

    Race, Reg

    White, Frank R.

    Radice, Giles

    White, J.(G'gowPollok)

    Rees, Rt Hon M (Leeds S)

    Whitehead, Phillip

    Richardson, Jo

    Whitlock, William

    Roberts, Albert(Normanton)

    Wigley, Dafydd

    Roberts, Allan(Bootle)

    Willey, RtHonFrederick

    Roberts, Ernest (Hackney N)

    Williams, Rt Hon A.(S'seaW)

    Roberts, Gwilym(Cannock)

    Wilson, Gordon (DundeeE)

    Robertson, George

    Wilson, RtHonSirH.(H'ton)

    Robinson, G. (Coventry NW)

    Winnick, David

    Rooker, J. W.

    Woolmer, Kenneth

    Ross, Ernest (Dundee West)

    Wright, Sheila

    Rowlands, Ted

    Young, David (BoltonE)

    Ryman, John

    Sever, John

    Tellers for the Ayes:

    Sheerman, Barry

    Mr. James Tinn and

    Sheldon, Rt Hon R.

    Mr. George Morton.

    Shore, Rt Hon Peter

    NOES

    Adley, Robert

    Brittan, Rt. Hon. Leon

    Aitken, Jonathan

    Brooke, Hon Peter

    Alexander, Richard

    Brotherton, Michael

    Alison, RtHon Michael

    Brown, Michael(Brigg&Sc'n)

    Alton, David

    Browne, John(Winchester)

    Amery, RtHon Julian

    Bruce-Gardyne, John

    Ancram, Michael

    Bryan, Sir Paul

    Arnold, Tom

    Buchanan-Smith, Rt. Hon. A.

    Aspinwall, Jack

    Buck, Antony

    Atkins, RtHonH.(S'thorne)

    Budgen, Nick

    Atkins, Robert(PrestonN)

    Bulmer, Esmond

    Baker, Kenneth(St.M'bone)

    Burden, SirFrederick

    Baker, Nicholas (N Dorset)

    Butcher, John

    Beaumont-Dark, Anthony

    Cadbury, Jocelyn

    Bell, SirRonald

    Carlisle, John (Luton West)

    Bendall, Vivian

    Carlisle, Kenneth(Lincoln)

    Benyon, Thomas(A'don)

    Carlisle, Rt Hon M. (R'c'n)

    Benyon, W.(Buckingham)

    Chalker, Mrs. Lynda

    Best, Keith

    Channon, Rt. Hon. Paul

    Bevan, David Gilroy

    Chapman, Sydney

    Biffen, RtHon John

    Clark, Hon A. (Plym'th, S'n)

    Biggs-Davison, SirJohn

    Clark, SirW. (CroydonS)

    Blackburn, John

    Clarke, Kenneth(Rushcliffe)

    Blaker, Peter

    Clegg, Sir Walter

    Body, Richard

    Cockeram, Eric

    Bonsor, SirNicholas

    Cope, John

    Bottomley, Peter(W'wich W)

    Cormack, Patrick

    Bowden, Andrew

    Corrie, John

    Boyson, Dr Rhodes

    Costain, Sir Albert

    Braine, SirBernard

    Cranborne, Viscount

    Bright, Graham

    Critchley, Julian

    Brinton, Tim

    Crouch, David

    1092

    Dean, Paul (North Somerset)

    Lawrence, Ivan

    Dickens, Geoffrey

    Lawson, Rt Hon Nigel

    Dorrell, Stephen

    Lee, John

    Douglas-Hamilton, LordJ.

    LeMarchant, Spencer

    Dover, Denshore

    Lennox-Boyd, HonMark

    du Cann, Rt Hon Edward

    Lester, Jim (Beeston)

    Dunn, Robert(Dartford)

    Lewis, Kenneth(Rutland)

    Eden, Rt Hon Sir John

    Lloyd, Ian (Havant & W'loo)

    Edwards, Rt Hon N. (P'broke)

    Loveridge, John

    Eggar, Tim

    Luce, Richard

    Elliott, SirWilliam

    Lyell, Nicholas

    Emery, Sir Peter

    McCrindle, Robert

    Eyre, Reginald

    Macfarlane, Neil

    Fairgrieve, Sir Russell

    MacGregor, John

    Faith, Mrs Sheila

    MacKay, John (Argyll)

    Farr, John

    Macmillan, RtHonM.

    Fell, SirAnthony

    McNair-Wilson, M.(N'bury)

    Fenner, Mrs Peggy

    McNair-Wilson, P. (NewF'st)

    Finsberg, Geoffrey

    McQuarrie, Albert

    Fisher, Sir Nigel

    Madel, David

    Fletcher, A. (Ed'nb'gh N)

    Major, John

    Fletcher-Cooke, SirCharles

    Marland, Paul

    Fookes, Miss Janet

    Marlow, Antony

    Forman, Nigel

    Marshall, Micheal(Arundel)

    Fowler, Rt Hon Norman

    Marten, Rt Hon Neil

    Fox, Marcus

    Mates, Michael

    Fraser, Peter (South Angus)

    Maude, Rt Hon Sir Angus

    Freud, Clement

    Mawby, Ray

    Gardiner, George(Reigate)

    Mawhinney, DrBrian

    Gardner, Edward (S Fylde)

    Maxwell-Hyslop, Robin

    Garel-Jones, Tristan

    Mayhew, Patrick

    Gilmour, Rt Hon Sir Ian

    Mellor, David

    Glyn, DrAlan

    Meyer, Sir Anthony

    Goodlad, Alastair

    Miller, Hal(B'grove)

    Gorst, John

    Mills, lain(Meriden)

    Gow, Ian

    Mills, Peter (West Devon)

    Gray, Hamish

    Miscampbell, Norman

    Greenway, Harry

    Mitchell, David(Basingstoke)

    Griffiths, E.(B'ySt.Edm'ds)

    Monro, SirHector

    Griffiths, Peter Portsm'thN)

    Montgomery, Fergus

    Grimond, Rt Hon J.

    Moore, John

    Grist, Ian

    Morgan, Geraint

    Grylls, Michael

    Morris, M. (N'hampton S)

    Gummer, JohnSelwyn

    Morrison, Hon C. (Devizes)

    Hamilton, Hon A.

    Morrison, Hon P. (Chester)

    Hamilton, Micheal(Salisbury)

    Mudd, David

    Hampson, Dr Keith

    Murphy, Christopher

    Hannam, John

    Myles, David

    Haselhurst, Alan

    Neale, Gerrard

    Hastings, Stephen

    Needham, Richard

    Havers, Rt Hon Sir Michael

    Nelson, Anthony

    Hawksley, Warren

    Neubert, Michael

    Hayhoe, Barney

    Newton, Tony

    Henderson, Barry

    Nott, Rt Hon John

    Hicks, Robert

    Onslow, Cranley

    Higgins, Rt Hon Terence L.

    Oppenheim, Rt Hon Mrs S.

    Hogg, HonDouglas(Gr'th'm)

    Page, Richard (SW Herts)

    Holland, Philip(Carlton)

    Parkinson, Rt Hon Cecil

    Hooson, Tom

    Parris, Matthew

    Hordern, Peter

    Patten, Christopher(Bath)

    Howe, Rt Hon Sir Geoffrey

    Patten, John(Oxford)

    Howell, RtHon D.(G'ldf'd)

    Pawsey, James

    Howells, Geraint

    Percival, Sir lan

    Hunt, David (Wirral)

    Pink, R.Bonner

    Hunt, John(Ravensbourne)

    Pitt, William Henry

    Hurd, Hon Douglas

    Pollock, Alexander

    Irving, Charles(Cheltenham)

    Porter, Barry

    Jenkin, Rt Hon Patrick

    Prentice, Rt Hon Reg

    JohnsonSmith, Geoffrey

    Price, Sir David (Eastleigh)

    Jopling, Rt Hon Michael

    Prior, Rt Hon James

    Joseph, Rt Hon Sir Keith

    Proctor, K. Harvey

    Kaberry, Sir Donald

    Pym, Rt Hon Francis

    Kellett-Bowman, MrsElaine

    Raison, Timothy

    Kershaw, SirAnthony

    Rathbone, Tim

    King, Rt Hon Tom

    Rees, Peter (Dover and Deal)

    Knox, David

    Rees-Davies, W. R.

    Lamont, Norman

    Renton, Tim

    Lang, lan

    Rhodes James, Robert

    Langford-Holt, SirJohn

    RhysWilliams, SirBrandon

    Latham, Michael

    Ridley, HonNicholas

    1093

    Ridsdale, SirJulian

    Temple-Morris, Peter

    Rifkind, Malcolm

    Thatcher, Rt Hon Mrs M.

    Roberts, M.(Cardiff NW)

    Thomas, Rt Hon Peter

    Roberts, Wyn (Conway)

    Thompson, Donald

    Ross, Stephen (Isle of Wight)

    Thorne, Neil (IIfordSouth)

    Rossi, Hugh

    Thornton, Malcolm

    Rost, Peter

    Townend, John(Bridlington)

    Royle, SirAnthony

    Townsend, Cyril D, (B'heath)

    Sainsbury, HonTimothy

    Trippier, David

    St. John-Stevas, Rt Hon N.

    Trotter, Neville

    Scott, Nicholas

    van Straubenzee, Sir W.

    Shaw, Giles (Pudsey)

    Vaughan, DrGerard

    Shaw, Michael (Scarborough)

    Viggers, Peter

    Shelton, William(Streatham)

    Waddington, David

    Shepherd, Colin (Hereford)

    Wainwright, R.(ColneV)

    Shepherd, Richard

    Wakeham, John

    Shersby, Michael

    Waldegrave, HonWilliam

    Silvester, Fred

    Walker, RtHon P.(W'cester)

    Sims, Roger

    Walker-Smith, Rt Hon Sir D.

    Skeet, T. H. H.

    Waller, Gary

    Speed, Keith

    Walters, Dennis

    Speller, Tony

    Ward, John

    Spence, John

    Watson, John

    Spicer, Jim (West Dorset)

    Wells, Bowen

    Spicer, Michael (S Worcs)

    Wells, John(Maidstone)

    Sproat, lain

    Wheeler, John

    Squire, Robin

    Whitelaw, RtHonWilliam

    Stanbrook, Ivor

    Whitney, Raymond

    Stanley, John

    Wickenden, Keith

    Steel, Rt Hon David

    Wiggin, Jerry

    Steen, Anthony

    Williams, D.(Montgomery)

    Stevens, Martin

    Winterton, Nicholas

    Stewart, A. (ERenfrewshire)

    Wolfson, Mark

    Stewart, Ian (Hitchin)

    Young, Sir George(Acton)

    Stokes, John

    Younger, RtHonGeorge

    StradlingThomas, J.

    Tapsell, Peter

    Tellers for the Noes:

    Taylor, Teddy (S'endE)

    Mr. Anthony Berry and

    Tebbit, Rt Hon Norman

    Mr. Robert Boscawen.

    Question accordingly negatived.
    Question, That the propose words be there added, put forthwith pursuant to Standing Order No.32 (Questions on amendments):
    The Houe divided: Ayes 289, Noes 236.

    Division No.54]

    [10.12

    AYES

    Adley, Robert

    Brooke, Hon Peter

    Aitken, Jonathan

    Brotherton, Michael

    Alexander, Richard

    Brown, Michael(Brigg&Sc'n)

    Alison, RtHonMichael

    Browne, John (Winchester)

    Amery, RtHonJulian

    Bruce-Gardyne, John

    Ancram, Michael

    Bryan, Sir Paul

    Arnold, Tom

    Buchanan-Smith, Rt. Hon. A.

    Aspinwall, Jack

    Buck, Antony

    Atkins, RtHonH.(S'thorne)

    Budgen, Nick

    Atkins, Rooert(PrestonN)

    Bulmer, Esmond

    Baker, Kenneth(St.M'bone)

    Burden, SirFrederick

    Baker, Nicholas (NDorset)

    Butcher, John

    Beaumont-Dark, Anthony

    Cadbury, Jocelyn

    Bel, SirRonald

    Carlisle, John (Luton West)

    Bendall, Vivian

    Carlisle, Kenneth(Lincoln)

    Benyon, Thomas(A'don)

    Carlisle, RtHon M. (R'c'n)

    Benyon, W. (Buckingham)

    Chalker, Mrs. Lynda

    Best, Keith

    Channon, Rt. Hon. Paul

    Bevan, DavidGilroy

    Chapman, Sydney

    Biffen, RtHon John

    Clark, Hon A. (Plym'th, S'n)

    Biggs-Davison, SirJohn

    Clark, SirW. (CroydonS)

    Blackburn, John

    Clarke, Kenneth (Rushcliffe)

    Blaker, Peter

    Clegg, Sir Walter

    Body, Richard

    Cockeram, Eric

    Bonsor, SirNicholas

    Cope, John

    Bottomley, Peter (W'wich W)

    Cormack, Patrick

    Bowden, Andrew

    Corrie, John

    Boyson, DrRhodes

    Costain, SirAlbert

    Braine, SirBernard

    Cranborne, Viscount

    Bright, Graham

    Critchley, Julian

    Brinton, Tim

    Crouch, David

    1094

    Dean, Paul (North Somerset)

    LeMarchant, Spencer

    Dickens, Geoffrey

    Lennox-Boyd, Hon Mark

    Dorrell, Stephen

    Lester, Jim (Beeston)

    Douglas-Hamilton, LordJ.

    Lewis, Kenneth (Rutland)

    Dover, Denshore

    Lloyd, Ian (Havant& W loo)

    du Cann, Rt Hon Edward

    Loveridge, John

    Dunn, Robert(Dartford)

    Luce, Richard

    Eden, RtHon Sir John

    Lyell, Nicholas

    Edwards, Rt Hon N. (P'broke)

    McCrindle, Robert

    Eggar, Tim

    Macfarlane, Neil

    Elliott, SirWilliam

    MacGregor, John

    Emery, Sir Peter

    MacKay, John (A rgyll)

    Eyre, Reginald

    Macmillan, RtHonM.

    Fairgrieve, SirRussell

    McNair-Wilson, M.(N'bury)

    Faith, MrsSheila

    McNair-Wilson, P. (NewF'st)

    Farr, John

    McQuarrie, Albert

    Fell, SirAnthony

    Madel, David

    Fenner, Mrs Peggy

    Major, John

    Finsberg, Geoffrey

    Marland, Paul

    Fisher, SirNigel

    Marlow, Antony

    Fletcher, A. (Ed'nb'gh N)

    Marshall, Michael (Arundel)

    Fletcher-Cooke, SirCharles

    Marten, RtHon Neil

    Fookes, MissJanet

    Mates, Michael

    Forman, Nigel

    Maude, Rt Hon Sir Angus

    Fowler, Rt Hon Norman

    Mawby, Ray

    Fox, Marcus

    Mawhinney, DrBrian

    Fraser, Peter (South Angus)

    Maxwell-Hyslop, Robin

    Gardiner, George (Reigate)

    Mayhew, Patrick

    Gardner, Edward (S Fylde)

    Mellor, David

    Garel-Jones, Tristan

    Meyer, Sir Anthony

    Gilmour, Rt Hon Sir lan

    Miller, Hal(B'grove)

    Glyn, DrAlan

    Mills, lain(Meriden)

    Goodlad, Alastair

    Mills, Peter (West Devon)

    Gorst, John

    Miscampbell, Norman

    Gow, Ian

    Mitchell, David(Basingstoke)

    Gray, Hamish

    Monro, SirHector

    Greenway, Harry

    Montgomery, Fergus

    Griffiths, E.(B'ySt. Edm'ds)

    Moore, John

    Griffiths, Peter Portsm'thN)

    Morgan, Geraint

    Grist, Ian

    Morris, M. (N'hamptonS)

    Grylls, Michael

    Morrison, Hon C. (Devizes)

    Gummer, JohnSelwyn

    Morrison, Hon P. (Chester)

    Hamilton, HonA.

    Mudd, David

    Hamilton, Michael(Salisbury)

    Murphy, Christopher

    Hampson, DrKeith

    Myles, David

    Hannam, John

    Neale, Gerrard

    Haselhurst, Alan

    Needham, Richard

    Hastings, Stephen

    Nelson, Anthony

    Havers, Rt Hon Sir Michael

    Neubert, Michael

    Hawksley, Warren

    Newton, Tony

    Hayhoe, Barney

    Nott, RtHon John

    Henderson, Barry

    Onslow, Cranley

    Hicks, Robert

    Oppenheim, Rt Hon Mrs S.

    Higgins, RtHon Terence L.

    Page, Richard (SW Herts)

    Hogg, HonDouglas(Gr'th'm)

    Parkinson, RtHonCecil

    Holland, Philip(Carlton)

    Parris, Matthew

    Hooson, Tom

    Patten, Christopher(Bath)

    Hordern, Peter

    Patten, John(Oxford)

    Howe, Rt Hon Sir Geoffrey

    Pawsey, James

    Howell, RtHon D. (G'ldf'd)

    Percival, Sirlan

    Hunt, David (Wirral)

    Pink, R.Bonner

    Hunt, John(Ravensbourne)

    Pollock, Alexander

    Hurd, HonDouglas

    Porter, Barry

    Irving, Charles(Cheltenham)

    Prentice, Rt Hon Reg

    Jenkin, RtHon Patrick

    Price, SirDavid (Eastleigh)

    JohnsonSmith, Geoffrey

    Prior, RtHon James

    Jopling, RtHon Michael

    Proctor, K. Harvey

    Joseph, RtHon Sir Keith

    Pym, Rt Hon Francis

    Kaberry, SirDonald

    Raison, Timothy

    Kellett-Bowman, MrsElaine

    Rathbone, Tim

    Kershaw, SirAnthony

    Rees, Peter (Dover and Deal)

    King, RtHon Tom

    Rees-Davies, W. R.

    Knox, David

    Renton, Tim

    Lamont, Norman

    Rhodes James, Robert

    Lang, Ian

    RhysWilliams, SirBrandon

    Langford-Holt, SirJohn

    Ridley, HonNicholas

    Latham, Michael

    Ridsdale, SirJulian

    Lawrence, Ivan

    Rifkind, Malcolm

    Lawson, Rt Hon Nigel

    Roberts, M. (Cardiff NW)

    Lee, John

    Roberts, Wyn (Conway)

    1095

    Rossi, Hugh

    Thompson, Donald

    Rost, Peter

    Thorne, Neil(llfordSouth)

    Royle, SirAnthony

    Thornton, Malcolm

    Sainsbury, HonTimothy

    Townend, John (Bridlington)

    St. John-Stevas, Rt Hon N.

    Townsend, Cyril D, (B'heath)

    Scott, Nicholas

    Trippier, David

    Shaw, Giles (Pudsey)

    Trotter, Neville

    Shaw, Michael(Scarborough)

    van Straubenzee, Sir W.

    Shelton, William(Streatham)

    Vaughan, DrGerard

    Shepherd, Colin(Hereford)

    Viggers, Peter

    Shepherd, Richard

    Waddington, David

    Shersby, Michael

    Wakeham, John

    Silvester, Fred

    Waldegrave, HonWilliam

    Sims, Roger

    Walker, RtHon P.(W'cester)

    Skeet, T. H. H.

    Walker-Smith, Rt Hon Sir D.

    Speed, Keith

    Waller, Gary

    Speller, Tony

    Walters, Dennis

    Spence, John

    Ward, John

    Spicer, Jim (West Dorset)

    Watson, John

    Spicer, Michael (S Warcs)

    Wells, Bowen

    Sproat, Iain

    Wells, John(Maidstone)

    Squire, Robin

    Wheeler, John

    Stanbrook, Ivor

    Whitelaw, RtHonWilliam

    Stanley, John

    Whitney, Raymond

    Steen, Anthony

    Wickenden, Keith

    Stevens, Martin

    Wiggin, Jerry

    Stewart, A. (ERenfrewshire)

    Williams, D.(Montgomery)

    Stewart, Ian (Hitchin)

    Winterton, Nicholas

    Stokes, John

    Wolfson, Mark

    StradlingThomas, J.

    Young, SirGeorge (Acton)

    Tapsell, Peter

    Younger, RtHonGeorge

    Taylor, Teddy (S'end E)

    Tebbit, Rt Hon Norman

    Tellers for the Ayes:

    Temple-Morris, Peter

    Mr. Anthony Berry and

    Thatcher, Rt Hon Mrs M.

    Mr. Robert Boscawen.

    Thomas, Rt Hon Peter

    NOES

    Abse, Leo

    Dalyell, Tam

    Adams, Allen

    Davidson, Arthur

    Allaun, Frank

    Davies, Ifor (Gower)

    Alton, David

    Davis, Clinton (Hackney C)

    Anderson, Donald

    Davis, Terry (B'ham, Stechf'd)

    Archer, RtHon Peter

    Dean, Joseph (Leeds West)

    Ashton, Joe

    Dewar, Donald

    Atkinson, N.(H'gey)

    Dixon, Donald

    Bagier, Gordon A.T.

    Dobson, Frank

    Barnett, Guy(Greenwich)

    Dormand, Jack

    Barnett, RtHon Joel (H'wd)

    Douglas, Dick

    Benn, RtHon Tony

    Douglas-Mann, Bruce

    Bennett, Andrew(St'kp'tN);

    Dubs, Alfred

    Bidwell, Sydney

    Dunn, James A.

    Booth, RtHon Albert

    Dunnett, Jack

    Boothroyd, MissBetty

    Dunwoody, Hon MrsG.

    Bradley, Tom

    Eadie, Alex

    Bray, Dr Jeremy

    Ellis, R.(NED'bysh're)

    Brocklebank-Fowler, C.

    Ellis, Tom (Wrexham)

    Brown, Hugh D. (Provan)

    English, Michael

    Brown, R. C.(N'castle W)

    Ennals, RtHon David

    Callaghan, Jim(Midd't'n&P)

    Evans, loan (Aberdare)

    Campbell, Ian

    Evans, John (Newton)

    Campbell-Savours, Dale

    Ewing, Harry

    Canavan, Dennis

    Faulds, Andrew

    Cant, R. B.

    Field, Frank

    Carmichael, Neil

    Fitch, Alan

    Carter-Jones, Lewis

    Fitt, Gerard

    Cartwright, John

    Flannery, Martin

    Clark, Dr David (S Shields)

    Foot, RtHon Michael

    Cocks, Rt Hon M. (B'stol S)

    Ford, Ben

    Cohen, Stanley

    Forrester, John

    Coleman, Donald

    Foster, Derek

    Conlan, Bernard

    Foulkes, George

    Cook, Robin F.

    Fraser, J. (Lamb'th, N'w'd)

    Cowans, Harry

    Freud, Clement

    Craigen, J. M. (G'gow, M'hill)

    Garrett, John (Norwich S)

    Crawshaw, Richard

    George, Bruce

    Crowther, Stan

    Ginsburg, David

    Cryer, Bob

    Golding, John

    Cunningham, G.(lslingtonS)

    Graham, Ted

    Cunningham, DrJ.(W'h'n)

    Grant, George(Morpeth)

    1096

    Grant, John (IslingtonC)

    Pitt, William Henry

    Grimond, RtHon J.

    Powell, Raymond(Ogmore)

    Hamilton, James(Bothwell)

    Prescott, John

    Hamilton, W. W. (C'tralFife)

    Price, C. (Lewisham W)

    Harrison, RtHonWalter

    Race, Reg

    Hart, Rt Hon Dame Judith

    Radice, Giles

    Hattersley, Rt Hon Roy

    Rees, Rt Hon M (Leeds S)

    Heffer, Eric S.

    Richardson, Jo

    Hogg, N. (EDunb't'nshire)

    Roberts, Albert(Normanton)

    Holland, S.(L'b'th, Vauxh'll)

    Roberts, Allan(Bootle)

    HomeRobertson, John

    Roberts, Ernest (Hackney N)

    Homewood, William

    Roberts, Gwilym(Cannock)

    Hooley, Frank

    Robertson, George

    Horam, John

    Robinson, G. (Coventry NW)

    Howell, RtHon D.

    Rodgers, RtHon William

    Howells, Geraint

    Rooker, J.W.

    Hoyle, Douglas

    Roper, John

    Huckfield, Les

    Ross, Ernest (Dundee West)

    Hughes, Mark(Durham)

    Ross, Stephen (Isle of Wight)

    Hughes, Robert (Aberdeen N)

    Rowlands, Ted

    Hughes, Roy (Newport)

    Ryman, John

    Janner, HonGreville

    Sandelson, Neville

    Jay, RtHon Douglas

    Sever, John

    John, Brynmor

    Sheerman, Barry

    Johnson, James (Hull West)

    Sheldon, Rt Hon R.

    Johnson, Walter (Derby S)

    Shore, RtHon Peter

    Jones, Rt Hon Alec (Rh'dda)

    Short, Mrs Ren´e

    Jones, Barry (East Flint)

    Silkin, RtHonJ.(Deptford)

    Kaufman, Rt Hon Gerald

    Silkin, Rt Hon S. C. (Dulwich)

    Kerr, Russell

    Silverman, Julius

    Kilroy-Silk, Robert

    Skinner, Dennis

    Kinnock, Neil

    Smith, Rt Hon J. (N Lanark)

    Lambie, David

    Snape, Peter

    Lamborn, Harry

    Soley, Clive

    Lamond, James

    Spearing, Nigel

    Leadbitter, Ted

    Spriggs, Leslie

    Leighton, Ronald

    Stallard, A. W.

    Lewis, Arthur (N'ham N W)

    Steel, Rt Hon David

    Lewis, Ron (Carlisle)

    Stewart, Rt Hon D. (W Isles)

    Litherland, Robert

    Stoddart, David

    Lyons, Edward (Bradf'dW)

    Stott, Roger

    McCartney, Hugh

    Strang, Gavin

    McCusker, H.

    Summerskill, HonDrShirley

    McDonald, DrOonagh

    Taylor, Mrs Ann (Bolton W)

    McKay, Allen (Penistone)

    Thomas, Dafydd (Merioneth)

    McKelvey, William

    Tbomas, Jettrey(Abertillery)

    MacKenzie, RtHonGregor

    Thomas, DrR. (Carmarthen)

    McNally, Thomas

    Thorne, Stan (PrestonSouth)

    McNamara, Kevin

    Tilley, John

    McTaggart, Robert

    Tinn, James

    McWilliam, John

    Torney, Tom

    Marks, Kenneth

    Varley, Rt Hon Eric G.

    Marshall, D(G'gowS'ton)

    Wainwright, E.(DearneV)

    Marshall, DrEdmund (Goole)

    Wainwright, R.(ColneV)

    Marshall, Jim (LeicesterS)

    Walker, Rt Hon H.(D'caster)

    Martin, M(G'gowS'burn)

    Watkins, David

    Mason, Rt Hon Roy

    Weetch, Ken

    Maynard, MissJoan

    Wellbeloved, James

    Meacher, Michael

    Welsh, Michael

    Mellish, RtHon Robert

    White, Frank R.

    Mikardo, lan

    White, J.(G'gowPollok)

    Millan, RtHon Bruce

    Whitehead, Phillip

    Mitchell, Austin(Grimsby)

    Whitlock, William

    Mitchell, R.C. (Soton Itchen)

    Wigley, Dafydd

    Morris, Rt Hon A. (W'shawe)

    Willey, Rt Hon Frederick

    Morton, George

    Williams, Rt Hon A.(S'sea W)

    Moyle, RtHon Roland

    Williams, Rt Hon Mrs (Crosby)

    Newens, Stanley

    Wilson, Gordon (Dundee E)

    Oakes, Rt Hon Gordon

    Wilson, RtHon SirH.(H'ton)

    Ogden, Eric

    Winnick, David

    O'Halloran, Michael

    Woolmer, Kenneth

    Orme, Rt Hon Stanley

    Wrigglesworth, lan

    Owen, Rt Hon Dr David

    Wright, Sheila

    Palmer, Arthur

    Young, David (Bolton E)

    Park, George

    Parker, John

    Tellers for the Noes:

    Parry, Robert

    Mr. Frank Haynes and

    Pendry, Tom

    Mr. Lawrence Cunliffe.

    Question accordingly agreed to.
    MR. SPEAKER forthwith declared the main Question, as amended, to be agreed to.
    Resolved,
    That this House endorses Government policies to reduce inflation and improve output and competitiveness, and so create better prospects for employment, on a lasting and sustainable basis.

  STATUTORY INSTRUMENTS, &c.
  Motion made, and Question put forthwith pursuant to Standing Order No. 73A (Standing Committee on Statutory Instruments, &c.)
  STATUTORY INSTRUMENTS, &c.

    VALUE ADDED TAX
    That the Value Added Tax (Insurance) Order 1981 (S.I., 1981, No. 1740), a copy of which was laid before this House on 11th December, be approved.—[Mr. Cope.]
    That the Value Added Tax (Special Provisions) Order 1981 (S.I., 1981, No. 1741), a copy of which was laid before this House on 11th December, be approved.—[Mr. Cope.]

    TAXES
    That the draft Oil Taxation (Gas Banking Schemes) Regulations 1982, which were laid before this House on 14th December, be approved.—[Mr. Cope.]
    Question agreed to.

A42 (Castle Donington)
Motion made, and question proposed, That this House do now adjourn.—[Mr. Cope.]
10.25 pm
Mr. Stephen Dorrell: I begin by thanking you, Mr. Speaker, for selecting this subject for debate tonight. It is very much appreciated in my constituency that you have selected the construction of the Castle Donington section of the A42 on the day that you select the subject for the Adjournment debate.
The immediate cause of my raising the subject in the House tonight is the tragic death of a girl on the existing road—the A453—through the village of Measham in November of last year. Nicola Harrison was a 4-year-old schoolgirl out with her mother in the village centre going round the shops when she was run over and killed on the main road that goes through the middle of Measham. That was a tragedy for her family and a tragedy which, in a remarkable way, affected the community in which she lived. It is important that the House should be aware of the strength of feeling that has been stimulated by the tragic events of November last year.
Nicola Harrison's death was the latest in a long line of incidents on the road in Measham which have caused the strength of feeling that is now evident. The way in which the community has expressed its concern about her death symbolises the threat that hangs over everyone living in the village—the threat to their families, their pets and themselves—because of the unsafe condition of the road at that point.
It should be placed on record not only that the feeling in the village is deep but that the manner of its expression has been dignified as it has been eloquent. There has been deep-seated unease and anger at the delays, procrastination, excuses and the bureaucratic mumbo-jumbo with which successive generations in that village have been confronted when they have asked for improvements to the road.
I wish to recount to the House the way in which that has been expressed in recent weeks. Immediately after Nicola's death, there was a demonstration in Measham. Eighty mothers from the village crossed and re-crossed the road. They did so not to break the law or to obstruct the peace. They spoke first to the police and demonstrated within the framework of the law in a dignified and quiet way. It was much the more eloquent for that.
At a meeting in the village which I attended, there were 400 people present on a cold and wet November night to express their anger at the way in which the village has been treated. I am not sure whether I am allowed to put it on the record, but it is significant that 40 people from the village have come 100 miles to hear the subject debated at 10.30 pm in the House. I do not believe that there can be any more eloquent expression of public unease than that series of events. That has been the immediate cause of my asking for this debate.
I have so far described the inadequacy of the road in Measham, but, of course, the issue that I asked the House to consider is much wider than that—it is the provision of the A42 road, the effect of which would be to steer traffic away from Measham. There is a wide recognition in Measham and other villages along the length of the road that that is the only long-term solution to their traffic problems.
1100
The offending road, on which Nicola Harrison met her death and which has been the scene of other serious accidents all along its length, is the A453 which joins Birmingham and Nottingham. My hon. and learned Friend the Under-Secretary of State knows the road well, because he travels along it regularly between his home and his constituency. When I describe the various shortcomings of the existing facilities, I know that I describe something that he experiences on a regular basis.
Just as the roads in Measham are totally inadequate to deal with the needs imposed on them, so are the roads in Ashby and the village of Breedon on the Hill where there have been repeated near fatalities, and serious accidents. Those roads are a continuous danger to the physical environment of the village and the town of Ashby.
The traffic on the A453 is much heavier than the road was designed to cope with, and the existing facilities are totally inadequate to deal with the volume and extent of the traffic that travels along that road.
The House is entitled to ask why the position has become so bad. As my hon. and learned Friend well knows, the answer is simple when one looks at a map, because the A453 is a main link between the East and West Midlands. The missing-link in the Midland motorway system is the A453 corridor. When the M6 was built, it was a north-west south-east link. We have never provided the south-west north-east link which was always envisaged as a complementary part of the Midlands' motorway pattern. It is to complete that motorway that the case for the A42 is so strong.
The case that I put is not simply to improve the environment in the three main centres of population in my constituency. It is a major case in the national interest for completing the area's motorway system so that business and commerce can be carried on more efficiently and effectively with the minimum impact on the local communities.
The reality is that the motorway has been envisaged for 20 years to my certain knowledge, and the fact that Governments have repeatedly delayed building it is now causing havoc in my constituency. My constituents are paying the price for successive Government's delay and inactivity on this subject.
Having filled in the background, I shall put some specific points about the progress of the case to my hon. and learned Friend.
The first and by far the most important issue which has caused concern in the constituency is the delay in the process of building the road. The Government's White Paper on roads made it perfectly clear that they wanted to proceed with the building of the A42. Therefore, we were pleased when, after the Government were elected, initial proposals were published in July 1979 and the public inquiry opened in January 1980. The House will, therefore, well understand why the people of the area are angry that, having opened an inquiry in January 1980, we still have not had the inspector's report which, as yet, has not ever been delivered to the Government.
On successive occasions, we were told that the inspector's report was about to be received by the Government. On other successive occasions we were told that it would be delayed for another one month, two months or three months. Recently, we were told that one of the reasons for the delay was that the inspector had been taken off the case altogether for 12 months to carry out an inquiry into nuclear bore holes in the Cheviots. No doubt,

1101
nuclear bore holes are important to constituents in the Cheviots, but I cannot for the life of me understand why bureaucratic incompetence should run to such an extent that inspectors are not allowed to complete one report before starting another.
I therefore seek two assurances from my hon. and learned Friend about the mechanics which have led to the delay in the publication and processing of the inspector's report on the route for the A42.
First, I seek the assurance that when the inspector's report is finally received—it is now promised for the end of March—the Government will move with all possible speed to reach their own conclusions. We have been told that it will take six months for the Government to reach final conclusions after the report has been published. In view of the long history of delay, bungling and procrastination that has marred the whole project, I ask my hon. and learned Friend to seek ways to shorten the delay between receipt of the report by the Department of Transport and publication of the Government's final conclusions. I cannot believe that a Government who attach the highest importance to building a particular road need six months to process their own conclusions when an inspector's inquiry into all the details has already been carried out.
The second assurance that I seek will not directly help the people of Measham, Ashby or Breedon, but it should help others in future cases. I seek an assurance from my hon. and learned Friend that the inspectorate has been tightened up and that its procedures are now such as to prevent this kind of bungling ever happening again. It is intolerable that the Government's own policy—not my policy or my constituents' requests—for the building of a road should be held up by the incompetence and bungling of the inspectorate.
I seek those two assurances arising from the delays in this case—first, that the Minister will process this matter as quickly as possible and, secondly, that steps will be taken to ensure that this kind of mistake never happens again.
The second specific point on which I seek a reply from the Minister is the timing of the building of the Castle Donington section. The House will appreciate that we are dealing with a road which will replace the existing A453, which is already totally inadequate over the stretch in my constituency. The one thing that my constituents in Measham, Ashby and Breedon fear more than almost anything else is that the Tamworth section will bring four lanes of traffic to the border of my constituency and disgorge them on to a road which is already inadequate to deal with the traffic that it is at present required to carry.
My hon. and learned Friend wrote to me on 15 December as follows:
"The Tamworth Section is at a very much more advanced stage of preparation than the Castle Donington Section and its construction…is bound to be possible before work could start on the section to the north."
If anything, that is an even worse blow than the news of the further delay in publication of the inspector's report. Referring to the fact that one section could be built and the other delayed, my hon. and learned Friend continued:
"Present indications are that this could be done without the traffic increasing appreciably north of Appleby Magna"—
the section that we are dealing with in this debate. If my hon. and learned Friend believes that, he should come to Leicestershire and see whether he can find one person in the county who agrees with him. None of my constituents
1102
believes that assurance. In addition, the north-west Leicestershire district council and Leicestershire county council do not believe it. It flies in the face of all motorway experience. It defies common sense to say that two-thirds of a motorway route can be built—leaving one-third uncompleted—and that the two-thirds will not generate traffic and make the position on the incomplete one-third even worse.
My constituents and I believe that building the road as far as Appleby would generate substantial traffic, which would have a serious effect on the environment. If that went on for any length of time, it would probably have irreperable effects, particularly on the towns of Measham, Ashby and Breedon on the Hill. None of my constituents and none of the local authorities can accept that the completion of the Tamworth and the Castle Donington sections of the road should be separated by anything more than a couple of months. The public inquiries were started at the same time, so the Government will have their work cut out to produce a convincing reason. My hon. and learned Friend said in his letter that the completion of the Tamworth section would not have an effect on traffic on the existing A53. However, that defies experience and commonsense.
It would be wrong of me not to mention two other small points. I have mentioned three places, but there are two other sources of concern. First, there is the problem of traffic passing through the village of Long Whattorn, particularly during the construction phase of the motorway. I do not expect my hon.and learned Friend to reply tonight, but I should be grateful if he would consider the matter and write to me. I hope that he will assure me that all possible steps will be taken to ensure that construction traffic will be channelled on to roads that are better able to carry the load.
Secondly, when my hon. and learned Friend considers the final route at the northern end, I hope that he will look into the problem of Diseworth. If he puts the road to the South of Diseworth, as originally suggested, Diseworth will be enclosed in a noise box between the A42, the Ml, and the east Midlands airport. I should be grateful if my hon. and learned Friend would consider those two points.
I have raised this Adjournment debate primarily to express the frustration, anger and feeling of hopelessness as a result of the tragic events last November in Measharn. Those feelings are also held in Ashby and Breedon. People feel that their lot has not been sufficiently considered in the corridors of power of the Department of Transport. In the past few weeks people have expressed their frustrations in a copy-book way, through the democratic institutions that have been set up for that purpose. If we are to maintain their confidence in those institutions, we must show that they respond to pressure. That is what I ask my hon. and learned Friend to do.
10.43 pm
The Under-Secretary of State for Transport (Mr. Kenneth Clarke): I congratulate my hon. Friend the Member for Loughborough (Mr. Dorrell) on his success in obtaining this debate. I am not surprised that he has raised the subject of the A42, because he has pressed it on me since becoming a Member of Parliament for that constituency. I know the great concern felt by my hon. Friend and his constituents about the need to build the new section of road.

1103
As my hon. Friend said, I know that section of road well. I correct him in only one respect. I used to be a regular user of the road between my home and my constituency—Rushcliffe, which adjoins Loughborough—and I used to drive regularly through Breedon, Ashby, Measham and Tamworth. However, I no longer do so, because the road is so dangerous, inadequate and unreliable. I make a rather enormous diversion using the motorways via Leicester and Coventry to avoid that road. I appreciate the frustration felt by my hon. Friend and his constituents, who live on an inadequate and dangerous stretch of road. I was very sorry to hear about the recent tragic death in Measham, which is only the latest in a series of very unfortunate accidents on that road.
The road has a long history. When I was first elected in the 1970s it was known. As early as 1972, the Department published proposals for a dual three-lane motorway between the A445 and Stanton by Dale. My hon. Friend the Member for Ashford (Mr. Speed) also asked questions, and we took part in discussions about whether the motorway should go near Trowell in Nottinghamshire—all to no avail.
Those orders were withdrawn in 1976, because the Department had gone through one of its periods of revising its traffic forecasts and design standards, altering the basis upon which it did the economic appraisal of roads. There followed a prolonged period of further investigation before the then Minister decided that an all-purpose dual carriageway should now be promoted, and that it would be preferable for the new road to join the M1 at Kegworth, which is where I and other Nottinghamshire Members had always insisted it should go, rather than Stanton by Dale, and the promotion of the road began all over again.
The Department then began to get on with it. It asked the public for their views in a process of public consultation in 1978. I was in my present post—the present Government had just been elected—when in June 1979 we announce our preference for a route which had been described as the blue route, and we published the statutory orders which the law requires for the new road in the following month.
The choice of route was finely balanced—there are problems in one or two villages in my hon. Friend's constituency—so we also published a route known as the red route as an alternative route of considerable merit, so that the two routes and the proposals for the road could be fully discussed at a public inquiry.
That was one of the very first decisions in which I was involved when the new Government were elected. I assure my hon. Friend that I believed that we would get on with a serious public discussion, as indeed we have, but also that we would move towards decisions about whether we would have the road and where it was to go, to do something to deal with the traffic problems in his constituency. I am as disappointed as he is—as are quite a number of my constituents—that matters have still not come to a point of decision, and that he had to initiate this Adjournment debate because his constituents no longer know when there will be a conclusion. The Government will do their best, within their powers, to bring the matter to a decision as soon as possible.
The public inquiry took place, and we are now awaiting the submission of the inspector's report on it. The inquiry into the Castle Donington section of the A42, together with
1104
orders concerning the neighbouring M42 Tamworth section, was held between 8 January and 11 June 1980. Site visits continued until 27 June 1980. The inquiry was conducted by Mr. Richard Spain. Sessions were held in both Measham and Tamworth, and there were 60 sitting days, with nine days of site visits. In other words, one must concede that it was a long and complex inquiry.
At about the time that the inquiry was coming to an end, the planning inspectorate, an organisation forming part of the common services of my Department and of the Department of the Environment, was also faced with the need to find an inspector to conduct an inquiry later in the year into the proposals for nuclear waste storage boreholes in the Cheviots. That inquiry also needed an inspector of a suitably high calibre, which had made Mr. Spain suitable for the A42 inquiry. I am assured that at the time the inspectorate had no reason to believe that Mr. Spain would not complete his report on the A42 inquiry in time to move on to take on the second one.
Officials in the inspectorate acted on the nomination of the Lord Chancellor in allocating the work of the nuclear waste inquiry to Mr. Spain, and they announced his appointment to the boreholes inquiry on 2 July 1980. After a time the inspectorate realised that Mr. Spain would not be able to finish his A42—M42 report in time, but by then it was too late to appoint a different inspector to the boreholes inquiry, and the arrangement had to stand.
Unfortunately, the inspector, Mr. Spain, found that he had another equally complex inquiry. The boreholes inquiry ran from 28 October 1980 to 28 November 1980 with 19 sittings. When it was complete, the Government and various Departments of Government faced the problem of which report should be given priority. My hon. Friend will know that disposal of nuclear waste is extremely controversial. The boreholes issue required urgent treatment. It was therefore decided that Mr. Spain should be asked to give priority to dealing with the nuclear boreholes inquiry. He completed his report on the boreholes first and signed it on 15 July 1981. That left the A42—M42 report outstanding with the inspector unable to start drafting his report.
Since that time, we have been waiting for Mr. Spain to produce his report on the important inquiry that he had been holding in Leicestershire. Unfortunately, Mr. Spain tells me that he has not been able to complete his report as quickly as he had once hoped. I have received a variety of estimates of dates by which the report might be received. He now tells me that he expects to submit his report to the Government in March. My position and that of the Government has been exactly the same as that of my hon. Friend and his constituents. We have been waiting for the report for a long time. There have been difficulties. An error was made in giving Mr. Spain a second and difficult inquiry in mid-stream. We have been waiting for Mr. Spain to complete his report since July 1981 when he submitted his last one on the boreholes inquiry.
Those are the facts. They are no consolation to anyone in the village in my hon. Friend's constituency or anyone else who believes that this is quite an important road proposal in the Midlands. In saying it is "quite an important" road proposal, I am using minimal language, It is, as my hon. Friend says, a missing link in the road network of the area. I am as disappointed as he is. I am anxious to make progress with the scheme. Apart from my hon. Friend, my hon. Friend the Member for Lichfield and Tamworth (Mr. Heddle) is equally agitated about the need

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for progress on the section of road in his constituency. Tamworth contains many people who feel that there is desperate need for a bypass.
There is little that I, as a Minister, or the Government, as a Government, can do to speed up the writing of the report of an independent inspector. There is nothing that we can do to begin to consider our decision and to come to conclusions in the light of the evidence and the inquiry until we have received a report written by the inspector we appointed. The inspector, who is nominated by the Lord Chancellor, is genuinely independent—contrary to the belief of some of the lobbyists in this sphere. The writing and the submission of the report is a matter for him. Ministers cannot be seen to be influencing him. Making inspectors clearly and genuinely independent was one of the changes that flowed from the review of highway inquiry procedures in 1978. The independence of inspectors is rebuilding confidence in the inquiry system.
As my hon. Friend will understand, there is a certain delicacy in the relationships between Ministers and the inspector. We can ask for the report and stress the urgency of the matter. We have to wait for the inspector to write and submit the report. I have not been wholly passive in the face of this unfortunate turn of events. I have already made arrangements to ensure that never again—I stress "never again"—is an inspector appointed to hold a new inquiry before it is clear that he will finish in time any outstanding work on a previous one.
This will be little consolation to the inhabitants of Breedon and Measham and everyone affected in the A42 case. I hope it means, however, that we shall never end up in this predicament elsewhere again. Once we receive Mr. Spain's report, we shall work to announce our decision on the schemes as fast as possible. How long this takes will depend on the contents of the report. This is a
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complex and controversial matter. We have set down a general policy that decisions on inspector's reports should be produced within six months, at the maximum, of receiving it.
That sounds a long time, but, as I have explained in other debates, there is more to be done than to read the report and reach a decision. Complex and difficult drafting has to be carried out to make sure that the decision is fully considered and is defensible.
My hon. Friend, like my hon. Friend the Member for Lichfield and Tamworth (Mr. Heddle), may feel that this is a long time to wait. The inquiry lasted 60 sitting days and covered 16 draft orders. It dealt with the Castle Donington and Tamworth sections of the road and also the need for a new route at all between the M1 and the M6. There are therefore difficult and important issues to settle and many smaller items to look at. It will take us some; time to reach the right decisions.
Because, if I may say so on behalf of the Government. I feel a certain sense of guilt about the delay in this case we have made special staffing arrangements to deal with the report when it arrives. I can assure my hon. Friend that no effort will be spared to deal with it quickly, whether or not we build the road and no matter which route we follow. All those are matters on which I must reserve judgment completely because we have to await the inspector's advice and reconsider the matter. We will make every effort within our power to deal with the matter promptly once we have the inspector's report to work on. We—
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 five minutes to Eleven o'clock.

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Preamble
The House met at three of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers —Read by the Lord Bishop of Liverpool.

Nuclear Force Talks: Intermediate-Range Weapons
Lord Mayhew: 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 progress has been made in the intermediate-range nuclear force talks, and what proposals they have to put forward.
The Parliamentary Under-Secretary of State, Foreign and Commonwealth Office (Lord Trefgarne): My Lords, the first round of these negotiations was held in Geneva from 30th November to 17th December 1981 and the second round started on 12th January: They have been conducted in a frank and businesslike manner, but the details remain confidential. Although these discussions are between the Governments of the Soviet Union and the United States, the United States Government have consulted closely with their NATO allies. Her Majesty's Government strongly support the United States proposal to cancel NATO's intermediate-range nuclear force modernisation programme in exchange for the dismantling of all Soviet SS20s, 4s and 5s.
Lord Mayhew: My Lords, I thank the noble Lord for his reply. While it is obvious that the events in Poland make such negotiations more difficult, may I ask the Minister to give an assurance that the intention of the Americans to press on with these negotiations is unchanged?
Lord Trefgarne: My Lords, the Americans have made it clear that they intend to persevere and pursue these negotiations, but the noble Lord is right to say that the events in Poland sour the atmosphere.
Lord Kennet: My Lords, can the Government confirm that the United States have postponed indefinitely the opening of the other set of disarmament talks on strategic arms reductions? If so, will the noble Lord most urgently convey to Washington the opinion —which I hope is the opinion of this House—that if that postponement is other than temporary and tactical, a very great deal would be lost to mankind?
Lord Trefgarne: My Lords, this Government certainly hope that these negotiations can proceed at an appropriate time. Indeed, I think we had all hoped that the date for the re-start of these negotiations would have emerged from the Haig-Gromyko talks
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the day before yesterday, and we are sorry it did not. On the other hand, one has to understand the difficulties in which the western side find themselves following events in Poland and, further back, in Afghanistan.
Lord Peart: My Lords, is the Minister aware that Moscow has, I think, shifted its stance? The International Herald Tribune, which every Member should look at, declares today that "it seeks no confrontation". I believe the Americans really have achieved something and I hope we can have a successful conclusion at some time. As I said the other day, I hope that we shall be kept informed of how the talks are going.
Lord Trefgarne: My Lords, we have become used to wringing declarations from the Soviet camp about their peaceful intentions. What we now have to do is see them match their actions to those fine words.
Baroness Gaitskell: My Lords, would the Minister agree that we should have more faith in the disarmament talks if they were not accompanied by a massive build-up of nerve gas, which was shown on television when the talks were being held?
Lord Trefgarne: My Lords, if the noble Baroness is referring to the "Panorama "programme a week or so ago
Baroness Gaitskell: I am, my Lords.
Lord Trefgarne:—then that programme made it clear that there is no present intention to base those gases in the United Kingdom.
Lord Shinwell: My Lords, is the noble Lord aware that there are many reports appearing in the press about changes that are taking place or are in contemplation? For example, it was reported only yesterday that our combat aircraft would be inadequate during the whole of the 'eighties. Is it not desirable that from time to time, in order either to refute such statements in the press or to clarify the situation, the Minister of Defence or his deputy should come to the House and make an occasional Statement, as for example our distinguished Foreign Secretary made yesterday?
Lord Trefgarne: My Lords, I have no doubt that my noble friend Lord Trenchard will hasten to come to the House to answer appropriate Questions when they appear on the Order Paper. It is of course the case that when we came to office a year or so ago, there were a number of deficiencies in our front line forces which we have been putting right ever since.
Lord Kaldor: Are there any plans, my Lords, to extend these talks on disarmament to what I would call short-range battlefield nuclear weapons?
Lord Trefgarne: My Lords, the present talks, if the noble Lord is referring to those which appear in the Question, are of course specifically aimed at intermediate-range land-based systems.
Lord Mayhew: My Lords, are we not to know the answers to Questions of this kind? Can we be told, for example, whether the agenda has been agreed and if there is a calendar of future meetings? Shall we be informed about such matters during the process of the talks?
Lord Trefgarne: My Lords, it has been decided that the details of the talks should remain confidential. I venture to suggest that if they were to be conducted in the full spotlight of international publicity, progress would be much more difficult.
Lord Brockway: My Lords, while I enthusiastically support Solidarity in Poland, may I ask the Minister whether he realises that there are similar situations in many countries—Turkey, El Salvador, Indonesia—and would not all of them be improved in a peaceful situation in which disarmament took place, as suggested by my noble friend Lord Kennet?
Lord Trefgarne: My Lords, if I may say so, the noble Lord, Lord Brockway, misunderstands the implications of the situation in Poland. The fact is that we are now asked to conduct negotiations in various disarmament and other fora with the eastern bloc in the context of their broken undertakings in respect of the Helsinki Final Act. En other words, we now have to be asked to believe what they say in the context of the fact that they have departed from their solemn undertakings in that document.
Lord Orr-Ewing: My Lords, can my noble friend say whether, pending the start of the talks, the Soviet Union has slowed down its deployment of SS20s, or is the current rate one new nuclear warhead every week? Is the total not now 280, and are they not reloadable and mobile? Does not this make it very difficult to avoid the balancing which becomes necessary by the deployment of cruise missiles if the Soviets refuse either to slow down or withdraw their SS20s?
Lord Trefgarne: My Lords, my noble friend puts his finger on the nub of the problem. It is indeed the case that the Soviet Union already has a substantial superiority in these intermediate-range weapons, and that is why it is so important for the talks at Geneva to proceed and, I hope, succeed.
Lord Cledwyn of Penrhos: My Lords, may I correct the noble Lord on one brief point before we come to the end of this Question? He said that the present Government have been in power for a year or so. Is he aware that they have been in power for nearly three years and it feels much longer?
Lord Paget of Northampton: My Lords, the noble Lord has said—
The Chancellor of the Duchy of Lancaster (Baroness Young): My Lords, we have now had eight minutes on this Question and I really think that it is time to move on to the next one.

Royal Warrants of Appointment
3.15 p.m.
Lord Spens: 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 policy towards the commercial use of the emblem of the Royal Warrant of Appointment to Her Majesty and to certain other members of the Royal Family granted to certain tradesmen.
The Parliamentary Under-Secretary of State, Home Office (Lord Belstead): My Lords, the issue of Royal Warrants of Appointment, whereby tradesmen who supply goods and services to Her Majesty and other members of the Royal Family are authorised to display the Royal Arms, or the arms of other members of the Royal Family, is the responsibility of the Lord Chamberlain and the Royal Households, and is not a matter on which it would be appropriate for the Government to express a view.
Lord Spens: My Lords, I should like to ask the Government whether they will express a view, though, on this point: If a commercial enterprise were to open up shop in, say, Paris or New York to sell only goods produced under the Royal Warrant, would the Government support, or would they frown upon, that enterprise if it started displaying the emblem of the Royal Warrant in the shop?
Lord Belstead: My Lords, that is a hypothetical question which does not admit of a direct reply.

The EEC Non-Life Insurance Directive
3.16 p.m.
Lord Bruce of Donington: 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 will state the results of the discussions between the Finance Ministers of the EEC on the non-life insurance services directive, and the date upon which they expect the directive to come into operation.
Lord Trefgarne: My Lords, despite repeated discussions by Ministers in the Finance Council and a great deal of pressure at all levels, agreement on the insurance services directive still appears to be some way off. The intensive work under our presidency has achieved agreement on some issues, and has clarified many of the areas of disagreement. But there remain fundamental differences of view between the United Kingdom and several other member states, not all of whom share our objectives.
Lord Bruce of Donington: My Lords, I thank the noble Lord for his reply. Is he aware that the directive

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under which the freedom to provide services is set out is now nearly eight years old, and that numerous endeavours have been made by successive British Governments, including his own, to have the matter rectified? Is the noble Lord also aware that the German and French Governments are afraid of admitting British insurance firms operating in the non-life field into either Germany or France, and that they have done their very best to prevent this by filibuster in the European Parliament and by obstruction in both Council and COREPER?
Will Her Majesty's Government pursue this question with renewed energy—I know that the noble Lord and the noble Lord the Foreign Secretary have done their best—on the basis that the actions of the Governments that I have mentioned are in direct opposition to Article 60 of the Treaty and only go to show that, whenever this country seeks to take advantage of the sections of the European Treaty outside the common agricultural policy field under which it is entitled to benefit, it almost invariably meets with obstruction?
Lord Trefgarne: My Lords, I must say that I very much share the views of the noble Lord in this matter, including the acute disappointment that it has not been possible to make more progress on the draft directive, which, as the noble Lord rightly said, first came forward from the Commission in, I think, 1975. Articles 59 and 60 of the Treaty of Rome impart the basic right of freedom to provide services within the Community. This country has conceded willingly the right in connection with the supply of goods within the Community, sometimes at considerable disadvantage to some of our industries. It is time that our service industries were allowed to compete likewise.
Lord Sandford: My Lords, may I ask a question that is a little more specific than that asked by the noble Lord, Lord Bruce of Donington? May I ask my noble friend to confirm that the Government will do their level best to ensure that this item remains on the agenda of every single meeting of the Council of Finance Ministers until it is resolved?
Lord Trefgarne: My Lords, it is of course the case that the Belgians have now taken over the presidency. We understand that they intend to keep up work on the directive, although it may be too much to expect them to do so at the pace which we set during our presidency. But we are very happy that they intend to keep up some pressure, at least, on this matter.
Lord Molloy: My Lords, would the noble Lord not agree that, as my noble friend Lord Bruce of Donington has said, this item has been on the agenda for nearly a decade and the matter has now developed into blatant discrimination against British insurers? We were told that direct elections would solve all the problems, but would he not agree that that has made no difference whatsoever? This discrimination continues, and it is about time that, in the interests of British insurers, a much firmer stand and a firmer protest were under-taken by Her Majesty's Government.
Lord TrefgarneMy Lords, I can assure the noble Lord that we pressed this matter with the utmost
1060
firmness during our time in the chair. Some of our member colleagues did not see eye to eye with us on it, and we very much regret that; but I can assure your Lordships that we lost no opportunity during our presidency and, indeed, will lose no opportunity in the future, to go on pressing this important matter.
Lord Davies of Leek: My Lords, would I be right in assuming that this would have an effect upon those who have to control the investment of money for industrial pensions and the movement of trade union funds into areas that would show some profitability for pensions to workers later on? This limitation has an effect on the investment of pension funds, does it not?
Lord Trefgarne: My Lords, so far as I know, that is not the case, I must say. The directive is related to the conduct of commercial-type insurance business in the Community; for example, large companies insuring their premises, and that sort of thing. It does not relate to the investment of funds; nor does it relate, incidentally, to consumer-type insurance, such as, for example, motor insurance or private house insurance.
Lord Davies of Leek: I thank the noble Lord.

Western Isles: Lobster Fishermen
3.22 p.m.
Lord Alport: 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 will give the same measure of assistance to the lobster fishermen of the Western Isles as they give to the crofter community.
The Minister of State, Scottish Office (The Earl of Mansfield): My Lords, the various forms of assistance which are available to crofters and lobster fishermen are designed to meet the very different circumstances of the two occupations. I do not consider that it would be realistic to bring the two into line. A number of lobster fishermen are of course crofters and qualify on both counts.
Lord Alport: My Lords, while thanking my noble friend for that Answer, may I ask him whether he would agree that fishing is as much a way of life in the Western Isles as is crofting; and that, so far as lobster fishing in particular is concerned, it has had the result of bringing hack into the islands, or keeping there, a number of young men who otherwise would have emigrated or worked outside, and who have been able to make a fairly successful livelihood lobster fishing? Would he say, further, whether he has received representations personally, during a visit to Lewis, along the lines of the Question; and, if so, whether any action was taken as a result and on receipt of those representations?
The Earl of Mansfield: My Lords, first of all, I entirely agree with my noble friend on the effects which lobster fishing has had upon the people who live in the Outer Isles, whether they are born and bred there or whether they have come back. I have in fact not only received delegations of lobster fishermen but have met them on numerous occasions on various trips to the Western Isles. I think that the matters which concern lobster fishermen most are imports of foreign lobsters and imports of foreign lobsters bearing disease. In both those situations Her Majesty's Government have taken the matter very seriously, and we have taken the appropriate action.
Perhaps I may say to my noble friend that I think the fortunes of lobster fishermen in the Western Isles are on the up-turn so far as the latest figures show; for instance, in the first 11 months of 1981 lobster landings in the Western Isles amounted to over 580,000 lbs. That is an appreciable increase over the 490,000 lbs. gross during the whole of 1980.
Lord Mackie of Benshie: My Lords, would not the noble Lord agree that in fact the development of the Western Isles as a whole is enormously important to both crofters and lobster fishermen, and could he give us some information as to the progress of the EEC scheme to develop that whole area?
The Earl of Mansfield: My Lords, this is really the subject of a Wednesday debate rather than a Starred Question, if I may say so, but perhaps I could confine the matter to lobster fishermen. They are of course entitled to receive all the interest which the Government give to fishermen as a whole, wherever they may be situated in Scotland. They will also be entitled to avail themselves of the aid which is to be offered in the new integrated development programme for the Western Isles, details of which are just being completed by my department. So far as lobsters are concerned, as I have said, we have sought to persuade the Commission and our partners in the Community to impose a reference price system. In fact, that was not agreed, but we are now in the throes (if that is the word) of working out a scheme of deficiency payments so far as lobsters are concerned.
Viscount Massereene and Ferrard: My Lords, would my noble friend not agree that over quite a number of years the Highlands and Islands Development Board have given very liberal grants to lobster fishermen to buy new boats and equipment? Would my noble friend not further agree that this, unfortunately, has rather resulted in over-fishing, and that certainly in my area of the Hebrides the lobsters are vanishing? Would my noble friend also not agree that we do not want to happen to the lobster what happened to the herring on that coast, as I was repeatedly warning this House, and as in fact happened? They completely vanished for two years.
The Earl of Mansfield: My Lords, I am glad to say that herring have now reappeared in the Minch and there was a fishery last winter. It is because we are worried about over-fishing of lobsters in the Western Isles that, for instance, we have increased the minimum landing size for lobsters from 80mm to 83mm carapace
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length with effect from 1st May 1981. A further increase to 85mm is proposed from 1st May 1983, but that is subject to review.
Lord Oram: My Lords, is the Minister aware of the good work that is being done by the Highlands and Islands Development Board in the encouragement of community co-operatives, and is he aware that such co-operatives can include in their membership both fishermen and crofters and therefore provide an ideal channel through which Government assistance can be provided to people in both these occupations?
The Earl of Mansfield: Yes, my Lords. I have very regular and cordial contact with the Highlands and Islands Development Board, and this is one of the means of encouraging commercial developments, not only in respect of fishing but of all kinds of commercial activity in the Outer Isles.
Lord Alport: My Lords, may I ask my noble friend whether among the representations he received was a representation that, as the crofters receive compensation for storm damage and other damage to capital equipment on their crofts, so the lobster fishermen should receive some sort of assistance when there is damage to their boats or equipment as results from the same sort of reasons?
The Earl of Mansfield: My Lords, I am not aware of any scheme by which crofters can obtain compensation as of right for the vagaries of the climate or weather, and I do not think it would be appropriate for Her Majesty's Government to underwrite any such scheme for fishermen.

Harbours (Scotland) Bill [H.L.]
3.29 p.m.
The Earl of Mansfield: My Lords, I beg to move that this Bill be read a third time.
Moved, That the Bill be now read a third time.—(The Earl of Mansfield.)
Lord Boothby: My Lords, I beg the noble and learned Lord's pardon for interrupting his putting of the Question, and I certainly do not wish to dispute his authority, but I was informed by the Vote Office—I made careful inquiries—that any noble Lord who was bold enough to jump to his feet on the Motion, That the Bill be read a third time, would and should be called. Otherwise, my Lords, I would never have dared to do so. I do so on this occasion only because I want to say that, although there are very few advantages in living to the age of 82, one of them is that on rare occasions one lives to see the achievement of work which one has done for most of one's life. It happens very rarely, but for me this is one of those occasions.
I was the Member of Parliament for East Aberdeen— shire—of which Peterhead is the leading or co-leadingcity—for 34 years. For 34 years I struggled with the problem with which we are dealing and have now successfully dealt. Then nothing could be done about it,

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apparently, by any Government department. Like most Governments, successive Governments were sympathetic but impotent; and so this great harbour, and it is a great harbour, remained split, impotent, divided between convicts and fishermen—the great bay of refuge denied, more or less, to the fishing fleet, with no adequate fishing harbour! This went on and on, and for 35 years I struggled to get some order into the business.
My Lords, now we have got it; but I am afraid it was not Boothby that did it. It was oil, an even more potent force. Oil successfully forced the Government's hand and, once forced, it has been enforced in good measure. This is a drastic Bill. It gives great and necessary powers to the Government of the day. I am sure the noble Earl, Lord Mansfield, will agree, it is really built round the harbour at Peterhead and its particular problems. That is why I take a great personal interest in it. But it also applies all round the coast of Scotland. I believe there are several harbours off the West Coast, for example, where similar problems arise; and, when they do, I hope that we may have an assurance from the noble Earl that the provisions of this admirable Bill will apply and will apply to them equally as they are now being applied to Peterhead.
My Lords, I should like to say one word in conclusion. The noble Lord, Lord Ross of Marnock, opened the new harbour at Peterhead. I had the honour of opening the new fish market at Peterhead. Since then, Peterhead has become the leading white-fish importing harbour in this country. I think that that is enough to make both the noble Lord, Lord Ross of Marnock, and the noble Lord, Lord Boothby, feel pleased and proud.
The Earl of Mansfield: My Lords, perhaps I should respond briefly to the noble Lord, Lord Boothby, who we are delighted to see pronouncing upon this penultimate stage of this little Bill. I think it is no exaggeration to say that the noble Lord, Lord Boothby, is regarded as the personification of East Aberdeenshire, not least by the many fisherfolk whom he represented with great distinction and assiduity over many years. This Bill is the culmination of a great many efforts of a number of people. It allows the Secretary of State for Scotland to disengage from the day-to-day management of Peterhead Bay Harbour for which until now he has been the harbour authority. There will now be a new authority who will have all his powers, and the responsibility for the harbour will pass in this manner. This is a natural and, I think, proper development in the history of Peterhead Bay. As I said on the Second Reading of this Bill, if other harbours in Scotland find themselves in similar circumstances, then the same procedures can be followed without the necessity for primary legislation.
On Question, Bill read a third time.
The Earl of Mansfield: My Lords, I beg to move that this Bill do now pass.
Moved, That the Bill do now pass.—(The Earl of Mansfield.)
On Question, Bill passed, and sent to the Commons.

Fire Service College Board (Abolition) Bill [H.L.]
Bill read a third time and passed; and sent to the Commons.
Sex Discrimination (Amendment) Bill [H.L.]
Bill read a third time and passed; and sent to the Commons.

Social Security (Contributions) Bill
3.37 p.m.
The Parliamentary Under-Secretary of State, Department of Health and Social Security (Lord Elton): My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.
Moved, That the House do now resolve itself into Committee.—(Lord Elton.)
On Question, Motion agreed to.
House in Committee accordingly.
[The LORD ABERDARE in the Chair.]
Clause 1 [Increase in contributions]
Lord Bruce of Donington Lord Bruce of Donington moved Amendment No. 1:
Page 1, line 13, leave out ("8÷75") and insert ("8÷4").
The noble Lord said: I beg to move the amendment on the Marshalled List which stands in my name and in that of my noble friend Lady Jeger. It may be convenient if Amendments Nos. 1, 2 and 3 were taken together since they all refer to the same point. I should like to direct your Lordships' attention to Amendment No. 2, the text of which ends with the figure 3. That figure should be 2÷85. This was so notified to the Public Bill Office, but unfortunately has been reproduced as "3÷0". With the leave of the Committee, I should like permission for that figure to be altered to 2.85.
The purpose of this amendment is to eliminate from the increase in contributions that part of the increase that relates to a proposed contribution to employment protection by the employee who pays at Class I rate. The reasons for moving this are clear. The Redundancy Payments Act which was passed by a Labour Government in 1965 was one of the most revolutionary measures to be passed in Parliament. It removed a very great sense of insecurity, of which those who remember the pre-war years will be very well aware. In the pre-war years unemployment, in addition to bringing that sense of despair, futility and frustration that still attends it today, also carried with it a very considerable financial hardship indeed. To be unemployed in those days meant being dependent on unemployment benefit as it then existed; and I think it has been universally agreed since the end of the war that that did not meet the justice of the situation.
It involved physical hardship. In many cases it involved the imposition of means tests and all those measures that the state at that time thought it necessary to impose upon those whose bad fortune it was to

1065
become out of work. Following the war my own party and the party opposite as well—at any rate in the initial stages—took a different view altogether. In the first place, both the great parties of the state pledged themselves. I do not like to use the words "pledged themselves", because these days people pledge themselves to do a number of things which they subsequently repudiate; but in those days I think they meant it. They pledged themselves to work for the maintenance of full employment.
Even so, unemployment following redundancy could still be a grave financial hardship, and it was therefore decided, and was so enshrined in the Bill in those days, that people who became redundant after a certain period of service—and there was much debate in another place and this place as to how long that time should be—should he entitled to a redundancy payment fixed in accordance with certain rules that were set out in the original Act. It was quite right that that should be so, and it is quite right that it should continue to be so.
Over wide sections of industry there are those who are not liable to Class 1 contributions in the same way or subjected to the same harsh financial disciplines. We have the phenomenally modern times of the golden handshake: when people become redundant at board level or at very high executive levels in the company or concern of which they happen to be members, it has now become almost the rule for them to be awarded astronomical sums because the company is deprived of their services. When one looks at some of the figures in recent press reports of proposed redundancy payments one wonders how industry can stagger along at all without the wizardry that these people must have imparted to the managements of their companies while they were still on the board. Indeed, measured by the level of redundancy payments —because that is what they are—one wonders whether British industry can be inefficient at all. These very large sums have been awarded over the past few years. I mention this point to put the whole question of redundancy payments as it applies to this Bill in perspective.
In moving the amendment, we are not asking for the moon; we are asking merely for justice. It was a cardinal principle of the original Act that the contributions towards redundancy should be made in part by the employer and in part by the state—in part by the Government. The employee, himself or herself, should not bear any part of that cost, save of course in the role as a payer of income tax, of a one-time payer of purchase tax and now of course of value added tax, of excise duties and all the rest of it, by which one contributes directly to the funds of the state. It was not anticipated at that time to be a matter of justice that employees should contribute as part of their national insurance contribution any money towards what is sometimes euphemistically referred to as the redundancy fund. The noble Lord will undoubtedly explain to us in due course the whereabouts of this redundancy fund and its constitution.
The original rules were passed at a time when unemployment was very largely what we would normally term in the economic sense as of a frictional kind.
There was no very large core of unemployment and no prospect of the levels of unemployment that we have today. So the principle was—and in our view should remain—that the employee, not being responsible for his own redundancy should not have that responsibility laid on him. Redundancy is a matter which is directly in the hands of his employer and, in the sense of the direction of state policy that has a bearing on redundancy, the responsibility of the state.
Now we have the new principle that the employee shall be required to contribute to the redundancy fund out of which eventually, should he become redundant within the terms of the Redundancy Payments Act 1965 and therefore subject to its sections, he may be paid. I should like to hear from the noble Lord what justification there now is in imposing a burden on the employee which did not exist before. What has changed in the principle itself? It is still true that the employer, either the employer or the firm, is responsible for the redundancy.
It is still true that the Government of the day, of whatever political complexion, in its direction or lack of it creates the climate in which firms may find it necessary to make people redundant. Why now should the employee be required to pay? What great new moral and social principle is involved? What is the justification—and it will have to be a detailed and reasoned one—for the departure from the original principle? It is one of some significance. According to the Actuary's Report (Cmnd 8443) at page 6, some £402 million is going to be raised from employees during the tax year 1982–83 for this purpose. It is therefore not a matter of insignificance.
We from our point of view can see no justification for this, and of course there is the political aspect of it as well. The political aspect is that the stated policies of' Her Majesty's present Government, as set out in their own election manifesto, enlarged upon very picturesquely by most of the media in their support and further elaborated by very vivid speeches from the right honourable lady the Prime Minister and many of her supporters, advocated a policy of the wage-earner being left a greater proportion of his weekly wage in his pocket. The term used was "fructify". That was a prospect that I must say must have commended itself to the great mass of employees throughout the country.
Indeed, as I indicated on Second Reading—and I am quite prepared to elaborate on it in some detail if required—even before this latest impost, the position was that, whatever the marital status, whatever the number of children below and above 16 in a family, whatever the level of earnings—whether they were half the average, average, one and a half times the average or twice the average—whatever the grade or the type of family, even now before this impost comes into operation, every grade of Class I employee is in fact, taking taxation and national insurance contributions together, paying a far greater proportion of his income into taxation and national insurance contributions than he or she did when the Government came into office.
There are no exceptions; and so there is a question of honouring the election manifesto which is waved in front of our eyes at all convenient opportunities. I should have thought there would have been some very red faces and much sincere argument at Cabinet level, whatever the degrees of humidity of Cabinet

1067
members, as to whether it would be proper and indeed honourable to introduce a measure of this kind. But so it is, and we on this side of the Committee take the view that this is an impost that should not be made. It lacks any equitable justification; it lacks any moral justification; it lacks any sense of justice; and above all it has been expressly repudiated by direct inference in the manifesto of the party opposite. I beg to move.
Lord Banks: I should like briefly to support the amendment. The noble Lord, Lord Bruce of Donington, has made it clear that employees have not previously been required to contribute to the redundancy fund, and I believe there is a clear distinction and difference between a national insurance scheme and compensation. Redundancy payments are not an extension of unemployment benefit, and the victim or potential victim is not usually expected to contribute to his own compensation or potential compensation. If the Government were to say they wanted to make redundancy payment a part of the national insurance scheme, we could then discuss that proposition. I would wish to oppose it, but I would regard it as more logical than the present proposal. I think it is wrong to exact a contribution in this way.
Lord Elton: Amendments Nos. 1, 2 and 3 together are designed to remove from the increased contribution proposed in the Bill that proportion intended to go to the redundancy and maternity funds, and the noble Lord, Lord Bruce of Donington, has made that abundantly clear. In the Bill, Clause 1(2) applies an increase of 1 per cent. to the employee's share of Class I contributions and 0÷35 of this, as I said on Second Reading, is intended for the fund. This applies to the generality of employed people. Opted-out married women and widows are separately dealt with by regulation, and the noble Lord's second amendment, to which he spoke but which he did not, I think, elucidate, is intended to apply a similar reduction to their contribution—and in effect it does apply, because the noble Lord has corrected the figure in the Marshalled List.
The first two amendments strike at that part of the Bill which raises the money. Amendment No. 3 strikes at Clause 3(3), which is the part of the Bill which allocates it. The loss of revenue to the redundancy fund which would be caused by the amendments would be £353 million in 1982–3. The very sharp increases in redundancies over the past year or so have meant heavy calls on the redundancy fund. The total number of payments made in 1981 was about 888,000, including insolvency payments, as compared with 552,000 in the whole of 1980. Although the indications are that the peak has now passed, our estimates show that 0÷35 per cent. is the minimum increase needed to bring about a reasonable reduction in the fund's deficit during 1982.
The noble Lord asked where and what the fund was. The Department of Employment receives income from the Department of Health and Social Security which it pays out to employers when claims are made. The question of what happens to a surplus, to which I was about to address myself, does not at the moment arise because at present the Department of Employment has regularly to borrow to be able to cover the payments. So, if the fund exists, it is in deficit, if the
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noble Lord wants to look at it in concrete terms. Without additional funding from contributions, the fund would not keep within the statutory borrowing limits within which it is already operating.
During Second Reading I emphasised the need to restrict to a minimum additional burdens upon employers. At present 59 per cent. of the redundancy payments made to employees is borne by the individual employer and the remaining 41 per cent. is made up from the redundancy fund, which is itself entirely funded by employers, with no assistance at present from employees.
The redundancy fund is an insurance scheme. It insures employed workers against the loss of their work. It provides them with a useful capital sum at a time of very great difficulty. It does not operate for the benefit of employers as a group; it protects their employees. Yet up till now 100 per cent. of the money has had to be found by the employer. The law has required him to do so.
The Bill changes the law and requires the worker to contribute to that protection. The protected person is being required to contribute to his own protection—not to pay for it, but to contribute to it. The lion's share of the contribution will still come from the employers, and the employees are being asked to pay a smaller share: about one-quarter.
Noble Lords opposite speak as if this were the introduction of some great new principle. Indeed, the noble Lord, Lord Bruce of Donington, almost used those exact words. He asked what was the great new principle or philosophy involved. I can see none. They speak as if to pay even part of the premium of a policy of which one was the beneficiary was new to their experience. On Second Reading it was said that employees would he paying for their own redundancy. That is a colourful and captivating phrase, but it is utterly misleading. In so far as their contribution will reduce the burden which employers would otherwise have to bear, it is to that small extent the exact opposite of the truth. Their contributions make their redundancy, by that fractional amount, less likely—not more.
To describe paying a part of one's own insurance premium in the terms which noble Lords opposite have used may seem odd. What I find odder is their whole reaction to this issue. If it is all right for employees to contribute towards their benefit during unemployment and throughout unemployment, I do not see the logic, to which the noble Lord, Lord Banks, appeared to allude, in objecting to their contributing towards a larger benefit at the beginning of unemployment. It seems to me that there is neither morality nor logic in what noble Lords opposite are trying to convince us of—
Lord Davies of Leek: The noble Lord has used the word "logic". I cannot see any logic in a man having to contribute towards a redundancy for which he himself is not responsible.
Lord Elton: It is always a pleasure to give way to the noble Lord, because it throws a new perspective, if I may so put it, on an argument. I was not aware that most of the catastrophes against which I personally insure myself were ones to which I had contributed

1069
either. I do not, therefore, see the force of the argument.
I think that I should mention very briefly the opted-out married women and widows, if only to say that, even after the increases proposed in the Bill, of which noble Lords opposite would have us remove a proportion, the difference between the standard Class 1 rate and the reduced rate will be 5÷55 per cent., compared to the difference of 4÷5 per cent. which applied from April 1978, from which point women had to consider their position in the light of the new pension scheme. They do not have a worse position than they had before.
The last leg of this composite amendment, as I understand it, is to remove from the Bill the exemption which it provides to the Secretary of State from making a review of the level of contributions. The logic of that, I understand—the noble Lord will correct me if I am wrong—is that noble Lords opposite think that the work should be done again. They may wish to link this with their next amendment, in which case the noble Lord will, perhaps, signal to me. But as he mentioned the first three amendments, it is worth saying that the Act provides for the Secretary of State to review the level of contributions. If you provide an exemption, as the Bill does, then the Bill has to carry out the review and that it has done. The noble Lord wishes to sabotage this review and, therefore, to require the Secretary of State to make one at a later stage. But the three issues hang together. What the noble Lord is saying is that people should not contribute to their protection against redundancy. I think that the way in which it is proposed in this Bill is proper, reasonable, just and, above all, necessary. I advise your Lordships to reject this amendment.
Lord Underhill: Before my noble friend replies, would the noble Lord the Minister agree that there are a number of benefits which are now payable and which are not on the insurance principle? We have discussed in this House the question of disablement benefits. If one accepted the Minister's logic, then all of us should contribute towards a disablement fund, but we do not. The redundancy payment was introduced in order to cushion the effects of possible long-term unemployment. I see no reason whatever why we should try to adopt logic in this case, when the principle has been agreed in respect of quite a number of other deserving cases.
Lord Elton: The noble Lord and I are arguing on opposite sides of the same coin. It is not necessary that a benefit should be contributory. There are many that are not. Equally, it is not necessary that an insurance policy should attract no payments of premium from those who benefit from it. There is no new philosophy involved. At the outset, when the Redundancy Payments Act was brought into force, it was expected to be self-financing from contributions. The noble Lord, Lord Bruce of Donington, was saying that it would be largely supported by the state. We are not changing anything dramatically. I accept that noble Lords feel that these are very hard times and that they have to speak out, but we are not
1070
making a fundamental departure of principle and I again urge your Lordships to resist this amendment.
4.5 p.m.
Lord Bruce of Donington: In response to the first point which the noble Lord put to me, I would much prefer, with his co-operation, to discuss Amendment No. 6 on its own, rather than mix it with this one. The noble Lord said that the taxing—because that is what it amounts to—of employees for the first time in connection with redundancy payments is not particularly revolutionary or unique. I should have thought that even he would have realised that the imposition of this extra burden on employees for the first time was rather unique. By definition, the first time always tends—I hope that I have the noble Lord, Lord Boyd-Carpenter, with me—so long as it is not followed by another one, to be unique. The noble Lord ought to explain why there has been a departure from the principle, but this he has not done at all.
I observed that in the course of his remarks— and the noble Lord always puts his points most courteously —he rather gave the impression that employers bore the whole burden of redundancy. I think that on reflection, and after taking into account the rebates which an employer receives from the Government, the noble Lord will agree that that was an impression which was slightly short of accurate. He bears it in the first instance, but, ultimately, he does not bear the whole. The Government and the state bear a proportion. It is quite clear from what the noble Lord has already said, that there is no intention on the Government's part to concede any part of the case that has been put forward by my noble friends and myself. In those circumstances, we shall have no alternative but to divide the Committee upon the amendment.
Lord Boyd-Carpenter: Before the noble Lord does that, I wonder whether he would answer a question which has been puzzling me throughout this short debate. He seems to see here a great question of principle. He has a gift for identifying questions of principle, which are not always so clearly apparent to other noble Lords. He accepts, as I understand it, that it is right that the Class 1 contributor should contribute some part of his national insurance contribution to pay for unemployment benefit, to help him should he have the misfortune to become unemployed. Having accepted that, why is it so wrong that that Class 1 contributor should also contribute towards the cost of another benefit which is also directly related to the contingency of becoming unemployed; that is, to the redundancy payment?
Unemployment benefit and redundancy payment are both humane and civilised methods of cushioning the impact of the misfortune of unemployment. For many years, it has been accepted that unemployment benefit is something for which you contribute. It is perfectly true that when the redundancy fund was set up, it was set up on a different basis. But the two payments have basically—if not the same—a concurrent objective, and it is certainly difficult to see why, accepting the contributory basis for the one, applying it to the other is apparently such a terrible outrage.
Baroness Phillips: In so far as the noble Lord who has just spoken is an expert, would he not agree that employees certainly feel—and I assume wrongly—that the redundancy payment which they receive, as distinct from unemployment benefit, is, generally, physically given by the employer? It literally is paid by the employer, so they surely assume—quite wrongly, apparently—that this is coming from a contribution directly from the employer and the state.
Lord Boyd-Carpenter: The noble Baroness is kind enough to attribute to me expertise which I certainly do not claim. Surely, with very great respect to her, that is a very weak argument. She is admitting that the employee is under an illusion in believing that his redundancy payment comes solely from his employer. Surely the existence of that illusion is one of the weakest possible arguments against making a provision of this sort and making this benefit contributory. The point is very easily dealt with by explanation. In most well-run companies with which I have any connection I know that the general systems of social and other benefits are explained with considerable clarity, sometimes with reiteration, to those concerned. And those I have dealt with understand it perfectly well.
Baroness Wootton of Abinger: It can well be argued that the whole financing of the national insurance system is grossly unjust. The tax upon the employee is a poll tax. It takes no account whatever of his income. It is a poll tax merely because he is an employed person. Therefore it is extremely undesirable to extend this form of taxation to more and more ultimate compensations or benefits. It should be strictly confined to the things for which it was originally introduced. Even then it was not a good method.
Lord Elton: I ought to remind noble Lords that the calculations which we have been discussing are made on the basis of a percentage of income.
Lord Banks: In answer to the noble Lord, Lord Boyd-Carpenter, is not the difference that people regard redundancy payment as compensation for loss of their jobs, which varies according to the length of their service, whereas a national insurance payment is designed to provide the minimum to live on if you should be in that unfortunate circumstance? The earnings-related supplement has now gone, but even the earnings-related supplement was merely designed to cushion the immediate effect of unemployment. The idea of a redundancy payment is that there should be some compensation for the fact that you have lost your job. To have to contribute to it seems to undermine that principle of compensation.
Lord Elton: I should like to put one other answer to the noble Lord, Lord Bruce of Donington, because it would not be right to let the matter go by default. He referred to rebates, which puzzled me somewhat. However, I deduce that he is referring to what an employer gets back after he has made a redundancy payment to a redundant employee. That money comes from the redundancy fund, which at present is subscribed 100 per cent. by employers. It does not come
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from the Government. Everything I have said is right, and I stand on it.
4.14p.m.
On Question, Whether the said amendment (No.1) shall be agreed to?
Their Lordship divided: Contents, 65; Not-Contents 115.

DIVISION NO. 1

CONTENTS

Airedale, L.

Kaldor, L.

Amherst, E.

Kennet, L.

Ardwick, L.

Kilmarnock, L.

Aylestone, L.

Leatherland, L.

Balogh, L.

Listowel, E.

Banks, L.

Llewelyn-Davies, of Hastoe, B.—[Teller.]

Beaumont of Whitley, L.

Beswick, L.

Longford, E.

Birk, B.

Lovell-Davis, L.

Bishopston, L.

McCluskey, L.

Blease, L.

Milverton, L.

Boston of Faversham, L.

Oram, L.

Briginshaw, L.

Peart, L.

Brockway, L.

Perry of Walton, L.

Bruce of Donington, L.

Phillips, B.

Byers, L.

Ponsonby of Shulbrede, L.—[Teller.]

Cledwyn of Penrhos, L.

Collison, L.

Roberthall, L.

Cooper of Stockton Heath, L.

Seear, B.

David, B.

Sefton of Garston, L.

Davies of Leek, L.

Shinwell, L.

Donaldson of Kingsbridge, L.

Stewart of Alvechurch, B.

Stewart of Fulham, L.

Ewart-Biggs, B.

Stone, L.

Foot, L.

Strabolgi, L.

Gaitskell, B.

Tordoff, L.

Gladwyn, L.

Underhill, L.

Gosford, E.

Wade, L.

Hampton, L.

Wedderburn of Charlton, L.

Hanworth, V.

Wells-Pestell, L.

Jacques, L.

White, B.

Jeger, B.

Winstanley, L.

Jenkins of Putney, L.

Wootton of Abinger, B.

John-Mackie, L.

Wynne-Jones, L.

NOT-CONTENTS

Abinger, L.

Effingham, E.

Airey of Abingdon, B.

Ellenborough, L.

Alport, L.

Elton, L.

Ampthill, L.

Ferrier, L.

Auckland, L.

Fortescue, E.

Avon, E.

Fraser of Kilmorack, L.

Bathurst, E.

Gainford, L.

Bellwin, L.

Glanusk, L.

Belstead, L.

Glenkinglas, L.

Boyd-Carpenter, L.

Gormanston, V.

Caccia, L.

Greenway, L.

Campbell of Alloway, L.

Gridley, L.

Cathcart, E.

Grimston of Westbury, L.

Cockfield, L.

Haig, E.

Cork and Orrery, E.

Hailsham of Saint Marylebone, L.

Cowley, E.

Craigavon, V.

Harvey of Prestbury, L.

Cromartie, E.

Harvington, L.

Cullen of Ashbourne, L.

Hayter, L.

Daventry, V.

Henley, L.

Davidson, V.

Hives, L.

Denham, L.—[Teller.]

Hornsby-Smith, B.

Derwent, L.

Hunt of Fawley, L.

Dilhorne, V.

Hylton-Foster, B.

Drumalbyn, L.

Inglewood, L.

Duncan-Sandys, L.

Jessel, L.

Dundee, E.

Kinloss, Ly.

1073

Kinnaird, L.

Rankeillour, L.

Kinross, L.

Redcliffe-Maud, L.

Lane-Fox, B.

Renton, L.

Lindsey and Abingdon, E.

Rodney, L.

Linlithgow, M.

St. Davids, V.

Long, V.

Sandford, L.

Lucas of Chilworth, L.

Sandys, L.—[Teller.]

Lyell, L.

Savile, L.

Mackintosh of Halifax, V.

Selbourne, E.

Macleod of Borve, B.

Selkirk, E.

Mancroft, L.

Sempill, Ly.

Mansfield, E.

Shannon, E.

Marley, L.

Skelmersdale, L.

Massereene and Ferrard, V.

Soames, L.

Mersey, V.

Spens, L.

Monckton of Brenchley, V.

Stamp, L.

Strathspey, L.

Mottistone, L.

Sudeley, L.

Mowbray and Stourton, L.

Terrington, L.

Thomas of Swynnerton, L.

Moyne, L.

Thorneycroft, L.

Murton of Lindisfarne, L.

Trumpington, B.

Newall, L.

Tweedsmuir, L.

Noel-Buxton, L.

Vaux of Harrowden, L.

Norfolk, D.

Vickers, B.

Northchurch, B.

Vivian, L.

Nugent of Guildford, L.

Wakefield of Kendal, L.

Orkney, E.

Westbury, L.

Orr-Ewing, L.

Willoughby de Broke, L.

Pender, L.

Wynford, L.

Platt of Writtle, B.

Yarborough, E.

Portland, D.

Young, B.

Resolved in the negative, and amendment disagreed to accordingly.
[Amendment No. 2 not moved.]
On Question, Whether Clause 1 shall stand part of the Bill?
4.23 p.m.
Baroness Jeger: I will speak as briefly as is consistent with the importance of this clause and explain why we arc moving to leave out Clause 1. In the first place Clause 1 increases workers' contributions at a time when there are many other increases in the cost of living for working people in this country. We accept that the Treasury needs more money and we all know why the Treasury needs more money; because the unemployed under this Government's policies have now reached the figure of 3 million and it looks like going higher. Therefore, we are all the time narrowing the income base for social security benefits, because the fewer the number of people we have at work, the Government are saying, the more per head they have to pay, at the same time as Government policies are increasing the number of those people who are not at work.
I have to ask the noble Lord the Minister this. Are we to expect that when unemployment goes up to 4 million the contributions will have to go up again from those fewer and fewer people who remain at work? It would be quite right for the noble Lord the Minister to ask us what the answer is, but I would be out of order to expand on the economic policies which I believe could improve the situation. In so far as it is relevant to this Bill, most of us think that increases in income tax are much fairer than increases in national insurance contributions, because the former arc more closely related to income, including unearned income. I take the noble Lord's point regarding the partial relationship between contributions and earnings,
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but in our view it is not as fair as the relationship between income and income tax. I would remind noble Lords opposite, if they want to know where we would get the money from, that in their first budget £1,400 million was given in tax relief to the richest 5 per cent. of the people in this country.
There has been a creeping increase, and the importance of this clause, it seems to me, is that it creates a precedent for further increases in the contribution to national insurance which workers are having to make out of their own earnings. In 1979 a worker on average earnings was paying 6÷5 per cent. of his income in national insurance. Now, and before this Bill comes into effect, the figure is 8÷75 per cent. It is the fact that we see this figure creeping up all the time that makes us feel that this is a very invidious and objectionable clause. It is also regressive and discouraging to the lowest paid.
I made the point on Second Reading, and will not labour it again, that Class I contributions has its minimum raised from £27 to £2950, which is infinitely too low to be fair. This means that if somebody on the very low wage of £29÷50 gets a rise of £1 or earns £1 a week in overtime, he suddenly has to pay out £2÷60 in national insurance contributions, which makes him worse off. As I understand the effect of Clause I, after next April anyone earning more than £35,000 a year will he paying 2÷9 per cent. in national insurance contributions, whereas a man earning £140 a week will be paying 8÷5 per cent. I know that the argument can be made that the man with the higher income will be paying more in income tax, but this Bill is about national insurance contributions and I have already tried to field that argument from the boundary; we think it is much fairer that the higher proportion of payments should be based on total income.
We are against this clause because it raises the upper limit from only £200 to £220. That is not enough, even to take care of inflation. When I asked at Second Reading whether it was a fact that someone earning £500 a week would be paying the same contribution as a neighbour earning £220 a week, I did not get an answer. I believe that I did not get an answer because the answer is, yes. The effect of Clause 1 is bound to increase these anomalies and disparities, and I hope that your Lordships' House will throw it out.
Lord Banks: The noble Baroness has pointed out that the employee's contribution has gone up 6÷5 per cent. to 8.75 per cent., if we include the Bill's proposals, during the time of this Government. I would oppose the 1 per cent. increase to which this clause gives effect for three reasons: first, because I do not think there should be an increase in the employee's contribution in a scheme of this kind without a balancing contribution from the employer. I think the way to help employers, if it is felt they need special attention, is through a reduction in national insurance surcharge. Secondly, I do not agree with a contribution being made by employees to the redundancy fund, and we have just discussed that. Thirdly, I do not agree with a contribution being extracted from employees to offset a reduction in the Treasury supplement, and I imagine we shall discuss that when we come to the question of whether Clause 2 should remain in the Bill. So for

1075
those reasons I would support what has been said by the noble Baroness, Lady Jeger.
Lord Boyd-Carpenter: In moving this amendment or objecting to Clause 1 standing part, the noble Baroness opposite really repeated, rather more briefly, what she said on the Second Reading of the Bill. I think we know her views. I would only, if I may, put this to her. Her view is quite simple; given the heavy calls on the fund at the moment, the additional money required—and she accepts of course that additional money is required—should be raised out of national taxation, and particularly out of direct national taxation. I wonder if she has considered this thought. The essence of the national insurance scheme from the beginning has been that it has been a basically contributory scheme that because people contribute they have been entitled to their benefits as of right. There has always been an Exchequer contribution, and we may come to another amendment dealing with the quantum of that. But it has basically from the beginning, back to Lord Beveridge, been a contributory scheme, and that has been the justification for the payment of benefits as of right without means test. If the noble Baroness pushes too hard the idea that the national insurance scheme should become taxation supported, she will undoubtedly generate a demand for the erosion of the" benefit as of right " concept. She will succeed in destroying—I agree with her it has been damaged, but it has not been eliminated—the insurance concept. I think she will have done a great deal of harm to the whole social security system of this country.
I only add one other comment. I think she suggested in an aside that, apart from financing the additional costs from taxation, she would like to see the level of income which attracts contribution moved even further up the income scale than the Bill proposes. I wonder whether she has thought that out. Certainly as regards the retirement pension that would carry the corollary of increasing the retirement pension of the better-off. First of all, that is a rather doubtful proposition from the point of view of a national scheme. Secondly, it would be considered a very serious erosion into the private pensions schemes which all progressive companies maintain, because if people are having to contribute more by way of national insurance—and the bulk of the contribution is to pay for the retirement pension; that is where the weight of the cost lies—it becomes more difficult to maintain the private or occupational or company pension schemes, the development of which has been, I hope she will agree, one of the good and wholesome developments of the last few years. Therefore, though I can understand her feeling of anxiety about an increase in these contributions—which undoubtedly are heavy, there is no getting away from that—I wonder whether she has really thought out what would be the very serious damaging consequences of doing what she has suggested as an alternative.
Baroness Jeger: I hope the noble Lord is not chiding me for saying things that I said on Second Reading. That just proves the consistency of my argument, and it would be remarkable if I said something different today from what I said then. I feel it would tire
1076
the House if we were to go into a long philosophical debate about the relationship between income tax and national insurance. There is a great deal of academic thought going into it. There is thinking going on in all the political parties about the relationship between these contributions. I do not think it is within the scope of this Bill, and certainly not of this amendment, to deal with it further. I would just leave the noble Lord with a repetition of my last point, that I find it unacceptable that somebody earning £500 should pay into the national insurance fund the same as somebody earning £220.
Baroness Gaitskell: May I remind the House that when this Government were elected they set a pattern regarding taxation and which sections of the community had to pay. They said they would cut taxes. They therefore proceeded to cut the taxes of the rich and followed this up by taxing the poor. This is absolutely true—it is no good the noble Lord shaking his head. I often shake mine. But I take issue with him. That is exactly what they did. They cut the taxes of the rich and followed it up by taxing the benefits of the poor. The pattern is still maintained in this Bill.
Lord Elton: If I may start with the jumping-off ground of the address of the noble Baroness, Lady Jeger, the point was made that the Treasury needs more money because of unemployment. To put this debate into its proper perspective, I should remind the Committee that in the year 1982–83 it is expected that only £13 million extra is going on unemployment and nearly £1,500 million more will be spent on retirement pensions. I think that statement puts this issue in the right context.
The second thing I would say is that the gravamen of her speech—and how could it be otherwise this week?— was directed at the unemployment figures. These are sad figures; they are indeed bad figures. I do not seek to disguise the fact. It does not perhaps, in that context, matter that in Germany, in the United States, in the Netherlands, in Sweden, in Canada, the rate of unemployment is increasing faster than it is here. In the United States they lost 1 million jobs in the three months up to December. But that is not our tragedy; it is the 130,000 jobs lost in this country since the December count that this House and this Government are concerned with. We should not entirely forget the others; we are all in the same economic ocean if not the same economic boat. Anybody who thinks that recessions in another part of the world do not affect us is like somebody who last week thought that the snow fell on his back garden but not on his neighbour's. Let us, therefore, look at our own predicament. It is a bad one.
However, noble Lords who are concerned with the redundancy fund are concerned with the future. Those who sit opposite say, almost in so many words, that we are living in a nightmare and should therefore be looking for the door. There are signs—short-time working is down; the numbers are less than one-third of last year's low. Overtime working is up, one-sixth higher than in the first half of last year. The number of unfilled vacancies is up. Our industrial performance and our levels of employment are linked, rather like a tractor and a trailer; the one leads the other wherever it

1077
goes, uphill or down. The figures I have given are statistics about the work people are doing now. The work they are going to do depends on the way industry is performing, and it is beginning to improve. Output is rising; it is 2 per cent. up on last year's low. The tractor has begun to climb the hill ahead; the trailer, of course, is still coming down the hill behind. Yes, there will be more unemployment. Yes, there will be more redundancies. But we do need this provision in this Bill. To take it away would be a cruel deprivation.
So I believe that the strangest thing about noble Lords opposite is that at one and the same time they are saying that we are heading for permanent, multiplying, apocalyptic unemployment and seeking to exclude working people from contributing to their insurance against that eventuality; and complaining in the person of the noble Baroness, Lady Wootton of Abinger, that the contributions are not entirely related to income and in the person of the noble and charming Baroness, Lady Jeger, both that they are linked because of the incident of contributions at lower rates and that they are not linked because of the same rates paid by her two neighbours earning £200 and £500 a week. She is right in that—I am sorry that I did not rise to that bait on Second Reading. Falling employment is a difficulty for the nation and a tragedy for many individuals. We are seeking to provide for that and for many things in this Bill and this clause must remain a part of it.
Lord Bruce of Donington: I want to ask noble Lords opposite whether they still seriously think that it is right, in all the circumstances, that an increased burden in this respect should be placed upon employees, particularly in the light of the taxation implications which sometimes tend to get overlooked? It is, of course, I believe, generally realised that employers are entitled to deduct their proportion of the employees' national insurance contribution for income tax purposes and a tax relief is therefore obtained upon it. I do not complain of that. However, when it comes to the question of old age pensions we find that these—and as from, I believe, April 1983 unemployment pay—will be subject to taxation even though under Clause 119 of the Income Tax Act 1970, as amended by subsequent Finance Acts, the contribution that the employee pays is not allowed for tax purposes, is not deductible for tax purposes even though ultimately—as of now—the retirement benefit is taxed. Perhaps the noble Lord, Lord Cockfield, will correct me but I think that as from April 1983 the present intention is to tax unemployment benefit as well.
Let us contrast that situation with the other situation that obtains. Let us take the provisions of Section 127 of the Income Tax Act 1970 by virtue of which the premiums paid by better-off employees for annuity policies can be deducted 100 per cent. from their tax assessments. Their annuities, which they ultimately receive and which substitute in effect for pensions, are taxed, but unlike the contribution of the employee towards his retirement pension, and as from April 1983 his unemployment pay, he is not permitted to deduct the national insurance contribution for the purposes of determining his tax liability. So with a person on, for example, a current income of £10,000 per annum, on the assumption that he is of the average age and is
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not in one of the older age groups, he is entitled to take out an annuity policy and pay £1,750—in fact, 17½2 per cent. is the normal figure. There are grades according to age which I believe are determined by Section 128 of the Income Tax Act 1970 as amended by subsequent Finance Acts. Such a person can deduct from his total income during the year in which he pays the premium £1,750 and he can deduct that at the highest rate of tax that he pays; on the assumption that he has investment income in addition to his £10,000 salary he can in fact deduct it at a higher rate. That does not seem to me—I do not know how it seems to your Lordships—to be quite fair.
I look forward to an intimation from Her Majesty's Government, when we are considering this clause that puts the extra burden on employees, as to whether, when the Budget resolutions come up and when the Budget is being prepared and all kinds of pre-election largesse is being handed out, they will seriously consider whether it can be done, whether they will bring forward proposals for employees' national insurance contributions to be an allowable deduction for tax purposes. That would make it absolutely fair. In the meantime, I do not think—and we on this side of the Committee do not think—that the situation is fair at this stage and for the reasons that have been so admirably outlined by my noble friend Lady Jeger we do not think that this clause makes any sense or is in any way justified and we shall vote against it as a whole.
4.46 p.m.
On Question, Whether Clause 1 shall stand part of the Bill?
Their Lordships divided: Contents, 112; Not-Contents, 61.

DIVISION NO. 2

CONTENTS

Abinger, L.

Ellenborough, L.

Ailesbury, M.

Elton, L.

Airey of Abingdon, B.

Ferrier, L.

Alport, L.

Fortescue, E.

Ampthill, L.

Fraser of Kilmorack, L.

Avon, E.

Gainford, L.

Balfour of Burleigh, L.

Glanusk, L.

Bathurst, E.

Glenarthur, L.

Bellwin, L.

Glenkinglas, L.

Belstead, L.

Gormanston, V.

Bessborough, E.

Gowrie, E.

Birdwood, L.

Gridley, L.

Boyd-Carpenter, L.

Grimston of Westbury, L.

Caccia, L.

Haig, E.

Campbell of Alloway, L.

Hailsham of St. Marylebone, L.

Campbell of Croy, L.

Cathcart, E.

Halsbury, E.

Clitheroe, L.

Henley, L.

Cockfield, L.

Hives, L.

Colwyn, L.

Hornsby-Smith, B.

Cowley, E.

Hunt of Fawley, L.

Craigavon, V.

Hylton-Foster, B.

Cromartie, E.

Killearn, L.

Cullen of Ashbourne, L.

Kinloss, Ly.

Daventry, V.

Kinnaird, L.

Davidson, V.

Kinross, L.

Denham, L.[Teller]

Lane-Fox, B.

Dilhorne, V.

Linlithgow, M.

Drumalbyn, L.

Long, V.

Duncan-Sandys, L.

Lucas of Chilworth, L.

Dundee, E.

Lyell, L.

1079

Mackintosh of Halifax, V.

Sandys, L.[Teller].

Macleod of Borve, B.

Savile, L.

Mancroft, L.

Selborne, E.

Mansfield, E.

Selkirk, E.

Marley, L.

Sempill, Ly.

Massereene and Ferrard, V.

Skelmersdale, L.

Soames, L.

Melville, V.

Spens, L.

Mersey, V.

Stamp, L.

Monckton of Brenchley, V.

Strathspey, L.

Mottistone, L.

Sudeley, L.

Mowbray and Stourton, L.

Swinfen, L.

Murton of Lindisfarne, L.

Terrington, L.

Newall, L.

Thomas of Swynnerton, L.

Noel-Buxton, L.

Thorneycroft, L.

Norfolk, D.

Trumpington, B.

Northchurch, B.

Tweedsmuir, L.

Orkney, E.

Vaux of Harrowden, L.

Orr-Ewing, L.

Vickers, B.

Pender, L.

Vivian, L.

Platt of Writtle, B.

Wakefield of Kendal, L.

Portland, D.

Westbury, L.

Rankeillour, L.

Willoughby de Broke, L.

Renton, L.

Wynford, L.

Rodney, L.

Yarborough, E.

St. Davids, V.

Young, B.

NOT-CONTENTS

Airedale, L.

Kaldor, L.

Amherst, E.

Kennet, L.

Ardwick, L.

Kilmarnock, L.

Aylestone, L.

Leatherland, L.

Balogh, L.

Llewelyn-Davies of Hastoe, B.

Banks, L.

Lockwood, B.

Beswick, L.

Longford, E.

Birk, B.

Lovell-Davis, L.

Bishopston, L.[Teller.]

Milverton, L.

Boston of Faversham, L.

Oram, L.

Briginshaw, L.

Peart, L.

Brockway, L.

Phillips, B.

Bruce of Donington, L.

Pitt of Hampstead, L.

Byers, L.

Ponsonby of Shulbrede, L.[Teller.]

Cledwyn of Penrhos, L.

Collison, L.

Roberthall, L.

Cooper of Stockton Heath, L.

Sefton of Garston, L.

Crowther-Hunt, L.

Segal, L.

David. B.

Shinwell, L.

Davies of Leek, L.

Stewart of Alvechurch, B.

Donaldson of Kingsbridge, L.

Stewart of Fulham, L.

Elwyn-Jones, L.

Stone, L.

Gaitskell, B.

Strabolgi, L.

Gladwyn, L.

Wade, L.

Gosford, E.

Wedderburn of Charlton, L.

Gregson, L.

Wells-Pestell, L.

Hanworth, V.

White, B.

Houghton of Sowerby, L.

Winstanley, L.

Jeger, B.

Winterbottom, L.

Jenkins of Putney, L.

Wootton of Abinger, B.

John-Mackie, L.

Wynne-Jones, L.

Resolved, in the affirmative, and Clause I agreed to accordingly.
Clause 2 [Alteration of Treasury supplement to contributions]:
4.55 p.m.
On Question, Whether Clause 2 shall stand part of the Bill?
Lord Bruce of Donington: I beg to move that Clause 2 be deleted from the Bill. We on this side of the Committee made it quite clear on Second Reading that we objected to the percentage contributed to the fund by Her Majesty's Government being reduced from 14.5
1080
per cent. to 13 per cent. I shall not elaborate on the arguments that we used then. But the noble Lord will remember that on Second Reading I pointed out that the whole structure of the fund to which these contributions are supposed to be made was to some extent shrouded in mystery.
According to the report of the Government Actuary, there was approximately £5,000 million in the fund, and I pointed out that there were certain notional or actual interest payments made in respect of the fund. The noble Lord, Lord Cockfield, had an opportunity of considering the points that I raised on Second Reading and said that he himself thought that these were proper points to be dealt with in Committee.
Quite clearly, if there are actual funds of £5,000 million in the national insurance fund, then at first sight it may appear odd on the face of it that we should not be using them. Why make more demands on the Class I employees and, indeed, upon the self-employed if there is £5,000 million or thereabouts already in the fund? I did hazard a view, although I did not express it in very strong terms, seeking enlightenment from the noble Lord, Lord Cockfield, on this matter; I cast some doubts as to whether this fund existed at all, or as to whether it was purely a bookkeeping device, which was of assistance to the Actuary in making calculations. If there is £5,000 million in a fund—and I am talking of the term "fund" in the straight, ordinary meaning of the term—then that fund is represented by assets that are either in the form of cash held on deposit or in the form of investments. If that is so, I merely inquired what the investments were.
My inquiry as to what the investments were led directly from a reference in the Actuary's report—Command 8443, at page 6, Table 2—to investment income. I am quite sure that the noble Lord, Lord Boyd-Carpenter, who always contributes so constructively on these occasions, will agree with me that if you have an amount in an account under "income" which says "investment income", a reasonable inference to draw from that is that the income comes from investments. I think that I would carry the noble Lord with me that far.
So the question is, what are the investments? Or is it merely a device? Is it merely the case that this surplus of £5,000 million that has been built up—because it must have been a built up surplus—has not gone in a physical cash form into a fund, but has merely been paid into the Consolidated Fund and has therefore relieved the PSBR consistently over the years? I make no complaint about a particular party. I am not accusing the existing Government of any sleight of hand in this. It would apply equally to former Governments of my own political persuasion. But, if a fund has been built up of £5,000 million and there is investment income from it, and it has not been put in investments but has been put into the Consolidated Fund, then it has operated presumably —the noble Lord at the Treasury is expert on these matters—to relieve the public sector borrowing requirement in the past, and therefore has been of enormous benefit to the PSBR. I did heighten the point a little by saying that I thought that a return of 11.1 per cent. at a time when the base rate has varied between 14 and 16 seemed on the face of it to be a bit low. If this surplus existed to produce an investment

1081
income, then somebody has not managed it too well to produce an income of only 11 per cent. These are all questions that require some answers.
I have no doubt at all that the noble Lord, Lord Cockfield, will have a perfect series of replies that fit jigsaw mathematically into position; that he will be entirely convincing about the whole matter. But if it emerges, as I think it may well emerge, that the whole thing is a series of book-keeping entries, it does of course cast doubt, to put it at its lowest, upon the insurance concept to which the noble Lord, Lord Boyd-Carpenter, has made such reference, and indeed which he holds in much reverence.
If the truth really be that the fund is merely a matter of mathematical calculation, then the harsh facts of the matter are that the contributions that come in one year are merely used for the payments that are made during that year, and that any question of funding into the future backed by tangible reserve assets for them is entirely out of the question. If, on the other hand, they are represented by tangible assets, then it seems that we are getting rather a poor return on them. The noble Lord can have it whichever way he likes.
In the suspicion, however, that it is the former, may I suggest to the noble Lord that a time when the funding has shown a £5,000 million surplus appears to be an odd time for the Government to cut down their own contribution? We ourselves on this side of the House do not think it the correct thing that the Government, who are themselves largely responsible for the creation of large-scale unemployment on the scale we now have it, should relax their own contributions. In fact, there might even be a case for increasing them. I beg to move the deletion of the clause.
5.5 p.m.
Lord Banks: The Government argument for the reduction of the Treasury supplement is that expenditure on social security met from general taxation, including the Treasury supplement, has increased from 37 per cent. to 45 per cent. since 1975–76. It is true, of course, that expenditure on non-contributory benefits is only 33 per cent. of the total because the 45 per cent., as I mentioned, includes the Treasury supplement which goes towards financing contributory benefits. But there has, of course, been an increase from some 24 per cent. of the total in 1975–76 to about 33 per cent. of the total in 1980–81 in the proportion of the whole which is represented by non-contributory benefits.
During the Second Reading debate I said that the introduction of child benefit to replace family allowances, which was partly paid for by the elimination of income tax relief for children, was the major factor in this increase. I said that the increase in the cost of child benefit in 1980–81 over the cost of family allowances in 1975–76 nearly equals the cost of income tax allowances in 1975–76, so it is not really an additional cost for the Government to bear. The noble Lord, Lord Cockfield, challenged that when he came to reply. He said that the introduction of child benefit was certainly a factor, but that it was not the major factor.
The noble Lord said that he would write to me and he has done that, and I am greatly obliged to him for doing so. But I noticed that the figures which he had sent me were not at constant prices, and I think it is
1082
rather essential to have figures at constant prices if we are going to compare the situation as it was with tax allowances and family allowance in 1975–76 with the position today with child benefit.
The noble Lord raised a number of other points which I should like to go into with him, and I shall write to him. I am sure he will forgive me if I do not take up those points now, but I should like to explain to the Committee how I came to my own conclusion. I looked at the White Paper issued in March 1981, which set out the Government's expenditure plans. On page 121 there is a review of social security expenditure over the years at 1980 survey prices. That table shows for 1975–76 total non-contributory benefit expenditure of £3,673 million, and for 1980–81 a similar expenditure of £6,205 million. In other words, an increase over that period of £2,532 million.
The table also showed that child allowances in 1975–76 were £870 million; that child benefit in 1980–81 was £2,579 million. The increase there was £1,709 million out of a total increase of £2,532 million. It seemed to me in those circumstances that it was reasonable to say that child benefit was the major factor. If one looks at the similar White Paper issued a year earlier in March 1980, at page 111 we see that the value of child tax allowances in 1975–76 is shown as £1,600 million. That is at 1979 survey prices, so it is slightly different, one year different, but I felt that that was sufficiently close for one to say that that £1,600 million approximately equalled the £1,709 million, the difference between child allowances in 1975–76 and child benefit in 1980–81.
If we revert to the more recent of the White Papers, the one published in March of this year, we see with regard to supplementary benefit allowances, as distinct from supplementary benefit pensions, that as between 1975 and 1980–81 they increased by £426 million. That is largely due to the increase in unemployment, which we on these Benches would argue is at least in part due to the economic policies pursued by the Government.
If you add £1,709 million increase for child benefit and £426 million increase for supplementary benefit, you see that out of a total of £2,532 million increase, those two items contribute £2,135 million. So they form the greater part of the increase which is given as the reason why the Treasury supplement must be reduced. But why should the Treasury supplement he reduced and national insurance contributors be asked to pay more as a consequence of an increase in noncontributory benefit expenditure, the bulk of which was not really increased expenditure at all and a considerable further part of which may be said to derive from the Government's economic policies? It is because of the arguments which I have just put to the Committee that I would argue that the clause should not stand part of the Bill.
Lord Kilmarnock: I do not want to make a Second Reading speech, but before the Committee decides whether to accept or reject the clause I wish to go back a short way over recent history. The clause reduces the Treasury supplement from 14½ to 13 per cent. with a resultant benefit or saving of £260 million to the Exchequer. But that is not the whole of the story

1083
because reference to the preceding year suggests strongly that it must be part of a general strategy.
In the Social Security Contributions Act 1980, which this Bill very much resembles in its general thrust, the supplement was reduced by a whopping 3½ per cent. from 18 per cent.—at which it had stood since, I think, it was fixed at that rate by the Social Security Act 1973—to the 14½ per cent. from which it is sought to remove another 1½ percentage points today. That is a reduction of 5 per cent. in two years of this vital third leg of the tripartite system of contribution. I think we must, and have a right to, register once again our protest over this in so far as it departs even further from the Beveridge principle under which the national Exchequer would provide one-third. We are entitled to ask the Government how they are proposing to use the money they are getting in this way as they rapidly move in the direction of reducing the Treasury supplement to zero.
I cannot believe, or I prefer not to believe, that this is not just a desperate ad hoc measure to raise or save a bit of cash by hook or by crook. It has therefore occurred to me—possibly because I was feeling in a rather charitable mood—that the Government do have a strategy and that what they may be gearing themselves up to do, or paving the way for, may possibly be a reduction in the employer's surcharge. In other words, by progressively lessening the Treasury supplement to the fund, they are giving themselves some elbow-room for making a reduction in the employer's surcharge, which is of course a direct tax on employment. I realise of course that the cost of making a reduction of, say, one percentage point in the surcharge would be in the region of £1 billion. However, the £ ½billion the Treasury are saving under the Bill would certainly provide a useful tranche of any projected cut in the employer's surcharge.
I raise this not out of idle curiosity but because I am trying to understand what the Government aim to achieve by this substantial cut of 5 per cent. in the Treasury supplement to the national insurance fund over two years. We know they do not want to tax employers of labour any further, which is perfectly understandable in the present lamentable state of the labour market. It seems at least possible that they may want to listen to the CBI and other organisations which have raised their voices time and again against this straight 32 per cent. payroll tax on the employment of labour—for that is what it is; the employer's surcharge is collected along with the employer's contribution under the Social Security Act 1975, but it is paid straight into the Consolidated Fund.
The Government may well in the circumstances want to find a way of reducing this payroll tax, in which we would sympathise with them; in fact, we would welcome it if they did. We would not, I hasten to say, have gone about it in this way, by making heavier demands on the very poorest sectors of the community in order to ease the pressure on the Treasury. We would have tried to spread it more evenly. If that is what is in the Government's mind, perhaps they will tell us, as it would at least help us to understand their motives and help us on this Bench to decide whether we can regard Clause 2 in a slightly more favourable light than we are inclined to at the moment. It would
1084
help us in fact to decide whether to support the Opposition in their Motion to delete the clause. I should be grateful if the Minister would enlighten me when he replies.
Lord Cockfield: The noble Lord, Lord Bruce, followed up the point he raised on Second Reading about the balance in the fund, which currently stands at approximately £5 billion. There are two separate documents that we need to look at. The first is the report of the Government Actuary, and that is the document from which he quoted. The objective of the report of the Government Actuary is to deal with the balance of the fund and to indicate to what extent contributions may need to be changed in order to maintain that balance. Inevitably in talking about these matters it was relevant that he should refer to the balance.
But quite separate from the Government Actuary's report there are the audited accounts of the national insurance fund. These accounts are audited by the Comptroller and Auditor General himself, a man who, as the noble Lord, Lord Bruce, will agree, is of high repute and great standing. Those accounts are published each year. The last published accounts were for the year 1979–80, which were published on 26th February 1981, and therefore we might expect to see the accounts for the year 1980–81 published in the near future. I agree with the noble Lord that it is perhaps rather a pity that we did not have the accounts in front of us at the time of discussing the Bill, but the preparation of the accounts has been a little delayed by problems due to the Civil Service dispute. So, if I refer to last year's account, rather than this year's, he will understand the reason why.
Those accounts set out in detail every single investment held in the fund. In the 1979–80 accounts, the list of investments appears at page 13. This is in fact an actual fund; it is not a notional one. The money is invested in Government securities, local authority stocks and so on. The noble Lord asked why the investment income produced by this fund was only approximately 11 per cent. against rates of interest in the region of 14 or 15 per cent. commonly available today in the money market. The answer depends on a number of factors. First of all, there is a certain amount of money in transit. That is, there are balances which are held by various people; the contributions are originally collected by the Inland Revenue, they are handed over to the fund—the fund must have a certain amount of money as a buffer for paying out benefits—so there is a certain amount of money which is in transit, and therefore the total reserves exceed the amount which is actually invested, and that acts as a slightly depressing influence on the rate of return secured.
Secondly, the securities appear at cost and not at market price. I can say—without disclosing the contents of the accounts, which have not yet been audited and therefore not yet presented—that the market value is expected to be slightly more than cost. Nevertheless, the return is the return on cost and not on market value. If you buy a Government security which has a low or relatively low coupon, part of the return appears as an income yield and part as capital appreciation on redemption. Therefore, the running yield is commonly less than the redemption yield, and

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it is that differences between the running yield and the redemption yield which largely accounts for the fact that the average return on the fund appears to be somewhat over 11 per cent., instead of the 14 or 15 per cent., to which the noble Lord quite rightly refers.
The noble Lord then asked, why is it necessary to have such a reserve at all? First, such a reserve has always existed in the fund. It is a common feature in all insurance funds. Five billion pounds is in fact a large amount of money, but one has to bear in mind that the amount of benefit which is expected to be paid out in the coming year is of the region of £18.9 billion. Therefore, the reserve represents little more than a quarter of the annual flow of payments of benefit, and it has always been felt that this is a reasonable level of reserve. If one spent the reserve by not increasing the contributions, the effect would be that in the coming year one would lose the investment income, which would then have to be made good by a higher rate of contribution. But spending the reserve would protect one for only a very limited period of time, and as a matter of financial prudence we believe that the present level of reserve is a perfectly reasonable one.
I should now like to come to the general point raised by the noble Lord, Lord Banks. As he said, I have written to him in some detail about the point that he raised. We treated his argument very seriously. In fact, I spent a whole day on this matter myself going through the figures. I mention that only to indicate that we treat these matters very seriously. But, if I may say so, with respect, the noble Lord seems to be shifting his ground a little. If we take precisely what he said in the Second Reading debate, we see that he was talking in cash terms, and there is no doubt that in cash terms the income tax allowances which have now disappeared do not represent the major part of the growth in the non-contributory benefits. The noble Lord is now talking in terms of constant prices. This is all very well, but in fact both benefits and contributions are made in current cash, they are not made in terms of constant prices.
When one is looking at matters of this kind, one needs to look at what in fact is happening, not what might have happened in other circumstances. Nobody can tell what the position would have been had the child tax allowances not been abolished and had they not been replaced by child benefit. Underlying the whole of the noble Lord's argument is an assumption that the child tax allowances would have risen either pro rata to prices or pro rata to total non-contributory benefit. But if the noble Lord looks at what has happened to income tax allowances over the period that he is talking about—namely, 1975–76 to 1980–81 or to 1981–82—he will find that income tax allowances have gone up very much less than prices have gone up.
So that once one gets into this field where one is arguing about what might have happened in different circumstances, it is really frightfully theoretical, and what I really want to do is come down to the hard facts of the situation. I should like to do this by taking as my starting point the year 1978–79, which is the year before the present Government took office. I take that as a starting year as much as anything because it was the year when the transition from child tax allowances to child benefit had been completed, and therefore that particular problem is no longer with us.
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The total benefit in 1978–79 amounted to £15.3 billion. In the current year they will have risen to £26.6 billion, and they are expected to rise to £30 billion next year. Non-contributory benefits have risen from £4.6 billion in 1978–79 to £9.3 billion this year, and they are expected to rise to a figure of the order of £11 billion next year. There has therefore been an increase in non-contributory benefits of some £4.7 billion between 1978–79 and the current year, and we anticipate an increase of £5.4 billion between 1978–79 and next year.
If one looks at the total share of this cost that the Treasury will bear, one will see that even when the amendments proposed in the Bill have been made, in 1978–79 the Treasury would have borne 43 per cent. of the total cost, and in 1982–83 it will bear 45 per cent. So despite two reductions in the Treasury supplement, the Treasury will, nevertheless, be bearing next year, as it is this year, a higher proportion of the total cost as compared with what it bore in 1978–79.
I want to leave this erudite area of figures in order to go to the much broader issue which was touched upon by the noble Lord, Lord Kilmarnock, and which really underlines the whole of the present debate. The noble Lord, Lord Kilmarnock, referred to the tripartite basis on which the national insurance fund was established, and he was no doubt referring to the words of Sir William Beveridge in his epoch-making report. But if your Lordships look at that with care, you will see that "tripartite" did not mean three equal shares, as the noble Lord supposes. Indeed, if your Lordships go back to the days of Mr. Lloyd George (as he then was) you will find that the share borne by the Government was considerably less than one third.
A number of things have happened since then. In Mr. Lloyd George's day the number of income tax payers was very small indeed, and a large number of people were brought into the national insurance scheme. He had two schemes in fact an unemployment benefit scheme, and a sickness benefit scheme. The number of people in those two schemes was very much greater than the number of people who were income tax payers. So in effect by asking the Treasury to contribute to his fund he was transferring money from one group of people, the income tax payers, to another group of people, the contributors to the fund.
If I take my mind forward to the time when Sir William Beveridge's report began to be implemented —that is, in the 1940s—I well remember
Mr. Hugh Dalton (as he then was) saying that he had relieved 3 million people from paying income tax, thereby reducing the number of people liable. The number of people now paying income tax is approximately 26 million. So we have moved over this period of 70 years from having two different sets of people—income tax payers and contributors—to having two groups of people who largely overlap one another. So the Treasury supplement to a large degree has become a question of transferring money from one pocket to another pocket of the same pair of trousers. That is the first point.
The second point is that as benefits and provision for benefits have increased in the last few years, the tendency has been for new benefits and for increases in benefits to come on the non-contributory side. By

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their very nature, of course, the non-contributory benefits are paid for entirely by the Treasury—in this respect, of course, "the Treasury" simply being a synonym for the general body of taxpayers: it does not mean the particular individuals who happen to be Commissioners of the Treasury, it is simply a synonym for the general body of taxpayers—and as the Treasury has paid for this rising amount of non-contributory benefits, it is perfectly reasonable and perfectly proper that the Treasury contribution towards the contributory benefits should be reduced.
I could well understand noble Lords opposite protesting very strongly if the position was that the Treasury was now paying a smaller proportion of the total. If that were the position I could well understand them saying that this was wrong. But as I said in reply to the specific point made by the noble Lord, Lord Kilmarnock, the fact of the matter is that the Treasury will still be paying a larger proportion of the total amount. It is really on the basis that we believe that the provision is a perfectly fair and a perfectly reasonable one that it has been included in the Bill.
The noble Lord, Lord Kilmarnock, in fact suggested that underlying all this was a subtle strategy to enable the Treasury to reduce the national insurance surcharge. He attributes perhaps far more skill and cunning to the Treasury than the Treasury has possessed at least during the 30 or 40 years that I have been associated with it; and I see the noble Lord, Lord Roberthall, agreeing with me on that particular point. As far as the national insurance surcharge is concerned, this is a matter for my right honourable and learned friend's Budget. I have said that he will of course pay due regard to everything that has been said in your Lordships' Chamber, but I assure your Lordships that there is no subtle or devious plot underlying this.
The proposal which is included in Clause 2 is a perfectly simple and a perfectly straightforward one: in our view it reinforces the general contributory nature of the scheme. I entirely accept that the noble Baroness, Lady Jeger, feels that we ought to have an entirely different sort of scheme. She herself said at the beginning (which saves me from having to say it) that this is a subject which lies outside the narrow scope of this Bill. It is a subject of enormous interest and fascination, and one which one could discuss and debate at great length. There are solid arguments on both sides, but they do rather transcend this Bill.
As my noble friend Lord Boyd-Carpenter said (if I may use the words that he used on Clause 1 in relation to Clause 2) this is not essentially a matter of principle: it is simply a matter of arithmetic. We feel on this that we have the arithmetic right, and it is on that basis that I commend the clause to your Lordships.
On Question, Whether Clause 2 shall stand part of the Bill?
5.34 p.m.
Their Lordships divided: Contents, 109; Not-Contents, 53.

DIVISION NO. 3

CONTENTS

Abinger, L.

Long, V.

Airey of Abingdon, B.

Lucas of Chilworth, L.

Alport, L.

Lyell, L.

Avon, E.

Mackintosh of Halifax, V.

Bathurst, E.

Macleod of Borve, B.

Bellwin, L.

Mancroft, L.

Belstead, L.

Mansfield, E.

Boardman, L.

Marley, L.

Boyd-Carpenter, L.

Marshall of Leeds, L.

Campbell of Alloway, L.

Massereene and Ferrard, V.

Campbell of Croy, L.

Mersey, V.

Cathcart, E.

Milverton, L.

Cockfield, L.

Monckton of Brenchley, V.

Colwyn, L.

Mottistone, L.

Cork and Orrery, E.

Mountevans, L.

Cowley, E.

Mowbray and Stourton, L.

Craigavon, V.

Murton of Lindisfarne, L.

Cromartie, E.

Newall, L.

Cullen of Ashbourne, L.

Noel-Buxton, L.

Daventry, V.

Norfolk, D.

Davidson, V.

Northchurch, B.

De La Warr, E.

Orkney, E.

Denham, L.[Teller.]

Orr-Ewing, L.

Dilhorne, V.

Pender, L.

Drumalbyn, L.

Platt of Writtle, B.

Dundonald, E.

Portland, D.

Ellenborough, L.

Rankeillour, L.

Elton, L.

Renton, L.

Ferrier, L.

Robbins, L.

Fortescue, E.

Rodney, L.

Fraser of Kilmorack, L.

St. Davids, V.

Gainford, L.

Sandford, L.

Gisborough, L.

Sandys, L.

Glenarthur, L.

Savile, L.—[Teller.]

Glenkinglas, L.

Selbourne, E.

Gormanston, V.

Selkirk, E.

Greenway, L.

Skelmersdale, L.

Grimston of Westbury, L.

Spens, L.

Haig, E.

Stamp, L.

Henley, L.

Strathspey, L.

Hives, L.

Sudeley, L.

Hornsby-Smith, B.

Swinfen, L.

Hunt of Fawley, L.

Terrington, L.

Hylton-Foster, B.

Thorneycroft, L.

Inglewood, L.

Trumpington, B.

Ironside, L.

Vaux of Harrowden, L.

Killearn, L.

Vickers, B.

Kinloss, Ly.

Vivian, L.

Kinnaird, L.

Wakefield of Kendal, L.

Kinross, L.

Westbury, L.

Kitchener, E.

Willoughby de Broke, L.

Lane-Fox, B.

Wynford, L.

Lauderdale, E.

Yarborough, E.

Linlithgow, M.

Young, B.

NOT-CONTENTS

Amherst, E.

Gaitskell, B.

Ardwick, L.

Gosford, E.

Banks, L.

Gregson, L.

Beswick, L.

Hanworth, V.

Birk, B.

Houghton of Sowerby, L.

Bishopston, L.

Howie of Troon, L.

Boston of Faversham, L.

Jeger, B.

Briginshaw, L.

Jenkins of Putney, L.

Brockway, L.

John-Mackie, L.

Bruce of Donington, L.

Kilmarnock, L.

Cledwyn of Penrhos, L.

Listowel, E.

Collison, L.

Llewelyn-Davies of Hastoe, B.

Cooper of Stockton Heath, L.

David, B.

Lloyd of Kilgerran, L.

Davies of Leek, L.

Lockwood, B.

Elwyn-Jones, L.

Longford, E.

Ewart-Biggs, B.

Lovell-Davis, L.

Fisher of Rednal, B.

Noel-Baker, L.

Foot, L.

Oram, L.

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Peart, L.

Stewart of Fulham, L.

Phillips, B.

Stone, L.

Pitt of Hampstead, L.

Strabolgi, L.

Ponsonby of Shulbrede, L. [Teller.]

Underhill, L.

Wade, L.

Roberthall, L.

White, B.

Sefton of Garston, L.

Wootton of Abinger, B.

Shinwell, L.

Wynne-Jones, L.

Stewart of Alvechurch, B.

Resolved in the affirmative, and Clause 2 agreed to accordingly.
[Amendment No. 3 not moved.]
Clause 3 agreed to.
5.42 p.m.
Baroness Jeger Baroness Jeger moved Amendment No. 4:
After Clause 3, insert the following new clause:
("Redundancy payments for employees otherwise disqualified by lack of continuous employment. 1965 c. 62
.Employees liable for increased contributions under sub-sections (2) and (3) of section 1 of this Act who become disqualified from receiving redundancy payments under the provisions of section 32 of the Redundancy Payments Act 1965 solely because at the time of their redundancy they have not been in the same continuous employment for one hundred and four weeks as required by section 8 of that Act shall be repaid out of the Redundancy Fund an amount equivalent to 0÷.35 per cent. of their earnings in respect of which National Insurance contributions were paid in the employment which has been terminated by redundancy.").
The noble Baroness said: I beg to move this new clause standing in my name and in the name of my noble friend Lord Bruce. I dare say there is a great deal wrong with the drafting of it, and I hope that noble Lords will be lenient in understanding what we are trying to get at, even though we may not have got it all quite right textually. We are in some difficulty, of course, because what we really need to do is to look again at the Redundancy Payments Act 1965. Of course, that would be out of order this afternoon; so all we are trying to do today is to seek some protection for people who are disqualified from receiving redundancy pay because under the terms of the 1965 Act they will not have completed 104 weeks with the same employer.
I should like to remind the Committee that the Redundancy Payments Act was passed in 1965, that successive Governments accepted the principle both of the two-year limit and also that the workers should not be involved at all in making any contribution. I have been carefully through all the references in the Library and I cannot find one instance where any Conservative Minister from 1965 onwards has ever questioned those arrangements. Therefore, it is a very new principle which suddenly has been thrust into this Bill—and thrust in sideways, I would submit—and it seems to me quite proper that we should be spending some time this afternoon asking what made the Conservatives change their minds. Over the years, they had maintained the principle of no contribution from the workers; and now it is we reactionaries on this side who are asking, "Why not leave things as they are?—not all innovations are good.
I should like to remind the Committee of the different circumstances in which that 1965 Act was passed and which included the two-year rule. In June 1965, total unemployment was 269,929. That is a totally different atmosphere from that in which we are having to work
1090
today. Moreover, there was a more stable employment picture and it seemed quite fair to put this two-year rule into that Bill. Now we have a much more volatile situation, with more people falling out of jobs—and I wish I could say that they were getting into new ones. But there is a much greater movement of labour and it is much harder to stay in the same job for two years.
The relevance to this Bill is that all workers are to be expected to make this contribution to the redundancy fund. If, through no fault of their own, their job disappears and they become redundant—and, tragically, this is happening in many parts of the country—they will have paid for a redundancy benefit which they will never be entitled to claim. It could happen that a man loses his job after 18 months and that perhaps his next job lasts only for one year. Throughout those jobs he will have paid these contributions. I wonder how many people there are at Invergordon who face this problem and who may not have had worked there for two years. I wonder how many workers in the De Lorean motor works have been in their jobs for two years. Not many of them can have been, because of the newness of the firm. I would remind the Committee that under Clause 4(5) this Bill is to be applied to Northern Ireland, where the question of redundancies is even more stressful than here.
Thinking that this Bill might at least provide some concession for people who do not fulfil the two-year limit in the main Bill, I raised this matter on Second Reading, and I should like to thank the noble Lord, Lord Elton, who, with his usual courtesy, wrote to me a long letter about it. It would be discourteous of me not to refer to one or two things that he said but with which I must take issue. The noble Lord wrote
"If we allowed them refunds should we not do the same for people who leave their jobs of their own accord or because they had reached the normal retirement age or were dismissed for reasons other than redundancy?"
The answer to this question is, No. People retire voluntarily. That is their decision. We are talking about people who have no choice and not about people who leave their jobs of their own accord. The opposite is true. I can understand—the noble Lord explained it to me—the thinking behind the redundancy payments, which were intended to compensate for the loss not simply of jobs but of all the accrued benefits, and that it seemed fair to take the two-year limit so that workers would have got some record in the firm.
I am not seeking to alter the two-year limit; in fact, it would be outside the power of this Committee so to do. I am only asking the Committee, through this amendment, to give consideration to the refund of amounts which have been contributed by people who, through no fault of their own, may never be able to make a claim. I do that because we on this side insist that the redundancy money should be totally different from the national insurance money. That was the intention of the Act when it was passed in 1965. It cannot be regarded as an insurance benefit. It is only in human fairness that people who are likely to fall foul of this new impost should have some consideration. If I do not have the wording right, I apologise. I beg to move.
Lord Elton: My Lords, the noble Baroness, with her customary charm, has disarmed the criticisms of draft

1091
ing—which were legion—which I had marshalled before me. I accept the difficulty of drafting in this case. The noble Baroness—if I can say it without sounding condescending—has done extremely well. It would not have worked as drafted. That is not the issue that we are concerned with. There are serious objections to the principle of refunds and there are practical difficulties of such a scheme.
First, the refunds to those made redundant before they had qualified for redundancy payment would be entirely at odds with the social insurance basis of the statutory redundancy scheme. It is intended to spread the risk and the cost of redundancies and concentrate the benefits on those longer service employees who lose most when they lose their jobs in terms of accrued rights, seniority within the firm in which they are working, status among their colleagues, and security to which they have become accustomed. The scheme never was intended to provide compensation for people who lost jobs before they had built up any such accrued rights, nor to provide benefits pro rata to contributions like a personal savings scheme.
Secondly, it is wrong to think that employees with fewer than two years' service cannot draw any benefit from the redundancy fund. The fund meets claims not only for redundancy payments but also for back pay, holiday pay and notice payments when employers become insolvent owing to debts to their employees. People with less than two years' service are as entitled as others to these insolvency payments which totalled over £31 million in 1981. This is a part of the scheme which benefits those who lose their jobs under two years' service and it does so significantly.
Thirdly, the cost of processing refund claims—and one is apt to overlook this when devising schemes of administration—would be very high indeed in relation to the amount refunded to employees. No employee could get more than £80. The great majority would get less than £50. Some would get less than £10. Administrative costs, which are at present some £6½ million a year, could be doubled, as could the numbers of staff required.
The money lost by this means to the redundancy fund as a result of refunds and extra administrative costs would aggravate its deficit and might mean that contributions have to be raised even further. Employers would also be saddled with extra costs because they would have to keep a record of the contributions of everybody in their firm until they had served for two years in order to establish the appropriate payment.
The fourth point—and one which may weigh with those who put their names to this amendment and may consider voting for it—is that refunds to redundant employees with less than two years' service would create further anomalies and leave other groups of employees at a disadvantage. I phrased that before the noble Baroness replied to my letter. It does not carry as much weight as the other arguments in my letter which I hope I have summarised. It is not a question of defective drafting, which makes it essential that this amendment is rejected in any case. It is a matter of the principle on which it is founded that would render the scheme very expensive and torpedo it.
Lord Bruce of Donington: It is quite clear from what the noble Lord has said that the idea of making Class I contributors pay anything towards the redundancy payments fund has been misconceived from the outset. It should never have been done at all in the first place because of course he knows perfectly well that there are bound to be a very large number of people who are paying amounts into the redundancy fund who under no circumstances are going to be able to get them out. There is no point in fudging the issue by saying that of course if they did not pay, other people would have to pay more. There is already facility in the Employment Protection (Consolidation) Act 1978, Clause 104. Schedule 1 to the present Bill refers to additional powers to be given to the Secretary of State to make refunds. If he looks at Schedule 1, paragraph 2, he will find:
"2.—(1) In section 105 of the Employment Protection (Consolidation) Act 1978 (payment to employers out of redundancy fund in respect of certain employees who are not entitled to redundancy payments), after subsection (4) there are inserted the following subsections—
'(5) Where the Secretary of State has determined a class of employees under subsection (3) above he may also make payments out of the fund to employees of that class and may determine, with the approval of the Treasury, the amounts of the payments which may be so made.
(6) The payments made to an employee by virtue of this section shall not, in respect of any period, exceed the amount appearing to the Secretary of State to be equal to the amount paid into the fund from the appropriate employment protection allocation from all primary Class I contributions paid by or on behalf of that employee under Part I of the Act of 1975'.".
It seems as though the noble Lord in moving this Bill has already anticipated setting up the administrative apparatus in order that this part of the schedule may be complied with. What is the objection under those circumstances to accepting the amendment? He has to set up the apparatus. He has given the Secretary of State powers. Why does he not do something about it?
Lord Elton: I can only reiterate the remarks which I have already made. The principle which the noble Lord presses is not congruent with the legislation that we have before us. The schedule gives power to make redundancy payments to certain categories of people who are excluded from payments such as mariners. It would not allow payments to people disqualified because of length of service. It would not have been possible to have adduced that without looking at the principal legislation. I am sorry that I hesitated at the beginning. We sometimes depend upon the "carrier pigeons" and it was rather a swift flight on this occasion I think. I counsel the Committee, for all the reasons I have given, to reject this amendment.
On Question, amendment negatived.
Lord Spens Lord Spens moved Amendment No. 5:
After Clause 3, insert the following new clause:
("Tax-relief on contributions of self-exmployed earners
.After subsection (9) of section 9 of the principal Act there is inserted—
"(10) The total of the Class 2 and Class 4 contributions of a self-employed earner shall be divided in a similar proportion to the total of the primary and secondary Class 1 contributions made by an employed earner and by his employer; and the proportion of such total equivalent to the secondary Class 1 contribution of an employer shall be wholly allowable against tax.".").
The noble Lord said: At Second Reading, I drew attention to a positive discrimination which self-employed earners consider they suffer at the moment from the way in which their contributions are assessed and collected. I am not going into all the details that I discussed then, but the noble Lord the Minister who replied to that debate did not refer to my point at all, and so I put down this amendment in oder to get a positive answer in one way or the other from the Government on this point.
Most self-employed earners contribute in two ways to the national insurance scheme. They all have to pay a flat rate Class II contribution and then those who make profits above a minimum have to pay a percentage of those profits later, collected by the Inland Revenue at the same time as their tax is collected. The total amount they have to pay has been calculated, so we are told, to take account of the fact that they are not entitled to claim unemployment benefit or industrial injuries benefits, but that otherwise they are, of course, entitled in due course to claim their pensions and certain other short-term benefits.
The way their contributions are calculated relates not only to the Class I contribution of an employee but also to the Class I contribution of his employer; and in the Second Reading debate I drew attention to the discussion document which was issued by the Department of Health and Social Security in October 1980 and which I was told by the Minister is likely to come to fruition in the fairly near future. Almost at the beginning of that document there are a couple of sentences which I want to quote to establish the fact that I am right when I say that the self-employed earners contributions are related both to the Class I contribution of the employee and the Class I contribution made by his employer. I quote:
"One very important point must be made. Some people seem to argue that self-employed contributions should be compared with the employee's share of the Class I contribution without taking account of the employer's share. But this would be unfair. Although the Class I contribution is divided into employee's and employer's shares, they must be looked at together as a single contribution. This is because the employer and the employee are jointly contributing towards the employee's national insurance. For this reason, the Class II and Class IV contributions must be compared with the whole—employers plus employee's' Class I contributions ".
That establishes the point that the self-employed contributions are compared with the whole of the Class I contributions, and the discrimination arises because the employer is allowed to set off his portion of that contribution against tax, whereas the self-employed person is not allowed to do so. The fact that this point must have been in someone's mind, I think, appears in Schedule 1 to the Act, where in paragraph 6(1)(g) we see that regulations may provide
"without prejudice to sub-paragraph (f) above, for enabling the whole or part of any payment of Class II contributions to be treated as a payment of secondary Class I contributions;".
It is the secondary Class I contribution which is the employer's portion of that contribution.
I have made inquiries and, so far as I know, no such regulations have been made; but the thought is there that they could be made, and if my amendment is not appropriate to this Bill perhaps it might be put into a regulation of that kind. There is this very positive discrimination. The employer can set his contribution
1094
against tax whereas the self-employed person cannot; and so I have drafted my amendment to try to break up the total of the Class II and IV contribution so that a proportion of it may be allowed to be set against tax. I beg to move.
Lord Roberthall: I rise to support the amendment now proposed by the noble Lord, Lord Spens. He set out in the Second Reading debate the case that he has just been elaborating. I have always thought that was a most extraordinary feature of the tax system, for the reasons he has given. The stamp contribution that the self-employed person makes is a benefit and it is reasonable that you should pay for benefits out of your income. But the other part is a pure cost on any definition—I cannot remember the ones one gets in connection with one's personal income, of "wholly necessary" and so on—but clearly this falls under that very strict one. The self-employed person has to pay this tax and he gets no benefit from it at all. Yet he is not allowed to charge it as a cost. It is quite illogical. I remember when a Labour Government, I think, actually introduced this, and I was attacking the noble Lord, Lord Wells-Pestell, about it. All he could say at the end was, "Well, we need the money". And that is what happens. But for a Conservative Government, who go round the country saying what great things are going to be done for the self-employed person and that they are looking to the activities of the self-employed person, to persist in this is something that I cannot understand.
I am not sure, but I do not think the noble Lord, Lord Spens, is going to press this to a Division and I believe in fact it would be improper for your Lordships to pass something of this nature, because it seems to me to have all the aspects of a money Bill. Nevertheless, it gives us a good opportunity to say how wicked we think it is, even if we cannot do anything about it.
Lord Banks: I should like to add just a brief word to what has already been said, and I shall be interested in the reply Lord Spens receives to this amendment of his. It seems that the principle is sound. It seems reasonable; the self-employed man pays a single contribution in lieu of the employer's and employee's contributions. He is the employer, but also, by inference, he employs himself, and it seems reasonable that his contribution should be divided in the proportion suggested in the amendment and what we might call the employer's element should be allowed as an expense. As I say, it seems a very reasonable proposition, but I shall be interested to hear whether there are any grave administrative difficulties which would prevent its being put into practice.
6.10 p.m.
Lord Cullen of Ashbourne: As the noble Lord has explained, the purpose of this amendment is to enable self-employed people to be given some tax relief on their own national insurance contributions to correspond with the relief given to employers in respect of the contributions which they are obliged to pay on behalf of their employees. I am sure that the Committee will be grateful to the noble Lord, Lord Spens, for having initiated this debate. The subject has been discussed

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on several occasions in another place, but I do not believe ever before in your Lordships' House.
As the noble Lord has said in moving this new clause, the argument for making a proportion of the Class I and Class IV contributions, which self-employed people have to pay, tax deductible is that employers enjoy tax relief on their share of the Class I contribution which they pay for their employees. He has rightly said that the contribution rates for self-employed people are derived ultimately from the total Class 1 contribution; that is, from the employers' and employees' shares combined. So, the argument runs, it is only fair to allow self-employed people tax relief on that proportion of their contribution which corresponds to the employers' part of the Class I contribution. At present, neither the flat-rate Class II, nor the profits related Class IV, contributions paid by self-employed people is tax deductible.
I should tell your Lordships at the outset that the change in the taxation arrangements which is proposed in the new clause would cost in the region of £65 million. I do not need to spell out to your Lordships at this time what the effects of this loss of revenue would be. But, quite apart from the cost of the proposal, your Lordships may think that there are objections to the new clause of both principle and practice.
The first consideration must be whether it is fair to compare the tax treatment of contributions paid by employers, on behalf of their staff, with that of contributions paid by self-employed people. It is utterly reasonable for an employer to get relief for his share of Class I contributions for his employees, because he pays it, like the other wage costs of the employee, wholly and exclusively for business purposes. But the same cannot be said of the self-employed man. Of course, the contribution which he pays is a statutory obligation on him, just as it is for the employer. But that does not mean that it is a comparable expense. The self-employed man is contributing on his own behalf for benefits to which he himself will be entitled. I doubt, therefore, that the comparison which the noble Lord, Lord Spens, has drawn is altogether a fair one.
The conclusion of the argument which I have just been putting to your Lordships is that, in terms of tax relief, the self-employed man's contribution is a personal expense and it is right that it should be treated as such. Because the self-employed man gets the benefits which accrue from his contributions, they are a personal expense in exactly the same way as his own tax liability, for which, of course, he gets no tax relief. The reason why I labour this point is that the type of expense which the self-employed man is incurring in paying his contributions should be compared not to that of the employer in paying his share of the employee's contribution; it should be compared to the employee's own contribution on which, of course, no tax relief is available. Indeed, if we were to allow tax relief on the contributions which self-employed people pay, it could be difficult to justify refusing it on the employees' share of the Class I contribution, and to allow that relief would cost an additional £2,000 million a year.
Nor could we justify tax relief on the grounds that self-employed people are currently paying a dis-
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proportionate share in their contributions. On the contrary, the present rates of contribution of self-employed people are calculated in a way that is more than fair. As I mentioned a few moments ago, the rates are derived from the combined employees' and employers' Class I rate, which is adjusted to take account of the fact that self-employed people are not entitled to certain benefits. This calculation is in accordance with a formula agreed between the political parties in 1975 as a fair way of working out contribution rates for self-employed people. And in approving Clause 1 of the Bill a short while ago, your Lordships have endorsed contribution rates for the coming year which are even more favourable to self-employed people than the strict application of that very fair formula.
I have so far dwelt on the arguments of principle against the new clause. Perhaps briefly I may say something about practical difficulties; and I think that the noble Lord, Lord Banks, suspected that there might be some. It is not clear to me, even after the lucid explanation of the noble Lord, Lord Spens, what form the tax allowance which he has in mind would take. If it is to reflect the employers' relief, it should be a deduction from profits. But this would be difficult to administer since the Class IV contribution is determined by the size of the net profits. A deduction from profits of a percentage of the contribution would reduce the profit on which the contribution should be calculated and so on, giving rise to an absurd and endless process. So I hope your Lordships will accept that the new clause would create very real problems of administration.
I have considered at some length the principles and practicalities behind the new clause which the noble Lord has moved. I have done so, because it has been ruled that the new clause falls technically within the scope of the Long. Title of the Bill and, therefore, I felt that it would be less than courteous to your Lordships to respond to it in any perfunctory way. Essentially, my noble friend Lord Elton reminded your Lordships on Second Reading that this is a Bill with a very narrow purpose. It is a Bill about paying for benefits during 1982–83 and the new clause takes us a long way beyond that.
In going into this matter, I have not used any argument as to whether this is a right matter to be debated on this Bill. There was some question as to whether it was outside the scope of the Bill, but technically it is not. However, I am resting my case not on that, but purely on the practicalities and the administrative details that I have gone into. I hope the noble Lord will feel that he has had a good run for his money in this debate, and that he will now feel able to withdraw his amendment.
Lord Boyd-Carpenter: If the noble Lord, Lord Spens, were to press this matter to a Division, I would certainly vote against him, simply on the basis that I do not think it is within the conventions governing the relationship of this place and another place to legislate on matters of taxation; and I think, from the indications which the noble Lord had given, that he shares that view. But I should not like for that reason to let his amendment be withdrawn, without

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one expression, at least, from this side of the Committee, of sympathy with his general purpose.
My noble friend Lord Cullen of Ashbourne will allow me to say that he is always persuasive, but he is sometimes more persuasive than at other times and this was one of the other times, for he did not seem to me to get to grips with what is a real grievance of the self-employed. When I was involved with the administration of these matters, I always had great sympathy with the self-employed—some noble Lords may remember that I was able, to some extent, to modify their contribution rates in comparison with those paid by those in Class I—because I have always felt that they have not had as much benefit as the employed from the national insurance scheme. I feel that the noble Lord, Lord Spens, is on to a very practical point, in as much as they are not allowed to set any of their national insurance contribution against tax. With very great respect to my noble friend Lord Cullen, it is all very well to say that this is a personal payment of theirs. Of course, in a technical sense, it is, but it is a personal payment which is obligatory by law. It is not the result of any decision of theirs. I think it is a fact, from my own contacts, that some of them feel, for the reasons which the noble Lord, Lord Spens, set out so fully and clearly, that they are rather badly treated from a tax point of view.
As I say, I do not think that this Bill is a proper vehicle for the admittedly very difficult legislation which will be required to put the matter right, but I should not like my noble friends on the Government Front Bench to feel that there is not also—at any rate, from one example on this side of the Committee—a good deal of feeling that there is here a genuine grievance and that it ought to be looked at by responsible Ministers.
The fact is that the party to which my noble friend and I belong has always particularly claimed to be concerning itself with the interests of that admirable section of the community, the self-employed. They are a section of society which perhaps makes almost a disproportionate contribution to the well being of our national economy in relation to their numbers and their remuneration.
I agree with my noble friend that the difficulties would be considerable. I am not sure that they would be insuperable. The cost of doing exactly what the noble Lord, Lord Spens, wants would be £65 million. In these days, that figure is all within the inevitable errors of judgment on any Budget. No Chancellor of the Exchequer would say for a moment that he was able to budget with that degree of precision. And if he did say it, nobody in either House would believe him. It is well within the errors of it. So the financial burden directly is not insuperable. More difficult, I agree with him, is the precedent that it might, and would, set for the more generous tax treatment of the Class I contributor. I believe that there are some merits in that, though there the cost figure is prohibitive.
I hope that in due course, either now or later, the noble Lord, Lord Spens, will withdraw his amendment because, for the reasons I have given, it is not one which I personally could support. However, I should like my noble friends on the Front Bench to give some indication that they feel there is a certain amount of merit in this point which is worth further investigation by a humane and kindly Government.
Lord Drumalbyn: May I add a very brief word to what my noble friend has said. Some of your Lordships may remember that I was my noble friend's immediate successor. I found that he had done his very best to contain the contributions from the self-employed, and I certainly did the same. But one of the difficulties which has arisen is the enormous increase in contributions since that time. If I remember rightly, at that time the weekly contribution was below one shilling. I think I raised it to one shilling. It was something like ls. 4d. for the self-employed. It is the enormous extent to which since then benefits have increased (and therefore contributions have increased) which has borne so much on the self-employed, many of whom are on a very low rate of remuneration. They do not make very much. One tends to think of the self-employed as people with enormous businesses all over the world. In fact, many of them are among the low paid workers. That is one point which has to be borne in mind.
Lord EltonPerhaps I should say that the Government hold the self-employed in very high esteem. They regard them as an innovative and important element in the British economy. They recognise that they are not all very wealthy men. Some of them are like little acorns which grow into great economic oak trees, while others remain small men throughout their lives. And they are the salt of the earth and of the economy.
I would not like your Lordships to forget what my noble friend Lord Cullen of Ashbourne said earlier: that the rate at which the contributions are made was agreed originally between the parties as being fair in discounting benefits which the contributors could not expect to receive, and that in the recent review they were re-rated at a rate lower than that formula, if it had not been adjusted, would have justified.
We are considering the position of the self-employed. My noble friends need have no fear that we do not wish to favour them as we can. What I am saying at the moment, however, is that to favour them in this way has practical as well as philosophical difficulties. With the greatest and most real respect to my noble friend Lord Boyd-Carpenter, junior Ministers are not in a position to throw away £65 million on the nod, however large the overall figures of the Treasury may be. So I must ask your Lordships to indulge the Government on this point this evening and to reject the amendment.
Lord Spens: I am most grateful to all noble Lords who have taken part in this little debate. It gives me a lot of heart to hear the noble Lord, Lord Boyd-Carpenter, speaking up on behalf of the self-employed in this way. I am very grateful for his support. I agree with him that the noble Lord, Lord Cullen of Ashbourne, did not really make out a very good case against my point. Certainly arithmetically it would be quite easy to make the calculations for which I have asked. However, I realise that it is not something which the Government can give away quickly. I hope that they will bear it in mind for the future.
May I give this final warning: that if nothing has happened by this time next year and we get a Bill

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similar to the present one, I shall put down this amendment again. With that, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 4 [Supplemental]:
6.27 p.m.
Baroness Jeger Baroness Jeger moved Amendment No. 6:
Page 3, line 16, leave out subsection (4).
The noble Baroness said: I beg to move this amendment which would leave out subsection (4), and I do so for one very simple reason that I cannot understand subsection (4). When one cannot understand anything, I feel that one should leave it out. The old journalist rule when I worked on the Guardian was, "If in doubt, leave out". Noble Lords will be even more surprised to know that my very numerate noble friend Lord Bruce of Donington does not understand it, either. We thought that if there is no good reason for keeping it in we should propose to leave out subsection (4). However, we should be interested to hear why the Government would rather have it in. I beg to move.
Lord Elton: I hope that the noble Baroness does not apply the same principles to her modes of transport as she does to legislation. The effect of the amendment is to impose a duty on the Secretary of State to carry out a review under Section 120 of the Social Security Act 1975 of the general level of earnings and, if necessary, to produce an order to alter the rates of Class 2 and Class 3 contributions: the figure of earnings below which the small earnings exception may be granted and the profit levels between which Class 4 contributions are calculated. The Bill which the noble Baroness seeks to amend—or, rather, does not seek to amend—provides for the suspension of this duty this year because the Bill itself includes the increases which can be made under that order as well as the increase of 1 per cent. in the Class 1 contribution rate and the increase of 0÷25 per cent. in the Class 4 rate.
In short, and I mistakenly alluded to this in our opening debate, the Act requires the Secretary of State to carry out a review every year. This year that review has been incorporated in this Bill and has been done. If one takes out the bit in the Bill which the amendment proposes to take out, then one is taking out the bit which says that the review has been done and need not be done again. We should have to embark at once upon a second review. And having seen how the present one is going down with the Opposition, I am sure that they would not want that!
Baroness Jeger: I thank the noble Lord for his courteous explanation. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 4 agreed to.
Remaining clause and the schedules agreed to.
House resumed: Bill reported without amendment.

Civil Aviation (Amendment) Bill
Read a third time, and passed.

Pet Animals Act 1951 (Amendment) Bill [H.L.]
6.33 p.m.
Lord Houghton of Sowerby: My Lords, I beg to move that this Bill be now read a second time. A year ago tomorrow, 29 January 1981, this Bill received an unopposed Second Reading in your Lordships' House. On that occasion the Bill was supported by Lord de Clifford, whose recent death we all mourn and whose absence from this debate I greatly regret. I saw the noble Lord just before the Christmas Recess and he said that he was looking forward to supporting this Bill on the Second Reading. Last year, the Bill subsequently passed all its stages and was sent to another place, but, because of lack of time there, it made no progress.
Thirty years have now elapsed since the main Act, the Pet Animals Act 1951, became law. That Bill was sponsored by the late Sir Ronald Russell, who was a Member of Parliament. Thirteen years have elapsed since the late Sir Ronald Russell made the first of three attempts, unsuccessful as it turned out, to amend the 1951 Act. He proposed to amend his own Bill, which became the 1951 Act, in precisely the manner which is included in this Bill this evening. So one year has elapsed since I followed in the late Sir Ronald Russell's footsteps.
A week may be a long time in politics but a year is a fleeting moment in Parliament, because it takes years to get anything through Parliament unless the Government of the day offer some support and give time for it, or the sponsor of the Bill is lucky enough to come out in the ballot. Quite literally we do have legislation by ballot in Parliament, and that applies to Private Members' Bills. That enabled me to say, with some reproach I hope, that no Government ever lent any aid to Ronald Russell's main Bill or to his attempts to amend his own Act. No Government raised a finger to enable him to bring these reforms to the statute book, and yet for 30 years Governments have been relying on the provisions of the 1951 Act to defend the laws safeguarding the welfare of animals exposed for sale in pet shops and in market-places.
This Bill is an exact copy of the Bill introduced by Sir Ronald Russell between 1969 and 1974 and by me last year, in 1981. The 1951 Act, if I may briefly remind your Lordships, regulates the sale of pet animals. It requires those who carry on such a business to do so under a licence granted by the local authority. The business of selling pet animals is permissible under the Act only when conducted in a shop or from a barrow or stall set up in an authorised street market. The Act prohibits the sale of animals as pets in any other place, with certain exceptions made in the case of recognised breeders of pedigree animals.
An interesting sidelight on the law in this regard is that, during the recent very bitter weather, in one of the markets in London where both birds and pet animals are offered for sale the plight of the birds was probably less distressing than that of the animals,

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because fortunately the birds could be removed to the shelter of a room in a nearby pub, and the sale of the birds proceeded there, but the pet animals could not be transferred to the warmth of a nearby pub because the pub was not a licenced pet shop. So the animals had to remain on a stall or barrow, where they were exposed to the winds and the bitterly cold weather under a licence granted under the 1951 Act. My Lords, we are a curious people sometimes.
Another provision of the 1951 Act is that the local authority is required before granting a licence to have regard to various safeguards for the protection of animals. These include the need for ensuring that the animals are kept at all times in accommodation that is suitable, that is of the correct size and has the correct temperature, lighting, ventilation and cleanliness, and that the animals will not be sold at too early an age. That is the law, and the conditions may be satisfactorily or literally complied with or they may not. We must not ignore the fact that enforcement in these circumstances presents many difficulties. This Bill proposes to put a total ban on the sale of pets from barrows and stalls in street markets; it would withdraw the power of local authorities to grant licences to sell pet animals from stalls or barrows in market places.
One reason for the removal of this proviso in the 1951 Act has had little notice before, but I am becoming more impressed as time goes on with the need to encourage more responsible ownerships of pet animals. There are many temptations in the buying of kittens and puppies. In a debate in another place just before the Christmas Recess, the Minister of State at the Home Office joined in the exhortations to parents and other generous Christmas donors not to give pets to children for Christmas presents, but to bear in mind that kittens grow up to become cats and puppies grow up to become dogs; and probably before then those who have them are tired of them, and that often leads to animals being turned out or abandoned or even put down. That speech was as recent as 23rd December.
The temptation to buy pet animals is greater, especially in the case of the impulsive purchase or the casual purchase, if a person is passing a stall or barrow where puppies are exposed for sale. Animals should not be bought as a passing fancy. There is a responsibility attaching to their health and welfare. It is a shame that, in so-called animal-loving Britain, hundreds of thousands of pet animals are put down every year because there are too many of them and too many of them are not wanted: in many cases, they have been taken in and then thrown out. Some heartless people throw their pets out, drop them on the motorway, abandon them. All this is against the law, but how does one enforce these provisions against wanton cruelty when there are so many people who are willing to do this kind of thing?
I say, therefore, that it is desirable to make the buying of pets a serious and premeditated act. I think that taking pet animals out of markets will help to achieve that purpose. If people have to go to a pet shop for an animal, it is much more likely to be a purposeful visit, premeditated and provided for, than may be the case with somebody passing a stall in a market and picking up a puppy. The child takes a fancy to one and they buy it on the spot, especially when at
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the end of the day in market places prices usually fall, they are going cheap and that is the time when temptation is even greater.
Nevertheless, the main reason for this Bill is the one I put up a year ago, and that is that stalls and barrows in open market places are no longer acceptable as a place for the sale of pet animals. The Minister of State in another place and the Parliamentary Under-Secretary in this House are constantly reminding us of the obligations of local authorities to enforce the law and to make sure that animals are kept in conditions of reasonable comfort. We all know what local authorities are saying about their financial resources. We all know what they are saying about the difficulty of maintaining their services in present circumstances. If local authorities were as good as the law expects them to be, and if the vendors were as compassionate for the welfare of their animals as the law expects them to be, and tries to insist that they shall be, why then does the RSPCA feel it necessary to have inspectors on duty at these market places in order to oversee what is happening there, to take note of abuses of the law and, in suitable cases, to launch prosecutions off their own bat? That is what is happening. I have often remarked on the extraordinary position which means that a voluntary organisation like the RSPCA has to cover the responsibilities of local authorities and of the police in this field of cruelty to animals. That is because of the difficulty of their enforcement by local authorities and others responsible. The law sounds better than it is: in practice it is nothing like so good as it sounds.
Without dwelling upon the impossibility of giving animals proper protection against the sort of weather we have been having in the past two months, I would say that nothing can be done with a street market to make it acceptable by present standards. Calor gas stoves, tarpaulins which blow about in the wind, puppies and kittens huddled in cages and containers: these arrangements do not provide satisfactory conditions for selling animals. They have to be lifted out, they have to be held up for a customer to look at and go over, and then if they are not sold they are put back, and if they are sold they are often taken away by the purchaser, most likely in makeshift conditions. The local authorities, I have no doubt, do their best to keep the streets free of dust and rubbish and to try to enforce the regulations. But from what I have seen of it they are very often fighting a losing battle against dirt and litter, dust and wind and conditions which are extremely unpleasant.
I do not think any market place exposed to all weathers can claim to be a modern institution. It is nothing more than a survival of ancient ritual. People were selling animals in some of these markets two or three hundred years ago and they want to go on doing it. Some animals have been banished from these markets, but others remain. A market may be good for trade, but it is the wrong trade in many cases, and these animals should not be subject to that kind of treatment. A lot of them are sick and need medical attention. Often they do not survive very long after they have been bought.
I know the Minister may say, "Yes, this all right, but who are you getting at? Is it Club Row or is it more than Club Row?" What he said last time was that I was hitting at a wider target beyond the immediate

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cause of concern and of difficulty. That is not so. It is true that Club Row in the East End of London gets a good deal of publicity. For one thing it is close at hand for Fleet Street journalists, who can get good copy whenever they go and look at it, especially photographers. So it has long been notable for the kind of criticism it gets. But Club Row is not the only one; there are others throughout the country, happily a diminishing number, because public opinion is now expressing itself and its disapproval is known to those engaged in this business of selling pets in open markets. One can hope that there will be a rapid reduction in this volume of trade.
Another suggestion that has been made is that it would deprive some people of their livelihood if they were banned from selling pets in market places and stalls. That, my Lords, is a mistaken fear. We have got the pedigree of all the people who are selling in Club Row market. We have got the pedigree of those who sell the animals but we have not got the pedigree of the animals. The pedigree of those who sell them shows without any doubt whatever that they are in this business in pet shops and other outlets for their animals, whether they breed them or acquire them. Nearly all those who are selling at Club Row have got an interest in pet shops as well. There are eight pet shops in the immediate vicinity of that one market. Therefore, we understand that animals are, in many cases, taken out of the pet shops, put in the market, and if they are unsold they are taken back to the pet shop. So the market is frequently only an additional outlet for selling in the pet shop business, probably because the casual trade in the market is worth going for—a matter which I criticised earlier.
Reports by the RSPCA of conditions in other markets and correspondence which I have received all suggest that it really is time to make a clean job of the business of selling pets in the open. In Holland the selling of animals in open market-places was banned as from 1st January. I should hope that we can follow suit. I shall not detain your Lordships more than a minute or two longer because my final appeal to your Lordships is as follows. There is a very good reason why this Bill, if it represents the view of your Lordhips' House, should be given an unopposed Second Reading tonight, in order that such messages as go from here to another place may reach the House of Commons in time for the Report stage of the Local Government (Miscellaneous Provisions) Bill, which came out of Committee just before Christmas. The reason is that the Local Government (Miscellaneous Provisions) Bill is an attempt by Government to lay pretty firm foundations of the highest common denominator for local government powers, to save local authorities having to promote Private Bills to get powers for themselves by Private Bill procedure which can be conferred upon them in a Public Bill.
In Committee in another place, a debate took place upon whether a prohibition should be included in that Bill upon local authorities responsible for markets, to ban the sale of pet animals in those markets. I understand that, by a very narrow vote, the amendment did not proceed, but it is more than likely, I believe, that it will come up again at the Report stage.
I think that there will be two interesting topics in the
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Report stage of that Bill; one will be the licensing of sex shops, and the other will be pet shops. Which will attract the most interest in another place, I would not venture to say. I am sure that when that Bill reaches your Lordships' House we shall be interested in both of them. However, that is the situation. I hope that this matter can be disposed of in another place in the course of the final stages of the Bill to which I have referred.
Be that as it may, we can only be concerned tonight with what we ourselves do. I suggest that, as we gave this Bill a Second Reading a year ago, we might confidently do the same again this time. The noble Lord the Minister said last time that, while the Government would not introduce a Bill of their own, they would not oppose this one. I should think not—with great respect, I should think not. Their record does not entitle them to oppose anything which seeks, as this Bill does, to improve the conditions of pet animals in market places, because they have done little or nothing to get the legislation there in the first place. I think, also, that what has happened in Holland might be borne in mind, and that is why I mention that matter again.
So to give the Bill an unopposed Second Reading would, I think, convey the right sort of message to another place and to the public at large. I trust that the speech which I have made in support of the Bill is adequate for the occasion. I beg to move.
Moved, That the Bill be now read a second time.—(Lord Houghton of Sowerby.)
6.55 p.m.
Lord Airedale: My Lords, I think that we all admire the tireless efforts of the noble Lord, Lord Houghton of Sowerby, on behalf of animal welfare and I trust that we shall give his Bill its Second Reading as we did on the former occasion. I am grateful to the noble Lord for not having forestalled my little joke that, with a name like mine, I ought to be concerned with the welfare of pet animals. However, I am only speaking at rather short notice in place of my noble friend Lord Beaumont of Whitley who spoke in the Second Reading debate on the former occasion, and I feared that if I hurriedly tried to cobble together a speech it would only result in what the late Lord Montgomery of Alamein would have called appropriately "a dog's breakfast". Therefore, since this topic is a narrow one and has been so well gone into, and since no doubt your Lordships have all read the Second Reading speeches on the former occasion, I shall content myself with making just one point which may not have been emphasised quite so much as some of the others.
This is very much the age of the consumer, although personally I prefer to call him a "shopper". Efforts are being made in all directions to give disorganised people who go shopping a fair deal in their dealings with the people from whom they have to buy. If the average person goes to a market stall to buy a pet animal, I would imagine that the chances are that he will not be very clever at judging the health and wellbeing of the animal upon one cursory examination, particularly when we bear in mind that the animal may have been put into a temporary state of wellbeing by some medical treatment before hand. But if the purchaser gets the animal home and finds that literally

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he has been sold a pup and he wants to bring a complaint against the trader, he is probably faced with having to return to the market on one particular half-day in the week and that may be impossible or extremely inconvenient for him, and even if he does manage to make a return visit to the market it is by no means certain that that trader will again be there with his market stall. So we really are doing shoppers a favour when we encourage them to deal with pet shops and not with market stalls, so that when they have a complaint to make about the condition of the animal that has been sold to them, they will know that they can return at normal business hours to the shop from which they bought it, and confront the proprietor of the shop with the nature of their complaint. That is the only point that I desire to make. However, having concentrated on the interests of consumers, I hope that it will not be thought that I do not have the most heartfelt sympathy with any pet animal which is ever put unnecessarily into a state of distress.
6.59 p.m.
Lord Mishcon: My Lords, a short Bill merits a short speech, especially from someone who, through an oversight, has not got his name on the list of speakers. But it was my intention to speak on this Second Reading and to pay my tribute, as so many tributes have been paid, to the noble Lord, Lord Houghton, who ought to be known as the St. Francis of Assisi of Parliament.
I would not follow the noble Lord completely in his admiration for those in another place who raised the question of pets being given as gifts to children. Provided that the child is first asked and the family is first asked about that gift, I would hope that we would always encourage the love of pets by children. Indeed, the love of animals generally in the home is, as we all know, very much centred in the children of the household, who would protest very vigorously and successfully if, when the kittens turn to cats and the puppies turn to dogs, father or mother thought of giving the dogs or the cats away or parting with them.
I am at one with the noble Lord when he says that stalls and barrows in market places are completely unsuitable for the sale of pets. This is especially so because of the surrounding circumstances of stalls and barrows in market places. They are crowded, they are noisy, they are frightening for many animals and many birds and, indeed, the milling crowds that are round, not the pet stall or the pet barrow, but other places in order to secure bargains or whatever it may be, make it most unsuitable that barrows in market places should be there for the sale of pets. With those observations, I give all my support to the Second Reading of this Bill.
7.1 p.m.
Lord Peart: My Lords, the House is indebted to the noble Lord, Lord Houghton of Sowerby, for initiating this Bill. On many occasions I have had the pleasure of supporting his views, and he has been a tireless advocate. I am glad that he is now able to further what he seeks; that is, the matter of the Pet Animals Act 1951 (Amendment) Bill [H.L.]. As I say, the House is indebted to the noble Lord, Lord Houghton, for initiating this Bill. Among the very serious problems which face us from day to day, aspects of
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less concern but still of relative importance may not get the attention and time that they deserve: the well-being of those less able to care for themselves, including, of course, animals and birds, which come under the classification of "pets". We are all indebted to my noble friend on this occasion, as on many others in connection with animal welfare. Although he and others have shown a special concern, it is, of course, true that we all share that concern, and we are grateful for the opportunity that he has afforded us to stop and examine the situation that he has outlined today.
We are grateful, too, to the various bodies and organisations which have a continuing regard for the welfare of animals, including the RSPCA. The noble Lord's Bill would regulate the sale of pet animals. In other words, he is, quite rightly, seeking to control the conditions under which they are kept before people buy them. But we are concerned not only about conditions under which they are kept, but about other aspects too, and that must include whether they are being bought by people for their own pleasure or whether they are being bought for others as gifts.
We have all heard of pets being given as Christmas or birthday presents—the noble Lord himself dealt with this—and which become unwanted gifts, which cannot be stored and passed on to others later. They are often uncared for and later are abandoned. So we come to the problems of concern as regards the sale of pets, which include the way in which pets are transported to and from shops; the way in which they are kept and the conditions of storage—the containers, cages and packaging; the need for proper housing, feeding and care, whether sold from shops where care is greater or from stalls or barrows in a market; the environment and the weather—whether it is too hot or too cold; whether they are sold from a public place or from private premises; the length of time in captivity, even in reasonable conditions; the classification of "pets"—and I should like to know whether that includes fish sold in small quantities of water in a plastic bag, birds sold in too small a cage or animals sold in very restricted containers for transport by the new owner; and whether sold for cash, or given as prizes or for reward.
The Bill extends protection to the market stall and barrow. It is this aspect which is very important and I know that my noble friend and, indeed, all Members when they have intervened have dealt with this on previous occasions. The Pet Animals Act 1951, which would be amended by this Bill, refers only to "pet animals" including those with "vertebrae", and that is to be found in Section 7(3) of the Act. I should like to know what will happen about fish and birds, which I have mentioned, which also require protection.
Whatever controls we seek to exert in the interest of animal welfare, there are bound to be situations where influence and control cannot be exerted or is less effective. They include possible situations where control is less likely to be satisfactorily enforced. This would include the absence of adequate enforcement measures. It would include the inadequacy of the inspectors allotted to the task by public authorities, which have been forced to reduce public spending to the point where there are not even enough health and safety inspectors in factories and in other places where people work and live.

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Much depends on whether pets are sold or whether they are given as prizes in competitions where people are gathered and therefore may not be "sold". This is much worse because people may not have chosen to have them. We are appreciative of the opportunity afforded to us by my noble friend. This is a Private Member's Bill and I am sure that my noble friends will make up their own minds on what their response will be.
Whatever happens, the passing of legislation is only a part—albeit an important part—of the task of ensuring animal wellbeing. Much depends on what conditions prevail after pets are bought, as well as conditions of sale. Much depends on enforcement. Public vigilance will matter a good deal, but most important will be whether the Government will ensure, through national and local authority resources, the cash and manpower for inspection of premises and conditions of sale. I hope that the Minister will be able to give us some answers to the points that I have raised and, indeed, to those that my noble friend has raised. I hope that we can go further and say that this is another milestone in the work of ending cruelty as it affects animal welfare.
7.8 p.m.
Lord Belstead: My Lords, the noble Lord, Lord Houghton, has reminded the House that it is a year ago tomorrow that your Lordships debated the Second Reading of this identical Bill. The noble Lord has also reminded us that the late Sir Ronald Russell, the promotor of the 1951 Act, attempted also to amend his Act in order to prohibit the sale of pets and animals from stalls or barrows in markets, in the same way as the noble Lord, Lord Houghton, seeks to do on this occasion again in this Bill. I join in recognising that it is to the credit of the noble Lord, Lord Houghton, that with characteristic resolve he has not been deflected by the previous lack of progress from pursuing the welfare of pet animals.
I suggest, however, that there are wider considerations that need to be taken into account in assessing the case for this Bill. First, there are the present legislative provisions which are designed to ensure the welfare of pet animals and to safeguard their interest. The Protection of Animals Act 1911 provides protection for domestic and captive animals by making it an offence to cause or, being the owner, permit to be caused, any unnecessary suffering to any such animal, whether in a market or elsewhere. Under the Act it is open to any person or society to initiate proceedings or report the matter to the police where there is reason to believe that an offence has been committed. The penalties are realistic. For offences under the 1911 Act they include a maximum fine of £500 or three months' imprisonment, or both. There is also an important power whereby a court can deprive a person convicted of cruelty of the ownership of the animal or animals involved.
Secondly, the Abandonment of Animals Act 1960 is also relevant to the remarks that were made by the noble Lord in this speech in that it makes it an offence for the owner of a domestic or a captive animal to abandon it in circumstances likely to cause any unnecessary suffering. Thirdly, and really most im
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portantly, there is the Pet Animals Act 1951, which provides specific controls over the sale of pet animals. The Act requires any person carrying on a business of selling animals as pets to obtain a licence from the local authority, and prohibits the carrying on of such a business in any part of a street or public place, except at a stall or barrow in a market. Provided market traders have been licensed by their local authorities, they can therefore sell pet animals at a market stall or barrow, and of course it is this provision with which the noble Lord, Lord Houghton, takes issue this evening.
In placing the onus on local authorities to safeguard the welfare of animals sold as pets, Parliament requires local authorities to specify in any licence conditions for appropriate accommodation, for food and drink and other things that the noble Lord, Lord Houghton, mentioned. Licences may only be granted for up to one year at a time, and this gives the local authorities the opportunity to reassess the position at the end of that time. These requirements are backed by provision for local authorities to authorise their officers or a veterinary surgeon to inspect any licensed premises, including stalls or barrows in markets. Any offence may be punished by a fine or imprisonment; and a court may cancel a licence and may disqualify a person from engaging in the business of selling pet animals.
It will be seen from what I have tried to say that the law provides a battery of measures designed to safeguard the welfare of domestic animals, and the 1951 Act specifically requires local authorities to enforce this in respect of the sale of pet animals.
As to the reasons advanced by the noble Lord, Lord Houghton, for the Bill, I think it would be fair if I claimed that the Bill is prompted mainly by the expressions of concern about the welfare of animals at Club Row Market in the Borough of Tower Hamlets. It is claimed that the general standards required by the 1951 Act really cannot be met in a street market. Furthermore it certainly was alleged on the previous occasion by the noble Lord that Club Row is an outlet for illegal animal dealers who are known to have stolen pets, and the noble Lord also alleged that they are dealers who are connected with the sale of pets to research laboratories.
These are serious charges, and I quite understood when the noble Lord, Lord Houghton, and the noble Lord, Lord Peart, both asked me the question, can local authorities in the present economic climate in fact carry out their responsibilities under the 1951 Act? I have had inquiries made about the position specifically at Club Row, and I have found that persons selling pet animals there must be licensed, and the Tower Hamlets Borough Council is obliged to carry out its responsibilities under the 1951 Act. The chief environmental health officer for that borough has assured the Home Office that the licences issued by his department incorporate standards recommended by the British Veterinary Association. The director of community services for the borough informed us earlier this month that since 1968 it has been the policy of the borough—in accordance with the general provisions of the 1951 Act—to exclude from the prescription of all new licences the sale of cats and dogs under the age of six months. I understand that during 1981 members of the council's

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Health and Consumer Services Committee received detailed reports about the situation at Club Row. Committee members visited the market to see the position at first hand and also received deputations from the East London Protection of Animals Association and the Bethnal Green Street Traders' Association. In addition, members of the committee considered a list of possible amendments to the 1951 Act which had been submitted by the RSPCA.
After detailed consideration of the situation, the committee instructed its officers to continue with the existing level of supervision and control through the strict enforcement of the present law. At the same time, the committee also instructed that no action should be taken with regard to amending the council's resolution designating Sclater Street (the street in which Club Row stands) for the purposes of street trading for the market or to seeking amendment of the 1951 Act.
As to facts and figures concerning the market, Tower Hamlets Borough Council issued 36 licences under the1951 Act in 1981, 20 of which were in respect of stalls in the market and four in respect of shops in the market area. I understand that all the stalls are inspected on renewal of licences annually, and at least monthly thereafter by the council's environmental health officers and by animal health inspectors of the City of London Corporation Veterinary Department. There were no prosecutions in 1981 and the condition and welfare of the animals were found to be satisfactory. Perhaps at this point I should add that officers of the RSPCA are also regularly in attendance at the market. There is, of course, also a significant police presence there. The police say they are not aware of any cases of illegal animals sales at the market during 1981, although last March a man was found to be in possession of four undernourished dogs in a street outside the recognised market area. He was successfully prosecuted by the RSPCA under the Protection of Animals Act 1911, for causing unnecessary suffering.
Since January 1981 the borough council have imposed licence conditions which they believe are in line with the guidelines issued by the British Veterinary Association. The director of community services for Tower Hamlets has informed us that the new licence conditions are working satisfactorily; that they have generally reduced the number of animals exposed for sale; and have led to an increase in the time spent on inspection and administration.
As regards all the other street markets which the noble Lord mentioned on the previous occasion a year ago, and made some mention of this evening, the Home Office have received very few complaints, but again we made inquiries. One complaint recently concerned a market in North Finchley, but on inquiry it was vigorously denied by the Barnet Borough Council. We wrote last year to five district councils selected at random in whose areas it was claimed that there was cause for concern about the welfare of pet animals sold from stalls and barrows. We were told by the chief environmental health officers for Bracknell, Braintree, Harlow, Selby and South Tyneside that the situation in their markets was satisfactory.
Very recently, because of specific complaints, we made inquiries of another four district councils whose markets
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were the subject of concern expressed by animal welfare people. We understand that at two of these markets—Romford and Bishop's Stortford—there have been no licensed stalls for many years; and that there is no illegal trading. At the third market—Dagenham—there has been only one licensed stall selling small animals and budgerigars. The stall holder has decided not to renew the licence for next year. At the fourth market, at Doncaster, there was one complaint four years ago but the district council is satisfied that the present position is satisfactory.
I am—I say this genuinely— fully aware of the concern which is expressed by the noble Lord, Lord Houghton, and others of your Lordships this evening. As the noble Lord was good enough to say, my right honourable friend the Minister of State, Mr. Raison, spoke in a debate in another place just before Christmas and drew attention to the valuable advice and other services which are available. My honourable friend quoted from the Pet Health Council's leaflet, Ten Points on Choosing a Pet:
"Never buy on impulse, think first, look at lots of animals and learn what's involved before you start. Don't let your heart rule your head; never take a pet simply because you are sorry for him".
The leaflet reminds people that a pet obtained from a low-grade shop or street market could become a liability. It has good advice on how to get ready to have a pet at home.
I do not seek to minimise the welfare of pet animals at Club Row market, which is the real impetus behind this Bill, but I think that there are broader considerations. I believe, from the evidence I have tried to give this evening, that the Tower Hamlets Borough Council have been very carefully discharging their statutory responsibilities. As for complaints about other markets, I do not think those have been substantiated. While, therefore, I am grateful to the noble Lord, Lord Houghton, for concentrating our attention on the welfare of pet animals—which incidentally, under the law, with the 1951 Act, includes fish, and the very large regulation in the licences issued by Tower Hamlets Borough Council includes poultry and other birds, I would remind the noble Lord, Lord PeartI must say that I do not think the solution advocated in the Bill is wholly justified.
7.21 p.m.
Lord Houghton of Sowerby: My Lords, I am grateful to noble Lords who have taken part in this short debate and I especially wish to thank the noble Lord, Lord Airedale, for drawing attention to quite an important aspect of buying animals in market places—the questions of warranty and redress if one has, so to speak, bought a pup and frequently the difficulty of getting complaints attended to on the part of stallholders who are not regularly there. There is no doubt that to buy from pet shop premises under the conditions by which pet shops are now regulated and supervised is the most suitable way of buying a pet animal, apart from going to the breeders themselves, and a number of people do go direct to breeders and look at what they are buying and rely on the quality of the animals they get.
I am grateful to my noble friend Lord Mishcon and although we are not always on the same side, on this

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occasion my heart warmed to him in a most unusual way, and I hope it lasts. My noble friend rightly chided me with using too much shorthand in regard to the purchase of animals by or on behalf of young children. I take his point, and it is a fair one; one should take great care before buying animals for children. One should resolve to make it part of the training of young people in understanding animals and in treating them propertly and kindly. I am grateful to my noble friend for having made that point, a very valid one, and it would be wrong if I left the House under the impression that I was advocating a complete boycott on the purchase of animals for young children. It is all a matter of the sense of responsibility of the parents, and if that is there, then children should be encouraged to know animals from the very earliest age.
I am grateful, also, for the continued support of my noble friend Lord Peart. All went well with the debate until the Minister rose to make his contribution. The first thing I want to tell him is that the British Veterinary Association have done their best in their guidelines to raise the standard of welfare within the provisions of the Act. The framework of the Act lays down the conditions under which animals should be kept in licensed markets. But the noble Lord has to dispose of the fact that notwithstanding the efforts of the BVA to help raise standards and maintain them, they are still in favour of this Bill. I believe that fundamentally they think that those are not conditions under which animals should be kept for sale, and if they are to be kept for sale under those conditions, let us try to raise them to the highest standard of welfare and comfort.
I was not a bit surprised that the noble Lord erected the whole battery of protective legislation, from the Protection of Animals Act 1911 to the Abandonment of Animals Act, the 1951 Act and so on—the sort of array of safeguards that are there—but when they are all looked at closely, one finds difficulties in applying them, getting convictions under them and enforcing them. After all, the whole basis of the 1911 Act is unnecessary cruelty, something which has troubled lawyers for ages. What is unnecessary cruelty when you are about to slay an animal? What is unnecessary cruelty when the law authorises you to put it on sale on a stall on a bitter winter day with a blizzard blowing down the street such as we have not experienced for many years past? What is the degree of unnecessary cruelty there? Basically, as my noble friend Lord Mishcon said, they are unsuitable conditions, especially these days when there are so many other avenues for sale and when modern standards are such an improvement on the past. One should get rid of the primitive conditions under which animals were treated and lift them to a new level.
In relation to enforcement and the Tower Hamlets Borough Council, I would not wish to detain the House now by going into the problems of that council. They have many market places under their authority, and a lot of them are held on Sundays, which makes staffing and inspection very difficult. I need not stress the point of Sunday work on the part of local government officials who are responsible for inspecting and visiting markets. Petticoat Lane is only just around the corner, and there are perhaps eight markets under the jurisdiction of Tower Hamlets Borough Council.
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The noble Lord probably did not have the benefit of hearing what the authorities said about the difficulties of manning their responsibilities. Their officials are there, and they can be excused for not being there all the time; and that is why the RSPCA have gone to the expense and trouble, also on Sunday, of having somebody there all the time. That is important. Why are they there all the time? Surely it is not because they like being there on a cold Sunday morning. It is because they fear that conditions may be brought to their notice which will require attention.
I could, of course, go on further, but I sense that the House would not wish to make an issue at this time over the Second Reading of this Bill. There are times when we in this House use our own judgement and try to pursue our own purposes which we believe justify the step that we are taking, and I think it would be as well if your Lordships, in giving an unopposed Second Reading to the Bill, were to convey the message which the Bill really carries. There may be details about it, but for us to express our concern in this way surely cannot do any harm. After all, one can go on passing Bills in this House, but unless they get time in another place one has achieved very little except the publicity, if any, attaching to a debate and the message that one gives to quarters which might take notice of it. That, I suggest, is what we can do again tonight, especially as in another place they may have opportunities in the near future of themselves looking at this issue in a different context.
If the two minds can meet in Parliament in the near future, we might find some satisfactory solution to a problem which nags a lot of people and which started with Sir Ronald Russell in 1969 and is still going in 1982. There must be something in it. We cannot just be moved by emotion and exaggerated accounts of conditions. The persistence of different people behind this movement surely indicates a deep concern and disapproval of what is done to animals. I am sorry the Government do not rise to occasions. Goodness me! would it not be a delight if we could see some imaginative purpose on the Government Benches sometimes, trying to lead the county into a higher conception of the quality of life, instead of defending theoretical conditions which do not in practice satisfy all our requirements. Therefore I sincerely hope that the House will proceed to give the Bill a Second Reading.
On Question, Bill read a second time and committed to a Committee of the Whole House.

Greater London Council (General Powers) Bill
Returned from the Commons with the amendments agreed to.
  MANIPULATIVE THERAPY
  MANIPULATIVE THERAPY
  NATIONAL MUSEUMS AND GALLERIES SCOTLAND
  NATIONAL MUSEUMS AND GALLERIES SCOTLAND
  COUNCIL DWELLING SALES, RECEIPTS AND LOANS
  COUNCIL DWELLING SALES, RECEIPTS AND LOANS
  COUNCIL HOUSE SALES: VALUATIONS
  COUNCIL HOUSE SALES: VALUATIONS
  SCHOOL CROSSING PATROLS: HERTFORDSHIRE
  SCHOOL CROSSING PATROLS: HERTFORDSHIRE
  IMMIGRATION INFORMATION LEAFLET: DACCA
  IMMIGRATION INFORMATION LEAFLET: DACCA
  X-RAYS ON CHILDREN IN INDIAN SUB-CONTINENT
  X-RAYS ON CHILDREN IN INDIAN SUB-CONTINENT