Sitting of 10 November 1982

Preamble
The House met at half-past Two o'clock
PRAYERS
[MR. SPEAKER in the Chair]
PRIVATE BUSINESS
  WRITERS TO THE SIGNET DEPENDANTS' ANNUITY FUND ORDER CONFIRMATION
  Mr. Secretary Younger presented a Bill to confirm a Provisional Order under section 7 of the Private Legislation Procedure (Scotland) Act 1936, relating to the Writers to the Signet Dependants' Annuity Fund; And the same was read the First time; and ordered to be considered upon Tuesday 16 November and to be printed [Bill 8.]
Oral Answers to Questions
  ENVIRONMENT

    Grand National
    Mr. Fitchasked the Secretary of State for the Environment if he will make financial resources available to help to ensure that the Grand National horse race continues.
    Mr. Parryasked the Secretary of State for the Environment whether his Department has given any advice or assistance to ensure that the Grand National horse race continues to take place at Aintree racecourse.
    The Under-Secretary of State for the Environment (Mr. Neil Macfarlane): Under an agreement signed on 5 November between the trustees of the Jockey Club's Grand National campaign and the private owner of the Aintree racecourse, the former has been granted an option to acquire the freehold of the racecourse and the permanent rights to the race for £4 million at any time up to 1 May 1983. The holding of the 1983 Grand National has been guaranteed under separate arrangements.
    I sincerely hope that the long-term future of this great steeplechase can now be assured, although I fully appreciate that much depends upon the fund-raising ability of the Jockey Club to reach its target over the coming months.
    Mr. Fitch: If this assurance is not fulfilled, will the Government be prepared to give some financial support? Does the hon. Gentleman agree that this is not a parochial event, but a major event in world sport that is watched on television by 49 countries and therefore should not be allowed to die?
    Mr. Macfarlane: I echo the hon. Gentleman's final sentiments, but I can give the House no guarantees or
    530
    assurances that the Government will provide any money. It is very much the responsibility of the racehorse fraternity. I understand that much will depend upon how these funds can be raised over the next few months. I draw the hon. Gentleman's attention to the press statement by the Jockey Club, which he might read and thereby understand a few further matters.
    Mr. Parry: I congratulate the Jockey Club and the Merseyside county council on their efforts to ensure that next year's race will be run, and I hope that financial assistance will be raised to enable it to be run in future years. Will the Government consider providing financial assistance for a sports complex, which would be a tremendous boost to Merseyside and the North-West and would provide some urgently needed jobs?
    Mr. Macfarlane: It is difficult to hypothecate what might happen in future. Much depends on what happens between now and the middle of next year, but the future depends on the ability of the Jockey Club to raise funds. I am certain that many Government agencies are interested in the future of the steeplechase and will consider the observations and suggestions of local people.
    At some future stage the regional sports council may receive overtures from people in this area, which it might consider. However, I make it clear—
    Mr. Speaker: Order. The answer is becoming very long.
    Mr. Budgen: Will my hon. Friend be a great deal firmer and tell the House that there is no intention of giving taxpayers' money to maintain the Grand National? Will he state that when a Tory Government are necessarily cutting back on public spending in the Welfare State it is wrong to give money to activities that ought to be no part of the business of any Government?
    Mr. Macfarlane: I thought that I had made it clear that the Government have not made any contributions. This is naturally a matter for the Jockey Club and the racehorse fraternity.
    Mr. Denis Howell: I appreciate the initiative of the Jockey Club, but how does the price compare with the known price of the district valuer? How will the money be raised, and how much will be needed to replace the stands under the provisions of the Safety of Sports Grounds Act? As there is a desperate shortage of play space in Merseyside, is not the greatest priority to get Aintree opened up to the people in the area?
    Mr. Macfarlane: The whole concept of the continuation of this race, together with the facilities and acreage, depend on its viability. Everybody must understand that the Government are not in the business of giving subsidies for this type of activity. I shall happily find some of the answers to the detailed statistics, but I should point out that the Home Office also has a major interest in organisations involved in racing in this country.

    Local Authorities (Expenditure)
    Mr. Altonasked the Secretary of State for the Environment whether local authorities have taken up his invitation to increase capital spending.
    Mr. Campbell-Savoursasked the Secretary of State for the Environment if he will make a statement on the instructions he is giving to local authorities on capital spending limits for the year 1982–83.
    Mr. Jim Marshallasked the Secretary of State for the Environment what estimate he has made of capital spending plans by local authorities for the year 1982–83.
    The Secretary of State for the Environment (Mr. Michael Heseltine): Returns from local authorities suggest that there will be an underspend on capital investment by English authorities by over £1 billion in 1982–83. I have urged local authorities to bring forward worthwhile capital schemes and have offered additional expenditure allocations for that. I have also asked my regional offices to approach individual authorities, as has happened many times in the past, to establish what schemes they may have available suitable for acceleration. I hope that will lead to a reduction in the underspend, with consequent benefit for the construction industry, but applications from local authorities are still being received and it is too early to forecast the extent of the response. For 1983–84, allocations will be made shortly in the usual way.
    Mr. Alton: Has the Secretary of State had an opportunity to explain to the Prime Minister that, contrary to what she said in the House last week, money allocated for capital schemes cannot be transferred by local authorities to pay for wage demands? How are councils to deal with the revenue implications? Will they not face clawback if they spend money on capital projects and incur revenue implications? Does the right hon. Gentleman agree that taking decisions against the clock will result—
    Mr. Speaker: Order. I have twice this week appealed that when an hon. Member is called to ask a supplementary question he asks what is his right—one supplementary question—or he takes up the time of other hon. Members.
    Mr. Heseltine: I believe that the hon. Gentleman was asking me about the jerry-building that local authorities will propose as a result of the schemes that they put forward. We shall ensure that local authorities do not do that. There is not the slightest evidence that they will.
    My right hon. Friend the Prime Minister has expressed herself clearly. I see no reason for doubt.
    Mr. Campbell-Savours: Will the Secretary of State place on record that local authorities can use their capital receipts to pay interest charges on borrowings that arise from the use of the £1 billion that is being made available to them on a wider basis? Is he aware that my local authority is applying to him for £1,250,000 extra to pursue the programme that he has set as an objective, because it is worried about what will happen at the year-end on carryover? Will he introduce flexibility in that area?
    Mr. Heseltine: It is early days, but the hon. Gentleman's local authority is one of those that have responded with a number of schemes. That proves that it is possible for local authorities to do exactly what we requested. No Minister has expressed the view that the total underspend predicted for this year can be made up on any significant scale. It is too large and too late. That is the difficulty facing the Government. Local authorities have underspent on such an enormous scale for this year
    532
    that that capital resource is lost to the construction industry. The Government are doing their best to make up some of the shortfall that the local authorities have created.
    Mr. Marshall: If the Secretary of State's exhortations to local authorities are successful, will he give an assurance that any increased revenue expenditure arising from increased capital expenditure this year will be exempt from any future controls on local authority revenue expenditure?
    Mr. Heseltine: The hon. Gentleman knows that we cannot separate the accounts of 420 local authorities to find the revenue consequences arising from any decisions in the way that he suggests. Local authorities understand that fully, as they have always done. They will use their own judgment. The real world is made up of a large number of local authorities, many of them represented by Opposition Members, which are now trying to find schemes to create jobs in the construction industry. If the Opposition would concentrate on helping those local authorities, as opposed to raising difficulties, more jobs would be created.
    Mr. Chapman: Has my right hon. Friend seen the proposal by the House-Builders Federation that local authorities should use part of their capital underspend this year to buy houses already built and to offer them to people on their waiting lists on a shared equity basis? Will he encourage that proposal?
    Mr. Heseltine: That is a classic example of a constructive approach to what the Government are trying to do. I am looking at that idea.
    Mr. Frank Allaun: After halving housing expenditure in three years and bringing council house building to almost nothing, is there not something indecent in the Secretary of State now telling local authorities to increase capital expenditure? If he is aware of the misery that he is causing, he is a stinking hypocrite.
    Mr. Speaker: Order. The hon. Member knows that it is out of order to refer to another hon. Member in those terms. One cannot say "If' and add that a man is a hypocrite, or we shall be crawling on the floor, without standards.
    Mr. Allaun: I withdraw that remark, Mr. Speaker, and say that this is a stinking hypocrisy.
    Mr. Heseltine: I shall do my best to draw those interesting observations to the hon. Gentleman's local authority, which happens to be putting in one of the longest lists of bids.
    Mr. Squire: Will my right hon. Friend continue to review the need to make a commitment to local authorities on future capital expenditure and borrowing powers, because the main deterrent is against sudden capital expenditure on fairly minor schemes. Anything that has happened during the past few weeks cannot change the position on major schemes, unless they have a greater expectation of support in future years on capital spending.
    Mr. Heseltine: I understand the point made by my hon. Friend, but he will realise that as local authorities have £600 million of capital underused from last year, £1 billion capital underspent this year and substantial projected capital receipts next year, the level of allocation by the Government becomes less important in their forward capital planning.
    Mr. Kaufman: First, will the right hon. Gentleman answer the question put by my hon. Friend the Member for Wokington (Mr. Campbell-Savours)—a question that he dodged—on whether local authorities can use capital receipts to service loans? Secondly, will he summon up the honesty to admit that his and the Prime Minister's new spend, spend, spend stunt is nothing but a phoney and a sham? He is simply asking local authorities to bring forward by four months next year's capital spending projects. If they are incautious enough to obey him, the revenue consequences, plus the abolition of the GREA amnesty and the planned reduction in their spending ceilings, will make them liable to savage penalties for doing what the Secretary of State is telling them to do.
    Mr. Heseltine: The right hon. Gentleman is an expert in trying to frustrate any scheme that is to the benefit of the construction industry. It is fortunate that Labour-controlled local authorities take absolutely no notice of what he says. Significant numbers of local authorities are producing capital schemes to help the construction industry, and the right hon. Gentleman is deliberately trying to frustrate them.

    Council House Sales
    Mr. Timothy Smithasked the Secretary of State for the Environment what proposals he has further to encourage the sale of council houses.
    The Minister for Housing and Construction (Mr. John Stanley): The Housing and Building Control Bill, published last Friday, will extend the right to buy to council tenants whose dwellings are on leasehold land and to certain tenants of charitable housing associations.
    It will also further extend the right to buy by giving tenants who are not able to afford to buy outright the right to buy on a shared ownership basis instead. In addition, the Bill will remove certain obstacles which some councils have used to obstruct and dissuade tenants from exercising their legal right to buy their homes.
    Mr. Smith: That will be a welcome extension to the right-to-buy provisions. Does my hon. Friend agree that, bearing in mind the substantial reduction in mortgage interest rates that has taken place this year and the fact that there is more to come on Friday, this is a propitious moment to draw to the attention of council tenants their right to buy under the Housing Act 1980?
    Mr. Stanley: My hon. Friend is right to draw attention to the success of the Government's policy in reducing inflation, interest rates and mortgage rates. He is also right to say that the weekly cost to many council tenants of buying their homes on a mortgage will be no more, and in some cases will be even less, than the cost of continuing to pay rent.
    Mr. Allan Roberts: Will the Minister explain whether, under the shared ownership proposals for council houses, a tenant may join other members of his family resident in the dwelling to buy part of the house? If they can do that, in much the same way as they can buy the whole of the house jointly under the Housing Act 1980, what will happen if there is a dispute while half the house is owned and half is rented? Will the person who owns half of the house be able to ban a member of his family from that part of the house and make him live in the other half?
    Mr. Stanley: The rules on buying part of the equity on a shared ownership basis are the same as those on buying outright under the right-to-buy provisions. The provisions have applied satisfactorily in many voluntary sales under shared ownership arrangements.

    Footpaths
    Mr. Andrew F. Bennettasked the Secretary of State for the Environment when he expects the sections of the Wildlife and Countryside Act 1981 relating to footpaths to come into operation.
    Mr. Macfarlane: My right hon. Friend expects to bring the rights of way provisions into operation early in the new year.
    Mr. Bennett: Will the Minister give us an assurance that there will be sufficient staff, locally and nationally, to carry out the footpath provisions of the Wildlife and Countryside Act? In the past 10 years most local authorities and the Government have not had sufficient staff to carry out their responsibilities.
    Mr. Macfarlane: No, I cannot give that guarantee. The hon. Gentleman is aware of the guidelines and the requirements and he knows what our consultations with other organisations involve. I hope that we shall have the regulations before Parliament in January and that they will come into operation one month later.
    Dr. David Clark: Does the Minister appreciate that many local authorities have done much work on the preparation of their footpath review maps? Will he take the opportunity to clarify the Government's plans for the outstanding reviews?
    Mr. Macfarlane: No, I cannot do that now. I know what the hon. Gentleman is worried about. We have had a dialogue on the matter previously, both inside and outside the House. As soon as I have anything to report, I shall let him and the House know.

    British Waterways Board
    Mr. Ashtonasked the Secretary of State for the Environment whether he has received the latest report of the British Waterways Board; and if he will make a statement.
    The Under-Secretary of State for the Environment (Mr. Giles Shaw): The board's annual report and statement of accounts for 1981 were laid before this House on 23 June.
    Mr. Ashton: Is it not a fact that the Government had to send in their own auditors, because the financial affairs of the board were in a mess, and that the board is now bringing in its own auditors again to check on the Government auditors?
    Mr. Shaw: The general review by the Inbucon consultants into the affairs of the board includes an examination of the efficiency of management and the structure of the board. Publication of the report is expected shortly.
    Mr. John Wells: Is my hon. Friend aware of the importance of keeping the maximum mileage of waterways open at all times in this era of increased leisure?

    535
    It is essential, particularly in the Midlands areas, which are remote from the sea, that people should have waterways available for fishing and other recreation.
    Mr. Shaw: I agree with my hon. Friend. It is indeed important that we should optimise the benefits that waterways can offer, but I remind the House that it is also necessary to increase the income.
    Mr. Denis Howell: Is it not astonishing that the affairs of the board have got into such a serious state, administratively and in respect of the lack of repairs to waterways, that outside auditors have had to be brought in? Is it not even more astonishing that bureaucratic arguments are taking place between the Government's auditors and the board's auditors? Will the Minister accept the Government auditors' accounts, as we would do, and agree that that means that urgent action must be taken to open up the whole canal system and repair it properly, for the benefit of the nation and to ensure that it is run efficiently in the public interest?
    Mr. Shaw: I agree with the necessity of ensuring that the affairs of the board are run with maximum efficiency. I remind the right hon. Gentleman that the Government have increased substantially the grant-aid available to the board to make good some of the backlog of work.

    New Towns
    Mr. Newensasked the Secretary of State for the Environment what representations he has received on his proposals for responding to claims made by new town local authorities under section 51 of the New Towns Act 1981.
    The Under-Secretary of State for the Environment (Sir George Young): No representations have been received from the authorities concerned since the Department's letters of 13 October. I saw a group of hon. Members last Monday and had a most helpful discussion with them.
    Mr. Newens: Does the hon. Gentleman not recognise that his refusal to meet more than a fraction of the cost of design defects in houses transferred to new town local authorities represents a gross breach of faith by the Government, in view of undertakings given in the past? Would not a commercial firm which attempted to renege on its liabilities be guilty of a flagrant breach of contract? Is the hon. Gentleman not prepared to make a more reasonable offer to the authorities which took over new town houses?
    Sir George Young: The Government have made a generous and realistic offer to the new towns. The problem with Harlow is that 85 per cent. of its claim relates to maintenance items and, under the criteria for the assessment of claims, normal maintenance is not eligible for grant.
    Mr. Dover: Will my hon. Friend confirm that local authorities in second and third generation towns are unlikely to have to make such claims, because the design of houses in those towns is much more traditional?
    Sir George Young: I confirm that we do not expect the same problems on future transfers, for the reason that my hon. Friend has given. It is also worth saying that the new towns concerned have benefited financially from the transfer of the houses.
    Mr. Dormand: Will the hon. Gentleman confirm that the new town with the worst problems is Peterlee in my constituency? Does he agree that Easington district council has followed his guidelines on rent policy, and will he tell us where he thinks the money will come from to pay for the vast number of repairs that will be needed? Surely this is a national, not a local, matter.
    Sir George Young: The Government intend that expenditure that has to be incurred will be taken into account in the HIP allocations to the local authorities concerned. I think that the hon. Gentleman knows that I am meeting the Association of District Councils tomorrow, and I hope that the matter can be satisfactorily resolved.
    Mr. Michael Morris: Is my hon. Friend saying in relation to third generation new towns that where properties are not built in the traditional way there may be a case for a claim?
    Sir George Young: The Government hope that in many cases there will be management arrangements between the district council and the new town so that the council that takes over the properties will have experience of them before the transfer takes place. It will be able to assess the value of the properties and they can be repaired by the new town corporation before the transfer, thereby obviating the problems to which hon. Members have referred.
    Mr. Graham: When the hon. Gentleman meets new town representatives tomorrow, will he temper his present mean offer with the reflection that the causes of the financial problems and disasters that will fall on local ratepayers and rent payers are no fault of theirs, but are due to a breach of faith by, among others, the Secretary of State for the Environment?
    Sir George Young: That is not the case. The Government are under no legal obligation to make any offer in respect of these properties. We accept that there is a moral obligation and, in discharge of that, we have offered to pay 40 per cent. of admissible expenditure. In the light of the overall benefit to new town councils of the properties to be transferred, our offer is generous.

    Council House Rents
    Mr. Guy Barnettasked the Secretary of State for the Environment when he intends to give details of the level of council house rent increases devised by the Government in 1983–84.
    Mr. Winnickasked the Secretary of State for the Environment whether he expects local authorities to increase council house rents in 1983; and, if so, by what amount.
    Mr. Heseltine: I issued the statutory consultation paper to local authorities on Monday of this week, proposing that housing subsidy for 1983–84 should be calculated on the basis of an 85p increase in the local contribution. Actual rent increases are a matter for decision by individual authorities.
    Mr. Barnett: Is it not shameful that after three and a half years in office, during which time average council house rents have more than doubled, the Government

    537
    should even contemplate the possibility of further increases? Ought not the Secretary of State to be thinking in terms of a rent freeze?
    Mr. Heseltine: The hon. Gentleman will remember that the Labour Government believed that keeping rents broadly in line with the rate of inflation was a reasonable policy.
    Mr. Winnick: Is the Secretary of State aware that council tenants throughout the country are thoroughly fed up with being punished by the exorbitant rent increases of the past three years? Is it not a fact that council house rents have increased by more than double the increase in the retail prices index in the same period?
    Mr. Heseltine: I am sure that the hon. Member is aware that the standards of maintenance on council estates—arising from the fact that capital projects were cut in half by the Labour Government—presented real difficulties, which we have had to put right. Now that we are in a position to get a better balance, we can ensure that council tenants gain from the fall in inflation.
    Mr. Squire: Will my right hon. Friend join me in condemning the scaremongering tactics of the Labour Party, which, in the past two weeks, has circulated rumours about prospective excessive rent rises, which have caused unnatural and unfair concern to many people?
    Mr. Heseltine: I understand why my hon. Friend raises the matter. It is not for me to apologise to the House for the shameless behaviour of the right hon. Member for Manchester, Ardwick (Mr. Kaufman), who cynically trudged round the country telling people that there would be a £2 a week council house rent increase. That was mainly to help the Labour Party in the by-elections—and what disastrous results it achieved.
    Mr. Kaufman: Is the right hon. Gentleman aware that we are gratified to have scared him off the £2 increase that was proposed in his document? Is he further aware that even an 85p increase is twice as high as the Government's 3½ per cent. pay limit? As-no thanks to the Government—home-owners are at last to have mortgage interest payments reduced for the first time to below the level that the Government inherited from Labour, is it not unjust that council tenants are to have a 134 per cent. rent increase-five times as much as rents went up under Labour?
    Mr. Heseltine: I think that we now understand the difficulty into which the right hon. Gentleman has got himself. The document to which he refers is a local authority document, and the figures in it were chosen by the local authorities. As those figures were not endorsed in any way by my Department, will he now have the grace to admit that the information on which he based his whole scaring attitude was phoney and that he has misled every council tenant in the land?
    Mr. Kaufman: These were the right hon. Gentleman's proposals, and he knows it. If the Prime Minister had not got into a panic, preparing for the general election, it would have been a £2 increase.
    Mr. Heseltine: I must tell the right hon. Gentleman that the proposals are not mine. It was his failure to understand that fact that caused him to indulge in this scare technique.
    Mr. Greenway: Did my right hon. Friend hear the Labour Party talking about rent increases of 134 per cent. over three and a half years, when the Labour-controlled Greater London Council increased rates by 97 per cent. in less than a year? Does he think that it is moral for the Labour Party to advocate rent freezes at the expense of the ratepayers?
    Mr. Heseltine: I sympathise with my hon. Friend, but it is not just a matter of rent freezes at the expense of ratepayers; it is rent freezes at the expense of appalling housing conditions for people who live on council estates.
    Mr. Kaufman: On a point of order, Mr. Speaker. I am sure that the Secretary of State would not wish to mislead the House about the document to which I referred. It has on it the words "Department of the Environment 18 June".
    Mr. Heseltine: May I reply to that point, Mr. Speaker.
    The assumptions in that document were produced by the local authority associations as a set of hypothetical calculations. They were their assumptions, not ours.
    Mr. Freeson: Bearing in mind the additional burden that high rates have on rents for council tenants and, indeed, many other house occupants, will the Secretary of State advise local authorities to use significant proportions of their capital receipts—to which he referred this afternoon—to reduce the rates burden; and possibly rents, too?
    Mr. Heseltine: The right hon. Gentleman has a deep knowledge of these matters, but I am not sure how capital receipts could be used in that way. He was in the Department of the Environment long enough to know that the rules broadly divide the capital and current account programmes. I do not think that that has changed significantly in a way that would make his proposals possible.

    Housing Improvement Grants
    Mr. Cryerasked the Secretary of State for the Environment if he will introduce legislation to allow post-1919 houses to be subject to improvement grants; and if he will make a statement.
    Mr. Stanley: Of the four categories of grant, improvement and intermediate grants are already available for any dwelling provided before 2 October 1961. Special grants are already available to any house in multiple occupation, regardless of age. It is only repairs grants that are currently limited to dwellings built before 1919. I am however giving consideration, without any commitment at this stage, to making the cut-off date for repairs grants later than 1919.
    Mr. Cryer: Will the Minister bear in mind the position of householders and owner-occupiers in the Stockbridge area of Keighley, who have been blighted by motorway proposals since 1968 and have understandably delayed repairs for many years? In May 1982, when an alternative proposal was accepted, the blight was removed. Those people believe strongly that their properties have been blighted through no fault of their own and that their houses should be subject to grant-aid in some form, thus restoring them to the standard in which they would have been maintained had there been no blight. Will he consider the matter very carefully, because it is a just cause?
    Mr. Stanley: I am aware of the correspondence that the hon. Gentleman has had with my hon. Friend about the houses at Stockbridge, and I shall take it into account, with the representations that I have received from other hon. Members about the cut-off date for eligibility for repairs grants.
    Mr. Stephen Ross: I welcome the Minister's statement to extend the time limit. Will he consider making those repairs grants obligatory on local authorities, rather than discretionary? People looking for house roofing grants find that many local authorities either do not have the staff to deal with them or are not prepared to make grants available.
    Mr. Stanley: As the hon. Gentleman will be aware, there are limited categories of repairs grants which are mandatory, as opposed to being discretionary. One has to decide as a matter of policy how far to circumscribe the freedom of local authorities in allocating money between the various types of grant. So far, the Government have taken the view that concentration should be focused on the provision of basic amenities—baths and inside WCs. Intermediate grants are mandatory, and local authorities are free to exercise their discretion on the remainder. I note what the hon. Gentleman has said.
    Mr. Parris: Has my hon. Friend looked at the problem of those who commenced the purchase of Airey houses at high prices, at pre-Barnsley scare prices, but and where completion took place after the Barnsley scare, and who at present will be excluded from the help that he is offering?
    Mr. Stanley: The people who completed after the public statement was made about the defects in Airey houses should have had the valuation of their houses adjusted downwards to reflect the statement that was made. We have received representation from hon. Members—and, indeed, from individual owners of Airey houses—about people who bought at the inflated valuations after the date of the public announcement, and we are considering the matter further.
    Mr. Torney: Is the Minister aware that 270 council houses, and houses built by the council and since sold to occupiers, in my constituency of Bradford have to be demolished because they are unsafe? What kind of grant will the council give to build the 330 new houses that are going up? What advice has he given the local authority on how to deal with the claims of tenants and owner-occupiers?
    Mr. Stanley: If the hon. Gentleman is referring to Airey houses, current owners can invite the local authority to buy back such houses. If that happens, the Government will meet the full cost to the local authority. If the local authority, of its own volition, demolishes dwellings, it is for the local authority to include in its HIP bid to the Department the capital implications of replacing such dwellings. That factor will be taken into account in making individual allocations to individual authorities.
    Mr. Beaumont-Dark: My hon. Friend's comments on 1919 houses will be widely welcomed in the Midlands. When will he make a statement? That would be extraordinarily helpful to many householders in the Midlands.
    Mr. Stanley: I hope that we can shortly reach conclusions on that. However, as consultation with other Government Departments is involved, I cannot give a date today.

    Council House Sales
    Mr. Michael Morrisasked the Secretary of State for the Environment what is his latest estimate of the number of families who have become house owners under the right-to-buy legislation.
    Mr. Knoxasked the Secretary of State for the Environment if he is satisfied with the progress made so far with the sale of council houses to sitting tenants.
    Sir George Young: My right hon. Friend the Secretary of State is generally satisfied with progress. Between April 1979 and the end of June 1982 an estimated 370,000 public sector dwellings were sold in Great Britain, some 182,000 of which were sold under the right-to-buy provisions. There remain a minority of councils where progress with the right to buy gives cause for concern.
    Mr. Morris: Is my hon. Friend aware what good news the figure of 370,000 is? Will he perhaps consider setting a target of half a million sales within the lifetime of this Parliament? To achieve that end, will he ensure that the laggard authorities are forced to get on with such sales, which are the right of British citizens?
    Sir George Young: My hon. Friend the Minister for Housing and Construction keeps a close watch on those authorities about which my Department receives complaints and will continue to do so.
    The Government hope that the half million target will be achieved. The most welcome drop in mortgage rates, referred to a few minutes ago, will give a fresh impetus to the sale of council houses.
    Mr. Knox: How many local authorities are still dragging their feet over the sale of council houses? Are they all Labour-controlled?
    Sir George Young: I have in front of me a rather long list of local authorities about which my Department has received complaints. The vast majority of them are under Labour control. My hon. Friend the Minister for Housing and Construction has regular correspondence and meetings with them to bring home to them the importance of making swift progress in giving people their statutory right.
    Mr. Marks: In view of the Minister's claim to success in that regard, will he now extend the right to buy to tenants of privately owned houses?
    Sir George Young: That has already been dealt with at a previous Question Time. Those houses are already in private ownership and the Government's mandate extends only to those in public ownership.
    Mr. Hugh D. Brown: Has the Minister instructed his Department, or asked housing authorities, to commission research into the social consequences for people who are frustrated because they live in deprived areas with difficult to let housing, with low incomes, and whose chances of transferring to decent houses have been reduced?
    Sir George Young: The social consequences speak for themselves. Three hundred and seventy thousand people have exercised their right. What more evidence does the hon. Gentleman need?

    Rate Support Grant
    Dr. Edmund Marshallasked the Secretary of State for the Environment if he will introduce proposals simplifying the arrangements for rate support grant.
    The Minister for Local Government and Environmental Services (Mr. Tom King): I share the hon. Gentleman's concern to simplify grant arrangements as far as is possible, given the large sums involved and the importance of ensuring the fairest distribution for the more than 400 authorities involved. I am currently considering several options for simplification of the assessments of grant-related expenditure for the 1983–84 RSG settlement.
    Dr. Marshall: Are not the present rate support grant arrangements, which even the Minister has said are shrouded in complication and, I would say, excessive jargon, being used as a deliberate smokescreen to pass on to local authorities the blame for cuts in local services that are really being imposed by the Government?
    Mr. King: No, Sir. The hon. Gentleman will recognise that the rate support grant has never been a simple matter. Substantial sums of money are involved and the formulae have always been complex. However, there is now a better understanding of the way in which the needs assessments are made for individual authorities and we should continue to simplify the system in that area.
    Mr. Kenneth Lewis: Is my right hon. Friend aware that the increased imposition of rates upon industry year by year is becoming serious? It is creating financial and job losses. Will my right hon. Friend consider giving additional support to those local authorities that give special rate concessions to industry? That is important for jobs and for industry generally.
    Mr. King: I endorse my hon. Friend's opening remarks. At a time of recession we should reinforce the importance of all authorities not adding to the burdens of industry and commerce. There seems to be an illusion fostered by some political parties that rate levels do not matter to industry. However, they are a matter of the greatest concern. While I cannot go along the particular line that my hon. Friend suggests, I can tell him that we are most concerned about the general theme that he has put forward.
    Mr. Foster: Will the Minister confirm—or deny—press statements to the effect that the Secretary of State intends to claw back from local authorities any benefits that might accrue from the reduction in interest rates? If that is the case, will he advise local authorities such as Wear Valley and Sedgefield district councils, which would dearly like to spend capital on land reclamation, how to do that without having some flexibility on revenue expenditure?
    Mr. King: The matter that has been referred to in the press, over which there has been some confusion, deals with the supplementary report, which is presently under discussion. It has been the practice of successive Governments to deal with what are called "variable items" at the supplementary report stage. If interest rates rise local authorities are compensated, and if they go down there is some clawback. That is the standard practice, which the hon. Gentleman will find was followed by the Labour Government.
    Mrs. Rumbold: Will my hon. Friend assure the House that his simplified guidelines on the rate support grant will also provide some measure of equity to those authorities that have tried faithfully to follow the Government's guidelines but have so far seen little compensation for their efforts?
    Mr. King: If I were to answer that question fully I would incur your wrath, Mr. Speaker. It is my constant ambition to do what my hon. Friend suggests. When she fully analyses the proposals that we shall put before the House, I hope that she will see that justice has been done.

    Inner City Policy
    Mr. Tilleyasked the Secretary of State for the Environment whether he proposes to take steps to modify the inner city policy of his Department.
    Mr. Heseltine: We are continually seeking new ways, such as the urban development grant, of achieving urban regeneration. The urban programme is relatively new. It offers the opportunity for considerable flexibility. It is continually under review as a consequence.
    Mr. Tilley: Is the Minister aware of the reported remarks of his noble Friend and ministerial colleague, Lord Bellwin, on South Tyneside? Is he aware that Lord Bellwin is reported to have said that the Department is considering rejigging the inner city policy to take away the concentration of funds from the partnership areas? Partnership areas such as my constituency of Lambeth, and that of Liverpool, amongst others, while they are grateful for the concentration of funds in the past, still regard such funds as being sadly inadequate for their desperate needs. Is the right hon. Gentleman aware that they will regard such a switch in policy as a betrayal of past statements on the inner city areas?
    Mr. Heseltine: If the hon. Gentleman keeps in mind the fact that his authority's allocation has been increased by 30 per cent. this year compared with last year, he will see the seriousness with which we treat the matter. He will already have a flavour of the fact—it cannot be more than that—that the urban development grant initiative, which is now under consideration, means that significant increased funds should be flowing in his direction if the scheme stands up to examination. I hope to say something further about that shortly.
    Mr. Alton: Is the Secretary of State aware that over the past 12 months 10,000 trees have been planted in inner city Liverpool, that one job has been lost for every tree planted and that one crime is committed every four minutes? His remedies are wholly cosmetic and irrelevant to the basic problems of unemployment and crime.
    Mr. Heseltine: I was not aware that 10,000 trees had been planted in Liverpool over the past 12 months. I shall give the deepest consideration to the implications of that.
    Mr. Dover: Will my right hon. Friend ease planning restrictions in inner city areas, to try to encourage more private development?
    Mr. Heseltine: I am very sympathetic to that view. The Government have amended the general development order. One of the consequences of that will be to help in that way. However, local authorities are now adopting a very practical approach—particularly in some of the

    543
    industrially deprived areas and in some of our inner cities—to the need to attract industrial and commercial investment.

    Local Authorities (Housing Revenue)
    Mr. Wardellasked the Secretary of State for the Environment how many local housing authorities are currently showing a surplus on their housing revenue accounts; and how many are estimated for 1983–84.
    Mr. Stanley: Actual data on authorities' housing revenue accounts for the current financial year will not be available until the summer of next year. No estimates can yet be made for 1983–84.
    Mr. Wardell: Do not the Secretary of State's departmental calculations show that, as a result of the £1 a week rent increase from April next year, at least 305 out of 367 housing authorities will have a profit on their housing revenue account? Will he confirm that it is the Government's intention to make maximum profits out of council house tenants, as demonstrated by the 133 per cent. rise in rents since May 1979, compared with an average rise in earnings, by April 1983, of only 51·7 per cent?
    Mr. Stanley: The hon. Gentleman says that that is "the Government's intention", but I hope that he will look at the rent increases made by individual local authorities. In particular, I hope that he will consider the rent increases levied by several Labour-controlled authorities. If he bears in mind the details of what has happened on the ground, he will realise that a significant number of Labour-controlled authorities, in both the last financial year and this one, are voluntarily choosing to raise rents by an amount in excess of the assumption used by my right hon. Friend the Secretary of State.
    Mr. Squire: Did not the Labour Government resolve to increase the proportion of the revenue account that is met by rents? If so, have we not had an example of the Labour Party saying one thing in Government and something else in Opposition?
    Mr. Stanley: My hon. Friend is right. Since we came to office it has been necessary to increase rents in real terms because, contrary to the protestations of the Labour Party there was a substantial decrease, in real terms, when that party was in Government.
    Mrs. Ann Taylor: As the Minister has accepted that Labour councils have had to increase rents because of the Government's direction, will he now have words with the Secretary of State? As the Secretary of State has changed his mind on the policy of local government spending, will he suggest to him that he should also change his mind on the "no profits" rule and reinstate that rule on housing revenue accounts, to ensure that the profits that he is forcing local authorities to make are ploughed back into council housing and that tenants derive some benefit from them?
    Mr. Stanley: I do not think that the hon. Member listened to my reply to the original question. Contrary to what she says, a significant number of authorities—as I have already made clear—including many Labour-controlled councils, have voluntarily chosen to increase rents by an amount greater than the assumption used by the Secretary of State.

    Greater London Council
    Mr. Spearingasked the Secretary of State for the Environment if he will place in the Library a list of all the statutory functions of the Greater London Council which relate to his responsibilities.
    Mr. King: The Library already has, I understand, a copy of the comprehensive "Index of Statutes affecting Local Government in Greater London". This covers not only the London Government Act 1963 but the numerous local Acts in force in the GLC's area.
    Mr. Spearing: Does the right hon. Gentleman agree that the matters that are the responsibility of his Department and of his colleagues in Government have often, in the past 100 years or so, been the responsibility of London's local government, under the London County Council and its successor? Does he really believe that he can administer those matters without a uniform body covering the whole of London?
    Mr. King: The hon. Gentleman will be aware that our primary concern is with local authority expenditure and the overall level of expenditure. Against that background, the hon. Gentleman would be singularly ignorant—which I know he is not—if he did not know that the GLC's recent performance has hardly contributed to the collective effort by local authorities to meet the Government's public expenditure target.
    Mr. Durant: Will my right hon. Friend consider abolishing the GLC? Will he further consider letting that building as a multi-storey car park, as the corridors are wide enough?
    Mr. King: As I have said, our first concern is with expenditure, not structure. However, I well understand my hon. Friend's concern—it is shared by millions of Londoners—that the GLC's behaviour serves only to increase the totals given on the GLC's banner. The rate burdens imposed by the GLC have undoubtedly added directly to the number of London's unemployed.
    Mr. Graham: With reference to the disclosure about the Strongbridge housing association and certain Tory members of the GLC, the Minister will recall that I raised such matters with one of his colleagues in the House last July. May we have an assurance that the Minister will come to the House at the earliest opportunity and make a full statement, recognising that the effectiveness of the monitoring function of the Housing Corporation must now be in question?
    Mr. King: That point does not arise directly from this question. However, whether the issues affect Labour, Tory or other councillors, they must be properly investigated.

    Council House Sales
    Mr. Hillasked the Secretary of State for the Environment whether, following the success of such a scheme in Southampton, he will seek the assistance of building societies for funding council house sales to reduce local authorities' mortgage lending to house buyers and to release funds for new building projects.
    Sir George Young: I understand that the scheme under consideration would involve the re-financing of council mortgages by a leading building society, where the

    545
    mortgagor consents. This can offer benefits for all concerned. A number of building societies have arranged or expressed interest in such schemes, and I have urged local authorities to consider them.
    Mr. Hill: Does my hon. Friend agree that this is a gentler form of privatisation, which will result in a cheque in the council coffers of some £21 million? It also means a lower mortgage rate for the tenants and can do nothing but good. There will be a reduction in the number of staff needed to administer the council house scheme and there will be better administration of the houses by the building society concerned.
    Sir George Young: My hon. Friend has succinctly identified many benefits that would result from the proposal. I hope that the local authorities will read his remarks and take note of them.
    Mr. Allan Roberts: As the Minister has been discussing this issue with the building societies, can he let us know their attitude towards funding the purchase of part of a council house? How many building societies are interested in funding the purchase of council flats, a few of which are apparently being sold?
    Sir George Young: I am certainly aware of building societies financing properties under shared ownership schemes, and that has been a great success. I am sure that building societies will consider mortgages on council flats if such a proposition is put to them.

    Recreational and Sports Service
    Mr. Denis Howellasked the Secretary of State for the Environment why his Department has failed to provide adequate staff to complete and publish the findings of the Yates committee on the training of management for the recreational and sports service; and when he now expects to publish the report.
    Mr. Macfarlane: The secretariat of the Yates committee was reduced two years ago when it seemed likely that its work would soon be completed. This forecast proved optimistic, but I now expect to receive the report before Christmas.
    Mr. Howell: Given that a committee was set up seven years ago to consider the important subject of public management and that it completed its work five years ago, what justification can there be—other than inadequate provision in the Department—for the fact that we are still waiting for secretarial help to produce the first draft? Now that the matter has been drawn to the Minister's attention, will he deal with it speedily?
    Mr. Macfarlane: I shall try to assist the right hon. Gentleman. He set up the committee in late 1976 and it
    546
    had its first meeting in May 1977. I am informed that the final draft is with the chairman of the committee, awaiting approval. I hope that it will be cleared speedily so that the report can be presented.

    Construction Industry
    Mr. Andersonasked the Secretary of State for the Environment what is the current level of bankruptcies in the construction industry.
    Mr. Stanley: There were 1,124 bankruptcies in the construction industry in the first six months of this year including both individuals and partnerships going into receivership and companies going into liquidation.
    Mr. Anderson: Is there not a clear and tragic message for the Government in that answer in terms of the number of jobs lost? The industry has no confidence in the Government and cannot believe that the Prime Minister and the Secretary of State can think that local authorities can turn on their capital investment programmes like taps.
    Mr. Stanley: I agree with the hon. Gentleman in so far as I regret the level of bankruptcies in the construction industry and any other industry. However, to maintain perspective, the hon. Gentleman should take into account the fact that under the Government the level of bankruptcies in the construction industry has never approached the numbers achieved by the Labour Government in 1975 and 1976.
    Mr. Nicholas Winterton: Is my hon. Friend aware that the construction industry has considerable confidence in the Prime Minister? Will he give further and deeper consideration to the issue of construction bonds that will attract private resources into the construction industry? Will he also consider further projects that are advanced by private enterprise companies, such as Tarmac Ltd., for the funding of major roadways, which could be built initially with private resources to help public expenditure?
    Mr. Stanley: I assure my hon. Friend that we have considered those matters in detail and have produced some practical results. We have, for example, increased the proportion of construction activity that can be financed privately. We have achieved much wider building society lending on house purchases than previously and my right hon. Friend the Secretary of State has pioneered many other schemes in Merseyside and elsewhere using public expenditure to attract substantial private input. I endorse what my hon. Friend said about the construction industry's confidence. That is reflected by the net increase in construction companies in the past two years. Some 8,000 such companies have registered for VAT.

Britoil
3.30 pm
The Secretary of State for Energy (Mr. Nigel Lawson): With permission, Mr. Speaker, I should like to make a statement about the privatisation of Britoil.
The offer for sale of 51 per cent. of the shares in Britoil will be by tender, with special arrangements for small investors to apply for shares at the striking price without having to bid a specific price in advance.
The shares have today been underwritten at a minimum tender price of 215p per share. Payment for the shares will be in two instalments, a first instalment of £1 a share on application, with the balance due next April.
The prospectus and application form will be available in the Library from today and published in newspapers on Friday. Copies of the prospectus in book form will be widely available through main branches of the clearing banks, Trustee Savings Banks and main post offices from next Monday, 15 November. The application list for the shares now offered for sale will open at 10 am on Friday 19 November and may be closed at any time thereafter.
In order to encourage small investors to retain a long-term interest in the company, they will, subject to the conditions set out in the prospectus, receive one free share, known as the small shareholder bonus, for every 10 still held in three years time.
As I told the House a fortnight ago, the privatisation of Britoil will in no way effect the system of participation agreements, which will remain in place, under 100 per cent. Government control, as a means of safeguarding our national security of supply. But what it will do is enable the people of Britain to take a direct personal stake in the North Sea. It will create an independent British oil company free to seize the opportunities open to it; and it will substantially reduce the size of the public sector in an area where State ownership has no rational justification whatsoever.
Mr. Merlyn Rees: The right hon. Gentleman's statement represents the final stage in the splitting up of BNOC. It involves the biggest sell-out of our national interests because it involves the sale at half the value of the assets and the dismantling of the instrument through which the United Kingdom has been able to exercise control and influence over the development and use of North Sea oil, depletion policy and so on. It bears no comparison with British Petroleum. BNOC served a different and modern purpose compared with the shareholding in BP of 70 years ago. BP was never the chosen instrument of Government control.
I welcome the statement, following my representations yesterday, but we have been told very little. The Opposition have made it clear that we will one day take BNOC back into public ownership. Moreover, we will keep the House fully informed—unlike the Government.
I accept that we have not had a copy of the prospectus for legal reasons. Nevertheless, I was offered a copy by the media this morning. Hon. Members did not receive a copy. The prospectus is being discussed outside the House. So much for legality.
Is the decision to sell by tender the Secretary of State's own? We shall carefully examine the price. No doubt the Public Accounts Committee will do so too. I shall be surprised if the sale realises anything like the estimate of
548
£1 billion quoted 18 months ago. Will the right hon. Gentleman confirm that the net proceeds of the 51 per cent. sale will be less than half of the £1 billion that they are worth?
On the information that has been given to us, we cannot make a value estimate even on the underwritten price because we do not know how many shares are on offer. What value does the minimum tender price put on the entire company? We should know that so that we can judge what value the Government have set on it.
What does "small shareholders" mean? How small must a shareholding be to be defined as small? What are they promised in three years' time when Britoil will come back on to the market for the reasons that everyone has been talking about?
Why has the Secretary of State ignored the PAC's advice about underwriting? It said:
"We are concerned that, in the course of this re-examination, the Treasury should look again at the practice of underwriting such sales…We therefore trust that the adoption for sale of publicly owned shares of this aspect of normal City practice will be very carefully re-examined."
There is no need for underwriting. It would not matter in the short run if all the shares were not sold. In any event, the issue could have been handled by the Bank of England. What costs are to be paid to the merchant banks and underwriters for the preparation and sale of this asset?
The Secretary of State has decided to go ahead with part-paid shares. That will be risky if the share value rises quickly in the first week. We shall wait and see.
The statement is incomplete. We must discuss the matter again, in Government time, having seen the prospectus. There is no point in hypothetical questions. Everyone else knows what is in the prospectus, but we do not. We shall discuss profits, overseas investments and window dressing soon. [Interruption.] The statement may have been short but it is right that our reply should be long.
Will the balance sheet of the company that has been agreed between the Secretary of State and BNOC and has been the subject of much speculation be published in the prospectus? It will be possible to demonstrate that what the right hon. Gentleman said about window dressing is correct only if the balance sheet is included. We have been far too dependent on information from outside.
The Government and the Secretary of State, fired by ideology, have let the nation down. Only the speculators will rejoice at this Government policy.
Mr. Lawson: I shall do my best to answer the many questions that the right hon. Member for Leeds, South (Mr. Rees) asked. I make no complaint about their number. I acknowledge that the matter is highly complex.
The right hon. Gentleman was right to point out that there have been several leaks today. I regret them deeply. I deplore the leaks that have occurred throughout. Nevertheless, the right hon. Gentleman has been only too happy to seize on those leaks on several occasions. I deplore all leaks. I certainly did not authorise any of them. Indeed, I have given strict instructions throughout that the House is to be informed first.
The right hon. Gentleman said that the sale was for half the value of the asset. That is nonsense. The right hon. Gentleman has no idea of the value of the asset. I challenge him to sustain that assertion. He said that we were losing control of depletion policy. That is untrue. Our powers over depletion policy remain intact and are not in any way affected by the privatisation.

549
The right hon. Gentleman renewed the renationalisation threat. I am aware of the Labour Party's threat. It is referred to on page 4 of the prospectus. Potential shareholders will be free to make as much or as little of it as they wish.
The right hon. Gentleman asked whether the decision to go to tender was mine. Indeed, it was. I have long been a supporter of tenders. I was the Minister most closely responsible earlier in the Government's term of office for the innovation of selling gilt edged by tender. When the right hon. Gentleman examines the prospectus, he will see that we have sought to square the circle to achieve a method of sale by tender which does not deter the small shareholder. I believe that we have achieved that.
The right hon. Gentleman said that a year ago I estimated that the proceeds would be £1 billion. There is no truth in his suggestion. He can find no such assertion on the record. When asked a year ago, I said that the sum would be substantial but that it was impossible to say what it would be. The right hon. Gentleman said that the proceeds would be less than £½ billion. Again, he is wrong. [HON. MEMBERS: "What will they be?"] Given a chance, I shall explain. It is impossible to say what the proceeds will be because that depends on the striking price of the tender. The minimum proceeds, at the minimum tender price, will be £548 million gross for the equity, plus £88 million for a debenture, of which £55 million will be paid into the national oil account, giving total proceeds of over £600 million.
Mr. Edward Rowlands: That is bogus.
Mr. Lawson: It is not bogus; it is genuine. It is the hon. Member who is bogus through and through.
The right hon. Member for Leeds, South asked for a definition of a small shareholder. A small shareholder is defined in the prospectus as anybody who applies for not more than 2,000 shares.
The right hon. Gentleman asked about underwriting. Of course, following the PAC report, we reconsidered whether the issue should be underwritten. We are confirmed in our belief that it is right to underwrite the issue, for two reasons. The first is that it is essential to complete the privatisation. The second is that the knowledge that the issue is underwritten assists in obtaining a better price for the taxpayer, about whom the right hon. Gentleman purports to be concerned. The total commission for underwriters and sub-underwriters is 1·55 per cent. [HON. MEMBERS: "How much is that?"] The figure in the prospectus is £8½ million. It is a substantial issue and hon. Members should be able to work out their percentages without aid from me.
The right hon. Member for Leeds, South asked whether the balance sheet appears in the prospectus. Of course it does. I am astonished that he should suggest otherwise.
Several Hon. Members rose—
Mr. Speaker: Order. Many right hon. and hon. Members seek to take part in the main debate. I therefore propose, out of fairness to the House, to continue these questions only till 4 o'clock. I remind the House that we are asking questions, not debating the issue.
Mr. T. H. H. Skeet: I congratulate the Secretary of State on the transfer of Britoil to private enterprise. How is the mean price established? Is it
550
established by the number of applications put in or by the number of shares applied for? When the company is established in full operation, will it be able to apply to purchase shares in the British Gas Corporation's offshore oilfields?
Mr. Lawson: The method of disposing of the British Gas Corporation's offshore oil interests has not yet been decided. The striking price for the tender will be determined in the normal way. The details are in the prospectus, but broadly it will be either the highest price at which applications totally cover the value of shares on offer, or such lower price as I may, in certain circumstances, decide. Anything that I say is qualified by what is in the prospectus.
Dr. J. Dickson Mabon: I deplore the substance of the matter and the way in which it has been handled. It borders on contempt of Parliament, in view of the Minister's earlier statements. To what extent are foreign companies, and through them foreign Governments, being freely invited to take part in the sale of these national assets? To what extent will the Minister try to ensure that the proportion of shares going to small investors is large rather than small?
Mr. Lawson: The prospectus is a large and bulky document, so the right hon. Gentleman will forgive me if I do not quote from it verbatim. The prospectus states clearly that it does not constitute an invitation to anyone outside the United Kingdom to apply for shares.
The right hon. Gentleman asked how we could ensure that small shareholders have a fair crack of the whip. Obviously that depends to some extent on the volume of applications from small shareholders, but the method of allocation is at my discretion. The Government's commitment to wider share ownership and the small shareholder is well known.
Mr. Geoffrey Lofthouse: Is it in the best interests of parliamentary democracy that some hon. Members who earlier this year voted for the Bill which paved the way for the bonanza may make a colossal profit or enjoy a rake-off at the taxpayers' expense?
Mr. Lawson: The taxpayer will receive a fair price for the asset. Of course, hon. Members will be able to apply for shares, just as any other member of the public will. Whether they will make a profit is not for me to say, because I do not possess a crystal ball.
Mr. Tim Eggar: I join my right hon. and hon. Friends in warmly welcoming the decision and, in particular, the bonus scheme, which has been cleverly devised to give incentives to small investors to buy and to retain the shares, which is extremely important. What measures are to be taken to restrict multiple applications?
Mr. Lawson: I am grateful to my hon. Friend for his welcome. The prospectus states clearly that all multiple applications may be declared invalid.
Mr. Douglas Jay: Mr. Speaker, would you buy a second-hand car from this Minister?
Mr. Gordon Wilson: Is the Minister satisfied with the way in which the Department has approached the sale in the past year? Does he agree that the public have been given the impression that he and his Department have displayed all the skill of players in a game of blind man's buff and that there has been a clear

551
refusal to give the House any idea of what possible benefits the sale could bring and, in particular, what sum will go into the national Exchequer? In view of the vagueness about the proportion of the assets to go to small investors, what percentage would the Minister prefer it to be? If he cannot answer, we can only assume that this is a gift to the institutional investors and to no one else.
Mr. Lawson: As I have said, I am anxious to see a significant proportion of the issue go to the small investor. As the size of that proportion must depend upon the number of applications from small investors, I cannot say at this stage what it will be.
Mr. John Hannam: Will my right hon. Friend ignore the squeals of the Opposition, who will object just as strongly if the sale is successful as if it is not, and will he accept our congratulations on the method that he has devised to help small investors?
Mr. Lawson: I am grateful for my hon. Friend"s last remark. I entirely agree with his psychological analysis of the Opposition.
Mr. Dick Douglas: Does the Minister accept that to the extent that he has made a U-turn since 27 October, when he suggested that a tender issue was so difficult as to be virtually impossible, we welcome his conversion? As he is the sole shareholder in the firm, what value does he put on the nation's assets and what possible public benefit can be derived from flogging those assets in this way? What are his criteria with regard to the national interest? Does he accept that we see no case whatever for putting the nation's assets into the City at this time and that they should therefore be taken back forthwith?
Mr. Lawson: I said previously that there had never been a tender of this size, and that is true. I also said that a straightforward tender would deter the small shareholder, which I did not wish to do. That is why I and my professional advisers have spent months working out—I think that we have now reached the right conclusion—a variant of the tender that will not deter small investors. That is entirely new and very important.
As for the hon. Gentleman's comments about flogging national assets, I deeply resent the implication that only the public sector is British, and the whole of the private sector of industry will deplore it, too.
Mr. David Penhaligon: What special arrangements have been made for the employees, or are they to receive no consideration whatever as they are not mentioned once in the statement?
Mr. Lawson: The hon. Gentleman is right to stress the importance of the employees' share scheme. I said frequently in the debates on this that there would be an employee share scheme, and indeed there is. Employees will be entitled to up to £60 worth of shares entirely free and a further number free on a one-for-one basis—that is, for every share for which they apply they will receive a further share free. The offer contains a very generous employee shareholding scheme which I hope will commend itself to the hon. Gentleman and his party.
Mr. Peter Rost: I welcome my right hon. Friend's efforts to weed out the multiple
552
applications so that the genuine small investor will have a better chance of an allocation, but will he give an assurance that if the issue is oversubscribed the allocations will be heavily weighted in favour of the small applicant, who will not be subjected to a ballot or a scaling down?
Mr. Lawson: If the issue is oversubscribed, preference will certainly be given to the small investor, as in all previous privatisation issues.
Mr. John Maxton: Will the Minister give a guarantee to the employees of Britoil in Glasgow that following this ludicrous sale the headquarters of the company will not be moved from Glasgow to the South-East of England?
Mr. Lawson: So far as I am aware, the company has no intention of moving its headquarters, but if the hon. Gentleman is concerned about the company's welfare it is strange that he should talk about it in those terms.
Mr. Richard Alexander: I accept my right hon. Friend's assurances about sales to multiple and foreign applicants, but what assurance can he give that there will not then be subsales by the smaller purchasers to multiple applicants and to foreign interests?
Mr. Lawson: In a free country and a free market, anyone is free to sell his share to anyone else. That is true in every company. My hon. Friend will be aware, however, as we debated this at some length in the House, that the articles of association provide for one special share to be held by the Government, which will ensure that control of the company or of its board cannot pass into unacceptable hands.
Mr. Tam Dalyell: What is the definition of "unacceptable hands"?
Mr. Lawson: That is a tempting question, but I think that the hon. Gentleman will have to leave that to the discretion of the Government. I am aware of the point that he makes. I should have thought that my reply was sufficient for his purposes if he understands anything about the subject.
Mr. Anthony Nelson: Although many of us wholeheartedly support and welcome my right hon. Friend's initial statement about the sale of the Government's interest in Britoil, is he aware that some of us believe that a far more desirable means of achieving widespread share ownership is not by having differential categories of share bonus schemes but by having an initial share offer as opposed to a tender, which would offer certainty and simplicity and thus attract far more widespread subscription?
Mr. Lawson: I am aware of my hon. Friend's views and I took them into account when deciding on the method of sale. He is, however, wrong to suggest that the only help given to small shareholders is the special category of bonuses. In fact, there are two other important elements.
First, the small shareholder does not have to bid a price. In a tender, it is often confusing for the small applicant to know what price he should bid. That is why a fixed price offer has often been considered preferable. In the Britoil flotation, however, in the space where he would otherwise have to state a price the small shareholder may simply write "striking price". He will then be deemed to have bid whatever the striking price turns out to be, so he need not worry about that.

553
Secondly, payment will be in two instalments. The first will be a fixed sum of £1. The second, which will not be due until April, will be the difference between that and the striking price. This means that the payment on application will be a fixed price, and the small shareholder will know exactly what it is as in a fixed price offer.
Mr. Andrew Faulds: As the right hon. Gentleman talks about sales to the British people, would he care to forecast how many of my constituents in Smethwick are likely to take up shares?
Mr. Lawson: I regret that I am not sufficiently familiar with the hon. Gentleman's constituency to answer that.
Mr. Michael Morris: I congratulate my right hon. Friend and his team on actually making denationalisation work for once. May I reassure him that the British public behind him? As a member of the Public Accounts Committee, may I also welcome the method of sale? Finally, does my right hon. Friend agree that if anyone is responsible for trading down any price that we receive for Britoil it is the Labour Party, with its insistence on renationalisation of Britoil?
Mr. Lawson: I am grateful for my hon. Friend's remarks. He is right to say that during the past few months Labour Members have done their best to talk down the sale and to obtain the worst possible deal for the taxpayers. Despite their efforts, the Financial Times actuaries oil share index today stands 16 per cent. higher than when I made the original announcement in October 1981.
Mr. Bob Cryer: As the Minister is so concerned to spread ownership, will he make a special needs payment to the unemployed, the low paid and those who receive supplementary benefit to enable them to purchase shares? Will he recommend that the Health Service workers who take home £50 or £60 a week should have an extra wage settlement to enable them to buy shares? Is it not true that the vast majority of working men and women will not be able to buy shares? The sale is a bonanza for City slickers, with a £9 million commission immediately for the right hon. Gentleman's friends. Does the Secretary of State agree that there are no safeguards for the sale because foreign-owned United Kingdom based companies are not excluded?
Mr. Lawson: It is a great pity that the hon. Gentleman should have taken time that could have been given to those who wish to ask serious questions.
Mr. Kenneth Lewis: Is my right hon. Friend aware that there is everything to be said in Britain now for arranging that Government-controlled industries—this industry is still controlled by the Government—should have the widest possible shareholding among the people of Britain, including those who work in the industry?
Mr. Lawson: I agree entirely with my hon. Friend.
Mr. Cryer: On a point of order, Mr. Speaker. The Secretary of State is dealing with a serious matter. He does not have the right to shrug aside questions from hon. Members who have been duly elected, as he did with my question.
Mr. Speaker: That is not a point of order. It has long been the case that Ministers answer when they wish to answer. That has always been a Minister's right.
Mr. Dalyell: On a point of order, Mr. Speaker. During my many years in the House I have not seen a Minister with such deplorable parliamentary manners as the Secretary of State. When he is asked for a definition of a phrase that he used, it is not sufficient to say "If the hon. Gentleman understands"—
Mr. Speaker: Order. However strongly the hon. Gentleman may feel about the reply to his question, he knows that it does not raise a point of order for me.
Several Hon. Members rose—
Mr. Speaker: Order. I remind the House that yesterday evening there was some feeling among hon. Members who were not called. Many hon. Members will not be called in today's debate, especially if the points of order are not genuine points on which I can rule.
Mr. Dalyell: Further to that point of order, Mr. Speaker. Is it not parliamentary abuse to add gratuitously "if the hon. Gentleman knows anything about it"? I spent many hours with my colleagues in Committee and I have a constituency interest—
Mr. Speaker: Order. Honour is satisfied now.
Mr. John Morris: Further to that point of order, Mr. Speaker. Would you be good enough to allow the Secretary of State further time to answer my hon. Friend's question properly, decently and honourably?
Mr. David Winnick: On a point of order, Mr. Speaker. As many Conservative Members who asked questions clearly have an interest to declare, would it not have been appropriate and certainly honourable of them to declare that interest?
Mr. Speaker: Even though hon. Members may have an interest—I am unaware of any—at Question Time it is not obligatory for them to declare it.
Mr. Michael English: On a point of order, Mr. Speaker. In his answer to my hon. Friend the Member for Keighley (Mr. Cryer), the Minister implied that he should like another question of a serious nature. May I ask it?
Mr. Speaker: Yes, but not now.
Mr. D. N. Campbell-Savours: On a point of order, Mr. Speaker—
Mr. Speaker: Order. We shall move on now in the interests of the House. It is very unfair—
Mr. Campbell-Savours: This is another matter, Mr. Speaker—
Mr. Speaker: Order. I am standing, so the hon. Gentleman must sit down. It is unfair to hon. Members who are desperately anxious to take part in the debate. If the hon. Gentleman wishes to waste the House's time further, I shall hear his point of order and we shall see what sort of point it is.
Mr. Campbell-Savours: You said, Mr. Speaker, that you wished to protect the rights of Back-Bench Members in the subsequent debate. Do you intend to curtail the length of speeches in that debate?
Mr. Speaker: That is a matter for hon. Members, who I hope will exercise discipline. I shall ask them to do so.
Mr. Gary Waller rose—
Mr. Speaker: The hon. Gentleman's point of order is about something entirely different. We must finish this matter first.
Mr. Merlyn Rees: My hon. Friend the Member for West Lothian (Mr. Dalyell) has been treated discourteously. He served on the Committee. My hon. Friend has a reputation for being a nuisance, which may be a good thing in the House, but perhaps I could ask the same question. We discussed the word "unacceptable" in Committee and it has not been hidden. Is the Secretary of State's reticence about the word something to do with the EEC? The point of having the word discussed on the Floor of the House is to enable other hon. Members to have a chance to know what the problem is.
The Secretary of State gave only a partial answer to the second question. What are the total costs of presentation, not just underwriting? Is the figure £20 million, of which the Government will pay £14 million? The right hon. Gentleman referred to some parts of the prospectus and it may be valuable to clear up that matter. Although it is not an authorised leak, is it correct that the prospectus estimates a profit of £90 million for the first year, with a £45 million dividend?
Mr. Lawson: The right hon. Gentleman is approximately right, but he will find the precise figures in the prospectus that will be deposited in the Library within, I hope, half an hour. He will find in the full prospectus much that is of interest; it contains an invaluable amount of information. It is impossible to predict the full cost of the issue. Some costs will depend on the work to be done in processing the applications, which in turn depends upon the volume of applications. As soon as the figure is known, it will be made public in the usual way in the Department's estimates.
The right hon. Gentleman referred to the question raised by the hon. Member for West Lothian (Mr. Dalyell). We debated the matter at considerable length in Committee when both the right hon. Gentleman and the hon. Gentleman were present. We also debated it at some length in the House. The right hon. Gentleman and the hon. Gentleman can refresh their memories by reading the Official Report. It is for the Government to judge whether a potential change in control would be unacceptable. It is arrant nonsense for the right hon. Gentleman and hon. Gentleman to say that when they were in office they did not allow the Government any discretion. The right hon. Gentleman and the hon. Member for West Lothian—whose questions I always welcome—understand the position.
Mr. Waller rose—
Mr. Speaker: Order. Before I call the hon. Member for Brighouse and Spenborough (Mr. Waller), who has given me notice of a point of order although not its entire contents, I must apologise to the hon. Member for Workington (Mr. Campbell-Savours). He raised a valid point of order, and I am glad that he made it.

Parliamentary Proceedings (Broadcasts)
Mr. Gary Waller: On a point of order, Mr. Speaker. It relates to a point of order raised by the hon. Member for Jarrow (Mr. Dixon) late yesterday evening before the winding-up speeches during the debate on the Loyal Address. I do not criticise the hon. Gentleman's point of order. The hon. Gentleman had waited during the debate in the hope of catching the eye of the occupant of the Chair. I speak with some feeling because I also hoped to do so, but was unsuccessful.
Before the final speeches in the debate, the hon. Gentleman, on a point of order, drew attention to the fact that he had not been called and used somewhat extravagant language. Although the expletive has not been deleted from Hansard, it would be described as unparliamentary. You, however, Mr. Speaker, naturally showed considerable kindness to the hon. Gentleman because of his strong feelings and because a constituency interest was involved.
It is not what happened last night but what happened this morning that leads me to raise this point of order. As may be known, the BBC has altered the format of its programme "Yesterday in Parliament". Rather than being a programme which simply records what happens in the House of Commons, there is now a considerable element which reflects the view of the person presenting the programme. On the programme this morning, although most of the contributions during the debate were not included, the hon. Gentleman's point of order was, with the expletive which was not deleted from Hansard.
If the BBC, in exercising its responsibility to record what is said in Parliament, gives precedence, as it seems to do now, to sensational behaviour on the part of certain hon. Members, it will encourage other hon. Members to raise bogus points of order and to act similarly. It could be the thin end of the wedge. Although I realise that you, Mr. Speaker, are not responsible for what the BBC presents, I hope that some guidance will be given so that behaviour in Parliament does not deteriorate.
Mr. Michael English: Further to that point of order, Mr. Speaker. It is fair to say in support of the hon. Member for Brighouse and Spenborough (Mr. Waller) that the programme "Yesterday in Parliament" no longer exists. It is now subsumed in the programme "Today". The only programme of record that now provides for the BBC's charter requirements is "Today in Parliament" at 11.30 pm.
Mr. Don Dixon: Further to that point of order, Mr. Speaker. I did not raise my point of order last night in order to get publicity. I sat through the debate last night because my constituency will be devastated by the denationalisation of British Shipbuilders. I raised my point of order not for publicity but on behalf of people outside. When I referred to hon. Members waffling on, I was referring to hon. Members, most of whom spoke during the debates, who had never seen a pair of overalls, let alone worn a pair.
Mr. Speaker: Order. We have a Select Committee on Sound Broadcasting. The matters which the hon. Gentleman has raised should be examined by the appropriate Committee because of the feeling on both sides of the House.
Mr. Andrew Faulds: My hon. Friend the Member for Jarrow (Mr. Dixon) has made a totally valid defence of his position last night, but, as one who has consistently supported the BBC throughout my term in the House of Commons, I have to say that there has been a marked decline in the standard, responsibility and quality of both "Yesterday in Parliament" and "Today in Parliament" over the past 18 months or so.
Mr. Speaker: The House is still the master of its own affairs. It decides whether broadcasting should continue. The matter is in the hands of the House, and I hope that we shall all be reasonable about it and will count to ten. The Committee will examine the matter.

BALLOT FOR NOTICES OF MOTIONS FOR FRIDAY 26 NOVEMBER
Members successful in the ballot were:

Mr. Peter Temple-Morris

Mr. John Wells

Mr. Ivan Lawrence

BILLS PRESENTED
  CONWY TUNNEL (SUPPLEMENTARY POWERS)
  Mr. Secretary Edwards, supported by Mr. Secretary Howell, Mr. Nicholas Ridley and Mr. Michael Roberts, presented a Bill to authorise the Secretary of State to acquire certain land and construct and carry out certain works, and to confer on him certain other powers, for or in connection with the construction, maintenance and improvement of a tunnel which he is authorised under the Highways Act 1980 to construct across the Convey Estuary as part of a special road; 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 9.]
  CURRENCY
  Mr. Jock Bruce-Gardyne, supported by Mr. Secretary Jenkin, Mr. Secretary Lawson, Mr. Leon Brittan, Mr. Nicholas Ridley, Mr. Barney Hayhoe and Mr. John Wakeham, presented a Bill to amend the Coinage Act 1971 and the law relating to issuing and writing off bank notes: And the same was read the First time; and ordered to be read a Second time tomorrow and to be printed. [Bill 10.]
Orders of the Day

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

  Unemployment and the Economy
  Mr. Speaker: I have selected the amendment in the name of the Leader of the Opposition and also the amendment in the name of the right hon. Member for Glasgow, Hillhead (Mr. Jenkins). As the House knows, under Standing Order No. 33A, on the last day of the debate on the Address, I am empowered to select two amendments for Division purposes, and I do.
  4.15 pm
  Mr. Peter Shore: I beg to move, at the end of the Question, to add—
  But humbly regret the continued failure of Your Government's economic policies; its stubborn refusal to learn from its own grievous mistakes; and the absence from the Gracious Speech of effective measures to reduce Britain's mass unemployment, to restore the competitiveness of our industries and to secure the living standards of the British people.
  This was a remarkable Queen's Speech. Faced with the greatest economic crisis for 50 years, with a disastrous total of 3⅓ million registered unemployed, with a spreading industrial wasteland of silent factories and workshops, with record bankruptcies and liquidations, the Queen's Speech contained no proposals even remotely relevant to the clamant needs of the country, its industry and people. Instead we have statements, such as the one we have just heard, of Government proposals to sell off great national assets at knockdown prices—an act of wanton self-injury, of benefit only to those seeking capital gain.
  Those are short-term benefits, because we shall take back Britoil shares and we shall pay not a penny more than the Government receive. Let that message be registered by all those hoping to make a killing on Friday.
  Two days ago we heard the Chancellor's economic statement. I shall deal with the economic implications of that statement shortly. First, I want to register again the contempt and anger that we feel at the Chancellor's proposed treatment of pensioners, other social security recipients and, above all, the unemployed. Here is a Chancellor with at least £1 billion in hand for the 1983 budget—I suspect a good deal more—solemnly asserting that he intends to claw back—to adjust—the pensions uprating next year, because in his view and that of the Prime Minister the pensioners will be receiving an undeserved bonus of 95p a week in the 12 months ahead.
  560
  The Prime Minister and the Chancellor simply do not understand how people in the real and harsh world of social security and national insurance benefits have to struggle. Nor do they understand that a steady and differential improvement in their living standards is a major objective that every Government until their own have sought to pursue.
  Worse still is the Government's treatment of the unemployed—the extra 2 million who, as a result of the Government's policy, are now on the dole. Two years ago, the Chancellor cut their uprating by five points on the ground that they were outside the tax net, but on the clear understanding that it would be restored when they were brought within it. They are now within it, but no restoration has been made. If the Government have a scrap of concern for the victims of their economic policies they should announce forthwith that the lost benefit will be restored.
  The more one studies the content of the mid-year economic forecast that the Chancellor is obliged, under the Industry Act 1975, to present to the House, the more bleak and disastrous the outlook appears to be. This year will see a growth of our GDP of one half of 1 per cent.—almost too small to register—over 1981. The forecast made at this time last year, and again in the Red Book that accompanied the March Budget, spoke not of half of 1 per cent. but of a 1½ per cent. increase in GDP, in 1982 over 1981, rising to 2 per cent. in the first half of 1983.
  The original forecast of the rate of growth, modest enough in all conscience, provided the persistent theme of countless ministerial speeches. We all recall the Prime Minister's confident assertion in the debate on the Loyal Address a year ago that:
  "the Government have created the conditions in which out of the recession can come renewed confidence. It is in the coming year that our confidence will be rewarded."—[Official Report, 4 November 1981; Vol. 12, c. 29.]
  We also recall the Chancellor's summary description of his 1982 March Budget—a Budget for industry, jobs and people. Who can fail to forget the scream of babbling optimism that issued from the Chief Secretary in speech after speech throughout the winter and spring of this year, culminating in his famous assertion that he could see signs of recovery everywhere? The then CBI president, Sir Ray Pennock, in his customary role of Little Sir Echo to the Chancellor, also welcomed the March Budget in extravagant terms.
  The Opposition disagreed with the budget, for the simple reason that there was no evidence that any of the main components of demand would increase in the year ahead. Our view was shared, not by Sir Ray Pennock and his colleagues in Centre Point, but by the 1,700 CBI member firms in every region and industry in Britain that responded to the CBI questionnaire about economic prospects and economic activity. At the end of July, the CBI—as it was bound to do—published the result of its membership questionnaire and the judgment of its technical and expert sub-committee, as distinct from that of its obviously political leadership. The evidence was plain—there was no way in which the Chancellor's anticipated growth could be achieved this year.
  Following the proposals that I put forward before the Budget, I wrote to the Chancellor in early August—before his annual escape to the sun—urging him to set in hand measures for corrective action this autumn. I outlined a five-point package, including a deep cut in interest rates

  561
  designed to achieve a realistic exchange rate for the pound, the abolition of the national insurance surcharge, increased expenditure on construction and building, increased social benefits—with the unemployed at the top of the list—and a substantial easement of the restrictions on local government expenditure to help reduce the rates that fall so heavily on householders and industry alike, including a stop on the rating of empty business and industrial premises.
  The response from the Treasury was predictable and negative. A junior Minister was given the task of chastising the CBI for daring to publish an objective report on the state of industry and even for having had the impertinence to talk to me. In a letter dated 12 August from the Chief Secretary, we were told:
  "if there were any quick or easy solutions that would bring sustainable results we would obviously have adopted them"
  So nothing was done, and precious months were wasted.
  At the end of October, the CBI published yet another economic review, which strongly reinforced the findings of July review. The House now also has the Government's mid-year forecast. It is a bulky document, which in no way contradicts the two recent CBI surveys, but rather confirms and reinforces them. Worse still for the future of Britain, the Treasury forecast reveals an astonishing deterioration in our balance of payments account. As the forecast put it:
  "So far this year, exports in total have been running about 4 per cent. below the level forecast at budget time…Import volumes this year have continued at close to the high levels reached in the second half of 1981."
  It is the decline—and, at best, sluggishness—of exports, coupled with the remorseless rise of imports—by 4½ per cent. in 1982 above 1981, and by a further 5 per cent. next year—that will lead to the annihilation of our balance of payments surplus by the end of next year.
  I ask the House to reflect upon that development. This year, for the first time since records were kept, Britain has ceased to be a net exporter of manufactured goods. We must search the annals of Tudor history before we can find a year in which that has previously happened in Britain. Even in the middle of a deep recession, with net oil exports running at £3½ billion this year, we can look only for a bare balance in our current account at the end of next year. On existing policies, any serious increase in activity in Britain will inevitably lead to a balance of payments deficit.
  Faced with further deterioration this year, and with the truly daunting prospect ahead, what have the Government decided to do? Too late for an autumn Budget, they opted for a once-and-for-all three month reduction in the national insurance surcharge for the last quarter of the 1982–83 fiscal year. That is worth about £350 million. The Secretary of State for the Environment also made an amazing call to local government. After three years of urging them to cut, cut and cut again, under the threat of dire financial penalties, he urged them to spend, spend, spend during the remaining five months of the financial year. The Chancellor's response to the now confessed failure of his March Budget judgment is not only ineffective—it is pathetic.
  Next year there will be a much-trumpeted 1 per cent. reduction in the national insurance surcharge—a benefit to private industry of £700 million. At any rate, that is what the press, the public and most hon. Members assumed when they listened to the Chancellor's statement on Monday. He referred to a table in the Vote Office—which no one had then seen—which purported to show not only
  562
  by how much the national insurance surcharge was to be cut, but by how much it would be offset by increases in employers' contributions to the national insurance scheme. The table would have led any reasonably diligent reader to conclude that, after all offsetting factors had been taken into account, employers would gain by £686 million. However, under questioning in the House on Monday, the Chancellor said that the gain was not £700 million or £686 million, but £450 million after offsetting the additional ¼ per cent. employers' contribution and the increase in the earnings limit, also announced on Monday.
  Now £450 million is not exactly £700 million—but that is not the end of the story. What the Chancellor omitted to tell the House, and what a sharp-eyed reader could deduce from the table in the Vote Office, was that there were other offsets to the £700 million reduction to be taken into account in the next fiscal year. Another £217 million was due to be paid by employers who opted out of the national insurance graduated pension scheme. It is reasonable to estimate that half of that will be paid by private sector employers—£109 million. If we take £109 million away from £450 million, the boost to private industry falls to about £340 million. That is no doubt useful, but set against the total private sector employers' national insurance and national insurance surcharge contributions of some £8,000 million a year, it is a reduction of well under 4 per cent.
  I have not mentioned—because I am not sure that it is fair—that with increased earnings yet another £130 million in employers' national insurance contributions will have to be paid. If that is deducted from the national insurance surcharge concession, employers are left with a net sum of £210 million for the coming year. That is some boost to industry—is it not?
  The Chancellor could say that all of us, including Sir Terence Beckett—who had a positive frisson of delight last Monday afternoon—should have known that all those offsets to the £700 million national insurance surcharge reduction were in the pipeline and due to emerge at precisely the same moment as the cut. But the Chancellor of the Exchequer did not go out of his way to alert or remind us of that, so I say to the right hon. and learned Gentleman yet again—because there was a similar oversight in the presentation of last year's Budget and similar confusion over national insurance figures in November 1980—that he should be much more careful about what he puts to the House of Commons. A cheerful headline in the press the following morning—I do not blame the press for that—is not worth it if 48 hours later a substantial downward revision must be made.
  It is against the background of that paltry measure that one looks in vain to the Queen's Speech for any other sign of an effective policy to match the truly desperate needs of the British economy. There is the ritualistic reference to
  "the anxieties and distress caused by unemployment."
  Anyone who believes that the Government feel anxiety and distress at unemployment should have listened to the speech made last night by the Secretary of State for Employment—or rather unemployment—when he replied to the debate. It was one of the most brutal, vulgar, abusive, unworthy and irresponsible speeches that I have ever had the misfortune to hear. It was not improved by the happy and smiling patronage that the Prime Minister bestowed upon it from its nasty beginning to its still nastier end.

  563
  The Queen's Speech tells us that the Government's
  "economic and other policies will be determined by the need to secure a sustainable growth in output, and thus a lasting reduction in the numbers out of work".
  We can only rub our eyes at such an assertion. The forecast admits that unemployment will rise yet again—by another 300,000—during the coming year. Already in the three years from June 1979 to June 1982 2,850,000 jobs have been wiped out. Britain has now the lowest number of people at work since 1950.
  What are the Government's proposals? None whatever, except to sell Britoil and other nationalised industries such as British Shipbuilders, British Airways and British Telecommunications. What possible benefit can there be, except to those who hope to make a profit from the sales, and to the Treasury, which, because it is trapped into a definition of the borrowing requirement that includes, unlike those of all other industrial countries, the borrowings of public industry, hopes to reduce the PSBR by raising money on the capital market If that happens, it will no doubt crowd out the existing private sector as much, or rather as little, as public sector borrowing does today. However, I can leave the privatisation decisions until another time.
  The truth is that on present policies, reinforced by the attacks on the publicly-owned industries, there will not be
  "a sustainable growth in output",
  as the Queen's Speech proclaimed, and there will be no reduction, let alone a lasting reduction, in the numbers out of work. The rate of inflation has fallen a good deal faster than the Government anticipated. Why? Not just because the Government have been willing to sacrifice employment and output in the United Kingdom but because, as the world recession has deepened, inflation has fallen almost everywhere. The Government's forecast states:
  "Inflation in most industrial countries has fallen from 12 per cent. in 1980 to about 7 per cent in 1982. Interest rates have fallen very broadly in line with inflation but remain positive in most countries."
  If economic policy was simply about inflation, the Chancellor of the Exchequer would have earned some modest applause, but economic policy is not simply about inflation. It is about employment and industrial output. What must be clear by now, not only to the House and industry, but to the country, is the appalling exorbitant and shocking price that we have already paid in unemployment and lost output.
  Now we come to the real test. Inflation here, as elsewhere in the world, has fallen well into single figures. According to the Government's oft-stated philosophy, when inflation comes down, employment and real jobs begin to grow. Yet the Chancellor of the Exchequer confesses that he is now anticipating next year not a check on unemployment, let alone a fall, but growth of a further 300,000. The idea that a low rate of inflation will lead to spontaneous growth is a myth. In the lifetime of many hon. Members there have been protracted periods, in the 1920s and 1930s, when prices, far from rising, fell year on year, yet those years were disfigured by consistently high unemployment, culminating in the great slump and disaster of the early 1930s.
  The Government no longer believe in their own doctrine. We all know about the leaked Think Tank report that was put before the September Cabinet, containing
  564
  odious proposals for dismantling a large part of the Welfare State. Those proposals were in no way abandoned by the Government but have been shelved until the general election is out of the way.
  The most important thing about the Think Tank report is the Government's estimate, which underlies it, of growth between now and 1990 of just on 1 per cent. per annum in GDP. That is the prospect ahead as the Government see it. That is the prospect on their own assumptions of success in dealing with the problem of inflation.
  The problem that besets us in the 1980s, not only in Britain—although here the problem is in a still more aggravated form—but in the world, is an obvious and massive lack of effective demand. The capacity to produce goods is there. Human wants in the West and human needs in the vast impoverished areas of the world are as strong today as they ever were. However, purchasing power is lacking and order books are thin. In many firms and industries they are empty.
  The Government's answer to that is first to assert that as there is a world recession Britain is no worse off than anyone else and that in any event there is nothing that we can do about it. The Government's second answer, which contradicts the first, is that there is plenty of demand in the United Kingdom but it is just the uncompetitive state of British industry that makes it unable to take advantage of it. I shall address myself to both those points as they lie at the heart of our national economic debate.
  Last week, in introducing the Queen's Speech, the Prime Minister plundered international statistics in her attempt to show that unemployment had risen further in the countries that are our competitors than in Britain. However, one-year figures are misleading when we can and should consider Britain's performance since the right hon. Lady formed her Government three and a half years ago. Last night my right hon. Friend the Member for Chesterfield (Mr. Varley) dealt effectively with that when he showed that in the three-year period from midsummer 1979 to the summer of 1982, the increase in unemployment in the United Kingdom far outstripped that recorded in the other six countries that make up the big seven industrial countries in the world.
  The fact is that Britain now stands at the top of the unemployment league. There is no mystery about why that has happened. Britain has deflated harder than any other western economy. Taxes, the reduction of which was a principal objective and pledge of the Government, have not been cut, but raised from 35 per cent. to 39 per cent. of our GDP. The Government now need to hand back to the British taxpayer no less than £9 billion simply to restore the 1979 level of taxation. Further, interest rates have until recently been kept persistently higher in Britain than elsewhere. Public expenditure has been cut in spite of the massive increase in financing compulsory idleness through social security payments. The Government's borrowing requriement, on a comparable basis to that of other OECD countries, is now the lowest in the Western world.
  What makes our record so disgraceful and unacceptable is the fact that the principal reason why other OECD countries, particularly the other six of the big seven, have deflated in the past three years is the major and adverse effect upon their economies of the redoubling of oil prices in 1979. The extra burdens placed upon most countries have been staggering. Canada has had a minus figure of

  565
  $2 billion—the lowest figure—in terms of her oil balance. Japan has had a minus of $33 billion and the United States has had a minus of $35 billion because of the extra price of imported oil. In France it was a minus of $13 billion, in Germany $14 billion and in Italy $14 billion. Britain was not minus anything. Britain was plus $9 billion in net oil trade as a result of developing North Sea oil and the movement of oil prices.
  How has this great bonus for Britain been reflected, under the right hon. Lady's mismanagement, in terms of the GDP and industrial output? She and the Chancellor should know as well as I do. Every one of our major competitors, the other members of the seven, shows a positive growth in GDP. Only Britain's figure has decreased, and by no less than 4 per cent. during the period of the right hon. Lady's rule.
  The world recession makes economic progress more difficult for us. However, so did the earlier world recession following the first oil shock in 1974, when the Labour Government had not a drop of oil to help them see it through. The right hon. Lady ignored that crisis then. Now, it is her principal excuse. What she and the Chancellor have to explain is how it is that, in spite of this enormous North Sea advantage, Britain has suffered much more severely than any other country, including those that have had the burden of vastly increased import bills.
  Demand and competitiveness are linked. We need to increase demand in Britain. There are vast programmes of building and construction to be undertaken, and hundreds of thousands of people will find work when we do so. Why, if the Prime Minister and the Chancellor deny the job-creating capacity of public investment, did the Prime Minister write to the local authority associations last week asking them to spend more? Why did she scold the nationalised industries for not doing the same?
  Lack of competitiveness is a major obstacle to a more general increase in demand in the economy. In spite of the repeated efforts that I made on Monday to obtain confirmation from the Chancellor, I had no straight answers about the extent to which Britain had lost its competitiveness against other countries since the general election of May 1979. The Chancellor cannot contradict me when I say that competitiveness has fallen over this period by at least 36 per cent. Will he deny that he and I have not known in our political lifetimes of any such appalling collapse in British competitiveness? What is his answer? What does he propose to do about this?
  We have already examined the contribution to competitiveness that will be made by changes in the national insurance contribution. It is negligible. The right hon. and learned Gentleman may also point to the fall in interest rates and important increases in productivity. However, the fall in interest rates has taken place in the United States, Germany and other countries as well, and productivity is increasing sharply in other countries too, as the Prime Minister conceded when opening the debate last Wednesday. If we have gained any advantage from these developments, they are certainly not large.
  What about the future? In the Government's forecast, consumer prices in the big six are expected to rise by about 6 per cent. in 1983. In Britain, between November 1982 and November 1983, prices are expected to rise by 5 per cent. There will be, if the Government's estimates prove to be correct, a 1 per cent. gain this coming year. What does it all add up to? By the end of 1983, as we near the
  566
  end of a full five-year Parliament, Britain will be not 36 per cent. less competitive than it was in May 1979, but 35 per cent. less competitive.
  Mr. Raymond Whitney: The right hon. Gentleman speaks of the rise in prices, but when he presented his own package of measures to the House last year, the right hon. Member for Down, South (Mr. Powell) costed those measures at about £15,500 million to £20,000 million. The right hon. Member for Stepney and Poplar (Mr. Shore) was in the Chamber at the time, but took no opportunity to correct that figure. Will he now do so, and say, if that were the figure, what would be the effect on the rise in prices if the package were put into effect?
  Mr. Shore: Far from not giving the information, I went so far as to publish a document and circulated it to the press, and it was analysed by anyone who was interested. It gave precise figures for increases in public expenditure and the PSBR. If the hon. Gentleman took these matters seriously he would know that already.
  Mr. Tim Eggar rose—
  Mr. Shore: What the Government have done with national insurance cuts or through what is expected in productivity and lower interest rates, is no cure for the great problem of our loss of competitiveness.
  That brings me to what is at the core of the Government's policy, and to what the Chancellor keeps hinting at, but is afraid to state. As long as he maintains his present policies and insists upon no movement in the exchange rate, the only way to restore the lost competitiveness of three and a half years ago is not by achieving the wage moderation that he beseeches us to support, and the unions to accept. It is cutting wages and salaries, not by a margin but by the full amount, that is necessary—the full 35 per cent. that would restore the competitiveness that we have lost in the past three and a half years.
  It is time that the right hon. and learned Gentleman spelt out what he is about. He is not asking for a wage round of minus 35 per cent. However, he must have a target in mind, a minus sum, which, if pursued over another full Parliament, must be about minus 6 or 7 per cent. in wage and salary changes in each year. The right hon. and learned Gentleman knows that he will not be able to achieve this, or even anything approximating to it. However, he is prepared year after year, as we have seen already, to seek to obtain pay increases below whatever rate of inflation is current. To bring that about, he is prepared to use the weapon of unemployment as a means of beating down wage increases to the minus league. This is a recipe not only for increased unemployment but for ever-increasing industrial strife, and an ever-declining standard of living for the British people.
  The Chancellor says that there is no alternative, but there is, and a substantial part of it is to be found in achieving a realistic exchange rate for the pound. That has been the course suggested to him over the past three years by the CBI, the Labour Party and most responsible economists and commentators in this country. Now, those voices have been joined by one who has, I am told, some access to the Treasury. Mr. Sam Brittan writes in the Financial Times. On 28 October he said:

  567
  "To rely purely on pay restraint to restore competitiveness would require several wage rounds averaging zero or less. Would it not be more realistic to provide a little help on the exchange rate front too?"
  Mr. Frank Hooley: Without in any way disagreeing with my right hon. Friend's point about the exchange rate, is not the crucial factor in competitiveness in a modern industrial economy a sustained high level of investment in industrial plant and machinery and new processes? However, the record of this Government—far from being one of a sustained high level—is one of a catastrophic fall for 30 successive months, since they took office.
  Mr. Shore: I agree with my hon. Friend. I am not saying that a realistic exchange rate is the only answer. It is not. A whole series of reinforcing measures have to be taken as well.
  Mr. Sam Brittan has given the same message as that of Dr. Otto Emminger, the former president of the Deutsche Bank, in his recent evidence to the Select Committee on Treasury Affairs. My hon. Friend the Member for Motherwell and Wishaw (Dr. Bray) quoted it last night.
  Dr. Emminger said:
  "the pound sterling rose against a group of important currencies on a trade weighted basis between 1978 and the first quarter of 1981 by 25 per cent. in nominal and by 37 per cent. in real terms."
  He further stated:
  "at its peak in February 1981 the real sterling exchange rate was not only about 50 per cent. above its depreciated value of 1976 but about 30 per cent. higher than in 1972. This is by far the most excessive over valuation which any major currency has experienced in recent monetary history."
  I do not claim that a realistic exchange rate would be the solution to all our problems—far from it. Quality, innovation, design, delivery dates, hard work, motivation and investment and, yes, moderation in wage matters are of major importance also. It is not only the responsibility of the work force that matters. The Government must play their part by intelligent planning, leadership and management.
  As the Queen's Speech demonstrates, and ministerial speeches have confirmed, the Government have nothing to offer the people but endless deflation, increasing despair, deepening class antagonisms and the breakdown of that sense of community that a great and successful nation must have.
  All we have is the stubborn pursuit of folly and failure. A week ago the Prime Minister told us that one of her favourite poems was the Nun's Prayer. There is one sentence in it that she should read and read again:
  "Teach me the glorious lesson that occasionally it is possible that I may be mistaken."
  We are not just asking for new measures or even a change of policy. The country needs a new perspective, a new set of values, a new philosophy and, above all, new leadership. It is for that reason that we shall be voting for our amendment tonight.
  4.52 pm
  The Chancellor of the Exchequer (Sir Geoffrey Howe): Opposition Members are bound to take a fascinated delight in my sartorial equipment. If I were to allow myself to be seen fully, they would observe that I have been able to make a satisfactory adjustment to a recent unfortunate shortfall below the line.
  568
  The right hon. Member for Stepney and Poplar (Mr. Shore) comes to these debates confidently asserting a simple rostrum. I ask him to pay attention to the three key features that dominate the economic scene and emerge clearly from the autumn statement. The first is the extent to which and the pace at which inflation—the formidable enemy of economic stability—has been reduced during the past two years. At its peak it was 22 per cent. It was 12 per cent. a year ago and is 7 per cent. now, with the prospect of 5 per cent. next spring. It is a formidable achievement, but it is one with which the Government or country cannot be content. The House may not have realised fully its importance and value. It is a foundation for confidence and investment and, in the longer run, a foundation for growth in employment.
  Secondly, and equally formidably, there has been a reduction in the rate of interest. Short-term rates have fallen by seven full points during the past 12 months. That is significantly faster than elsewhere. Each point reduction is worth between £250 million and £300 million in a full year to British industry.
  The third feature is the reason for the success in achieving those reductions in inflation and interest rates. It is the sustained success in controlling Government borrowing and spending. The public sector borrowing requirement has fallen from a peak in 1975–76 of almost 10 per cent. to 5 per cent. in 1979–80, and to our current forecast of 3¼ per cent.—£9 billion—in the current year, which is a little below the objective that I set at the time of the Budget. The right hon. Member for Stepney and Poplar appeared to regard that as a subject for complaint. It is not only my judgment but that of many others that it is a firm foundation for our success against inflation, and the dramatic fall in interest rates. Without those two factors it is not possible to lay a secure foundation for sustainable growth and a sustainable rise in employment.
  The right hon. Member for Stepney and Poplar sought to brush aside the prospect for the year ahead. In the current year—in a world whose difficulties he did something to acknowledge—there has been some small growth in the United Kingdom economy. It is much less than we should wish. I shall return to that later. In the year ahead there is the prospect of growth of 1½ per cent.
  During the current year real domestic demand has been growing at 3 per cent. It is likely to continue to do so in 1983. However, as The Guardian pointed out yesterday, not enough of that real growth in demand is being met by British goods. Total investment will grow at 3 per cent. in the current year and 5 per cent. next year. Our plans allow for a growth in investment in housing, local authority capital investment and on the nationalised industries. Everyone in the House is deeply worried about the prospect for employment and certainly no one is more concerned than I am. It cannot be stated too often, but that is anything but a uniquely British phenomenon. To hear the right hon. Member for Stepney and Poplar speak one would think that he disregarded many of the essential components in the equation.
  First—the right hon. Member for Stepney and Poplar acknowledges this—even in other economies more competitive than ours unemployment has been rising. In West Germany—the case cited by the right hon. Member for Chesterfield (Mr. Varley) last night—over the past three years unemployment has risen by 100 per cent., which is close to the rise in this country. The rate of increase in the West German economy—starting from a

  569
  much lower level than ours—has been 100 per cent. The right hon. Member for Stepney and Poplar said that that placed us at the top of the unemployment league, but there are other countries that are close and others that have a higher rate than ours.
  Having taken account of our great good fortune in having North Sea oil, one can never overlook the extent to which we were so far behind all other economies in our industrial performance. The National Institute Economic Review in August this year pointed out that in 1980 manufacturing output per head in Germany and Japan was twice as high as it was in Britain. In the United States, it was 2½ times as high. Between 1973 and 1980 output per head in British manufacturing rose 6 per cent., in Canada and the United States 20 per cent., in France 30 per cent. and in Japan 40 per cent. The National Institute believed that a further 50 per cent. improvement is required to bring British up to European levels of productivity.
  Mr. Robin F. Cook: The Chancellor referred to The Guardian editorial. Two of the figures given in that editorial related to the increase in average unemployment for the OECD countries during the past three years, which was 59 per cent. The increase in Great Britain for the same period—the three years during which he has been in office—was 124 per cent. Does that not demonstrate that the increase in unemployment while he has been in charge of economic policy has been just over double the average of our competitors?
  Sir Geoffrey Howe: I have just been dealing with those figures and addressing myself to that argument. The German figure during the same period rose by 100 per cent.
  Mr. Cook: Less than ours.
  Sir Geoffrey Howe: Yes, less than ours, but at four fifths of our rate over the three-year period. It has been a formidable and substantial increase.
  When the right hon. Member for Stepney and Poplar ignores the enormous difference in our underlying competitiveness, productivity and performance, he is ignoring the underlying causes of our long-run economic decline. He understandably expresses disappointment about the prospects for our own growth, but the outlook for growth among our European partners next year is no better. The European Commission forecasts growth in the Community Ten next year of 1·1 per cent. and suggests that growth in Germany, France and Italy will be 1 per cent. The Germans themselves forecast no growth for next year.
  Those conditions, overriding all our national difficulties and applying to the world as a whole, represent, as my hon. Friend the Member for Chippenham (Mr. Needham) said earlier this week, the consequences of
  "the enormous burden of debt overhanging the developing countries, the appalling deficit in the United States, and the general state of the economies of the world" .—[Official Report, 8 November 1982; Vol. 31, c. 355.]
  What needs to be done? We agree with the right hon. Member for Stepney and Poplar that we must improve our economic performance. That can be summed up in the word "competitiveness". We must also seek to play as full a part as we can in restoring the balance and dynamic of the world economy.
  In the domestic economy it is essential to continue with a responsible monetary and fiscal strategy if we are to
  570
  continue to succeed against inflation. That is not inconsistent with the prospect of real tax reductions—on the contrary.
  The Government's monetary strategy is one of steady, but not excessive, downward pressure on the monetary variables over a period of years, making due allowance for what happens outside this country. Our policy has been neither set nor implemented rigidly. Its counter-inflationary purpose and direction are not in doubt, nor is the consistency of its various components. Some criticisms of our position have been based on a selective approach to the evidence. For example, one view that the policy is too restrictive rests on the assumption that the policy is solely directed to objectives that we have never set.
  It is true, for example, that money GDP is expected to grow more slowly than was assumed in the spring, but we have no targets for money GDP. It is merely one indicator, to be looked at alongside others. Those other indicators, particularly the performance of the monetary aggregates, do not support the view that conditions are unexpectedly or excessively tight.
  It is also true that our performance in controlling expenditure and bringing down the borrowing requirement has been particularly good, but the outside world sees that as a sign not of excessive tightness but of prudent financial management. It does not criticise us; it tries to copy us.
  Our success in keeping a firm rein on public borrowing has been one of the key reasons for our success in seeing interest rates come down safely and substantially. The two have to be put into the balance together in making judgments about the stance of policy.
  It is in that sense that I shall approach my judgment about the PSBR for 1983–84. While the revenue and expenditure forecasts in the autumn statement are the best central estimates that can be made at this stage, the 1983–84 PSBR figure is presented only as a conventional assumption. It does not imply that a decision has already been made. It has not been, because at this stage it cannot be.
  In judging the balance of policy, we need to consider recent performance, here and abroad. External demand is weaker than anyone expected, mainly because of problems elsewhere in the world, but also because our supply performance has been disappointing. However, the United Kingdom has not contributed to the slowdown in world trade this year. On the contrary, our domestic demand has strengthened and has been growing well in line with previous expectations. I do not need to tell the House, because the point was made by the right hon. Member for Stepney and Poplar, that imports into this country are running at a high level. It would not be sensible for us to try fully to replace missing external demand by still more domestic demand. That would be trying to pull the world out of recession. The right hon. Member for Stepney and Poplar seemed to be coming near to advocating that at one point. The Labour Party has tried that before and will remember how it came to grief.
  There is increasingly wide agreement that a simple reflation of demand is no answer to poor supply side performance. Expanding demand is not the same as expanding supply. Reflation on its own leads to inflation. I was interested to see the recent article in which the hon. Member 'for Oldham, West (Mr. Meacher) set out his understanding of that part of the problem. However, neither the hon. Gentleman nor the Labour Party has begun to produce a credible solution.

  571
  Anyone who thinks, as so many Labour Members appear to think, that poor supply performance can be remedied by raft after raft of new controls and planning agreements has learnt nothing from the experience of the past 25 years.
  Mr. David Winnick: When the Government came to power unemployment in the West Midlands, the heartland of our manufacturing industry, was 5·1 per cent. It is now 16·5 per cent. In the same period there has been an increase in the number of those who have been unemployed for more than a year of well over 300 per cent. Surely those figures illustrate the devastation that has occurred in what was once our most prosperous region. Does the Chancellor agree that if he continues with his policies there will be even worse devastation in the West Midlands?
  Sir Geoffrey Howe: I well understand the anxiety felt in the West Midlands. It is not long since I was there to witness it for myself. It is shared by each region of the country that has seen a rise in unemployment and particularly by those that have been dependent on long-prosperous industries such as the motor industry, which has been severely affected in many parts of the world, though particularly in the West Midlands. However, that does nothing to gainsay the general point that I am making.
  I stand by the stance of policy that I outlined in the Budget Statement. Indeed, in today's dangerous world I make no apologies, and feel no need to do so, for continuing with the policies that have brought us dramatically lower interest rates. I also make no apologies for supplementing that help with business costs by doing something to structure my fiscal proposals in the same direction.
  It is important for us to continue to maintain firm control of public spending. It cannot be said too often that the public sector is not the source of growth and jobs. If it were, there would be no problem.
  For the first time since 1977 a Government have been able to stick to their plans for the year ahead, without the help of the IMF. We have been able
  "to reduce the share of resources taken by public expenditure."—
  one of the objectives set out in the Labour Government's letter of intent to the IMF in 1976. They did it because they had to do it; we are doing it because we know that it is right.
  The autumn statement spells out changes in the composition of spending plans for next year. I shall not repeat them, but I will deal with the social security provision, to which the right hon. Member for Stepney and Poplar referred. We need no lecturing from the right hon. Gentleman or anyone else about the needs of the less fortunate. We are standing by our pledge to maintain the real value of pensions and associated benefits. I understand why Labour Members wish to conceal that behind a welter of false accusations, using the misleading and emotive expression "clawback".
  The simple fact is that pensions will go up later this month by 11 per cent.—much more than is necessary to maintain their real value, even allowing for the 2 per cent. that we are adding to make up for the underestimate at this time last year. Pensioners are getting a substantial real increase in their standards of living. It is nonsense for the right hon. Member for Stepney and Poplar to describe that
  572
  as undeserved, but it is happening at a time when many workers are accepting pay increases well below the rate of inflation and in some cases receiving no wage increase.
  That advance payment—the accelerated increase in the level of benefits—this year must be seen as something on account of next year's uprating. Taking the two years together, our pledge will be maintained, as it has been maintained over the Government's life. Those who talk about clawing back, as though pensioners were going to have the cash or the real value of their pensions reduced, are talking rubbish, and the only result can be to cause distress and worry to the pensioners who are being misled.
  I come back to the measures that we are taking to improve the competitiveness of British industry. I have already referred to the fall in interest rates. We have also achieved a substantial reduction in the inherited rate of national insurance surcharge of 3½ per cent. What we did in the last Budget and what I announced on Monday, taken together, will mean that the private sector employers will save £1 billion this year and about £1½ billion in 1983–84.
  The right hon. Gentleman sought to reduce the figure by pointing to the effect, taking place at the same time as the consequences of my announcement, of the increase in contributions that results from the cut in the contracting-out rebate announced in March. However, that formed no part of my announcement. [Laughter.] Hon. Members may laugh, but I disclosed the matter to the House both in the table that was placed in the Vote Office, and in a later answer to the right hon. Gentleman. I told the House then of the consequences of the decisions that we had taken and that I announced on that day. The cut in the contracting-out rebate was announced to the House in March, as a consequence of the Government Actuary's review of the provisons for contracted-out schemes. That review took place as a result of the Social Security Act 1975, passed by the Labour Government. Moreover, the Labour Party was critical when we proposed that reduction in the contracting-out rebate, complaining that the cut was not higher. So it is sheer hypocrisy for the right hon. Gentleman to seek to add that reduction, which has nothing to do with the announcements that I made on Monday, to the figures that I announced then.
  Mr. Shore: The right hon. and learned Gentleman misunderstood the purport of my remarks on the subject. I was trying to elucidate from him—it is the central question of this debate—how we would tackle the problem of loss of competitiveness. What I said about the national insurance surcharge was that if, substantially or more or less substantially, it is offset by increases in other forms of national insurance payment by employers, there can be no improvement in our competitiveness from that source. I merely wanted him to direct his mind to that aspect, so that he could then answer the central question about how he intends—apart, obviously, from cutting real wages—to restore the competitiveness of British industry.
  Sir Geoffrey Howe: I shall come to that matter shortly. The right hon. Gentleman suggested that the effect of the announcements that I made on Monday was not accurately represented by the statement that I made then.
  Mr. J. W. Rooker rose—
  Sir Geoffrey Howe: I shall not give way.
  I told the House on Monday:
  "For all employers, after taking account of the reduction in contracted-out rebate announced in March this year, the total

  573
  payments would have been about £12·8 billion. They will now be £12·1 billion. That represents a reduction of 5½ per cent. and therefore makes a significant contribution to the competitiveness of British industry".—[Official Report, 8 November 1982; Vol. 31, c. 325.]
  That observation still stands. Indeed, it is remarkable that the right hon. Gentleman—who formed part of the Government who, by increases in national insurance contributions and the introduction of and increases in the national insurance surcharge, added 5 per cent. to employers' costs—should make this case against me now, when the net effect of the changes that we have made is to reduce those costs by a net figure of 1½per cent. Indeed, for the right hon. Gentleman to say that is bare-faced effrontery.
  We have announced other measures this week to help to reduce the costs of industry—for example, ending the regional development grant deferment. The reduction in gas prices that will be achieved by the announcement made by the British Gas Corporation—
  Mr. Dan Jones rose—
  Sir Geoffery Howe: Much though I respect the hon. Member for Burnley (Mr. Jones), I would prefer not to interrupt my speech. As the right hon. Gentleman acknowledged, Governments cannot do everything.
  It is up to both sides of industry to play their part in improving our competitiveness. We therefore welcome the formidable increases in productivity which, although not yet enough, have taken place since the end of 1980. The drive for improvement must continue. Above all—it cannot be said too often—we need further pay moderation and lower pay settlements. The unit wage costs of our manufacturing industry are rising much more slowly than they were—at a rate that is comparable to those of Germany, and only a little faster than those of Japan—but in nearly all cases our competitors are making further progress towards still lower pay settlements. We cannot afford to fall further behind. Pay bargainers on both sides must take note of the performance and forecast inflation, and lower their sights accordingly. I am delighted to have the right hon. Gentleman's affirmation today of the importance of the need for moderation in pay claims. That cannot be stated too loudly or clearly for the benefit of those who take part in pay bargaining.
  The right hon. Gentleman pressed on me the alternative or supplementary course of devaluation, although it is seldom so crudely expressed. Labour Members often combine that plea, in a most extraordinary way, with passionate opposition to the abolition of exchange control, although they completely fail to acknowledge that that was the one certain item within the power of Government that could make the exchange rate lower than it otherwise would be.
  There is one other thing that no doubt would bring down the rate. When the former hon. Member for Southampton, Test, Dr. Bryan Gould, gave evidence to the Treasury and Civil Service Committee on 5 July he said, referring to the policies that his party now urges on the Government:
  "I think there would be an enormous loss of confidence if the Government announced it was going to pursue these policies …that would do the job for us; that is exactly we want."
  That is an honest and remarkable insight into the reaction of the outside world if the right hon. Gentleman were in a position to introduce his policies.
  However, there are more serious comments than that to make about a policy of deliberate devaluation. First, it is
  574
  a great deal more easily said than done. Labour Members should know. In 1977, during a nine-month period, they reduced nominal interest rates from 14½per cent. to 5 per cent. , with two results. The first was an explosion in the growth of money supply. In fact, M1 grew by 25 per cent. The second and more important result was failure in the end to resist upward pressure on the exchange rate.
  Secondly, even if the rate does come down, it is all too likely to be offset by further loss of competitiveness. That is what happened between 1972 and 1975, when the rate fell by over 20 per cent., but there was no improvement in competitiveness. By the end of the period, all the effects of the depreciation had been offset by the pay explosion.
  The truth is that devaluation can be relied on to improve competitiveness only if it is accompanied by even more severe pay restraint than would otherwise be desirable or attainable. It is a means—if it works, and if it can be sustained—of reducing workers'living standards without telling them so. We all remember the famous broadcast in 1967, when the people of this country were told that the pound in their pocket would not be devalued. That, nevertheless, was the object of the exercise.
  So it is not easy. If the right hon. Gentleman brought about devaluation in that way, he would find that inflationary pressures would grow, and the need for pay restraint would become greater, not less. That is why, when the policy was tried in the past—advertently or inadvertently—the consequence was no restoration of competitiveness. Perhaps I should ask the right hon. Gentleman what he has in mind when he talks about devaluation. The effective exchange rate is now at about the same level as it was about a year ago. Nevertheless, over that year, the pound weakened against the dollar by 5 per cent. to about the lowest level for six years, but it strengthened against the French franc by about 11 per cent., and against the yen by 8 per cent.
  At the CBI conference, some of its members called on the Government to take steps to devalue the pound against European currencies. I understand why they did so, because sterling's present level bears hard on many manufacturing industries. However, to call for devaluation of the pound against European currencies means devaluing the dollar against the deutschemark and the yen, and that is not in my power nor in the power of the right hon. Gentleman.
  The best verdict on the whole debate was that expressed by Mr. Ron Sansom at the CBI conference. He said:
  "If we can't put the underlying trends right, then the situation can only get worse with time and you will be back next year and the year after, asking for an even lower rate of exchange."
  Mr. Shore: I disagree with the right hon. and learned Gentleman's analysis of the effects of currency depreciation, both historically and prospectively. However, leaving that aside, the clear conclusion to be drawn from what the Chancellor has said is that he will not use currency depreciation as a means of restoring the lost competitiveness which has been so grievous to Britain over the past three and a half years. If that is so, will he now tell us what he will do in order to restore that competitiveness? It is no good asking people to be moderate and reasonable in free collective bargaining. Is it or is it not true that he is asking for major cuts in the read increases of wages and salaries against the cost of living during the coming year?
  Sir Geoffrey Howe: The right hon. Gentleman must acknowledge that, while the present pattern of cost competitiveness of British industry persists and while in many cases the present level of pay bargaining is taking place, many people are suffering substantial cuts in real living standards in the manner of which he complains. They are suffering that as a result of unemployment. If the Labour Party is to be taken seriously in its pressure to turn the rising tide of unemployment, it must put its shoulder behind the case for pay responsibility and mean it. The Labour Party must not make the intellectual case in the House at one moment and go up and down the country at the next giving tacit and often explicit support for industrial action wherever it takes place.
  Many working people—members of trade unions—are seeing for themselves that in order to secure the future of their jobs and firms they must accept the necessity for reduced living standards. They do that because they have greater wisdom than many of their trade union leaders and Members on the Opposition Front Bench. That is the reality. We are entitled to ask the right hon. Gentleman to give his meaningful support to the case for pay moderation.
  Dr. Jeremy Bray rose—
  Sir Geoffrey Howe: I wish to acknowledge what I know is felt by many hon. Members, that, quite apart from Britain, there is cause for concern about the turbulence of the international background against which we are having to restore the health of the British economy.
  Mr. Shore rose—
  Sir Geoffrey Howe: I am sorry, I shall not give way.
  Mr. Shore rose—
  Mr. Speaker: Order. It is clear that the Chancellor does not propose to give way and therefore he must be allowed to continue.
  Mr. Shore rose—
  Sir Geoffrey Howe: No, I shall not give way. I have given way a great many times.
  A point which formed the background of the right hon. Gentleman's speech was the concern that we must all feel about the turbulence of the international background against which we are having to restore the health of our economy.
  Not only Britain but the whole world economic community is experiencing real stresses of transition from a period of high inflation. For industrial countries that strain has, in most cases, taken the form of high unemployment. For developing countries the strain has increased their problems of servicing their debts and has often sharply reduced their living standards. In both cases the problems have been most acute where adjustment to changing conditions has been longest delayed in the past.
  Worldwide unemployment and low growth is the price being paid for past failure to tackle inflation and for mistaken decisions after the first oil shock to seek to float and print one's way out of trouble.
  The handling then of the OPEC surpluses, which have effectively disappeared this year, can now be seen to have contributed to delayed problems of indebtedness. That is not just my diagnosis but it is the generally agreed diagnosis and there is widespread agreement on the prescription.
  576
  The major achievement of the international community in recent years has been to establish and maintain a global strategy which can provide the prospect of sustainable growth and stability, attained through the reduction of public sector deficits and the adoption of firm but flexible monetary policies. That resolve is now sustained by real and major achievement in terms of success against inflation and the foretaste of recovery represented by lower interest rates.
  An attempt to boost the world economy by the indiscriminate creation of international credit would only add to the problems of servicing and repaying existing debts, and would risk the hard-won progress towards more stable prices, exchange rates and lower rates of interest. That would not be wise. As at home, so abroad, the need is to consolidate the gains so painfully made while cushioning the process of transition for those most dangerously exposed.
  My right hon. Friend the Member for Chesham and Amersham (Sir I. Gilmour) on Monday expressed the hope that we, in conjunction with other countries, are
  "planning to deal with the present impoverishment of the Third world"
  and also planning for all advanced economies to
  "correlate their fiscal policies."—[Official Report, 8 November 1982; Vol. 31, c. 347.]
  We are aware of those problems and working to deal with them.
  There is no overall magic solution. For developing countries which have run into difficulties adjustment is essential. It is important to maintain confidence in the banking system. In banking and bank lending, patience and prudence are both necessary to correct what I have already referred to as the "over-exuberance of the past".
  It is widely recognised that that adjustment cannot be achieved quickly. In many cases it calls for support from the international financial institutions. IMF lending cannot replace private banking flows. However, it can help with policy adjustment and by sustaining banking confidence it can give time to implement adjustments at a sensible pace. For that purpose it is essential that the IMF should have adequate resources.
  I am one of those who have strongly urged upon my colleagues at the fund the need to accelerate decisions to increase the quotas available to the IMF. I am glad that we were able to secure agreement at Toronto on acceleration of the timetable. It is important now to reach agreement on the substance. I believe that we shall, although there is a difficult job to be done in reconciling widely differing views about the appropriate size of the increase.
  During the weeks ahead I shall be acting to secure further progress in that area. I hope, too, for benefits from the studies set up following the Versailles summit on exchange rate issues. One such benefit might be the enhancement of the role of the managing director of the IMF in encouraging the adoption of national policies which will promote convergence—the very "correlation" of policies that my right hon. Friend the Member for Chesham and Amersham seeks.
  Nowhere is that more important than in relation to the United States where an adjustment to the balance of fiscal and monetary policies, coupled with success for the Administration in their battle to control the deficit, would have a beneficial impact worldwide. The current strength of the dollar and the high level of American interest rates exacerbate the problems of adjustment in many countries.

  577
  I make no apologies for placing the issues in a wider world setting. That is how they must be seen.
  Mr. Dan Jones: Has the Minister had a reply from the employers? I am particularly anxious to know because I have traded with them a damn sight more frequently than the Chancellor has. If he has, will he make that known to the House?
  Sir Geoffrey Howe: I regret that neither I nor my hon. Friends understand the purpose of the hon. Gentleman's question.
  It is no good pretending that the world does not exist. We must tackle world problems as well as those of Britain. The House may be invited—it has not been by the right hon. Member for Stepney and Poplar—to look at the cost of the Labour Party's policies. I shall not take up the time of the House by dwelling on that now because I know that many other right hon. and hon. Members wish to speak.
  If there ever was an opportunity for the Labour Party to put into effect its policies to tackle Britain's problems today, it would be too late already for the IMF to start work on the next British letter of intent to deal with the problems that would be created. By contrast, the decisions set out in the autumn statement—the economic policy sustained by the Queen's Speech—represent a continuation of the responsible programme that is necessary for the continued reduction in inflation and interest rates, and continued help in the industry's costs, so necessary to restore profitability, competitiveness and the prospects for output and jobs.
  It is clear that, unlike some other major countries, we can look forward to modest recovery in the year ahead. What I shall be able to do in my Budget will be done with a view to nurturing and sustaining that recovery. I invite the House to reject the amendment.
  5.31 pm
  Mr. Roy Jenkins: While hon. Members recover from the peroration of the Chancellor of the Exchequer's speech, which was greatly assisted by the brief and lucid intervention of the hon. Member for Burnley (Mr. Jones), may I say that the fault of the penultimate part of the Chancellor's argument was not that he did not become trapped into the meaningless question whether he intends to cut wages by enough to restore productivity—which is manifestly impossible—but that he failed to respond adequately to the question how otherwise he proposes to face up to this central question for the British economy.
  I thank you for selecting our amendment, Mr. Speaker, which I commend to the House. The right hon. Member for Stepney and Poplar (Mr. Shore) delivered the conventional Opposition economic attack on the Government.
  Dr. Bray rose—
  Mr. Jenkins: I shall give way three times in the course of my speech, but I have not yet reached the first time.
  The speech of the right hon. Member for Stepney and Poplar was delivered with great force and contained a considerable amount of truth. Unfortunately, much of its constructive thrust is vitiated by the Labour Party's unwanted and damaging proposals for further nationalisation.
  Mr. D. N. Campbell-Savours: Tell us about them.
  Mr. Jenkins: According to which wing of the party a member belongs, there is a desire to nationalise either 25 or 100 companies. The right hon. Member for Stepney and Poplar almost certainly does not believe in that. The strength of his argument was also vitiated by the disruptive effect on exports and investment that withdrawal from the EEC would have, although the right hon. Gentleman certainly believes in that.
  Mr. Bob Cryer: Why does not the right hon. Gentleman declare his interest?
  Mr. Jenkins: For many years, I have had an interest in Britain pursuing a policy that serves British interests in Europe. [Interruption.] That has led me to take various steps, such as resigning the deputy leadership of the Labour Party.
  Oppositions always blame Governments for almost all the sins that man is heir to. There is a danger that may have been developing for some time. The problem is that Oppositions have a vested interest in the failure of our country. This afternoon, I was struck by the fact that the Government are developing a vested interest in the failure of other countries. Our performance is so strikingly bad that the Government look for some buttress and for some approximately bad—although not as bad—performance on the part of someone else. However, our national interest lies in Britain being successful in a successful world, and not in believing that the downward turn in our country is justified by its being about half the size of the downward turns in some other countries.
  When I remember what the Prime Minister said about unemployment doubling under the previous Labour Government, I wonder what she would have said if she had remained in opposition and a Labour Government had been presiding over an unemployment rate that would probably have been even higher. At the moment, the Government's essential message is that we are being led through a long but necessary wilderness so that the country can be purged of the evils of a generation or more of Keynesian lushness. I wonder when it became apparent to the Government that such a purge was necessary. Was it before, or after, the 1979 general election? Was it before, or after, the Prime Minister authorised the poster showing a dole queue, which suggested that the Government would get those people back to work? Not many election posters stand up well in history, but that one has a quite peculiar place in the pantheon of dishonesty.
  No one should ignore the fact that the dips in our economy have become progressively worse. Even such a farsighted statesman as lain Macleod attacked me strongly—assisted by the right hon. Member for Worthing (Mr. Higgins) whom I see in his place—for allowing unemployment to increase by between 500,000 and 600,000 at the same time as we produced a massive shift of resources into the balance of payments. In fairness, I also remember making a tremendous fuss and tabling a vote of censure when unemployment passed the 1 million mark for the first time under the right hon. Member for Sidcup (Mr. Heath). He reduced it fairly sharply, but with some less than beneficial side effects. As we know, the previous Labour Government more than doubled unemployment. However, the orders of magnitude then in relation not only to statistics. but to waste and suffering were totally different from those of today. Nevertheless, there is a basis in that history of decline for saying that we

  579
  should take a long-term, rather than a series of short-term views, and that a series of deep-seated faults in the British economy has developed over the lives of several Governments.
  This Government's fault is that they hold the extraordinary belief that to diagnose the malady as in some way deep-seated justifies them in taking any perverse measures that they like to deal with it and immunises them from any rational criticism of their methods. Furthermore, although the Prime Minister exhorts long-term views for everyone else, she has become more addicted to the misleading use of short-term statistics than anyone else I can remember speaking from a position of comparable authority in the House. Last week she tried to pretend that we were doing as well as, if not better than, most other countries. She did so by citing one-year percentage increases in unemployment. She enumerated several countries and suggested that the increase in Britain was less. However, she knows perfectly well that they all started from a much lower base and that a one-year comparison—in view of what happened in the previous two years—is profoundly misleading.
  It did not suit the Prime Minister's book to mention Austria, although she did not confine herself to large countries and mentioned at least two small countries. Austria has a good Social Democratic Government and happens to be one of the few countries to have more or less full employment. [Interruption.] It has substantial State ownership, but it does not change the frontiers every four years and does not waste its energy in such futile frontier battles. [Interruption.] I do not believe in ridiculous shuttlecock policies. [Interruption.] We shall consider issues on their merits. If we are to prevent industry from being treated—to the nation's immense damage—as a political football, restraint must be shown on the part of the dogmatists of both Right and Left. If everyone says that they will reverse everything that everyone else has done, so it will go on and so the country will continue in decline.
  Mr. Nicholas Fairbairn rose—
  Mr. Jenkins: Not yet. I shall give way in a moment. All that stemmed from what I thought was a relatively innocent paving reference to—I shall not say "a faraway country of which we know nothing" although it is next door to the country of which that was said—Austria. I was not even able to develop the example. Austria enjoys more or less full employment but its unemployment—3·2 per cent.—increased last year much more than ours. On the Prime Minister's argument it would therefore be valid to say that Austrian unemployment last year was more serious than ours.
  Mr. Fairbairn: I am obliged to the right hon. Gentleman for giving way. In his analogy of kicking footballs in industry, can he tell us, apart from anything that was nationalised under my right hon. Friend the Member for Sidcup (Mr. Heath), whether he was not a member of the party that nationalised everything in Britain and thus kicked the football in one direction?
  Mr. Jenkins: Not everything has been nationalised. Many of the early nationalisation measures were right.
  580
  They have remained part of the social fabric. I favour measures of that type. [HON. MEMBERS: "Oh."] Certainly. One of the evils from which Britain has suffered is that in the past many great controversial measures were carried after great argument—even after great bitterness—and, because they stemmed from the nation's essential needs, once carried they were accepted and remained on the statute book. However, recent British politics has increasingly produced policies that do not stem from such needs and which have then been reversed by one party after the other. As long as we go on in that dogmatic way we shall continue with such self-inflicted wounds.
  Mr. Campbell-Savours rose—
  Mr. Jenkins: No, I shall not give way. There are at least seven minutes to go before the second intervention.
  Mr. Alexander W. Lyon: Front-Bench spokesmen only get 15 minutes.
  Mr. Campbell-Savours rose—
  Mr. Jenkins: I shall give way in approximately seven minutes. I may give way a little sooner if I get on more rapidly.
  Mr. Tim Eggar: On a point of order, Mr. Speaker. I was under the impression that you asked for brevity from the Back Benches.
  Mr. Jenkins: I am much in favour of brevity. If hon. Members want brief speeches, as do I, they should not interrupt me, or try to interrupt me, all the time. They take up almost as much time.
  After the Prime Minster's misrepresentations—they were a gross misuse of statistics on unemployment—one could almost accept as routine her equally extraordinary misrepresentation of the Social Democrats' position on reflation. Hon Members may recall that last Wednesday she said that the Social Democrats had retreated from advocating a reflation of £7 billion to £8 billion to advocating a reflation of £4 billion. She must know—Prime Ministers with all their resources do not speak without something to support them—that we have never mentioned such a figure. It turns out upon inquiry that she got the figure from examining a table in one of our documents that specifically stated illustrative budgetary measures over two to three years. She added the total and proceeded to present it to the House. That is equivalent to saying that the Chancellor, who, I believe, has borrowed about £40 billion during his Chancellorship, is running a deficit of £40 billion a year. [AN HON. MEMBER: "The right hon. Gentleman is not being consistent."] We have been completely consistent since our programme was advanced at the Warrington by-election where we did rather well. It was a six-point programme that has since been adopted by many people for a reflation of about £3 billion to £4 billion a year and the reduction of unemployment by 1 million over 18 months to two years. It is quite precise. There are no extravagant promises and it has not been challenged.
  Competitiveness, which has been debated much already, is of central importance. The Prime Minister makes a great deal of the improvement in productivity in 1981 as though it were a change of trend, the end of the long night and the beginning of a sunlit day. I wish it were, but there is absolutely no evidence of it. The presentation of that one year in that form is deeply misleading. The fact is that there was a gain of 9·3 points—from 100·9 to

  581
  110·2—in 1981. But that was a rebound from a loss of 8·9 points in 1980. Since the Government have been in office, the average gain in productivity has been less than that during the previous Labour Government. Moreover, as the Prime Minister said, competitive advantage is drifting away again this year.
  I should like competitiveness to improve. I support the Government's demands for responsible wage claims and wage restraint as strongly and with as little hesitation as the Government. People may disagree with me about incomes policy, but they cannot possibly believe that we want an incomes policy to support irresponsible wage claims. We want one to enable more sustained growth and higher levels of employment. The Government would be well advised to direct themselves to that objective.
  Apart from what is happening to the competitiveness of a particular factory, a particular industry or part of it, many factories, and nearly whole industries, have ceased to exist. One need only visit the West Midlands or many parts of the North and Scotland to realise the industrial deserts that have been created.
  It is not simply a matter of price, but of whether we can now fulfil demand. The Chancellor often talks about the importance of the supply side. That is crucial to our price competitiveness, but it ignores the fact that capacity itself has been and is being permanently destroyed.
  There has certainly been no growth in competitiveness to offset the 35 per cent. loss that we have incurred since 1978. The right hon. Member for Stepney and Poplar said that there has been a 36 per cent. loss and I do not quarrel with that figure. That has much, though not everything, to do with the exchange rate, which is too high. But it is not 35 per cent. too high, or anything like it.
  Mr. Nick Budgen: How would the right hon. Gentleman bring the exchange rate down?
  Mr. Jenkins: There is no difficulty in bringing down the exchange rate if one wants to. The most obvious and simple way is by having lower interest rates. There is a combination of ways but it is important that it should be brought down in a controlled way. I fear that it will come down in an uncontrolled way in the not too distant future when our balance of payments goes into the red, as it will do on present form.
  We should not think of solving the problem by devaluation to that extent, or anything like it. To imagine that one can solve the problem by devaluation is a recipe for general financial indiscipline to which I am as opposed as the Government. The Government are locked in. Their sole economic achievement, which I do not dismiss, is a decline in the inflation rate. That decline is fragile and the Chancellor already knows that. If there is a significant reduction in the exchange rate it will become not only fragile but crumbling. The Prime Minister's and Chancellor's only economic monument will disappear if there is a realistic exchange rate in relation to competiveness.
  Mr. Eggar: Will the right hon. Gentleman give way?
  Mr. Jenkins: No.
  To crown it all, last Wednesday the Prime Minister delivered an extraordinary lecture to local authorities and nationalised industries for not having spent enough money on capital account in the past year. She said what a
  582
  difference it would have made if capital expendiuture plans had been fulfilled. What a muddle is created when she suddenly says that after everything that has been said over the past three years.
  I thought that, apart from the Prime Minister's failure to understand local government finance—on which she was completely exposed by the right hon. Member for Manchester, Ardwick (Mr. Kaufman) last week—the Government's great doctrine was that public investment and spending crowd out private investment and that such a public stimulus can have no beneficial effect on the rest of the economy.
  The Prime Minister's overnight conversion to a muddled Keynsianism plus delivering a typical hectoring lecture to those who did not anticipate her sudden change of mind is nonsense. It is a recipe for wasteful rather than sensible plans.
  The Chancellor of the Exchequer, even in the limited and inadequate proposals that he made on Monday, shows every sign of proceeding down the wrong road. He should give greater help to industry now. He should have abolished the national insurance surcharge instead of waiting for the spring and possibly announcing personal tax concessions. Perhaps he thinks that they will catch more votes, but in the past he has not shown great enthusiasm for vote-catching, whatever else may he held against him.
  What is more important is that the right hon. and learned Gentleman is wrong. More benefit can be given to the people, both employed and unemployed, both business and labour, by a stimulus to the general level of activity, than can be given by limited personal lax concessions.
  Everybody knows how vulnerable we are to an unprecedented flood of imports. That makes a mockery of talk about improved competitiveness. The result could be a further increase in unemployment with no rise in output, a balance of payments going into deficit, leading to an involuntary, belated and possibly uncontrolled fall in the exchange rate. For other reasons too, there could also be a reversal of the downward inflation trend accompanied by a continuing long-term decline in industry. That is an appalling prospect.
  Our amendment refers to privatisation and nationalisation. I dealt with that to some extent when replying to the hon. Member for Workington (Mr. Campbell-Savours). We believe substantial stability is essential. That was dealt with fully by my right hon. Friend the Member for Stockton (Mr. Rodgers) yesterday.
  The country certainly needs a stimulus from the Government in a form which gives private industry the confidence to respond with the investment which alone can create jobs. We must also consider international aspects. The Government are keen to refer to the international scene whenever they feel that they need an excuse for their difficulties. They are far less keen to consider the international scene in any constructive context.
  The Prime Minister is now the senior among the Western or summit leaders, except perhaps for Mr. Trudeau who has broken service, as I have in this House. It is not enough to comfort oneself with the view that one can merely lecture others, trying, with spurious statistics, to make a virtue out of what other countries are suffering while ignoring menacing world conditions. We are in great danger of spiralling down both in the developed world, arid in the developing world which is suffering from an

  583
  appalling decline in commodity prices—one of the reasons for our falling inflation rate. That trend has a grave effect on poor countries' standards of living and their ability to buy goods.
  Last week the Leader of the Opposition quoted Sir Terence Beckett with approval when he called for a new Bretton Woods. I was surprised and interested because I thought I remembered that one of the Leader of the Opposition's first acts in the House was to vote against the first Bretton Woods agreement. He voted against the Bill implementing the agreement and setting up not only the International Monetary Fund, but the World Bank.
  I agree with Sir Terence Beckett in that respect. Our approach must show that we know that we cannot solve our problems alone. By sensible changes of policy it would be possible to reverse the unemployment trend and—over a period, not immediately—to reduce unemployment by 1 million and perhaps a little more. To go substantially further than that certainly depends partly on taking account of the international context and getting other countries to take responsibilities and move forward as well. That involves an act of leadership which so far has not been forthcoming from any Western leader. The British Government should try to think in that context and take the initiative. They should also change direction at home away from the message of hopelessness which they are offering to the unemployed and the country.
  5.57 pm
  Mr. Edward Heath: I agreed with the Chancellor of the Exchequer when he said at the conclusion of his speech that he made absolutely no apology for discussing the international scene. The right hon. Member for Glasgow, Hillhead (Mr. Jenkins) also dealt with that. I shall say a few words about it before commenting on the Chancellor's statement. If we are to find any solutions at all to our present difficulties we must appreciate that the international scene is still deteriorating economically. It is deteriorating fast. It is of prime importance to Britain that the United States' deterioration has come about at least a year, and possibly two years, after Europe's deterioration.
  The American people are suddenly shocked that unemployment has gone up into double figures and is now over 10 per cent. Large areas of the North are becoming de-industrialised and even in the South, which has taken industry on, steel plants are being closed and will never re-open.
  No signs in the United States' economy point to recovery. At first the authorities said that they thought that by the third or fourth quarter, during the election season, the recovery would not only have begun, but be obvious. That is now shown to have been a fallacy.
  The position in Canada is much worse than it is in the United States. Unemployment in Canada is now massive. Canadian interest rates are higher than those of the United States, production is falling rapidly, and in a whole province—Quebec—the situation is worsened by political problems. The Australians, who have always liked to think of themselves as cut off from the rest of the world, now suddenly find that they are in no way protected from the depression that is sweeping right across it. In Western Australia, the long-term contracts made by the Japanese, from which State revenues are to a large extent obtained,
  584
  are now being taken up only to the extent of 67 per cent., and nothing whatever can be done about it, as to reject them would mean no contracts at all.
  The situation in Europe has already been described by the Chancellor of the Exchequer. I do not want to go into comparisons of who is slightly better or slightly worse off, but the situation in Germany is undoubtedly deteriorating. According to German business opinion, there will be no progress until after the elections of 6 March. The situation will simply remain stagnant. This means that for all our major export customers—the United States and the Community countries, particularly Germany—the situation is bad and getting worse, and in none of those countries is there any sign of recovery or of any turn in the downward progression.
  More than two and a half years ago many of us warned in this House that the indebtedness of many of the developing countries was a threat not only to our trade but to the Western banking system. What we feared has now come to pass. Poland, which had been a good customer, is bankrupt to the tune of $23 billion. Mexico, $80 billion in debt, was saved suddenly by the United States, which had opposed any action to help other developing countries. The United States Administration, finding that a major developing country on its own doorstep was suddenly bankrupt, stepped in with a package to save it. I do not mind that, but I object to the United States blocking help to other countries which are in a similar position but are not on its doorstep.
  Banks are now moving in to try to help Brazil, which owes $60 to $70 billion. The state to which such countries have been brought by high interest rates, high oil prices and low commodity prices can be shown by the fact that in Mexico the percentage relationship of debt servicing to exports was 129 to 100, so Mexico could not possibly service its debts, let alone pay for imports. In Brazil, the figure is 122 per cent. Even in South Korea, whose economy is much more evenly balanced despite a lack of oil, debt servicing has a relationship of 59 per cent. to exports, and this limits the country's activities. Nigeria has already had to clamp down heavily on imports twice and is now publicly declared to be four months behind all payments of every kind, whether for debt, for interest or for purchase from the outside world. Mexico, Brazil and Nigeria are all major developing countries and two of them would formerly have been described as rich oil countries. Yet all are now in that position.
  The impact of this on the United States will be considerable as those countries will not be able to buy its exports. The impact on Europe will be the same, and the impact on both sides due to reduced trading and not being able to buy their commodities creates a vicious circle in which there is no sign of change. That is the present position for both the developed and the developing world.
  The Chancellor in his statement seemed to be keeping all his options open for use at a later stage. He may have done so deliberately for the Budget next spring. In some areas, I wish that he had not kept the options quite so open. I agree with the right hon. Member for Hillhead that it would have given confidence to industry and seemed a little less grudging if the Chancellor had been able to deal with the whole of the national insurance surcharge at one go. That would certainly have been beneficial.
  I, too, wish to say a word about old-age pensions. I offer just one thought on this. There is no doubt that the Chancellor is arithmetically correct, as was my right hon.

  585
  Friend the Prime Minister, but some of us have learnt from long experience that one can never convince the old-age pensioners of the correctness of the arithmetic and the amount that will be saved is simply not worth the effort of constantly trying to explain it.
  I appreciate the pressure to which the Chancellor is subject, but I recall the introduction of the £10 Christmas bonus, which was warmly received by pensioners but which was introduced despite obstruction from those who said that it was improper because those who paid income tax could not be taxed on the £10. Yet even today I still receive letters from pensioners recalling the introduction of that bonus. It was worth overruling the objections on that occasion, and I suggest to my right hon. and learned Friend the Chancellor that it is now worth overcoming the slight arithmetical difficulties and letting the pensioners see that they are getting something rather generous.
  Pensioners live from month to month and from year to year. When they receive a little extra, they do not save it to deal with the time when they will receive a little less. That is an important practical consideration. I hope, therefore, that having kept his options open, my right hon. and learned Friend will use them to good advantage when he takes his final decision.
  The main issue is unemployment. The Chancellor can rightly claim that in other matters he has been successful. Inflation is down to 7 per cent., with the prospect of 5 per cent. next year, although I think that he would be unwise to ignore the fact that a considerable part of that is due to the fall in commodity prices of the goods that we import. That may be one reason why my right hon. and learned Friend is keeping his options open. He has established a clear incomes policy for the public sector and a price freeze for nationalised industries, and he has started the process of re-creating review boards to achieve more amicable arrangements and more wages. I hope that he will not take offence if I say that to re-create all those three in just two and a half years is a remarkable achievement, for which I give him full credit.
  Some of those things will certainly be needed if we go into a period of expansion, but that is what I want to ask about. Will the Chancellor or the Leader of the House, who is to wind up the debate, answer the question that I have put previously? What intellectual explanation can he give as to how expansion will come about, not just here but elsewhere? What is the intellectual justification for saying that there will be a recovery? We have had no previous recession on a scale sufficient to compare with the present one, unless we go back to the 1930s depression. The present recession is deeper than that. What brought about an upturn? Manufacturers had run down their stocks so much that they said, "We must not be caught out; we must be prepared for wholesalers and retailers to start buying again by building up our stocks now." They could do that because interest rates were so low. The Chancellor described the recent fall in interest rates as beneficial, but by any recession standards, interest rates are still far too high. Interest levels have never been so high during a recession.
  I fully realise the influence on interest rates of the Federal Reserve and the United States of America. That is another subject, and I have discussed in the House how the European Community can avoid hanging on to the coat-tails of the Federal Reserve if it maintains its policy.
  The recession cannot be turned around, nor will business men be prepared to turn it around either by
  586
  undertaking capital investment or building up stocks, as long as the present conditions pertain. The most recent CBI report shows yet again that many businesses are still trying desperately to get rid of their stocks because they cannot afford the interest on the loans that they require to hold those stocks. We have not yet reached the botton of the business cycle, where people have got rid of their stocks and must start to think about rebuilding. I have outlined the major problems. Will the Chancellor of the Exchequer or the Leader of the House explain the intellectual justification for saying that we can get out of the recession? Will they, further, tell us how they intend to do it?
  The problem of recession and high interest rates is coupled with the problem of competitiveness, which was discussed by the right hon. Member for Stepney and Poplar (Mr. Shore). It is possible to over-simplify discussion about competitiveness. We can be competitive in many areas without being competitive in others and the net balance may still be against us, as it undoubtedly is at present. There are many markets today in which British business men can win contracts all over the world. However, it is worrying that the bottom has fallen out of the market in the developing world, where many contracts for heavy equipment arise. The slump has happened not through lack of competitiveness—we can get the contracts—but because of the state of the developing world, in which we have a major interest through the British Commonwealth. The developing countries cannot afford the goods that we wish to sell to them. There is bound to be a limit to the extent to which export credit guarantees can finance our exporters, given the present world slump.
  What is the intellectual justification behind the Government's policy? In 1980, because of beliefs that were held at the time, sterling was allowed to rise to a level that did immense and permanent damage to our capital industries. However, I do not wish to go over the past and we must accept what happened. No doubt the sterling exchange level could be brought down again. I understand the Chancellor's fear that that would help to feed inflation. We must strike a balance and it is an infinitely difficult one to strike. The Chancellor has the unenviable responsibility of doing so. He may decide that, in order to keep out imports and to give our exports a better opportunity, the sterling rate should come down. He could then adjust value added tax to prevent inflation from affecting the overall cost of living. Such a move would depend upon the sterling rate being controlled and the balance of payments being secured. If my right hon. and learned Friend is deliberately keeping open his options for the spring, we may be able to persuade him of some aspects in which he can adjust the balance and produce the answers.
  At the Toronto conference there was an agreement that there should be further study on international action and a meeting in the spring, but it went no further than that. If it did, I am glad, but we may have to face a difficult decision. If America is to maintain its position of not allowing the IMF or the World Bank to have substantially more resources with which to deal with the balance of payments and investment in the developing world, are the rest of us prepared to continue being blocked?
  We may have to take an even more important political and economic decision, but it will face us, if not in the spring, next autumn when the IMF and the World Bank meet again. The United States of America proposed an

  587
  individual fund, apart from the international institutions, of $12½ billion. That is not acceptable, because it means that the fund would be controlled by the United States of America and that country would use it for political purposes in the developing world. That will not produce a satisfactory answer for those countries or for us. The action must be taken by the existing international institutions.
  The right hon. Member for Stepney and Poplar and the CBI have proposed a new Bretton Woods conference. With the present world representation, we shall not obtain a new arrangement by having a new Bretton Woods conference. Our only chance is to build up institutions such as the European monetary system and, if possible, a yen and dollar system that can then come back under the IMF. To try to deal with a new Bretton Woods agreement in global negotiations such as we have been trying to obtain in the United Nations for other problems does not fill me with enthusiasm. Nor do I believe that we shall find a solution in the time that remains, which is comparatively limited.
  Another important aspect of the IMF's operations is the conditions under which it will help countries. In 1980–81, the IMF moved forward considerably in showing understanding of the problems of the developing world. To my regret, it has been pushed back again by the Administration in Washington. That is very damaging. Nigeria has been told that help will be provided only if it devalues its currency. No economist who considers Nigeria's economy would say that devaluation of the naira would be other than harmful. Nigeria's main, and almost only, export is oil, which is valued in dollars. If Nigeria devalues its currency, internal prices will increase, there will be more internal disruption—there is already some disruption in the North—and the pricing system will be upset. It shows a lack of understanding by the IMF and pressure from outside that countries should be forced to conform to procedures that are believed to be correct historically.
  The world bank requires money for development. Where is it to come from? It can only come from the surpluses that have accumulated in the OPEC countries and that have been drained off the Western world and, partly, off the developing countries. It is unlikely that the surpluses this year will be great. If we take OPEC as a whole, there may be no surplus. The Gulf States may have surpluses, but not the other countries. However, the accumulated surpluses that are on deposit and trying to attract the highest possible interest are available for investment in the developing world if the international institutions are prepared to attract them to the IMF and the World Bank.
  The British should give leadership and I urge the Chancellor to continue his efforts, not only in regard to securing more resources for the IMF and persuading the American Administration that that is justifiable, but also with regard to dealing with the problems of the World Bank, to give it the greater resources it needs to start further development in the developing countries. If the resources are given to the World Bank, they are under control, and corruption is reduced to a minimum. That is particularly required for the energy affiliate because new sources of energy are desperately required to meet the demands that would come if we had an expansion.
  588
  What will our own problems be if there is expansion? First, there are the problems of commodity prices. After such a depression the production of the commodities we require has fallen away in the developing world. Production cannot suddenly be expanded and we shall therefore be faced with a price rise. I have already mentioned the impact that that would have on inflation but that must be accepted.
  Second, what will happen to the price of oil if there is an expansion of the British and world economies? It will undoubtedly rise again. Countries have now learnt to live with limited production—except, perhaps, in the case of Nigeria—and they have no desire to increase their production. The result will be another rise in oil prices comparable to 1974 and 1979. When Iraq and Iran went to war production fell by 4 per cent. and prices increased by 140 per cent. That is an indication of the price rise on a marginal change in supply. The only possible ways of dealing with that are by conservation or by reaching an agreement with OPEC on its future pricing and supply policy. That, too, will require offering incentives to OPEC.
  It is deplorable that no attempt has been made either by the Community or by the Western world as a whole to reach agreement with the OPEC countries on the crucial questions of supply and pricing of oil if a world expansion begins. I urge the Chancellor and his colleagues to give that further consideration and to give leadership in trying to bring it about.
  Training is of great importance. At the end of each recession that I have seen, the number of our trained and skilled people has been fewer than before. Those were the type of problems that Government and industrialists faced. The problem was immediately tied up with the wages question. Once an industrialist was convinced that expansion was under way he would not wait until his competitor had seized a larger than fair share of the skilled manpower. He started acquiring manpower before he needed it. That will occur again unless we have the necessary skilled manpower. Such action had an immediate impact on wage demands and, as we have seen in the past, it has not even needed wage demands. The wages have come from the employers, in order to get the limited skilled men available or to buy them away from their rival employers.
  We have tried different systems of training in Britain. In the old days, large employers trained the men and small employers used them afterwards. Then we had the training boards, of which there are a few left. Now we have another training system. We do not have a comprehensive, educational training system, such as the Germans have had since Bismarck and which the French and Americans also have. I have come to the conclusion that we shall never have the trained manpower and womanpower required in Britain until we accept that training has to be an inherent part of the educational system. Obviously, that takes time. The new system will take time. It will not begin until autumn 1983 but, looking to the future, as we should be doing, it is essential to plan ahead and decide how to deal with that problem.
  In planning ahead I would emphasise to the Chancellor the importance of doing more to encourage the conservation of energy in Britain. A great deal of work has now been done by the public authorities, universities and

  589
  individuals. We are not taking anything like full advantage of that work. We could save ourselves from some part of the problem of OPEC increases at a time of expansion.
  The trade unions and their wage demands will once again come to the front of the picture. We should be thinking about what will happen then. If, as the right hon. Member for Stepney and Poplar suggested, wage demands are now low or reasonable because of mass unemployment, that implies, to my regret, that if we succeed in tackling unemployment the wage demands will become much higher.
  Mr. Maurice Macmillan: Of course they will.
  Mr. Heath: My right hon. Friend the Member for Farnham (Mr. Macmillan) says, "Of course they will". The position then will be no better than the one we faced in the past. If, on the other hand, my right hon. Friend had said, "No, unemployment is not having an effect on wage demands," what do the Opposition consider will happen when unemployment is reduced? Do they believe that wage demands will remain at the same level or lower than they are at present? I see no evidence of that. We ought, therefore, to be addressing ourselves seriously again to the longstanding question of how trade unions become involved in the whole economy, more productive, more competitive, and at the same time feel that they are receiving a reasonable deal.
  It cannot be done by standing aloof from the trade unions, much though some people would like to do that. It can only be done by what has already proved to be a long and difficult task of trying to incorporate them and the whole of the work force into the economy, and thereby to bring about an improvement.
  We have been discussing competition but it has not been mentioned that the competitive position can be greatly improved by an increased output. Increased output reduces overheads and once that is done we would become more competitive throughout the industrial world. That is one of the most powerful arguments for an expanding economy, which enables us to have a continuous process of increased competitiveness. I did not quite understand my right hon. and learned Friend's figures about becoming uncompetitive after devaluation in 1972 as a result of his policies of incomes freeze and prices freeze. In fact we did more than maintain our competitive position—
  Mr. Robert Kilroy-Silk: Is the right hon. Gentleman giving his right hon. and learned Friend a pat on the back?
  Mr. Heath: According to The Economist, we had the lowest inflation rate at that time in Western Europe. I gladly pat my right hon. and learned Friend on the back for that, but I think that he has been misled by the figures he quoted this afternoon. The competitive position can be greatly improved by an expansion of output. It is a matter of balance and the Chancellor has to judge. We return eventually to the fact that if we are to have a satisfactory employment position it can only be done, as the right hon. Member for Stepney and Poplar said, as part of a world recovery. That will not happen automatically in the present position. It has to be brought about by world leadership.
  It is sad that the United States, which did so much through Bretton Woods and the Marshall Plan, which saw the world as a whole and was responsible for the financial
  590
  recovery of a whole continent—Europe—should today be taking exactly the reverse view. I hope that we can persuade the United States that its previous position achieved far more in both its interests and those of the world. If there is anything that the Chancellor can do to give that leadership, the House and the country will be grateful.
  6.30 pm
  Mr. John Spellar: It is usual in maiden speeches to refer to one's predecessor. That is especially poignant for me because of the tragic circumstances that led to my election to the House. My predecessor, Mr. Jocelyn Cadbury, was highly regarded in his constituency and, as I have found since I came to the House, by all hon. Members. He was admired for his hard work and dedication, and for his lively interest in both industrial and social issues. As a member of the Cadbury family, he carried on the tradition of concern for the welfare of his constituents and those who work for his company. I know that the disastrous worsening of conditions for his constituents was of great concern to him, and that that concern was reciprocated by his constituents.
  My constituency in the south-west of Birmingham has grown substantially during the past few years in both private and municipal housing. Indeed, it is now the largest constituency in Birmingham and, until this year, one of its wards had more than 35,000 electors—a measure of its growth. It is not an area of the traditional thousand trades, although many of my constituents work in those industries, travelling to the city or the black country. It consists mainly of large-scale manufacturing plants. Cadbury's Bournville plant in the neighbouring constituency of Birmingham, Selly Oak employs a considerable number of my constituents. The Kalamazoo business system plant is moving into a new area of electronic manufacture.
  The constituency is best known for the British Leyland Longbridge plant. The position there during the past three years has, in many ways, highlighted what has happened to employment in Birmingham. When my predecessor made his maiden speech in the House, he said:
  "the largest employer in Northfield is the giant British Leyland works at Longbridge, which employs about 19,000 people."—[Official Report, 18 June 1979; Vol. 968, c. 986.]
  Today, the plant employs only 10,000 people and even their future is threatened.
  For many years that plant provided the basis for the prosperity of the area—it was part of what was once known as the "golden triangle". Even in the 1930s people flocked to Birmingham from depressed areas—indeed, from your area of Wales, Mr. Speaker—to find work in the Longbridge car plant and the industries dependent upon it. That area, and my constituency, are no longer part of the "golden triangle".
  Unemployment in Birmingham is 18 per cent. Statistics from the Northfield jobcentre in 1979 showed that unemployment was less than 4,000—it is now more than 10,000. The Northfield citizens advice bureau has shown the largest increase nationally in cases during the past year. Unemployment is higher than in Glasgow, Swansea, Port Talbot and many other traditional black spots. Youth unemployment stands at a horrific level. It is estimated that in September only one in 10 school leavers in Birmingham found work. Yet that area and the industries operating within it were once highly prosperous.

  591
  A month ago the West Midlands chamber of commerce conducted a survey of firms in the area. Only one in eight is working at full capacity, with all the obvious implications for productivity and competitiveness, the need for which has been stressed during the debate. About threequarters of the firms said that their trading position was worse this year than last year—yet it is the traditional industrial manufacturing heartland of Britain.
  Neither in the Queen's Speech, nor in any speech on the Address—especially last night's speech by the Secretary of State for Employment—have I seen any sign of any realisation of the disaster that is hitting British manufacturing industry. I may be a new Member, but I must say that the superficial nature of the speech of the Secretary of State for Employment was amazing in the light of the many difficulties being faced in Britain. We heard repeated references to the Morning Star and Tribune. Perhaps we would be better served if the right hon. Gentleman spent more time reading the Department of Employment Gazette and the Financial Times, rather than searching for cheap political points. I found no reassurance in his speech, nor in the more developed speech of the Chancellor of the Exchequer this afternoon. The manufacturing areas of Britain are concerned that the recent speech of the Minister of State, Treasury, the hon. Member for Maldon (Mr. Wakeham) proved that the Government want Britain to move out of manufacturing industries into service industries. That is the true feeling of the Government and the Civil Service. It is of great concern to the people of Birmingham, who are so dependent on manufacturing industry, especially the motor car industry.
  My predecessor, in his maiden speech, asked Ministers to remember that the British motor industry needed time to recover its strength. He said:
  "It is still the lifeblood of the Midlands. Its collapse would leave Birmingham an industrial desert and the effect on the nation's balance of payments would be catastrophic".—[Official Report, 18 June 1979; Vol. 968, c. 987.]
  I wish to reiterate that message today. The collapse of the motor and engineering industries would have a catastrophic effect on the economic, industrial and social life of Britain.
  When I spoke to my constituents both during my campaign and subsequently, I realised that the major fear hanging over the West Midlands was that there would be a collapse in manufacturing industry. They fear the breakup of British Leyland and the closure of Longbridge, with the consequential disappearance of the engineering industry. They fear that the Government have written off any interest in manufacturing industry. The speeches in this debate have not given the reassurance that my constituents need. I hope, therefore, that the message that I have brought from them to the House will receive attention. I thank the House for its courtesy in listening to me.
  6.38 pm
  Mr. Richard Luce: It is a great pleasure to follow the hon. Member for Birmingham, Northfield (Mr. Spellar). It is an unusual characteristic in the House to show such a generosity of spirit across party lines. When it happens, it is refreshing. The House warmed to the hon. Gentleman's tribute to his predecessor, Mr.
  592
  Jocelyn Cadbury, and the manner in which he paid it. Not only Mr. Cadbury's family, but his former constituents and all in the House should be grateful for the warm way in which he spoke. It would be beneficial to the House if that characteristic of generosity of spirit were to be more amply spread in the weeks and months to come. The nation can only suffer from a lack of such spirit.
  One aspect of the grave unemployment problem, to which the Gracious Speech and the hon. Member for Northfield referred, is structural unemployment. During the debates on the Queen's Speech and on previous occasions when unemployment has been debated, I have noticed that that subject has not featured much. We should put our minds to it and think more fully about its implications.
  I do not look gloomily at that subject. I am not a doom monger in that context, but we must face up to some of the implications. Even with a stable economy, for which we are working, and even when we manage to generate reasonable growth in the 1980s and 1990s, we shall have to face up to some other factors that may cause higher unemployment than we would otherwise expect.
  If we look at that problem at this stage and try to anticipate developments and assess how we can best deal with the problem, there will be less suffering in the last part of this century. We must take four extra factors into account. First we must take into account the birth bulge. Another half million people will come onto the market to join the work force during the rest of the 1980s.
  Secondly, we have to take into account the matter that was so fully dealt with today and on previous days in the debate on the Gracious Speech—the problem of the world recession. I do not think that anyone with any imagination can believe that we can make a dramatic turn around, even with the necessary international co-operation that is so urgently required and on which my right hon. Friend the Member for Sidcup (Mr. Heath) gave his interesting and constructive views. We must expect a low level of growth in the foreseeable and immediate future.
  The third factor is the dilemma that while we are becoming more competitive, which we should not underestimate, that involves overcoming the accumulated inefficiency of the past 20 years which has, to our pain and to the pain of those who have been made unemployed, meant the shedding of excessive labour. That process is painful and must involve unemployment.
  The fourth factor is the modernisation and new technology that are essential for our future. They are essential if we want to create wealth, but at the same time they are by no stretch of the imagination labour intensive. In 1965 in the manufacturing work force there were 8·4 million jobs but in 1982 there were 5·7 million jobs. As a proportion of the employment force the figure is declining. In the United States the forecast is that the proportion of the labour force required for the manufacturing of goods will continue to decline for the next few years.
  Mr. Macmillan recently said:
  "Soon civilisation can be based on leisure rather than work slavery."
  There is an important implication in that remark. We should give it serious thought.
  Not long ago agriculture took up a substantial proportion of the labour force. Today it does not, but it is highly efficient and helps to create wealth. Some people say that the service sector is expanding. Of course that is

  593
  true and the more it expands the better, but we should not underestimate the extent to which modernisation is taking place in the service sector, too. The use of microprocessors, word processors, computers and so on means that it, too, will not require the labour force that might have been required in the past.
  My hon. Friend the Minister for Industry and Information Technology, who is doing a tremendous job to encourage the growth of new technology, in his interesting recent Conservative Political Centre pamphlet entitled
  "New Jobs for New Technology",
  emphasises the increasing proportion of the work force that will work in information technology. That is right. The more we encourage it the better. He said that it would
  "create a great number of jobs."
  No doubt that, too, is true, but we face the dilemma that none of the jobs is likely to be labour intensive.
  We must ask ourselves, "Will even a high rate of growth in new technology be sufficient to replace the labour intensive industries that are declining rapidly, such as steel and shipbuilding?" That question is difficult to answer and there are serious implications.
  The dilemma is that the process of creating a climate for successful wealth creation also produces unemployment problems that may be, and one hopes will be, temporary. Against that background The Times in an editorial on 8 November entitled "Playing it long" stated:
  "But unemployment is not going to go away, either in the short or the medium term …
  Sir Geoffrey today cannot shrink from an admission that high unemployment is here to stay. Nor can the Opposition. No alternative political programme for the economy can offer a serious reduction in this chronic unemployment. The search therefore concentrates on creating economic conditions which will work first at the margin and then gradually force their way to the centre of the problem."
  Some may say that that view is too gloomy, but I believe that there is a considerable grain of truth in it and that we should take it seriously. The process of wealth creation, with the serious implications for unemployment, is not all bad. On the contrary, the prospects for a higher standard of living are good for the country. That in turn creates more jobs. We should welcome the prospects for less drudgery in work and more leisure. However, there will also be problems of major proportions of adjustment and changes in the pattern of employment.
  I wonder whether we have grasped both the pace and nature of the change that is taking place. Those who have read the books by Alvin Toffler do not have to agree with everything that he said in his books "Future Shock" and "The Third Wave" to accept the idea that, inevitably, there will be substantial changes in hours of work, methods of working, the way of life that we lead and the frequency of changes of job in the lifetime of any one person. The least that we can do is to prepare ourselves for those changes.
  The prospect of a structural unemployment problem will be graver unless we grasp the issue positively not only as a Government but as a people. The measures that are required to deal with the problem of structural unemployment must be flexible and infinitely adjustable because we cannot forecast precisely how serious the problem will be in the years ahead. Therefore, we need to encourage the development of measures that are as adjustable as possible.
  The Select Committee on Unemployment in the other place produced in its report in May 1982 two possible
  594
  courses of attack on the problem of how we overcome structural unemployment. To oversimplify it, the first category was to take whatever measures we can to delay entry to the labour force and to deal with the other end, by encouraging early voluntary retirement. In other words, we should deal with both ends of the labour force. The second category that the Committee looked at was the redistribution of jobs by reducing the time spent at work by each person to make room for others.
  The more I thought of this and the more that I read the report, looking at the second category—the reduction of weekly working hours, the reduction of overtime, the extension of annual holidays, more sabbaticals and the promotion of part-time work—the more I tended to come to the view that the encouragement of that is likely to promote greater inefficiency rather than greater efficiency. It is therefore not something to which any Government should lend too much support, save for one suggestion, that of work sharing and job splitting.
  We are looking for constructive measures that will, to the extent that they are required in the foreseeable future, help to alleviate the problems, provided that they do not reduce efficiency and competitiveness in our work force. I have in mind policies such as encouraging greater flexibility in retirement policies. The paper "Growing Older" which was published last year suggested that flexibility of retirement between the ages of 60 and 70 was something that we should encourage. I should like us to examine more fully the scope for early retirement for those who wish to take that course, and the encouragement of private pension schemes to this end.
  Equally, we should build on the excellent job release scheme that is being developed. At the other end, we should not underestimate the range of measures that my right hon. Friend the Secretary of State for Employment and others in the Government have taken to improve training facilities for young people. What they are doing is very encouraging and I hope that they will take it stage by stage much further than is already planned.
  There is a third development that needs examination, although I cannot at the moment form a conclusive view about it. There is already a greater natural voluntary move towards more part-time work, which means more women at work. However, we should see whether it is possible to adopt further fiscal inducements to married mothers so that they are encouraged to remain at home as long as they are mothers. It would contribute to the easing of the unemployment and to the enhancing of family life.
  The final development is that of job splitting and work sharing. Again, my right hon. Friend the Secretary of State for Employment deserves congratulations for the way in which he has taken the lead in announcing that he will introduce schemes and measures along these lines to encourage more of this next year. GEC and Barclay's Bank have already introduced their own schemes and are finding that they are working with reasonable success. This is a development from which we should learn the lessons of experience of voluntary schemes that have already been adopted.
  It is not just the people who are young or in their late fifties about whom we should worry. It is also those who are unemployed in their thirties and forties but who have families to look after when they are made redundant. Work sharing or job splitting schemes can do a great deal to help them.

  595
  I hope that when my right hon. Friend replies to the debate he will give me an assurance that the Government are looking at structural unemployment in a cohesive and comprehensive fashion, pulling all the strands together. It is an issue which, if we ignore it, will lead to far greater suffering and problems than otherwise need be the case. We need to face up to this issue and thus create greater confidence in our society.
  6.55 pm
  Mr. Douglas Jay: I pay warm tribute to the admirable speech of my hon. Friend the Member for Birmingham, Northfield (Mr. Spellar) who has brought to us an up-to-date and close knowledge of the disastrous state of industry in the West Midlands. I am afraid that I cannot say the same of the Chancellor's speech. I do not think that I have ever heard a more bleak, negative, depressing, unconstructive and gloomy speech by a Chancellor to the House.
  Mr. David Watkins: Since the wind-up speech by the Secretary of State for Employment last night.
  Mr. Jay: That may be so.
  To my mind, the Chancellor's policies stand condemned on this score if not on any other—he is budgeting for a still further rise in unemployment in the next year.
  The right hon. Member for Sidcup (Mr. Heath) referred to the wider Western world. There is at least one faint sign of hope in that world to which he did not refer. The United States Federal Reserve Board and the American Government a month ago went a long way to abandoning crude monetarism, money supply targets and the rest. I see some hope there for recovery from the American side. That hope would be very much stronger for us if the Chancellor would also cease treating his money supply targets and the PSBR as totem poles, which would give some chance of getting still lower interest rates here.
  The American authorities eventually changed course a month ago because the international deflation caused by extreme monetarism, not just here but in many countries, had reached the stage when even the banking system was at risk. We reached the point where the damage due to cutting down demand had hurt industry so much that many banking assets were turning into bad debts and so banking collapse was threatened. That actually occurred in the great depression in the United States of America in March 1933. Internationally we have been very near to the brink of that in recent months.
  The right hon. Member for Sidcup was not quite right about what caused the upswing in 1932·33. The deflation was stopped only by vigorous reflationary action by President Roosevelt and not by just sitting and waiting for something to happen. In the past 12 months we have learnt yet again that, as the right hon. Member for Sidcup rightly said, deflations do not usually stop until Governments or central banks take some action to stop them.
  The present Chancellor, to judge his powers of forecasting these things, told us in December 1980 that the Government looked forward to the recession coming to an end during the course of the next year. That does not encourage much confidence in the Chancellor's powers of
  596
  prediction. Here we are in November 1982, and both he and the CBI are telling us that unemployment will rise still further next year.
  The intellectual fallacies of crude monetarism have been so conclusively exposed in the past two years both in theory and in practice that one need not enumerate them again. However, it is worth briefly setting on record the enormous real damage done by deflation in the past two years, particularly to the United Kingdom.
  First, extreme deflation of this kind means a huge fall in real output, living standards and employment prospects. It is no compensation to claim that the value of money is now falling less quickly, which is the Chancellor's only claim to have achieved anything. Money is only one means to the end of higher production and living standards. If one sacrifices output, employment and living standards to money values, one simply sacrifices the end to the means and the substance to the shadow.
  Secondly, deflation is a staggering waste of resources. The United Kingdom is probably losing current income at the rate of about £40 billion or £50 billion a year by underusing our productive resources. That loss will never be recovered. In those circumstances, even the normal economic doctrine that we cannot have more of one thing without having less of something else, which we hear regularly from Treasury Ministers, becomes untrue. We can afford what we have the capacity to produce—houses, hospitals or more naval frigates. The United Kingdom has now reached the point—this is the most serious element—when the productive capacity that we shall sorely need in the future is still being destroyed.
  Thirdly, deflation and unemployment always bring restrictive practices internally and protectionism internationally. The unemployment of the 1930s brought many of the restrictive practices of the 1940s and, inevitably, a failure of demand internationally brings excessive protectionism. The international crisis in the steel industry is due to the artificial cut in general demand due to deflationary policies. No agreements between one country and another will solve that problem. Only a general reflation will check world protectionism.
  The final futility of a deflation policy pushed to those lengths is its short-sightedness. As the right hon. Member for Sidcup rightly said, if there is no policy to restrain the rise in money costs the whole process will start again as soon as demand picks up. The damage that has been caused both here and overseas is not due to something mysterious called a recession that nobody can explain, as the hon. Member for Shoreham (Mr. Luce) suggested; it is due to a failure in the task of keeping overall money demand and costs in balance, or, in this country, of trying to do so. That is why factories are closing and firms are collapsing almost every day.
  The Prime Minister showed her misunderstanding of the problem by the strange new argument that there cannot be a lack of demand because we are importing too much. We are importing too much, but nobody has ever suggested that in managing demand one should assume that there would be no imports. If excessive imports are threatening output, employment and the trade balance, the remedy is to let the exchange rate fall and not to cut demand further. That will only make the position worse.
  During the past year the Government could have learnt something from Mr. Neville Chamberlain and, although

  597
  I confess I did not support him at the time, there is something to be said for his internal policy when one compares it with that of this Government.
  In this country, as opposed to the United States of America, the great deflation of 1932 was ended partly by President Roosevelt's reflation but mainly by two decisions of the United Kingdom Government. First, interest rates were reduced to 3½ per cent. Secondly, a moderate import tariff was placed for the first time on all manufactured imports. That policy brought five years of considerable revival from 1932 to 1937.
  The Economic Secretary to the Treasury (Mr. Jock Bruce-Gardyne): Would the right hon. Gentleman remind the House of the rate of price increases when interest rates were reduced to 3½ per cent.? Is it not true that in real terms interest rates were no higher then than they are now?
  Mr. Jay: I knew that the hon. Gentleman would raise that point. I shall return to it.
  Those policies brought a considerable revival. The CBI is absolutely right to argue that interest rates should be reduced further and quicker. The real rate of interest in recent months has been rising to some extent. We should reduce the nominal rate to 4 or 5 per cent. within a few months. That would stimulate investment and construction, which is labour intensive and does not suck in imports on a large scale.
  The hon. Gentleman and other members of the Government have been arguing for some months that lowering interest rates is not as easy now as it was in 1932 because internationally prices have risen rather than fallen. That is no longer true. World prices are falling in free markets. If it were not for the common agricultural policy, food prices here would fall and give us the relief that they gave in 1932. Although it may not be as easy as it was then, it is not as difficult as the hon. Gentleman suggests.
  Lower interest rates would help industry by reducing the exchange rate. We are sometimes asked how the exchange rate can be lowered. One way is to allow lower interest rates to affect the exchange rate. Although I do not regard that as a permanent panacea, as some people do, it is unquestionably desirable now.
  I also believe that the United Kingdom needs some tariff or quota restraint on imported manufactured goods from all sources for a time. It is unfortunate that when free trade and protectionism are discussed—sometimes even in the House—it is suggested that one or the other is always right at all times for all countries. But it depends on the country, the commodity and the prevailing circumstances. The correct policy for the United Kingdom for the latter part of this century is one of free import of food and materials and some restraint on the import of manufactured goods from all sources. The supreme mistake that was made in the 1970s—the right hon. Member for Sidcup cannot escape some responsibility—was to do precisely the reverse: to raise the price of our food imports artificially and to admit manufactured imports from the Continent tariff-free which are causing devastation to the Midlands engineering industries.
  Both those blunders must be reversed if British industry is to be saved. The United Kingdom applies already a moderate tariff to imported manufactured goods from all parts of the world outside the EEC. The same tariff should now be imposed on manufactured imports from all sources.
  598
  Otherwise the effect of restraining imports from Japan or other parts of the world will be to replace them by increased imports from Germany, France and Italy. Faced with all that, the Government's antics over the privatisation of public industries are pathetically inadequate.
  In the short term, there is an urgent need to reduce interest rates quickly, to allow the exchange rate to fall naturally, to expand demand and investment through the Budget and not to have stop and go at the same time, which seems to be the policy of the Secretary of State for the Environment.
  In the medium term, we must impose some restraint on the import of manufactured goods, return to the free import of food at world prices and devise a rational system for restraining the rise in money costs which will recur as soon as demand picks up. If we do not do most of those things soon, we shall face a catastrophic trade balance and economic situation when our oil supplies begin to run out in 15 or 20 years.
  7.10 pm
  Mr. Terence Higgins: The debate is taking place against the background of the Chancellor's statement to the House on Monday and the autumn statement that he published at that time. As the Chairman of the Select Committee on Procedure (Finance) and a member of the Select Committee on the Treasury and Civil Service, I congratulate the Government on the way in which the document has been produced. It is a significant advance on previous such publications.
  The figures for public expenditure have been produced, at least in outline, in the autumn, which has happened only once before—when I was a Treasury Minister—and that is a great improvement on what happened this year, when the figures were not produced until the spring. In addition, some of the figures for the ready reckoners for tax changes are illuminating.
  However, in the light of the discussions that the Treasury and the Procedure (Finance) Committee have been having on the Armstrong report and the proposals for a "Green" Budget, bringing the taxation and expenditure sides of Government affairs together, the autumn statement is a long way short of a true "Green" Budget. Therefore, we look forward to further progress. Nevertheless, the statement is to be welcomed as a step in the right direction.
  It is always a pleasure to follow the right hon. Member for Battersea, North (Mr. Jay). There are frequently points on which we disagree. Indeed, he made again the usual points with which I always disagree, although I had not previously heard the comparison with Neville Chamberlain.
  I wish to take up the theme of the thoughtful and compassionate speech of my hon. Friend the Member for Shoreham (Mr. Luce). We must face the fact that the unemployment that we are experiencing is qualitatively different from that which we experienced in previous postwar cycles. The recession has been so deep that many firms have reduced overmanning and incurred the considerable expense of massive redundancy payments. They have found that they can produce as much as they did before, but with a much smaller labour force—in some cases as much as 30 per cent. smaller. It would be unrealistic to suppose that any foreseeable increase in demand, domestic or overseas, will persuade those firms

  599
  to take back their redundant workers. Tragic though the situation is for the individuals concerned, we do no good to anyone if we seek to conceal those facts.
  We must also face up to two other aspects. There is still substantial overmanning in many parts of the public sector and while we believe that technological advance will generate more jobs, rather than fewer, in the long term, the revolution in computers and so on will substantially reduce the number of white collar jobs.
  The battle that we face for at least the next decade, and probably far beyond that, is on a different scale and involves different problems from anything that we have faced before.
  Mr. Jay: The right hon. Gentleman will recall that that is what everybody said in 1932, and it was all proved wrong within a few years.
  Mr. Higgins: That may be the case, but we are in a new situation and we must analyse it correctly if we are to provide the right solutions. I do not agree with the right hon. Gentleman's analysis of the position in the 1930s, for the reasons outlined by my hon. Friend the Economic Secretary to the Treasury, who referred to the real rates of interest then and now.
  I attended the recent CBI conference as a delegate. As was agreed there, the crux of the issue is competitiveness. The fact that the Government are winning the battle against inflation is of the greatest importance, not least because it means, we hope, that there will be a corresponding reduction in the level of wage settlements. That is the main way in which we can claw back the massive reduction in competitiveness between 1979 and 1980 and enhance the prospects for more investment in existing firms and for the creation of new firms.
  We are right to give the battle against inflation the highest priority. It is a mistake to suppose that we could change at this stage from an inflation priority to an unemployment priority. The conquest of inflation is essential if we are to do anything to alleviate unemployment in the long term.
  I greatly welcome the reduction in interest rates. It should enable us to get more investment and to get the economy going again, not least because it will considerably reduce industrial costs and will help to restore our competitive position.
  The right hon. Member for Stepney and Poplar (Mr. Shore) was less frank than usual. He tried to say that we have had a 36 per cent. deterioration in our competitive position and that it is wrong for the Government to say that we must get that back in terms of real wages. The right hon. Gentleman advocated devaluation as a panacea for all our problems, but he knows that devaluation would succeed in restoring our competitiveness only if there were a corresponding effort to ensure that the effect of devaluation on higher import costs and inflation was not reflected in wages.
  Therefore, the right hon. Gentleman is also advocating a reduction in real wages. We all know that the reduction in our competitive position was due partly to a change in the exchange rate and partly to a massive increase in motley wages. If we are to restore our competitiveness, we must get a better adjustment of our wages in relation to those of our competitors. There is no way round that. We paid ourselves more than was justified.
  Mr. Robert Sheldon: Will the right hon. Gentleman give way?
  Mr. Higgins: I give way to the right hon. Gentleman, because he has interrupted me every time that I have spoken in the Queen's Speech debate over many years, and it would be a shame not to maintain that tradition.
  Mr. Sheldon: I am happy to maintain that tradition. The right hon. Gentleman fails to take into account a number of possibilities, not least that put forward by his right hon. Friend the Member for Sidcup (Mr. Heath). There could be an offset by reductions in VAT to take account of the increase in prices. There are many other ways of doing that. It would be tedious for me to go over them all, but at least one has been put forward in the debate so far.
  Mr. Higgins: But we all know about the implications for the deficit, the money supply and resurgence of inflation, which, in turn, would be reflected in higher wage claims and so on. That is not a legitimate viewpoint.
  Mr. Heath: If the Chancellor of the Exchequer takes the view, as we understand he does, that he has £1 billion, £2 billion or £3 billion to play with, why should he not play with it in this direction if he wants to reduce the value of sterling and thereby improve our competitive position and keep out imports? Why does my right hon. Friend dismiss that so casually? It deserves serious consideration.
  Mr. Higgins: Of course, but I was answering the point made by the right hon. Member for Ashton-under-Lyne (Mr. Sheldon). I do not dispute that, given the scope for a so-called fiscal adjustment, one could concentrate it in one form of tax relief or another that might have important implications for the cost of living. That is certainly one option, but it does not legitimise the argument of the right hon. Member for Ashton-under-Lyne. The point made by my right hon. Friend is separate and needs to be considered on its merits. I hope that there will be scope for a fiscal adjustment, and there are various ways in which it could be used.
  A fundamental point is that excessive wage claims in the parts of the public sector where the workers have great industrial muscle have serious implications for unemployment elsewhere. If the wage settlements in the water, electricity and gas industries are high and unjustified in the light of the present rate of inflation, the effect, reflected in prices and industrial costs, on other firms—for example in the West Midlands, to which the hon. Member for Birmingham, Northfield (Mr. Spellar) referred in his maiden speech—will be dangerous, and will inevitably increase overall unemployment in other industries. It is important for the Opposition Front Bench and the TUC to convey to people in the public sector industries the effect that excessive wage claims are likely to have on unemployment among other trade unionists in other parts of the industrial and manufacturing sector.
  I want to say a word about the national insurance surcharge. The Chancellor of the Exchequer has been ingenious in his attempt to backdate it as far as possible. We all know that it is a difficult technical matter. Many of us had hoped that it would be abolished. None the less, although we do not know the outcome of the present wage round, he was right to be prudent at this stage in the extent to which he reduced the surcharge. Otherwise there would be a danger of people saying, "There is an improvement

  601
  in the cash flow of companies, so let us put in a bigger wage claim." We must see how the wage round goes between now and the Budget. When it comes to the Budget, I hope that the Chancellor of the Exchequer will give the highest priority to the abolition of the national insurance surcharge.
  Of course, there will be other competing claims, not least the one mentioned by my right hon. Friend the member for Sidcup (Mr. Heath). My view is that we should concentrate our efforts in the spring on industrial costs and our competitive position, not on income tax—if there is any scope for fiscal adjustment, as I believe is likely—provided that the wage settlements in the meantime are reasonable.
  On inflation, we have been considerably successful so far. However, there are statistical dangers in quoting annual or other rates of inflation. We all recall the figure of 8·4 per cent. that was quoted some time ago by the right hon. Member for Leeds, East (Mr. Healey). Perhaps my right hon. Friend, in winding up, will say what the present rate of inflation is, calculated on the same basis as was used by the right hon. Member for Leeds, East on that occasion. I believe that it is close to zero. However, the corollary of having a number of good months is that it is difficult, unless we truly reduce the rate of inflation to zero, to go on doing that the following year. Inevitably, the tendency will be for the figures to rise again. We should not overlook that purely statistical—or arithmetical—fact. If we succeed in beating inflation, the total increase in prices and the effect on people's living standards are none the less beneficial.
  On pensions clawback, I do not believe that it is legitimate to use the expression "clawback" in the context of the proposals that have been made by my right hon. and learned Friend the Chancellor of the Exchequer. What is proposed is clear. The forecast for inflation went wrong, and it will still be covered to the full extent, as I understand, in the coming year. There is to be an adjustment for a subsequent period. In my opinion, that cannot legitimately be described as clawback. Clearly, there is a problem of presentation.
  However, we cannot win in politics. There is another aspect to be considered. During the past few days I have received many complaints from my constituents. They do not praise the reduction in the rate of inflation, but complain about the reduction in the rate of interest. Unfortunately, they have all put their money in building societies. They complain bitterly that the income that they had hoped to get for a long time to come has been significantly reduced by no less than about seven percentage points. Therefore, we should not underestimate the problems, despite the fall in inflation, in the adjustment that will have to be made by those who have saved over a lifetime and provided for their retirement, and who are now living on fixed incomes. They will have to make a genuine adjustment. I hope that that fact will be taken into account when the Chancellor of the Exchequer decides on the adjustment that he should make eventually to national insurance pensions.
  I should like to comment briefly on the policies that the Government have adopted. I have maintained consistently throughout the period of this Government that we have not had a true monetarist policy. Indeed, that view was supported by the Treasury and Civil Service Committee. Instead of seeking to control the money supply with a low
  602
  PSBR and low interest rates, we have had a high PSBR and high interest rates. The situation has begun to change. Public expenditure is now gradually coming under control.
  The PSBR is correspondingly low, and we can now look forward to further falls in interest rates. That I welcome. That is the right way to proceed, and I have said so consistently for some time.
  At the same time, however, we should take into account the overall state of the economy. We shall look forward in the Select Committee to considering the Chancellor's present proposals in greater depth. If we look at the history of the money supply, it is difficult for those who have taken a simple-minded view on the issue to argue that what is now happening to inflation is consistent with what happened to the money supply in earlier periods. Such people would argue, I think, that inflation should be going up, not down. We shall need to go into the matter in more detail in the Committee, and no doubt we shall report in due course to the House.
  My right hon. Friend the Member for Sidcup suggested in his intervention that there might be scope for more fiscal adjustment, and so on. If we get a satisfactory wage round, I hope that will be possible next spring. There has been a feeling for some time that any attempt at a pre-election Budget would be regarded with great cynicism by the electorate. It might even be counter-productive. We should beware of being too cautious in the spring, if the wage round has been satisfactory, for fear of being accused of an electioneering Budget, when in fact there are sound economic reasons for relaxation in a number of ways. However, it is right to concentrate on ways of reducing industrial costs and continuing the battle against inflation. Only in that way—even though it may take a long time—can we hope to cure the fundamental problem of unemployment which is having such tragic results for many of our people.
  7.27 pm
  Mr. Bernard Conlan: It would have been remarkable if the Government had not referred in the Gracious Speech to their sympathy with and understanding of the current unemployment. The words that the Government inserted in the Speech are remarkably similar to the words that they used in the first Queen's Speech on 15 May 1979, shortly after they came to office.
  What has happened since then? Unemployment has increased more than twofold. If the Government's pious words of May 1979 did not bear the fruit that they expected, why should we believe that their pious words of 1982 will fare any better?
  However, we should not be surprised that unemployment has increased since this Government came to office by an astonishing 123 per cent., because the central plank of their economic policy is to drive down the level of inflation. It has been said clearly time and time again by right hon. and hon. Members on the Treasury Bench that the principal Government strategy is to reduce the level of inflation. The weapons that they are using to achieve lower inflation rates are attacks upon the trade unions and the increasing level of unemployment, thereby weakening the bargaining power of the trade unions. There is no doubt that the trade unions today are unable to achieve higher levels of wage increases because unemployment has led to their weakening. That has been a central Government strategy.

  603
  I come from the North of England, which has suffered more than any other region in Britain from a high level of unemployment. With the exception of Northern Ireland, the Northern region has the highest level of unemployment. It is higher even than in Scotland and Wales, where unemployment is high. In the Northern region unemployment has traditionally been higher than even in those black spots.
  We have pressed successive Governments for equality of treatment with Scotland and Wales. Both those regions have development agencies which have been able to encourage the expansion of their economies. Governments have constantly resisted our overtures for a development agency for the North. That must be rectified.
  It is impossible for those who have not suffered the drudgery and misery of unemployment to begin to understand the suffering, the agony and the deprivation that unemployment brings to men who want to work. Unemployment affects not only the menfolk of a family but every member, including the children.
  One of this morning's papers carried a report of an extremely sad case in Strathclyde of a man who had been made redundant. As a consequence of that, the whole family were suffering and unable to pay their weekly rent, as a result of which they faced eviction. The poor wife's state of mind was so dreadful that she deprived her two young children of their lives and tried to take her own. That is the misery that is caused by unemployment. God forbid that such a story will be repeated. However, similar pressures are being felt by millions of families throughout the length and breadth of Britain.
  The Prime Minister has belatedly recognised the need to buy British in order to support British manufacturing industry. A late conversion is better than none at all but the Government's performance will have to be better than it has been. Only a few months ago I drew the attention of the House to the purchase by the Home Office of an antenna from an American company for the reception of radio signals in Britain. That antenna could have been satisfactorily built by a British company which specialised in such work.
  The Government argued that the American company's price had the edge. I dare say that it would not have had the edge if the people responsible for placing the contract at the Home Office had taken into account the redundancy payments to the 40 or 50 people who lost their jobs as a result of that decision, the unemployment benefits that had to be paid by the Government as a result of those people being thrown out of work, and the loss of income tax from those people.
  My point is that the net figure—the figure on the bottom line, as the Americans prefer to call it—would have been far higher, when all those matters are taken into account, than the price paid by the Home Office for that antenna. If the Prime Minister is now converted to a policy of buying British, well and good. We must have no repeats of such an experience.
  In recent weeks and months, the Americans have put up barriers against the importation of British steel. I do not complain about that. I do not blame the Americans for adopting that policy because the loss of a job in the Pittsburg steel industry is as severe and distressing to a family there as the loss of a steel job in the constituency of my hon. Friend the Member for Consett (Mr. Watkins).
  604
  The loss of a job in the motor car industry in Detroit is as tragic as the loss of a job in British Leyland or Dagenham. Therefore, I do not blame the Americans for resisting imports that damage their industrial competitiveness and the jobs of their people.
  What I do say is that the Government must tackle those problems in exactly the same way. We are the soft touch. Imports are coming into Britain and damaging our industrial capacity because we are allowing it. We must make a stand and ensure that such imports do not come in as readily as they are, damaging our most vulnerable sections of manufacturing industry.
  Unemployment can and must be reduced. First, we must adopt a policy of selective import controls to protect those areas of our manufacturing industry that are most vulnerable at present. Second, to reduce the high level of unemployment it is essential that we have a massive public investment policy. If the Government cannot take up those policies they should pack up and go.
  7.40 pm
  Mr. James Hill: We have had a series of speeches—some rather broad brush—but I was glad to listen to the speech made by the hon. Member for Gateshead, East (Mr. Conlan). He brought home to us the fact that when discussing the economy or unemployment we must ultimately think, in particular, of our constituencies.
  Southampton has unusual employment and economic problems. The city and port rely on each other. We have major warship building yards and many of my constituents provide a service to British ships and to seafarers. The three hang together. Seafarers are faced with a terrific reduction in the British merchant fleet. Indeed, it is being reduced so quickly that it is almost impossible to keep up with the percentages. The facts came out after the Falklands affair. During that crisis there were 54 chartered and requisitioned merchant ships and the British merchant fleet played a significant part in that conflict.
  Given the rapid deployment of those ships and the way in which the ports of Portsmouth and Southampton rallied, it is distressing to discover that between January 1981 and the last count possible, the number of British registered ships fell from 1,141 to 919. That is a decline in numbers of 19 per cent. in just over 18 months and a decline of 24 per cent. in the gross tonnage of the British merchant fleet. As we are a maritime nation one draws the conclusion that Governments past and present and even the British people have forgotten that, as a great exporting and trading nation, we must see to the health of the British merchant fleet. We must maintain our fleet in times of greatest stress, and it should be borne in mind that Admiral Sir John Fieldhouse said:
  "I cannot say too often and too clearly how important has been the Merchant Navy's contribution to our efforts. Without the ships taken up from trade, the operation could not have been undertaken, and I hope this message is clearly understood by the British nation."
  However, I do not think that that message is clearly understood. Many of my constituents who are seafarers find it more and more difficult to obtain employment on British ships.
  Some hon. Members are probably sick and tired of our debates on the fact that flags of convenience are gradually taking over the merchant fleets of the world. That means that other nationals will be hired as crews. The great

  605
  fear—as demonstrated by the "Torrey Canyon" disaster—is that the ships are sometimes not well officered or supervised and take far more safety risks than are allowed in British merchant ships. I plead with the Government at least to consider the reasons for that decline and to adopt some sensible national programme that will encourage shipowners to register ships under the "red duster". That would certainly give my constituents employment.
  Southampton is a seafaring town. The "Queen Mary" and the "Queen Elizabeth" have not been forgotten. We still have the "QE2" although it goes on long cruises and does not provide—except for seafarers—the necessary employment.
  The Gracious Speech tells us that British Shipbuilders is to be privatised. That is a very long shot. The British merchant fleet could use more ships, but will the orders go to British Shipbuilders? Once again, the Government must have a programme. They cannot privatise a company just by selling the warship yards and then expect some fairy godmother to take up the merchant shipbuilding side of British Shipbuilders. The company has done very well. In the past few years I think that it has gained 43 orders from Hong Kong. However, that cannot continue. I am not asking for a subsidy, but perhaps the Government could induce the powerful British shipowners—who own dozens of ships—in the General Council of British Shipping to use British Shipbuilders on the basis that it has the best possible yards for building new merchant ships.
  If British Shipbuilders is privatised, Vosper Thornycroft will become tremendously important. At one stage it seemed to be the money-making side of that industry. The money was put into one big coffer and used to pay for the loss leaders and other merchant shipbuilding yards that did not make good profits. Therefore, I am sure that Vosper Thornycroft will be pleased if British Shipbuilders is privatised. Of course, it must have been extremely pleased to hear the Chancellor of the Exchequer talk about the £622 million for the replacement of ships lost around the Falkland Islands. Many of them were built on the south coast and Vosper Thornycroft must hope that the Government will give this company a kind thought. Vosper Thornycroft is one of our major employers. My constituency and Southampton, Itchen will be affected if Vosper Thornycroft obtain several more orders for frigates.
  The brief from the research department of the Library included about 12 areas of privatisation. We know most of them. British Airways has not yet quite got off the ground. British Aerospace got off the ground quite well. There has been a statement on Britoil and so on. The British Transport Docks Board was at the end of the list. I was a member of the Committee discussing this issue. The Transport Act 1981 has been enacted for well over a year. The Secretary of State for Transport has not made any significant move towards privatising the British Transport Docks Board, which will be called Associated British Ports.
  Of course, the British Transport Docks Board had a serious managerial problem. There were problems in Southampton last year when the whole port was practically at a standstill. Last year, the figures did not read well, but this year a £14 million profit is on its way. We are getting to the point when the Secretary of State for Transport could move ahead with denationalisation. I say that because there is some unrest in the port because of the doubt about
  606
  whether we shall denationalise. As the matter was not mentioned in the Queen's Speech I have a nasty feeling that the 1981 Act will not be acted upon by any Secretary of State.
  In view of the problems that are associated with that group of nationalised ports it might be as well if the Leader of the House could make a mental note, not perhaps to mention this feature of my speech, but to let the Secretary of State for Transport know that someone is still interested in the privatisation of the British Transport Docks Board.
  The sum of what almost amounts to my resumé of Southampton's problems revolves around shipping. We are a fine port. We have many good sailors and the city has many good attributes. Please do not let the city or the port die through lack of interest. Lack of interest cart be the only cause.
  The Transport and General Workers Union is worried about possible planning consent for a container port in Falmouth. It would be complete madness to set up another container port that would compete with the one that the Government are hoping to privatise. There could be nothing more disastrous in the prospectus, when it is approved, than the prospect of the very Government who will privatise a port setting up an enormous rival. Moreover, the rival is not necessary. Both Southampton Members of Parliament will resist it as far as possible. I hope that the matter will be rethought. One cannot predict how much trade Southampton will enjoy in the future. Nevertheless, another major container port only a few miles away—that is all it is in shipping terms—would be disastrous for Associated British Ports.
  The economy and employment of Southampton is close to my heart. The problems there are different from those being suffered in the North and Scotland. We have never experienced much unemployment in the past and it is now about 8 per cent. I should not like neglect by a Conservative Government to allow it to climb higher.
  7.52 pm
  Mr. Richard Wainwright: I shall speak to the Liberal-SDP amendment on which the House will divide. But first I endorse one of the characteristically compelling points made by the right hon. Member for Worthing (Mr. Higgins). He rightly pointed out that clawback is not the right term for what the Government propose to do about pensions and that this is not the valid criticism of the Government's rather nefarious intention with regard to pensions. He demonstrated that clearly.
  The Government's declaration about their future treatment of pensions reveals the urgent need for a specific cost of living index or special retail price index for people of pension age. I shall take some topical examples. The substantial element of mortgage interest and the cost of sophisticated consumer durables in the national retail price index is inappropriate to the vast majority of people of pension age. Even in these times, they have probably finished paying off their mortgage by the time a married couple are both pensioners. In contrast to that, every hon. Member knows that pensioners have to make a conspicuous outlay on heating and lighting costs and comforts in the home. Moreover, when they are involved with families elsewhere and have grandchildren, they must often bear the cost of public transport. There is therefore a stronger case than ever before for a specific index for

  607
  pensioners. If one were applied, there would not be much room for the Government's intended adjustment to the pensions next November.
  We have listened to some illuminating speeches. The lengthier and deeper the British recession grows—lengthier and deeper than in any other major industrial country—so also grows the Chancellor's air of detachment. When he speaks, it is as if he were presiding over a laboratory rather than the flesh and blood of one of the great manufacturing nations. I do not blame the Chancellor as much as I blame his colleagues. I am, therefore, glad that the Leader of the House is present.
  The Chancellor has been allowed to adopt such a detached attitude because of his Cabinet colleagues' failure to influence him. It is almost as though he were a vivisectionist observing an experiment when he talks about the unhealthy state of the economy. It is truly awful that there is in Cabinet no voice of the Northern part of the kingdom with its manufacturing areas to bring home to the Chancellor the fact that he is not simply conducting a laboratory experiment but tampering with the British manufacturing base. The absence of a voice from the traditional manufacturing areas in the Cabinet is a tremendous lack. I am aware that the voice from Whitby is sometimes eloquent in fishing matters, but Britain's real substratum in the North is not represented in the Cabinet. I shall give just one example out of many of the results of that lack.
  Year by year, the Chancellor seems almost to pride himself on moving by small steps. That is the case with the autumn statement. There are modest adjustments to the national insurance surcharge. Does he fail to appreciate that if tax remissions and tax concesaions are to be of real value, especially to our great exporting industries, there must be plenty of notice of them so that those industries can include them in their costings? The alteration is welcome in cash terms. In January, February and March, employers will be able to deduct 3 per cent. of their wage bill from their NIS remittances. The alterations are fine with regard to cash but for getting orders the news comes far too late. To get into the costings for new contracts for next year, the news should have been made available in the summer. Modern industry requires ample notice of major changes, especially when those changes can make all the difference to winning or losing a contract in world competition.
  The Treasury Select Committee was insistent on the autumn statement being a green Budget because ample notice and an early unveiling of such matters is very important. The Committee wanted the autumn statement as a green Budget so that industry could be informed and have an opportunity to express its views carefully from all quarters rather than as a result of an esoteric conference in Eastbourne of all places. For the information of hon. Members who did not share my privilege of being there, there were division bells in all the bars and cafes on the complex at Eastbourne. I saw CBI members going in to vote on the exchange rate motion when they had not heard a word of the debate. To an MP, it was a familiar sight, but CBI members were asked to endure the tedium of Eastbourne for only one-and-a-half days, whereas we usually attend here about 220 days a year. It was unfortunate that the CBI should follow our tradition of distant warning bells.
  608
  For the benefit not of business men's excursions but of people who graft hard in their business and on the shop floor, a green Budget should be produced in the autumn revealing the options for the spring Budget. Teasing industry and commerce with newspaper discussion of possible options, such as
  "Will an October rabbit turn into a March hare?",
  as one headline put it, is not businesslike. That is not satisfactory when world conditions are so intensely keen. The Chancellor is to blame for keeping everyone in suspense.
  Partly because of the Government's unbusinesslike attitude, some of the main pillars of manufacturing and metal working industries are in dire straits as a result of low profitability. Gradually they are losing their capacity to compete because they do not make enough to keep abreast of modern developments. A cursory examination of the business press in the last few days reveals the plight of such firms. I refer to household names such as Brockhouse, Peter Brotherhood, Capper-Neill, GKN, Midland Industries, Neepsend, Renold, the 600 Group, United Springs, Armstrong Equipment, Lucas Industries and Jonas Woodhead. They are all in grave difficulties. Lack of profit has resulted from misguided and unbusinesslike national policies pursued not only by the present Government but by various Governments in recent years. This problem has been greatly aggravated in the last three years.
  Certain measures need to be introduced urgently. The Liberal-SDP amendment states:
  "overdue repair and modernisation of public assets and public services together with measures essential for increased industrial efficiency would be of far greater significance than the proposed changes in mere ownership."
  In saying that we are flatly denying the Chancellor's extraordinary statement today that orders do not emanate from the public sector. He has said that before and should not be allowed to get away with it. The only companies of any size in manufacturing that are thriving are those involved in armament orders, so the Chancellor's statement is hollow.
  In the present trough of recession, the time is ripe for the Government to introduce capital schemes which already exist in their pigeon holes. There is an enormous shortfall in the order books of firms making the heavy machinery needed for sewer works, digging industries, building equipment and construction equipment industries. I am talking about firms that produce bulldozers and mechanical diggers for programmes which are labour intensive and have a low import content.
  It will be no surprise to hon. Members that the Monopolies and Mergers Commission, in its report published earlier this week about two major water authorities, contained a long passage part of which stated:
  "The dilapidated state of the nineteenth century sewer system in the north-west, and the frequency of sewer collapses, represent a major challenge both to NWWA and to the statutory framework … There is also the scale of the problem, which would be daunting whatever the legal and institutional framework."
  In some of the industrial towns in the north-west not a week goes by without a fresh cavity appearing in a main street, with all the dislocation that that involves. It is flagrantly extravagant to have to make patchwork repairs with urgency instead of tackling the job in a businesslike way on a major scale.
  A house rehabilitation programme is also desperately needed. That would have the advantage of a low import

  609
  content and a special advantage of work beginning quickly. House rehabilitation does not have a long lead time. One can get cracking quickly. About 500,000 homes are officially designated as unfit. There is immense scope to save 500,000 national assets before they become derelict and beyond repair.
  The right hon. Member for Sidcup (Mr. Heath) rightly said that instead of messing around with the national insurance surcharge in his autumn statement the Chancellor should have abolished it. Employers would be given confidence if the legislation were repealed. Employers would then not fear that a misguided Government would slip the surcharge back by passing a late night order through this House.
  Interest rates must be brought down at greater speed. The real interest rate is still high. The continual need for companies to go further and further into debt wipes out any advantage that they might have experienced as a result of the recent drop in nominal interest rates.
  Any chance of such a move reducing the international exchange value of sterling should be welcomed rather than feared. By carefully contriving, we could establish a controlled devaluation of sterling instead of getting into a mess later with the balance of payments which looms in the autumn review, and therefore suffering an uncontrolled devaluation of sterling as a result of forces beyond our reach.
  Finally, in the view of the alliance, there is a pressing need not for more temporary job creation schemes—we have enough of those, some valuable and some rather dubious—but for the creation of a large number of permanent welfare and health jobs to help to deal with victims of the rapidly declining social climate. There is no doubt, especially perhaps among hon. Members who live in or represent urban areas, that the pressures of unemployment and the insecurity felt by those who are still clinging to jobs are greatly increasing the amount of mental and physical illness and the general results of stress.
  The local government welfare services and the National Health Service are desperately short of unskilled but well-disposed people who should be given the chance to help those more skilled in health and welfare with their tasks, especially in keeping people looked after and cared for in their own homes. The Government seem frequently to overlook the enormous economy of enabling the elderly, the frail, the disabled and the subnormal to carry on in their own home setting through the provision of some supportive care from day to day, rather than allowing them to be institutionalised, to their own disadvantage and at a greatly increased cost to the taxpayer. A substantial number of long-term jobs should be created to assist the health and welfare services.
  It is appalling that we should have to debate such tragic matters as the present rate of unemployment and its continued increase in a country which, almost uniquely in the industrial world, is self-sufficient in energy. If we cannot manage our affairs with the great privilege of energy supplies assured for many years ahead, one wonders whether we deserve to succeed.
  8.11 pm
  Mr. Anthony Beaumont-Dark: An important theme in the past few days' debate on the Gracious Speech has been the genuine and great concern that we all share about unemployment. I hope that
  610
  the Leader of the Opposition will not regard it as too much of a pun when I say that he put the boot in for me when he commented that in an article in The Financial Times I said that manufacturing industry had its back not against the wall but against a precipice. I went on to say that industry had been hammered by unions, by rates and taxes and by all those who did not understand that it is manufacturing industry that makes the profit that enables people to care rather than simply talking about caring, which is always so much easier.
  As a result of the Chancellor's firm action, which should have been taken by his predecessors in the past 20 years if they had been realistic about where we were going, we are now likely to have up to £2 billion to be used in one way or another. Many argue that that money should be used to reduce taxation on those in employment. In my view, however, whatever promises politicians may make about reducing taxation, the most important task facing any Government is to do all that they can to reduce unemployment and the pain and anguish that it brings. There is no doubt that the money should be used, as has so far been announced in the past week, for further moves to help industry to be more profitable, to preserve more jobs and to stop more businesses foundering.
  The Chancellor's proposals for the national insurance surcharge are absolutely right and will greatly help industry. Thank God, too, that there is now some realism about the fact that the great increases in energy costs have been an enormous burden on industry. That is now to be stopped, and I applaud that decision. Above all, my right hon. and learned Friend the Chancellor has succeeded in bringing back to the shop floor and into nationalised industries a sense of realism about wage bargaining. Who would have thought that the time would come when we should hear about a three-year wage agreement at Scottish and Newcastle Breweries or a two-year agreement at British Leyland that overturned what the unions wished to do? Industry will blossom, with the new realism.
  A tremendous problem still faces British industry. Successive Governments have let wages rip. Industry has been weak and unions have been too strong so that basic wage rates have increased by 387 per cent. since 1975 while output has increased by only 111 per cent. The squeeze is on industry and I appeal to the Government to recognise the causes. Industry has now done everything possible to reduce its costs and further help is needed. The Government must re-examine industrial rates charged on manufacturing industries. I know of a large company in the West Midlands whose rates bill has increased by 79 per cent. since 1978. The company is now paying more than £11 million a year in rates. Another smaller manufacturing company is paying more than £600,000 in rates this year and made a loss of £240,000.
  Of course firms will lay off more people. Much of the blame for job losses and the misfortunes of local authorities lies in their overspending. If we impose too many further penalties on local authorities now, we shall be punishing not them, but the ratepayers and those whose jobs will be put at risk. Of course local authorities should be introduced to the real world, but let us not penalise the industry that provides the jobs. Let us use some local authority funding partially to derate industry. That measure would save at least some firms and jobs. I hope that we shall take some risks by abolishing the national insurance surcharge as soon as possible. There is no justification for the immoral 10 per cent. surcharge on

  611
  cars. It was a rotten tax when it was introduced and it is even more so now. It is an insupportable burden on a vital industry that employs so many.
  The Economist defined protectionism as the delusion of painless remedies. It would be useless to adopt wholesale protectionism but, because of the pain that we have gone through in becoming competitive again, people now realise that, as Rab Butler said, this country must export or die. Let us at least ensure that competition is fair. Is it fair that we export 355 cars to Spain and import 59,318 cars from that country because we charge them only 41½ per cent. duty and they charge us 36 per cent.? Is it fair that we should import 30,000 cars from Eastern Europe, when the duty that Romania charges on our exports is 50 per cent. and when our import charge is nil? We must be realistic but we must not delude ourselves that restrictiveness will solve our problems. Such a policy would only compound our difficulties.
  Incomes will rise by about 7 to 8 per cent. this year. That may create problems in attracting more imports, so there is no case for personal taxation relief this year. The duty of all hon. Members is to bear it in mind that people expect us to create jobs. The Government, who have stuck firmly and properly to their policy of reducing inflation and returning people to realism, have a good chance of creating jobs. That is why the public consider that the Conservative Party has the only real policy. There is no alternative to realism. I hope that the country will realise that it must ask not "What tax concessions may we have?", but, "What can we do to help to reduce unemployment?" Many of the remarks made by hon. Members on both sides of the House have shown that realism. We can rebuild industry but only if we do it on the basis that we are here to create jobs. That is all that matters.
  8.20 pm
  Mr. David Watkins: The hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) was commendably brief, and I shall follow his example. He was also characteristically forthright and I shall follow his example, although I have a different view. However, I agreed with much of the gist of his remarks about the need to create employment.
  The most depressing feature of the Gracious Speech is that it simply restates philosophies and policies that have proved during three and a half years of practice to be dismally unworkable in creating employment. They have had the opposite effect. The result of the three and a half years is that a small minority of the manipulators of wealth are better off. That has been achieved at the expense of the large majority of the producers of wealth, who are called conventionally "both sides of manufacturing industry".
  An appalling indictment of what has happened is the intake of apprentices in the engineering industry. I worked in that industry until I entered the House and, more years ago than I care to remember, I served an apprenticeship. In 1979, 30,000 apprentices were employed, but we are now looking forward, after a continual decline, to an expected intake of 9,000 in 1983. That will present Britain with problems for many years, because it needs skilled labour.
  The real figure for unemployment is about 4 million—certainly more than the official estimate. Not only is there no sign of improvement, but we are told
  612
  officially that we can expect further substantial increases in unemployment. As a result, a policy of low wages and of fear and intimidation by more unscrupulous employers is being established as the national norm. I hasten to say that when I say "fear and intimidation … as the national norm", I am not making a personal reference to the Secretary of State for Employment.
  In the long term, the most serious result of the Government's failure will be the huge drop in national production and the systematic destruction of Britain's industrial base over which the Government have presided. The favourite ploy is to blame the world slump. The Chancellor of the Exchequer spent the greater part of his speech reiterating that ploy. We know that there is a world crisis of capitalism, although I recall that the Conservative Party denied that any such crisis existed when they were in Opposition and said that everything was the fault of the Labour Government.
  What is so worrying is that, even if and when that passes, and there is an upturn in the world economy, Britain may still be relatively worse off because we shall have no industrial base left on which to build to take advantage of an international upturn in trade. If there is an increase in spending power, there will be floods of imports and a further loss and erosion of British export markets. The Tory Party will then once again turn to blaming the miners or the Health Service workers or whoever or whatever happens to be the convenient scapegoat at that time. They will blame everyone but themselves.
  My hon. Friend the Member for Birmingham, Northfield (Mr. Spellar), in an able maiden speech, referred to the spread of unemployment from traditional blackspots to the once prosperous areas such as the West Midlands. I have the honour and privilege of being a Member of the House, but the task of representing what has been turned into one of the worst unemployment black spots in Britain. I shall refer to my constituency not because I wish to make a constituency speech but to cite it as a classic example of the failure of the Government's policy.
  Two years ago the profitable and viable steelworks at Consett was arbitrarily shut down in conformity with the monetarist straitjacket which had been imposed at that time by the Government on the British Steel Corporation. Three thousand seven hundred jobs vanished forever. One and a half years ago the Ransome Hoffman Pollard ball bearing factory at Stanley in my constituency was arbitrarily closed down by a company which then announced that it had doubled its profits, and another 1,250 jobs vanished forever. It is worth noting that Ransome Hoffman Pollard was created by an infusion of public money under a Labour Government but has been brought down in the cold climate of Tory monetarism.
  In my constituency, in the past three years, practically every other industrial plant, including many which were established in earlier and happier years with grants and public subsidies, has either been closed from a distance by headquarters or bankrupted completely or survived only as a shadow of its former self with massive redundancies. It is a significant pointer that the largest employer in my constituency today, which was once a major centre of industry, is the Shotley Bridge general hospital. That is a terrible indictment. We all know that the Government are already well forward in their long-term aim of dismantling the National Health Service.

  613
  The Government's policies are based on the theory that if an economy, supported publicly for the common good, is destroyed in this way, commerce and industry, left to their own devices, will prosper. We are told that new private industries will rise to stand proudly on their own feet and save us all. The events of the past three years show that that is nonsense, and, again, I turn to experience in my constituency as an illustration.
  At the time of the closure of the Consett steelworks, the Prime Minister, in answer to a Question from me, conveyed the impression that a so-called private consortium was likely to take over and continue running the Consett steelworks. The Prime Minister's sycophants in Fleet Street rushed to publicise that assertion with their usual cavalier carelessness for the truth. The truth was, as everyone in the North-East knew, that the so-called consortium lacked credibility. Today, the steelworks, which the consortium was to take over and run, is in an advanced stage of demolition.
  Over the past two years, as a result of various efforts, there have been many inquiries from the private sector to establish new plants in the Consett and Stanley areas but a common theme runs through every one of those inquiries. The theme of every inquiry is, "How much Government grant and how much public money can we get if we go there?" The private capital market simply is not capable of funding new industry.
  My area has made prodigious efforts to create jobs, and with some success. However, it is only a fraction of what is needed. I have worked with those responsible for seeking to attract industry and jobs into the area, and I pay tribute to them for their work. It is a further irony that those efforts have come from the public sector—in spite of, not because of, Government policy.
  Affairs in my constituency are always uppermost in my mind. I am trying to relate them to the national climate, as did the hon. Member for Southampton, Test (Mr. Hill). We are seeing a classic example of the failure of laissez-faire capitalism. What is called monetarism today is simply old-fashioned laissez-faire capitalism dressed up in twentieth century garments. The Opposition advocate an economy planned and financed in the public interest.
  The official figure for unemployment in my constituency, after three and a half years of the disastrous monetarist experiment, is about 28 per cent. The official figure for male unemployment is more than 33 per cent. We all know that actual figures are substantially higher than official figures. Official figures do not show the true unemployment among school leavers, which, in the Consett area, is no less than 80 per cent. Eight in every 10 school leavers cannot find work, and there is no prospect of their doing so. A generation is growing up—and not only in the North-East—whose lives are blasted and wasted from the day that they begin to experience the grim reality of life under this Government.
  The philosophy being applied is essentially nineteenth century, and it does not work any better now than when it failed 100 years ago. The Government must be replaced with one in touch with late twentieth century reality, who look ahead to the twenty-first century rather than back to the nineteenth. Then a start can be made on what is undoubtedly the immense and enormously difficult task of seeking to bring about a new Britain to rise from the ruin that has been created.
  Mr. Deputy Speaker (Mr. Bernard Weatherill): I remind the House that Front Bench spokesmen wish to begin their speeches at 9.20 pm. A considerable number of hon. Members have been waiting all day to take part in the debate. Therefore, short contributions will ensure that fewer are disappointed.
  8.34 pm
  Mr. Raymond Whitney: I cannot comment on affairs in the constituency of the hon. Member for Consett (Mr. Watkins), but if he believes that we are indulging in laissez-faire capitalism he surprises me—and I think that Adam Smith will be spinning in his Scottish grave.
  One common theme across the House has been the great problem of competitiveness. We are no longer in the debate about the horrors of unemployment. The question is how to solve it, and that involves competitiveness. I do not believe that the idea of some massive devaluation can possibly be the answer, even if it were attainable. Experience has shown that that is not an answer.
  I remind my right hon. Friend the Member for Sidcup (Mr. Heath), who mentioned 1972, that in the four years after that there was a devaluation of the currency of over 25 per cent. but no improvement in competitiveness. Therefore, although there may be some adjustment, as a way out and a way forward to competitiveness, that cannot be the answer. The answer has to be basically to maintain the Government's course, which is to follow the Keynesian injunction not to debauch the currency and so not to follow the beguiling methods offered by the Labour Party and the alliance, that involve spending several thousand billion pounds more. That would lead to inflation and would destroy any hope of competitiveness.
  One point that has not been mentioned enough is the need to continue to remove the restrictive practices that have grown up in British industry. Sadly, that was because of the unique power of trade union leaders. They have uniquely abused that power. Professor Minford estimates that trade union restrictive practices have cost 1 million jobs. The CBI suggests that if we could have maintained the share of international and domestic markets that we had 10 years ago, 1½ million more people would be employed. Therefore, the Government must continue to consider restoring to workers their powers of decision. I hope that the Government will press ahead with the consideration of secret ballots, which will improve the prospects of the competitiveness of British industry and will bring back jobs.
  We must achieve a different balance between the public and private sectors. We have moved from 45 per cent. of the GDP to 44 per cent. of the GDP being spent in the public sector. That is progress, but we have a long way to go.
  Those are the general areas of domestic activity on which the Government should concentrate. I have one final international point to make, which has not been made in the debate. We have heard a great deal of gloom—rightly so—about the state of the world economy. Contrary to what the right hon. Member for Glasgow, Hillhead (Mr. Jenkins) said, we know, certainly on the Conservative Benches, that the fate of this country and that of other industrialised countries are linked. We do not rejoice in other people's problems. We make no invidious comparisons. We are linked. That linkage comes through the GATT trading system. We should therefore recognise

  615
  the vital importance of the GATT ministerial meeting that is to take place in Geneva on 24 November. GATT has been the engine of world progress since the war. I am amazed that no one has emphasised that.
  My right hon. Friend the Member for Sidcup talked a good deal about the importance of the International Monetary Fund and the World Bank. However, whatever their state of development, trade is far more important to all countries than aid and development assistance by a factor of 15 or 20, however low the state of development of those countries. Therefore, it is the trade of the world economy that we must restore.
  What was going to be a meeting of hope in Geneva this month is turning out to look like a meeting of menace, where the countries assembling there will threaten to put up more protectionist barriers. Therefore, in their international effort to create more jobs I urge the Government not only to go to the GATT ministerial meeting in a positive frame of mind, which I am convinced that they will do, but to try to convince all our trading partners, developed or developing, that over 25 years the open market system was a great success and that the agreements and accords reached in the Tokyo round have not been properly implemented. There is great hope and there are great prospects. We reject them at our peril. If we all retreat into protectionism, whatever sensible policies are followed here or in other countries, we shall all be lost and our economies will be destroyed.
  8.40 pm
  Mr. Robert Kilroy-Silk: Representing as I do a Merseyside constituency and an area with harrowing and persistently high levels of unemployment, I cannot but judge the Gracious Speech and the Ministerial statements made on it by the criterion of whether or not the speech, the proposals in it and the statements made during the debates will contribute to the lowering of unemployment on Merseyside. The sad, unpalatable but clear fact is that it will in no way alleviate the serious and unacceptably high level of unemployment on Merseyside. The Government, unfortunately, seem to have little if anything to offer to deal with this problem.
  I have now represented my Merseyside constituency for the best part of a decade. One of the most dispiriting features of being a Member of Parliament for that area is having to watch the almost daily decline in its manufacturing industry, the apparently almost irreversible erosion of its industrial base. I do not say that that is the responsibility of this Government, the previous, Government or any Governments of any political complexion. On Merseyside we were losing manufacturing jobs at a rate of about 11,000 a year well before the onset of the recession. It is a demonstration of the scale of the erosion of the manufacturing base on Merseyside that we lost 32,000 jobs from closures in the period 1972–79. That accelerated to a further 25,000 jobs lost in the two years from 1980. That is on top of the 64,400 redundancies since the Government came into office.
  The demise of the area and the steady drip, by drip, apparently almost irreversible erosion of industrial opportunities and employment is illustrated not only by the figures but by the large number of household name companies that have not just had redundancies but have closed down, shut up shop and left the area for ever. They
  616
  include companies such as Dunlop, Tate and Lyle, Mecaw, British Leyland and in my constituency Hygena, Courtaulds, British Oxygen, Albright and Wilson and many other companies.
  It is interesting that my right hon. Friend the Member for Stepney and Poplar (Mr. Shore) in opening the debate, and every hon. Member who has spoken since, have talked about making British industry more competitive, leaner, sparer, perhaps better able to take advantage of the opportunities that an upswing in the world economy may present. That may be the case in some constituencies, but it is clearly not the case for an Albright and Wilson factory that is no longer in business, or a Dunlop factory that is no longer in Speke or a British Leyland factory that has gone from Merseyside for ever. We shall never have those companies and factories back, however competitive British industry becomes.
  In that sense the debate about competitiveness—although it is supposed to be an important issue—is academic if not irrelevant to the real problems and needs of Merseyside. We do not have left the industry that will be able to make it competitive and to take advantage of whatever wonderful opportunities are supposed to exist in the future. It is a terrifying, almost harrowing, sight to go round the inner-city industrial estates or those on the periphery of Merseyside in Kirkby in my constituency or Skelmersdale on its edge and see brand new, purpose-built industrial factories and estates all with "To let" notices, closed down or derelict. It is not a metaphysical or metaphorical waste land, but an actual ghost of an industrial town.
  A creeping industrial paralysis is overcoming the whole of Merseyside. Those features have a profound impact on the will, motivation and commitment of the population. There is no doubt, certainly in my constituency, which has a high level of unemployment, of the complete demoralisation of the work force and those who have been unemployed since the Government came to office, and before, to be fair. They see no prospect of obtaining worthwhile full-time occupation.
  While I have to accept that Merseyside's peculiar industrial problems are not exclusively the responsibility of this or previous Governments, there can also be no doubt that its problems have been seriously exacerbated by the dogmatic pursuit of rigid monetary policies by this Government. The Government's policies killed the Courtauld factory and 1,000 jobs in my constituency. High interest rates, high fuel charges, a high exchange rate and the severe cuts in public expenditure have sent Merseyside into a further cumulative and vicious decline.
  The result is that an unemployment level of 12·9 per cent., which was unacceptable and intolerable in 1979, is now 20·5 per cent. There has been an 83 per cent. increase during the three and a half years that the Government have been in office. There is an increase of 191 per cent. in the Ormskirk travel-to-work area. There are 141,500 people unemployed in Merseyside. There are a further 22,000 people on temporary and cosmetic employment schemes.
  I remember—I believe that some Conservative Members will remember also—when I and my hon. Friends berated my Government in 1976 and 1978 about the high unemployment levels on Merseyside. I remember causing one hell of a stink and fuss in the House when the level of unemployment in Merseyside was no higher than 87,000. It is now double that figure. That brings all the serious not just industrial but social consequences that we

  617
  have witnessed—it has not been mentioned previously today—in Toxteth and Moss Side, which are now an ordinary everyday experience on Merseyside.
  The riots that occurred—disturbances as they are called—in Toxteth did not end last year. They have been continuing ever since. Hardly a week goes by without a major conflict between the police and the population of that area. While there may be many other factors that contribute to that social disturbance, a growing sense of bitterness, resentment and frustration at what they see as the Government's callous indifference to their plight is largely contributory to the sense of desolation felt by young people. They take their feelings out on a society that does not seem to care.
  The figures speak for themselves. There are 50 unemployed adults for each vacancy on Merseyside. There have been 62,000 people unemployed for over a year. There are 197 adults chasing one vacancy in Kirkby. The most distressing feature is the effect on young people. There are 16,500 unemployed young people aged 19 and under in the North-West who left school in the year that the Government came into office. Those young people have never had a full-time job or the opportunity of such a job. They have been looking forward to jobs, careers and futures. That is a terrible responsibility that the Government have to bear.
  On Merseyside there are 5,500 young people aged 19 and under who are in the same position. They have no prospect of ever obtaining worthwhile employment. There are just under 8,000 unemployed 18-year olds on Merseyside, and there are 25 vacancies for those 8,000 young people. In Kirkby, there are 1,024 young people who have never had a full-time job and there are no vacancies. There were none yesterday, last week or last month and there will be none next month.
  Hon. Members have to see the people who are affected, and talk to them day in and day out, to realise the reality that lies behind the figures. That applies to a worse degree to black people, the disabled and women for whom the prospect of employment are far more horrendous. Inner city estates in Liverpool and in my constituency have male unemployment rates of well over 40 per cent.
  It is in that context that we have to judge the statements in the Queen's Speech and today's speech by the Chancellor of the Exchequer. He will not help and he has not helped. Nothing that he has done or proposes to do will beneficially affect long-term employment prospects on Merseyside.
  In effect, all that we have had so far is the Speke enterprise zone, but not one of the 200 new jobs in that zone was created. Every one was pinched from other areas in Merseyside. The much-vaunted enterprise zone has brought not a single new job to Merseyside. The Secretary of State for the Environment admitted in a parliamentary answer last week that every one of the 200 jobs has been brought from another Merseyside area.
  The Chancellor of the Exchequer was extremely reluctant to admit to my right hon. Friend the Member for Stepney and Poplar that he expects to increase competitiveness by reducing real wage levels. That is the Government's strategy. Not content with having increased unemployment dramatically and having demoralised the work force on Merseyside and nationally, the Government will introduce next year the second leg of their economic strategy, which is to increase something called the competitiveness of British industry, at the cost of the real
  618
  standard of living of working people. That was the clear implication in the Chancellor's refusal to disavow that intent when my right hon. Friend gave him several opportunities to do so.
  Your predecessor in the Chair, Mr. Speaker, asked for brief speeches, which seems always to happen at this stage of our proceedings and not when Front Bench speakers are making their 40-minute speeches. However, I know that a number of my hon. Friends still wish to speak.
  We shall not be able to deal with the problems of Merseyside through an upturn in the international or the domestic economy. We shall never benefit substantially from pickings at the rich man's table. The West Midlands might be revitalised, but Merseyside will not be revitalised until we have a Government whose overriding priority is the pursuit of full employment and who garner all the resources of society and the economy in pursuit of that overriding objective.
  We need a Government who are prepared to plan the economy rationally, coherently and determinedly and to allocate resources and investment to the unemployment black spots and other areas where they are needed most. Unless we do that we will not get a voluntary and spontaneous upturn in the domestic Merseyside economy or the increase in employment that we need.
  If Conservative Members do not like the implications of such a policy, they are saying that Merseyside must die. The stark alternative to planned growth of investment and jobs on Merseyside is to sit back and let it die and let its jobs and opportunities disappear.
  Not only do the Government have no answer to the deep-seated problems of Merseyside, but they have accelerated the area's decline. The people of Merseyside have looked to the Government for a lead, but it has not been given. We need a Labour Government with a clear commitment to an alternative economic strategy. By that means, and no other, will the people of Merseyside be given the opportunity of jobs and the decent civilised life that seems so easily obtainable in other parts of the United Kingdom.
  8.54 pm
  Mr. Jim Lester: Until the hon. Member for Ormskirk (Mr. Kilroy-Silk) reached his solutions, I had considerable sympathy with his analysis and particularly with the fair point that he made about the structural change under successive Governments which has damaged his part of the world.
  My comments will support the contributions made by my right hon. Friend the Member for Worthing (Mr. Higgins) and my hon. Friend the Member for Shoreham (Mr. Luce), but I also wish to pay tribute to the able maiden speech of the hon. Member for Birmingham, Northfield (Mr. Spellar). We who were friends of Jocelyn Cadbury particularly appreciated what the hon. Gentleman said about him. It is good to know that the concern that Jocelyn showed for his constituents will be carried on by his successor.
  On Monday, my hon. Friend the Member for Chippenham (Mr. Needham) gave a fair and factual analysis of the structural problems that have faced this country. He said that political changes, in terms of Governments, had done little to lessen the impact of those remorseless lessons. When we hear some of the wanton promises now made by the Opposition, speaking as though

  619
  they could suddenly change this inherent structural problem, we realise how our political integrity is undermined, as is the people's faith in this House.
  Nor do I dissent from what my hon. Friend the Member for Bath (Mr. Patten), said about the balance of demand in the domestic economy, and what the House of Commons is likely to do if the Government do not recognise the justice of restoring the 5 per cent. abatement on unemployment benefit. Earlier today, we heard a major and graphic speech from my right hon. Friend the member for Sidcup (Mr. Heath) on the need for international co-operation, whether through the IMF or through GATT, and the part that my right hon. and learned Friend the Chancellor of the Exchequer could play in that respect.
  I welcome the measures that my right hon. and learned Friend the Chancellor introduced on Monday. It must be right to put an extra £3 million into the economy before Christmas. That will help our manufacturing industry to retain its labour force through a most critical time. Some of the earlier schemes that were announced—taking the lid off the housing improvement system, the bypass programme, and so on—are moving in the right direction.
  The matter on which I wish to press the Government tonight is long-term unemployment, particularly as the Chancellor of the Exchequer gave us the gloomy news in his statement that the Government expect unemployment to continue to rise over the next 12 months to 3·2 million. We now have a meaningful second statistic for long-term unemployment. The figures for the third quarter, from 1979 onwards, show why this House should be concerned. In 1979, the figure was 339,000, in 1980 it was 342,000, in 1981 it was 586,000, and in 1982 it was 1,023,000. Those of us who study these matters know that if one is unemployed for short periods of less than a year, there are flows on and off the register, but when one is unemployed for a year or longer, the situation changes dramatically.
  I shall not dwell on the reasons for or problems of unemployment. All of us know the problems it brings to individuals, families and communities. I am concerned about the response to the problem. Those of us who went to Eastbourne saw the CBI film presentation on unemployment "A challenge to us all". Its assessment was realistic. It was that given certain conditions, British industry thought that it could create perhaps 1 million jobs over five years. Assuming that the conditions for which the CBI asked were fulfilled, it means that, if we take a broad outlook, there has been a fundamental change in the employment pattern in this country, which is likely to remain for a significant time.
  In my view, there is no inherent reason why jobs should not be created over time, but it is the length of time, the amount of change in world conditions and the time that that will take, and the amount of change in our domestic conditions that concern me. In addition, there is the question of what we do in the meantime. If we are to maintain our social cohesion, we should have an urgent study of the concept, not of a fully-employed society in the old sense, but of a fully-occupied society with an efficient and effective industrial base.
  We need to take a fundamental look at our present institutions—the way we use education establishments such as the Open University, the new "Open Tech", and information transfer. We need to take a fundamental look at benefits, how they are paid, how people are entitled to
  620
  them and what they are entitled to do with them. We need to take a fundamental look at regional grants, why we pay them and why they go to certain areas, taking capital intensive industry into areas of high unemployment. We need to look at work sharing, particularly in stressful jobs where people can do a better job for three days than for five. We need to look at overtime, and so on. That should be set in train as a matter of urgency. It would be a good subject for the Prime Minister's Think Tank.
  What could the Government do in the short term? Here again, following the comments of my hon. Friend the Member for Shoreham, we must look at the beginning and end of the employment pattern. The Government have made major moves in the introduction of the youth training scheme, which I sincerely hope will provide a long-term answer to how we introduce young people into the world of work, deal with skill shortages, and train and keep a securely trained work force. We have now a common objective among the trade unions, the CBI and the Government. However, the Government must ensure that they play their full part in the introduction of the scheme and that their commitment to it is beyond doubt. I see no reason why the requirement for the job release scheme should not be lowered to 60 and the terms and conditions looked at to see whether they cannot be made more attractive.
  We need a new approach to the benefit-plus scheme, for which the Chancellor has announced additional resources in his statement. The new community programme is an important way of introducing a fully occupied society. To expand that scheme from the present 30,000 places to a quarter of a million places—which, I submit, is required—requires incredible ingenuity and support from all areas. It is not particularly encouraging at this time that the introduction of the new community programme does not seem to have welcome and support from the voluntary sector and those sponsors who might well be able to provide the places.
  We should develop the concept of the young worker scheme, where employers receive £15 a week for taking on a young person in his first job. I see no reason why somebody who has been unemployed for a year or more should not have his benefit transferred to an employer to compensate him for retraining a person and thereby putting him back into profitable and worthwhile employment. I recognise that that does not create extra jobs in the economy, but it takes people off the one and two year registers. They are the people about whom we should be concerned and who should be brought back into the employment market.
  A Select Committee is considering the subject of retirement. There is a great deal to be said for considering a more flexible approach to retirement, particularly through the job release scheme. However, my plea is for a group of people who have made a belated demand for justice. They are the people who are now between 60 and 65 years of age, who have been unemployed for over a year and who have more than £2,500 of savings. Many of them served in the last war. Many of them, according to the letters that I have received, have worked for between 30 and 40 years, yet they are currently in limbo. They are jobless, with no prospect of a job, no benefit and no place in society. They wash around like flotsam and jetsam. They write and ask whether they have done all that they have done in their lives, saving as they have done, to end up as they have. The House and the Government should

  621
  consider early retirement for people who have been unemployed for a year or longer. There should be some scaled-down pension benefit based on their contribution.
  I have long argued for an even-handed approach to the problem of unemployment, particularly long-term unemployment. We can all agonise over the problem but the real question is how we should act. Where the Government can act, they should act. I can think of no reason, either of finance or principle, why the suggestions that I have made—in what I hope has been a short speech—should not be acted on, and acted on now.
  9.5 pm
  Mr. Stan Crowther: At one stage, the hon. Member for Beeston (Mr. Lester) appeared to suggest that the factors underlying our present problems are so longstanding and deep-seated that no one can do much about them. He offered some cosmetic measures that would do little more than scratch the surface.
  I am convinced that the dramatic changes and radical measures proposed in the document "The Alternative Strategy", which was agreed between the TUC and the Labour Party will put industry—provided there is any left—back on its feet when the next Labour Government are elected. The debate has been rather dispiriting because there was nothing in the Chancellor of the Exchequer's speech and little in the speeches made by his hon. Friends to suggest that they have any grasp of the appalling crisis of British industry.
  Many of those who have contributed to the debate are economic experts. I am not, and I am pleased that I am not. This is one area in which the experts are nearly always wrong. However, in due course I hope—although I do not expect—to receive some answers, simple or otherwise, to my simple questions. A few months ago the Prime Minister went to Japan to plead with the Japanese to spend their money on building factories in Britain and on creating jobs and producing goods in Britain. That would be a very good thing. For years, the Department of Industry has had a section called the Invest in Britain Bureau, which does that same job all over the world. I applaud its activities. However, at the same time, the Government allow the financial institutions that control most of the money available for capital investment in Britain to send it abroad, thus creating jobs in other countries so that others can produce goods to send to Britain.
  To my simple mind, that is straight out of "Alice in Wonderland". Where is the logic in such an arrangement? Some time ago The Observer claimed—it has not been disputed—that the staggering sum of £27 billion was exported last year from Britain. That represents many jobs, a lot of production and a lot of demand for steel. All industries use steel, whether as a raw material, in the form of machinery, or both.
  I apologise for returning to the problems of the steel industry. However, thousands of people in my constituency are out of work who not long ago were doing a very dood job for Britain in that industry. They are skilled, experienced people and, like thousands of others in Britain, they are well aware of the technique of wealth creation through manufacturing industry. They have now been told that they are no longer needed. Their skill and experience are no longer of any consequence. Why do we no longer need that vast wealth of skill that has been built up over the years and why are factories, mills, plant and
  622
  machinery standing idle, surplus to requirements, when Britain is being flooded by imported manufactured goods? How can that be right? I should like an answer.
  The collapse of manufacturing industry is at the heart of the problems of both public and private sectors of the steel industry. As my hon. Friend the Member for Rother Valley (Mr. Hardy) pointed out in an Adjournment debate a fortnight ago, steel imports are now dangerously high and the case for limiting them has been made. However, import control would be a crisis measure to adjust the share of the market available to the British steel industry.
  The state of the market is a far more fundamental problem. Imports of steel goods—motor cars, refrigerators, cookers, machine tools and the rest—represent a far more fundamental problem in the long term. Nearly 60 per cent. of motor cars sold in Britain are imported. One car represents one liquid tonne of steel. How can the steel industry live with that?
  At the other end of the cycle, the scrap industry is now exporting more than 3 million tonnes of ferrous scrap each year. I remember 20 or 30 years ago when the steel works in my constituency, the old Steel, Peech and Tozer works of the United Steel Companies, were on short time, not because of the lack of orders as they are now but because the scrap industry was unable to provide sufficient ferrous scrap for those great furnaces. The problem has now reversed itself. That exported ferrous scrap will make foreign steel to be turned into foreign motor cars that will be sent back to Britain to put more British car and steel workers on the dole. That is too bizarre for even Lewis Carroll to have thought it up.
  Britain used to be proud to be called the workshop of the world. For three and a half years, the Government have been rigidly and unswervingly imposing policies that, in their own words, were supposed to make British industry leaner and fitter, more productive and competitive. Unemployment was the price to be paid for it. We have paid the price all right, but where are the benefits? Where is the improvement in competitiveness?
  My right hon. Friend the Member for Stepney and Poplar (Mr. Shore) pointed out that it is not simply productivity that leads to competitiveness. There are many other factors such as energy prices. The Government have done hardly anything about them. Exchange rates are another factor. We are not getting more competitive. I shall mention just one example. The director of the Society of Motor Manufacturers and Traders wrote a letter to the Financial Times recently. He said:
  "It is interesting that identical Ford cars were continuously cheaper in the United Kingdom than in West Germany from 1971 to 1979."
  Having given several prices to make his point, he continues:
  "The changeover did not occur until 1979."
  That year is significant. That was when our fortunes changed. It also happens to be the year that the Government were elected. I shall not quote the many other available examples to show how our competitiveness has decreased while unemployment has increased. We are not getting anywhere. We do not now hear the long-playing record that we used to hear—the one about overmanning in industry. The only overmanning now is in the dole queues.
  I listened with great interest to my hon. Friend the Member for Ormskirk (Mr. Kilroy-Silk). He described the industrial wastelands of Merseyside. I sometimes wonder

  623
  whether right hon. and hon. Members who do not represent heavy industrial areas appreciate the tragedy of areas such as mine. When I travel between Rotherham and Sheffield, through the area that once contained the heaviest concentration of steel making and heavy engineering in Britain and probably the world, I pass empty mills and factories that once throbbed with activity. It is a heartbreaking experience. That is the level to which the Government have reduced a once great industrial nation. I hope that Ministers are proud of their achievements.
  9.13 pm
  Mr. Mark Wolfson: Of necessity, my speech will be brief. I welcome the Queen's Speech, not least for the prominence that it gives to the personal anxiety and distress that is caused by unemployment.
  It is high time that the Government gave the same priority to overcoming the problems of unemployment they have given to the problem of inflation. In saying that I am, of course, clear about the essential link between the two. What I have to say concerns the sins of omission rather than the sins of commission by my right hon. Friends on the Front Bench. Their economic strategy, pursued with extraordinary steadfastness and considerable political courage, has resulted in remarkable and necessary changes both in attitude and action within British industry. For the first time in many years there is a real understanding of the link between company profits and individual jobs, between company losses and redundancies, between markets held and job security enhanced, between customers lost and workers on the dole.
  People no longer expect the Government to pay for bogus job security. They understand that, like their own households, Governments have no bottomless pit from which to raise revenue. They understnad that uncontrolled borrowing to pay current bills in the end leads to national, as well as individual, disaster.
  The Government's economic strategy was and is necessary. It continues to have my broad support. However, I dispute with my right hon. Friends on two issues. The first is that since our election in May 1979 I have never been satisfied that we have developed, let alone articulated for the nation at large, an adequate industrial strategy. We have argued the economic case for the free market. We have constrained nationalised industries to put their house in order. We have given considerable assistance to small business. I do not decry or underestimate such positive steps. However, precious time has been lost by our reluctance publicly to identify the type of industries for which we believed growth was possible and to which we looked for job creation to fill the gaps left by the decline in heavy industry and in manufacturing, and by our reluctance to give such industries particular and special stimulus.
  Japan has had her sunrise industries for many years. Our own, or some of them, are only now being given proper political visibility through the positive approach of my hon. Friend the Minister for Industry and Information Technology. We require more of that approach.
  A record of bad Socialist planning should be no bar to a good Conservative industrial strategy, properly articulated and clearly put over to the electorate which, make no mistake, will want it demonstrated.
  624
  My second argument leads straight from the first. I ask for a clear strategy on unemployment. We must have a strategy that involves more than a monetary argument and more than social concern. We face long-term unemployment as part of the nation's life over a decade and possibly beyond. Many other hon. Members have made that clear. It is no passing phenomenon that will end with the end of recession.
  New technology and the growth of manufacturing in the developing world are two major and crucial factors that will make the second industrial revolution in the United Kingdom of long duration and difficult solution. That is clearly understood by the CBI. I congratulate that organisation on its initiative in establishing a working party and publishing its interim report
  "Unemployment: A challenge to us all."
  I strongly commend to the Government the practical approach and sensible balance of that first report of the CBI's steering group on unemployment, but it is a matter of concern to me that the CBI leadership and not the Government should be the first to establish a top level working party on unemployment and to produce sensible proposals and a total strategy directed towards long-term solutions. The CBI has shown a practical social concern that is properly expected of the Government as well. The unemployed expect it of our party and our Government, those in work expect it, and so will the whole electorate when the time comes for it to make its choice.
  Realism and restraint alone are not enough. Our people rightly demand hope and opportunity as well. Therefore, I for one hope to hear a constructive and sensible solution to the long-term problems of unemployment, which I felt was lacking in the reply of my right hon. Friend the Secretary of State for Employment yesterday.
  9.20 pm
  Mr. John Silkin (Deptford): The debates on this year's Gracious Speech have been distinguished by three impressive maiden speeches. I had the good luck today to hear that of my hon. Friend the Member for Birmingham, Northfield (Mr. Spellar) and I have read the Official Report of those made by my hon. Friends the Members for Gower (Mr. Wardell) and Peckham (Ms. Harman) last week. Those three areas differ greatly in character, in history and in geography, and they are hundreds of miles apart. Yet the common theme that dominated all three maiden speeches was that of unemployment and economic disaster in three completely different parts of the country, at least two of which were always assumed to be prosperous in years gone by.
  The Government have offered no positive remedies, either in the Gracious Speech or in the debate, but that is what we are all looking for. Not unusually, the Gracious Speech began with a commitment and proposals on foreign affairs and defence and our first major debate, last Thursday, was on that subject. We may discuss and argue about what is a proper foreign policy and a proper defence policy—that is, when the Prime Minister appoints a Secretary of State for Defence who can give us some replies—but questions of foreign policy and the weapons systems that one should operate pale into insignificance compared with one vital ingredient of a credible foreign policy and a credible defence policy.
  A strong industrial base is essential to a credible foreign policy and defence policy. That is why the United States and the Soviet Union are the strongest powers today. It is

  625
  because they are the strongest industrial powers. Indeed, it was with that thought that Ernest Bevin said many years ago:
  "Give me coal and I will give you a foreign policy."
  What kind of defence can there be in a country that is selling off its oil and its energy assets and, as my hon. Friend the Member for Sheffield, Attercliffe (Mr. Duffy) said yesterday, allowing its steel industry to run into the ground? One cannot possibly operate a defence policy on that basis. Nor can one have a prosperous country in the kind of society that the Government are busy creating.
  What an opportunity they had. On 8 May 1979, five days after the election, the Financial Times headed a front page article with the words "signs of recovery in economy". The article began:
  "Sir Geoffrey Howe, the new Chancellor of the Exchequer, will start his first full day at the Treasury today faced with growing evidence of an upturn in the level of economic activity. An improvement in orders for industry is indicated by the Financial Times survey of business opinion published this morning."
  It did not take the Chancellor long to dispose of that. We did not get action; we got many words, and much complacency and self-deception. A list of quotations originating from the Government Front Bench promised us light at the end of the tunnel and economic recovery.
  The promises have been going on and on. The quotation that I like best was that from the Prime Minister, in Scotland of all places, on 3 September 1981. The Financial Times reported:
  "Mrs. Thatcher said yesterday she thought Britain was through the worst of the recession … Her visit was apparently designed to bring an optimistic message to the regions."
  That report was in September 1981, more than a year ago.
  If the Prime Minister has recently been more hesitant in giving us signs of recovery, others on the Front Bench have been only too glad to keep us up to date. The Chief Secretary always keeps us informed. He has promised us more new dawns than most of us have had hot dinners, but the recovery seems strangely delayed. The quotations are so reminiscent of the past that they become almost uncanny. They remind me of a quotation from the United States of America:
  "We have now passed the worst and with continued unity of effort shall rapidly recover".
  President Hoover said those words a couple of months after the great crash of 1929.
  What has really happened? We have seen the ruin of public utilities and the public sector. The right hon. Member for Sidcup (Mr. Heath) talked about the 1930s. He spoke partially correctly about low interest rates—[Interruption.]—He was partially correct. Low interest rates did not tell the whole story—and the recovery from the crash was not entirely attributable to them. I remind the right hon. Gentleman that the other factor in recovery in the 1930s was the growth in building and construction.
  What society can one have where 400,000 building workers are out of work and there are too few houses for those on the waiting lists? The 1930s recovery in Britain began with the return of the construction industry. It started with investment in public utilities. Enormous capital projects should be undertaken that would provide work for the unemployed—roads, sewers and water works, including the pipe system, which has been neglected. The terrible thing is that net investment in public utilities is now below capital replacement costs. We are getting more and more into decay. The other day the Prime Minister said, "By all means spend money on
  626
  capital projects," but it is not as simple as that. My right hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman) pointed that out when he made an especially successful attack on the Prime Minister. She did not answer, presumably because she did not have the answer at the time. My right hon. Friend said that current expenditure is incurred at the same time as capital expenditure. He was right—[Interruption.] I do not know whether the Secretary of State for Employment is trying to muscle in during this part of the debate. He did not have a great success yesterday and, if I were him, I should wait a little before coming back.
  Public works should be our key and the Government partially recognise that fact. I understand the political motive behind saying that a road tunnel will be constructed across the Conwy estuary. The Government are clearly proud of that commitment. The Thames barrier has just been finished. I played a part in its planning, as did Ministers of Agriculture of both political parties, and we are proud of it. It is one of the greatest technological constructions of our generation and has a great future as an export. However, the State alone can carry out those projects, which are of benefit to all industry. When one spends money on public works one assists both the public and the private sector. The Government do not understand that and have neglected public works.
  The Government are busy not only not creating necessary public works and utilities but destroying our publicly owned assets. Curiously, they are destroying the best. The Secretary of State for Energy calls it "privatisation", but it is public asset stripping. That is why British Telecommunications must be handed over, despite the fact that in private hands it will be destroyed as a catalyst for industry and employment and it may well lose to foreign competition.
  Under State ownership, British Shipbuilders is in better shape than it has been for years. If we compare it with world shipbuilding, we see an enormous improvement. Losses have been reduced from £110 million two years ago to only £19 million this year, at a time when world shipbuilding is in the doldrums. That is a tribute to nationalisation and to the work done by the Labour Government. But it is also a tribute to the co-operation, hard work and self-sacrifice of the trade unions. Two years ago, shipbuilding workers were third in the wages table, but they have gone down to nineteenth. The unions accepted the loss of many jobs in order to make the industry efficient. Does anyone believe that if the industry is sold, the co-operation, hard work and self-sacrifice of the unions will still be available? Will they not regard the self-sacrifice as having been in vain, which of course it will have been? [HON. MEMBERS: "Why"?] They did it to make a prosperous shipbuilding industry, but now they see that the cream goes not to them but to people who are not interested.
  Mr. Eric G. Varley: We shall have no industry.
  Mr. Silkin: My right hon. Friend is correct. The Government do not care. They have their own dogma and they are prepared to see those industries fall.
  My right hon. and hon. Friends have been forthcoming today about problems in their constituencies, but there is a common theme. The prosperous Midlands, the prosperous South-East, Wales, not-so-prosperous

  627
  Scotland, the North and the North-West are all suffering. The Chancellor of the Exchequer boasts about a 1·5 per cent. increase, he hopes, in general output next year. Of course, he does not boast about the fact that manufacturing output has fallen by nearly 20 per cent. since 1979.
  The Chancellor is boasting about under 10 per cent. recovery—if he gets it—of the loss his Government have inflicted. In addition, we have what may be termed the Government's treble chance, which is those statistics that have increased three times since Labour left Government in 1979. Three and a half years has meant a three times increase. First, there are three times as many empty factories and warehouses as there were in May 1979. Secondly, there are more than three times the number of business failures now than in May 1979—now more than 1,000 a month. The greatest obscenity of all is that unemployment is three times as high as it was in May 1979.
  It was justly pointed out by the right hon. Member for Glasgow, Hillhead (Mr. Jenkins)—a rather surprising quarter because I did not expect his approbation on this issue—that the Conservative Party in the 1979 election won on a particularly vicious poster which showed people in an unemployment queue with the words "Labour isn't working". They were blaming unemployment on the Labour Government, but now the Prime Minister comes to the House and whimpers that it is not her fault, but the fault of the world recession. We know whose fault it is and the people of Britain know whose fault it is.
  Some of my hon. Friends referred to school leavers who left school in the year the Prime Minister came to office, who have not found work since, and will not perhaps for years if the Government are re-elected. Those people are suffering because of the Government's policies and not because of world recession. If we examine other countries such as Norway, which also possesses oil, and Austria which does not, we find that Governments which were able to carry out a proper, planned economic policy were able to give full employment, or near full employment, to their people.
  I can understand why the Queen's Speech was thin because, as we all know, it will probably be the last Queen's Speech of this Parliament. That gives the Prime Minister the political manoeuvre and the devious option of choosing the time of the election—
  Several Hon. Members rose—
  Mr. Silkin: —the devious option of an election, probably next year. The Secretary of State for Employment is laughing, and he is entitled to have his little laugh now, but he will be laughing on the other side of his face when that election comes. The Opposition are not afraid of an election. We have something much better to offer. We have to offer full-scale new planning, large-scale investment in industry, the extension and the maintenance of public-sector working so that people may return to work and the protection of our industry.
  The right hon. Member for Sidcup, in his references to the 1930s, omitted to mention import controls which also had an effect on bringing back some stability from the depths of the depression. We are prepared to introduce import controls. We heard a great deal of noise from the Conservative Benches recently about import controls but
  628
  I do not know what has happened to that. It appeared that the Government were going to introduce them but they have not done so.
  Above all, we stand not only for an economic society in which the country is able to get back to work—if Conservative Members do not like that, they have the society they wanted—but for a fair society in which values, such as the National Health Service and education, shall be paramount. We stand for a fair society in place of a clawback society. That is what we shall be voting about tonight.
  9.40 pm
  The Lord President of the Council and Leader of the House of Commons (Mr. John Biffen): The House will shortly by voting to conclude the debate on the Loyal Address, which was initiated with elegant contributions by my right hon. Friend the Member for Bournemouth, West (Sir J. Eden) and my hon. Friend the Member for Edinburgh, South (Mr. Ancram). There has been a wide-ranging canvass of all the issues that properly concern national debates in the Chamber.
  I join with the right hon. Member for Deptford (Mr. Silkin) in picking out for commendation the three excellent maiden speeches. I was privileged to hear them all. The hon. Member for Peckham (Ms. Harman) is a formidable and fluent acquisition for the Left wing of the parliamentary Labour Party. Her arguments were formidably displayed, and as I listened to her I felt that whatever her views on the virtues of a dirigiste society, she has already learnt in this institution about the relentless and inexorable forces of supply and demand for parliamentary pairing.
  I listened with great delight to the hon. Member for Gower (Mr. Wardell). I am sure that all hon. Members who were in the Chamber when he spoke would agree that he displayed an intense affection for language—itself a major attribute and commendation in this Chamber. There could be no better tribute to his predecessor, Ifor Davies.
  We very much appreciated the references made by the hon. Member for Birmingham, Northfield (Mr. Spellar) about Jocelyn Cadbury, who was so widely respected throughout the Chamber. The hon. Gentleman comes here, as I am sure he would acknowledge, in the tradition of Ray Carter and Lord Northfield, who did much for the Labour cause. I enjoyed the controversial character of his maiden speech and, above all, his suggestion that the Treasury Benches should take to the habit of reading the Financial Times. If ever I wanted evidence that he belonged to the revisionist wing of the Labour Party, that was it.
  The right hon. Member for Deptford kindly agreed with me that the replies to the debate would break dangerous and daring innovative ground, in that we would each speak for 20 minutes. I proceed with the innocence that always attends one early in the parliamentary Session of believing that a certain amount of Front Bench practice is so much more powerful than all the precept and preaching. I hope that our example will encourage the concept of shorter speeches, which will do much to contribute to a debate that remains spontaneous, because it is not contained within a rigid formula, but allows a greater number of voices and, I hope, a wider range of opinion.
  It is customary on these occasions for the Leader of the House to say a few words about business arrangements. That is quite proper because the national debate is mirrored

  629
  in the Chamber and cannot helpfully proceed without the voice of the Commons—[Interruption.] In the act of self-restraint undertaken by the Front Benches, we were not taking account of the stage props. I shall say a few words about procedure and then deal with the topics of controversy that have featured in the six days of debate.
  My predecessor, now the Secretary of State for Foreign and Commonwealth Affairs, my right hon. Friend the Member for Cambridgeshire (Mr. Pym) said, in winding up this debate last year, that we are pledged to uphold the central role of Parliament and to enable the House of Commons to be effective in relation to the Executive. There have been some valuable developments during this Parliament in carrying out that pledge. The most significant development has concerned the work of the comprehensive structure of departmental Select Committees established in 1979. I hope that the growing expertise of those Committees will enable them to make a still greater contribution in future to the work of the House as a whole. Building upon that foundation, the House agreed just before the Summer Recess to a series of important reforms in our financial procedures and the control over Government expenditure.
  Those are valuable developments. I realise that much will now turn upon the work of the Committee, ably chaired by my right hon. Friend the Member for Worthing (Mr. Higgins), which is now considering other matters and which has been established for the remainder of this Parliament. It is considering a wide range of other aspects of financial scrutiny. Those are valuable procedures, but I realise that they are subsidiary to the great political topics that will dominate the coming Session as we approach a general election.
  Trade policy was mentioned by many speakers and is referred to in the Queen's Speech. There is a link between trade and employment. I remind the House that my right hon. Friend the Prime Minister made it clear last week that the Government continue to support the open trading system. That is a judgment of self-interest.
  The United Kingdom is still more heavily dependent on overseas trade than any other major industrialised nation. Some 30 per cent. of our GDP comes from exports. That point was well made by my hon. Friend the Member for Flint, West (Sir A. Meyer). Moreover, an open trading system is good for the general competitive climate in the United Kingdom. It benefits not only the high street consumers, but manufacturers who benefit from access to competitive, well-designed industrial components and supplies.
  Furthermore, we should not ignore the wider aspects of this issue. The alternative to open trade is the crippling regionalism of the 1930s, with its fortresses of tariffs and quotas and its downward spiral of trade. The world of the 1980s, with newly emerging economies and transferable technology, cannot afford trade-exacerbated divisions between North and South; the oil-rich and those without; the newly industrialised countries and the developed world.
  That is our guiding principle. But the recession has highlighted current problems in international trade. We have to make it clear that the open trading system has to be supported on a general and not a highly selective basis.
  My noble Friend the Secretary of State for Trade has made it quite clear that he attaches great importance to changes in trading partners' practices that lead to more open markets. I believe that there will be widespread
  630
  support for the view that we cannot ignore other nations' derogations from the open trading system. The Government will be taking every opportunity to bring about a change towards greater equity in market access.
  That policy can be tested at the forthcoming meeting of GATT Ministers. There are two areas of immediate concern. The first concerns how trading barriers have developed under the GATT. That problem is confined not just to newly industrialising countries, although it is normally argued in that context. Second, we shall support work in GATT on the liberalisation of trade in the service sector. That is a valuable part of United Kingdom trade, and we are anxious that it should not be handicapped by barriers.
  Of course, running throughout the debate and flowing inexorably from the consideration of trade is concern about protectionism and anxiety about the recession in which we are now living, a recession of such intensity that it outstrips the experiences of the 1930s. Central to that—this has been reflected not only in today's debate but in the other debates on the Gracious Speech—has been the level of unemployment. No one doubts that this is a major and miserably unhappy factor. There are arguments as to whether this is part of an international pattern. However, anybody who makes a dispassionate assessment of what is going on cannot deny that it has an international character. Other broadly comparable economies show the same unemployment trends. For example, the United States has a 10 per cent. rate and France has one just under 11 per cent. These rates are not much different from, although lower than, the rate in the United Kingdom.
  It is true that, although our unemployment level is higher than those of the countries to which I have just referred, the rate of increase has accelerated in those countries relative to our own. No one takes any satisfaction from that, but it establishes that this is an issue that its international in character and ultimately, as was observed by my right hon. Friend the Member for Sidcup (Mr. Heath), one which will be resolved in an international context.
  Mr. Winnick: Without accepting any of the points that the right hon. Gentleman has made for justifying mass unemployment, what possible justification is there for victimising those on the dole queue? I refer to the 5 per cent. that was taken away from them in lieu of taxation. Benefits are now being taxed but the unemployed have had that 5 per cent. stolen from them. Is the right hon. Gentleman justifying such a policy?
  Mr. Biffen: The hon. Gentleman will doubtless attend to my speech and draw his own conclusions, but the House might like to know what the hon. Gentleman had to contribute to the debate on 3 November. He said:
  "Unemployment was the deliberate policy of the Government."—[Official Report, 3 November 1982; vol. 31, c. 79.]
  If people believe that, we are inhibited in debate.
  The three factors that will have a bearing on the future course of unemployment are inflation, interest rates and pay bargaining. Unemployment cannot be considered as one isolated component in our economic position.
  My right hon. and learned Friend the Chancellor of the Exchequer has referred to these issues today and in the autumn statement. None the less, the House should reflect that there has been a quite remarkable success in getting a reduction in the rate of inflation from a peak of 22 per

  631
  cent. to a current rate of just over 7 per cent. and to a prospective rate of 5 per cent. That is the achievement that is central to the Government's strategy, and around which our policies shall proceed between now and the general election when the public can make their decision as to which policies have both the achievement and the prospects that merit confidence.
  Interest rates are related to our success against inflation, although international factors can play a significant part in determining levels of interest. However, the fact that a year ago the clearing banks' base rate was 15 per cent. and today is down to 9 per cent. is something that should give us great encouragement. That is not least the case because, when hon. Members have been talking about what factors resolved the slump of the 1930s, low interest rates were prayed in aid. Now that we have falling interest rates many Labour Members show a marked disinclination to take some encouragement from this and give the Government some credit.
  The third factor is that of pay bargaining. Over the past two years there has been a difficult and no doubt painful adjustment to a far greater realism in pay bargaining. The significance of this can be assessed when one realises that pay accounts for about 30 per cent. of central and local government expenditure. No policy on public expenditure can be independent of that factor. What is more, pay accounts for between 50 to 60 per cent. of business costs.
  Evidence proffered by the CBI shows that about two-thirds of the settlements concluded at the moment are between 5 and 8 per cent. That view is validated by Income Data Services Ltd. That is another success for the Government that many hon. Members, particularly Labour Members, would not have supposed at the time of the Queen's Speech 12 months ago.
  It is not just the downward pressure on the level of pay settlements but the general atmosphere in pay bargaining that is important. I shall not comment upon the mineworkers' ballot except to say that I believe that it displayed a position that was different from the one that would have been thought likely two or three years ago. Scottish and Newcastle Breweries has concluded a three-year pay settlement with its employees.
  Mr. George Foulkes: How much id it contribute to the Tory Party?
  Mr. Biffen: Caterpillar has concluded a three-year deal with its employees. When someone asks what will be done about the price of its products, its ability to keep the price of its products down will be enhanced as pay is a large part of the organisation's costs.
  Mr. James Hamilton (Bothwell)rose—
  Mr. Biffen: I shall not give way, as I am approaching the end of my speech. The House will shortly vote upon the Queen's Speech. For six days we have had the wide-ranging and exhausting debate with which a parliamentary Session begins. However, tonight's vote will not conclude a debate. It will mark the beginning of another. That other debate is the wider national discourse that will precede a general election.
  The measures outlined in the Queen's Speech are an integral part of that wider argument. The Government believe that there is clear evidence of a fall in the rate of
  632
  inflation and in the level of interest rates; and of greater realism in pay bargaining. Those are not factors that have been brought about by the creation of unemployment. It would be a facile reading of that unemployment problem so to suggest. It is the belief of those on the Government Benches that the improvements I have noted are the preconditions for a successful employment policy.
  My right hon. Friend the Member for Sidcup asked for the rationale of the Government's policies in those matters. I offer such a rationale as I can. There is no simple linkage between, on the one hand, the factors of falling interest rates, falling inflation and greater pay realism and, on the other, rising levels of output and falling unemployment. One major unknown factor will be the climate of business confidence. However, the factors that I have mentioned are the best ingredients to nourish business confidence.
  Even so, we do not live in the easy world of optimistic expectations. Any initial rise in output will almost certainly be met by our existing industrial and commercial work force. Ultimately, the economic and social challenge of high unemployment can only be met by the creation of jobs that derive from a genuine and not contrived demand. The fiscal and monetary policies that are now reducing the turbulence of inflation are those that will provide a sound basis for future employment. It is a policy that is sustained by the programme for this Session. That programme strikes a balance. There are measures designed to improve the economy, such as the Telecommunications Bill, and proposals for other public utilities. The Queen's Speech also promises that
  "legislation will be introduced to enable improvements to be made to the health and social services."
  The Opposition challenge that policy. They challenge the relationship between success over inflation and pay bargaining and the likelihood of eventual success with unemployment. Tonight's vote will be but an opening shot in a wider campaign for the nation's endorsement. It is a campaign which my right hon. and hon. Friends will contest with conviction and enthusiasm.
  Question put, That the amendment be made:—
  The House divided: Ayes 272, Noes 313.

  Division No. 2]

  [10 pm

  AYES

  Abse, Leo

  Campbell, Ian

  Adams, Allen

  Campbell-Savours, Dale

  Allaun, Frank

  Canavan, Dennis

  Anderson, Donald

  Cant, R. B.

  Archer, Rt Hon Peter

  Carmichael, Neil

  Ashley, Rt Hon Jack

  Carter-Jones, Lewis

  Ashton, Joe

  Cartwright, John

  Atkinson, N. (H'gey,)

  Clark, Dr David (S Shields)

  Bagier, Gordon A.T.

  Clarke, Thomas (C'b'dge, A'rie)

  Barnett, Guy (Greenwich)

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

  Barnett, Rt Hon Joel (H'wd)

  Cohen, Stanley

  Beith, A. J.

  Coleman, Donald

  Benn, Rt Hon Tony

  Concannon, Rt Hon J. D.

  Bennett, Andrew (St'kp't N)

  Conlan, Bernard

  Bidwell, Sydney

  Cook, Robin F.

  Booth, Rt Hon Albert

  Cowans, Harry

  Bottomley, Rt Hon A. (M'b'ro)

  Cox, T. (W'dsw'th, Toot'g)

  Bradley, Tom

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

  Bray, Dr Jeremy

  Crawshaw, Richard

  Brocklebank-Fowler, C.

  Crowther, Stan

  Brown, Hugh D. (Provan)

  Cryer, Bob

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

  Cunliffe, Lawrence

  Brown, Ronald W. (H'ckn'y S)

  Cunningham, G. (Islington S)

  Brown, Ron (E'burgh, Leith)

  Cunningham, Dr J. (W'h'n)

  Buchan, Norman

  Dalyell, Tam

  Callaghan, Rt Hon J.

  Davidson, Arthur

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

  Davies, Rt Hon Denzil (L'lli)

  633

  Davis, Clinton (Hackney C)

  Lamond, James

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

  Leadbitter, Ted

  Deakins, Eric

  Leighton, Ronald

  Dean, Joseph (Leeds West)

  Lestor, Miss Joan

  Dewar, Donald

  Lewis, Arthur (N'ham NW)

  Dixon, Donald

  Lewis, Ron (Carlisle)

  Dobson, Frank

  Litherland, Robert

  Dormand, Jack

  Lofthouse, Geoffrey

  Douglas, Dick

  Lyon, Alexander (York)

  Dubs, Alfred

  Lyons, Edward (Bradf'd W)

  Duffy, A. E. P.

  Mabon, Rt Hon Dr J. Dickson

  Dunnett, Jack

  McCartney, Hugh

  Dunwoody, Hon Mrs G.

  McDonald, Dr Oonagh

  Eadie, Alex

  McGuire, Michael (Ince)

  Eastham, Ken

  McKay, Allen (Penistone)

  Edwards, R. (W'hampt'n S E)

  McKelvey, William

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

  MacKenzie, Rt Hon Gregor

  Ellis, Tom (Wrexham)

  Maclennan, Robert

  English, Michael

  McMahon, Andrew

  Ennals, Rt Hon David

  McNally, Thomas

  Evans, Ioan (Aberdare)

  McNamara, Kevin

  Evans, John (Newton)

  McTaggart, Robert

  Ewing, Harry

  McWilliam, John

  Faulds, Andrew

  Magee, Bryan

  Field, Frank

  Marks, Kenneth

  Fitch, Alan

  Marshall, D (G'gow S'ton)

  Flannery, Martin

  Marshall, Dr Edmund (Goole)

  Foot, Rt Hon Michael

  Marshall, Jim (Leicester S)

  Ford, Ben

  Martin, M (G'gow S'burn)

  Forrester, John

  Mason, Rt Hon Roy

  Foster, Derek

  Maxton, John

  Foulkes, George

  Maynard, Miss Joan

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

  Meacher, Michael

  Freeson, Rt Hon Reginald

  Milkardo, Ian

  Garrett, John (Norwich S)

  Millan, Rt Hon Bruce

  Garrett, W. E. (Wallsend)

  Miller, Dr M. S. (E Kilbride)

  George, Bruce

  Mitchell, Austin (Grimsby)

  Gilbert, Rt Hon Dr John

  Mitchell, R. C. (Soton Itchen)

  Ginsburg, David

  Morris, Rt Hon A. (W'shawe)

  Golding, John

  Morris, Rt Hon C. (O'shaw)

  Graham, Ted

  Morris, Rt Hon J. (Aberavon)

  Grant, George (Morpeth)

  Moyle, Rt Hon Roland

  Grant, John (Islington C)

  Mulley, Rt Hon Frederick

  Grimond, Rt Hon J.

  Newens, Stanley

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

  Oakes, Rt Hon Gordon

  Hardy, Peter

  Ogden, Eric

  Harman, Harriet (Peckham)

  O'Halloran, Michael

  Harrison, Rt Hon Walter

  O'Neill, Martin

  Hattersley, Rt Hon Roy

  Orme, Rt Hon Stanley

  Healey, Rt Hon Denis

  Owen, Rt Hon Dr David

  Heffer, Eric S.

  Paisley, Rev Ian

  Hogg, N. (E Dunb't'nshire)

  Palmer, Arthur

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

  Park, George

  Home Robertson, John

  Parker, John

  Homewood, William

  Parry, Robert

  Hooley, Frank

  Pendry, Tom

  Horam, John

  Penhaligon, David

  Howell, Rt Hon D.

  Pitt, William Henry

  Howells, Geraint

  Powell, Raymond (Ogmore)

  Hoyle, Douglas

  Prescott, John

  Huckfield, Les

  Price, C. (Lewisham W)

  Hudson Davies, Gwilym E.

  Race, Reg

  Hughes, Mark (Durham)

  Radice, Giles

  Hughes, Robert (Aberdeen N)

  Rees, Rt Hon M (Leeds S)

  Hughes, Roy (Newport)

  Richardson, Jo

  Janner, Hon Greville

  Roberts, Albert (Normanton)

  Jay, Rt Hon Douglas

  Roberts, Allan (Bootle)

  Jenkins, Rt Hon Roy (Hillh'd)

  Roberts, Ernest (Hackney N)

  John, Brynmor

  Roberts, Gwilym (Cannock)

  Johnson, James (Hull West)

  Robertson, George

  Johnson, Walter (Derby S)

  Robinson, G. (Coventry NW)

  Johnston, Russell (Inverness)

  Robinson, P. (Belfast E)

  Jones, Rt Hon Alec (Rh'dda)

  Rodgers, Rt Hon William

  Jones, Barry (East Flint)

  Rooker, J. W.

  Jones, Dan (Burnley)

  Roper, John

  Kaufman, Rt Hon Gerald

  Ross, Ernest (Dundee West)

  Kerr, Russell

  Ross, Stephen (Isle of Wight)

  Kilroy-Silk, Robert

  Rowlands, Ted

  Kinnock, Neil

  Ryman, John

  Lambie, David

  Sandelson, Neville

  634

  Sever, John

  Varley, Rt Hon Eric G.

  Sheerman, Barry

  Wainwright, E. (Dearne V)

  Sheldon, Rt Hon R.

  Wainwright, R. (Colne V)

  Shore, Rt Hon Peter

  Walker, Rt Hon H. (D'caster)

  Short, Mrs Renée

  Wardell, Gareth

  Silkin, Rt Hon J. (Deptford)

  Watkins, David

  Silkin, Rt Hon S. C. (Dulwich)

  Weetch, Ken

  Silverman, Julius

  Wellbeloved, James

  Skinner, Dennis

  Welsh, Michael

  Smith, Cyril (Rochdale)

  White, Frank R.

  Smith, Rt Hon J. (N Lanark)

  White, J. (G'gow Pollok)

  Snape, Peter

  Whitehead, Phillip

  Soley, Clive

  Whitlock, William

  Spearing, Nigel

  Wigley, Dafydd

  Speller, John Francis (B'ham)

  Willey, Rt Hon Frederick

  Spriggs, Leslie

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

  Stallard, A. W.

  Williams, Rt Hon Mrs (Crosby)

  Steel, Rt Hon David

  Wilson, Gordon (Dundee E)

  Stewart, Rt Hon D. (W Isles)

  Wilson, Rt Hon Sir H. (H'ton)

  Stoddart, David

  Wilson, William (C'try SE)

  Stott, Roger

  Winnick, David

  Strang, Gavin

  Woodall, Alec

  Summerskill, Hon Dr Shirley

  Woolmer, Kenneth

  Taylor, Mrs Ann (Bolton W)

  Wrigglesworth, Ian

  Thomas, Dafydd (Merioneth)

  Wright, Sheila

  Thomas, Jeffrey (Abertillery)

  Young, David (Bolton E)

  Thomas, Mike (Newcastle E)

  Thorne, Stan (Preston South)

  Tellers for the Ayes:

  Tilley, John

  Mr. James Hamilton and

  Tinn, James

  Mr. Frank Haynes.

  Torney, Tom

  NOES

  Adley, Robert

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

  Aitken, Jonathan

  Chalker, Mrs. Lynda

  Alexander, Richard

  Channon, Rt. Hon. Paul

  Alison, Rt Hon Michael

  Chapman, Sydney

  Ancram, Michael

  Churchill, W. S.

  Arnold, Tom

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

  Aspinwall, Jack

  Clark, Sir W. (Croydon S)

  Atkins, Rt Hon H. (S'thorne)

  Clarke, Kenneth (Rushcliffe)

  Atkins, Robert (Preston N)

  Clegg, Sir Walter

  Atkinson, David (B'm'th,E)

  Cockeram, Eric

  Baker, Kenneth (St.M'bone)

  Colvin, Michael

  Baker, Nicholas (N Dorset)

  Cope, John

  Banks, Robert

  Cormack, Patrick

  Beaumont-Dark, Anthony

  Corrie, John

  Bendall, Vivian

  Costain, Sir Albert

  Benyon, W. (Buckingham)

  Cranborne, Viscount

  Best, Keith

  Critchley, Julian

  Bevan, David Gilroy

  Crouch, David

  Biffen, Rt Hon John

  Dickens, Geoffrey

  Biggs-Davison, Sir John

  Dorrell, Stephen

  Blackburn, John

  Douglas-Hamilton, Lord J.

  Blaker, Peter

  Dover, Denshore

  Body, Richard

  du Cann, Rt Hon Edward

  Bonsor, Sir Nicholas

  Dunn, Robert (Dartford)

  Boscawen, Hon Robert

  Durant, Tony

  Bottomley, Peter (W'wich W)

  Dykes, Hugh

  Bowden, Andrew

  Eden, Rt Hon Sir John

  Boyson, Dr Rhodes

  Edwards, Rt Hon N. (P'broke)

  Braine, Sir Bernard

  Eggar, Tim

  Bright, Graham

  Elliott, Sir William

  Brinton, Tim

  Eyre, Reginald

  Brittan, Rt. Hon. Leon

  Fairbairn, Nicholas

  Brooke, Hon Peter

  Fairgrieve, Sir Russell

  Brotherton, Michael

  Faith, Mrs Sheila

  Brown, Michael (Brigg & Sc'n)

  Farr, John

  Browne, John (Winchester)

  Fell, Sir Anthony

  Bruce-Gardyne, John

  Fenner, Mrs Peggy

  Bryan, Sir Paul

  Finsberg, Geoffrey

  Buchanan-Smith, Rt. Hon. A.

  Fisher, Sir Nigel

  Buck, Antony

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

  Budgen, Nick

  Fletcher-Cooke, Sir Charles

  Bulmer, Esmond

  Fookes, Miss Janet

  Burden, Sir Frederick

  Forman, Nigel

  Butcher, John

  Fowler, Rt Hon Norman

  Butler, Hon Adam

  Fox, Marcus

  Carlisle, John (Luton West)

  Fraser, Rt Hon Sir Hugh

  Carlisle, Kenneth (Lincoln)

  Fraser, Peter (South Angus)

  635

  Fry, Peter

  McNair-Wilson, P. (New F'st)

  Gardiner, George (Reigate)

  McQuarrie, Albert

  Gardner, Edward (S Fylde)

  Madel, David

  Garel-Jones, Tristan

  Major, John

  Gilmour, Rt Hon Sir Ian

  Marland, Paul

  Glyn, Dr Alan

  Marlow, Antony

  Goodhart, Sir Philip

  Marshall, Michael (Arundel)

  Goodhew, Sir Victor

  Marten, Rt Hon Neil

  Goodlad, Alastair

  Mates, Michael

  Gorst, John

  Maude, Rt Hon Sir Angus

  Gow, Ian

  Mawby, Ray

  Gower, Sir Raymond

  Mawhinney, Dr Brian

  Gray, Hamish

  Maxwell-Hyslop, Robin

  Greenway, Harry

  Mayhew, Patrick

  Grieve, Percy

  Mellor, David

  Griffiths, E. (B'y St. Edm'ds)

  Meyer, Sir Anthony

  Griffiths, Peter Portsm'th N)

  Miller, Hal (B'grove)

  Grist, Ian

  Mills, Iain (Meriden)

  Grylls, Michael

  Millis, Sir Peter (West Devon)

  Gummer, John Selwyn

  Miscampbell, Norman

  Hamilton, Hon A.

  Moate, Roger

  Hamilton, Michael (Salisbury)

  Monro, Sir Hector

  Hampson, Dr Keith

  Montogomery, Fergus

  Hannam, John

  Moore, John

  Haselhurst, Alan

  Morgan, Geraint

  Hastings, Stephen

  Morris, M. (N'hampton S)

  Havers, Rt Hon Sir Michael

  Morrison, Hon C. (Devizes)

  Hawkins, Sir Paul

  Morrison, Hon P. (Chester)

  Hawksley, Warren

  Mudd, David

  Hayhoe, Barney

  Murphy, Christopher

  Heath, Rt Hon Edward

  Myles, David

  Heddle, John

  Neale, Gerrard

  Henderson, Barry

  Needham, Richard

  Heseltine, Rt Hon Michael

  Nelson, Anthony

  Hicks, Robert

  Neubert, Michael

  Higgins, Rt Hon Terence L.

  Newton, Tony

  Hill, James

  Normanton, Tom

  Hogg, Hon Douglas (Gr'th'm)

  Nott, Rt Hon John

  Holland, Philip (Carlton)

  Onslow, Cranley

  Hooson, Tom

  Oppenheim, Rt Hon Mrs S.

  Hordern, Peter

  Osborn, John

  Howe, Rt Hon Sir Geoffrey

  Page, John (Harrow, West)

  Howell, Rt Hon D. (G'ldf'd)

  Page, Richard (SW Herts)

  Howell, Ralph (N Norfolk)

  Parkinson, Rt Hon Cecil

  Hunt, David (Wirral)

  Parris, Matthew

  Hunt, John (Ravensbourne)

  Patten, Christopher (Bath)

  Irvine, Rt Hon Bryant Godman

  Pattie, Geoffrey

  Irving, Charles (Cheltenham)

  Pawsey, James

  Jenkin, Rt Hon Patrick

  Percival, Sir Ian

  Johnson Smith, Sir Geoffrey

  Peyton, Rt Hon John

  Jopling, Rt Hon Michael

  Pink, R. Bonner

  Joseph, Rt Hon Sir Keith

  Porter, Barry

  Kaberry, Sir Donald

  Prentice, Rt Hon Reg

  Kellett-Bowman, Mrs Elaine

  Price, Sri David (Eastleigh)

  Kimball, Sir Marcus

  Prior, Rt Hon James

  King, Rt Hon Tom

  Proctor, K. Harvey

  Kitson, Sir Timothy

  Raison, Rt Hon Timothy

  Knight, Mrs Jill

  Rathbone, Tim

  Knox, David

  Rees, Peter (Dover and Deal)

  Lamont, Norman

  Rees-Davies, W. R.

  Lang, Ian

  Renton, Tim

  Latham, Michael

  Rhodes James, Robert

  Lawrence, Ivan

  Rhys Williams, Sir Brandon

  Lawson, Rt Hon Nigel

  Ridley, Hon Nicholas

  Lee, John

  Ridsdale, Sir Julian

  Le Marchant, Spencer

  Rifkind, Malcolm

  Lennox-Boyd, Hon Mark

  Rippon, Rt Hon Geoffrey

  Lester, Jim (Beeston)

  Roberts, M. (Cardiff NW)

  Lewis, Kenneth (Rutland)

  Roberts, Wyn (Conway)

  Lloyd, Ian (Havant & W'loo)

  Rossi, Hugh

  Lloyd, Peter (Fareham)

  Rost, Peter

  Loveridge, John

  Rumbold, Mrs A. C. R.

  Luce, Richard

  Sainsbury, Hon Timothy

  Lyell, Nicholas

  St. John-Stevas, Rt Hon N.

  McCrindle, Robert

  Scott, Nicholas

  Macfarlane, Neil

  Shaw, Giles (Pudsey)

  MacGregor, John

  Shaw, Sir Michael (Scarb')

  MacKay, John (Argyll)

  Shelton, William (Streatham)

  Macmillan, Rt Hon M.

  Shepherd, Colin (Hereford)

  McNair-Wilson, M. (N'bury)

  Shepherd, Richard

  636

  Shersby, Michael

  Trippier, David

  Silvester, Fred

  Trotter, Neville

  Sims, Roger

  Van Straubenzee, Sir W.

  Skeet, T. H. H.

  Viggers, Peter

  Smith, Dudley

  Waddington, David

  Smith, Tim (Beaconsfield)

  Wakeham, John

  Speed, Keith

  Waldegrave, Hon William

  Speller, Tony

  Walker, Rt Hon P. (W'cester)

  Spence, John

  Walker, B. (Perth)

  Spicer, Jim (West Dorset)

  Walker-Smith, Rt Hon Sir D.

  Spicer, Michael (S Worcs)

  Wall, Sir Patrick

  Sproat, Iain

  Waller, Gary

  Squire, Robin

  Walters, Dennis

  Stainton, Keith

  Ward, John

  Stanbrook, Ivor

  Warren, Kenneth

  Stanley, John

  Watson, John

  Steen, Anthony

  Wells, Bowen

  Stevens, Martin

  Wells, John (Maidstone)

  Stewart, A. (E Renfrewshire)

  Wheeler, John

  Stewart, Ian (Hitchin)

  Whitelaw, Rt Hon William

  Stokes, John

  Whitney, Raymond

  Stradling Thomas, J.

  Wiggin, Jerry

  Tapsell, Peter

  Wilkinson, John

  Taylor, Teddy (S'end E)

  Winterton, Nicholas

  Tebbit, Rt Hon Norman

  Wolfson, Mark

  Temple-Morris, Peter

  Young, Sir George (Acton)

  Thatcher, Rt Hon Mrs M.

  Younger, Rt Hon George

  Thomas, Rt Hon Peter

  Thompson, Donald

  Tellers for the Noes:

  Thornton, Malcolm

  Mr. Anthony Berry and

  Townend, John (Bridlington)

  Mr. Carol Mather.

  Townsend, Cyril D, (B'heath)

  Question accordingly negatived.
  Amendment proposed, at the end of the Question, to add:
  But humbly regret that the Gracious Speech contains no plans for a sustained reduction of unemployment accompanied by industrial recovery; consider the Government's dogmatic commitment to privatisation to be as irrelevant to the nation's needs as that of the Official Opposition to further nationalisation; and believe that the overdue repair and modernisation of public assets and public services together with measures essential for increased industrial efficiency would be of far greater significance than the proposed changes in mere ownership.—[Mr. Roper.]
  Question put, That the amendment be made:—
  The House divided: Ayes 43, Noes 311.

  Division No. 3]

  [10.16 pm

  AYES

  Alton, David

  Owen, Rt Hon Dr David

  Bradley, Tom

  Paisley, Rev Ian

  Brocklebank-Fowler, C.

  Penhaligon, David

  Brown, Ronald W. (H'ckn'y S)

  Pitt, William Henry

  Cartwright, John

  Robinson, P. (Belfast E)

  Crawshaw, Richard

  Rodgers, Rt Hon William

  Cunningham, G. (Islington S)

  Ross, Stephen (Isle of Wight)

  Ellis, Tom (Wrexham)

  Sandelson, Neville

  Ginsburg, David

  Smith, Cyril (Rochdale)

  Grant, John (Islington C)

  Steel, Rt Hon David

  Grimond, Rt Hon J.

  Stewart, Rt Hon D. (W Isles)

  Horam, John

  Thomas, Dafydd (Merioneth)

  Howells, Geraint

  Thomas, Mike (Newcastle E)

  Hudson Davies, Gwilym E.

  Wainwright, R. (Colne V)

  Jenkins, Rt Hon Roy (Hillh'd)

  Wellbeloved, James

  Johnston, Russell (Inverness)

  Wigley, Dafydd

  Lyons, Edward (Bradf'd W)

  Williams, Rt Hon Mrs

  Mabon, Rt Hon Dr J. Dickson

  (Crosby)

  Maclennan, Robert

  Wilson, Gordon (Dundee E)

  McNally, Thomas

  Wrigglesworth, Ian

  Magee, Bryan

  Mitchell, R. C. (Soton Itchen)

  Tellers for the Ayes:

  Ogden, Eric

  Mr. John Roper and

  O'Halloran, Michael

  Mr. A. J. Beith.

  NOES

  Adley, Robert

  Alexander, Richard

  Aitken, Jonathan

  Alison, Rt Hon Michael

  637

  Ancram, Michael

  Fisher, Sir Nigel

  Arnold, Tom

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

  Aspinwall, Jack

  Fletcher-Cooke, Sir Charles

  Atkins, Rt Hon H. (S'thorne)

  Fookes, Miss Janet

  Atkins, Robert (Preston N)

  Forman, Nigel

  Atkinson, David (B'm'th, E)

  Fowler, Rt Hon Norman

  Baker, Kenneth (St. M'bone)

  Fox, Marcus

  Baker, Nicholas (N Dorset)

  Fraser, Rt Hon Sir Hugh

  Banks, Robert

  Fraser, Peter (South Angus)

  Beaumont-Dark, Anthony

  Fry, peter

  Bendall, Vivian

  Gardiner, George (Reigate)

  Benyon, W. (Buckingham)

  Gardner, Edward (S Fylde)

  Best, Keith

  Garel-Jones, Tristan

  Bevan, David Gilroy

  Gilmour, Rt Hon Sir Ian

  Biffen, Rt Hon John

  Glyn, Dr Alan

  Biggs-Davison, Sir John

  Goodhart, Sir Philip

  Blackburn, John

  Goodhew, Sir Victor

  Blaker, Peter

  Goodlad, Alastair

  Body, Richard

  Gorst, John

  Bonsor, Sir Nicholas

  Gow, Ian

  Boscawen, Hon Robert

  Gower, Sir Raymond

  Bottomley, Peter (W'wich W)

  Gray, Hamish

  Bowden, Andrew

  Greenway, Harry

  Boyson, Dr Rhodes

  Grieve, Percy

  Braine, Sir Bernard

  Griffiths, E. (B'y St. Edm'ds)

  Bright, Graham

  Griffiths, Peter Portsm'th N)

  Brinton, Tim

  Grist, Ian

  Brittan, Rt. Hon. Leon

  Grylls, Michael

  Brooke, Hon Peter

  Gummer, John Selwyn

  Brotherton, Michael

  Hamilton, Hon A.

  Brown, Michael (Brigg & Sc'n)

  Hamilton, Michael (Salisbury)

  Browne, John (Winchester)

  Hampson, Dr Keith

  Bruce-Gardyne, John

  Hannam, John

  Bryan, Sir Paul

  Haselhurst, Alan

  Buchanan-Smith, Rt. Hon. A.

  Hastings, Stephen

  Buck, Antony

  Havers, Rt Hon Sir Michael

  Budgen, Nick

  Hawkins, Sir Paul

  Bulmer, Esmond

  Hawksley, Warren

  Burden, Sir Frederick

  Hayhoe, Barney

  Butcher, John

  Heath, Rt Hon Edward

  Butler, Hon Adam

  Heddle, John

  Carlisle, John (Luton West)

  Henderson, Barry

  Carlisle, Kenneth (Lincoln)

  Heseltine, Rt Hon Michael

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

  Hicks, Robert

  Chalker, Mrs. Lynda

  Higgins, Rt Hon Terence L.

  Channon, Rt. Hon. Paul

  Hill, James

  Chapman, Sydney

  Hogg, Hon Douglas (Gr'th'm)

  Churchill, W. S.

  Holland, Philip (Carlton)

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

  Hooson, Tom

  Clark, Sir W. (Croydon S)

  Hordern, Peter

  Clarke, Kenneth (Rushcliffe)

  Howe, Rt Hon Sir Geoffrey

  Clegg, Sir Walter

  Howell, Rt Hon D. (G'ldf'd)

  Cockeram, Eric

  Howell, Ralph (N Norfolk)

  Colvin, Michael

  Hunt, David (Wirral)

  Cope, John

  Hunt, John (Ravensbourne)

  Cormack, Patrick

  Irvine, Rt Hon Bryant Godman

  Corrie, John

  Irving, Charles (Cheltenham)

  Costain, Sir Albert

  Jenkin, Rt Hon Patrick

  Cranborne, Viscount

  Johnson Smith, Sir Geoffrey

  Crouch, David

  Jopling, Rt Hon Michael

  Dickens, Geoffrey

  Joseph, Rt Hon Sir Keith

  Dorrell, Stephen

  Kaberry, Sir Donald

  Douglas-Hamilton, Lord J.

  Kellett-Bowman, Mrs Elaine

  Dover, Denshore

  Kimball, Sir Marcus

  du Cann, Rt Hon Edward

  King, Rt Hon Tom

  Dunn, Robert (Dartford)

  Kitson, Sir Timothy

  Durant, Tony

  Knight, Mrs Jill

  Dykes, Hugh

  Knox, David

  Eden, Rt Hon Sir John

  Lamont, Norman

  Edwards, Rt Hon N. (P'broke)

  Lang, Ian

  Eggar, Tim

  Latham, Michael

  Elliott, Sir William

  Lawrence, Ivan

  Eyre, Reginald

  Lawson, Rt Hon Nigel

  Fairbairn, Nicholas

  Lee, John

  Fairgrieve, Sir Russell

  Le Marchant, Spencer

  Faith, Mrs Sheila

  Lennox-Boyd, Hon Mark

  Farr, John

  Lester, Jim (Beeston)

  Fell, Sir Anthony

  Lewis, Kenneth (Rutland)

  Fenner, Mrs Peggy

  Lloyd, Ian (Havant & W'loo)

  Finsberg, Geoffrey

  Lloyd, Peter (Fareham)

  638

  Loveridge, John

  Roberts, Wyn (Conway)

  Luce, Richard

  Rossi, Hugh

  Lyell, Nicholas

  Rost, Peter

  McCrindle, Robert

  Rumbold, Mrs A. C. R.

  Macfarlane, Neil

  Sainsbury, Hon Timothy

  MacGregor, John

  St. John-Stevas, Rt Hon N.

  MacKay, John (Argyll)

  Scott, Nicholas

  Macmillan, Rt Hon M.

  Shaw, Giles (Pudsey)

  McNair-Wilson, M. (N'bury)

  Shaw, Sir Michael (Scarb')

  McNair-Wilson, P. (New F'st)

  Shelton, William (Streatham)

  McQuarrie, Albert

  Shepherd, Colin (Hereford)

  Madel, David

  Shepherd, Richard

  Major, John

  Shersby, Michael

  Marland, Paul

  Silvester, Fred

  Marlow, Antony

  Sims, Roger

  Marshall, Michael (Arundel)

  Skeet, T. H. H.

  Marten, Rt Hon Neil

  Smith, Dudley

  Maude, Rt Hon Sir Angus

  Smith, Tim (Beaconsfield)

  Mawby, Ray

  Speed, Keith

  Mawhinney, Dr Brian

  Speller, Tony

  Maxwell-Hyslop, Robin

  Spence, John

  Mayhew, Patrick

  Spicer, Jim (West Dorset)

  Mellor, David

  Spicer, Michael (S Worcs)

  Meyer, Sir Anthony

  Sproat, Iain

  Miller, Hal (B'grove)

  Squire, Robin

  Mills, Iain (Meriden)

  Stainton, Keith

  Mills, Sir Peter (West Devon)

  Stanbrook, Ivor

  Miscampbell, Norman

  Stanley, John

  Moate, Roger

  Steen, Anthony

  Monro, Sir Hector

  Stevens, Martin

  Montgomery, Fergus

  Stewart, A. (E Renfrewshire)

  Moore, John

  Stewart, Ian (Hitchin)

  Morgan, Geraint

  Stokes, John

  Morris, M. (N'hampton S)

  Stradling Thomas, J.

  Morrison, Hon C. (Devizes)

  Tapsell, Peter

  Morrison, Hon P. (Chester)

  Taylor, Teddy (S'end E)

  Mudd, David

  Tebbit, Rt Hon Norman

  Murphy, Christopher

  Temple-Morris, Peter

  Myles, David

  Thatcher, Rt Hon Mrs M.

  Neale, Gerrard

  Thomas, Rt Hon Peter

  Needham, Richard

  Thompson, Donald

  Nelson, Anthony

  Thornton, Malcolm

  Neubert, Michael

  Townend, John (Bridlington)

  Newton, Tony

  Townsend, Cyril D, (B'heath)

  Normanton, Tom

  Trippier, David

  Nott, Rt Hon John

  Trotter, Neville

  Onslow, Cranley

  van Straubenzee, Sir W.

  Oppenheim, Rt Hon Mrs S.

  Viggers, Peter

  Osborn, John

  Waddington, David

  Page, John (Harrow, West)

  Wakeham, John

  Page, Richard (SW Herts)

  Waldegrave, Hon William

  Parkinson, Rt Hon Cecil

  Walker, Rt Hon P. (W'cester)

  Parris, Matthew

  Walker, B. (Perth)

  Patten, Christopher (Bath)

  Walker-Smith, Rt Hon Sir D.

  Pattie, Geoffrey

  Wall, Sir Patrick

  Pawsey, James

  Waller, Gary

  Percival, Sir Ian

  Walters, Dennis

  Peyton, Rt Hon John

  Ward, John

  Pink, R. Bonner

  Warren, Kenneth

  Porter, Barry

  Watson, John

  Prentice, Rt Hon Reg

  Wells, Bowen

  Price, Sir David (Eastleigh)

  Wells, John (Maidstone)

  Prior, Rt Hon James

  Wheeler, John

  Proctor, K. Harvey

  Whitelaw, Rt Hon William

  Raison, Rt Hon Timothy

  Whitney, Raymond

  Rathbone, Tim

  Wiggin, Jerry

  Rees, Peter (Dover and Deal)

  Wilkinson, John

  Rees-Davies, W. R.

  Winterton, Nicholas

  Renton, Tim

  Wolfson, Mark

  Rhodes James, Robert

  Young, Sir George (Acton)

  Rhys Williams, Sir Brandon

  Younger, Rt Hon George

  Ridley, Hon Nicholas

  Ridsdale, Sir Julian

  Tellers for the Noes

  Rifkind, Malcolm

  Mr. Anthony Berry and

  Rippon, Rt Hon Geoffrey

  Mr. Carol Mather.

  Roberts, M. (Cardiff NW)

  Question accordingly negatived.
  Main Question put:—
  The House divided: Ayes 310, Noes 268.

  Division No.4]

  [10.29 pm

  AYES

  Adley, Robert

  Eyre, Reginald

  Aitken, Jonathan

  Fairbairn, Nicholas

  Alexander, Richard

  Fairgrieve, Sir Russell

  Alison, Rt Hon Michael

  Faith, Mrs Sheila

  Ancram, Michael

  Farr, John

  Arnold, Tom

  Fell, Sir Anthony

  Aspinwall, Jack

  Fenner, Mrs Peggy

  Atkins, Rt Hon H. (S'thorne)

  Finsberg, Geoffrey

  Atkins, Robert (Preston N)

  Fisher, Sir Nigel

  Atkinson, David (B'm'th,E)

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

  Baker, Kenneth (St. M'bone)

  Fletcher-Cooke, Sir Charles

  Baker, Nicholas (N Dorset)

  Fookes, Miss Janet

  Banks, Robert

  Forman, Nigel

  Beaumont-Dark, Anthony

  Fowler, Rt Hon Norman

  Bendall, Vivian

  Fox, Marcus

  Benyon, W. (Buckingham)

  Fraser, Rt Hon Sir Hugh

  Best, Keith

  Fraser, Rt Hon Sir Hugh

  Bevan, David Gilroy

  Fry, Peter

  Biffen, Rt Hon John

  Gardiner, George (Reigate)

  Biggs-Davison, Sir John

  Gardner, Edward (S Fylde)

  Blackburn, John

  Garel-Jones, Tristan

  Blaker, Peter

  Gilmour, Rt Hon Sir Ian

  Body, Richard

  Glyn, Dr Alan

  Bonsor, Sir Nicholas

  Goodhart, Sir Philip

  Boscawen, Hon Robert

  Goodhew, Sir Victor

  Bottomley, Peter (W'wich W)

  Goodlad, Alastair

  Bowden, Andrew

  Gorst, John

  Boyson, Dr Rhodes

  Gow, Ian

  Braine, Sir Bernard

  Gower, Sir Raymond

  Bright, Graham

  Gray, Hamish

  Brinton, Tim

  Greenway, Harry

  Brittan, Rt. Hon. Leon

  Grieve, Percy

  Brooke, Hon Peter

  Giffiths, E. (B'y St. Edm'ds)

  Brotherton, Michael

  Griffiths, Peter Portsm'th N)

  Brown, Michael (Brigg & Sc'n)

  Grist, Ian

  Browne, John (Winchester)

  Grylls, Michael

  Bruce-Gardyne, John

  Gummer, John Selwyn

  Bryan, Sir Paul

  Hamilton, Hon A.

  Buchanan-Smith, Rt. Hon. A.

  Hamilton, Michael (Salisbury)

  Buck, Antony

  Hampson, Dr Keith

  Budgen, Nick

  Hannam, John

  Bulmer, Esmond

  Haselhurst, Alan

  Burden, Sir Frederick

  Hastings, Stephen

  Butcher, John

  Havers, Rt Hon Sir Michael

  Butler, Hon Adam

  Hawkins, Sir Paul

  Carlisle, John (Luton West)

  Hawksley, Warren

  Carlisle, Kenneth (Lincoln)

  Hayhoe, Barney

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

  Heath, Rt Hon Edward

  Chalker, Mrs. Lynda

  Heddle, John

  Channon, Rt. Hon. Paul

  Henderson, Barry

  Chapman, Sydney

  Heseltine, Rt Hon Michael

  Churchill, W. S.

  Hicks, Robert

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

  Higgins, Rt Hon Terence L.

  Clark, Sir W. (Croydon S)

  Hill, James

  Clarke, Kenneth (Rushcliffe)

  Hogg, Hon Douglas (Gr'th'm)

  Clegg, Sir Walter

  Holland, Philip (Carlton)

  Cockeram, Eric

  Hooson, Tom

  Colvin, Michael

  Hordern, Peter

  Cope, John

  Howe, Rt Hon Sir Geoffrey

  Cormack, Patrick

  Howell, Rt Hon Sir Geoffrey

  Corrie, John

  Howell, Rt Hon D. (G'ldf'd)

  Costain, Sir Albert

  Hunt, David (Wirral)

  Cranborne, Viscount

  Hunt, John (Ravensbourne)

  Crouch, David

  Irvine, Rt Hon Bryant Godman

  Dickens, Geoffrey

  Irving, Charles (Cheltenham)

  Dorrell, Stephen

  Jenkin, Rt Hon Patrick

  Douglas-Hamilton, Lord J.

  Johnson Smith, Sir Geoffrey

  Dover, Denshore

  Jopling, Rt Hon Michael

  du Cann, Rt Hon Edward

  Joseph, Rt Hon Sir Keith

  Dunn, Robert (Dartford)

  Kaberry, Sir Donald

  Durant, Tony

  Kellett-Bowman, Mrs Elaine

  Dykes, Hugh

  Kimball, Sir Marcus

  Eden, Rt Hon Sir John

  King, Rt Hon Tom

  Edwards, Rt Hon N. (P'broke)

  Kitson, Sir Timothy

  Eggar, Tim

  Knight, Mrs Jill

  Elliott, Sir William

  Knox, David

  640

  Lamont, Norman

  Rees-Davies, W. R.

  Lang, Ian

  Renton, Tim

  Latham, Michael

  Rhodes James, Robert

  Lawrence, Ivan

  Rhys Williams, Sir Brandon

  Lawson, Rt Hon Nigel

  Ridley, Hon Nicholas

  Lee, John

  Ridsdale, Sir Julian

  Le Marchant, Spencer

  Rifkind, Malcolm

  Lennox-Boyd, Hon Mark

  Rippon, Rt Hon Geoffrey

  Lester, Jim (Beeston)

  Roberts, M. (Cardiff NW)

  Lewis, Kenneth (Rutland)

  Roberts, Wyn (Conway)

  Lloyd, Ian (Havant & W'loo)

  Rossi, Hugh

  Lloyd, Peter (Fareham)

  Rost, Peter

  Loveridge, John

  Rumbold, Mrs A. C. R.

  Luce, Richard

  Sainsbury, Hon Timothy

  Lyell, Nicholas

  St. John-Stevas, Rt Hon N.

  McCrindle, Robert

  Scott, Nicholas

  Macfarlane, Neil

  Shaw, Giles (Pudsey)

  MacGregor, John

  Shaw, Sir Michael (Scarb')

  MacKay, John (Argyll)

  Shelton, William (Streatham)

  Macmillan, Rt Hon M.

  Shepherd, Colin (Hereford)

  McNair-Wilson, M. (N'bury)

  Shepherd, Richard

  McNair-Wilson, P. (New F'st)

  Shersby, Michael

  McQuarrie, Albert

  Silvester, Fred

  Madel, David

  Sims, Roger

  Major, John

  Skeet, T. H. H.

  Marland, Paul

  Smith, Dudley

  Marlow, Antony

  Smith, Tim (Beaconsfield)

  Marshall, Michael (Arundel)

  Speed, Keith

  Marten, Rt Hon Neil

  Speller, Tony

  Maude, Rt Hon Sir Angus

  Spence, John

  Mawby, Ray

  Spicer, Jim (West Dorset)

  Mawhinney, Dr Brian

  Spicer, Michael (S Worcs)

  Maxwell-Hyslop, Robin

  Sproat, Iain

  Mayhew, Patrick

  Squire, Robin

  Mellor, David

  Stainton, Keith

  Meyer, Sir Anthony

  Stanbrook, Ivor

  Miller, Hal (B'grove)

  Stanley, John

  Mills, Iain (Meriden)

  Steen, Anthony

  Mills, Sir Peter (West Devon)

  Stevens, Martin

  Miscampbell, Norman

  Stewart, A. (E Renfrewshire)

  Moate, Roger

  Stewart, Ian (Hitchin)

  Monro, Sir Hector

  Stokes, John

  Montgomery, Fergus

  Stradling Thomas, J.

  Moore, John

  Tapsell, Peter

  Morgan, Geraint

  Taylor, Teddy (S'end E)

  Morris, M. (N'hampton S)

  Tebbit, Rt Hon Noman

  Morrison, Hon C. (Devizes)

  Temple-Morris, Peter

  Morrison, Hon P. (Chester)

  Thatcher, Rt Hon Mrs M.

  Mudd, David

  Thomas, Rt Hon Peter

  Murphy, Christopher

  Thompson, Donald

  Myles, David

  Thornton, Malcolm

  Neale, Gerrard

  Townend, John (Bridlington)

  Needham, Richard

  Townsend, Cyril D, (B'heath)

  Nelson, Anthony

  Trippier, David

  Neubert, Michael

  Trotter, Neville

  Newton, Tony

  van Straubenzee, Sir W.

  Normanton, Tom

  Viggers, Peter

  Nott, Rt Hon John

  Waddington, David

  Onslow, Cranley

  Wakeham, John

  Oppenheim, Rt Hon Mrs S.

  Waldegrave, Hon William

  Osborn, John

  Walker, Rt Hon P. (W'cester)

  Page, John (Harrow, West)

  Walker, B. (Perth)

  Page, Richard (SW Herts)

  Walker-Smith, Rt Hon Sir D.

  Parris, Matthew

  Wall, Sir Patrick

  Patten, Christopher (Bath)

  Waller, Gary

  Pattie, Geoffrey

  Walters, Dennis

  Pawsey, James

  Ward, John

  Percival, Sir Ian

  Warren, Kenneth

  Peyton, Rt Hon John

  Watson, John

  Pink, R. Bonner

  Wells, Bowen

  Porter, Barry

  Wells, John (Maidstone)

  Prentice, Rt Hon Reg

  Wheeler, John

  Price, Sir David (Eastleigh)

  Whitelaw, Rt Hon William

  Prior, Rt Hon James

  Whitney, Raymond

  Proctor, K. Harvey

  Wiggin, Jerry

  Raison, Rt Hon Timothy

  Wilkinson, John

  Rathbone, Tim

  Winterton, Nicholas

  Rees, Peter (Dover and Deal)

  Wolfson, Mark

  641

  Young, Sir George (Acton)

  Tellers for the Ayes:

  Younger, Rt Hon George

  Mr. Anthony Berry and

  Mr. Carol Mather.

  NOES

  Abse, Leo

  Evans, John (Newton)

  Adams, Allen

  Ewing, Harry

  Allaun, Frank

  Faulds, Andrew

  Alton, David

  Field, Frank

  Archer, Rt Hon Peter

  Fitch, Alan

  Ashley, Rt Hon Jack

  Flannery, Martin

  Ashton, Joe

  Foot, Rt Hon Michael

  Atkinson, N. (H'gey,)

  Ford, Ben

  Bagier, Gordon A.T.

  Forrester, John

  Barnett, Guy (Greenwich)

  Foster, Derek

  Barnett, Rt Hon Joel (H'wd)

  Foulkes, George

  Beith, A. J.

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

  Benn, Rt Hon Tony

  Freeson, Rt Hon Reginald

  Bennett, Andrew (St'kp't N)

  Garrett, John (Norwich S)

  Bidwell, Sydney

  Garrett, W. E. (Wallsend)

  Booth, Rt Hon Albert

  George, Bruce

  Bottomley, Rt Hon A. (M'b'ro)

  Gilbert, Rt Hon Dr John

  Bradley, Tom

  Ginsburg, David

  Bray, Dr Jeremy

  Golding, John

  Brocklebank-Fowler, C.

  Graham, Ted

  Brown, Hugh D. (Proven)

  Grant, George (Morpeth)

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

  Grant, John (Islington C)

  Brown, Ronald W. (H'ckn'y S)

  Grimond, Rt Hon J.

  Brown, Ron (E'burgh, Leith)

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

  Buchan, Norman

  Hardy, Peter

  Callaghan, Rt Hon J.

  Harman, Harriet (Peckham)

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

  Harrison, Rt Hon Walter

  Campbell-Savours, Dale

  Hattersley, Rt Hon Roy

  Canavan, Dennis

  Healey, Rt Hon Denis

  Cant, R. B.

  Heffer, Eric S.

  Carmichael, Neil

  Hogg, N. (E Dunb't'nshire)

  Carter-Jones, Lewis

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

  Cartwright, John

  Home Robertson, John

  Clark, Dr David (S Shields)

  Homewood, William

  Clarke, Thomas (C'b'dge, A'rie)

  Hooley, Frank

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

  Horam, John

  Cohen, Stanley

  Howell, Rt Hon D.

  Coleman, Donald

  Howells, Geraint

  Concannon, Rt Hon J. D.

  Hoyle, Douglas

  Conlan, Bernard

  Huckfield, Les

  Cook, Robin F.

  Hudson Davies, Gwilym E.

  Cowans, Harry

  Hughes, Mark (Durham)

  Cox, T. (W'dsw'th, Toot'g)

  Hughes, Robert (Aberdeen N)

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

  Hughes, Roy (Newport)

  Crawshaw, Richard

  Janner, Hon Greville

  Crowther, Stan

  Jay, Rt Hon Douglas

  Cryer, Bob

  Jenkins, Rt Hon Roy (Hillh'd)

  Cunliffe, Lawrence

  John, Brynmor

  Cunningham, G. (Islington S)

  Johnson, James (Hull West)

  Cunningham, Dr J. (W'h'n)

  Johnson, Walter (Derby S)

  Dalyell, Tam

  Johnston, Russell (Inverness)

  Davidson, Arthur

  Jones, Rt Hon Alec (Rh'dda)

  Davies, Rt Hon Denzil (L'lli)

  Jones, Barry (East Flint)

  Davis, Clinton (Hackney C)

  Jones, Dan (Burnley)

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

  Kaufman, Rt Hon Gerald

  Deakins, Eric

  Kerr, Russell

  Dean, Joseph (Leeds West)

  Kilroy-Silk, Robert

  Dewar, Donald

  Kinnock, Neil

  Dixon, Donald

  Lambie, David

  Dobson, Frank

  Lamond, James

  Dormand, Jack

  Leadbitter, Ted

  Douglas, Dick

  Leighton, Ronald

  Dubs, Alfred

  Lestor, Miss Joan

  Duffy, A. E. P.

  Lewis, Arthur (N'ham NW)

  Dunnett, Jack

  Lewis, Ron (Carlisle)

  Dunwoody, Hon Mrs G.

  Litherland, Robert

  Eadie, Alex

  Lofthouse, Geoffrey

  Eastham, Ken

  Lyon, Alexander (York)

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

  Lyons, Edward (Bradf'd W)

  Ellis, Tom (Wrexham)

  Mabon, Rt Hon Dr J. Dickson

  English, Michael

  McCartney, Hugh

  Ennals, Rt Hon David

  McDonald, Dr Oonagh

  Evans, Ioan (Aberdare)

  McGuire, Michael (Ince)

  642

  McKay, Allen (Penistone)

  Rowlands, Ted

  McKelvey, William

  Ryman, John

  MacKenzie, Rt Hon Gregor

  Sandelson, Neville

  Maclennan, Robert

  Sever, John

  McMahon, Andrew

  Sheerman, Barry

  McNally, Thomas

  Sheldon, Rt Hon R.

  McNamara, Kevin

  Shore, Rt Hon Peter

  McTaggart, Robert

  Short, Mrs Renée

  McWilliam, John

  Silkin, Rt Hon J. (Deptford)

  Magee, Bryan

  Silkin, Rt Hon S. C. (Dulwich)

  Marks, Kenneth

  Silverman, Julius

  Marshall, D (G'gow S'ton)

  Skinner, Dennis

  Marshall, Dr Edmund (Goole)

  Smith, Cyril (Rochdale)

  Marshall, Jim (Leicester S)

  Smith, Rt Hon J. (N Lanark)

  Martin, M (G'gow S'burn)

  Snape, Peter

  Mason, Rt Hon Roy

  Soley, Clive

  Maxton, John

  Spearing, Nigel

  Maynard, Miss Joan

  Spellar, John Francis (B'ham)

  Meacher, Michael

  Spriggs, Leslie

  Mikardo, Ian

  Stallard, A. W.

  Millan, Rt Hon Bruce

  Steel, Rt Hon David

  Miller, Dr M. S. (E Kilbride)

  Stewart, Rt Hon D. (W Isles)

  Mitchell, Austin (Grimsby)

  Stoddart, David

  Mitchell, R. C. (Soton Itchen)

  Stott, Roger

  Morris, Rt Hon A. (W'shawe)

  Strang, Gavin

  Morris, Rt Hon C. (O'shaw)

  Summerskill, Hon Dr Shirley

  Morris, Rt Hon J. (Aberavon)

  Taylor, Mrs Ann (Bolton W)

  Moyle, Rt Hon Roland

  Thomas, Dafydd (Merioneth)

  Mulley, Rt Hon Frederick

  Thomas, Jeffrey (Abertillery)

  Newens, Stanley

  Thomas, Mike (Newcastle E)

  Oakes, Rt Hon Gordon

  Thorne, Stan (Preston South)

  Ogden, Eric

  Tilley, John

  O'Halloran, Michael

  Tinn, James

  O'Neill, Martin

  Torney, Tom

  Orme, Rt Hon Stanley

  Varley, Rt Hon Eric G.

  Owen, Rt Hon Dr David

  Wainwright, E. (Dearne V)

  Paisley, Rev Ian

  Wainwright, R. (Colne V)

  Palmer, Arthur

  Walker, Rt Hon H. (D'caster)

  Park, George

  Wardell, Gareth

  Parker, John

  Watkins, David

  Parry, Robert

  Weetch, Ken

  Pendry, Tom

  Wellbeloved, James

  Penhaligon, David

  Welsh, Michael

  Pitt, William Henry

  White, Frank R.

  Powell, Raymond (Ogmore)

  Whitehead, Phillip

  Prescott, John

  Whitlock, William

  Price, C. (Lewisham W)

  Wigley, Dafydd

  Race, Reg

  Willey, Rt Hon Frederick

  Radice, Giles

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

  Rees, Rt Hon M (Leeds S)

  Williams, Rt Hon Mrs (Crosby)

  Richardson, Jo

  Wilson, Gordon (Dundee E)

  Roberts, Albert (Normanton)

  Wilson, Rt Hon Sir H. (H'ton)

  Roberts, Allan (Bootle)

  Wilson, William (C'try SE)

  Roberts, Ernest (Hackney N)

  Winnick, David

  Roberts, Gwilym (Cannock)

  Woodall, Alec

  Robertson, George

  Woolmer, Kenneth

  Robinson, G. (Coventry NW)

  Wrigglesworth, Ian

  Robinson, P. (Belfast E)

  Wright, Sheila

  Rodgers, Rt Hon William

  Young, David (Bolton E)

  Rooker, J. W.

  Roper, John

  Tellers for the Noes:

  Ross, Ernest (Dundee West)

  Mr. James Hamilton and

  Ross, Stephen (Isle of Wight)

  Mr. Frank Haynes.

  Question accordingly agreed to.
  Resolved,
  That an humble Address be presented to Her Majesty, as follows:—
  Most Gracious Sovereign,
  We, Your Majesty's most dutiful and loyal subjects, the Commons of the United Kingdom of Great Britain and Northern Ireland in Parliament assembled, beg leave to offer our humble thanks to Your Majesty for the Gracious Speech which Your Majesty has addressed to both Houses of Parliament.
  To be present by Privy Councillors or Members of Her Majesty's Household.

  Royal Naval College, Greenwich
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Lang.]
  10.41 pm
  Mr. Guy Barnett: I am grateful for the opportunity to raise the issue of contract catering at the Royal Naval College, at Greenwich in my constituency.
  The proposal to move to contract catering became public shortly after the Ministry of Defence began consultations on 23 July. It has caused a good deal of concern and even alarm in my constituency. There has been comment in the local press. The present catering staff, who are likely to be affected, are deeply worried by the proposal. Doubts have even been expressed by the management of the college.
  I wish to emphasise that I have deliberately not asked the management officially for its views for fear of placing it in a difficult position, but the Minister should tell the House what reaction his proposal has met among the naval staff and the management of the college. Understandably, it is the industrial staff whose jobs are directly threatened who are most alarmed and dismayed by the proposal. There can be no valid criticism of the performance of the staff. Every time I have been a guest of the Royal Naval College or enjoyed the hospitality of the Admiral President I have been struck by the efficiency, thoughtfulness and courtesy of the catering staff with whom I have come into contact, and I have been highly impressed by their culinary skills.
  Let no one be in any doubt about the considerable demands that are made upon them. In addition to the considerable requirements of the officers' mess, which start daily with early morning tea for every accommodated individual and end with dinner in the Painted Hall, there are varied requirements which arise from Royal, State, diplomatic and Admiralty Board banquets. There are formal dinners for external organisations, buffet lunches, parties and receptions. That is just to name a few of the varied requirements that fall upon the present catering staff who serve the college so supremely well.
  They do so because the people who make up that staff share a tradition of loyalty derived from the fact that many of them have previously served Her Majesty in the Armed Services and have then served the Government for many years in anticipation that their jobs would be safe, even if the weekly wage was small.
  What is the argument for the proposal to replace the present staff of about 100 by a contract firm? I wrote to the Under-Secretary of State for Defence Procurement, and his reply, in a letter dated 1 October, was that it would be cheaper. He thought—I hope that I interpret his words fairly—that a contract firm would be at least as efficient as the present work force.
  I shall deal first with the cheapness argument. The Minister cannot quote the nature of the putative contractor's bid without disclosing commercial information. I understand that. But if cheapness is his objective, he must answer a number of questions. First, what initiatives have been taken by the management of the college, on his instructions, to cut costs in the present service? My information is that no such initiatives have been taken. It would be making quixotic demands on the trade unions to suggest that they should come forward with such proposals.
  644
  Secondly, as the Minister knows, there has been an almost universal ban on recruitment, with the result that the present work force is about 30 below strength. So why does the Minister insist on making cost comparisons that count the establishment level and not the numbers actually in post? Does he not accept that the only legitimate comparison is on the basis of those now in post, plus an efficiency exercise initiated by the management in cooperation with trade union representatives? Thirdly, in his letter to me the Minister states:
  "in line with Treasury guidance, 5 per cent. of total redundancy compensation is included in the comparison of the annual costs of contract and in-house catering."
  That may be the Treasury's idea of a fair comparison, but no accountant would agree that so small a percentage represents a realistic figure for redundancy costs that will arise as a result of implementing the proposal to go out to contract.
  The Minister used the argument of efficiency. That is even less soundly based. In his letter to me he said that he is well satisfied with his many cleaning contractors. Even were that to be true, it is hardly relevant to this proposal. He admits in his letter:
  "Our experience in the catering field is as yet somewhat limited."
  Yet he is prepared to consider a proposal to hand over to a contractor a very wide-ranging function. It is a varied responsibility of which few contractors can have had experience—anything from a full dress State banquet to the routine and varied needs of the college, as well as the private functions.
  It would not surprise me if the contractor who had been awarded the contract, and possibly even moved in, would find it necessary to withdraw because he was unable to fulfil his obligations. He might even default on them. What would the Minister do then? He may think that the best hope is for the contractor to re-engage the staff who are being made redundant to take advantage of their expertise and experience. If so, what is he saying? It is that the work force of the college is highly competent, but the management of the college is not. If that were the case, logic should then decide him to sack the management, appoint new managers and keep the present staff.
  I am driven to the unwelcome conclusion that the Government think that it would be advantageous to divest themselves of their responsibilities as employer, and that the major saving that they hope to make will be made at the expense of the employees who, if they are re-engaged by the contractor, will be paid even lower wages than they are now receiving and suffer worse conditions of employment than those which are currently the subject of trade union negotiation.
  Mr. Roland Moyle: Does not my hon. Friend agree that both he and I have enjoyed the catering arrangements at the college from time to time, and found them of first-class efficiency? Is it not crystal clear to any impartial person that the interests of his constituents and mine are being sacrificed for a managerial scheme of dubious efficiency, purely on doctrinaire grounds?
  Mr. Barnett: I agree entirely with my right hon. Friend. He represents a constituency near to mine and will recognise, as I do, the vital importance of the role of the Royal Naval College in our area. However, I would go further. I am sure that my right hon. Friend will agree that the Royal Naval College has a national, if not international, reputation, which needs to be preserved.

  645
  My final point, which is perhaps the most important, concerns security. We are told that the Government are security conscious. If they are not, they should be when there is a constant threat to the realm, to important individuals and to members of the Armed Services. Recent lapses in security affecting the Royal Family have caused considerable public disquiet. I raised those issues in my letter to the Minister, but his view is that there is no cause for concern on security grounds with regard to the proposal for the college.
  Would that also be his view about the Palace of Westminster? I understand that the House of Commons (Services) Committee would not accept it. If anything, the risks to be run at the Royal Naval College are greater than those that might affect this building. One reason is the fluctuating demands for catering and waiting staff in the college, which dictate the need for casual staff on precisely those occasions when the college hosts royalty, foreign statesmen, diplomats and other important individuals.
  The Minister suggests that there will be a pool of supplementary labour from which the contractor can draw for special occasions and that the Ministry will ensure that that pool contains only the people who are security vetted. However, I am told that there are a number of instances in which that system does not work. The substitution of a security-cleared worker for someone who has not been so cleared is a strong possibility, and is one that I understand has arisen in other areas where contractors have been employed.
  I ask the Minister to consider that matter of security more seriously than he seems so far to have done or to give a fuller answer than the one contained in the letter that he wrote to me.
  There are, of course, differences between the Government and myself on political grounds, but I am deliberately not dilating on them in this Adjournment debate. However, the Government owe the House, and those who work in my constituency and who are involved, much more explanation on three points: how the Minister arrives at the cost comparisons that he says that he has made; whether he thinks that the figure that he has included to cover redundancy costs is fair; and explanation on the security aspect on which the House is entitled to greater reassurance than hon. Members who have written to the Minister have so far received.
  10.52 pm
  The Under-Secretary of State for Defence Procurement (Mr. Geoffrey Pattie): I am grateful to the hon. Member for Greenwich (Mr. Barnett) for raising this subject tonight, as it gives me the opportunity to set out some of the background both to the specific proposal to introduce contract catering at the Royal Naval College, Greenwich and to the general exercise of which this is a part. Since 1979 we have been examining the scope fpr contracting out cleaning and catering services at defence establishments in Great Britain, and I know from the letters that I have received that this subject is of interest to a considerable number of hon. Members.
  I should say at the outset that we have not yet taken a final decision on whether to introduce contract catering at the Royal Naval College, Greenwich. We are at present consulting the departmental trade union side on the proposal, and we shall take its views into account before reaching a final decision. We shall also, of course, take into account the points in the debate tonight. We do,
  646
  however, hope to be able to make the decision in the near future, because if we are to go ahead, the timing of the changeover to contract is an important consideration to which I shall return later.
  Before I deal with the merits of this proposal, I should like to set it in the context of our general study of contract cleaning and catering. The Government came into office committed to bringing about a reduction in the size and cost of the Civil Service. Contracting out cleaning, and catering services is one of the "good housekeeping" measures undertaken in my Department as a contribution to this goal. It enables us to save money and to help to meet our reduced manpower targets, without detriment to the defence effort. From the beginning, it was clear that contract cleaning offered the prospect of significant financial savings at a large number of Defence establishments. It was also clear that, while the case for contract catering was in general more finely balanced, there was the possibility of savings at certain establishments such as the Royal Naval College, Greenwich.
  It is sometimes said that the aim of this exercise is to contract work out to the private sector whatever the cost. This is not so. We decide to contract out cleaning and catering only after a careful and detailed cost comparison between the costs of doing the task in-house and the costs of contract, and only when we are satisfied that contract would be no more expensive. In all the large number of cleaning contracts and the small number of catering contracts so far approved, contract has proved to be not just no more expensive but clearly cheaper—in many cases substantially so.
  Cleaning contracts have so far been authorised for over 200 defence establishments, which will save over 4,800 complemented Civil Service posts, and an estimated sum of around £8 million a year. Only a few catering contracts have so far been authorised, mainly because a much smaller number of establishments are suitable for contract catering, and, because in some cases contract would have been more expensive than continuing the present in-house arrangements, we do not proceed with them. The Royal Naval College, Greenwich, is, however, one establishment where we could save money by changing to contract.
  I regret to say, as the hon. Member for Greenwich predicted I would say, that I am unable to disclose details of the cost comparison which leads to that conclusion. I recognise that the hon. Member would like to have these full details, as indeed would our trade unions. There is unfortunately a genuine difficulty here to which we have been unable to find a solution. The fact is that the tenders we receive are submitted on a "commercial in confidence" basis. Tenderers have a right to expect that the privacy of the details they provide to us will be respected. This point was considered by the central arbitration committee in 1980, when the Civil Service union sought a ruling that the Ministry of Defence should disclose information from some cleaning tenders. the central arbitration committee concluded that because the information was submitted by tenderers "in confidence", the Department could not be required to disclose it. I can, however, give the hon. Member my assurance that the cost comparison for catering at Royal Naval College, Greenwich shows that that contract would be significantly cheaper.
  The cost comparison is, as I have said, based on a detailed assessment of the relative costs of in-house and contract catering. It includes, on the in-house side, the

  647
  costs of food, wages, employer's national insurance contributions, superannuation, administration and other costs. On the contract side, it includes the contract price, the costs of those directly employed staff who would be retained, administration and other costs and a proportion of the likely cost of redundancy payments to staff who would no longer be required.
  The total in-house costs of catering at the college come to £1,028,000 a year at 1981 prices, based on the full complement of staff. Because of under-manning, to which the hon. Member for Greenwich referred, the staff strength is below the complement, and on the basis of staff in post, the in-house cost is about £200,000 less, or £837,000 a year. For the purposes of the cost comparison, we normally use the in-house costs based on the full complement of staff, to ensure that we are comparing like with like. The full complement is the number of staff required to carry out the full task, and this is also the basis on which tenders are invited. A true comparison of the costs of the two options must therefore be based on the in-house costs of carrying out the full task—in other words, the cost of the full in-house complement. In fact, in this case, contract catering would be cheaper even than the lower in-house costs that I have quoted, based on the actual number of staff employed at present.
  I know that the trade unions have questioned the fact that the allowance for redundancy costs in the comparison is 5 per cent. of the total estimated payments, and have argued that that percentage is too low. The figure of 5 per cent. has been laid down by central Departments as the correct one to use when making such cost comparisons. It is based on the fact that redundancy payments are, of course, a one-off cost in the changeover to contract, and to add the total cost on to the first year of the changeover would give a false picture of the long-term balance of advantage between in-house and contract catering. We must take a long-term view of the relative costs, and while clearly some account must be taken of the once-for-all costs of a change, spreading such costs out over a reasonable period is considered the best way of doing so.
  Mr. Moyle: The Minister is basing his case entirely on costs. There are other factors, as my hon. Friend the Member for Greenwich (Mr. Barnett) has said. Many prominent people from abroad take advantage of the catering services at the Royal Naval College. Will he assure the House that standards of service and efficiency will be at least as good as they are now under any future arrangements?
  Mr. Pattie: As the right hon. Gentleman will appreciate, I am dealing with a series of points and I shall be coming to standards. I assure him that a change of this sort would not be contemplated if we were not satisfied on two fundamental points—first, that we would get genuine and significant savings, and, second, that standards would be as high as they had been in the past. There is no point in changing to lower standards.
  The hon. Member for Greenwich also raised the point whether it would still be cost-effective to change to contract catering when that would also involve giving staff pay in lieu of some of the u period of notice to which they would be entitled. That raises the question of the timing of the changeover, to which I referred at the beginning of my speech. For practical reasons, the
  648
  changeover would be best made during one of the holiday periods at the college—Easter, summer or Christmas. The defence studies wing of the National Defence College, Latimer, will be moving to Greenwich during next summer, and it would not be practical to introduce catering contractors at the same time as this other change is taking place. That means that if the changeover to contract did not take place in Easter 1983, it would not be possible until the end of the year. Making the change at Easter would involve giving some pay in lieu of the full period of notice, but the cost of that is assessed as being less than the savings achievable by changing to contract at the earlier date.
  I am aware that the local work force has now expressed an interest in submitting its own proposals for cutting the costs of in-house catering as an alternative to contract. It has been made clear to our trade unions that while we are ready to consider counter proposals from them, these must be submitted no later than the tendering stage. That is to allow us time to evaluate them and, if they are considered acceptable, to cost them and compare them with the tenders. That stage has now passed, and so it is too late to consider such proposals.
  I fully understand the anxieties of the work force about job losses and its future employment prospects. The proposal to bring in catering contractors at the college would involve the disappearance of the equivalent of 118 full-time complemented posts. Because a number of those are unfilled at present, the actual number of jobs lost would be the equivalent of 85½ full-time posts. The number of individual staff members affected would depend on how many part-time and full-time employees in the expected field of redundancy actually leave, but the maximum number would be just under 100. Every effort would be made to find alternative Government employment for those displaced, but it is likely that some at least would have to be declared redundant.
  However, the incoming contractor would of course need to employ staff to enable him to carry out the contract, and we encourage both cleaning and catering contractors to recruit the extra staff they will need from among the existing work force.
  It is in both his and our interests that he should have a work force experienced in the requirements of the establishment concerned, and we have found from experience that contractors co-operate well on that point. For example, we have analysed what became of the directly employed staff at the first 95 establishments where contract cleaning has been introduced during the current exercise. Of the staff in post when the decision was taken, 53 per cent. either transferred to other Ministry of Defence employment or opted for retirement or voluntary redundancy terms. Four-fifths of the remaining 47 per cent. were offered employment by the incoming contractor. Of those, just under half accepted the offer of employment and just over half, for whatever reason, declined. The final result was that 71 per cent. of the existing staff were either employed elsewhere in the Ministry of Defence or by the contractors, or had opted for retirement or voluntary redundancy, and most of the remaining 29 per cent. had had the opportunity of employment with the contractor. Our experience with the small number of catering contracts let so far has been similar, and while, of course, no guarantees can be given

  649
  that the pattern would be repeated exactly at the RNC Greenwich, there is no reason to expect that that would not be so.
  As to the terms of employment offered by commercial firms, they are obliged under the contract to observe the terms of the fair wages resolution, and we take care to verify that the contractors' proposed wage rates are in line with local market rates.
  On the question of the standards of service provided by contractors, we are satisfied that the firm to which we propose to award the RNC Greenwich contract is highly reputable and is fully capable of meeting our requirements. Firms are asked to tender only if we consider them to be able to carry out the task to our satisfaction and tenders are carefully scrutinised to see that they are realistic and provide acceptable standards.
  As the right hon. Member for Lewisham, East (Mr. Moyle) reminded us, particularly high standards are required at the RNC Greenwich, because of the nature of some of the catering functions held there, but the use of contractors for such prestige functions is not a complete novelty. The Government hospitality fund makes considerable use of commercial caterers for its functions, and we are confident that a commercial firm at RNC Greenwich would be able to maintain the high standards expected of it.
  Some concern has been expressed about the security aspect of using a commercial caterer in an establishment such as the college, particularly since the contractor would need to bring in extra staff to supplement his regular employees on special occasions. As I said a moment ago, contractors are already used in similar circumstances by the Government hospitality fund, and the Department would take whatever steps were considered necessary to satisfy itself as to the acceptability of the staff employed. That would naturally be made easier if, as we hope, the contractor at Greenwich recruited his extra staff from the existing work force. Arrangements would also be made to establish a pool of reserve labour for special functions
  650
  when more staff were needed. I assure the House that we attach great importance to security and we are satisfied that the arrangements will be adequate.
  I do not share the suspicion in some quarters that commercial contractors are somehow less reliable and less able to meet the standards required than directly employed staff. That is not borne out by our experience. Our many cleaning contractors and their staff have, in general, shown themselves to be as reliable, adaptable and dedicated as our own employees. For example, in a number of establishments where special demands were placed on them during the Falklands operation, they responded well. In many cases, despite some initial apprehensions about the standards provided by contract cleaners, we have seen positive improvements in standards as a result of their introduction. Although we have, so far, less experience of contract catering, I am confident that it can be just as successful.
  I fully sympathise with the present catering staff at RNC Greenwich whose jobs would be affected by the proposal. Many have given long and dedicated service, but, at a time when we are looking for economies, we cannot afford to ignore the significant savings which we are satisfied would come from a change to contract. I hope that many of the existing work force will find employment with the contractors so that their services will not be lost to the college.
  In conclusion, let me repeat what I said at the outset. We have not reached a final decision on the proposal, although we hope to do so soon. All the views expressed tonight will be taken into account in reaching that decision, but I must say that I believe that there remain good reasons why the proposal should go ahead, and that the apprehensions about the implications of the change to contract are not well-founded. If the final decision is that we should go ahead, I am sure that we can maintain the high standards of catering required at the college while making worthwhile savings.
  Question put and agreed to.
  Adjourned accordingly at seven minutes past Eleven o' clock.

ATTORNEY-GENERAL
  Crown Courts (Bedford and Luton)
  Crown Courts (Bedford and Luton)
NATIONAL FINANCE
  Tax Relief
  Tax Relief
  Personal Taxation (Allowances)
  Personal Taxation (Allowances)
WALES
  Disabled Persons (Access to Buildings)
  Disabled Persons (Access to Buildings)
  Unemployment Statistics
  Unemployment Statistics
  House Condition Survey
  House Condition Survey
HOME DEPARTMENT
  Nuclear Warfare (Casualties)
  Nuclear Warfare (Casualties)
  Oxford and Reading (Prisons)
  Oxford and Reading (Prisons)
  Immigration Rules
  Immigration Rules
  Police (Riot Equipment)
  Police (Riot Equipment)
  Deportation
  Deportation
  Firemen (Pensions)
  Firemen (Pensions)
  Civil Defence
  Civil Defence
  Iranian Nationals
  Iranian Nationals
  Firearms Certificates
  Firearms Certificates
CIVIL SERVICE
  Fast-stream Graduates (Selection)
  Fast-stream Graduates (Selection)
NORTHERN IRELAND
  Abortion Act 1967
  Abortion Act 1967
  Assembly Elections
  Assembly Elections
  University Reform
  University Reform
ENERGY
  Britoil
  Britoil
  Standing Charges
  Standing Charges
OVERSEAS DEVELOPMENT
  Departmental Staff
  Departmental Staff
INDUSTRY
  Small Engineering Firms Investment Scheme
  Small Engineering Firms Investment Scheme
  Government and Public Sector Contracts
  Government and Public Sector Contracts
  Garlon 2 Herbicide
  Garlon 2 Herbicide
PRIME MINISTER
  Local Authorities and Nationalised Industries (Expenditure)
  Local Authorities and Nationalised Industries (Expenditure)
EDUCATION AND SCIENCE
  Special Education
  Special Education
  Thames Polytechnic
  Thames Polytechnic
  Schoolgirl Mothers
  Schoolgirl Mothers
  Disabled Persons (Access to Buildings)
  Disabled Persons (Access to Buildings)
  Student Grants
  Student Grants
  16-plus Examinations
  16-plus Examinations
  "Relationships and Sexuality"
  "Relationships and Sexuality"
FOREIGN AND COMMONWEALTH AFFAIRS
  British Antarctic Territory
  British Antarctic Territory
  Security and Co-operation in Europe
  Security and Co-operation in Europe
  Disabled Persons
  Disabled Persons
  Lebanon
  Lebanon
EMPLOYMENT
  Chemical Substances (Storage)
  Chemical Substances (Storage)
  Construction Industry
  Construction Industry
  Employment Transfer Scheme
  Employment Transfer Scheme
  Community Programme
  Community Programme
  Health and Safety Executive
  Health and Safety Executive
  Factory Inspectorate
  Factory Inspectorate
  Health and Safety
  Health and Safety
  Dangerous Substances (Inspections)
  Dangerous Substances (Inspections)
  Unemployed Persons (Availability for Work)
  Unemployed Persons (Availability for Work)
  Trade Union Ballots
  Trade Union Ballots
DEFENCE
  Royal Ordnance Factories
  Royal Ordnance Factories
  Departmental Staff (Transfer)
  Departmental Staff (Transfer)
  Falklands Campaign (Mail Censorship)
  Falklands Campaign (Mail Censorship)
  Falklands Campaign (Nimrods)
  Falklands Campaign (Nimrods)
  Merchant Vessels
  Merchant Vessels
SCOTLAND
  Accountants and Consultants
  Accountants and Consultants
  Commission for Local Administration in England (Report)
  Commission for Local Administration in England (Report)
  Commissioner for Complaints
  Commissioner for Complaints
  Disabled Persons (Access to Buildings)
  Disabled Persons (Access to Buildings)
  Tenancy Agreements
  Tenancy Agreements
  Tenant Farmers
  Tenant Farmers
  Doctors, Nurses and Teachers
  Doctors, Nurses and Teachers
  Glasgow and Edinburgh (Unemployment Statistics)
  Glasgow and Edinburgh (Unemployment Statistics)
AGRICULTURE, FISHERIES AND FOOD
  Butter
  Butter
  Dioxin TCDD
  Dioxin TCDD
  Battery Farming
  Battery Farming
  Garlon 2 Herbicide
  Garlon 2 Herbicide
  Dog Licences
  Dog Licences
  European Community (Intervention Stocks)
  European Community (Intervention Stocks)
  Common Fisheries Policy
  Common Fisheries Policy
  Food Additives
  Food Additives
  Bananas (Import)
  Bananas (Import)
  Imported Foodstuffs
  Imported Foodstuffs
  Food Industry (Enzyme Preparations)
  Food Industry (Enzyme Preparations)
TRADE
  European Community (Steel Imports)
  European Community (Steel Imports)
  Clothing Imports (Quotas)
  Clothing Imports (Quotas)
  "Buy British" Campaign
  "Buy British" Campaign
  Manufactured Goods
  Manufactured Goods
  Car Imports
  Car Imports
  Fireworks
  Fireworks
  United States of America
  United States of America
  Argentina
  Argentina
  Steel Imports
  Steel Imports
  Spain
  Spain
  Third London Airport
  Third London Airport
SOCIAL SERVICES
  Unified Rent Scheme
  Unified Rent Scheme
  Geriatric Inpatients
  Geriatric Inpatients
  Black Report
  Black Report
  Lead-free Petrol
  Lead-free Petrol
  Benefits
  Benefits
  Pleural Fibrosis
  Pleural Fibrosis
  Benefit and Pensions
  Benefit and Pensions
  National Health Service Statistics (Körner Committee)
  National Health Service Statistics (Körner Committee)
  Prescribing (Greenfield Report)
  Prescribing (Greenfield Report)
  Viral Hepatitis
  Viral Hepatitis
  Pharmaceutical Industry
  Pharmaceutical Industry
  Iatrogenic Diseases
  Iatrogenic Diseases
  Disabled Persons (Access to Buildings)
  Disabled Persons (Access to Buildings)
  Dental Treatment
  Dental Treatment
  Supplementary Benefit
  Supplementary Benefit
  Social Security (Oxford)
  Social Security (Oxford)
  "The Handicapped and Impaired in Great Britain"
  "The Handicapped and Impaired in Great Britain"
  Fuel Direct Scheme
  Fuel Direct Scheme
  Tadworth Court Hospital
  Tadworth Court Hospital
  Social Services Committee (Fourth Report)
  Social Services Committee (Fourth Report)
  Immigrant Population (Statistics)
  Immigrant Population (Statistics)
  Report on Enzymes
  Report on Enzymes
  Social Security Commissioners (Appeals)
  Social Security Commissioners (Appeals)
  Household Expenditure Survey
  Household Expenditure Survey
TRANSPORT
  Accountants and Consultants
  Accountants and Consultants
  Tyres
  Tyres
  New Drivers (Accidents)
  New Drivers (Accidents)
ENVIRONMENT
  House Building
  House Building
  Local Authorities (Expenditure)
  Local Authorities (Expenditure)
  Central Berkshire
  Central Berkshire
  Commons Registration Act 1965
  Commons Registration Act 1965
  Football Hooliganism
  Football Hooliganism
  Birmingham (Audit)
  Birmingham (Audit)
  Water Rates (Rebates)
  Water Rates (Rebates)
  Rates
  Rates
  Water Industry
  Water Industry
  Unoccupied Council Houses
  Unoccupied Council Houses
  Local Government (Select Committee Report)
  Local Government (Select Committee Report)
  Consett and Scunthorpe
  Consett and Scunthorpe
  Housing Improvement Programme
  Housing Improvement Programme
  Industrial Housing Construction
  Industrial Housing Construction
  Local Authorities (Housing Capital Allocations)
  Local Authorities (Housing Capital Allocations)
  Minis 3
  Minis 3
  Housing Investment Programme
  Housing Investment Programme
  Apartheid (United Nations Blacklist)
  Apartheid (United Nations Blacklist)
  Inner City Policy
  Inner City Policy
  Commercial Property (Rates)
  Commercial Property (Rates)
  Gibraltar
  Gibraltar
  Cavity Insulation
  Cavity Insulation
  Airey Houses
  Airey Houses
  Council House Sales
  Council House Sales
  Leasehold Property
  Leasehold Property
  Housing Grant-related Expenditure
  Housing Grant-related Expenditure
  Planning Inquiries
  Planning Inquiries
  Sport and Recreation
  Sport and Recreation
  Commission for the New Towns
  Commission for the New Towns
  Water Authorities (Expenditure)
  Water Authorities (Expenditure)
  Refuse Collection
  Refuse Collection
  Co-ownership Flats (Sales)
  Co-ownership Flats (Sales)
  Departmental Organisation (Privatisation)
  Departmental Organisation (Privatisation)
  Royal Parks Constabulary
  Royal Parks Constabulary
  Housing Stock
  Housing Stock
  Victoria Street (Parking)
  Victoria Street (Parking)
  Empty Council Properties
  Empty Council Properties
  Land Reclamation
  Land Reclamation
  Disabled Persons (Access to Buildings)
  Disabled Persons (Access to Buildings)
  Merseyside Task Force
  Merseyside Task Force
  Housing (Sheffield)
  Housing (Sheffield)
  Disabled Persons
  Disabled Persons
  113 Dimbes Lane, Lichfield
  113 Dimbes Lane, Lichfield
  Housing Improvement
  Housing Improvement
  Central Register of Historic Buildings on the Government Estate
  Central Register of Historic Buildings on the Government Estate
  Rates Avoidance
  Rates Avoidance
  Departmental Correspondence
  Departmental Correspondence

Preamble
The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Bath and Wells.

The UN Law of the Sea Convention
Lord Kennet: 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 the Prime Minister received a special American emissary, Mr. Donald Rumsfeld, to discuss questions arising following the adoption of the Law of the Sea Convention, and whether they will make a statement.
The Minister of State, Foreign and Commonwealth Office (Lord Belstead): My Lords, Mr. Rumsfeld saw my right honourable friend the Prime Minister and a number of other Ministers concerned with UNLOSC on 25th October. He explained the American position towards the convention. We said that no decision had yet been taken by the United Kingdom on signature, but the views of our allies would be taken into account.
Lord Kennet: My Lords, while not wishing to press the Government to a premature decision or to disclose anything they should not disclose, can they go so far as to say that they will not publicly state their intention not to sign this convention before discussing the matter at least in this House, and the House of Commons if convenient, and that they wiill not associate themselves with any American declaration of intention not to sign until there has been parliamentary debate?
Lord Belstead: My Lords, we are still examining the texts which have emerged from the conference in the light of our national interests and the views of other governments. No decision has yet been taken as to whether or not to sign the convention. So far as debate in your Lordships' House is concerned, that, of course, would be a matter for the usual channels.
Lord Cledwyn of Penrhos: My Lords, the Minsiter must agree that he has said at that Box several times recently that he and his colleagues have been studying these texts for a very long time. Are they not able to reach a conclusion? Can he be specific about the reasons of Her Majesty's Government for not signing this convention? Is it not the case that 15 months ago the Government appeared to be very favourable towards signing this convention, and took the view that it was advantageous to a great maritime nation like Britain to be involved in a convention of this kind? Since then, the Government's ardour has become extremely dampened. Can the noble Lord tell the House what are the Government's reasons for not moving, like the other 130 countries which have ratified it, towards signing the convention?
Lord Belstead: My Lords, the lack of consensus within the conference is the reason why the United Kingdom abstained on the vote on the adoption of the convention. So far as our final decision as to whether or not to sign is concerned, as I say, we are still studying the text.
Lord Cledwyn of Penrhos: My Lords, with great respect, given the time that has elapsed since the texts were available to Her Majesty's Govenment, can the noble Lord tell the House when the Govenment are likely to make a judgment on this and inform Parliament accordingly?
Lord Belstead: My Lords, I think the noble Lord is being, perhaps uncharacteristically, a little harsh so far as the period of time is concerned. The last session of the conference was held in New York on 22nd to 24th September. It was on that occassion that the British Government tried very hard indeed to get an area of agreement between the Group of 77 nations and the main mining nations, particularly on the difficult questions of transfer of technology and opportunities for mining companies to get licences when the independent seabed authority is set up, and indeed on the question of the review conference, which is another difficult matter so far as mining under the convention is concerned. On all those three points the United Kingdom was not successful in being able to get a consensus. With respect to the noble Lord, that was not so very long ago, and we have only had since that moment to sit down and think what our final decision on the convention should be. That is what we are still doing at the present time.
Lord Gisborough: My Lords, can the noble Lord say whether it is true that, under the convention, a situation could arise with regard to profits on mining of the seabed in which some of those profits could be allocated to such people as the IRA and so on?
Lord Belstead; No, my Lords, I do not think the answer to that could possibly be "yes". I would go further. There is no question of the IRA being able to participate in the benefits of the convention. They could not meet the necessary criteria.
Lord Kennet: My Lords, in view of the fact that this is a turning point in the history of mankind, and in view of the manifest insufficiency of the interim agreement concerning arrangements relating to polymetallic nodules, which any signatory can leave with three months' notice, can the Government please give some undertaking that they will not state their intention not to sign in a way which will surprise the world?
Lord Belstead: My Lords, the question of debate on this subject, which has, incidentally, been the subject of more than one parliamentary Question in your Lordships' House, is entirely a matter for the usual channels in this House.
Lord Kaldor: My Lords, may I ask the noble Lord this? Some of us are not quite clear about it from his remarks. Is this one of the matters on which the Government would normally wish to consult

231
Parliament before coming to a firm decision, or is it one of the matters on which the Government, having made a decision, would inform Parliament?
Lord Belstead: My Lords, a matter of this kind is entirely a matter for the House and not for the Government. If any of your Lordships wish to raise the matter in debate the Government must stand ready to reply, as indeed I have stood ready to reply on behalf of the Government to Questions which have already been asked.
Viscount St. Davids: My Lords, while it would seem to most people that there might well be a bias on the part of the Government to follow the ideas of the United States in this matter, will the noble Lord and his friends do what they can to move in the directions suggested by the noble Lord, Lord Kennet? There are a great many matters to be dealt with in this extremely complicated situation which one would very much like to hear argued on the Floor of this House.
Lord Belstead: My Lords, let us be quite clear. There is very little doubt that the clauses in the convention on mining the seabed could be very disadvantageous to this country, although there are other clauses, such as those concerning the freedom of navigation, that would help us.
Whether your Lordships will wish to debate this subject at greater length is entirely a matter for your Lordships' House.

Police Equipment: Civil Disorder
2.43 p.m.
Baroness Sharples: 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 are satisfied that the police services are now provided with the necessary clothing and equipment to deal with any civil disorders should they arise.
The Parliamentary Under-Secretary of State, Home Office (Lord Elton): My Lords, all police forces in England and Wales now have supplies of clothing and equipment to protect their officers when dealing with civil disorder. It is for each chief officer to judge how much of such equipment his force requires, but I have no reason to suppose that any force is not now adequately provided for.
Baroness Sharples: My Lords, I thank my noble friend for that reply. I last asked this Question in June 1981. Can my noble friend please tell me whether the helmet which I have tried on now, which is considerably more comfortable, will be improved by having better transmitters and receivers, because I understand that they are not very good at present?
Lord Elton: My Lords, I think we are referring to different sorts of helmets. I am thinking of a protective helmet for the use of policemen dealing with civil
232
disorders. Of those, there are about 20,000 with the forces. They have recently been the subject of careful scrutiny and I understand that they are extremely efficient.
Lord Inglewood: My Lords, may I ask the Minister to give us more information about the scale? Can he say that the majority of men now recruited into what we call task forces of different kinds, no matter what the name might be, have been issued with the necessary equipment and have had the necessary training? Will he make a special point of this and let us know that it is not just a question of issuing new equipment but also of giving the necessary training?
Lord Elton: My Lords, as to the first part of my noble friend's question, in addition to the 20,000 helmets there are 15,000 pairs of fire-resistant overalls and 8,000 shields. I can assure my noble friend that our police forces are trained effectively in the use of all equipment issued to them.
Baroness Sharples: My Lords, can my noble friend say whether the overalls which are being issued will have identification on them? I understand that the public are worried to some extent because they cannot identify an officer should there be any problems.
Lord Elton: My Lords, yes, it is our intention that they should always bear identification numbers. I am aware of a recent occasion when a small number of officers were said not to be wearing identifying numbers on their flame resistant overalls. That is a subject of investigation and I should not, therefore, like to go further.
The Lord Bishop of Peterborough: My Lords, does the Minister agree that the best defence or armour that the police force has is public esteem? Could not much more be done to commend the long-suffering police to the public? Will the Minister investigate and perhaps propagate the new scheme for the police and the public which is to begin in Northamptonshire on 1st January next? If he does not know about it, would he be glad if I told him?
Lord Elton: My Lords, I always look forward to a conversation with the right reverend Prelate and would expect to profit from it, whatever the subject. However, we are on common ground. I entirely endorse his approach to this subject. The commendation of the police, implicit in his words, could not come from a better source. We in the Home Office are also extensively engaged in promoting means of consultation between communities and their local police forces because, as I said on another occasion, police forces do nor impose things upon the community, nor are they themselves imposed upon them. They are part of the community and act with the consent and support of the community. That is the origin of good policing.
Lord Molloy: My Lords, is the Minister prepared to consider giving more assistance particularly to young police constables who desire very much to get involved with youth clubs and youth organisations in schools and similar places? I believe that this, too, would be a contribution towards better understanding of the role of the police.
Lord Elton: My Lords, at the risk of departing even further from the Question, I will say that a good deal of this work is already going on and we sympathise with the noble Lord's position.
Viscount St. Davids: My Lords, does the noble Lord agree that there would be practically no oppression possible in the world if it was not for the fact that it is carried out by people who are faceless? Does he agree that it is the lack of identification which makes so many horrible actions possible? It should be very strongly moved on the part of every Government that all people who have authority in the world should have labels on them by which they can be identified, so that these terrible things can never happen.
Lord Elton: My Lords, as I said earlier, it is our intention that every police officer should be clearly identifiable. As to the hypothesis on which the noble Viscount rests his case, the features of Hitler, Mussolini and Stalin were indelibly etched in every mind in this Chamber.
Viscount St. Davids: And ended in their destruction, my Lords.

University Staff Retirement Regulations
2.49 p.m.
Lord Annan: My Lords, I beg leave to ask the first Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government how many universities have applied to the Privy Council to amend their statutes, or have altered their ordinances or regulations, so as (a) to vary the age of retirement or (b) to lengthen the period of probation before a member of staff acquires tenure until the retiring age.
Lord Elton: My Lords, the answer to the first part of the noble Lord's question is, none. As to the second, provisions relating to the probation of academic staff are, of course, entirely the responsibility of the university concerned and the department would not be informed about such changes.
Lord Annan: My Lords, in thanking the Minister for that Answer, may I ask whether, in view of the extremely favourable settlement which the universities have received, announced in The Times this morning, in part settlement of the very large claims that they have made on the Government for provision for retirements within the university, it is not now the time for the University Grants Committee to press universities to change their present system of tenure? Would not the noble Lord agree that it is a scandal that someone aged 25 can, within two and a half years, obtain a contract which cannot be broken without great damages being paid to him and which entitles him to a job until the retiring age of 65? Does the noble Lord not think that it would be much better if universities in general followed the example of the University of Cambridge in which there is a period of eight years before anyone has such an unbreakable contract?
Lord Elton: My Lords, I am grateful for the noble Lord's acknowledgment of the generosity of the agreement reached yesterday and announced by my right honourable friend in another place. As regards contracts, new contracts can of course be worded to provide for dismissal for reasons of, for instance, redundancy. Existing contracts which do not allow for this can be expensive, and that was reflected in yesterday's settlement. In such cases, a university is faced with negotiating amendments to the contracts or, in suitable cases—as is implied in the noble Lord's substantive Question—changing the provisions in their statute. So far two universities have made tentative inquiries about such amendments to their statutes.
Lord Vaizey: My Lords, is the noble Lord aware that this practice grew up in the 1950s; that it is a contractual arrangement which has very little to do with academic freedom; and that, while many would agree with him that it is proper for the Government to adopt an arms-length, hands-off relationship to the universities, the present position whereby young men and women find it almost impossible to find a university post because of the blockage at the top, is really not conductive to the health of our universities? It would be helpful if the Government could engage in constructive discussions with the universities on this matter.
Lord Elton: My Lords, I am certain that my right honourable friend would engage in any discussions if he was approached on the subject. I understand that he has been approached by two universities. I am well aware of the ossification that threatens some university departments and the noble Lord will know that we have an initiative to introduce new blood into universities.
Lord Glenamara: My Lords, in spite of what the two noble Lords have said, will the Minister give the House an assurance that, where universities apply for an amendment to their charters on matters unrelated to tenure, the Government will not make their agreement conditional upon changes being made to the clauses regarding tenure? There is a widespread view in the universities that the Government intend to use, or rather abuse, the procedure of the Privy Council in this way.
Lord Elton: My Lords, I am obliged to the noble Lord for drawing that fear to my attention and I will see that it is related to my right honourable friend.
Lord Kaldor: My Lords, is the noble Lord aware that some universities offer terms for early retirement that are so generous that it is very difficult to see how the university saves any money by taking that course as compared with the alternative of those people continuing to function until the time of their retirement? If so, what advantage is there to the nation to induce people to retire years before their mental powers have deteriorated if it does not even save any money from the point of view of the Government?
Lord Elton: My Lords, these are matters for negotiation between the individual and the institution

235
concerned, but basically they are concluded when it is in the interest of each to do so.
Lord Annan: My Lords, would the noble Lord agree that the only way in which universities are likely to move on this matter is if the University Grants Committee is advised that some financial repercussions will occur unless there is movement on these matters? Unless such a statement is made, universities—as can be shown ever since 1969 when Mrs. Williams put 13 points to them—are unlikely to move.
Lord Elton: My Lords, the package to which we have referred several times in these exchanges contained £40 million to help with unforeseen and unavoidable increases in the cost of superannuation, as well as rates and some other smaller items. In fact I think that this will result in movement.

Students: Travel Grants
2.55 p.m.
Lord Annan: My Lords, I beg leave to ask the second Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government how much is spent on grants to students for the specific purpose of travel from their place of residence to their institution of higher education (a) at the beginning and end of term, (b) during term; and whether these funds could not be better spent in increasing the number of students at a time when this particular age group is at a peak.
Lord Elton: My Lords, in 1980/81 students in England and Wales claimed a total of £21 million in excess of the £50 notional element in the main rate of individual grants, but these claims were subject to a parental contribution. I regret that no breakdown of these claims between term-end and daily travel can be made. As to applying these funds for another purpose, I would simply say to the noble Lord that, although it is desirable to have more students in our universities, it is essential for those students already enrolled to be able to get to them in order to be taught.
Lord Annan: My Lords, I thank the noble Lord for that Answer. However, is he aware that many students use their own private initiative through hitch-hiking or through group methods of transport to get themselves to and from their universities six times during the year? Is that not in line with the Government's own policy of privatisation? Is he further aware that, with regard to some of the fares which I understand are paid during term time, the ancient practice in Oxford and Cambridge of bicycling from lodgings to lectures, classes or laboratories is well-established and has proved itself efficient? Finally, if students were to make savings of this kind on their account, would it not be right for the Government to use those savings to enable the potential students who have been denied the chance of higher education not merely in universities but in polytechnics and other colleges of further
236
education, to have that opportunity with the funds saved by this means? In other words, students should help other students.
Lord Elton: My Lords, the noble Lord has raised a number of points. What stands out in my recollection of the noble Lord's suggestion is that students often hitch-hike, which is perfectly true and, other things being equal, it is not a bad thing. The noble Lord mentioned that they ought to have other means of getting to their lodgings. Indeed, he referred to my own University of Oxford where such a situation is very common. I think that it is even more common in another university. However I recall, as perhaps he will recall, the gradient of Headington Hill, and I think that there are certain students who could not be expected to bicycle to their lodgings even if they could be expected to bicycle from their lodgings.
Lord Glenamara: My Lords, will the Minister supply the noble Lord, Lord Annan, with a copy of the British Rail timetables setting out the fares to his university in London from Newcastle, Manchester, Edinburgh and Leeds?
Lord Elton: My Lords, I think that would be a work of supererogation.

Business
2.59 p.m.
Lord Denham: My Lords, at a convenient moment after 3.30 this afternoon my noble friend Lord Mansfield will, with the leave of the House, repeat a Statement that is to be made in another place on Britoil privatisation. I should also like to inform the House that dinner will be available this evening at the usual time. Perhaps I could just bring the formidable list of speakers to your Lordships' attention and suggest that, if noble Lords could be as succinct as is compatible with the arguments that they intend to deploy, it might be for the general convenience of the House, in that any Division or Divisions that may take place would thereby be enabled to do so at not too unsocial an hour.

Travel Concessions for the Unemployed Bill [H.L.]
Lord Molloy: My Lords, I beg to introduce a Bill to provide for the extension of travel concessions to registered unemployed persons and persons working under the Youth Opportunities Programme. I beg to move that this Bill be now read a first time.
Moved, That the Bill be now read a first time.—(Lord Molloy.)
On Question, Bill read a first time, and to be printed.

The Queen's Speech

  ADDRESS IN REPLY TO HER MAJESTY'S MOST GRACIOUS SPEECH
  Debate resumed on the Motion moved on Wednesday last by the Lord Lucas of Chilworth—namely,

  237
  That a humble Address be presented to Her Majesty as follows:
  "Most Gracious Sovereign,
  "We, Your Majesty's most dutiful and loyal subjects, the Lords Spiritual and Temporal in Parliament assembled, beg leave to thank Your Majesty for the most gracious Speech which Your Majesty has addressed to both Houses of Parliament."
  3 p.m.
  The Secretary of State for Trade (Lord Cockfield): My Lords, this is the last day of the debate on the gracious Speech and it is appropriate therefore that I should congratulate my noble friend Lord Lucas of Chilworth who moved the Motion we are debating, and my noble friend Lady Trumpington who seconded it. They are both experienced debaters in your Lordships' House and we always listen with profit to what they say.
  Amendments to the Motion have been tabled in the names of the noble Lord, Lord Scanlon, and the noble Lord, Lord Byers. I will of course listen with interest to what they say and indeed to other noble Lords who contribute to the debate. We all look forward with pleasure to listening to the noble Lord, Lord Gormley, who will be making his maiden speech on this important occasion.
  One of the most important contributions this Government have made has been to break the sterile mould in which economic policy had been confined. When for so many years growth had lagged, when one had lost ground compared with one's competitors, when unemployment and inflation alike had increased successively as one turn of the economic cycle succeeded another, something must have been wrong. We reject the theory of big government; we reject the view that the state can do things better than the individual; we reject the view that what is needed is controls, regulations and direction from Government. On the contrary, our view is that it is only in the freedom of the individual—whether he be employer or worker—that enterprise will flourish, that people will give of their best, that we can build a prosperous economy that will offer opportunity and employment for all.
  The fact that this change in course has had to be made during severe recession has posed very great problems. But problems must be tackled; problems must be solved; they must not be thrust on one side because it is too difficult or thought too untimely to tackle them. The debates in your Lordships' House have always provided a forum for the exposition and pursuit of new ideas. Therein lies their importance. I hope the same will be true of today's debate. All this I will return to in due course. But I must start with more immediate matters.
  This year for the first time my right honourable friend the Chancellor of the Exchequer has published an autumn Statement: this brings together the separate announcements on economic and other matters usually made at this time of the year. The Statement provides an invaluable background to the kind of debate we are having this afternoon. It reviews developments in the economy in the current year and the prospects for next year. It indicates what the likely balance of income and expenditure next year will be.
  238
  And it thus enables an informed judgment to be made on next year's budgetary prospects. Of course, there is no lack of independent outside forecasts. This new Statement is not so much a matter of "the more the merrier"; but of the Treasury forecast being, hopefully, primus inter pares; as well as perhaps lifting the corner of the wraps in which the Chancellor's budgetary thinking is customarily shrouded, although to know more of that we must wait until next March.
  We have lived through the worst recession in half a century. Not alone, because the recession has struck every major country in the world. But it hit us earlier than most, and harder than many. Not least because the failures of past decades left us less well-equipped to resist. The fact that our share of world trade in manufactures had halved—from 20 per cent. to 10 per cent.—in little over 20 years, while import penetration into our home market had increased dramatically, illustrates how much our competitive position at home and abroad had been eroded.
  The dramatic increases in oil prices—two great surges in a single decade—brought inflation and recession to all the countries of Europe, to North America and to the furthest corners of the world. The universal nature of the recession is illustrated by the fact that growth in the major OECD countries, which had averaged 5 per cent. a year in the late 1960s and the early 1970s—that is in the decade before the first oil price explosion—has now fallen to nil. But the recession was not confined to the industrial countries. With recession the demand for commodities fell and thus prices fell too, posing severe problems for many of the developing countries.
  Last year the first signs of recovery began to appear. In this country output began to rise. We expected that this recovery would make progress this year and extend further next year. But the failure of the world economy to recover and the dramatic rise in interest rates in the United States last year, with the damaging effects this had world-wide, have together held back our own recovery. We expect total output to rise marginally this year. Next year we expect an increase of 1½ per cent. So we are not slipping back into recession. But recovery is painfully slow.
  Within this very modest improvement, manufacturing has done substantially less well than the economy generally. This is the reason why the CBI surveys, which relate largely to manufacturing, and not to the economy as a whole, show a more sombre picture. For many years now commercial and financial business and the service sector generally have shown a higher rate of growth than manufacture. There is nothing exceptional in this. Indeed, it is the direction in which all advanced economies tend to develop.
  There are three participants or partners in the working of an economy—the Government, employers and employees. The tendency today is to talk not of "employers" but of "industry", not of "employees" but of the "workforce". But as Shakespeare said: "What's in a name …". So I will not delay your Lordships on such matters of terminology. The important thing is that each of these three partners has his responsibilities, and it is only if all three play their part that economic progress can be made.
  The part of the Government is to provide the right framework, the right environment, in which industry, and the economy generally can operate. Sound money

  239
  is absolutely essential for the efficient operation of industry, for investment and development, and for the fair and equitable conduct of our social life. Inflation has existed ever since profligate rulers or evil men discovered how you could rob everyone else by debasing the currency or printing money. If you are to put a stop to inflation, you have to start by Government themselves accepting the firm discipline of a sound fiscal and monetary policy. That we have done. As the autumn Statement shows, this will be the first time since 1977 that the annual review of public expenditure will not have led to an increase in planned expenditure. And, on this occasion, not under pressure from the IMF. Public expenditure as a proportion of GDP, while higher than in 1979, will show a fall next year. So too will public sector borrowing. The monetary aggregates have been kept within the target range.
  The effect of these policies is to be seen in the dramatic fall in the rate of inflation. From a peak of nearly 22 per cent. in 1980, inflation is already down to 7·3 per cent. By the spring we expect it to be down to 5 per cent. There is still a long way to go, as inflation rates elsewhere are also falling—and in some countries, notably Western Germany and Japan, they start by being significantly below our own. Disraeli referred—in a slightly different context—to "the sweet simplicity of . . . 3 per cent." I commend that thought to your Lordships.
  Interest rates too have fallen quite dramatically. From a peak of 16 per cent. reached last autumn, base rate is now down to 9 per cent., a fall of no less than seven percentage points. As each percentage point is worth £250 million the benefit to industry is very considerable. But it is also of help to the private individual. As the reduction feeds through into mortgage interest rates it represents a real fall in the cost of living.
  The Government have also helped through a whole range of tax reductions and incentives. Last year's Budget provided help for industry totalling £1 billion, mainly through the reduction in the national insurance surcharge. My right honourable friend has now announced a further reduction in the national insurance surcharge. For this year and next this will be worth a further £1 billion to private sector employers.
  The organisation of production is a matter for management. It cannot be done by Governments. The truth of this proposition is increasingly being recognised. What we need, what we must have, is sufficient production to meet demand—both at home and overseas—at competitive prices, at prices people are prepared to pay. This is where in the past we have fallen so far short of what is needed. Overmanning, restrictive practices, outdated equipment and sometimes poor management have all contributed to a loss in competitiveness which has resulted in a loss of markets—domestic markets and export markets alike. But in the last two years great advances have been made. In manufacture, productivity has increased by 13 per cent. since the end of 1980.
  There is a heavy responsibility on employees, on the workforce, to co-operate in the improvement of productivity. There is equally a responsibility on employers and employees alike to ensure that pay settlements are moderate. Progress here too has been
  240
  made in the last two years. Wage settlements in the 1980–81 pay round were halved. Last year they fell again—to some 7 per cent. This coming year they need to fall further. Cost competitiveness has improved. In the last 12 months unit wage and salary costs in manufacture increased by only 6 per cent. This was less than half the rate of increase in the United States and France, but regrettably still higher than in Germany and Japan. There is evidence that in relation to the world's most competitive economies we are still losing ground.
  In the year to June, total domestic demand increased by 3 per cent. But output increased by 1 per cent. only. This means that most of the increased demand will have been met by imports. Clearly therefore we still have a long way to go before our level of costs enables us to compete effectively with the most efficient economies in the world. This is why it is essential to press on with improving our efficiency, increasing our productivity and reducing the level of our pay settlements.
  In the first nine months of this year our exports have shown an increase of 9 per cent. in money and 1½ per cent. in volume compared with the corresponding period last year. There was a very considerable rise in exports in the latter part of last year and with the failure of the world economy to grow, it has been very difficult to match those figures. Nevertheless, we are still likely to show a balance of payments surplus this year of £3½ billion. A third of this will come from visible trade: two-thirds from invisible trade—that is, from services, profits and dividends. We give considerable help and encouragement to our export trade through the British Overseas Trade Board and through our Diplomatic Service overseas. We provide credit facilities, including a measure of Government assistance, through the Export Credits Guarantee Department. In all these ways Government support the very considerable—and successful—efforts made by our exporters.
  I reviewed our policy on international trade in the speech I delivered in your Lordships' House on 20th October when we debated the prospects for the GATT Ministerial Meeting this month. We are—and intend remaining—one of the world's great trading nations; 30 per cent. of our GDP is represented by exports—one of the highest percentages of any major industrial country. A liberal, open, international trading system is very much to our advantage.
  There are of course other arguments in favour of a liberal trading system. Import controls blunt the competitive edge of competition. Too often they mean that the consumer gets poor value for his money. But we must be realistic. The world has changed since the original GATT agreements were negotiated 30 years ago. Many privileges conceded and enjoyed in the past are no longer justified. What we need, in the new world into which we are entering, is a new concept of parity of opportunity.
  Too often people try to achieve a better balance by restricting imports. We see the latest example of this in the case of France. We understand the problems the French face. They are very great. But these problems cannot be solved at the expense of other members of the Community. Free trade within the Community is a basic right of all members of the Community. As far as we ourselves are concerned, apart from oil, France

  241
  has a substantial balance of payments surplus with this country and we could not accept action which would disrupt our exports to France. I have made our concern very clear to Ministers in the French Government.
  I come back to the world trading scene. The last thing I would willingly want to do is to try and solve the problems we and others face by import restriction. What I want to achieve is a better balance by opening up overseas markets to British exports. Take the case of Japan. We have a massive unfavourable balance in our trade with Japan. In 1980, the adverse balance was £1 billion. Last year it was £1½ billion. This year it looks set to be £2 billion. Next year, it will be goodness knows what.
  This is not a situation we would want to put right by general restriction on Japanese imports. What we need—both of us, the Japanese as well as ourselves—is an opening up of the Japanese home market. The Japanese by their hard work, ingenuity and enterprise have earned for themselves a high standard of living. This they can really enjoy only if they open their home market to the import of the products of the Western world.
  A similar situation exists in the case of many of the newly industrialised countries in the Far East and South America, and in the case of countries like Australia and Spain. All these countries have relatively free access to our markets, usually at low rates of duty, while our exporters are denied equal access to their markets by quotas, high tariffs or other devices. In many instances our own industries are subject to severe competition from imports from these countries. It is difficult, if not impossible, to defend a situation where our own industries have to face competition of this kind when they themselves are denied export opportunities which ought in all fairness to be available to them.
  Countries which close, or effectively close, their home markets in this way need to realise that they are simply creating pressures for retaliatory action. One cannot expect the problem to be solved overnight, but there must be movement; it must be in the right direction, and it is already overdue.
  I come to the question of unemployment, the great unsolved problem of the Western industrialised world. We are not alone in facing high levels of unemployment. Nor is the present time unique in this respect. There have been serious recessions and high unemployment in former times. None of this in any way diminishes the hardship, frustration and loss of dignity that unemployment involves, but it does illustrate how intractable a problem it is.
  Of course, measures can be taken—and are being taken—to alleviate the problem. We in this country are spending £1½ billion this year on special employment measures. Next year we will spend £2 billion. We have extended and improved the Youth Opportunities Programme, we have launched a new and all-embracing Youth Training Programme and we have introduced other measures; but these are all, essentially, palliatives.
  Unemployment will be cured only when we can create secure, long-term employment. That will be done only when we can compete on equal terms with the rest of the world. By the CBI's own reckoning, if we enjoyed the same proportion of world trade in
  242
  manufactures as we did 20 years ago, the exports would be equivalent to 1½ million extra jobs in this country. We are back, therefore, to the basic principles about which I have already spoken. We must increase our productivity, we must improve our efficiency, we must restrain our pay increases and we must improve our cost competitiveness. Pay increases of 5, 6 or 7 per cent., while our competitors in Japan and Germany are accepting much lower increases, are going to destroy jobs, not create them. There is no magic in the formula I have described; there is nothing novel in it. The purveyors of novel remedies deceive the people. In the end, the solution will only be found in the trusted and well-tried virtues: in hard work, enterprise and self-discipline.
  There is reason to suppose that the emergence of great cartels—producers' cartels such as OPEC, the labour cartels represented by the unions, the industrial cartels represented by private monopolies and nationalised industries—have all accentuated economic instability. Without the constraints flowing from these distorting factors, adjustment to economic change would have been smoother and more efficient. It is to restore the free working of the economic system, and thus in the long run to reduce the severity of recessions, that we have abolished a whole panoply of controls, reduced the size of the public sector and reformed trade union law. Privatisation—or "liberation" as I would prefer to call it—figures largely in the gracious Speech. This is not political dogma. It is determined progress along the path of restoring flexibility and efficiency to the working of the economy, in the long run to the benefit of us all.
  In times of difficulty, when the going is hard, as it is at present, when the night is dark and the dawn seems far away, there will always be those who look on the dark side, who see every bit of bad news as confirming their fears, who lose confidence in the present and despair of the future. There is no hope down such a road. We face great problems. We must tackle them with resolution and courage. Since the dawn of recorded history there have been good times and bad; the seven lean years have followed the seven fat years. We have lived through the worst of this recession. We have not emerged as soon or as fast as we had hoped, but progress there is and progress will continue. Our task is to foster, encourage and develop that progress. That is what our policies are directed to, and that is what we will achieve.
  3.28 p.m.
  Lord Scanlon Lord Scanlon rose to move at the end of the Address to insert:
  "but regret that the gracious Speech fails to provide for adequate measures to revitalise the nation's economy and to bring about a solution to the tragic problem of unemployment".
  The noble Lord said: My Lords, I do not think it unfair to characterise the gracious Speech as a continuance of the medicine as usual, which means reliance on excessive monetarism and market forces, public expenditure cuts continuing, confrontation with the trade unions in the continued effort to reduce spending power and, hopefully, as a result of that, to reduce taxation, and, even more hopefully, to get some of that revenue into industrial investment. But is it working? The Government have now been in office for

  243
  three and a half years. In that three and a half years there was more than an adequate opportunity at least to establish the beginnings of the programme, if not completely to fulfil it. It is not so much that it is not even beginning to work, but rather that there are really no visible signs of any semblance of an upturn in the economy. Contrary to what the noble Lord, Lord Cockfield, said, the only conclusions that one can draw from this is that it has not worked, it is not working, and it will never work.
  It is true that there has been a fall in inflation. It is now approximately 2 per cent. less than what it was when the Government came into office. It is also true that interest rates have fallen, and, at least according to the Government, industry is alleged to be fitter, slimmer, and leaner; and I certainly confirm that it is leaner. In fact, one of the best ways to own a small establishment these days is to start with a large one, such is the rate of decline in industry. It is also true that wages have been kept down and that by various manipulations purchasing power has been restricted, in particular in the manufacturing section.
  But at what price have even those meagre, very meagre, aims been achieved? First, there is the staggering realistic figure of very nearly 4 million people unemployed in these islands at the present time. Then there are falling order books in both the immediate and future short-term periods, a nil growth in the economy, and, almost without exception, not only are firms not able to take on additional labour, but most of them are preparing for more closures and redundancies. No programme, no economic policy, no election victory, can be justified on the backs of 4 million unemployed and the present state of the economy.
  But bad as the unemployment figure is, there is developing a much more sinister philosophy, a philosophy of despair which indicates that somehow, some way, the figure will not merely remain, but will increase. Unemployment will remain in perpetuity, and somehow, some way—I say this with respect to the right reverend Prelate—this is almost a visitation of God, a situation not man-made and able to be resolved by man, but one in which, because of new technology, we have to live with this army of unemployed.
  I hope that the Government will publicly reject such dangerous nonsense. It is true that state benefit, meagre though it is, somewhat cushions the worst effects of unemployment. Certainly it cushions them as compared with my day when, if you were unemployed, you starved—literally starved. Indeed, had the cushioning not taken effect, social unrest would already have reached quite unacceptable proportions. But there is a limit beyond which the barriers of tolerance will break. This is not said lightly. More than any other single factor, the Government's complete inability to hold out any real hope for the future for the youth of this country will greatly exacerbate, and is greatly exacerbating, this dangerous, very dangerous, situation.
  However, there is a sound economic reason, as well as a social reason, for quickly reducing unemployment. Leave aside the obvious economic argument that the cost of unemployment is being met by the revenue of North Sea oil, instead of that being
  244
  used to re-equip and modernise our industry. Leave that aside. It is a matter of simple economics that slumps are caused by the inability of people to purchase back the goods that they themselves have produced. By the continual depressing of purchasing power, whether through unemployment, social expenditure cuts, or unnecessary wage restrictions, the situation will develop until, like a snowball going downhill, it will become uncontrollable and will lead us into economic despair from which it will be very difficult to recover.
  I remind your Lordships of what I know to be a true tale. The president of General Motors was showing the president of the United Automobile Workers around the firm's latest automated factory, in which from the molten metal to the finished engine block, ready for assembly in the car, everything was done by machines—casting, drilling, honeing, tapping, the lot. The president of General Motors said to the trade union leader, "You will have difficulty in making these machines your trade union members", and the president of the union replied, "You will have greater difficulty in getting these machines to purchase your motorcars". That will be absolutely true if we continue to depress the purchasing power of all.
  Perhaps the most unkindest cut of all in the policy of depressing purchasing power—if I may follow the noble Lord in quoting Shakespeare—is the proposed action of the Chancellor of the Exchequer, as indicated yesterday, on the future benefits for pensioners. This cannot be justified, even on the basis of the inflation rate. To claw back from the pensioners what it is indicated will be clawed back ignores completely the fact that the prices of the essential foods that they have to purchase are not altered by the rate of inflation. Try telling them that the prices in the shops have fallen. Try telling them that heating, lighting, cooking costs are falling, and they will give you an answer. Tell them additionally that the sustained increase in petrol prices is not having an effect on the whole range of commodities that they must try to purchase not so as to prosper, but merely to live. Above all, these pensions are spent immediately. They are not put into savings. In a very small way they go towards relieving the economic gloom by purchasing directly, which is not always the case in relation to other increases.
  We make this earnest plea to the noble Lords opposite, and in particular to the noble Lord, Lord Cockfield: Please use whatever influence you can to persuade the Chancellor of the Exchequer not to exact his pound of flesh, even though a very strict interpretation of indexing may well permit it. I believe that this is one of the most savage blows that any Government have contemplated against any defenceless section of our community.
  What is the alternative policy? I shall frankly admit that there is no general panacea for overcoming the very difficult economic situation with which we are faced and which is prevalent throughout the industrialised world. But there are things that can, and should, be done, and I shall name but a few. The first is that there must be a controlled—and I emphasise the word "controlled"—reflation of the economy. Cuts in the basic rate of tax will assist, but yesterday—and it has been repeated in your Lordships' House today—much was said about the so-called assistance that is being given to industry.
  The Chancellor, in his speech, estimated that every fall of one point in the rate of inflation was worth £250 million to industry. On a rough calculation, that means, on his figures, that industry should benefit to the extent of £1¾ billion. The cut in the national insurance surcharge means another £700 million; and we have heard again today that a fall of 1 per cent. in the interest rate means a further £250 million to industry.
  Where does that money go? Does it go to investment? There is no indication that this is so. I know the arguments that will be used by industry against this. They will argue that this money is cancelled out, and more than cancelled out, as a result of variations in the rate of exchange. It is a pity that the CBI were not able to be more definite than they were in the statement of their views on the exchange rate. It seems to me that neither they nor the Government, nor the Treasury, know whether they want a strong pound or a weak pound. It seems to the outsider, and to somebody who does not understand the mystiques of high finance, that when it is weak everybody wants it strong, and when it is strong everybody wants it weak. But let me say this. If only the CBI had used the much-maligned block vote and stopped the distributors and importers from out-voting the manufacturers, we might have been able to get a decision, even from the CBI.
  I turn now to the second point—and here again we must entirely disagree with the noble Lord, Lord Cockfield, on the question of import controls. I emphasise the word "selected" import controls. I can well remember (if I am not boring your Lordships with another true tale) that I happened to be at a Neddy meeting with the noble Viscount, Lord Watkinson, who was then president of the CBI, when we were debating import controls. He made a statement which has remained with me ever since. He said: "We would not need any import controls if only we could learn to fiddle as well as the French". That may well be true, but in the absence of our ability to fiddle, something has got to be done.
  Let us take, for instance, imports of cars from Spain. They are subject to a tariff of only 4 per cent. when they come into Britain, and yet cars manufactured here and going to Spain are subject to a figure nine times bigger than that—36 per cent. The same is broadly true of South Africa, of Australia and of Korea. These are the economics of the madhouse. You cannot continue, I say to the Government and to noble Lords opposite, to hide behind the idea that we cannot have import controls. Reciprocal trade, yes. Where there is equality between tariffs, yes. But where there is the outstandingly ludicrous situation that I have tried to describe, something must be done if industry is to survive and if the wage restraint and the working practices which have been referred to are not all to have been in vain.
  I turn now to the question of privatisation. Let me say again at the outset that I believe the Government can say with some authority that they had a mandate for a degree of privatisation. But the extent to which some of Britain's most priceless assets are being disposed of—I cannot say sold—only for the purpose of reducing the public sector borrowing requirement, thus enabling the Government, hopefully, to give some electoral tax relief not justified on the basis
  246
  of their economic policies, is little short of scandalous. Privatisation of bricks and mortar, of machines and equipment, may well be justified within the mandate; but it is one thing to talk about those things, it is another to dispose of the indigenous national wealth, such as oil, gas and coal, which belongs to the people of this country and is not for disposal to any private individuals, in our view, whether they be small shareholders or large shareholders. I hope that we will be able to remedy the errors of this Government, given the opportunity in the future.
  Now a word on the question of training. Here, let me say that the Government's record is good—very good. But—and I put it only in these words—there arc signs that the excellent programme launched by the Government is going to be used to subsidise low wages and as a constant replenishment of workers at low rates of pay, rather than by employment later on, after the training has been given. I do not want to labour the point any further than that; but some of these things will cost money, and the obvious question is: How is this money going to be generated?
  My Lords, we on this side of the House stand second to no one in our support for and agreement with the decisions on the Falklands, both to send the task force and to use it. We stand second to no one in our admiration for the valour and diligence of all the services, and of the Merchant Navy. I say that because yesterday the Chancellor again indicated that the additional cost of the Falklands conflict was in the region of £650 million. We cannot on the one hand support the end without on the other supporting the means. My only point in referring to these things is to say that if there was a willingness on the part of the Government to find money for reflation and for the necessary investment in industry, it could and it should be found.
  But there is another question on defence. I express my personal view (and I am not now going to embark on the argument between multilateralism or unilateralism) but it concerns the quite senseless expenditure of money and resources on a so-called independent nuclear deterrent which is neither independent nor a deterrent. If some of that money could be diverted into the channels to which I have referred, I think we would be doing something really useful for the regeneration of our economy.
  My Lords, I have spoken at length on some of the things to which I believe the Government should give immediate consideration and attention. One of the lessons one quickly learns is that Governments continue to govern even though they listen with rapt attention, and then proceed to do nothing about the remarks to which they have listened. But I believe that within the points that I have tried to outline, particularly in relation to some of the modified points of the Government's own programme, the Government should and must do something if we are indeed going to survive as an industrial nation. My Lords, I beg to move the first amendment to the Motion.
  Moved, At the end of the Address to insert: "but regrets that the gracious Speech fails to provide for adequate measures to revitalise the nation's economy and to bring about a solution to the tragic problem of unemployment".—(Lord Scanlon.)

Britoil: Privatisation
3.50 p.m.
The Minister of State, Scottish Office (The Earl of Mansfield): My Lords, with the leave of the House, I will repeat a Statement being made in another place by my right honourable friend the Secretary of State for Energy. The Statement is as follows:
"With permission, Mr. Speaker, I will make a Statement about the privatisation of Britoil.
"The offer for sale of 51 per cent. of the shares in Britoil will be by tender, with special arrangements for small investors to apply for shares at the striking price without having to bid a specific price in advance.
"The shares have today been underwritten at a minimum tender price of 215p per share. Payment for the shares will be in two instalments, a first instalment of £1 a share on application with the balance due next April.
"The prospectus and application form will be available in the Library from today and published in newspapers on Friday. Copies of the prospectus in book form will be widely available through main branches of the clearing banks, Trustee Savings Banks and main post offices from next Monday, 15th November. The application list for the shares now offered for sale will open at 10 a.m. on Friday, 19th November and may be closed at any time thereafter.
"In order to encourage small investors to retain a long-term interest in the company, they will, subject to the conditions set out in the prospectus, receive one free share, known as the small shareholder bonus, for every 10 still held in three years' time.
"As I told the House a fortnight ago, the privatisation of Britoil will in no way affect the system of participation agreements, which will remain in place, under 100 per cent. Government control, as a means of safeguarding our national security of supply. But what it will do is enable the people of Britain to take a direct personal stake in the North Sea. It will create an independent British oil company free to seize the opportunity open to it. And it will substantially reduce the size of the public sector in an area where state ownership has no rational justification whatsoever".
My Lords, that concludes the Statement.
Lord Bishopston: My Lords, the House will be grateful to the Minister for passing to us the Statement read in another place. As the House will know after the long debates on the Oil and Gas (Enterprise) Bill, which is now an Act of Parliament, this Statement is a progress report by the Minister on the sale of a great national asset which has produced vast amounts of oil for the nation, which has been an industry of great profitability and which has substantially contributed to the Treasury through taxation and in other ways; so we are not dealing with some industry which has failed the nation and run into debt. It follows that such an important Statement requires detailed and careful probing; and that the issue of more details later does not help the House at the present time.
As I anticipated in my comments on the Statement made in your Lordships' House a few days ago, the
248
Minister is really determined to sell these assets now regardless of the best timing for the public interest. It is we, the public, who are the owners of this asset and we should ensure that we get the best price. I should like to ask the Minister several questions. First, what heed has he paid to the PAC report, following the disgraceful sale, I may say, of the Amersham International shares, and especially their views on underwriting? What, incidentally, will be the cost of the underwriting? What will be paid to the stockbrokers and to the others concerned with the flotation of this sale? This can be a considerable sum of money which the public will have to pay to put these assets on the market. We have a right to be told.
What valuation do the Government place on this asset? There have been estimates in the press for a long time, with valuations going from £1 billion upwards and downwards. There have been lots of leaks in the press about all this—oil leaks and others—and the valuation has gone from £1 billion up and down. Is it likely that the valuation, or the amount that we shall get, will be only one-half of that amount? There is a lot of speculation that that may be the case: that the sale is being made with a loss to the public. What sums of money have been paid, or are being paid, to dress up this asset, to make it more attractive to those who want to buy and to make it more profitable for the private investors?
The Minister said on 27th October that the sale would be by fixed-price offer or by tender, but he said that in either case there will be part-paid shares. How does he intend that these shares shall be based on a widespread take-up by small investors? He talks about more people having a stake in this great enterprise, but how many does he envisage buying shares—5,000, 10,000, 50,000 or 100,000? How many will be able to compete on competitive tender? How does a small man or woman, or the small investor, compete with the big institutions and others?
There are other questions which deserve information. The Minister spoke about the sale of the part-time shares going ahead, but what happens if the price rises before the second instalment is paid? Will the Minister ensure that a full balance sheet is provided? We know that under (I think) Section 32 of the Act the Minister can override any of these corporations, the Gas Corporation or the British Oil Corporation and he does not need to give all the information which would have to be given to anyone else floating shares such as these. A full balance sheet must be provided. How many shares are on offer? What happens to shares which are unsold? Will they be retained by the public sector? What safeguards are there to ensure that shares do not go outside British control? Your Lordships will remember the amendment that we put down to try to stop them from going into foreign hands and influence, but that amendment was defeated. We want to ensure that this asset is still under British control. It would be useful to know—and I am sure that investors will want to know—about the dividend prospects, not only in the coming year but beyond.
There are so many aspects to be answered. There will be no use in the Minister saying in reply, if I may anticipate it, that all this will be made known if we read the papers in a couple of days' time. The House has a right to know now. As I said on the last Statement, whether we agree with the sale or not we all

249
have a duty to probe to ensure that this sale is the best which can be effected in the circumstances. I may say in a final word that those on the other side of the House who back the Government in the sale of this great enterprise have no less a duty—indeed, they have a much greater duty—than others in this House to see that the way in which it is done is in the best interests of everyone concerned.
3.59 p.m.
Lord Rochester: My Lords, from these Benches, I should like to join in thanking the noble Earl for having repeated this Statement. We cannot rid ourselves of the suspicion that what, on the Government's own showing, should be a commercial proposition, is prompted as to its timing, at least in part, by political considerations. Does this not invite a Government of a different political complexion to resume control over this great national asset? Indeed, only a few minutes ago, did we not hear something from the noble Lord, Lord Scanlon, to that effect? Would this not then prove to be a further instance of that continual swing from one industrial policy to another which has done so much damage to British industry over the last 30 years?
We welcome in principle the intention of the Government to make special arrangements for small investors in relation both to the application for and the retention of shares. Following Lord Bishopston's speech, may I press the Minister a little more on this aspect? If the large institutions put in large applications, will the allocation of shares be such as to give relatively more favourable treatment to the small investors?
Finally, may I ask whether it is the intention that there should be any provision under the new institutional arrangements contemplated for employees of Britoil themselves to acquire shares on favourable terms other than those that will be available for small investors generally?
4.1 p.m.
The Earl of Mansfield: My Lords, I thank both noble lords for their somewhat muted welcome to this Statement. If I may reply to the noble Lord, Lord Bishopston, the first matter upon which he complained was the timing of the sale. I remind him that in the year which has passed, and the two weeks or so since my right honourable friend announced his plans in another place, the Financial Times actuaries' oil share index has risen by somewhat more than 17 per cent. It would seem to me that this is as good a moment as any to make the flotation and complete the sale.
Then the noble Lord asked what has been done with the hindsight knowledge of the affair of Amersham International. In the first place, I reject his contention that in fact there was anything which was untoward about Amersham International. The return on the investment was very good indeed. But, nevertheless, the way in which these particular shares are going to be sold—that is to say, by tender rather than by fixed price—will make for a really true market valuation of the assets of the company.
The noble Lord asked about the underwriting costs. There will be a commission of 1·55 per cent. which will be paid—and I may say that this is set out in detail
250
in the prospectus. The noble Lord also asked: what is being paid to the stockbrokers? One must be careful about this matter. Various merchant banks have given advice. They will be paid an advisory fee. My right honourable friend has obtained totally independent advice from a firm of stockbrokers as to the pricing of the shares, and they too will be paid a fee.
I was than asked about the valuation of the assets. I assume that the noble Lord means a valuation of the shares and not a net asset valuation. There are a number of ways in which one can make a series of assumptions and on those assumptions build some form of valuation. My right honourable friend's department has certainly done its sums, and the results of those sums are reflected in the minimum tender price of 215p per share.
The next matter that the noble Lord asked about was, to quote his own elegant phrase, "What is being paid to dress up this asset?" The answer is, nothing. However, the full financial arrangements in respect of this company are in the prospectus and I cannot possibly go into them at this stage. The noble Lord asked how many small investors there will be and how they can compete in effect with the large institutions. If I may say so in as kindly a way as I can, the noble Lord has the wrong end of the stick. This is a sale by tender, and it will be for all investors other than the small investors to tender a price. But those who tender—in other words, those who put in an application—for up to 2,000 shares will not have to put a price at all. They merely put in an application. Once the striking price has been arrived at then they will be entitled to buy the shares at the striking price. So it is impossible at this stage to estimate how many small investors are going to apply for shares; how many shares they will apply for; what the striking price will be and therefore what the small shareholders, so to speak, will be at the end of the day.
Then the noble Lord asked what will happen to any shares that are unsold. They will be taken up by the underwriters who have contracted to do just that and are, as I have said, being paid a commission in respect of their underwriting duties. The remainder—the 49 per cent.—of the shareholding (which may have been in the back of the noble Lord's mind) will be held by the Treasury Solicitor. I think that deals with the noble Lord's points.
The noble Lord, Lord Rochester, asked about the allocation of shares to small investors. I very much hope that what I have said to the noble Lord, Lord Bishopston, will answer his questions too. He also asked about a possible share scheme for the employees of Britoil. I do not have the answer to that question at this moment. If I get it in time, I will tell him; otherwise I will write to him.
4.7 p.m.
Lord Taylor of Gryfe: My Lords, I, too, should like to thank the noble Earl the Minister for his Statement on this important subject, and congratulate him and the Government, if not on the timing of the issue, at least on adopting the tender technique in this case. He may be interested to observe that today's price of Amersham is 280p against an issue price of 140p/142p. I should like the noble Earl to give me his comment on the question of the timing of the issue. While he has quoted a 17 per cent. appreciation in the

251
oil market in the past few weeks, is he aware that the Financial Times oil share index, from which he quoted, has fallen in two years from 1,065 to 680 and that the Economist offered advice last week on this subject, and headed the article: "Postpone Britoil Sale because of the market conditions"? Similarly, the Sunday Times quoted: "Britoil—a doctrinal sale".
In these circumstances, would he not agree that this is perhaps the wrong time to make this issue? May I also ask him this: on the assumption that a minimum price of 215p per share is realised, what is the value of the asset that is now being disposed of? How much do the Government expect to realise on the basis of a minimum share of 215p, keeping in mind that reputable stockbrokers in the City last week estimated the total value of this asset at £2.5 billion?
May I also ask him whether there is a provision in the prospectus for small shareholders to retain their sharholding and get a free issue on a share and how does this affect the dilution of the Government's shareholding if that is put into effect? Presumably one is talking now about a 49 per cent. shareholding whereas there is possible dilution involved. I also wonder whether, in order to avoid frivolous applications and over-applications for shares, the Government have looked at the possibility of cashing the cheques on application at least for a period in order to avoid the kind of over-subscription that has taken place recently on other issues?
The Earl of Mansfield: My Lords, so far as the timing of the issue is concerned—I, too, read the financial pages when I have a moment—I believe that the underwritten price of the the shares in Britoil is fair against the background of today's market conditions. Of course, it will shortly be tested in the market. I do not think there is any reason to believe that we could have obtained a better price by delaying the sale. So far as the valuation is concerned, the minimum tender price is 215p per share and the total shares are valued at £1.075 billion.
Lord Taylor of Gryfe: My Lords, is that the value of the share issue or is the value of Britoil?
The Earl of Mansfield: My Lords, that is the value of the share issue. If the noble Lord was referring, as I think he was to the net asset value—I see him nodding—he will know very well that is not some sort of objective measure which can be translated directly into a market price for the shares. It is a calculation which has to be made on more or less arbitrary assumptions about future oil prices. exchange rates and oil production rates from fields, some of which have not yet even been developed. So it may be of value in making comparisons as between one company and another, but I do not think it is an indication of a fair market price.
The noble Lord asked what would be the effect of the issue of shares to small shareholders who retain their shares for the prescribed period. As I understand the position—and if I am wrong I will write hastily to the noble Lord—this will in effect be a minor scrip issue: no more and no less than that. The noble Lord also asked about what I might call "anti-stagging" measures. We do reserve the right to cash cheques on
252
receipt and the right is also reserved to refuse multiple applications. I understand that the application form has been printed in blue ink to make photocopies readily identifiable. I hope therefore that the noble Lord is to some extent reassured.
Lord Kaldor: My Lords, may I ask one point—if the noble Earl has already explained this, it has escaped my understanding. What is the meaning of "tendering" in this connection? The normal commercial meaning is that you tender for the whole lot and the thing goes to the highest bidder: in other words, you tender for all the shares at the highest price per share. Normally we would expect there to be various consortia of financial interests who would tender against each other. Is that the procedure which is to be adopted?—because in that case the ownership of the shares is bound to remain within a very narrow circle of financiers or others who participate in the consortia. Perhaps I have misunderstood what the noble Earl has meant by "tendering".
The Earl of Mansfield: My Lords, the meaning of "tender" is the normal meaning of the English word, and the actual mechanics of the operation are in the back of the prospectus. I have had it in my own hands for only a comparatively short time but, as I understand it, it is perfectly normal.
Lord Kaldor: My Lords, you must tender for the whole lot in one go?
The Earl of Mansfield: My Lords, one puts in one's application with the tendered price.
Lord Oram: My Lords, among the questions asked by my noble friend, Lord Bishopston, was one which referred to how much the stockbrokers would be paid. In reply to that question, the noble Earl merely said that certain merchant bankers will be paid a fee for advice and that a firm of stockbrokers will also be paid a fee. Does the noble Earl know what that fee is and, if so, should he not give it to the House?
The Earl of Mansfield: My Lords, I do not know and I am not sure that it would be proper for me to give it to the House even if I did—the reason being that it is a fee which is incurred by the Department of Energy and nothing to do with Britoil in the preparation of this flotation.
Lord Diamond: My Lords, does not the noble Earl owe it to the House to make clear one point on which I am quite confused, and I think that the noble Lord, Lord Kaldor, is still confused, with many others who will feel the same? I am not trying to catch out the noble Earl on an abstruse point. The simple question is: will the procedure adopted be likely to result in a large number of small shareholders or a small number of large shareholders?
The Earl of Mansfield: My Lords, it is quite impossible to answer that question now. The number of small shareholders will only be realised when the striking price is declared. Therefore, the number and extent of their shareholding, so far as small shareholders are concerned, can be ascertained. I hope therefore that the noble Lord will see that one cannot quantify it.
Lord Leatherland: My Lords, would the noble Earl say that if I were a very wealthy German capitalist it would be possible for me, along with other very wealthy German capitalists, to secure a holding of a very large number of these shares?
The Earl of Mansfield: My Lords, my right honorable friend reserves to himself the right to refuse any application, so whether the buyer was a very rich German capitalist or a very rich German Marxist makes no difference.
Lord Kaldor: My Lords, could the noble Lord tell us how the striking price is arrived at? If the Minister responsible has examined all the applications from every point of view, including the nationality of the applicant and all other things, I cannot see any simple procedure by which—
Lord Boyd-Carpenter: Question!
Lord Kaldor: My Lords, my question is how the striking price is arrived at.
The Earl of Mansfield: My Lords, the striking price will be the minimum price which has been tendered in order to ensure that the applicant receives his shares.
Lord Donaldson of Kingsbridge: My Lords, if, as a small investor wanting 1,000 shares, I put in a bid and the striking price is then agreed by other people's investments, what proportion of my 1,000 shares am I likely to get? Would I get 1,000 or 10 per cent. of something else, and, if so, of what? I really have never heard such a confused Statement on anything for a very long time in this House.
The Earl of Mansfield: My Lords, I really do not think there is need for any confusion. The applications are made and the tenders are received. The Government then have to work out the striking price and do a sum which will ensure that the number of shares on offer reflects those applicants who are above the striking price and the number of small shareholders, who, as I have said, make their application without entering any price at all. In that way, the amount of shares which will be awarded, if that is the correct word, to these small shareholders will be ascertained.
Lord Boardman: My Lords, if as my noble friend said, a copy of the prospectus was to be placed in the Library today, is it not the case that many of these highly technical problems could best be answered by looking at the prospectus itself?
The Earl of Mansfield: My Lords, I am most grateful to my noble friend. I think that a perusal of the prospectus in the Library, or as from Friday in the newspapers, or as from next Monday in the main branches of the clearing banks, the Trustee Savings Banks and the main post offices, probably would be fruitful.
Lord Bishopston: My Lords, may I finally ask the Minister this question in view of the uneasiness which is obvious in the House? Despite the assurances of his noble friend Lord Boardman, the House really is not
254
getting the information which it ought to have. Saying that noble Lords can read about it in the press, in the Library or elsewhere is not good enough. Can there be a debate on this matter, or can there be a further Statement by the Minister at the earliest opportunity?
The Earl of Mansfield: My Lords, it certainly would not be appropriate to have a debate upon the prospectus of a company which is being issued in the manner in which this one is. If the noble Lord wishes to raise the matter, then I am sure that he will do so through the usual channels.
Lord Kaldor: My Lords, may I—
Lord Denham: My Lords, we have already spent 30 minutes on this Statement. Of course, noble Lords are entitled to ask my noble friend any brief questions for elucidation that may arise, but we have had a very great number of questions. I am, of course, in the hands of the House, but perhaps your Lordships may generally feel that we should carry on with the debate.
Lord Kaldor: My Lords, may I finish? Would it not save a lot of time if the Minister—
Several noble Lords: Order!
Lord Denham: My Lords, it is usual, when the House has expressed its view by sound when such a suggestion is made, for noble Lords to accept the advice. Of course, if I am wrong I shall apologise, but I think that we ought to carry on.

The Queen's Speech

  ADDRESS IN REPLY TO HER MAJESTY'S MOST GRACIOUS SPEECH
  4.22 p.m.
  Debate resumed.
  Lord Byers: My Lords, I think it is the sense of the House that we should stop pouring Britoil on troubled waters and get back to the debate on the gracious Speech. I was particularly interested in the contribution from the noble Lord, Lord Scanlon. The House listens to him with great interest whenever he speaks, and I was particularly interested in what a far cry his speech was from the various policies which have been adopted by Labour conferences in the last year or two. It was very refreshing indeed. I shall be very interested, too, to listen to the noble Lord, Lord Gormley, making his maiden speech and to hear his version of official Labour Party policies.
  The gracious Speech and Government pronouncements do not give much hope for those of us who are deeply concerned and preoccupied with the mass unemployment which has risen during the Government's three and a half years in office, and which shows no signs of diminishing through any effort of the Government themselves. For this, and other reasons, we have tabled a Liberal/SDP Alliance amendment which, at an appropriate moment, will be moved by my noble friend Lord Diamond.

  255
  Of course, we recognise and give credit for the importance of the reduction in the rate of inflation. This is vital and it can only be in the national interest that a low rate should be maintained, and that pay demands by union leaders asking for double-figure rises should be resisted in the interests of all of us. But the reduction in the rate of inflation does not, in my view, exonerate the Government from adopting policies which could contribute to a reduction in unemployment. I can only repeat what I have said many times before in this House; namely, that this country is suffering basically from a lack of effective demand. This was the theme of the speech that I made on the loyal Address in November 1980, and my colleagues and I have repeated this view ever since then.
  A number of factories got rid of their overmanning early on in the piece, but now they are at risk because their order books are far too slim. The demand for their products is not there in sufficient volume to avoid redundancies. In other words, ineffective demand for the product means ineffective demand for labour. I do not think it is any use the Prime Minister denying that there is a shortage of demand, particularly for British goods, while castigating local authorities and nationalised industries for underspending and causing a shortage of demand.
  I do not support the view that it is the duty of the Government to spend their way indiscriminately out of the recession—far from it. That would certainly put at risk much that has been gained by reducing inflation. On the other hand, I believe that something must be done immediately to stimulate demand. I believe, as I have said before, that selective investment to create new assets or to undertake maintenance and repair work, which simply cannot be put off indefinitely, would do a great deal to stimulate demand in the right direction.
  We have, apparently, seriously underspent our projected public borrowing requirement target. I know that we are approaching a general election, and that in these circumstances Governments are often tempted to attract votes by reducing personal taxation. But I believe that if we were to use the whole, or a very substantial part, of whatever surplus is thought to be available by reducing personal taxation it would result only in the substantial purchasing of imports which we simply cannot afford. This is the real weakness of the official Labour case, which is based on the principle of spending up to the hilt in the hope that it will result in more jobs. It is much more likely to result in more foreign jobs.
  But selective public or private investment, designed to create more wealth in the United Kingdom, would be of lasting benefit, especially if the emphasis is placed on insisting that, wherever possible, the products used to create the new assets are made in Britain and on selecting projects where the British-made content is likely to be high. For instance, it must be clear that if we were to mount a substantial long-term programme of constructing new housing units and refurbishing others, particularly in run-down areas, the result must be an increase in the effective demand for British bricks, steel, textiles, tubing, electrical and other domestic appliances and fittings.
  The Times on Tuesday of last week, 2nd November,
  256
  reported that private builders saw little or no chance that councils would spend the £1,000 million by which they are undershooting the Government's expenditure targets. Once again that points to a reduction in what should have been an important weapon in the armoury of effective demand management. What I believe is needed is a continuous programme of refurbishing and home improvements over a number of years, if demand in this field is to be maintained at an effective level.
  It is no use having capital investment programmes which are on a year-by-year basis, with insufficient confidence for the people who are carrying them out. I believe that the repair of our town and city roads and the replacement of sewers and drains, for instance, cannot be put off much longer. Why not commission this work now? The electrification of the railways must come sooner or later. Let it be sooner. This is what I pleaded for on 27th November, 1980. I pointed, also, to the indiscriminate nature of the public expenditure cuts which I said, and still believe, had become the enemy of private sector viability and private sector order books. Only now, after two years, does the penny seem to have dropped—two years and over 1 million extra unemployed later.
  The Prime Minister made a speech last Thursday and took this as her text. She pleaded with people to spend money in this way, having vetoed it exactly two years ago. We all admire her iron nerve, but this indeed is nerve. If she can complain about underspending creating unemployment, then she confirms the case for higher sustained selective spending to create wealth and lasting assets as a reasonable way to diminish unemployment. What we are suffering from at the moment is a mini "stop-go" and whenever we have had this policy it has always been detrimental to the national interest. The truth is that the Government have wasted two years by being blinded by monetarism as a solution, and by a refusal to create jobs by encouraging the creation of wealth and stimulating demand for British goods.
  Indeed, I believe that we need a new approach to buying British. Exhortation is not enough. If we are to increase the consumption of home-produced goods, we shall not do it by imposing import controls or non-tariff barriers. I cannot tell the noble Lord, Lord Scanlon, too sincerely how much I disagree, even though he puts the word "selective" into his argument. That is not Labour Party policy, as I understand it, which is import controls and not selective import controls—
  Lord Scanlon: No.
  Lord Byers: Yes, my Lords. Perhaps my recollection of the resolutions is wrong. But there is not much doubt about it that if we follow the line of import controls we will do grave damage to our own exports and we will certainly do damage to our own productivity in this country. I believe that we have to identify what are the various responsibilities for getting a Buy British movement really under way. The first responsibility, I believe, lies with the British manufacturer to produce something which is at least as good value for money as can be obtained abroad, and preferably better, delivered on time and of equal or better design and durability. The most stringent test of

  257
  this is to try to market the British goods in the overseas countries from which the goods of our competitors emanate, and this is being done in certain sectors.
  The second responsibility lies again with British industry, with manufacturers, to examine their own purchasing policies in detail to see how far they can go in buying or commissioning basic materials and components from British sources in substitution for those items which are now imported. There are in a number of companies people who simply do not understand that they could in fact, if they made sufficient investigation, get small and medium-sized British companies to make the components which they are now buying from abroad. There was an excellent exhibition put on by the London Enterprise Agency and the CBI recently—it was called "Can You Make It?"—and 49 large firms put on the table the things they were buying from abroad and challenged 3,000 small businesses to see which of these things they could tender for on a value-for-money basis. All that is now being progressed and it looks as if it is going to be an interesting development. These are the initiatives, I believe, that we need.
  The third responsibility lies with those who sell directly to the public through retail channels to buy British wherever they can, and to demand from their suppliers standards as high as those of imported goods, which they can then market with confidence. The final responsibility, I think, lies with those in the public and private sector to review their own purchasing policies, to insist that wherever possible they buy British when they place the contracts for which they are responsible.
  Today references have been made to competitiveness. I think it is absolutely right, but I think that Governments should study the costs on business which are of Government making, or costs which are made by local authorities. There is some recognition of this in the announcement that the National Insurance surcharge will be reduced; but why not get rid of it now? Why cannot we afford to do it? It is a burden on British industry.
  I hear complaints on all sides that our energy costs to industry are much higher than those suffered by our competitors. I know it is difficult to measure the exact amount by which this may be so but surely when the energy industries are making profits of hundreds of millions of pounds there must be some scope for reducing the burden on British industry. Local authority rates are another imposition which adversely affects the prices of industry and commerce. One must ask whether over the past two decades the increase in jobs in local authorities by 78 per cent. and in central Government by 45 per cent. can all be really justified. These are the burdens which are having to be borne partly, largely, by British industry. I have only mentioned a few of them. I would like to see the Government make an inventory of the Government-made or local authority-made impositions and review them to see to what extent they can reduce these burdens so that we have a better chance of being competitive.
  I hope that we shall do something to increase the chances of British business becoming more competitive, because our competitors are really competitive, and if we do not do that we are going to be landed with something like 4 million unemployed.
  4.36 p.m.
  Lord Boyd-Carpenter: My Lords, from its beginning this House has always included among its membership representatives of the great centres of power in this country, and it is in accordance with that longstanding and, I think, very salutary tradition that this afternoon we have the amendment put forward by the Official Opposition moved by a very eminent trade unionist, and also that I am to be followed by the eagerly awaited speech of the noble Lord, Lord Gormley, another major figure in the trade union movement. To those of us who believe in the future of this House it is encouraging that the trade unions—one of the great centres of power in this country today, whether their power be well or ill used—should be here and taking an active part
  It is also a particularly good occasion for us to be debating the general problems of the national economy, because it is really the first debate in this House since it has become clear that the Government's policy of giving priority to combating inflation has proved successful. Many of us on both sides of the House had hoped that inflation would have been checked earlier, but there is now the clearest evidence that the priority which, with great courage and determination, the Government have given to combating inflation is really producing results. I hope I shall not offend any of your Lordships when I say that to me that seems to be an enormous achievement. Those of us who have seen what inflation can do in eroding the whole fabric of a society, whether it be in Weimar Germany or in contemporary Argentina, and how it can destroy the standards, destroy the values, destroy the savings of a whole people, cannot be sufficiently thankful, having seen inflation in this country rise to dangerously high figures, that that tendency has now been reversed and the figures are going down.
  I thought that the noble Lord, Lord Scanlon, was less than generous to the Government when he referred to the fact that inflation today was only 2 per cent. below the level that it was in 1979. No doubt for the moment the noble Lord forgot the situation in 1979, when not only was there a powerful underlying inflationary trend, but, in the first 18 months of its period of office, the Government of my right honourable friends were left to inherit the mass of post-dated cheques for wage settlements, at high and indeed excessive rates, which had been left behind by the Government presided over by Mr. Callaghan. When due allowance is made for that, I think the achievement of my right honourable friends in dealing with the problem of inflation is perhaps set in a fairer context, and I for one would wish to congratulate my noble friend on the Front Bench and his colleagues on having achieved this.
  It has not been easy. They have been subjected to every sort of pressure, not only from outside their own party but from many people who, frankly, should know better, including some people who should know better from their own experience in Government. They have been subjected to every sort of pressure to relax on the hard, unpopular, difficult, arduous steps that had to be taken to achieve this. Now that it has been achieved and is showing every sign of being held and improved, I think it is appropriate that we should acknowledge this.

  259
  In saying that, I know that your Lordships will not think for a moment that I am underrating in any degree whatever the concern which we all feel for the other and unsolved evil of our economic situation, the problem of unemployment. I was very glad to see that the amendment which the noble Lord, Lord Scanlon, moved refers to what is, of course, the key to this, the revitalising of the economy. That is quite a different, and, if he will allow me to say so, a very much more respectable approach than that adopted by the Labour Party at its conference, because I do not think there are any of your Lordships who would quarrel with that phrase.
  I was a little disappointed that the noble Lord, with his immense trade union experience and his immense prestige in the trade union movement, did not find time in the course of his very interesting speech to give any indication as to what the trade union movement might do to help. I think a fair judgment of the situation is that there is a good deal that the Government can do, and if I have time I shall say a word about that. There is quite a lot that employers and industrialists can do, and I shall also say a word about that. But there is also a contribution which the trade union movement can make. I find it very disappointing that the noble Lord, Lord Scanlon, did not offer, to the best of my recollection, any contribution of that kind.
  I do not want to seem offensive to the noble Lord—that is the last thing I want to do—and I do not want to weary your Lordships with examples, but there are so many cases in which the unemployment situation has been made worse by the action of trade unions. There was the appalling and unnecessary steel strike of two years ago, which was the direct cause of the unemployment today of thousands of steel workers following on the loss, permanent in some cases, of markets because customers had to go elsewhere to get their steel at that time. There has been the infinite damage done to our motorcar industry. Many of your Lordships are old enough to remember the days when the motorcar industry was our star export performer, dominating the export markets of the world. But successive strikes, successive interruptions of supplies, successive unreliability, therefore, of delivery and higher costs have turned us, for the first time, into a country which imports more motorcars than it exports.
  There are so many ways in which a very powerful trade union movement can help, rather than hinder, and help enormously in improving the competitiveness of British industry, by not again and again adopting the attitude and practices which were perfectly sensible at one time; for example in the railways, Fleet Street printers, and the London docks. They have not only outlived their usefulness, but are a positive handicap to the efficiency on which competitiveness depends. One needs, above all, a recognition of the truth of a little poster—I apologise for repeating this, because I said something about this to your Lordships a few months ago—that I saw in a factory a year ago in the United States. It was put up by those who worked there, and said:
  "Customers make pay day possible."
  A little more realisation of that by the trade unions and their very able and distinguished leaders would
  260
  help very much to improve the supply of jobs.
  Of course, the Government must make contributions. It seems to me that one of the reasons for the lack of competitiveness of much of British industry is our high energy costs. The noble Lord, Lord Scanlon, referred to this. This takes one on to a very important point. Although our general rate of inflation has fallen very satisfactorily and price increases over most of the economy are very slow, that is not true in the public sector. For the 12 months ending September of this year, the price of products in public sector industries increased by 13.2 per cent., thereby tending towards the average of 6 or 7 per cent. produced by the very low level of increase in the private sector. Some of that responsibility, notably for gas, rests on the Government. Their decision on gas prices has been wrong.
  It is over the nationalised sector as a whole, as the noble Lord, Lord Scanlon, pointed out in a very moving passage on the problems of pensioners, that prices are still continuing to rise. Why is that? Is it inefficiency? Is it the knowledge of those who work in the public sector that however much they may disrupt production by industrial action, they cannot bankrupt their employers and it is therefore safe to take such action? Is it the lack of competition? Is it some inherent old-fashioned inefficiency? I do not know. But it is a very significant fact, and ironic, that that very sector of our economy which is owned by our people is the very sector which is not contributing to the reduction in prices and to the countering of inflation. The situation, therefore, again lies little with the Government. Privatisation on the lines of the Statement we heard earlier this afternoon looks more and more sensible in the light of that significant fact.
  Coming back to unemployment, I agree very much with the noble Lord, Lord Byers, that some controlled development in public spending on the infrastructure of our society makes sense at this stage. I am debarred a little in earrying forward that argument about the need for further investment in construction because I happen to be chairman of a company which would benefit greatly from such a programme. I therefore declare that interest, and in delicacy must forbear from pressing the argument further. Perhaps for that reason I found the argument of the noble Lord, Lord Byers, most attractive.
  There are other actions the Government could take. One of them is to tackle the stranglehold of bureaucracy on new development. We had a Statement yesterday about the development of Gatwick airport which will bring thousands of good jobs to that area. But did your Lordships notice that it is three and a half years since the decision was taken to set up a public inquiry? Even today, although planning permission has been given by the Secretary of State, your Lordships who read the decision will have seen that the promoters still cannot go ahead with building because they have to seek the permission of some local planning committee on certain details before they can actually put a spade into the ground.
  One sees in the bureaucracy of the local authorities the delay in granting planning permission which holds up building just at the time, as the noble Lord, Lord Byers, said so well, when building is one of the opportunity targets for a reinvigoration of the economy. There was a very good advertisement in the

  261
  Financial Times recently by a private company, headed by a slightly offensive reference to the CBI. It made the point that several vastly interesting new developments, such as cable television and cellular radio, were being held up because Government bureaucracy will not come forward with a decision.
  It is no use Whitehall saying that it has to take a long time over this because it has to make sure that everything is right. That is exactly the process which some years ago was applied to the decision to provide £80 million for a man called De Lorean to build a factory in Belfast, without apparently discovering that the man was a rogue. Therefore, I find that argument singularly unconvincing. I hope that we shall hear from the noble Earl who is to reply that the Government are to streamline these procedures. As the noble Lord said, with the burden of rates and taxation, industry carries a considerable burden which the Government could alleviate, and if it is alleviated industry will become more competitive.
  I was glad indeed that the noble Lord, Lord Scanlon, did not pretend that there was any across-the-board drastic, simple, straightforward cure for unemployment. I am sure that the House respected him for taking that proper and realistic view. It is not, of course, the view that is expressed by many of his right honourable friends outside. But it is true, and the noble Lord knows it, and that is why he said it. I had, in case the noble Lord felt like taking that line, armed myself with what could be regarded as an awful warning, not to the noble Lord but to those outside who seemed to think that it is possible suddenly to conjure up a change and a reduction in unemployment. The Labour Party's election manifesto at the beginning of the last great world slump in 1929 said that once the country could be freed from the blight of Tory misrule, the number of unemployed would rapidly recede. At that time the unemployed were 9.8 per cent. of the registered workforce. The Labour Party came to power and the next year the unemployed were 17·3 per cent. The following year they were 22·3 per cent. That is a lesson to all of us not to pretend that there is any wonderful cure, any wonderful specific.
  The truth is that it is necessary—to quote the words of the noble Lord's amendment—"to revitalise" our economy by becoming more competitive. It is, I suggest, no use, as the noble Lord, Lord Scanlon, was trying to suggest at one stage in his speech, simply to put more purchasing power into people's hands. There is no guarantee that if we do that a good deal of it will not be spent on sucking in even more imports. We have, first, to get British industry so competitive that there is no temptation, when people have more purchasing power, to spend much of it on imports, but to purchase goods made in this country because on quality, price and delivery date they are right.
  This debate was extremely well opened by my noble friend Lord Cockfield and by the noble Lord, Lord Scanlon, because we are starting it on the basis that what we are talking about are not great sweeping and dramatic changes which can improve the situation overnight; we are discussing the matter on the basis that some of us put more emphasis than others on exactly the measures which will help a bit, and particularly on the measures which will make our economy tougher, more vigorous and more competitive. I am
  262
  sure that that is the right spirit in which this House should debate the matter because, even in the period of an approaching election, I would venture to say that the people of this country would neither forgive nor forget those who cynically suggested that they had a remedy for this great evil and sought to obtain votes by that calculated deception.
  4.53 p.m.
  Lord Gormley: My Lords, the appeal was made earlier that we should try to modify our speeches in order that sometime tonight the Divisions could take place. I must admit that your Lordships have not been very successful up to now. It would seem that the average speech is about 20 or 25 minutes. I do not think that I shall take that long because much of what I wanted to say has already been said by my noble friend Lord Scanlon.
  When I rose I had a little apprehension because I asked myself: How do I address these people? I come from another environment in which I have deliberately created over the years the feeling that people should know one another by their first names. I understand that that is a little taboo here. However, I am lucky enough to be following only four speakers up to now and there is a possibility that I might remember them. If I do not do so, I can only apologise and say that I will learn as I go along in the House. My second feeling of apprehension was because I was told that a maiden speech should always be non-controversial, non-party political and non-anything like that. I am going to find it slightly difficult if I have to stick to those kind of terms. It is not impossible; it is difficult; but we shall see what goes on as we carry through.
  When I read the Queen's Speech—and, as I have said, I am a new boy here—I read it with great interest because I thought that we were in a crisis in Britain. I thought that we had an emergency that had to be dealt with. I was appalled by the seeming lack of sincerity that came through the document. There were no real valid arguments as to how we are going to get out of the pit that we are in. Let us forget who is calling it a "pit" at this moment, because we are in it. To keep looking back over history will not solve the problem. I look at this and ask myself: Why are we in this position in Britain? We have two of the greatest national assets in the world: a self-sufficiency for energy, and people. If we deal with those two matters on their own basis we can, at the end of the exercise, ask ourselves: Why?
  Let us take ourselves back to 1973. The year 1973 was when the crisis seemed to hit us harder than it had been hitting us previously, and that was because of the stupid political decisions that had been made in 1959 and the early 1960s on energy policy. I thought that the debate earlier on Britoil was fantastic, and we might comment on it a little later. In 1973 we were reliant and the whole of the Western World, even America, was reliant, on the fact that we ought to be able to purchase cheap oil in inexhaustible supplies from countries which were not within our own political control. Those political decisions had been taken not only by one party, but by other parties as well. Although the union in which I was involved kept warning people, in 1973 when those countries decided for economic reasons that they had to increase the price of their oil five times and cut the supply because

  263
  of the political situation against Israel, the whole world was floundering. We did not need to be floundering, but we were doing so because we had made those decisions to import our energy. That is why import control is so important. We can look back on history and see how it has knocked hell out of a lot of the history of Britain and the collective economic history of Britain.
  Therefore, along with the Government at that time, we set off in the 1970s to get a plan at least for the coal side of the energy field. We realised that it was important in discussing energy that we should have a plan for Britain that would make us self-sufficient. We decided that we would have a plan for coal, and I am pleased to say that that plan for coal was accepted by all the political parties. There should be no question at all of any change in that position just because there has been a change in Government. All the political parties saw the wisdom of that fight.
  At that time we started producing gas and oil from the North Sea, something which had been forecast and presumed for so many years. It came on tap at that time and has grown ever since. We have oil and gas and we have a nuclear programme for electricity production which needs a lot of bugs knocking out before it will be accepted by the public. But it is still there. We have energy from other sources. Therefore, since we are all involved in the use of energy, the price of energy, the position of energy and the supply of energy are important. Yet, it is not even mentioned in the Queen's Speech. The whole of the energy scene is completely ignored, and yet it is so vital to the economy not only of this country, but of the whole of the Western World.
  We glibly ignore it because some part of it says that we would have to deal with the Britoil situation. It has come out anyway. We spent a lot of time discussing it today, and no wonder! I read in the paper at the weekend that it is the "oil sale of the century". It is better than picking money off the streets. They say that there is a great feeling of euphoria among the establishments. No wonder! They are going to find a lot of money available to them which should be available to Britain. We should sit down and forget the political divisions among us and say that we need an energy policy which can be accepted by all parties, and not be destroyed because of the whims and fancies of the British public. We cannot afford it as a country and we should not allow it to happen any longer.
  Therefore, as I say, the privatisation of our national assets does not create, and never will create, one extra job. It is only political dogma sometimes that determines how we are going to deal with our whole economy. The energy situation is so important that we cannot afford to ignore it. I would hope that the Minister, in view of the statement that was made in Europe yesterday about the bigger need for coal, will at least emphasise the need for full support for the coal plan which was accepted by us all. Then we could have some peace in those places in Britain where there is a great deal of worry at the moment because of the statements made by different people. So I would urge noble Lords to say to their Government colleagues, "Come out in the open as early as possible to try to make sure that we have this plan, at least on one side of the energy industry, which cannot be nullified by other people."
  264
  Then, of course, we come to the second asset about which I spoke. In Britain, we have some of the most sophisticated people in the world. We have a far longer history than many other countries in the world. Among the older people there are the highly skilled; we have the greatest technicians, not only on the shop floor, because many of these lads have gone through the field to become managers and even top employers in their own right.
  The big tragedy, of course, is what has been happening over this last few years. We are not just talking about big firms shedding thousands at a time; we are talking about thousands of smaller firms that have had to go into liquidation. I shall be speaking to a group of these tonight to try to shed some light on their future. I hope that I shall be able to convince them that there is something for them to struggle for. I saw a man last night who said that he had suffered an injury towards the end of last year; he is the owner of a business. He returned to work in February after an operation and the people in the canteen made a path for him and cheered him the length of the canteen. A few months ago he had the difficult task of having to sack 1,000 of those same people. He said, "How can I expect loyalty from any of my workers when I have to treat them in this way?
  This is what is wrong with Britain. We are eating the seed corn which we should be looking after. We are losing skilled people who we shall need to fulfil the training programmes about which my noble friend Lord Scanlon spoke. We are losing those people because they think there is no future for them and they feel so battered, so full of bitterness and betrayed that we shall never again get the expertise of which we used to be proud in Britain, because people will say, "Why should we keep doing this when we are only putting ourselves out of work?"
  How do you expect to get increased production or increased productivity if the only thing the workers can see is that they will be the next on the dole queue? You cannot expect it, and you will not get it. As a trade union leader, I have been arguing for the need for increased production time and time again. I still believe in it, as most trade unionists do. I say to the noble Lord, Lord Boyd-Carpenter, "To keep deriding the trade union movement does not solve any problems. To keep picking out one section of the workers and paying special attention to them is criminal to Britain". Ninety per cent. of those lads all realise that they are not an oasis in the middle of a desert. They are all proud of British society and have to be proud of a good society if they are to prosper too. So do not keep deriding them and deriding their efforts.
  When we come to party policy, I hope that we are not sent here just to express party policy now and again. I am afraid that I shall not be here very long if that is the only condition on which I am to be allowed to be here. We have been breeding this for the last few years. I have hardly mentioned the younger people. The biggest crime against any state is how many young people have to go on the dole when they have finished their education. There are not only the 16-year-olds but there are lads who go to university, come out with high degrees and then have to be thown on the scrapheap because there is nothing for them. The Queen's Speech refers to the training programme, but

  265
  that is just a sop. What is 12 months' training? What will a lad do if, at the end of the training period, there is no regular work for him to go to? We need the jobs and we need the training. We need them together, we cannot have them in isolation.
  Therefore, I come to the crux of what I believe we should be doing. I believe that we can buy jobs. I believe that we can buy jobs as easily as we can buy unemployment. That is what we are doing at the moment. All the money that we are producing from our wealth in the North Sea and elsewhere is being dissipated by people having to take dole money instead of earned money. They are not making a contribution to their own upkeep because of the enforcement of the dole.
  I spoke to five Ministers two years ago on exactly the same matters as I shall speak of here. There are jobs that need doing for Britain and for Britain's future. The electrification of the railways is a must. This is not saying that tomorrow we shall spend £600 million or £700 million. It is a gradual process, but the very fact of saying that it has to be done creates another situation, and brings endless surges from other industries which will be supply industries in the future when we have the jobs. We need the fulfilment of the whole roadway programme, especially now that we are to have heavier lorries. We shall need a bigger roadway programme than we have at the moment. I admit that I spend a great deal of time on it, but it is a must because no one can say that it is something that is not necessary. We need a big house-building programme, particularly in the inner cities. These, to me, will build for Britain's future. I think that they will create an urge for people in private industries to invest, who at the moment cannot see any future and who are not willing to borrow money at the lower interest rates to invest in new equipment for their industries. I believe that we would create a different atmosphere among the people of Britain, and we would help to create more wealth and vigour in the energy markets to which I have referred.
  In my opinion, this is something which we should be determined to do; we should be determined to give a lead. We are the only country in this situation which has self-sufficiency in energy. If Germany was in this position, she would not be waiting for America; she would be leading Europe, and so would France and the other European countries. We should be seen to be leading Europe, because we are starting to climb out of the crisis rather than wallowing in it. I think that this would give us a chance to give greater help to the undeveloped countries of the world, who need all the help we can give them, and create again a bigger market for exports. This would also give us a better chance to lead the world—a position in which we used to be—in the fight for a peaceful world.
  In short, because of our assets let us be more positive. Let us ask the Government to accept the motto, "Get Britain back to work". That should be as good a motto as the one that used to be thrown out by some of our colleagues in years gone by, "I'm all right, Jack." I think that it is as important today to say, "Get Britain back to work", as it was to paraphrase that a few years ago. Let us lead Europe and the rest of the world in the recovery. I believe that if we are competent we can do it. We can get back our respectability and be regarded as "Great" Britain once again.
  5.8 p.m.
  Lord Taylor of Gryfe: My Lords, it falls to me to congratulate the noble Lord, Lord Gormley, on his excellent speech and to welcome him to the House of Lords and make him feel that he should not be apprehensive about intervening in subsequent debates. We have heard a speech this afternoon not only from a great and distinguished trade union leader, but also from a great patriot. The important message, which he has brought to us, is one which commends itself to these Benches in so far as he has urged us not to be a divided community and to think in terms of national welfare. The noble Lord, Lord Gormley, brought great wisdom and wise judgment to the National Union of Mineworkers, and I am sure that we are all delighted that the legacy he has left with the NUM has not been totally forgotten. He may, in fact, find the atmosphere in this House a little more pleasant than it was in the latter days during his presidency of that great trade union, so we welcome him here.
  I rise to support the amendment proposed by the noble Lord, Lord Byers, in the name of the Liberal-Social Democratic Alliance, and to echo what has been said by the noble Lords, Lord Scanlon and Lord Gormley, in saying that the Speech with which we are concerned was disappointing and even irrelevant. There is no sense of the urgency of the situation and the challenge which it presents.
  If you read the CBI survey of a few weeks ago which was featured in an article in the Economist, it was headed, "Help! Has anyone seen our recovery?" The CBI survey, which is frequently more accurate than the Treasury forecasts or the Government projections, indicated that there is a general collapse in business confidence, an unexpected fall in output over the first four months, with perhaps a further modest fall expected in the coming months, a similarly unexpected fall in recent orders, and maybe a further modest fall to come due to continued de-stocking, continued redundancies, and so on.
  This is not the projection of an enemy of the Government. It is based on an assessment covering the whole of industry, and does not encourage us to believe that there is going to be any substantial improvement, at least in the near future. Indeed, in an article in the Financial Times yesterday it was pointed out that in the projections which the Government are now making in their expenditure plans for the next year they are assuming an increase of 300,000 adult unemployed, and a further increase on top of the existing figures of 60,000 school-leavers in the next six to eight months.
  These are terrible and tragic statistics. We are talking about 3½ million of our fellow citizens. I recall after the last war the great Victor Gollancz, when he was raising money to relieve suffering in Europe among refugees, used to say that he spent an hour in quiet meditation before he made any appeal to try to get the feeling and the sense of suffering on the part of these people. In looking at this great problem of unemployment, and the dejection and humiliation which it means to millions of our fellow citizens, I wish occasionally that we would just try to put ourselves into the situation of an unemployed man who comes home with a redundancy slip, or a man in his fifties who sees no immediate prospect of any

  267
  further employment. What that means in terms of poverty and rejection is extremely serious.
  Keep in mind—and I say this to the Government with all respect—that one of the things on which they based their last election appeal, and for which they employed Messrs. Saatchi and Saatchi, was a great billboard showing people standing at the unemployed queue under Labour under the slogan. "The Conservatives will get you back to work". This kind of politics, and this kind of false promise, can do nothing for the good of democracy. I was interested recently in the Peckham and Northfield by-elections. All parties claimed success at these elections incidentally, including our own. But the frightening thing about both of these elections was that only 38 per cent. of the people in Peckham, and only 58 per cent. in a highly-publicised election in Northfield voted. What is happening in our country? Because of these kinds of false election promises people are losing faith in the democratic process. They are losing faith in the system.
  The noble Lord, Lord Boyd-Carpenter, referred to the consequences of inflation on the Weimar Republic and the demise of democracy in Germans. As a very young man I lived in Germany at that time. What brought about the Nazi victory was not simply the inflation, which was in 1923–24, but the fact that there were 8 million unemployed in Germany in 1930 and 1931. They said, "If this is what democracy means, then we are not interested in the retention of that kind of system." I say to the Government that, while they may think that the people are passive and complacent, a stage is reached when they begin to question the democratic process which is so inequitable and so unfair.
  I believe that democracy survives on participation and involvement of people, but it will not survive in the kind of passivity that was shown in these two by-elections. People cannot understand the system that condemns hundreds of thousands of people in the construction industry to unemployment at the same time as people are needing houses, roads and sewers. People cannot understand the system that takes all the benefits of North Sea oil, with a contribution to the Treasury of about £7 billion per annum, and transfers it to paying social security and unemployment benefit which is totally unproductive. It is difficult to understand or defend the logic of that kind of system.
  The noble Lord, Lord Byers, has indicated some of the steps which a Social Democratic Liberal Alliance Government would take. These will be expanded further by the noble Lord, Lord Diamond. There is a new mood around, as the noble Lord, Lord Gormley, indicated, among the workers of this country. There has been in the past few years a great educative process—and this has been accepted by the railwaymen with 6 per cent. and the miners in their recent settlement, and so on—that jobs depend on investment. There is a growing awareness that jobs depend on investment and we must get investment going if we are to create more jobs. The Social Democrats say that now is the moment for a national forum for the development of a consensus economic policy embracing the employers and the unions and the Government, so that we can establish some
  268
  national objective and national norm around which we would build the new economic revival.
  Reference was made to the state sector. Perhaps it is in that sector that the prejudices of British politics are most evident. In that area, "Doctrine rules, OK!" We have seen some evidence of it in the debate here. The Social Democrats do not believe that everything in sight should be nationalised. The Social Democrats do not believe that it is wise to have the state involved in all aspects of our national life. That is the way to Eastern Europe, and Eastern Europe is a bad example in terms of the suppression of democracy and the failure to generate any economic growth.
  We believe that the public sector should be looked at quite pragmatically in the best interest of the nation on the same basis as any other industry. The size of the state sector is important for the total economy. You have 2 million employees in the public sector and you have responsbility for more than 11 per cent. of the total GDP. There is no point in trying to solve the problems of the public sector by slogans and doctrine. The favourite doctrine from the Government is, "Let us wind back all activities in the public sector", and that is designated as "rolling back the frontiers of Socialism". On the other hand, my old colleagues in the Labour Party are similarly obsessed wth the question of ownership, when we should not be discussing ownership but discussing structure, efficiency and the good management of the assets for which we have responsibility. I suggest to the Government that what they are doing by their obsession with rolling back the frontiers of Socialism are several things which can hardly be justified in terms of the national interest.
  Reference is made in the gracious Speech to the fact that private capital will be attracted to the shipbuilding industry. That industry has just been rescued from private enterprise, and presumably if private capital is to be injected into it. it will be only in those profitable sections of the shipbuilding industry, and I suspect that candidates for denationalisation might be Yarrows and Vospers, who are entirely dependent on defence contracts. I do not think the City investor will be attracted to yards such as Scott Lithgow and any of the other ailing parts of the industry.
  That is what is wrong with the situation; in looking at the state sector, the Government are saying, "Let us hive off what is profitable but let us leave a rump of bankrupt industries to be carried by the taxpayer". By so doing, they are encouraging the anti-nationalisation prejudice in our society. That is not good government and I look forward to the Government commenting on this issue. British Airways is another industry that seems scheduled for privatisation, but I notice—the Financial Times and other financial papers suggest this—that only after a massive capital restructuring of the company will it come to the market, which of course means the injection of very large sums of taxpayers' money so as to make it more attractive to those who might be willing to invest.
  Unfortunately, there is little reference in the gracious Speech to the international situation, though as a trading nation we depend on a revival of international trade. The Government assume this year only a 2 per cent. increase in international trade. I agree with the noble Lord, Lord Byers, that it will be difficult to adjust exchange rates upwards against the

  269
  Deutschmark and the Yen and still retain the current exchange rate between an over-valued dollar and a devalued pound. There are great dangers in running immediately to import controls as a means of solving our economic problems. The consumer suffers, we retreat into Little Englandism and we induce retaliation, and that destroys the prospect of developing international trade. Of course we must protect ourselves from unfair dumping and other unfair practices, but let us be careful that we do not rush into import controls, which I believe would be a cul-de-sac.
  I note with pleasure that the noble Lord, Lord Cobbold, will speak later, and I expect that he will comment on the international banking crisis, an issue which affects the whole flow of world trade. I will not quote the astronomical debts that have been accumulated by countries who are finding difficulty borrowing to pay the interest, apart from the original principal, but it is causing great nervousness to exist in international banking centres as they try to get some kind of agreement on international lending policies.
  In The Times today it is stated that there is a new institute in Washington where information will be compared as to the risk element in international lending. It may be that in order to get world trade going, we shall require to look at new instruments for the stabilisation of exchange rates and for some guidance for international banking. Immediately we should increase our quotas to the IMF, which would enable them to have more freedom in their lending, without conditionally, to some of the third world countries.
  It is a great world tragedy—this also affects our domestic scene—that two major companies, International Harvester and Massey Ferguson, should be in trouble. They make the great equipment designed for food production, yet the third world is crying out for that kind of equipment. International Harvester has three factories in England. We must try to revive the purchasing power of the third world countries because if the international bankers become excessively nervous about lending to the third world, that will mean a further contraction in their buying power and further poverty. On the other hand, if you have a blanket imposition of IMF solutions—of cutting back on their own domestic consumption and restricting further imports—that in turn will contribute to a general contraction in world trade. I want to see the Government being a little more imaginative and positive in dealing with these issues.
  Reference is made in the gracious Speech to helping the poorest countries, but I notice that in the financial projections published by the Chancellor yesterday there is no substantial increase in the aid programme. I would have expected greater support for and greater use of the Bank for International Settlement, more aid and increased quotas for the IMF.
  When the SDP was formed, it was to break the mould of British politics. That did not mean simply changing the voting pattern of the people of this country. It meant also that we were trying to establish in British politics the idea of a national consensus aimed at taking away all confrontation and bitterness, thus securing some kind of national adherence to agreed objectives. It meant, too, creating in our society a greater sense of caring, compassion and responsibility for the Third World. I sincerely believe
  270
  that only by the injection of some moral principles—taking it away from the party conflict and injecting an ethical dimension into the conduct of our national affairs—will people begin to have faith in democracy; and we may save it yet.
  5.27 p.m.
  Viscount Eccles: My Lords, when people tell me that the House of Lords is useless and might just as well be abolished—because we make no contribution to national affairs—I always think of those debates in which some noble Lords bring experience that the rest of us do not have. When that is allied to, if I may say so, great actors' skill—a real performance, such as we had from the noble Lord, Lord Gormley; I am sorry he is not in his place because I should have liked him to hear my sincere compliments—then, when those two attributes are added together, that is a reason by this House should be better known. The media do not report our debates as they should be reported; they make them far too much a pale copy of the debates in another place, when they should single out two or three of the best speeches and put those before the public. I hope we hear Lord Gormley many times in the future because he obviously possesses, from dealing with a great industry from the trade union point of view, experience which we need very badly.
  That said, I have come to the conclusion, from listening to speeches from the Benches opposite—both here and elsewhere—that the Opposition are now saying that the Government are winning the battle against inflation at the cost of losing the battle against the recession. That is a most unfair way of putting the present situation. The two animals—recession and inflation—are very different. We are defeating inflation by our own efforts; no one else can do it for us. But the recession darkens almost the entire globe. It is not our doing that it has become very much worse throughout this year. By no stretch of the imagination could Britain alone reverse the collapse in world demand. It requires international action of a type that we have not yet thought of. I propose to come back to that in a minute, but first I want to say one or two things about the points raised by the noble Lord, Lord Scanlon.
  It is said that if more money were put into the hands of British consumers by either tax cuts or Government borrowing and spending, it would make a sizeable impression on the total of unemployed. I very much doubt it, partly because if it were done by borrowing on any scale, we should have to look to see the effect on the interest rate. The money would percolate through to consumers, and we should have to look to see the effect on prices. But more than that; as has already been mentioned by more than one noble Lord, there is a very serious risk that a large proportion of the new money would be spent on imports.
  In September I was in France and Italy, and, no doubt like other noble Lords, I had to hang about outside shops while my daughter went inside and checked the prices, and was moved to buy such things as clothes, shoes, kitchen and garden equipment. We all know that motor-cars are cheaper on the continent of Europe. Here at home, in our shops in London there are more foreign goods for sale. On our motorways there are tearing along many more foreign lorries than there were a year ago. Therefore, adding to consumer

  271
  demand is something that one must look at very carefully, and it must be very much a second best to getting down our costs, as the Chancellor of the Exchequer is trying to do, and selling more exports abroad. That said, I still think that international reflation, if it could be carefully arranged, would be a different matter, and probably it is really the only way to tackle the world recession.
  I thought that the noble Lord, Lord Byers, dealt very well with the question of import controls. I introduced our anti-dumping legislation years and years ago in another place, and I believe that it should be used to the full. If it is possible to stretch the meaning of "antidumping" to cover not only unfair pricing between the exporting company and ourselves here, but also huge differences in tariffs, then I think I should be in favour of looking at that very carefully.
  However, if general protection is out—it must be for a country such as Britain—should the pound be devalued? The CBI conference said, No, and it was right. Devaluation means a loss of wealth, it invites retaliation, it does great damage to our reputation as a world financial centre. We should be accused of exporting our unemployment to friendly countries which do not have the luck to be self-sufficient in oil. Those who have recently devalued, France and Sweden—and Spain will soon follow—first elected socialist Governments. Well, of course, any country that does that will find that confidence in its money and in its economic policy melts away. It has no option; it must devalue. We do not want to follow that example.
  I saw that Sir Michael Edwardes thinks that we could devalue bit by bit, presumably by lowering our interest rates faster than the rates in other countries. Except against the dollar, we have had no success at that game. Our interest rates come down and the pound stays up against the European currencies; and it is from Europe that the great bulk of our manufactured imports are coming. We have the oil, and we have a sound political background. We cannot expect investors to hold their money in currencies which are intrinsically weaker than sterling, especially when in many of the countries in Europe and elsewhere the budgetary situation is nothing like as satisfactory as is ours.
  It is the mention of budgets that brings me to the fundamental cause of the recession. The appalling common tragedy has a common cause. Government after Government have been overspending and over-borrowing, creating financial crises, which spread like a plague across the world. Finance Ministers are not the only ones responsible. As the noble Lord, Lord Taylor of Gryfe, said, the banks, often prodded by foolish Governments, have over-lent, and now must go on lending just to keep their loans alive. The air is full of the smell of default, and that is a disastrous situation in which to find the immense sums that are called for to begin the reversal of the collapse in world demand.
  One thing I think is clear. The rescue, if it is to come, can be carried out only by international agreement and action. Surely the underlying priority, the one which should engage the Americans right now, is to reestablish a sound world currency in which everyone can have confidence. As long as all rates of exchange
  272
  are floating, bobbing about in a sea of speculation, the attention that must be paid day by day to small financial and political events is absurd. It takes away from doing the real job of putting people to work. I know it will be objected that to establish a sound world currency would require sacrifices in the freedom to manage individual currencies. Indeed, it would; but what is the alternative? Is it better to allow exchange rates to be pushed up and down by windy dealers, who have no interest in the volume of unemployment here, or anywhere else?
  It would be a mistake to wait for the Americans to pull everybody's chestnuts out of the fire. They are coping with a huge deficit, and though the United States' economy is still the strongest, the dollar is not as powerful as it was. The rich countries will have to give each other firm undertakings both to keep their budgets in order and to support a world currency, on the basis of which action can be taken to reverse the recession.
  Keeping budgets in order—and of course I include the EEC budget, which is in disorder—will be much more difficult than it was in the 1950s and 1960s. I want to give from our own experience one or two reasons why the pressures to overspend are so enormous here and throughout the whole world. Take, for example, health and education. The public in this country are very reluctant to believe that the present Government are spending more than any Government have ever spent before on these two services. Now, why is that? Well, they are dazzled by the new discoveries—scanners, heart transplants, the Interferion drug, and so on. Why cannot every citizen, young and old, rich and poor, white and black, be offered all these wonders of science?
  Politicians out of office tell their listeners they could have all these things if only there was a more compassionate Government. But, my Lords, it has never been possible to provide every patient with the best treatment known to the medical profession. It has never been possible to provide all the growing number of old people with the highest standards of care. It has never been possible to provide every child with the quality of education to be had in our best schools and universities. It never has been, and at no moment will it ever be.
  There is nothing new in that; but what is new is the rate at which knowledge is outstripping resources, and the extent to which the public is informed, by the media and others, of the fruits of science and technology. The resulting increase in expectations will not disappear. It will continue to build up pressures on over-spending. As in health and education, so in defence—think of the cost of the new weapons systems—so in research, in transport, in care for the environment and in aid to the Third World. Every department of government in every country is in agony at the cost of the new developments which their experts tell them they cannot afford not to have.
  This is a new situation, and it is very relevant to how we solve the recession. Where are the resources to come from? At any given time there is a limit to the proportion of their incomes which those in work are prepared to see transferred to those not in work—to the sick, to the children, to pensioners, to the unemployed, to poorer countries. If that limit is overstepped—and it has been in country after

  273
  country—inflation is generated and disorder and unemployment follow as day follows night. Only the sternest measures of international discipline will bring back steady growth and the re-employment of the millions who are now without a job. Only the most imaginative international co-operation will enable the world to increase and make the best use of the maximum available resources.
  So I hope your Lordships will agree that the recession and the pressure to overspend are international in extent and demand international action. The Americans have the greatest power and responsibility, but the lead has not yet come from Washington. They want us to stop exporting to Russia when they ought to be leading us to frame the right financial system which would enable us to export more to each other all over the world. Could Her Majesty's Ministers make the first move? I know from my visits abroad that they have earned a reputation for taking and sticking to unpopular measures to combat inflation. If they called for international commitments to combat the recession, they would be listened to.
  One wishes that Britain could speak to the world with an all-party voice, but it is not possible because the Labour Party do not like sharing financial policy with non-socialist Governments. They stand for the maximum political control of our island economy, for getting out of Europe and for loosening our ties with the United States. Mr. Foot and Mr. Shore tell us that unemployment could be halved, and swiftly, by domestic reflation alone. That is untrue, and it is very dangerous because it invites the public to disregard what is happening in the rest of the world. Even to see the figure of unemployment remain at 3 million—and, God knows, that is far too high—we have to export one-third of all our manufactures.
  Fortunately—and this is my last word; I apologise for keeping the House so long—a sense of reality is growing in this country, and for that we have to thank the Prime Minister and her colleagues. I took a very different view of the by-election in the Midlands than did the noble Lord, Lord Taylor of Gryfe. It appeared to me that the most interesting thing about that by-election was that so many of the electors do not believe that unemployment is all home-made. They have come to that conclusion, and how right they are.
  The Government will gather further support if they place before us the sort of international policy now essential to begin to reverse the collapse in world demand. Finally, the Prime Minister is right to want to strengthen her staff at No. 10, because without it she will not be able to conduct the battle against the recession, which so clearly involves financial, foreign and economic policies.
  5.47 p.m.
  Baroness Wootton of Abinger: My Lords, I have something of a sense of unreality about this debate; but my first and most pleasant task is to add my congratulations and welcome to those expressed to the noble Lord, Lord Gormley. I think that perhaps I should append to that a little warning, and that is that we may be extremely self-indulgent in trying to draw upon his remarkable store of wisdom and experience, and I hope we shall not try his patience too much. I hope we shall hear him very often. My less pleasant task is to confess that I cannot stay to the end of this debate. In
  274
  fact, I shall have to leave these premises in a little more than an hour's time.
  My sense of unreality I think is that I feel there is a fundamental principle which has not come out and which lies at the core of this whole discussion. I see it best by going back, if I may, 65 years. Sixty-five years ago I found myself, very flatteringly, in the list of first-class candidates with a special mark of distinction in the final examinations which led to an honours degree in economics in the University of Cambridge. Of course, I had to wait another 30 years to get that degree because I was a woman, and women were not then permitted to be members of the university; but that is neither here nor there. I got it in the end, and I had the pleasure of having had those examination results.
  At that time I thought that persons trained in the study of economics (which we have been discussing, whether we are trained in the study of them or not, at great length tonight) would devote themselves to analysing and applying logic and common sense to the complex economic phenomena which we find around us in this world, with a view to formulating theories which would enable us to understand those phenomena better and, in the end, to control them more effectively in the public good.
  Looking back on those days, I still think that that was our objective and that it still is the objective of a good many of us who are interested in the questions that are under discussion tonight and in the fundamental principle which underlies this debate. I think that, my Lords, but 65 years later, what do I find? I find that a number of my colleagues, and I myself in particular, are totally unable to find any trace ! of logic or common sense in the policy which has been pursued by this Government for so long, apparently on the presumption that the closing of innumerable factories and the withdrawal of millions of persons from productive work would, if it did not facilitate, at any rate smooth the path to the restoration of this country's prosperity.
  Shattered by that, I felt that we were moving into a quite unreal world, talking about all the things that we might do, but apparently do not do, so long as this kind of doctrine prevails; although I did hear tonight one small hint perhaps of a little unacknowledged and limited U-turn in Government policy. It seems to me that this is the crux of the matter. Where, in a world in which we are still closing factories and still putting people out of work, is logic or common sense? Shall we all be millionaires when the GNP is reduced to nothing and nobody works at all? That seems to be the logical conclusion of this. So, my Lords, I can only leave it there: it is time that we turned again and thought on entirely different lines by reintroducing logic and common sense—and more particularly common sense.
  5.51 p.m.
  Lord Soames: My Lords, I should first like to say with every other speaker since we heard the maiden speech of the noble Lord, Lord Gormley, what a great addition he will evidently be to this old-established House. He showed great wisdom when he held the highest office in his own Union of Mineworkers, and after he had given it up; and I hope that wisdom is going often to be of benefit to your Lordships' House.

  275
  Where the noble Baroness, Lady Wootton of Abinger, who has just sat down is concerned, I must say that I thought that the burden of her speech was that she was totally at a loss to understand how any Government could pursue policies which resulted in a level of unemployment which is totally unacceptable to us all on both sides of the House. But I should like to ask her which Government in which country has pursued policies that she approves of; because I furnished myself with some official figures before I came here, thinking that this point might be made from the Opposition Benches. I found as follows. I asked, what has been the percentage of increase in unemployment in the bigger industrialised countries over the last 12 months? I find that in Britain it has been all too high at 10 per cent. In France, it has again been all too high at 10 per cent.—and this was when the Socialist Government in France had been following policies that were not far distant (if I understand it aright) from those which the noble Baroness would like to see pursued in this country.
  Indeed, I found myself dining the other night with a senior French Minister and was provoked to say to him that they were trying to do all the things that we were busily trying to undo and they have had to change course very considerably in recent months because they saw where that was leading them. But then I see that in the United States unemployment has increased by no less than 33 per cent. in the last 12 months; and in Germany, granted off a lower base, it has increased by no less than 45 per cent. in the last 12 months. I would hope that in this House noble Lords would be careful before inferring that these unacceptably high levels of unemployment have flowed from the policy of any one particular Government, for we all know that we are in the midst of an international recession.
  Baroness Wootton of Abinger: My Lords, if the noble Lord wishes to criticise my comments, I would point out that it is no answer, if we are pursuing the wrong policy, to say that a lot of other people have been pursuing the same or even worse with similar and, in some cases, notably worse results. In no degree does it lighten the burden that the only thing we can do in this House and in the other place is to change our methods here.
  Lord Soames: My Lords, well, of course, the House will judge whether it is possible to find policies that are going to result, in a fairly quick time, in the unacceptable degree of unemployment becoming acceptable in any way except by international action throughout the whole industrialised world. I think that anybody who infers otherwise must be wrong.
  I wanted to concentrate on one comparatively small but, I think, highly important factor: to suggest to the Government, and indeed to the Governments of other industrialised countries, that in these extremely difficult circumstances in which the world finds itself today we all have to be extremely wary of moving into a more protectionist stance. I say this for two reasons: first—I say it as a Briton—the United Kingdom of all countries profits from a liberal trading system. As my noble friend Lord Cockfield said in his speech today, exports represent about one-third of our gross domestic product and there is probably no country in
  276
  the world which depends more upon trade being as free as possible than our own. Secondly, it is by no means certain that we are going to see the end of the world recession (with all the horror that that brings to both rich and poor nations) in a short period of time. But if the industrialised countries choose to retire into a protectionist shell then, at best, that recovery is going to be put off further and, at worst, it would be aborted.
  I am one of those who believe that there were two factors which played an important part in the 1950s and 1960s—those golden years of growth, looking back on them now. One was the existence of the Bretton Woods Agreement and the fact that every nation had to pursue disciplined fiscal and economic policies. It was around a central currency, the pivotal currency of the dollar, and we all had to pursue highly disciplined policies to sustain our parties.
  Secondly, within the GATT there was a constant thrust to the gradual freeing of trade. The ending of the Bretton Woods Agreement in 1972 and, instead of having the disciplines which were demanded by that system, the substituting for it of a sort of economic and financial equivalent of the permissive society, with interest rates (as my noble friend Lord Eccles has said) going up and down like a yo-yo has, I think, had a profound effect and proven to be a motor towards world recession. For instance, why is it that the pound in relationship to the dollar should have moved in a matter of months from 2.40 dollars to the pound to 1.65 dollars? As the noble Lord, Lord Scanlon, said, one finds some who think that that is good news and others who think it is bad news. But what must be bad is the speed of the changes. That is what we have been seeing consistently since the ending of Bretton Woods, a degree of changes of parity which was never envisaged at the time when we moved over to a floating rate system.
  I believe that that has done a lot of harm, and I believe that it is important to get some degree of discipline back into the exchange rate system. That is imperative and can only be achieved by international agreement. My noble friend Lord Cockfield has heard me say this before, but I do not apologise to him for this fact. It needs to be agreed between the Europeans, the Americans and the Japanese. It is not a question of returning to totally fixed parities again, but it is a question of implanting a certain degree of discipline so that when there are movements of parties it can be seen that they are evident reasons for them.
  So much for Bretton Woods; now what about the GATT? I was a little worried by Lord Cockfield's remarks that the GATT was all right 30 years ago but times have changed. I think that people have heard this before. But have times changed that much? There was the Dillon round, then the Kennedy round and then the Tokyo round, all of which succeeded in breaking down barriers, both tariff and non-tariff. This has been a considerable success. It is very dangerous to use these somewhat specious arguments in favour of protection and to refer to examples which any country can provide. For we all have skeletons in our cupboards, as I saw clearly when I had to negotiate on behalf of Europe with the Governments concerned in the Tokyo round. One hears a good deal about seeking to move towards a more protectionist system which would be very dangerous for every country within the Community.

  277
  Here I will interrupt myself to say that I believe that the existence of the Community over the past 10 or 15 years has been an important motor in reducing barriers to trade, both among ourselves and also between Europe and the outside world.
  I now see a number of danger signals as the recession continues and as Ministers not only in our Government but in all Governments have made statements in the past that they can see the light at the end of the tunnel and that recovery is at hand. As recovery docs not come and as unemployment continues to rise not only in this country but in all industrialised countries, and at a faster pace, the temptations arc going to grow to move towards a greater degree of protection. There will be very specious arguments which in themselves are not all that easy to refute such as the case which the noble Lord, Lord Scanlon, mentioned of cars from Spain and the difference in tariff, 4 per cent. to 36 per cent. However, if we get into this frame of mind of thinking that we can get out of our troubles by protecting our industries from foreigners other than by becoming more competitive, then the whole world will suffer—us more than anyone else.
  I think it is dangerous to generalise too much. I have been generalising because I find it difficult not to. But there are risks in generalisations. There are risks because I think that there was substance in some things that have been aid lately, notably by the noble Lord, Lord Cockfield, in regard to what is in common jargon now known as the NICs—the newly industrialised countries. An example I choose to pick—and there are a number of others—is South Korea. It has been a non-playing and non-paying member of GATT for some time but whose degree of industrialisation has now reached a point where they should become playing members and paying members. We should be persuading them to open their markets to us rather than our closing our markets to them. Again, I agree with the noble Lord over Japan because I spent weeks and months arguing with the Japanese, when I was working in the Community, that they should open their markets. Because they have not done so and continue not to do so, we have for a long time had restrictions on Japanese imports not only into this country but into all countries of Europe and into the United States. I pray that they will come to see that the far better solution to this problem is for them genuinely to open their markets to us rather than for us to have to continue to put quotas on some of their exports to us.
  Another example of the danger of generalisation was a phrase—which was almost repeated today—by my noble friend Lord Cockfield, who said in an earlier debate in this House that the philosophy of the Government in this matter is:
  "If my home market is open to you your home market ought to be open to me on equal terms".
  That all sounds very fine, but when I was in Hong Kong last week and talking to a number of businessmen there they had read this statement and they "pointed out that there is no market anywhere in the world which is more open to British exports than Hong Kong". We export more to Hong Kong than we do to Japan or to all the countries of ASEAN, of South-East Asia, put together. And yet we turn upon Hong Kong and insist that they have to reduce their
  278
  exports to us in certain types of textiles. So that was a dangerous generalisation.
  My Lords, it is in the British interest that our Government be on the side of the angels. I was a little worried when I read the other day that Mr. Peter Rees had said—if I understood him aright—that the Government were going to set up some organisation to which any industry could lodge complaints about difficulties that they were experiencing in particular because of imports. This seems to me to be a dangerous invitation to industry as a whole to make complaints and gives the impression, both here and abroad, that the British Government, because of the difficulties in which we all find ourselves, are intending to tread a more protectionist path. I hope I am wrong and I hope that the Government will continue, as their predecessor Conservative Governments have always done, and hitherto indeed Labour Governments as well, to be on the side of the angels and trying to win the maximum of free trade for a more competitive industry. For it is only thus that we will get out of our troubles eventually, hard though the road may be. If we take a protectionist course, I think we are condemmed to a much longer recession.
  Lord Kaldor: My Lords, before the noble Lord sits down, permit me—
  Lord Soames: My Lords, I have sat down but I shall be delighted to hear the noble Lord.
  Lord Kaldor: My Lords, would the noble Lord say that Conservative Governments in this country were always against protectionism, as I think he said? Would he not agree that between 1902 and certainly 1939 Conservative policy was almost invariably in favour of protectionism and it was as a result of Conservative policies that protectionism was generally introduced into this country in 1932, with phenomenal results?
  Lord Soames: My Lords, I did not want to go back too far into history, but if I had I would have said how awful it was in 1929 when the Americans imposed 60 per cent. tariffs because they had very high unemployment, which was emulated by all too many countries, including our own, with the result that world trade was reduced by 25 per cent. and it took 10 years to recover from that. But really I am not here to argue about what happened between 1902 and 1942. All I know is that from 1951, when I have been involved one way or another in public affairs, the Conservative Party has consistently taken a free trading line and I hope it will continue to do so.
  6.12 p.m.
  Lord Ardwick: My Lords, towards the end of my speech I shall be following the noble Lord, Lord Soames, and the noble Viscount, Lord Eccles, rather closely in regard to an international solution of the problems that confront us. But first I should like to congratulate my noble friend Lord Gormley on a most remarkable and refreshing maiden speech. May I express the hope that his other duties will permit him to come here regularly and to speak frequently.
  In his autumnal statement, the right honourable gentleman the Chancellor of the Exchequer was able

  279
  to claim some genuine improvements such as the reduction in interest rates and in the rate of inflation. And he was able to predict further improvement in both these departments. He is entitled to his satisfaction, but it has been made possible only by the most narrow pursuit of one objective: a reduction in the rate of inflation. He has had, as Matthew Arnold put it,
  "One aim, one purpose, one desire".
  But when he came to look at the rest of the economy, at economic growth and the rate of unemployment, the Chancellor was not reaping a harvest: he was sweeping up the dead autumnal leaves. And the wildest hope he would permit himself is that there might be a vestige of growth in the year to come, though not enough to reduce unemployment, not even enough to prevent it from increasing. Yet he is going to stick to his one objective: to get inflation down and to keep it down.
  Like some other Chancellors—most of them on our side of the House—he has fallen in love with his own austerities. And like them he may be accused in time of contributing to his party's defeat at the next election, even after dribbling out a few election taxation bribes. The electoral consequences of the Chancellor I find highly desirable, but the consequences for British industry, its employees and its growing number of ex-employees, are frightening. We are in the midst of a recession which the Government have endeavoured to make less bad only by a reduction in interest rates and in the national insurance surcharge.
  But what of unemployment? The Chancellor did say a word for it. It remains, he said, the nation's most distressing problem. So it is. But what is he going to do about it! All that the noble Lord, Lord Cockfield, could claim was that the Government are introducing certain palliatives. The Times newspaper, under its new editor, seems to be a lot closer to the Government than the paper has been for some time and on Monday, in a leader which will haunt it for years to come, it said:
  "The British economy, along with the world's other industrial economies, and marginally worse, will be suffering from this under-use of its labour force for as far as the eye can see, when only 85 to 90 people in every hundred are likely to find permanent work".
  The Times is predicting, in its ancient, oblique fashion, that we may expect an unemployment rate of 10 to 15 per cent. not just in the immediate future but
  "as far as the eye can see".
  They go on to say that they can see no alternative political programme, very much as the noble Lord was saying earlier; and nothing that the Labour Party can devise for the economy can offer a serious reduction in our chronic unemployment.
  Is this really what the Government believe? Do they share the despair of The Times on the following day? The Times returned with more advice to the right honourable gentleman the Chancellor and suggested that even a 5 per cent. inflation rate, when it is achieved, is still too high. Is our industry to be crucified on a new cross of gold—a nil inflation rate? Apparently one's fears are not quite so extreme as they were after reading this article, because the noble Lord, Lord Cockfield, this afternoon spoke of the "sweet simplicity" of a 3 per cent. inflation rate. But even the
  280
  sweet simplicity will mean sweet Fanny Adam as far as the reduction of unemployment is concerned, or so far as economic growth is concerned if it is pursued too directly, too swiftly and without regard for other matters.
  Almost 40 years ago towards the end of the Second World War, the Tory Party, joined with Labour and Liberals in the Coalition, made a declaration on employment which was to herald 30 years of continuing economic and social progress and full employment. The declaration in the White Paper did not use the term "full employment" because of the influence of the noble Lord, Lord Robbins. We all, I am sure, very much regret his inability to be here today. I understand that he is not well but he has taken part in every economic debate that I can remember over the last 12 years and furthermore he has always been the most patient and assiduous listener to others in the Chamber. The late Lord Woolton decided to fortify himself against the seductive persuasiveness of Lord Keynes by taking the noble Lord, Lord Robbins, and Professor Jewkes into his department. Perhaps that is why the words "full employment" were avoided. The declaration said in the famous White Paper:
  '"The Government accept as one of their primary aims"—
  and I repeat, "one of their primary aims"—
  "and responsibilities the maintenance of a high and stable level of employment after the war".
  That pledge was repeated by Sir Winston Churchill in the 1950 election and was maintained and indeed honoured by Harold Macmillan. It was to be the basis of the long post-war consensus.
  Where to the Tory Party stand today? Nobody-wants to go back to the days of overfull employment when there were too many jobs seeking too few workers, but perhaps the noble Earl will tell us when he winds up whether today they regard the pursuit of
  "a high and stable level of employment"
  as a primary aim and responsibility of government. This was not, when it was made, just a political commitment; it was a moral commitment, and was felt very strongly by Conservatives such as Henry Brooke and others. This Government say they have broken the mould of postwar politics, or of the postwar consensus. In fact, the noble Lord, Lord Cockfield, said that it was a sterile mould—
  The Minister of State, Northern Ireland Office (The Earl of Gowrie): My Lords, I am most grateful to the noble Lord for giving way. Did the party which he supports break the mould of politics when they doubled unemployment? Is not this some indication that levels of unemployment are beyond the control of individual Governments, whatever their policy?
  Lord Ardwick: My Lord, I was going to say that it was not the mould which was sterile; it was the situation, or the climate, or the environment in which the mould existed. As the noble Lord said, it was the inflation generated by the Vietnamese war, and later on by the fantastic increase in Arab oil prices, that brought about the sterility.
  But is the mould irreparably damaged? Is The Times' despairing message giving counsel to the Government or is it merely echoing the Government?

  281
  Is it proferring the advice that the Government themselves solicit? Of course, everybody recognises that the road back to a high level of employment will not be short or easy. But, surely, we can make a braver start than the right honourable gentleman the Chancellor has done this week.
  I hope that the Chancellor will listen to the wise advice of the Financial Times. Their leader was headed "A missed opportunity" and they would have had the Chancellor abolish the national insurance surcharge completely. Mr. Samuel Brittan's commentary was headed "From monetarism to immobilism". The headline, like the one on the leader, is a little bolder than the copy below it. But Mr. Brittan, too, cannot believe that any Treasury economist could have supported the retention of the NIS, even in its attenuated form. He also adds that, nor could the Treasury
  "accept that nothing should be done about the effective exchange rate which has, against all fundamentals, appreciated by a further 4 or 5 per cent. in the past year."
  His words will be echoed by those great exporting industries which failed to convince the small fry of the CBI the other day. It is surely the Government's total obsession with the inflationary target which is responsible for the acceptance of an economically unrealistic exchange rate.
  But all this is to look at the problem within the national confines. Of course, we have all learned that no nation may safely expand beyond certain limits in a world recession. The question is—and this was raised by the noble Lord, Lord Soames, and the noble Viscount, Lord Eccles—what are this Government doing to persuade their trading partners to lay the foundations for a concerted, co-ordinated expansion, which could begin in the European Community and then the Governments could bring its strong influence to bear on other members of the OECD?
  The preliminary conditions for such a move have been persuasively outlined by my noble friend Lord Lever of Manchester, and I hope that he will give us the benefit of his latest thinking on this subject, which this House always hears with respect and pleasure, once his responsibilities to Lord Franks' Commission on the Falklands have been discharged. One of those conditions is an international solution of the grave disorder in the world's banking system and the suffering of weak Third World countries who are heavily over-indebted. The other condition is the reduction of the extreme fluctuation of currencies, starting off with a broad understanding among the nations which provide the key exchange rates about a co-ordinated intervention, based on the appraisal of fundamental economic factors. I hope that we can have a broader debate later on the world economic situation than is justified by one on the Address and on the autumn statement.
  6.25 p.m.
  The Earl of Onslow: My Lords, it may appear impertinent of me to congratulate the noble Lord, Lord Gormley, but I hope that he will excuse that impertinence. We have just heard a speech from a great Englishman, which exemplarised the best part of the trade union tradition which, at its highest, has given a great deal to a great people.
  282
  The gracious Speech states
  "My Government are deeply aware of the anxieties and distress caused by unemployment."
  I shall attempt to show that a reform of the tax and benefit system would help considerably to alleviate that distress. My right honourable friend's Government came to power pledged to encourage incentives and to reduce taxation, proclaiming, rightly, that this encouragement would provide the foundation for future growth and a reduction of unemployment. Our present system of taxes and benefits discourages employment, because, as supplementary benefit acts as a minimum wage and as tax reduces net earnings below, or only marginally above, living standards at supplementary benefit level, the effect on unemployment is indirect as well as direct. The direct effect is that it extends the period of job search, and the indirect effect is that it reduces job opportunities as employers react to wage inflation.
  Recently, the IEA has published a fascinating monograph called The Moral Hazards of Social Benefit. I hope that the Treasury, the Department of Health and Social Security and the Department of Employment all study Mrs. Hermione Parker's work. It shows that this country spends—I like this in round figures—£69,000 million in income redistribution; that is, 28 per cent. of our gross national product. These distributions consist of social security payments and housing subsidies, together with income tax allowances, reliefs and exemptions, but there is no one Government department which is responsible for this transfer. So far as can be seen there is no logic.
  Why, otherwise, would a pensioned couple have an income of £205 per week before the amount that the Government take away in tax exceeds the amount given in benefit? Why, therefore, should a married couple with two children have more taken away in tax than they receive in benefit, with an income of £74 a week? It is shown, quite conclusively, that it is not worth people's while to work at the lower wage scale. This is not because of social security, but because of the structure, or rather lack of it, in the British system.
  I will give your Lordships some examples. A family of four living in cheap local authority housing has £75 per week spending power, if the father earns £120 a week in full-time work. A similar family, where the father earns £45 a week in part-time work, is only £10 per week worse off. In other words, the implied tax on that extra £75 is £65. Quite rightly, the level of tax has been reduced on higher incomes, but surely to have allowed that implied tax rate is crazy.
  I will give your Lordships another dotty example. A single woman, earning £1.75 per hour part-time for 20 hours a week, has a net weekly spending power of £33.32, whereas a woman earning £70 a week full-time has a net weekly spending power of £29.92 a week. This is an implied tax of over 100 per cent. on the top 60 per cent. of that woman's earnings. The chairman of Shell or BOAC does not pay that rate. It has been assumed that £10 a week over the benefit level is the incentive level for people to work, and I will take that figure. But on a "Panorama" programme, it was taken as £20 a week and it has also been stated by certain people in Glasgow that it is £20 a week. For a school-leaver of 16 this represents a wage of £46 a week. I suppose that is not too bad, £10 up on £46 is quite a reasonable amount. For a married man with a

  283
  non-earning wife and two small children the figure is £132 a week, or just over £4 above the average male wage in this country. The worst and silliest example is this: a lone woman with two children, assuming £20 a week work expenses, cheap local authority housing, no entitlement to free school meals above the family income supplement ceilings; there is no spending power difference between part-time work for £20 a week and full-time work for £120 a week. She needs £140 a week to make that £10 difference. That £140 is over 170 per cent. of the average woman's wage. My Lords, this is a system of sheer and utter chaos.
  Please can this Government, which is a Government who do care, despite some of the things people may have said about them, who on the whole recognise essentials, give an undertaking that they will urgently try to reform the tax system so that those who can pay pay, and reform the benefit system so that those in need receive the benefits. The most sensible method I have seen suggested, is that of Sir Brandon Rhys-Williams, which is called the "basic income guarantee scheme".
  That is, I think, too complicated for me to go into now, but it is a sensible scheme; it makes absolutely certain that levels of support are in some ways higher than they are now; it is cash neutral—in other words, it is going to cost £69,000 million, the same as the other one does; anybody can earn as much or as little as they like, but every time they earn they are always better off. It helps the disabled because they can do a little work and not lose benefits; it helps the married woman with children; it helps everybody, and it costs no more. The present unjust and immensely complicated muddle must stop. It has been described as coals from Newcastle to Newcastle paying freight to a subsidised loss-making railway company on the way. Provided we stop this muddle, and I hope that we will, I am sure that one of the people who will be most pleased will be my noble friend Lord Gowrie, because the examples of where it must hurt most will be in Ulster, and we know what state Ulster is in now.
  6.33 p.m.
  Lord Rochester: My Lords, I would like from these Benches to join in congratulating the noble Lord, Lord Gormley, on his maiden speech. I much admired the predictably forthright way in which he spoke, and greatly look forward to his taking part in many other industrial and economic debates.
  I would like to take the opportunity afforded by this general debate on economic and industrial affairs to speak on two matters concerning industrial relations. If that seems to run somewhat counter to the theme of the debate so far, I hope at least that it may have the merit of introducing some variety into our proceedings. In the first case, I have noted the absence from the gracious Speech of any reference to further measures to reform the law relating to trade unions. I do not say that in criticism; rather I think the Government are to be congratulated on the omission, although I realise it is still possible for them to introduce legislation in this Session of Parliament after the promised consultation on matters such as secret ballots for the election of union officers and before strike action.
  284
  In last year's gracious Speech we were told that a second Bill was to be introduced on employment and industrial relations, and speaking for my noble friends at that time I expressed the view that legislation in this field should continue to aim at eliminating identified abuses in the existing law, and that it should proceed at a pace which gave reasonable assurance of consent on the part of the general body of trade unionists. That was the approach we endeavoured to make to the Bill that has just become the 1982 Employment Act, and it remains our view.
  In debating the specific question of secret ballots being made mandatory before certain strikes could legitimately be undertaken, I expressed a number of reservations, not on grounds of principle but of practicality, fearing that any attempts to force ballots of that kind on unwilling unions might prove counterproductive and might encourage even more unofficial action than there is at present. I have no more to say on that matter now, but I am sure the Government are right to carry out extensive consultations and consider the outcome very carefully before deciding whether, and if so precisely how, to legislate on this question before the next general election.
  The second matter on which I would like to speak, at rather greater length, if I may, is that of pay determination. Let me start from the position that at the very least there is a crucial need, after consultation between Government, employers and trade unions, and maybe other relevant interests, to gain the widest possible understanding and acceptance of the overall increase in incomes which at periodic intervals the country can afford. That is perhaps the least contentious definition of an incomes policy that could possibly be framed. As a privileged observer at the CBI conference at Eastbourne the other day, I was, therefore, very disappointed when even the concept of a national economic forum to provide background information for the determination of pay levels was rejected. What a contrast with the time only a few years ago when the late Sir John Methven, as Director General of the CBI, was first brave enough to advocate that idea! I remain convinced that our basic economic and industrial problems, unemployment, inflation, pay determination, will not be solved until there is a wider understanding of the relationship between them, and sufficient agreement among us as to how they should be tackled. To that end joint educative endeavours should, in my view, be encouraged at every level.
  Next I should like to revert to the debate we had, at the Report stage of the Employment Bill, on an amendment advocating that industrial action likely to result in the endangering of life or limb should no longer enjoy legal immunity. While deploring such action, I said at that time that it was not, in my view, feasible to seek to limit the freedom of the individuals concerned to withdraw their labour, without at the same time providing means whereby their pay and employment conditions could be determined in such a way that there would be no longer cause for them to take industrial action. There was not time to outline the form that such a procedure might take, although I offered to do so if challenged. This is the first opportunity there has really been for me to explain what I then had in mind, and I would like to take it. From this point on I think I should say that I shall be

  285
  speaking only for myself, although a number of knowledgeable people have certainly contributed to my thinking.
  In addition to the police, firemen, trained members of the medical profession, and those serving in the armed forces, there are other people employed in certain key occupations that are vital to the immediate support of life or to the stability of the state. In my view, the great majority of such people do not want to engage in industrial action, and normally will do so only if they feel that they are being exploited or treated unfairly. Recent events have shown that among them are health service employees. For obvious reasons I do not want to comment, at this delicate stage in the negotiations, on the short term aspects of the current pay dispute in that service. But surely in the longer term there is a strong case for treating employees in these key occupations as being above the battle. Has not the time come, if negotiations affecting their pay and employment conditions result in a failure to agree, when disputes should be referred to a single third party? I put it that way because all past experience seems to show that when matters relating to the pay of a particular group are examined in isolation attention is concentrated on the problem from the viewpoint of the group concerned rather than others affected by it.
  Such a referee might take the form of an independent standing commission. It would be distinguished from a mere arbitrating body by being empowered to call for evidence other than that of the parties themselves. It could also be required to give reasons for the awards it made. Because the Government would themselves be one of the parties to disputes of the kind I have in mind, might not members of the commission be chosen not by the Government of the day but by an electoral college established by statute? I do not presume to suggest precisely how such an electoral college might be set up, but if it could once be done that would ensure that it was independent, that there was continuity of office for its members and that it was acceptable to the Government, the main Opposition parties and to organisations representing both employers and trade unions. Only thus would it be reasonable to expect people in these key occupations to repose sufficient confidence in such a body to give the necessary prior undertakings that its findings would be observed.
  The right of such people to withdraw their labour would not thus be outlawed; rather they would voluntarily surrender that right in return for the privilege conferred on them. If subsequently they failed to honour the undertaking the privilege would be withdrawn. As I see it, there would be the need for a corresponding commitment on the part of the Government to accept the findings of the commission, withdrawal by the Government being possible only after the passing of a resolution to that effect by both Houses of Parliament, who must remain the sovereign authority.
  I anticipate two possible criticisms of this suggestion. An obvious one is that the Government, where it is both paymaster and employer, would alone continue to decide such matters. In reply I would say, first, that in that case it looks as if the community will have to face the prospect of continuing disruption as the only form of protest available to people who feel themselves to be unfairly treated. Secondly, the parlia-
  286
  mentary override incorporated in my proposal would have the effect that in the case, for example, of an overall pay freeze the Government would anyway continue to be the ultimate arbiter.
  A further possible criticism is that arbitration of this kind would result in inflationary settlements. It arises, I believe, from a failure to distinguish adequately between arbitration, on the one hand, and conciliation or mediation on the other. The objective in this case would not be to seek a compromise to bring the parties closer together, to split the difference between them, or any other such mishmash. Nor would it necessarily be to determine the pay of the people concerned by reference to average levels elsewhere, for that might introduce an undesirable inflexibility into the procedure. Rather the aim would be to reach a decision which would generally be regarded as reasonable because it would be made by a body whose members would be acknowledged to be independent. The alternative, it seems to me, is for pay in the centralised public services to continue to be determined to a significant degree by the ability to disrupt by monopolistic muscle and the crudities of what Mr. Sid Weighell once aptly called "snouts in the pig trough".
  I see no reason to suppose that this problem will disappear. Indeed, it may well return shortly in the case of the Civil Service. I accept that the question of where the line should be drawn is a difficult one. What, for example, of the water workers? But with points such as these in mind I, for one, regret that in their statement yesterday the Government confined their proposals to the establishment of a pay review body in the health service to trained members of the medical profession, and appeared to rule out an extension of the principle to other groups in that service. However, I notice that in response to a question in another place on what offer he would make to such people in return for a no strike pledge, the Secretary of State said:
  "if the unions wish to give that pledge, we are willing to talk on the point".—[Official Report, Commons, 9/1 1/82; col. 433.]
  In this particular dispute I do not know what is going on behind the scenes. It is always dangerous to venture opinions without knowledge of all the facts, and I am not prepared to take that risk. But I sincerely hope that the Government will seize the earliest opportunity to get us all out of the miserable chicken and egg situation that we are in, by showing themselves willing to involve the health service as a whole in seeking to improve long term pay determination arrangementś, even if they feel unable to make progress immediately towards the more comprehensive procedure I have endeavoured to outline. Of course, the unions might resist any such move. At worst it would then be plain where responsibility for continuing disagreement lay and, at best, surely a significant break-through would be achieved for the benefit of the whole community.
  I hope that the House will forgive me for saying no more about the specific terms of the amendment that is to be moved by the noble Lord, Lord Diamond, except to say that I want strongly to support it.
  6.48 p.m.
  Lord Kaldor: My Lords, I should also like to begin by congratulating most warmly the noble Lord, Lord Gormley, on his wonderful maiden speech. I am sorry that he is not here at the moment. It was one of the

  287
  most moving speeches that I have heard in this Chamber. I feel that this is probably a true reflection of the feelings of many other of your Lordships.
  This is the fourth debate on the Address in this Parliament and it is very likely to be the last. It provides a suitable occasion, therefore, to look back and review the economic consequences of the Government's policies in the light of their original aims and aspirations. It is natural for any Government to try to put their actions in as favourable a light as possible. However, they face on this occasion a far more difficult task than they could possibly have foreseen. This is because, unlike traditional Conservative Governments which were essentially pragmatists, this Government had a strong ideological commitment. They believed with an almost messianic fervour that they had an answer to all the country's major ills and that they had a policy which could put everything right provided that they stuck to it. No one has expressed this more eloquently and more often than the noble Lord, Lord Cockfield, in the early years of this Government. I am sorry he is not here.
  This last proviso, that the Government stuck to their policy, was important for it meant that as the economic situation worsened, as production fell and as unemployment rose, they were not prepared to use the rudder and not prepared in any way to adjust their policies in the light of developing circumstances, as previous Governments have done. Their reaction was to do nothing—to ignore what was happening and to go on as before, gazing at the gathering clouds with folded arms, in the firm belief that provided they did nothing everything would come right in the end.
  All that may be fine, indeed admirable, if the basic premises upon which the policy is founded are right. But it is absolutely fatal if the basic premises are wrong. The Government's basic philosophy was essentially a simple one. According to their creed inflation is the source of all evil, and inflation is simply a consequence of increases in the money supply. So control of the money supply became the central objective of policy. However, to control the money supply one has to do more than just turn off a tap—although Ministers, especially at the beginning, often talked as if it was as simple as all that; one must deal with the basic cause of having "to print money" (to use the Prime Minister's favourite expression), which, in their view, is too much public spending. One must roll back the frontiers of the state, economise on everything except on law and order and the police and possibly defence. However, as events have shown after the dramatic turnround over the Falkland Islands, even defence did not escape the slimming process. And one must also raise money under this simple philosophy, as much as one can and as fast as one can, by selling all the assets one can lay one's hands on—hence privatise, privatise and privatise, and never mind how much this lines the pockets of the share-owning community. The extraordinary haste to make this process of privatisation speed up so much in the final year of this Parliament makes one doubt their confidence in being returned at the next election.
  The other part of the policy is to improve productivity by improving incentives, and this means lowering taxation, particulary at the top end where tax is supposed to act as a disincentive. There is quite a
  288
  different type of incentive for bottom people—they are meant to work harder in response to the threat of unemployment and poverty.
  From the very beginning everything went wrong that possibly could go wrong. The Chancellor's first Budget, a few weeks after taking office, was the major cause, not of alleviating, but of aggravating inflation. From the 10 per cent. rate in May 1979 it rose within 12 months, by May 1980, to 22 per cent. And the money supply, which was scheduled to rise between 7 per cent. and 11 per cent. per year, again announced in the budget speech, rose by no less than 22 per cent. in the course of the following year. In the year after that it rose by 13 per cent. instead of between 6 per cent. and 10 per cent., as envisaged in the Medium Term Economic Strategy, and in the current year it is still around 13 per cent., although according to the original strategy it should be down by now to between 5 per cent. and 9 per cent. Government expenditure, which was meant to be reduced, kept going up as a percentage of the national income despite all ecomony drives which have been religiously repeated year after year. That was because national income, the denominator of this ratio, fell steadily and also because Government expenditure in connection with unemployment steadily rose.
  However, with the unexpected explosion of prices and wages in 1980–81, and the impossibility of preventing the money supply from rising in line with prices, strict monetarism—meaning Friedmanism—was quietly dropped because it did not work. Indeed, one Cabinet Minister declared in Cambridge last week that he always knew that Friedmanite policies were, "a lot of bloody nonsense". Luckily, perhaps, for him this was only reported in the local paper and it may not have reached the London area.
  In place of Friedman the Government regressed to an inverted Keynesian policy. I call it an inverted policy because the Keynesian instruments were used in reverse—for example, the budget was tightened in the face of growing unemployment, instead of loosened. The money supply as the main instrument of policy was abandoned and it was replaced by a rigid incomes policy—they call it "pay policy"—in the public sector, which was carried out very firmly against considerable resistance. This was combined with an over-valuation of the exchange rate achieved by high interest rates and the creation of mass unemployment in the private sector both through high exchange rates and even more through very tight fiscal policies which were concealed by the fact that revenues were low on account of unemployment and low output. On a full employment basis the PSBR was transformed into a surplus.
  All of these things which the Government have done are anathema to the pure Friedmanite creed. The Government have kept up the pretence that they are fighting an inflation caused by excessive demand long after they have adopted policies that are appropriate only to an inflation caused by a rise in costs—whether labour costs or raw material costs—a type of inflation which has no validity and which is not supposed to exist in the pure monetarist philosophy. And in this, at the price of ruining British industry, of reducing the standard of public services and camera, hand calculators, electronic yed, they have been reasonably successful. Inflation has indeed come down, as we heard today, to

  289
  the rate of 7.3 per cent. and the Chancellor has before him the glamorous prospect of 5 per cent. by next spring.
  But no one has explained, nor has ever attempted to explain, what the great benefit of the low inflation rate is, if its achievement and continuance involve falling or stagnating output, falling or stagnating living standards, the disappearance of whole industries and the general smell of poverty and decay. When the Chancellor was asked some weeks ago, with the prospect of 5 per cent. inflation, "Is it not time to lift the ban on reflation and allow the economy to expand?" he said, No, that would not do; it would merely endanger the hardly won gains on the inflation front. His Statement on Monday, despite making some concessions to industry, really confirmed this attitude in view of the reactions that have already been quoted from the newspapers.
  But what are these gains on the inflation front for, if they are not meant to improve our economic performance? Monetary stability seems to be regarded not as an instrument, but as an ultimate end of policy. It is no longer even claimed that it is a necessary prelude to economic recovery. Indeed, Ministers after years of burgeoning optimism have ceased to proclaim that prosperity is round the corner. Instead, as Sir Geoffrey Howe said two days ago, one cannot opt out of the world recession. He ignored the fact that Britain is an oil producer and indeed an important net exporter of oil. Therefore, Britain is not hampered by a balance-of-payments constraint which prevents other countries, such as Germany and France, from having expansionary economic policies. We are by no means compelled to fall in line with deflationary policies pursued either on ideological grounds, as in the case of the United States of Mr. Reagan, or on grounds of necessity as in the case of the oil consumers of continental Europe.
  One must contrast this vague fatalism with the admirable speech made last week to the CBI by Sir Kenneth Corfield, who is chairman and chief executive of Standard Telephones and Cables. It was a speech which, unfortunately, was not reported in its interesting parts in any of our serious newspapers. I think that I should remark here that there is a kind of privatised press censorship in this country which is not directed by the Government in any way—there are no D notices behind it—but is a spontaneous consequence of the kind of people who own our newspapers. Something of this existed for a long time, but in the last two years they seem to have abandoned all restraint, and newspapers which prided themselves on being newspapers of record, are ready to suppress very important information if it does not fit in with the line they are taking in their leaders.
  Therefore, I beg the indulgence of your Lordships if I quote from the suppressed passages of Sir Kenneth Corfield's speech. He said:
  "Designing and marketing the right product is not only the key to successful wealth creation, but it is one of the very few actions which are entirely in the hands of management. For many years research and innovation has been one of Britain's success stories. But the product of research and innovation, which is technology, has been neglected by far too many British firms".
  I am very glad that one of our most important industrialists happens to be here to listen to Sir Kenneth Corfield's words.
  Lord Weinstock: My Lords, if the noble Lord will allow me, I did read it all in the newspaper.
  Lord Kaldor: Sir Kenneth goes on:
  "Just think of the things that are not made in Britain—binoculars, typewriters, video recorders, cassette recorders, tape recorders, transistor radios, cameras and cine camera, hand calculators, electronic games—need I go on?"
  He went on to say that when it comes to industrial investment, not to goods for consumption, nothing is produced here except bricks and mortar. All the plant and equipment which was needed for the semiconductor plant which he wanted to install in Scotland had to be imported. We have known for many years—long before the present Government came to power—that British industrialists abandoned the production of the kind of machine tools which other British industrialists saw fit to install in their factories. So, one had to go abroad for the quality of plant and machinery which was necessary for investment. Sir Kenneth went on to say:
  "Britain, with its long industrial experience, its liberal traditions and its unexcelled academic prowess is a wasteland of obsolescent industry with a few oases of technical excellence."
  All this is not new—our decline, relative to newer industrial powers, has been going on for 100 years or more, though luckily it was reversed—and this is a very controversial statement although not as to facts—for 25 years during which time we protected our industries. That is to say, between 1932 and 1957, and especially during the five years preceding World War II, for the first time since the middle of the 19th century we were at the top of the league of countries in the rate of economic growth and not at the bottom of the league.
  But when that ceased our relative decline was resumed. We fell again to the bottom of the league and, after entry into the Common Market, our decline much accelerated—as, indeed, I made every effort to convince people that it would be—until we have now reached the point at which there is a danger of collapse of, if not the whole, at least the greater part of our manufacturing industry. Doubtless, as The Times says, we are very good at retailing, but what is the point of that if our manufacturing industry disappears? How do you make the money to spend in the shops?
  Clearly, Mrs. Thatcher's Government cannot be held responsible for all this. She is responsible only for telescoping into a few years what otherwise might have taken some decades. By being ruthless in the belief that she is applying a genuine remedy, she has made things very much worse than they need have been, and has brought us no compensating benefit. For despite what Ministers say and what the noble Lord, Lord Cockfield, said this afternoon, we are no better off from the point of view of industrial efficiency, of productivity, or in the range of products that we are producing. We have in no way eased the problems on the supply side, on which Sir Geofffrey Howe is so fond of concentrating. The weaknesses on the supply side have become very much greater, and not less, under this Government. So, we suffer all this with nothing to set against it on the other side. One is reminded of Tacitus who, when writing about the devastation of the outlying parts of Britain by the Romans, said:
  "Ubi solitudinem faciunt, pacem appellant ".

  291
  which is usually translated as:
  "They create a desert and call it stability".
  I think that this is an apt epitaph for Her Majesty's present Government.
  7.8 p.m.
  Lord Vaizey: My Lords, I should like to join with other Members of your Lordships' House in congratulating the noble Lord, Lord Gormley, on his maiden speech. If that was an example of his non-controversial speeches, I am very much looking forward to his controversial ones. The noble Lord, Lord Kaldor, has made a most powerful case, a case which underlies much of the Opposition's thinking, and one which deserves a serious answer. Following as I am, it is difficult to give such a serious answer immediately without replying in detail point by point. But I am rather surprised at his reference to informal self-censorship by the press, since I have certainly read Sir Kenneth Corfield's speech in The Financial Times.
  Lord Kaldor: My Lords, not the part which I quoted; that was left out.
  Lord Vaizey: My Lords, perhaps the simple solution would be for the noble Lord, Lord Kaldor, to set up his own newspaper in which he could print the censored parts of Sir Kenneth Corfield's speeches. That might well be a very good remedy for censorship and perhaps earn him a substantial profit.
  It always seems to me that we ought to be very cautious indeed in diagnosing the ills of the economy and in prescribing for those ills. The great boom from 1948 to the early 1970s certainly happened, and it was certainly not due to any particular economic policy adopted by any particular Government. The best performing economies over that period were those of Western Germany, Yugoslavia and Spain, all of which had completely different political forms and completely different economic policies.
  Therefore, I think it is difficult to assign the boom to a particular kind of policy, and it seems to me that the fashionable nostrums of the late 1940s, had they been adopted, mght very successfully have aborted the entire boom. My own modest hunch is that the boom was due partly to a stable international monetary order—and here I very much agree with my noble friend Lord Soames in what he said about Bretton Woods—but mainly due to a working through the world economy of a large number of new trades and industries: cars, consumer durables, television, artificial fibres, modern housing, tourism, all of which boomed during those years.
  The present world-wide slump is probably due—and again I think one can barely go beyond a modest hunch in these enormous questions—to the relative breakdown of the international monetary order which began with our devaluation in 1967 and when the United States went off gold, and clearly too the world is adjusting to a major series of technological innovations like the computer, which may well bear fruit later in this decade and in the 1990s. That seems to me to be the most probable explanation of the slump when our successors come to look back on it from the end of this century.
  292
  I agree with the noble Viscount, Lord Eccles, in arguing that the fundamental solution must be some kind of international agreement on the international economic order. I would very much hope that Her Majesty's Government would take seriously the message which the noble Viscount, Lord Eccles, gave to them. That being so, that kind of long-term view seems to me to give little comfort to the unemployed, but we shall be talking in detail about the Select Committee's report on unemployment next Tuesday, and rather than reiterate here my comments on unemployment and the causes and cures of unemployment, I would much prefer to keep them for the debate to be opened then by the noble Baroness, Lady Seear. I would much rather try to answer the basic question which the noble Lord, Lord Kaldor, posed, as to how the United Kingdom should adapt to the present world-wide malaise.
  I am far less depressed than many other noble Lords who have spoken in this debate. The reason for my modified optimism is, first, because we have abandoned policies which so evidently have not worked. Inebriation with the opium of easy expansion is over, and what we are now experiencing is something like withdrawal symptoms, or the hangover. If we want to refute the easy solution, the solution of having a hair of the dog that bit you, or going back to the bottle to cure the hangover, we need look no further than to our neighbour, the Republic of Ireland.
  In one of the bits that got through the informal censorship there was an article in yesterday's Financial Times, called "The Gathering Debt Crisis", about the Republic of Ireland, a country which I happen to know very well indeed, as does my noble friend on the Front Bench. The Irish Government devalued the pound, it boosted public expenditure, and the result, which is spelt out in great detail in Mr. Brendan Keenan's article, is the threatened collapse of the economy, like that of Mexico, a galloping inflation rate, mass unemployment, a wage explosion, fear of repudiation of debt, a growing political instability and a threat to the constitutional and democratic structure of that republic.
  That followed a substantial boom in Ireland which was brought about by the late Mr. Sean Lemass by means of a process of extreme fiscal and monetary conservatism. It only requires a simple flight to Dublin to see that the easy solution is not as easy as people think. I would counsel the Government not to go back to that previous policy which has failed here twice: once under the noble Lord, Lord Barber, and once under Mr. Healey.
  What we are seeing as a result of the depression is a reawakening of British management. In those businesses, both small and large, with which I am directly connected, I have a sense of Augean stables being cleared; of idle and slovenly management being given the push, either by the shareholders or, in more brutal circumstances, by bankruptcy, and new men and women seem to be taking their place. This is a very unpleasant process, but even in British Airways, which for over a decade has been a byword for slovenly inefficiency, they are now making an operating profit. If more and more British industry is responding to the challenge like that, then the longer run is more optimistic, and probably closer than many people have suggested.

  293
  I must say in passing that I would not pay too much attention to what the CBI says. First, as the noble Lord, Lord Cockfield, said in opening the debate, it represents quite disproportionately manufacturing industry which is a declining part of the total economy, and moreover the people who have time to go to the CBI conferences are not necessarily those people clearing the Augean stables of British business. One of the more crass managerial heresies has also been attacked, and has had its day, and that is the view that the bigger the firm, the bigger the organisation, the better. Those huge, unwieldy giants, nationalised and non-nationalised, seem to prove to be largely unmanageable and certainly inefficient.
  British Rail, British Telecom, large private quasi-monopolies as well, all seem to have been very much at the heart of the explanation of the malaise of British management. I would very much like to encourage the Government, in the person of my noble friend Lord Gowrie, to try to dismantle some of these huge enterprises into more manageable units where productivity can be attended to. My first major reason for being optimistic is because I know from personal experience that there is a radical change in the attitudes and efficiency of younger men and women in British business organisations, and that has to be good for us.
  What underlies this shift has been the breaking of inflationary expectations. For the first time for over 35 years inflation is now widely expected to go down rather than up. It is going down. The siren voices which are counselling devaluation, depreciation, and so on ought to be resisted. There is no doubt the pound will go down as we approach the election, for the reasons given by the noble Viscount, Lord Eccles. People will begin to take their money out of the country in case the present Government lose the election, and then we shall perhaps see the proof of the pudding. It may well be true that that is the right answer, but it is far too simple and easy a solution, because it has not worked in the past.
  If we assume that the inflationary tide is receding throughout the industrialised world, and that the expectations of price rises are going down, then the consequences are truly revolutionary. In the first place, the day of easy paper profits is over. We all know that business after business has in fact not adopted so-called inflation-proof accounting but has declared paper profits year in and year out. The consequence at the end of that is, first, that some firms are at last making genuine profits—and there is an interesting graph on page 9 of the autumn Statement which repays study, about the level of profitability in British industry in real terms—and, secondly, those firms which are making paper profits but not real profits go bankrupt. Again, a very powerful, unpleasant, appalling dose of medicine but one which is, I am afraid, having its consequences and its effects.
  The other consequence of declining inflationary expectations is the coming demise of the annual wage round. Trade union leaders now for 30-odd years have thought that they were in the business of getting an annual money wage rise for their members, and that money wage rise, as we all know—it has been told to us by Prime Minister after Prime Minister in Government after Government of different political complexions—is almost immediately eroded by a
  294
  price rise. Trade union leaders should have more serious things to do looking after—
  Lord Molloy: Would the noble Lord give way?
  Lord Vaizey: The noble Lord has his name down to speak in this very long debate, my Lords. Perhaps he will allow me to finish my argument and then I will sit down. Trade union leaders are, after all, in business to protect their individual members and, I should have thought, to help raise the productivity of the industries and firms in which their members work. That way lies real wage rises. So long as the inflationary expectations are there, they are bound to be in the business of getting annual wage rises, because that is the only way they can keep up with other groups in the labour force. But if inflation is over, I think we can reasonably expect the trade unions to take a positive and constructive role in the reconstruction of the British economy, which I submit is, very painfully and slowly, what we are now about. It will be a very painful and slow process and it will go on for quite a long time.
  7.12 p.m.
  Lord Roberthall: My Lords, I must begin, as other speakers have, by congratulating the noble Lord, Lord Gormley, on his magnificent maiden speech. I hope we shall hear from him again shortly. Your Lordships are probably sorry at having to listen to three economists in succession. I will not follow—I cannot call them my noble friends but they are certainly my old friends—the noble Lords, Lord Kaldor, and Lord Vaizey, in their interesting contributions. I have always felt on hearing an economic argument that I would rather read it before saying much about it.
  The debate is mostly about unemployment. The gracious Speech refers to the subject in only one paragraph, and that a very gloomy one; as I read it, it seems to mean that the Government expect unemployment to go on very long and to be cured very slowly. The wording is rather chosen to convey that; it is not in plain terms.
  When the Government came to power I said that although I had, for most of my professional life, been an advocate of incomes policy, I had to admit that it had not been very successful and I thought the Government were entitled to try something else, which was, of course, the monetarist policy. After three-and-a-half years I am a much more confirmed believer in incomes policy as the only possible solution for our difficulties than I had been before, and it is encouraging to see that the Government are moving in that direction and they practically have an incomes policy now.
  There are three main aspects of any incomes policy; a norm, some flexibility and sanctions. The Government practically have a norm which they hope the private sector will follow, and they hope they can impose it on the public sector, mainly by cash limits. There is also some flexibility; those with more muscle, like the miners, can do better than the average, and those who have some public sympathy, like the nurses, can also, and those in a less happy position will get rather less. The Government have very strong sanctions, and that is the great difficulty about the policy because their sanctions take the form of unemployment. That is our great problem, the one

  295
  which can be settled only by getting some agreement on some form of incomes policy of the kind which the noble Lord, Lord Rochester, was explaining. Otherwise, as I follow the Government's policy, if one must use unemployment as the sanction for one's incomes policy—that is, to cure inflation—one produces all the great difficulties that have been stressed, and will be stressed more, in this debate.
  Leaving the internal side, I want to speak mainly about the Government's external policy. I had intended to read a quotation from the speech of the noble Lord, Lord Cockfield, in our debate on 26th July, but as he practically repeated the same points today, perhaps I need not do that. The gist of his position is, "There have always been recessions and always will be. Though the length of the cycle may vary, good times and bad times follow one another with monotonous regularity".
  That is, at most, a half-truth and it is not altogether accurate. Between the end of the last war and about 1973 there were no serious recessions in the world at all. The foundations for that can be found in the postwar settlements, where, following the pledges which all the countries concerned took in the United Nations Charter—which everybody has completely forgotten about now—they pledged themselves to aim, all of them, at a high and stable level of employment, and they set up three institutions for doing that. The International Monetary Fund was to monitor and facilitate a stable currency system; everybody had to commit themselves to a fixed rate, which was to be moved only in certain circumstances, and that was to be watched and helped by the IMF.
  Then there was GATT, to which several noble Lords have referred. The gist of that was that people would eschew tariffs and quotas in order to maintain their own employment and would move towards lower tariffs which, as the noble Lord, Lord Soames, told us, resulted in the successful growth and stability of world trade. The third—the maintenance of high and stable levels of employment—was supposed to be monitored by ECOSOC, but a body as large as that was hopeless to monitor or control anything, and it gradually developed that the OEEC, the precursor of the present OECD, turned out to be the place where, for many years, that was done, where the different Governments of developed countries met together, discussed the economic situation, discussed the pressures that might arise either from inflationary or deflationary actions by particular Governments, and there was a sort of collective opinion—to which even the Japanese were somewhat susceptible—that one should not get too much out of line. Those were largely the common objectives and very successful ones.
  All that has more or less gone to the winds, just as at home high and stable employment as the first objective of policy has gone. The developed world has moved towards giving a higher priority to the cure of inflation than to the maintenance of employment. I had intended to say rather more about this subject, but I have been anticipated by the noble Viscount, Lord Eccles, and the noble Lord, Lord Soames, who both stressed a doctrine which I should have thought the noble Lord, Lord Cockfield, would not enjoin because he thought recessions were acts of God. The two noble Lords whom I mentioned both said—this is what I feel
  296
  so strongly—that the only way in which there is any hope of getting out of the recession is by trying to get back to collective action in the world economic scene.
  Is it not a half truth to say, as Ministers say, that the present unemployment situation is their fault only to a small extent, and is mostly the fault of the world recession? Presumably based on that theory, it is mostly the fault of God, and so they cannot help it. That is a half truth because we ourselves in the rush for salvation as the house burns down have been the ones who have pushed the hardest. We have the highest level of unemployment in the developed world. As several speakers have stressed, we have a favourable balance of payments. But we are now in no position to go to other countries and say, "Let's get together". I must try to make my speech short, and so I hope the noble Lord will forgive me if I do not give way. At present we are not in a position to go to other countries and say, "Let's get together, let's see how we can get out of this terrible recession, which is damaging all the institutions which were set up and which for such a long time have given us prosperity and stability".
  Several speakers, including my noble friend Lord Taylor of Gryfe, referred to the great strains which the international monetary system is suffering. The strains that are arising to the open trading system are obvious, and here at least I must give a good mark to the Government. The right honourable lady the Prime Minister has said plainly that the Government do not intend to depart from that system. But we have a favourable balance of payments, we have a very high degree of unemployment, and what is now needed is to change the stance. It is certainly not possible to go back to a very quick programme of spending, hoping that we shall get rid of unemployment quickly. But in our fairly favourable circumstances with the oil and the large reserves, there is room to make a move to bring down unemployment along the lines explained to us this afternoon by the noble Lord, Lord Byers.
  What the world needs so much is that there should be something to hope for. There is nothing to hope for at present, with the prospect of a long period of unemployment ahead and the world recession continuing. What we want to change is the stance of policy. We want to get the thing moving in the other direction to some extent, and if on the international side Her Majesty's Government could at least make some noises about the need to get together to find out how we can collectively get out of the recession, there would be something to hope for.
  There was vision in the postwar economic arrangements. I think that there is now no vision. Several speakers have quoted Shakespeare, and I shall end with that horrible passage from King Lear about vision all dark and cheerless.
  Lord Monson: My Lords, before the noble Lord sits down, I should like to ask him whether it is not a fact that Belgium has a higher level of unemployment than we do?
  Lord Roberthall: My Lords, I think that that is right, and if I said that we have the highest level, I stand corrected.
  7.34 p.m.
  The Countess of Mar: My Lords, in following so many experienced and knowledgeable speakers, I feel

  297
  very conscious of my own limitations. Therefore, I shall be specific, and very brief. The Queen's Speech contained reference to a number of measures to be taken to allow for the privatisation of some of the services of British Telecommunications. I must declare an interest, but I hasten to say that I speak entirely for myself, and not on behalf of the corporation. For some 12 years I was employed by the Post Office, latterly British Telecom. I joined it a few weeks before it became a public corporation in 1969. At that time I found an air of optimism. There was among my colleagues a firm belief that, once freed from the Treasury and the Civil Service, the business would advance with vigour into the technology of the coming decades. I also found an immense fund of expertise, inventiveness, and innovation among the staff, and their ability to withstand all manner of frustration, together with their comradeship, will remain with me.
  Traditionally the nationalised industries have appeared to present an impenetrable front to their customers. Is it surprising that consumers lack confidence in them? But British Telecom has made great efforts to develop and improve its efficiency and public image. This can be seen in shorter waiting lists.
  Public opinion would appear to show that there is growing concern for the future of this great corporation. In particular, the provision of telephone services in rural parts, public call offices, and the replacement of obsolete equipment and cable seem to be spheres in which private businessmen are unlikely profitably to invest. I should be very grateful to the noble Earl who is to wind up if he would clarify the financing arrangements. Is British Telecom still to be subject to limiting Treasury controls, or will it be as free as its competitors to seek outside finance? It has been suggested that steel, mines, the railways, and even British Leyland were nationalised because they were operating with obsolete plant and were unprofitable. Can it be that with their programme of privatisation the Government are invoking the reverse of that procedure?
  Competition is held to be the sovereign remedy for all the ills of the nationalised industries. I can see no reason why British Telecom should monopolise the communications market if the alternative is wider consumer choice, greater efficiency and innovation. However, the competition must be fair, and there must be sufficient support for British Telecom to compete on the same basis as its rivals. Will the noble Earl kindly confirm that that will be so?
  There are a great many people concerned with the decisions to be taken in the coming months. British Telecom employs in the region of 200,000 men and women, and there are several million telephone users who will be affected. It would indeed be a sad day if so much of the expertise and inventiveness to be found in British Telecom, and respected throughout the world, were to be sacrificed for political expediency.
  7.38 p.m.
  Lord Underhill: My Lords, in following the last speaker, I would say that I hope the Government will take serious note of what the noble Countess said about their plans for British Telecom. I should like to congratulate my noble friend Lord Gormley on what I thought was a notable speech, which brought a
  298
  breath of fresh air into your Lordships' House. With that speech I should like to link the speech of my noble friend Lord Scanlon in moving the Opposition amendment. I believe that in those two speeches your Lordships heard what I regard as the true voice of the British trade union movement, of which I hope the Secretary of State for Employment will take note.
  Time will not permit me to go over the serious position of British industry and our employment situation; but my noble friend Lord Scanlon covered that fairly fully in his speech. Therefore, on that issue I shall content myself with just two quotations taken from the Sunday Times. On 18th July (in the summer) referring to Government policy, the Sunday Times stated:
  "Yet there is a failure of imagination and endeavour in its immobility."—
  it was referring to Government policy—
  "Economic policy is not just about output and inflation: it is, or should be, about unemployment".
  The same article urged that there was room for a well-directed boost to public borrowing and job creating construction projects. That course has been pressed upon the Government by many bodies—the TUC, the Labour Party, the CBI, the Liberal Party (today), the Social Democratic Party (today). Everybody accepts the need for public borrowing and constructive efforts—except the Government.
  The other quotation is also from the Sunday Times. It appeared on 31st October, and commented on the CBI survey. I cannot go along with the noble Lord, Lord Vaizey—I am sorry he has left the Chamber—who thinks that the views of the CBI are of no importance. This was a very important survey carried out over a wide industrial base, and the Sunday Times comments:
  "It masks an immense amount of damage which industry is experiencing. When it says that confidence is low-to-zero, redundancies are rising, investment is declining for the fourth consecutive year, and 94 per cent. of its members complain about an absence of demand, these are not the ravings of ideologists but the sum of nearly 2,000 enterprises which supply the bulk of our productive employment in this country".
  The same article went on—and I quote:
  "Zero inflation is not an economic policy. The question is how far to encourage expansion, and in what direction"—
  again echoing the views which many noble Lords have expressed in this debate today. Other recent surveys have given similar warnings, that demand must be stimulated. The Government seem to ignore this.
  My noble friend Lord Scanlon referred to the proposals for (I use the word) interference with the nation's public industries—British Telecom, the electricity industry and British Shipbuilders. It seems that the Government are pressing on with damaging our national industries irrespective of whether or not they are efficient, and we have had examples in previous debates of the efficient nature of our great national industries. Time and time again the Government have ignored arguments that private investment will naturally go only to the profitable parts of any of our national industries. It is obvious; and that real national outlook has been ignored by the Government.
  I should like to ask the Minister some questions which I have put before and to which I have received no answers. How will these privatisation proposals help British industry? How will they help to cope with

  299
  the problem of unemployment? What are the parameters of Government policy on public industry? Do they really believe in the mixed economy, as the Labour Opposition does, or do they just mouth this statement about the mixed economy? Why are the Government so doctrinaire about not only public industries but public service, which seems to be reflected not only in their attitude to nationalised industries but also to local government and the public service in general?
  It seems that the Government have found at least one scapegoat on which to fasten some blame—and I am surprised that the noble Lord, Lord Cockfield, in his opening speech made no reference to this. The Secretary of State for the Environment has railed against local government for underspending its capital allocation and is urging local councils to set in motion such schemes by 31st March next year. This was further orchestrated by the Prime Minister, who complained that last year local authority capital expenditure and nationalised industry investment fell short by what the right honourable Lady said was a "staggering £1,600 million". In the other place on 3rd November, in col. 21, the Prime Minister said:
  "We need more capital spending by local government and in the public sector generally. I agree that it is vital to maintain the nation's infrastructure, its roads, its buildings, its water supply and its drains".
  The right honourable Lady added:
  "What a difference it would have made if those capital expenditure plans had been fulfilled".
  How encouraging! This is what many of us have been saying for a long time. I hope that this is recognition at long last by the Government that industrial recovery needs public spending on constructive projects. If the Prime Minister's statement does not mean that, then it may be that the Minister will tell us just what it does mean.
  The Earl of Gowrie: My Lords, while the point is fresh in the mind of the public and of your Lordships, perhaps I could say exactly what it means. The Prime Minister was quite firmly saying to local authorities that a certain proportion of their budget had been allocated to them in forward planning for capital projects. There was no excuse for them not to take up this money in terms of capital projects rather than in terms of maintaining different kinds of services with that particular part of the budget, or of keeping up high levels of pay.
  Lord Underhill: My Lords, I am grateful to the noble Earl for mentioning that, because I shall come to that in a moment. But is it, I wonder, that the Government have realised something, not as the Labour Opposition said but as the economic correspondent of The Times wrote on 6th November. I quote:
  "Ministers have become increasingly alarmed that their tough economic policies, designed to squeeze out inflation, are in danger of throttling the economy altogether".
  If the Prime Minister considers that certain capital expenditure is vital to the recovery of our industry, why not go further on railway electrification, as the noble Lord, Lord Byers, said, and similar projects?
  Local government is being criticised unfairly, and the noble Earl, Lord Gowrie, has told us of the Government's view on this. The Association of
  300
  Metropolitan Authorities has reminded the Prime Minister that for some time the Association have been urging that more public investment is needed. The Prime Minister is wrong to say that capital expenditure plans have not been fulfilled, because my information is that local government is spending up to its capital allocations. But these relate to what a local council may spend in one year, whereas previously approval was given to a complete project even though borrowing was spread over a number of years. Under the present procedure there is no certainty whatever for the future.
  It would seem that the real complaint of the Government is that local councils are not using their capital receipts from the sale of assets to supplement the capital allocation. On this, because of the uncertainty for the future, the chairman of the AMA has told the Prime Minister—and I quote:
  "Is it not surprising that local authorities are reluctant to undertake projects or that they store up capital receipts against future shortfalls in capital allocations".
  That is the answer to what has been said by the noble Earl.
  The Earl of Gowrie: My Lords, I am very sorry—the noble Lord has been most tolerant—but I must come back on that. I think the point there is that it is no use local authorities complaining that they do not have a sufficient allocation for capital expenditure when they refuse to realise the assets that they have.
  Lord Underhill: My Lords, let us see what the view of the AMA is on that, because the AMA has first of all stressed that few projects could be completed by 31st March, as the Secretary of State has requested; also, that very few capital projects do not also involve revenue expenditure. Most capital projects, says the AMA, affect staffing, maintenance and similar items for the future. We must bear in mind, too, that there is the Government squeeze on non-capital expenditure by local councils. Therefore, this has to be kept in mind when we are talking about what local councils are not doing.
  I say this—and I hope the noble Earl will take this up. If the Government really want increased capital expenditure by local government, I would urge that the Secretary of State should meet the representatives of the three local authority associations as quickly as possible and discuss practical plans for capital expenditure, including the capital assets. But this will mean giving some guarantees for the future that there will not be a squeeze within a few months which would interfere completely with a local authority's plans.
  There is one particular proposal in the gracious Speech on which I wish to conclude. It is stated:
  ".… to improve the control of subsidies to public transport in the conurbations".
  The Bill and the White Paper have now been issued, and I must say that it is clear that the word "improve" is a travesty of the meaning of that word. First of all, the proposal is directed only at the six metropolitan counties and the Greater London Council. We will deal with the complete details when the Bill comes before your Lordships' House, but I believe that the proposed legislation reflects once again the Government's sorry attitude towards public transport, which is essential to British industry and also to local govern-

  301
  ment. It is a further instance of central Government, through the Secretary of State, taking decision-making away from local councils. It ignores completely endeavours to introduce local policies which seek to implement election manifesto commitments. It also ignores the accountability of local councillors to those responsible for their election.
  Following the legal judgment on the GLC's "Fares fair" policy the Government were asked time and time again for the law to be clarified, that the criteria as to when subsidies become lawful should be set out. We asked that the GLC should be restored to the position of the PTAs and PTEs in the metropolitan counties under the Transport Act 1968. What the Government have done is to respond by seeking to control not only the GLC and London Transport but also to take away the 1968 position from the metropolitan counties.
  The White Paper gives a great deal of attention to the details of the GLC legal case; but it dismisses in just one sentence two other actions in the High Court. I should like to ask why there are not details given in the White Paper of the judgment in dismissing the application brought by Great Universal Stores against the policies being followed by the Merseyside Metropolitan Council. That was a completely opposite judgment from that given in the case of the GLC. Under the Government proposals—and these are in the White Paper—the Secretary of State will determine the transport plan for a local authority and will decide the amount of the subsidy. Although there is generous use of the word "advise", there appears to me to be encouragement to ratepayers to take legal action and for the possible surcharge on local councils. So that we have yet another important local issue to be taken away from the elected representatives of these seven important local authorities which, the White Paper stresses, hold more than one-third of the population of England.
  My Lords, furthermore, there had been no real consultation with the AMA and these local authorities before the Government decided upon this particular proposed legislation. The various authorities concerned have stressed that if the Government proposals are carried through and the Bill is passed, then the subsidy guidelines will inevitably mean increases in fares and/or cuts in services; and the Association of Metropolitan Authorities (the AMA) have made it quite clear that they and the metropolitan counties will strongly resist these proposals by the Government, not only because of interference in local council matters but also because of the strong and bad effect that the Government's proposal would have on public transport, which is so vital for the communities in these areas.
  The Earl of Gowrie: My Lords, before the noble Lord sits down, it might be for the convenience of the House if I made a short point. It is in no way a criticism of the noble Lord, who is admirably succinct; but the House might be interested to know that we are not yet, in numbers terms, halfway through this debate. I would therefore concentrate your Lordships' minds on the advice given by my noble friend the Chief Whip a little earlier, to see whether we could exercise stringent verbal cuts, if not public expenditure cuts, on our speeches from now until the end.
  7.55 p.m.
  Lord Campbell of Alloway: My Lords, I shall bear in mind, I hope, what has just been said but, in accordance with the traditions of this House—and not only that but with all the sincerity that I, personally, can muster—I would wish to join in the tributes to the noble Lord, Lord Gormley, on his vigorous and most instructive maiden speech. If consideration is to be given to "other measures" to be laid (referred to in the gracious Speech) in the field of industrial relations, may I ask my noble friend the Minister four questions arising outside the ambit of the existing legal framework, rather in the vein proposed by my noble friend Lord Cockfield in the pursuit of new ideas. The first is this. Should there be mandatory negotiations before any recommendation for collective industrial action qualifies for statutory immunity? Should employees in the public sector with pensionable employment be required to accept a no-strike clause in exchange for arbitral machinery? And, if so, should this concept be extended to other categories of employees in the public sector? Should we have a safeguard to prevent misuse of trade union funds to subvent industrial action, either proposed or taken, contrary to the wishes of the majority of the members? Furthermore—and I am afraid that this is one of my old chestnuts, but it will take only one second to say it—should we set up machinery for the resolution of inter-union disputes?
  My Lords, it was right when this Government were returned to seek to reintroduce the rule of law. That, we should have built on familiar foundations—foundations that were laid down at the turn of this century. But as we approach the end of this century, with all the changes that have ensued and shall ensue, is this not a time for reappraisal or for adaptation so that some durable thread may be woven into the texture of this ancient fabric in order that we may achieve continuity through change, that prophetic paradox coined by Edmund Burke—and if any noble Lord would like the reference, I will give it to him.
  I wonder whether the noble Lord, Lord Underhill, whom I have had the privilege to follow, would agree that the quest for continuity through change imposes its own disciplines, especially so in this field of industrial relations. As to continuity, if the touchstone for continuity is the realism of the man in the street, then must we not eschew theoretical abstractions? As to change, if existing institutions are to have an especial virtue—and I include among such institutions the trade unions and the trade union movement—then ought we not to recognise that change should never be abrupt or radical? As to implementation, if this process is to be achieved under the rule of law, then is it not right that the rule of law must be intelligent?
  On this question of intelligibility, last week in the Court of Appeal, the Master of the Rolls, Sir John Donaldson, in one of these International Transport Workers Federation cases—if noble Lords want to look it up it is called the Merkur Island Shipping Corporation case—held that the law on secondary-action—this is Section 17 of the Employment Act 1980—was now tolerably plain in view of the interpretive string of decisions of the courts. But he went on to say—in my submission, it is worthy of your Lordships' attention—that in his view where possible

  303
  statutes should not be amended but re-enacted in amended form. He said further that Ministers and Parliamentary Counsel should ask themselves this question: Is this a concept that is too refined to be capable of expression in basic English?
  In this sphere of industrial relations, the maintenance of the rule of law demands that its price should be paid in the coinage of its own currency: intelligibility. For if the law is not understood, how can it serve its prime purpose of securing order by consensus? How can it achieve that degree of acceptance requisite for its enforcement? If and when any of the questions that I have raised should ever receive consideration, is there not a case for reappraisal—a case for a new approach in terms of intelligibility?
  8.2 p.m.
  Lord Molloy: My Lords, like the noble Lord, Lord Campbell of Alloway, I should also like to pay my appreciation to the maiden speech that we heard from my noble friend Lord Gormley. I should also like to express my appreciation for the manner in which the noble Lord, Lord Cockfield, introduced this debate. It was an extremely gallant effort. Never have I heard a Minister have to bat—and bat so well—on such a "bum" wicket that this Government have left him. At one time I felt the pathos of his speech ought to have been put to the tune of "Hearts and Flowers". The sadness he felt for the 3 million unemployed and for the old-age pensioners who are going to be fiddled and cheated by this Government next year. That is a terrible thing to have to say in this House—and no one will contradict me because that is what is going to happen.
  The Earl of Gowrie: My Lords, I shall contradict the noble Lord. There is no question of pensioners being cheated or fiddled. This Government have done a great deal more for pensioners than the Government which the noble Lord supported by maintaining all their allowances in real terms.
  Lord Molloy: My Lords, that shows what a forthcoming young man the noble Earl is because he is out for promotion. After that brave effort I think he deserves it because when one looks at the facts he will be very embarrassed indeed. We shall check that very carefully and we shall watch it. I shall remind him of what he said today in this House and I suppose that that will mean his banishment from the Front Bench for ever for being so silly as to have interrupted me.
  However, the fact of the matter is that when the noble Lord, Lord Cockfield, spoke of what the Government had achieved, that it had broken the sterile mould, let us have a look at what breaks the sterile mould. There has been the highest degree of lawlessness in this land of ours in the past couple of years, under a Tory Government, since records were first kept. That is helping to break the mould all right! We are now approaching the figure of 4 million of our fellow Britons on the dole. What Ministers and members opposite do not realise is this: the breadwinner being on the dole does not mean that only their living standards have died. It means that after months and months of unemployment bitterness is created within a home, quarrelling within a home
  304
  and there is frustration within a family. That causes that family to break up. That is what Conservatives have to understand. They have very little experience of the dole. They have to try and understand what is meant by having nearly 4 million of our fellow countrymen unemployed and wasting their time when we need them so urgently.
  I suggest that the British public and much of industry are perplexed and anxious about the present and have an increasing sense of foreboding about the future. It is true that the reduction of the bank base lending rate to nearly 9 per cent. is the lowest for four years, and that must be welcome. I almost coin the phrase "We are back to Callaghan". So let us welcome it. But, regrettably, the publication recently of the index of industrial production has shown that our country's production is also the worst for four years and that must be very, very bad for anyone interested in this nation of ours.
  What has hardly been mentioned in the debate today is that what we are suffering from is what other countries have suffered from: the disaster of monetarism. Since 1979 our national output has declined as much as at the height of the great depression of the 1930s. I beg of you to consider what the phrase, "our national output has declined as much as at the height of the great depression of the 1930s", means. Bankruptcies are 80 per cent. higher than they were three years ago. Last year they were even higher than that. This I find is very distressing.
  I also have to say this. Up to 1982 bankruptcies have been the highest since the war. This is bankruptcies. There is not only an unemployment problem but businessmen are losing their businesses. May I say to Ministers and members opposite that when you talk to a person who has devoted his life to building up a little industry—perhaps he has only employed 20 or 30 people—and who has lost that when he is approaching 60 or 65 years of age—that little factory or little business, has gone—you realise that such people are smote mightily with terror, bitterness and anguish. That is the feeling among businessmen today as well as among our fellow countrymen who are on the dole. The waste and misery of unemployment is increasing year by year. With all these things together, increasing unemployment, the decrease in production, and massive bankruptcies, Great Britain is in danger of an industrial cardiac arrest which could prove fatal if we are not careful.
  With the economic stagnation the Government will claim that they have to impose certain squeezes, and those squeezes have come particularly heavily in the education system. Time will not allow me to go into detail. However, I say this: any Government that squeezes in these modern times and reduces the ability of our young people to learn, to go to colleges of technology and universities, must be stark, raving mad. Their crime is this—they are plundering the seed corn, and they may well force a growing number of highly skilled and qualified young men and women to leave this country, as indeed so many did in the 1930s. We have to understand that this new term, knowledge-intensive industries, will require very bright, able young men and women, and we are threatening them with no prospects and they are leaving this country. This is also very dangerous. Here we are saddled with

  305
  a Government that is marching up the "down" elevator to the cost of the nation.
  I think, too, that we should take much more cognisance of the growing competition from developing countries as well as from the advanced countries. This has been neglected to a degree by all Governments. We have aided many of our former colonies, some of which are now progressing very favourably, and we have left it at that. This has been, in my view, a crime of all Governments. I believe there are great markets available in the British Commonwealth as well as in the Americas and in Japan. Furthermore, I believe that those United Kingdom sectors involved in international trade should be assisted and encouraged to invest in new products and production methods. But they, like the rest of industry, depend on our energy and particularly on our steel—and it is not available for them.
  It is to me a fairly dreadful situation. The steel industry has hardly been mentioned during the debate, and we all know that it is vital, along with the energy industries, to the recovery of our industry. The steel industry needs economic growth to produce demand. I believe that immediate action—I know this is going to be unpopular—should be taken on import controls of steel coming into this country because if we make the steel and our industries need it we will start off a great rotation which I believe can contribute to our eonomic recovery. I firmly believe that if there was anyone who really hated Great Britain, what they would do would be to run down British Steel and our coal and energy industries. That is what we are doing voluntarily. It seems to me like a bout of dreadful insanity, and something should be done about it because this great steel industry faces a massive crisis as a result of the decline in Britain's industrial base. That is what has caused the decline in steel. Steel was not required because our industrial base over the last few years has been rotting away. In consequence, naturally there has been a decline in home demand and an increase of up to 30 per cent. in steel imports. Indeed, in some steel products it is as high as 80 per cent.; and these facts together are damaging both the British Steel Corporation and the private sector of the steel industry.
  A great deal has been leaked or talked about recently regarding the Trojan horse, as I would call it, known as the Think Tank, which is going to propose all sorts of fearful measures such as having to pay for unemployment and for all forms of illness. If that is a reality—and I hope it is not—I do beg the more experienced Members of this House, Members on the Front Bench opposite and Members on the Back-Benches, to make their voices heard in the Cabinet and in other places and do their best to see that this terrible affliction does not become a reality. I am dreadfully afraid that if that should happen we shall see massive unrest in this island of ours.
  I should like very briefly, if I may, to refer to the clawback which is proposed with regard to certain people in our island next year. I would say straightaway that no doubt the Government have looked at all the sources of where they can do some clawing back. They have had a look at the comfortably off: they cannot touch them because they are very important people. They probably have had a look at the judges and generals, and so on, but they cannot claw back
  306
  anything from them. They are very important people. They have had a look at the bulls and bears in the Stock Exchange: they are very important too. They have looked at all the consultants in the health service, and they cannot be touched. So there is only one section of people left which this courageous Government can have a go at to claw back; and they have made their choice—20 million old-age pensioners, children and the poorest in our country. What a magnificent Government!
  These are the ones who will suffer. These are the ones who will be bitter; and what the Government do not realise is that their children and grandchildren will be bitter too and they might like to wreak some form of revenge for this unutterably fearful crime which is being contemplated. When the Prime Minister tells us that these ordinary folk are going to be a pound a week better off, a visit to any high street in our island would show her how absolutely wrong she is. Therefore, I hope that this, too, will be abolished.
  I should like to close by talking very briefly about the economic field, as this is an economic debate. We have heard from many eminent speakers. I have listened very carefully to speakers from both sides of the Chamber and I have learned some very interesting economic facts; but they have not completely changed my mind as to what I believe we ought to do. It is not my economic theory—I am not clever enough and I do not understand it—but what I am going to suggest has been tried. It has been put to the acid test and has proved successful. It saved the Western World from Nazi tyranny. That was the Franklin D. Roosevelt New Deal of the 'thirties which saved America and it saved us and helped us to prepare to meet the onslaught of Fascism. That was evolved by a Canadian economist, but primarily by Keynes. It was accepted in the face of fierce opposition by American and British economists, who said it would not work. Keynesism and Galbraithism did work. They saved the Western World, and I believe they could save us as well. I am convinced that if we provide work and follow the principle of spend and prosper, there are tens—nay, hundreds—of thousands of building workers without work and we could build better hospitals and better schools, which we need. We are building less homes now this year than we did in 1925 and the list of people who have no proper house to live is reaching into millions. Is this not a form of lunacy? Let us spend to build houses, spend to build schools, spend to build hospitals and universities. The great industries which can do this want to do it and they want to do the same in many other great industries as well.
  In conclusion, I believe that if we were to adopt this policy—it has been proven in the face of opposition and was adopted by the Americans under Roosevelt, and we, thank God!, followed suit—and get back to this great philosophy, proved and tested, of "spend and prosper", we would get a response from the British people at all levels—from industry and commerce to the working man and the skilled artisan. It could be so great that it would not only put this country back on its feet but, when we have done that job, we could make our contribution to help other countries which are not so fortunate to get on to their feet. It will, I believe, make a contribution to world stability and ultimately to world peace. That is the

  307
  great challenge before us and I hope that this Government will have the courage to tackle it. If this Government do not have the courage, then let them leave it to some other Government to take over which is pledged broadly to follow what I have been suggesting. It is not just a theory or a hare-brained idea. It is something which was attempted and proved successful in the 'thirties. I believe it would also be successful in the 'eighties. What is more, I think it will lift up the courage, status and determination of the British people to pull us out of this mire and put the word "Great" back into Britain.
  8.20 p.m.
  Viscount Massereene and Ferrard: My Lords, I shall be only six minutes. I shall return in a moment to the speech of the noble Lord, Lord Molloy, but I should first like to congratulate the noble Lord, Lord Gormley, on his extremely robust speech. He complained that in the gracious Speech there was no mention of energy, but certainly the noble Lord put plenty of energy into his own speech.
  To return to the noble Lord, Lord Molloy, with due respect to him, I think that he has been speaking a certain amount of nonsense. He said that production in the United Kingdom over the last four years has been the worst in living memory. But I would remind the noble Lord that during the term of the last Socialist Government and the first few months of the Conservative Government—in other words, between 1970 and 1979—productivity in this country rose by only 9½ or 10 per cent., but wages rose by 400 per cent. To a certain extent, that is the cause of the recession, though I realise that there are other causes, too.
  The noble Lord, Lord Scanlon, whose speech I enjoyed, admitted in so many words at the end that he really did not know how to cure unemployment. He is a fair-minded man and I am sure he will also agree that a large part of the cause of our unemployment is due to costs. What is the main cost? If you have an account today from a plumber, a builder, a carpenter or any source that employs labour, you will find that 75 or 80 per cent. of your bill is for labour and the rest for materials. I remember the days, not so long ago, when the reverse was the case. Therefore, the cost of labour has been one of the causes of our recession.
  The unions must take a certain amount of responsibility for this. As I have said before, by their restrictive practices and by forcing up wages they have destroyed what an economist would call our corporate profitability; in other words, they have destroyed our competitiveness. If you cannot compete in the world, and if your corporate profitability is destroyed, you will not get people to invest, so your economy is in a bad way.
  The House has not been very generous to the Government. In reducing inflation from its former very high level to 6½ or 7 per cent. the Government have been marvellous, and my noble friend Lord Cockfield said that the Government hope to reduce inflation to 5 per cent. by the spring. Inflation is the real killer, the real evil. I was very pleased to see that the Government have invested £1,000 million in helping the unemployed, and I understand that that figure has now been increased by £500 million. But what really pleased me in the gracious Speech was the
  308
  reference to the Government's help for youth, especially the new vocational training scheme for next year. I have had a lot to do with youth, because for over 20 years I have been concerned with the National Association of Boys Clubs, in Kent. There is no doubt at all that unemployment is a very serious matter for youth. If they come out of school and are unemployed for six months, many of them lose heart. If a young person is unemployed for six months, it may become a habit and then some of them are not so keen to accept or to find jobs.
  The noble Lord, Lord Molloy, spoke about crime. I have not studied the figures, but it is interesting that, if young people have a lot of time on their hands, quite a lot of cash and are unemployed, that probably causes some crime. In the early 1930s, it was a real hardship to be unemployed, but, so far as I am aware, there was no increase in crime then because of unemployment. The unemployed in those days were perhaps made of sterner stuff and were more self-disciplined. It is an interesting point.
  I should like to be a little constructive. We hear a lot about the microchip and micro-technology, which has now been in existence for about 10 years. Many people are extremely scared that it will mean the loss of more jobs, but I do not think that that is necessarily so. When steam was invented, our heavy industries came into being and created vast employment. It is true that through the invention of the steam engine the crews on the sailing ships lost their jobs and were badly affected, but, on the whole, it was good for the country. It is the same with cars. Cars displaced horses and carriages, but on the other hand they created vast employment through garages, petrol, oil and manufacturing industries.
  I should like to add one point about unemployment. If you want to create employment—this could not be done here; it could be done only in an autocratic state, which I would not like—you could stop using automatic petrol pumps on forecourts and have the pumps manually operated. That would be crazy in our country where one has to be efficient, but you would probably create 300,000 or 400,000 extra jobs, although that is the wrong way of creating employment.
  I hope that the Government, in their vocational training for the young, will concentrate on micro-technology, because many young people seem to understand, far better than I do, the electronics and the amazing machines which we have now. So I hope that the Government will concentrate on that for the future, because I firmly believe that our future lies in micro-technology. Finally, in order to create some employment, I wonder whether it would be possible for employers with 10 people to take on two unemployed people, and for employers with 20 people to take on four unemployed people and so on with the Government still paying them the dole and the employer making up the wages to the proper level. That is only an amateur idea, and I mention it just in order to try to be constructive.
  8.30 p.m.
  Lord Cobbold: My Lords, I must apologise for having unavoidably missed the opening speeches. which I will read with care tomorrow. The general position has been well covered by noble Lords. I find

  309
  myself in agreement, on the one side, with those who welcome the recent improvement in regard to inflation and the reduction in interest rates, and also with those who see very rough water ahead, particularly in unemployment, in industrial competitiveness and, which is perhaps of particular interest to me, in world finance and banking. On the last question, very important and very difficult, Lord Taylor of Gryfe made some very wise comments. I only want to make a few comments, and to emphasise one point about the foreign exchanges which seems to me extremely important. On top of the volume of international lending, the dangerous volume I think, the extreme volatility of exchange rates has seemed to me to be one of the most damaging factors, and return to a measure of exchange stability is one of the main desiderata in the present situation. I am to some extent following the noble Viscount, Lord Eccles, and the noble Lord, Lord Soames.
  Looking back 30 years or so, when I had some responsibilities in these matters, it is true that from time to time we had our exchange crises. For some reason they always seemed to come in the uneven years, 1949, 1951, 1953, 1957. But we did not then suffer, as we do now, from the general and almost daily uncertainties and fluctuations. I believe that the main reason for this change is the vast increase in mobile funds floating around the world. During the 1950s, except when we had these biennial crises, the major central, banks—I say "central banks" though, of course, it applies to Governments as well—worked in sufficient harmony and had sufficient funds to deal with daily movements. What is more important, the markets knew that they had sufficient funds to prevent the sort of volatility we are seeing today.
  As the noble Lord, Lord Soames, said, Governments were in those years working within the Bretton Woods rules. This is no longer the situation. With the disappearance of Bretton Woods, with the great mass of mobile funds, it is essential to build some machinery to deal with this new position. In my view, the best hope of achieving this seems to me to build heavily on the International Monetary Fund and to work for a position—in some ways similar to Bretton Woods, but not exactly so—where the International Monetary-Fund, in consort with the major central banks has, and is known by the market to have, sufficient funds and sufficient influence to discourage the present very damaging volatility of exchange rates, and to restore a régime of reasonable stability.
  8.34 p.m.
  Baroness Seear: My Lords, I must begin with no fewer than three apologies: apologies because I was unable to be here at the beginning of the debate, being engaged on a matter connected with the business of this House; an apology because I cannot stay till the end, in that I have to catch the 11.30 p.m. train to Glasgow, and at our present rate of progress it does not look as though we shall have completed the debate in time; and thirdly—and this, of course, is very much my own loss—I did not hear the maiden speech of the noble Lord, Lord Gormley. I greatly regret that I did not. I would have enjoyed hearing it; I would have learned a great deal from it, and I would have been particularly glad to have been able to join my congrat-
  310
  ulations to those offered all around this House for that maiden speech.
  My Lords, we on these Benches have always believed that the Government were right to do everything in their power to bring down the rate of inflation. There can be no doubt that there can be no lasting recovery in this country—and temporary recoveries are little use to anyone, they are just false dawns—unless inflation falls and stays down. We are not convinced that the Government have the answer on how to keep it down, but that is a matter for another debate at another time. So we would congratulate the Government on the very successful reduction, the satisfactory reduction, of inflation to its present rate, and we look forward with them to a further reduction.
  My Lords, that is the silver lining, but the silver lining of what remains a very dark cloud indeed, and from those speeches I have heard this evening I have gathered the feeling that not sufficient emphasis is being put on the degree to which industry in this country is still not prospering to anything like the extent to which it needs to prosper if we are to have a decent future and there is to be any hope for a permanent sustained recovery from the present level of unemployment.
  It is not only the enemies of the Government, or shall I say the critics of the Government, who are making this point, outside this Chamber, if not within it. Only last Wednesday the Treasury, shooting in their own goal as you might say, produced a report which referred to exports running 4 per cent. below the level forecast in Budget time; the volume of exports is probably now some 4 per cent. below the second half of 1981. Import volumes this year have continued at close to the high levels reached in the second half of 1981. The continued rise in domestic demand and the recovery forecast in exports is expected to lead to a renewed rise in imports in 1983. The report goes on:
  "On current account the balance of payments has moved from an exceptionally large surplus in 1981 to a smaller but still very substantial surplus so far in 1982. With the UK economy expanding in 1983 nearly in line with the world economy, and with the UK's tendency to lose share in domestic and overseas markets continuing, a further deterioration in the volume of net trade is forecast. Moreover, the gains in the terms of trade in the last few years will probably not be repeated and may even be partially reversed. These factors may outweigh some rise of the balance in invisibles helped by increased earnings from overseas assets acquired as a result of recent current account surpluses and leave the current account not far from balance in 1983."
  My Lords, that is not a favourable prospectus, and until we reverse that trend, until we can see a real hope for advance in British industry, then all the other things we have talked about are of no avail. So I would urge that the Government should use all the resources they can muster—and we know that there are increased resources at the command of Government because of the successes that are being achieved—to help industry in every possible way.
  Of course, to some people the answer will be to block imports, to introduce strict import control. We on these Benches absolutely repudiate that as a solution. It might temporarily make things better, but only at the expense in the long run of making them far worse. As other speakers have said far better than I can, and I cannot but applaud every line in the speech of the noble Lord, Lord Soames, we are a trading

  311
  nation or we are nothing; if we exclude imports we lose our markets, and what is perhaps even more important, it gives us a false sense of security for a short period of time, and we can believe that the changes that need to be made inside industry need not be made because temporarily we can avoid imports competing with our industries here at home. Surely the only possible answer is that those industries have to compete. If we cannot compete with imports we must use our resources in other ways in which we can compete. This may be a tough doctrine, but it is the only long-term answer. So whatever additional resources the Government have should be concentrated on doing their utmost to relieve the pressures on industry.
  It will be very tempting in election year to use some of the additional Government resources to give benefits to individual citizens in terms of tax reductions. We do not believe that that is the right thing to do. If there is any money to spare, to assist in any area, it should go into assisting industry and not into tax reductions for individuals. Maybe the Government will not get so many votes, but in the longer run it would make far more difference. We know that in terms of the relief of unemployment the relief of taxation does very little to create additional jobs. What does create additional jobs is to make industry more successful and, therefore, more able to absorb people into employment.
  However, I make one exception to this use of the extra resources that the Government have. They should not use it for general tax relief to individuals; but—and here I go along very much with the noble Earl, Lord Onslow—our present level and system of taxation, especially at the lowest levels, is chaotic. It is an absolute nonsense that as a man moves into employment he is virtually paying 40p in the pound taxation on what he earns. When one adds the 30 per cent. income tax, plus national insurance contribution, that is an absurd and ridiculous marginal rate of tax. People complain about the hidden economy. I prefer to call it the hidden economy, rather than the black economy, because in many ways there is a great deal to be said for it. Of course, we have a hidden economy when people with non-hidden earnings are taxed at such a high rate and when we have VAT at 15 per cent. which gives inducements for the man selling a service and the buyer to have their operations on the black economy.
  Is it not possible to consider reverting to the position that we had and which we changed, for some reason I have never been able to understand, of a lower level of tax when people first move into employment, for the lowest earners? If we could push the starting rate of tax even higher than that required by the Rooker-Wise amendment, so that people started paying tax at a higher real rate—and not merely as a result of adjustment for inflation—that would do something to give a bigger gap between what people get when they are on benefit and what they get when they finally take home their earnings.
  Is it really so difficult not to start tax at 30 per cent? I believe I am right in saying that there is no other country which starts its level of tax at so high a rate. It was alleged that the Inland Revenue did not like having a lower starting rate. I have reason to believe
  312
  that that is something of a myth, and that the objection did not in fact come from the Civil Service but was for some reason conceived by the Government. That is the one area in which I suggest that individuals rather than industry should benefit from whatever additional resources the Government have.
  The main focus must be on doing everything possible to make industry more competitive. Why cannot the Government have gone the whole hog on the national insurance surcharge? That very simple thing by itself would have given tremendous encouragement to industry and would have made it more competitive. Making industry more competitive is the only way in which to fight imports. Cannot the Government find ways in which to bring interest rates down still further? It is alleged to be a great triumph that the interest rate has gone down to 9 per cent., but the time was when 9 per cent. would have been seen as a fantastically high rate. A drop in the interest rates combined with the abolition of the National Insurance surcharge would give industry a tremendous fillip and enable it to take off quicker than any other way. If we could reduce the interest rate below 9 per cent., that would be the way in which to work on the exchange rate. The CBI, as we know, was somewhat ambivalent on the question of the exchange rate. For my part, I am not advocating devaluation as such. I believe that the losses would be greater than the gains. But if it flowed as a consequence of the reduction in the interest rate, that would be a different matter.
  Finally, if there are some additional resources to be devoted to helping in the great competitiveness of industry and, through that, the reduction of unemployment, is there no way in which we can make a substantial difference in the energy charges, which are such a heavy burden on so many of our most important industries? My Lords, I have spoken for 12 minutes and that is far too long at this time of night.
  8.47 p.m.
  Lord Balogh: My Lords, last year the right honourable Lady the Prime Minister declared that she was "not for turning". One can now agree with her; because her call for increased investment is no mere U-turn; it is a somersault. But the direction of the somersault is still on the whole unchanging and disastrous. The policy of the Government, far from creating a solid base for subsequent expansion, has not even succeeded in stopping the deflationary spiral. Unemployment is still rising and if it is not soon arrested will weaken our potential expansion possibilities, because we shall not have the skilled labour necessary. The vast increases in real income for the British Shelf have been absorbed by our non-oil deficit. Our productive investment is still shrinking. If employment does not soon return, the availability of skill will also weaken. Instead of reconsidering the effect of their policy—namely, the classical monetary and fiscal weapon armoury—they blame the previous Government.
  They make efforts to win popular acceptance for their legislation. Mr. Tebbit's address to the conference is typical and very successful. He argued that it was not the present Government's choice of policies that was responsible for our malaise; it was the reckless inflationary spending of previous Socialist Governments and that it was the excessive demands of trade

  313
  unions and the laxity of accounting practices by nationalised industries. To recover prosperity, in their view, was a hard way. The way was based prominently on rolling back the state sector and keeping, indeed forcing, down public expenditure. Only if the public sector borrowing requirement was kept firmly in hand could there be any prosperity.
  On a psuedo-heroic impulse the Government restrained monetary expansion. The consequent loss and social tension can be mitigated only if a majority of the countries involved would also change their present policy. Then, and only then, could the economy sustain a combined expansion which would avoid the menace of deficits in the balance of payments by a reciprocal increase in demand. This alternative common-sense approach to the balance of payments problem was repudiated.
  Mrs. Thatcher has, moreover, reverted to the type of monetary and fiscal outlay of the pre-1945 position. For her Keynes has really died twice. She was willing, indeed eager, to reverse the trend to social reform. The latest moves in this respect were the accelerated reprivatisation or denationalisation of the public sector on a vast scale. If they follow present patterns, the Government seem to be drifting towards the loss of profits and taxes.
  Moreover, this social and economic counter-reform was based on a rather simple view of the working of a modern, industrialised economy. They claimed that the Government were able to dominate the complex forces, and to manage them entirely through the money supply, albeit that Mrs. Thatcher's closest admirers were completely unable to define satisfactorily that slippery concept. The fact was ignored that the economy in the main industrial countries had altered; that pure competition no longer dominated an increasing sector of the economy—more especially in the case of manufacture. In fact, Conservative policies in all affected countries from America to Germany were based on a model of the economy developed originally by the Swiss economist, Walras, and revived by Von Hayek and Friedman. They have nothing to do with reality. They do not recognise the fact of all but continuous unemployment can exist. They assumed that the market was balanced and automatically cleared. They asserted that management would not be able to influence the basic harmony. They denied that the systematic pressure on the unions, fought with bitterness, would make a negotiated easement of the tension impossible.
  All indications point to the conclusion that a free-for-all in the labour market, organised oligopolistically on the side of both employers and employees, is no longer compatible with the maintenance of full employment, if it ever was, if we ever had a continuous full employment, except in the immediate post-war period. The unions will resist any threat to their status and wages. The spiral of wage inflation also militates against the attainment of greater equality in the distribution of non-profit income. Unions are not equally well organised, nor are all occupations of equal importance strategically for the country as a whole, with the result that the lowest paid, the weakest, fare progressively worse in relation to the rich.
  The leapfrogging of wage demands is an inherent characteristic of the present phase, where wages, and especially wage rates, differentials, are not centrally
  314
  negotiated on the basis of an incomes policy. I believe that such a policy is workable if there is a strategy for all incomes and not only an attempt at restricting wages. Mrs. Thatcher's policies in the new stages of oligopoly in the market are dangerous, as was demonstrated more recently by both the crude oil and the refined product prices.
  The liberal Tories seem to believe that the union solidarity can be smashed, and the stabilisation of prices carried through without having discussions with the unions. Ministers always talk of the need to establish a solid basis for expansion without inflation, and they appeal to the common sense of the unions. It is more likely, however, that any increase in employment will result in the necessary increase in the bargaining strength of the unions and that they will exhaust it completely.
  The consequent vast losses of production and incomes have been shrugged off. The need for some permanent organ to help in this phase was rejected. Reference was made, over and over again, to the fact that incomes policies invariably failed, leaving behind an increasing ill-will. The fact was ignored that the National Board for Prices and Incomes of Aubrey Jones was a solid success because he did not rest on hearsay, but employed modern, analytical methods to find satisfactory solutions. Its existence was increasingly accepted as an important contribution to decision-making in the sphere of industrial policy.
  There has, however, lately been a drift towards using incomes policies for wage dictation. In my opinion in the end we shall only be successful if wage relations are negotiated by annual meetings sponsored by an independent board, comprised of Government, employer and employee representatives. In Western Germany this solution, though informal, had an important influence on decision-making and it was a success. It was also successful when it was tried in earnest in places like Malta, Austria and Sweden. Once the opportunity to establish such a permanent institution failed, the yearly wage round was inescapable, without a sharply deflationary policy.
  Nor must it be forgotten that the trade unions are of different strengths and militancy. Thus, the market based on "free collective bargaining"—the means to achieve a satisfactory solution. Still some advance has been made towards a viable system—a system which does not repudiate orderly solutions for dogmatic reasons. The most important condition remains a thorough re-examination of the failed methods—including instrumentation—which led to the disastrous decline of British manufacture. The suspicion which must not be allowed to linger on is that a wage policy is legitimate so long as it is the result of struggles. The Government would do well to crush this as soon as possible. It was the combined opposition of both sides of industry against incomes policy which led to our present mess. Unfortunately both sides of industry and the Government still put forward policies which they know are not viable because they will not in the end harmonise full employment and stability. The outlook for stability and progress is therefore uncertain.
  I shall turn to the one important new feature of the economy, and that is the denationalisation of the oil and gas production. The argument in favour of this is based on the theory that the private sector is more

  315
  efficient than any alternative. The answer is that a large and growing part of private industry is headed by civil servants, constituting a new problem in their relations with Ministers and the public. Moreover, most recently firms were nationalised because they had gone bust and had to be saved from bankruptcy in order to avoid a cumulative crisis which might have ensued if a large company or a bank had been allowed to fail. It has been subsequently alleged that this would open the way for a substantial increase in the availability of capital for essential purposes. In fact, the way in which money is raised has little influence on how it is spent. Moreover, if speculators know that a gigantic issue is coming, they will hold back purchases. We have already seen that the first estimate of over £1,000 million for the denationalisation of oil and gas has shrunk to £550 million. It will shrink further. These purchasers are not a limitless number of small investors, as assumed in orthodox economics; they are pension fund managers, insurance companies and investment trusts, which control a large majority of the important accounts.
  The state deliberately adopts a policy which will diminish its share of the take from the Shelf. In the latest version, much of this money will accrue to underwriters and advisers, who will appropriate a large part of the surplus of the rent. The process is more like highway robbery than a reticent transaction.
  It is, further, maintained that in this way the managerial representatives would be available for contract by small shareholders. The truth is that the more widely scattered the ownership, the greater will be the power of management. It seems to me that the advisers of the honourable Lady, academic and otherwise, have never heard of Burnham, Berle or Means.
  Last but not least of the problems is that of taxation policy of oil and gas on the British Shelf. With extremely varied costs. the Government's take of the crude production will be maximised by a tax which is highly progressive; otherwise the "bad" costly fields would not be exploited at all, while the "rich" fields would reap massive benefits.
  If such a solution were adopted, care would have to be taken over handling the problem of risk without reducing the take. The last Labour Government acted on the principle of allowing free depreciation. Unfortunately, the Inland Revenue, backed by the Treasury officials, refused to accept a simple, progressive tax system, arguing that a double or treble rate of tax would burden the administration of taxation with an impossible task. The extemely favourable conditions laid down in the licensing system on which the oil industry is based, very much enhanced the need for an exact ascertainment of costs and prices.
  However, the break-up and curtailment of the original BNOC and the annulment of its powers to participate in the operations and supervision of prices and costs will undoubtedly lead to a relative diminution of the Government's take. As I have already pointed out, neither costs nor prices can be securely ascertained if the Government do not participate in the exploration, development and production process itself. Expertise in this field is a costly business and it is highly improbable that the Inland Revenue and the
  316
  BNOC (in its diminished state) can effectively pursue a policy of strict supervision. The outlook for the moment is still very pessimistic.
  9.4 p.m.
  Lord Boardman: My Lords, if I understood the noble Lord, Lord Balogh, correctly, he said that there was no evidence that the private sector was any more efficient than the public sector. In that case, I would urge him to look at a clear example in today's press at the effectiveness of the introduction of the private sector in the refuse cleaning operations in Birmingham. But time prevents me from following the noble Lord further in his speech, which I shall look at again with interest tomorrow.
  I should like to join other noble Lords in congratulating the noble Lord, Lord Gormley, on his maiden speech. Some years ago in different capacities he and I spent a great deal of time negotiating and having discussions together. From my experience of him I am sure that if he serves this House as well as he served his union—and I am sure he will—we shall be very fortunate to have him here.
  I should also like to congratulate the Government on the form of presentation of their autumn Statement which puts to Parliament and, indeed, outside Parliament the economic facts with a clarity which has never previously been produced. It also includes—and this is a matter of some interest to many of us—a sort of "do-it-yourself" or ready reckoner for calculating what we all think next year's budget should be. I congratulate the Government not only on the form but on the content.
  Perhaps it is somewhat disappointing that with exceptions such as the noble Baroness, Lady Seear, few noble lords opposite have felt it right to pay tribute to the achievements of the Government in the economic field. Of course, the greatest of those achievements is in the field of inflation. When inflation was at high levels, it was accepted by all of us that it was a tremendous, terrifying scourge for society, that it destroys political and social stability, that it can ruin the thrifty, impoverish the pensioners and that the only beneficiaries of it—and not always them—are speculators.
  Now that it is forecast to be 6 per cent. by the end of the year and 5 per cent. by next year, it is a matter on which I had hoped the whole House could have united in congratulating the Government on their achievement. Although it is being conquered, we must not forget what a vicious enemy inflation is and that it is always poised ready to counter-attack. Nor do I believe that we should in any way be complacent about the forecast achievement of a 5 per cent. rate next year. The target must be nil inflation and, indeed, if only that could be achieved, the question of the annual wage round and all that sort of thing would vanish. Awards will then be made relative to merits, experience and skills; and what a prize to our industrial society that would be!
  It has been suggested that the cost of defeating inflation, or at any rate tackling it in the way which has been done by this Government, has been the high level of unemployment. I certainly do not agree, and I think that if the trend of inflation that was left by the previous Labour Administration in 1979 had been continued, there would be many millions more

  317
  unemployed today, and those that were employed would have been working on a poverty line.
  In view of the terms of the amendment, and prompted by my noble friend Lord Boyd-Carpenter's reference to party manifestoes—I think he went back to 1929—I was tempted to see what had been put in the party manifestoes in 1979. May I read one:
  "We must keep a curb on inflation and prices. Inflation is our enemy because rising prices hit most hard at the pensioner, the low paid, and the housewife and inflation causes losses of jobs".
  I read the sentence next but one after that:
  "Now we set ourselves the task of bringing inflation down to 5 per cent. in three years. It is an ambitious target. We need the assistance of everyone, and everyone will be better off if we succeed".
  If I turn on I see that we have a further paragraph saying:
  "Nothing so undermines a nation as inflation. Not only does it make a family's task of budgeting more difficult, it is a threat to jobs"—
  I repeat, "a threat to jobs"—
  "and a standing invitation to our overseas competitors to invade our markets."
  Your Lordships may wonder the source of that manifesto. The next paragraph I quote will give it to you:
  "In contrast to a savage Tory free-for-all, which would lead to soaring inflation and industrial chaos, the Labour Government will work with the TUC to achieve our agreed inflation target of 5 per cent. in 1982."
  Those are the views expressed in 1979. I would have hoped it would not be unreasonable for the Labour Opposition to have accepted that the achievement by this Government in getting that target down to 5 per cent.—admittedly it looks like being four years instead of their target of three, but they did it in a way not to cause a free-for-all or chaos, but in a responsible way—is something to be praised.
  I was tempted also to look at the Liberal Party Manifesto at the same time. Their remedy for the inflation trend was a statutory prices and incomes policy. Despite what the noble Lord, Lord Balogh, has just said, it seems that that ignores all the lessons of the past 20 years. I was faced with something of a problem with the Social Democratic Party. My problem was whether to associate them with the Labour Manifesto of which many of them had been supporters in 1979, or to associate them with the Liberal Manifesto with their prices and incomes in the new partnership that they have formed. Perhaps my dilemma there is one which is shared by some of the members of that party at the present time.
  Having praised the Government's policies, as indeed I do, may I make some, I hope, constructive criticisms or suggestions. First, as the noble Lord, Lord Byers, rightly said, there is the problem and criticism of our energy pricing policy. I welcome the announcement by the Gas Corporation of the freeze on gas prices for a further 12 months, and I wait hopefully for a similar announcement coming from the Electricity Council, but frankly it is too little and it is very late.
  The impact of energy prices hits most severely the heavy energy users, but those who are also by definition the large employers. The costs of those heavy energy users go right through the whole structure of our industrial society and right into the final costs. They are industries where their competitiveness is essential, and the cost of energy is
  318
  often greater than the total cost of wages, and yet we have consistently charged ourselves in this country more for our energy than has been charged by comparable competitors overseas.
  Lord Bruce of Donington: My Lords, I am grateful to the noble Lord for giving way. Will he indicate to the House whether he supported the Government when they themselves deliberately ordered the gas and the electricity industries to put their prices up to a level 10 per cent. above that of inflation? Will he say whether he supported the Government intervention to do that?
  Lord Boardman: My Lords, perhaps the noble Lord will allow me to continue. It is not the total raised by the prices I am concerned with, but it is the apportionment of it between the domestic and industrial user. Historically, we in this country have charged our domestic consumer far too little and our industrial consumer far too much, and there are political problems in remedying that. So it is not the total overall recovery, but the apportionment of it which, I believe, has been unfortunate.
  It is said in relation to electricity that we must keep a certain price level because of our commitments elsewhere. But even if our energy were somewhat cheaper than that of our overseas competitors, I wonder whether it would be wrong? We are, after all, self-sufficient in energy and I cannot believe that the French, who take the benefit of their cheap hydroelectric energy, would consider it wrong and would consider it necessary for them to charge themselves the same level of energy prices as is charged by countries which have to import high-cost oil. I urge my noble friends to keep that point very much in mind because the industries most severely affected are, as I say, largely heavy industries and they are largely in the North, and it is the North which perhaps is feeling the impact of the recession more severely than anywhere else.
  Another plea I would make to the Government is on the question of enterprise zones. I believe that as operated, they are in many cases counter-productive, and many instances could be given to illustrate—I am sure my noble friend will have heard of them—where the enterprise zone has enabled an importer employing a few men to have the benefits of being inside a zone and to put out of production a manufacturer making a similar product in some other area. On those two points I hope the Government will look carefully at the problems, which are real problems to industry, and which could have a marked effect on the employment level.
  With those small but important qualifications, I congratulate the Government and particularly the Chancellor of the Exchequer who, as my noble friend Lord Boyd-Carpenter said, has been subjected to fairly persistent criticism for a long time from all quarters, on maintaining policies which are clearly now the right policies to restore our economy.
  9.16 p.m.
  Baroness Burton of Coventry: My Lords, on Wednesday last in another place, the Prime Minister was asked why a certain item had not been included in the Queen's Speech. Mrs. Thatcher replied:
  "There is plenty of time yet, plenty of time".

  319
  I found it difficult to understand why the position of our national airline, British Airways, was not mentioned. Hence, I take comfort from the Prime Minister's remarks about there being plenty of time for omissions to be rectified, and I wish to comment tonight about the matter in the hope of elucidating some remarks from the Government.
  Last month I noted three headlines in the Financial Times; namely, "British Airways losses go supersonic", "British Airways £1 billion debt prompts call for capital reconstruction" and, "British Airways seeks way through turbulence". I suggest that all three are correct, but I wish at the outset to say that British Airways is seeking a way through this turbulence and that this is being a combined effort from top to bottom. Having said that, let us look for a moment at the losses, which have indeed gone supersonic. In my opinion, Sir John King had no option but to do what he has done. We have had years of mismanagement based on nil or inadequate action by Government, going back at least to the wrong basic decision to form one airline out of BOAC and BEA. The merger is now admitted generally to have been a fundamental error. Three comments from Sir John are worth repeating to your Lordships:
  "The deficit was the price of past wrong decisions going back for years".
  "With overmanning on a prodigious scale".
  "The airline was being conducted as though money grew on trees".
  Those were suscinet, realistic and comprehensive words and they described the position as a whole.
  What about the actual losses? As I understand it, the Government have given an assurance to the airline's board that they will ensure the availability of adequate financial resources to meet the board's obligations as they fall due. In other words, the Government will be responsible for keeping British Airways in the air until some final financial reconstruction is worked out; and I shall return to that aspect when I come to my third headline of British Airways seeking a way through turbulence.
  What about the losses, making the total indeed supersonic? This is stated as a deficit of £544 million, plus the writing-off by the management of what have been described as "extraordinary items" amounting to another £426 million.
  Let us take first the question of overmanning. My Lords, £100·4 million was necessary to persuade 9,000 employees to leave the airline last year, and a further £98·4 million will be required for the additional 7,000 who will have left by March 1983. Secondly, let us take aircrew. This problem is not aired too much in public, but there are too many aircrew with salaries above the average, and I think that I am correct in saying that so far they have not been affected by the lay-offs. At the beginning of the recession British Airways hoped, understandably, to be able to reemploy its aircrew. Now that is not so, and it has to face the problem of who is to go, the younger pilots, or the older ones?
  Thirdly, I turn to the question of discounted tickets and bucket shops, and I think that nobody will deny my right—if that is the correct word—to say something about this. In the debate on the Queen's Speech last year I said that some 500 million dollars per annum is lost by IATA members because of
  320
  operations conducted by bucket shop travel agents and the airlines which supply them. Going back to 18th February last year, when the House discussed the civil aviation industry, I was given the opportunity to speak on the marketing policy of British Airways in relation to bucket shops and discounted air fares. Certainly, as I then said, British Airways was only one villain among 40 others. But it was, and continued to be, a large-sized one. Sir John has said:
  "It is our intention to reduce discounting, if not to eliminate it altogether".
  As I understand it, the loss incurred by the discounted ticket-bucket shop operation was between £20 million and £30 million. I was told that British Airways' "special promotional costs" were on their way to reaching some £125 million in 1982–83, and that that figure so startled Sir John that he ordered I drastic action. Perhaps it might be relevant to explain that the so-called "special promotional costs" are chiefly made up of rebates to travel agents on discounted ticket sales. Indeed, the scale of British Airways' activities in this field so alarmed the accountants called in to look at the financial position that acute concern was expressed.
  I have tried to outline briefly three aspects, among many; namely, overmanning, aircrew, discounted tickets. I come now to the third headline that I mentioned at the beginning of my speech.
  "British Airways seeks way through turbulence".
  Here I should like to repeat what I said earlier. I do not believe that British Airways is the prime villain in this piece. I blame government (with a small "g") for approving the ill-fated merger of BOAC and BEA—two excellent airlines, as many of us would testify. I blame government also for resolutely—and I mean resolutely—refusing to take any steps to deal with the position over the past decade, despite the fact that so many people in this House, and elsewhere, tried to put matters before them. To so many of us it was so obvious that something was going gravely wrong in the way that the airline was performing and in its attitude to customers. But nobody would listen. They did not want to know. It was all too difficult. The relationship between the national airline and government was too "cosy" for any real remedial action to be taken. Anyway, who were these critics? And I think that one thing should be said. I do not believe that we should have got anywhere now had it not been for the Prime Minister.
  Perhaps I may offer to the House some seven simple facts according to my reckoning. First, any private concern or airline would be insolvent, given the position of British Airways—a state airline. Second, as it is still flying (for which I am glad) the Government obviously are bailing it out. Third, British Airways has abandoned certain loss-making routes and closed certain overseas offices. Fourth, the airline believes it will end up with a good route structure and with a workforce down from 59,000 to 35,000. Fifth, questions and problems remain, such as the index-linked pension scheme and the financial difficulty of some public service routes for social rather than commercial reasons. Sixth, the realisation that they, British Airways, aimed at growth and volume at the expense of profitability. Seventh, if a big chunk of the airline's £1 billion debt is to be written off with taxpayers' money, will other industries and other

  321
  airlines not have legitimate complaint? Indeed, might we not find ourselves in trouble with our EEC partners, who could claim unfair subsidisation?
  All this brings me to the question of privatisation. To my mind the first priority is that British Airways should become solvent and pay its way; and I believe that this is what the airline itself would wish and is trying to bring about. But if this can only be done, quite apart from any effort by the airline itself, by underwriting the prospectus with taxpayers' money, then we have a problem. Certainly having British Airways on our backs financially in the future as we have had in the past is not acceptable. So what?
  I feel, as I said earlier, that this affair had to be sorted out whatever the cost. Should the airline then be floated off? For my part, I should like to see British Airways put on its feet again, given adequate safeguards. As this could be accomplished only by the taxpayer once more footing the bill, would it not be better for the airline to repay some of its debts by, say, three or four years of profit before any question of privatisation arises? It will take a great deal of taxpayers' money to write off a debt of £1 billion.
  In conclusion, I wish British Airways well. I do not believe the fault was theirs in the first place: subsequently, they must take some share of the blame. But I believe that they can pull through. There is a quite different feeling today: a feeling that at last something is being done, however disagreeable.
  I should like to add a pleasant note. The House will doubtless be aware that recently British Airways was a clear overall leader as Airline of the Year 82. Runners up were Swissair and Lufthansa. The survey was conducted by the magazine Executive Travel, whose readers collectively make some 500,000 business trips and spend some £100 million on travel a year. I think we might all note that during the year British Airways carried a total of 15·2 million passengers worldwide, of whom some 9·6 million were short-haul passengers. What pleased me particularly about this Airline of the Year award was that those in charge at Executive Travel told me that airlines had been most generous in congratulating British Airways on their success; and I know what all this meant to the airline itself at this most difficult time.
  We would all agree that the right solution must be found—for the sake of the taxpayer, the passengers, the airline itself and the jobs at stake. In another place on Monday the Under-Secretary of State for Trade, Mr. Ian Sproat, said that when British Airways published its accounts for the first six months of this financial year it would be seen that the airline was in true profit of about £100 million after payment of taxation and repayment of debt interest. As no mention was made in the Queen's speech, could the Government tonight inform the House about the timescale and type of action they have in mind? This would be most helpful to all concerned.
  9.30 p.m.
  Lord Sandford: My Lords, may I invite your Lordships to switch your attention from airports to town halls, and may I, as president of the Association of District Councils, start by welcoming the noble Lord, Lord Underhill, in his new capacity as president of the Association of Metropolitan Authorities, to
  322
  debates on local government. This, of course, is a debate on the economy, but local government expenditure is 25 per cent. of all public expenditure and it is perhaps worth spending a moment or two thinking about things from the point of view of local government. I want to argue that from the point of view of local government each of these amendments should be resisted—the first one by the noble Lord, Lord Scanlon, because it is at least a a year late. I would say that local government does not now require additional measures with which to help revitalise the nation's economy because we got those, after a bit of a struggle, at the end of the last Session.
  I would say that local government is now equipped with a goodly range of measures and powers which are available to them, and over the coming months they will be increasingly used by local government, with increasing skill and sophistication, to do what almost all of them wish to do, namely, to revitalise and to regenerate the economies in their own local areas. For instance, we have from the Manpower Services Commission the Youth Training Scheme and the community programme, each of which is a very substantial advance on the Youth Opportunities Programme and the job creation programme with which all local authorities were able to do something positive to mitigate the effects of unemployment in their areas. The district councils, for instance, were able to provide about 30 per cent. of all the places under these schemes and will hope to do the same with the next schemes when they come into force in September. We have available to us a very substantial range of new measures, new incentives, with which to assist firms, and especially small businesses, which are there for local authorities to use.
  Of course, I would want to go on and say immediately that the role of local government in regenerating the local economy must be complementary to the role of the private sector. We are not there to act as bankers, solicitors and accountants, but we are to complement their activities and to concentrate on one of the most important jobs which we can do, namely, to keep the rates down. This is not to say that no authority should ever engage in any commercial activity and can ever do so profitably. I am not wearing today—but I sometimes do wear, with pride—the tie of Luton Airport which, by operating profitably, confers anything up to £1 million for the benefit for its ratepayers. The docks at Boston operate profitably, the buses of Plymouth operate profitably—not perhaps quite as profitably as do some parts of the private sector but, certainly, a good deal more profitably than most of the nationalised sector.
  The point that I want to make is that neither the range of powers available to local government for the regeneration of the local economy, nor the great range of new services, new incentives, to stimulate the growth of small businesses, nor the imaginative schemes of the MSC for mitigating the plight of the unemployed—none of these is designed to be run independently of each other, and the important skill is to blend all these together in the correct mixture according to the problems and resources of each particular area. That is why it is so important to get this right at the local level.
  My Lords, my reason for inviting the House to resist the amendment by the noble Lord, Lord Byers, is that

  323
  I think that in tabling it he does himself less than justice because, as your Lordships will know, he plays a significant personal part in the organisation, Business in the Community, which is responsible for fostering and spawning the local enterprise trusts, 80 or so now, operating in different parts of the country, and whose job it is to do specifically what I have just been saying—to blend together the activities and efforts of the private sector, local government and central Government, in a sensible mixture of schemes, programmes and so on, for regenerating the local economy in each area. I cannot conceive of any single constructive programme such as the amendment talks about which could possibly do this as effectively as a whole set of separate local programmes which the noble Lord is so active in fostering.
  The only other point that I want to make at this time of night is, in that context, the importance of conferring on local government a proper autonomy. Her Majesty's Government have, looking back over the past three years, been particularly successful in disengaging themselves from pay bargaining and from interference in that particular activity in both nationalised and private industries. They have abandoned any of the kinds of interference which we have associated in the past with an incomes policy. They must now seek to do the same in the area of local government and the finance of local government, and provide each separate tier of local government with its own separate source of finance. This will give local government the freedom to choose and the freedom to make and live by their own mistakes.
  The debate since the Green Paper on local government finance—and we had a general debate, and also a specific debate introduced by my noble friend Lord Boyd-Carpenter—revealed virtually unanimous support for the reformed system of the existing rating of property, provided that it is not overloaded as it is today. The existing rating system, with a few reforms and revisions, is entirely suitable for the sustenance of the low spending English and Welsh district local authorities—the great majority, 80 per cent., of all the authorities. Rates of the same type as today, but at a much lower level, would on their own meet all the requirements of these authorities and make them virtually independent of central Government and accountable wholly and solely to their own electorate.
  I put it to the House that if we can achieve that, we will achieve a major constitutional advance. Local income tax—advocated long ago by the Layfield Committee on which my noble friend Lord Ridley served—expensive as it may be to administer, difficult as it may be to introduce, has emerged as far and away the most acceptable and appropriate way of financing the smaller number—80 or so—of the high spending authorities which are responsible for expensive services like education, highways and the social services.
  With these two separate sources of revenue, these two separate tiers of local authorities could both become independent of central Government and accountable to their own electorates for their stewardship. That seems to me the single most important change that local government next needs. I do not regret the absence of these matters from the Queen's Speech. It is not the appropriate kind of
  324
  legislation to introduce at this stage in the life of a Parliament; but I hope that I carry the House with me in expressing the view that a serious malaise, both in constitution and in the economy, will continue to fester until this nettle is grasped, as I hope it will be in the next manifesto.
  9.39 p.m.
  Lord Davies of Leek: My Lords, this is a long debate and even if I were a Pericles after many, many years on political Benches I hope that I have enough sense to know that no matter how brilliant my speech is, the shorter it is the more it will be enjoyed.
  Several noble Lords: Hear, hear!
  Lord Davies of Leek: My Lords, at this time of night I am sure that the House and those who arrange our debates—and, whichever stand one takes there have been some excellent speeches, but unfortunately I have missed about nine, from both sides of the House—feel that with an important debate like this with over 40 speakers taking part we should have a two-day session instead of some people having to rush their speeches.
  Having said that, I want to put forward a few pregnant questions. The noble Lord, Lord Boyd-Carpenter, is an excellent advocate and a brilliant Minister—an enormous success—but he is denying all that the Labour Government has done and praising private enterprise to the skies. My 64,000-dollar question is: If private enterprise is so wonderful why is it that the acme of capitalism, the forum of private enterprise, the United States of America, has 11 million unemployed? Why is it that there, where they pride themselves on the liberty of private enterprise, they have those problems? The truth is that the old system of economics does not answer. We are moving into a completely new society as envisaged by Adam Smith, who was not so "private enterprise" as people may think, because he accused people of greed and usury in his book. Many people may have forgotten the days when they had to read it: nevertheless it is true.
  I should like to bring up the fact which was mentioned by the noble Lord, Lord Scanlon, who made a brilliant speech from our side of the House, that it is absolutely necessary, if you are to have a good engineering industry, not to cut down on opportunities in the technical colleges and universities. If we want to be in the forefront in this world of computerisation, robotics and so on in which we are living, we must have the kind of labour which can handle that. I think it is foolhardy to move into a system of society when, all the time we are talking of a sophisticated future, we cut down educational opportunities for the sons and daughters of the mass of the people, whatever their politics may be. The gateways to greater opportunities in education should be open right away because unless we have the sophisticated machines, the electronic devices and so on that we shall be using in the future, including computerisation, these things will not be understood. You can see it in the schools. There is a little boy of eight who is now learning the binary system. His mother is now doing odd jobs in my own house, and he wants to know what the binary system is; he is learning it at that age. This new type of

  325
  education is now coming, and the Minister of Education does not have the vision: he is no missionary for the children of the future, the present Minister of Education. It is a case of cut, cut, cut.
  Then again, I do not want to say beastly phrases about the Prime Minister, but the lady is dangerous. She is moving into a presidential system of society. Let me put it interrogatively; is the lady moving into a presidential system of society? I see a boffin on the other Benches shaking his head. He is very knowledgeable and he might answer me later. That is one of the things some of us are now questioning. It is such a pity, the things I wanted to bring out. It is fortunate that we have this most intelligent audience listening, and if noble Lords could go into the Printed Paper Office there is a document—I could talk about it for a couple of hours—which deals with the departments of trade, balance of payments, the economy and the current account of the United Kingdom balance of payments. As the noble Lord, Lord Balogh, and others who are knowledgeable have said, what stands out a mile is that were it not for the oil this country would be in a parlous position, without exaggeration, at the present moment. This is the thing which is keeping our nose just above water. I would love to go into it. It would bore the House, but most people would agree, whatever party they support, that it is one of the saviours of our economy at the present moment. Much as I would like to develop that, I shall have have to leave it there.
  I now come to the 64,000-dollar lesson. If you are building up small firms and thinking that the future destiny of Britain lies in masses of small firms, you may as well say "Let's go back to cottage industry." My warning is that there are no more gladiators, no more Falkland Islands battles and no more stories of imperialism. The small enterprise, little business
  326
  system is Poujadist to the core, and, unfortunately, there is a rhythm of Poujadism running through the philosophy of the Prime Minister. Poujade was never in the French Parliament, but he got a strike of about 8,000 shopkeepers going quite well. His motto was J'ai choisi le combat—I have chosen to fight. I admire the lady. She has chosen to fight. But it is time she trimmed her sails and I am glad that there is some influence in the Cabinet that is making her trim her sails, because monetarism as a solution of the economic problem has failed.
  I now raise the issue of fair wages and the abolition of Convention 94 of the International Labour Office. I have had a letter from the dental assistants. All of us owe a lot to our dental surgeons and they are proud of their work, but the dental surgeons and their assistants—there are 25,000 or more of them in hospitals and in practice—require fair wage deals. Their local repesentatives and their national paper are begging for a fair wages clause, because some of their salaries are below the levels that should exist. So I hope that the Government will attend to their plea, because these people, like our agricultural workers, are essential in our community.
  I was delighted that the machine tool industry was mentioned. I should have liked to give figures, but the sad thing we see today, when great factories close down, is the sale of machine tools which are snapped up and taken overseas. Whichever party wins the next election—there are no silly promises made by sensible politicians—it will be an uphill struggle. To meet that struggle, we need educational opportunities and a sensible system of government which knows how to build up our industrial relations. The excellent maiden speech of my noble friend Lord Gormley put up some signposts that are worth listening to. I have been nine minutes and that is enough on such a late night.
  9.48 p.m.
  Viscount Ridley: My Lords, my purpose in speaking tonight, as has been the case with some other noble Lords, is warmly to welcome the Government's moves to increase capital spending in the public sector, as was mentioned by the Prime Minister in another place in the debates on the gracious Speech. I do not go so far as the Liberal Party and regard that as a sudden conversion to the Keynesian theory of economics. I do not see us on the road to Damascus. But I believe it is absolutely right to stimulate economic activity in this field, and I am quite certain that most local authorities would be only too glad to do so and to spend more of their money—not, I should add, the Government's money—in the process. But—and this is the purpose of my speech—I must say that there will be difficulties in achieving the £1,000 million which the Government wish.
  First, for over three and a half years, local authorities have been castigated and accused of overspending and of reckless profligacy. They may find if difficult suddenly to trust the carrot which appears in front of them at the same time as the stick is being applied to their backsides by the Secretary of State for the Environment. Many authorities, if not all, have genuinely tried to reduce their current expenditure and in many cases, perhaps unavoidably, this has had to be done at the expense of badly needed capital projects which have had to be postponed. Indeed, I should add that many Conservative local authorities lost control to the party opposite in the process. So there is a major drawback, that capital spending now on such projects will have inevitable revenue consequences later. If you build old persons' homes you have to find people to staff them, and indeed every debt has to be serviced, although one immediately must admit that the fall in interest rates eases that burden very greatly. Authorities will be fearful of falling foul of the new GREAs targets limits, et cetera which make the whole system an even worse minefield than it used to be, much more complicated, and to turn on the tap now may involve fearful penalties in future years.
  If capital receipts should be used for these new projects, and the Government very rightly point out that they should be. therefore, no interest charges being payable, I think it must not be forgotten that such receipts in the past have usually been very wisely invested and the interest therefrom applied to the relief of rates. So that there may well be a similar effect on the future rating system as well. And, of course, capital receipts also formed a very valuable part of the reserve balances which prudent local authorities have always found it wise to keep.
  Even more serious than all this is the difficulty which I believe local authorities in particular will find themselves in, in that the Government wish this money to be spent during the current financial year. It may be very difficult to do this so quickly, however great the will to do it. I believe that this constraint should and can be eased. The need to complete things by 31st March in any one year has often been a most wasteful and an absolutely absurd system of running public finance. I quote the masses and masses of salt ordered by highways departments to be left in the open and washed away by summer thunderstorms because they had to be paid for before 31st March. There are
  328
  other examples which, had I more time, I would welcome the opportunity to develop.
  A lot of things, of course, cannot be done. It is difficult to improve roads when we are about to enter what may be an unknown winter with difficult weather. Indeed, the Government quite rightly have demanded that the construction of major road schemes should be put out to tender. This is a laudable object, but it will take time, and it is not possible that much can be done before 31 st March. So I believe that a major contribution to the saving of public money in many fields would be an end to this deadline. Local authorities must have the opportunity to make a multi-year programme, and furthermore to carry forward from one year to the other more than the 10 per cent. carry-over that they are now allowed under present legislation.
  There is another possibility to which I would ask the Government to give serious consideration. A great deal of deferred maintenance on public buildings, which has had to be deferred as a result of the cutbacks and squeezes of the last few years, could perhaps be regarded as capital and immediately be instigated as a way of producing employment and indeed using up the sums which are available. Things like the repainting of the outside of schools, repairing potholes in roads and so on, are all things that could be done quite quickly, which have had to be deferred, and, being labour intensive, would perhaps make some contribution towards relieving unemployment in some numbers. This could be done by 31st March, I hope. Of course, it means stretching the definition of the word "capital", but to be technical for a moment I believe this to be possible. Under the Local Government Act 1980, which we debated in this House for so many hours, paragraphs 4 and 5 of Schedule 12 give the Secretary of State power to redefine capital to this very effect. I believe this is what he should do as an immediate contribution on the problem.
  I see I have taken only two minutes, so I shall have another one. I want to ask the Government to look at another aspect of this matter. It concerns the European Regional Development Fund, the ERDF. I believe it would be possible to achieve an immediate injection of capital, and that indeed from Europe and not from the ratepayers or the taxpayers, if there could be some relaxation in the principle of additionality. This is a nasty word that has slipped into our language. It means that where the EEC makes an offer of a grant to a public body that authority's own capital allocation is reduced by that same amount, and the grant in effect ends up in Whitehall. The incentive, therefore, is not all that great to put forward schemes for this purpose, and I doubt whether we are getting all that we are entitled to under the European Regional Development Fund. The principle of this, in case noble Lords in the Opposition should start saying "Hear, hear", was in fact invented by the Labour Government in 1976 and carried on by the present Government without alteration in 1979.
  There is another drawback. Before submitting schemes to Whitehall for onward transmission to Brussels the authority concerned, whether local or a public body, has to be totally committed to starting work. It ought to be the other way around so that work

  329
  can start only if a grant is available. Schemes are not coming forward in case the commitment may prove too heavy and the authority is unable to complete it. The commitment could be relaxed. In other words, it could be said that if a grant is obtained, work can start. The present commitment is one imposed by our Government and not by Europe. It is an important distinction.
  I believe that we could reduce the principle of this additionality, partly if not wholly, and it would selectively help the less favoured areas where I come from, where unemployment is so serious. Therefore, I think it would be the cheapest and quickest way of stimulating economic activity, creating jobs and resulting in worthwhile improvements to our infrastructure. Moreover, ERDF grants are not tied to the financial year. Although we may not be alone in this matter, and the only offenders in the Common Market, we are at least among the worst and possibly the most blatant. In brief, I hope that the matter could at least be looked at.
  I have tried to make constructive suggestions for this important problem, not going so far as to reflate but to restimulate parts of the economy. I believe that the intention to do this and to reverse the under-spending comes at a very wise and opportune moment. Some may say that it is overdue. Never mind, it is an overall welcome change in direction. It could also be said that we warned the House during the debates on the 1980 Act. Indeed, Ministers were warned by the local authority associations that the ultracomplicated system which that Act brought in was bound to result in under-spending, as, in fact, actually happened. No, we do not wish to say, "We told you so". Let us now look forward, not backwards. I therefore repeat the request of the noble Lord, Lord Underhill, that the Government should, as a matter of urgency, discuss with the local authority associations what might be done to implement the programme.
  9.58 p.m.
  Viscount Caldecote: My Lords, in October of this year, I had the good fortune to travel round the world and was able to talk to manufacturers and financial institutions in the United States of America, Australia, Singapore and Rome. I was tremendously impressed by the extent and depth of the world recession and by the downward spiral effect of one country's difficulties increasing those of their trading partners and of the terrifying and increasing trends towards protectionism in various forms. I had not appreciated the great severity of those factors in the world. Certainly, we need to tackle them on a world co-operative basis.
  But to argue that because the recession is world wide and until the United States' ecomony recovers we cannot do anything here seems to me to be hopelessly defeatist and wrong. If we all take that view, nothing will ever happen and we shall never get out of this recession.
  I shall make one or two suggestions at this very late hour on what we can and should do towards solving today's overriding problem of achieving growth and more jobs without inflation. I join with other noble Lords in congratulating the noble Lord, Lord
  330
  Gormley, on his dynamic and sincere maiden speech. I agree with many of the things he said, particularly about the tragic waste of creative resources arising from unemployment I believe that we now have the opportunity of stealing a march on our competitors because of the resolute way in which the Government have tackled our problems over the past three years. This gives us a lead over our competitors who have lagged behind, as I saw when I went round the world, in tackling their problems.
  We have achieved a major reduction in inflation, interest rates and manufacturing costs, although more needs to be done in that respect, as the noble Lord, Lord Boyd-Carpenter, said. But there is no future in fewer and fewer companies becoming more competitive while creating even higher unemployment. Now is the time to exploit the real achievements that result from the Government's policy. As with most major initiatives, of course, there are risks involved, but they are not nearly as big as we readily accepted in the recent Falkland Islands campaign.
  Happily, the Government have declared their policy of maintaining a prosperous manufacturing base in Britain. That is good, for manufacturing is the source of all real wealth—we cannot live by service industries alone. It was encouraging and very welcome to industry that in the Chancellor's mini budget he gave us some further help towards reducing costs. But I thought that it was an error of judgment not to go the whole hog and abandon the NIS altogether. For, as he said himself, it is a bad and stupid tax.
  However, in the industrial scene there is now another factor that is assuming ever greater importance, and that is the need for a much bigger volume of orders. Over vast areas of our manufacturing industry there have been huge reductions in numbers employed—typically some 30 to 40 per cent. of the workforce. Factories have closed, production has been concentrated, in many areas orders are still falling faster than costs, the cash flows out and further closures become inevitable. In the bigger multi-product companies you can concentrate resources on a few businesses and you can go out of the others. But there comes a limit to the strain of closure costs, and the smaller, single-product companies have nowhere to go but the receiver.
  I wonder whether it is fully realised what the enormous average cost is of redundancy? It costs, net to the company, after Government contributions, an average of at least £2,500 per redundant employee—say, £1 million for every 400 people made redundant. Often companies simply have not the cash resources to enable them to make those payments. So the bankruptcy toll is mounting and the sick lists of financial institutions are lengthening. Above all, industry now needs an increased volume of orders, to exploit the cost cutting that has been achieved, to return to adequate profits, to provide cash for investment and to achieve lower unit costs. The capacity is there in machines and in labour. So increased orders ought not to be inflationary for, as Sir Stafford Cripps used to warn us years ago, inflation is caused by too much money chasing too few goods. In my opinion it is time we gave greater emphasis to

  331
  creating more goods in that equation, compared to reducing money supply on which we have rightly concentrated over the past three years.
  How then can increased volume of manufacturing be encouraged?—not primarily, I believe, by personal tax cuts, although there is need for some adjustment of allowances, as other noble Lords have mentioned, to deal with the problem of the poverty trap. But I am sure that the main impact as regards increased manufacturing orders will not be achieved through personal tax cuts, for there is a grave risk of increased purchasing power going largely into imports until industry's unit costs can be further reduced, not least by an increased volume of orders.
  Therefore, the only other way in which we can increase orders to manufacturing industry is through investment. Private sector investment is not likely to rise until the volume of orders and profits increase. So we must look to the public sector, as other noble Lords have already said, where there are many profitable opportunities for investment which have been held back over the past three years to control the level of Government borrowing. But we now have the absurd paradox of many important tasks to be done, of surplus labour to do them and savings to finance them, which are being exported at the rate of about £2 billion a year. We cannot accept any longer—although it has been necessary in the past—that those three things cannot be brought together. In the trading part of the public sector—steel, Telecom, railways and energy—much investment in specific projects would be profitable, reduce costs or bring in new business. But investment has too often been prevented because of the pressure to keep within the external financial limits. Surely this must be wrong, though I accept the need to keep a strict control over Government borrowing.
  The way through the dilemma is, I submit, by "project financing", using private sector finance. For the present, this is prevented by over-rigid Treasury rules and definitions. Those discourage financial institutions to devise suitable schemes based on the principle that the return on investment will depend on the success of the project. Such investments in the public sector cannot be inflationary any more than investments of the same type in the private sector. But a new co-operative attitude by the Treasury is essential if progress is to be made in that direction.
  In the non-trading public sector—in education, in health, in housing, and in services like sewage disposal—it is seldom possible to find profit-earning investments. So we have to look to another argument. But the investment there is no less urgent. The infrastructure is running down, the housing stock is deteriorating, many old people are living in disgraceful conditions, and hospital facilities urgently need improvement. Such investment cannot be indefinitely postponed; it must come some time. If it has to be done when the demand for labour is increasing, as it will be one day, that will simply add to the difficulties of expansion without inflation. So let us make a start now when there is plenty of labour, plenty of capacity and plenty of savings with which to do it, while spare capacity is available.
  332
  Therefore, my plea to the Government is let us seek out ways to stimulate profitable investment in the public sector, as well as in the private sector, by using private sector finance, and make a start on increasing essential investments in the infrastructure by using spare capacity while it is still available. It has the great advantage compared to consumer expediture: all such expenditure will be spent in the private sector; the volume of orders will increase; unit costs will fall; profits and private sector investment will rise. In short, there will be a virtual spiral of wealth creation, more jobs will be started with rising confidence and hope for the unemployed.
  The Government have done a wonderful job and now is the time to cash in on it, to exploit their achievements. Of course, everything must be done to stimulate world trade with maximum freedom from protection, but that will take time to have effect. In the meantime, we must start to help ourselves, for if we do not manufacturing industry will be so damaged that it will not be able to meet the demands on it when the world recession ends.
  10.8 p.m.
  Lord Hatch of Lusby: My Lords, in speaking to this amendment, I am happy to follow the noble Viscount, Lord Caldecote, in almost all he said, particularly in his criticism of the Government's continual bleating about their helplessness to do anything until the world recession is reversed. I should like to add to what he has said, and make a plea to the Government to take some responsibility for their part in the world recession and to do something about it. I did not recognise some of what he said, particularly when he was talking about what many of us think of as the industrial desert that has been left by this Government, or about the degree of productivity in manufacturing industry which, according to the national institute, would have to be raised by 50 per cent. to compete with our major competitors in Europe.
  However, I should like to start my remarks tonight with a particularly warm welcome and congratulations to the noble Lord, Lord Gormley, on his maiden speech this afternoon. I say particularly warm, because the noble Lord was chairman of the Commonwealth Committee when I was in Transport House 25 years ago. I was delighted to hear him refer in the latter part of his speech to the British responsibility to the poor of the world. In fact, I was tempted into this debate by the knowledge that it was to be wound up by the noble Earl, Lord Gowrie. I have missed him on the Government Front Bench; we have had some very pleasant jousts in the past.
  I will assure him that I will not again taunt him with la belle dame. I sometimes wonder whether he wakes up in the middle of the night and is quite as sure today as he was when he first entered office that she is belle. I have no doubt that he is in no question that she has no mercy. The last time that he and I spoke on the issue we are debating tonight was immediately after the general election in 1979. I want to remind him of our exchanges on that occassion because they are pertinent both to the amendment and to the Motion we are debating.

  333
  On that occasion I put this question to the noble Earl:
  "Between 1970 and 1972 under the Heath Government, before the U-turn, British manufacturing industry declined; the number of British manufacturers declined and investment went abroad. What reason has he to think that the same policies followed this time will not have the same consequences?"
  [Official Report, 19/6/1979, col. 954]
  This was his answer from column 955 of the Official Report:
  "The short answer is that we know a bit more now, on all sides, and we are going to follow the same essential policies, the same thrust, but with greater knowledge and greater caution."
  I wonder whether tonight the noble Earl can assert the same kind of confidence that the policies which he then proclaimed were going to be followed by the Government were going to have different consequences from those which had befallen the previous Conservative Government under Mr. Heath?
  In particular, we were discussing then the policy of the Government in tax cuts at the top amongst the rich and the belief of the Government that this would bring increased investment, particularly in manufacturing industry, and the dropping of exchange controls. I suggested at that time that this had been done by the Heath Government and that the result had been a massive outflow of British capital, a lack of investment in industry in this country, and that that outflow had been going to our major competitors; it had been going to other developed countries.
  Tonight we can see from the official figures just where three and a half years following that policy has led this country. In 1981, last year, there was an outward flow of direct investment of £5 billion. The inward flow was under £1 billion. I have not got the figures for last year as to the exact places in which this investment found itself. I have to go back to 1980. In 1980 £3 billion of investment from this country went to West Europe, North America, and other developed countries. Only £570 million went to the rest of the world, and half of this went to the Caribbean, Central and South America, which is mainly the middle income developing countries like Brazil, Mexico, and so on, leaving less than £235 million for the rest of the world.
  What has this to do with employment? There is a direct link here. Last night I asked the Minister of State at the Foreign Office to tell me the latest figures for employment engendered by British overseas aid. I told him that when we were in Government we reckoned that the aid programme provided at least 40,000 jobs in Britain. Aid has been cut since then. It has been cut by 11 per cent. I was not given an answer. I would still like an answer as to what British jobs are being provided by the aid programme.
  Apart from the aid programme, what about our export performance? About 25 per cent. of our exports go to third world countries. They are calculated to provide 1 million jobs for British workers. But, despite our long historical connection with the Commonwealth, the ex-colonies, Africa, Asia and the Caribbean, while 25 per cent. of our exports go to the developing countries, 35 per cent. of United States exports go to developing countries, 36 per cent. of EEC exports go to them and, for Japan, the figure is 41 per cent.
  334
  I suggest, in direct relation to the amendment, that while the gracious Speech omits any measures to tackle the question of unemployment and the economy, there are alternatives in front of us. The alternatives are being shown to us, in particular by the Japanese, something which is not generally known, so I will briefly summarise the Japanese position. Last year Japan's exports to third world countries increased by over 15 per cent., to about £40 billion a year. Ten years ago that figure was £6 billion. Of course, the Japanese do not have the raw materials we have, but we import a lot of raw materials, too. The Japanese, however, recognise that because they must import those raw materials, they must give the developing countries the means to supply them; they must give them the purchasing power to buy Japanese goods and, as a consequence, the Japanese have a deficit of £10 billion a year with the developing countries.
  I am suggesting that there is a field of commercial activity which we have sadly neglected, particularly since the end of the Colonial Empire, and that it is the kind of activity which could revive our economy—despite what happens in the United States and despite what happens to interest rates—if we will see the opportunity and so direct our policies as to allow the people who need and want our goods to have them and thereby to put our unemployed back in work. The Japanese have shown that, both in their trade and aid policy. Many people believe that the Japanese have lagged far behind in aid. They have, until recently, but, for example, last year the Japanese invested £12 billion in the third world and, in addition, they gave £4 billion in aid, one-half of it official aid, making them fourth in the table of Western nations from the point of view of overseas aid, and above us.
  All I want to submit to this House is that there is an alternative. Of course, this is only one part, but it is an important part—that a quarter of the human race is outside the market; they are waiting to be brought in. We have the historic links. We have the initiative, if it can be energised, as the noble Viscount was suggesting a few minutes ago, with public money and private money. There is the opportunity to reverse the decline of Britain as an industrial nation. There is a need to be met, and there is the opportunity for the future generations of British workers.
  10.21 p.m.
  Lord Diamond: My Lords, like the noble Lord, Lord Hatch of Lusby, first I want, on behalf of my party, warmly to congratulate the noble Lord, Lord Gormley, on his maiden speech. It was an excellent speech, and as I listened to it I felt bound to consider that there could not have been a stronger argument against the policy of his party to destroy the House of Lords. I am glad to say that I was happy with many of the things that we heard at the start of the debate from the noble Lord, Lord Cockfield. I agreed very much with his very kind reference to breaking the mould. I thought it an extremely diplomatic reference, and I agreed with everything that he had to say about import controls.
  However, I fear that I must go on to say that I have to criticise the Government severely for not taking seriously enough the numbers of jobless and the plight of industry. By now the facts are well-known, but I shall summarise them. Unemployment is higher here,

  335
  and has risen faster, than in any major developed country. Even worse, the number of long-term unemployed has trebled in the last three years. When we look at current living standards, we find that real disposable incomes—what people have to live on—last year had their sharpest fall since the war. When we consider future incomes and industry, which is the method by which future incomes are provided, we come across a set of figures which is truly terrifying.
  In the 16 years since 1966 there has been a decline in industrial jobs of no less than 4½ million—some 38 per cent. of the workforce. Even more terrifying is the fact that though industrial employment seemed to stabilise in 1978–79, in the last three years, under the present Administration, the loss of industrial jobs has amounted to more than 1¾ million, or nearly 20 per cent. That is to say, half of the total percentage drop to which I previously referred as having occurred over 16 years was in the last three years. That is a truly catastrophic fall. In no OECD country has the decline been so pronounced as it has been in the United Kingdom.
  So, following what the noble Viscount, Lord Caldecote, had to say, I must examine the industrial scene a little more closely, though of course very briefly. Not only is industry a provider of jobs, of goods, and of exports; it is also an indicator of the health of the economy. There is a strong association across countries between the growth of manufacturing output and the growth of gross domestic product, and we know that in June of this year gross manufacturing output fell to its lowest point since 1967.
  What then is the main cause of this deindustrialisation? It is certainly not technological change. Technical progress is itself the progenitor of industrialisation and so of the growth of industrial employment. The facts of the last few years can be explained only by severe demand restriction relative to potential output and the slow growth of exports relative to other countries—exports which, incidentally, import controls can obviously do nothing to foster directly. And when you look at the differences between countries, you see that it is not the United Kingdom's propensity to import which is so alarming, but the abysmally slow comparative growth of exports, which in turn, in my view, is not in the main due so much to price differences as to quality, design, reliability, delivery, marketing and servicing.
  So that is the distressing picture of our employment and industrial decline to which the Government's policy of concentrating on deflation at all costs has largely contributed, I would certainly not wish to overlook their measure of success in reducing inflation—some 2 to 3 per centage points since they took office. But at what cost in unemployment, bankruptcies and the rest? I feel bound to ask: What shall it profit a man if he shall gain a small reduction in his mortgage repayment and lose his whole livelihood? And what shall it profit a business man if he shall gain a few pounds in overdraft interest and lose his whole business?
  I am afraid the gracious Speech gives very little encouragement for the future. Indeed, the clear indication is that the Government will continue the same policies as those that have largely led to the distressing facts I have described. So I must appeal to
  336
  them to look afresh and to listen afresh. I want them to look afresh at the acres of empty industrial buildings, with some owners frantically removing the roof so as to avoid liability for rates. I want them—I do not know whether anybody wanted to interrupt.
  The Earl of Gowrie: My Lords, I certainly should not have interrupted from a sitting position, but my emotions overtook me. Having to remove a roof in order to avoid rates is hardly the fault of the Government; it is the fault of the local authority.
  Several noble Lords: Oh!
  Lord Diamond: My Lords, if the noble Earl thinks that is a very great argument, I will give it to him. Of course, some local authorities have the power to relieve rates, some local authorities do not relieve rates, and, of course, that is under the legislation which this and the other House have passed. But I repeat: that is the situation I want the Government to look at, and I am delighted that the noble Earl was so shocked that he had to do the unusual thing of interrupting me from a sitting position, so much were his emotions moved.
  That is what I want to happen. I want the Government to look afresh and see what the situation really is. I want them to look at the large packing cases containing efficient plant sold so cheaply under the liquidator's hammer that the buyer can afford to transport it to his own country and reassemble it there so as to make the same articles abroad and possibly export them back to this country. I want them to look afresh at the fast-growing queues of hopeless, dispirited, rejected jobless who have not worked for over a year. I want them to look afresh at the grumbling gangs of teenagers, with idle hands, ready to give heed to the Devil.
  I want them to listen afresh to the growing volume of voices asking for a change in emphasis in economic policy and for some measured increase in economic demand—weighty and well-informed voices, like that of the noble Viscount, Lord Caldecote, which was the last one we heard; other voices, like those of Edward Heath, Geoffrey Rippon and Sir Ian Gilmour; voices like those that were heard at the recent CBI conference of discontent. I hope, too, that they will study carefully the proposals made in the recently published interim report of the Alliance Commission on Unemployment and Industrial Recovery which shows how unemployment can be reduced by 1 million in two to three years at a net cost of little more than what has proved to be the margin of error in the estimates of the public sector borrowing requirement.
  Alas, my Lords, I have little reason to believe that the Government will listen. So far, they have shown themselves to be stiff-necked and obdurate and the recently announced concessions, welcome as far as they go, are quite inadequate to meet our desperate situation and show no real change on that attitude. I hope that they are not going to compound that obduracy by maintaining that any proposals different from their own are bound to lead us into a worse economic situation in the long run and that they alone can speak with authority as to this.
  The sorry fact is that the Government have lost all authority and credibility in forecasting the results of their economic policies. If that is challenged, let us go

  337
  back to the general election and consider what their forecasts were then. Did they then seek support promising a fall in living standards? Did they then ask the business community to vote them into power on their guarantee that the number of bankruptcies would be the greatest ever? Did they secure a considerable trade union vote by promising to raise unemployment to a minimum of 3 million? Of course not! Of course, this was not their intention. But it has all happened; and it has all happened because they have lost control of the economy. It has all happened because they have carried a narrowly defined policy to excess. I appeal to them to think again. And if they will not take advice from me, then perhaps they will take the advice which has stood the test of ages and which is to be found on the walls of the temple in Delphi and which Plato recommended to us: "Meden agan"—"Nothing in excess".
  10.34 p.m.
  Lord Bruce of Donington: My Lords, in winding up for the Opposition in this debate, which has been a very long debate, it is my first and very pleasant duty to congratulate my noble friend Lord Gormley on a most notable speech; indeed, one which, with its directness, spoke absolutely straightly to the House. The noble Lord did not talk with a forked tongue; he talked exactly as he felt and, in a way, in my opinion he set the tone for this debate in declaring boldly that what we want is earned money instead of dole money. I hope the noble Lord takes part in our debates again very soon. I hope that he will favour us with many more direct observations, some of which may not command universal approval—but which will, at any rate, enhance the value of this House and the esteem in which this House is held—by coming directly to the points at issue and approaching them on a basis which, in his case, rests on almost unrivalled experience.
  The noble Lord, Lord Cockfield, in opening the debate, with his usual modesty said that the role of his Government was principally to create the environment within which industry and commerce can prosper and in which people can be free. These are very worthy and completely acceptable aims. I observed that the noble Lord and his Government were congratulated by numerous noble Lords on the other side of the House on the Government's achievements. There seemed to be almost universal satisfaction with the steps that they had taken. True enough, some noble Lords—I mention in particular the noble Viscount, Lord Caldecote—seemed to detail a number of steps which they thought ought to be taken which found favour on this side of the House. Indeed, I wondered whether the noble Viscount, aside from his initial remarks of congratulation—I suppose the election is approaching and political pressures grow hard—supported the Government at all. Nevertheless, other noble Lords did so. I therefore want to put it to noble Lords—
  Viscount Caldecote: My Lords, may I put the noble Lord right? I support the Government wholeheartedly. The point I was making was that the Government have been entirely and wholly successful in the policy that they followed, and now it was time to proceed and to exploit the success of that policy.
  Lord Bruce of Donington: My Lords, I am most grateful to the noble Viscount. I hoped that I would be able to secure a united front on the other side by that very timely intervention. So much for success. Is it a success for the Government to create the environment within which total output has declined by 6 per cent. in the past three and a half years? Is that claimed as a success? Is it a triumph to create the climate—I am using the noble Lord's words—the environment within which industry functions, during which industrial output has declined by 12·3 per cent.? Is that an achievement? Does anybody boast of the achievement?
  Is it an achievement that manufacturing output should have gone down by over 17 per cent. in three and a half years? If so, let the achievement be acclaimed. Is it an achievement for investment in manufacturing industry?—and I emphasise "manufacturing industry" for the noble Lord, Lord Cockfield, in case he confuses it with gross investment; in case he confuses it with investment in the oil industry; and in case he confuses it with investment in the service industries. Is it an achievement for those who seek to create a climate or an environment within which industry can succeed, for them to have presided over a state of affairs in which manufacturing investment has decreased by 33⅓ per cent. over the past three and a half years?
  Congratulations for success abound. Do the Government claim it as a success that unemployment has gone up by 2,200,000? Is that a triumph? So, where is the success? Something that they have claimed is that the inflation rate is now running at a level which is approximately 3 per cent. below that at which it was running in May 1979. The noble Lord, Lord Boyd-Carpenter, was careful to point out that the trend was upwards. And if the trend was upwards so mightily, was it accelerated by the measures the Government immediately took which put in a matter of months 8½ points on the increase to a level of some 22 per cent. by their own action?
  Lord Boyd-Carpenter: My Lords, would the noble Lord allow me? As he is quoting me, would he carry on by reminding the House that I pointed out that one of the reasons why inflation rose sharply after 1979 was the enormous number of post-dated cheques for post-dated wage settlements which the Callaghan Government deliberately left behind them?
  Lord Bruce of Donington: My Lords, I am grateful to the noble Lord for his intervention. I was under the impression that the noble Lord's party many times before the last election emphasised its devotion to free collective bargaining and the repudiation of all incomes policies. Is he now complaining that before the election the rights he wanted to give to the trade unions, and upon which he bribed them, were exercised and they obtained wage settlements? Where is the noble Lord's blank cheque?
  Lord Boyd-Carpenter: My Lords, if the noble Lord persists in challenging me, I must persist in interrupting him. These were agreements mostly made by the Labour Government themselves with the unions concerned, apparently of their own free will, knowing that they would not be there to honour them.
  Lord Bruce of Donington: If that were so, why then did the noble Lord's own party deliberately add another 8½ per cent. to the inflation rate, which it most certainly did, by its raising of VAT, increases in rents and interest charges and so on? But I do not want to take away the credit for this 3 per cent. at all. Prices are still rising, but they are rising at 7 per cent. instead of ten, although that does not apply to old age pensioners, who have a different spectrum of expenditure from the Members on the other side of the House. For them, the inflation remains substantially what it was. The noble Lord's own figures show that the standard of living has gone down during that period by almost the exact amount that the rate of inflation has been decreased. So this is the achievement which they claim—or do they claim the achievement of 433 liquidations and bankruptcies a week? Do they claim that as a success? I rather wonder where the claims for success come from. Of course, the noble Lord, Lord Soames, has a complete alibi for that, because he said: "That is all due to the recession; it is not due to the Government at all." In order to prove his point he made the same selective quotations from statistics as were made by his right honourable friend the Prime Minister the other day, which related only to 12 months.
  I will give the noble Lord the figures for the three years since they have been in Office. During that period in seven countries—the United States, Japan, Germany, France, Italy, Britain and Canada—in the years 1978–81 taken together production went up by 5·5 per cent. In the United Kingdom it fell by 2·2 per cent. So far as unemployment is concerned in those years, the average unemployment in the seven, including Great Britain, in 1979 was 5·0; in the United Kingdom it was 5·7. But by 1982 the big seven had unemployment of 7·4 taken together, whereas the United Kingdom has now 12·4. This disposes of the argument that the recession is something which is essentially world-wide and we are caught up in it.
  Lord Soames: My Lords, would the noble Lord allow me? I was quoting figures of what had been the increase in unemployment over the last 12 months in a number of countries. The noble Lord rightly points out that some years back the figure in this country for unemployment was higher than in a number of other industrialised countries. We all know that we started off this recession less competitive than any of our trading partners and were in a less competitive position; and, indeed, a less kind of impartial person than myself might have pointed out that it was after five years of Socialist Government.
  Lord Bruce of Donington: My Lords, I trust that the noble Lord will read the figures tomorrow, when he will regret what he has just said, because they show that, in comparison with the seven, our position has deteriorated in all respects in the last three years more than the rest combined. But I do not want to be too unkind to the party opposite, because they know all this. They know it all, really. They are putting on a very brave face, which they have to do when elections come around, and they think that by the sheer power of the media, which they always have largely at their disposal, the big lie can, in fact, be sold. It is too late an hour to go into the very great detail which
  340
  answering every speech would, of necessity, require and I am anxious not to detain the House—
  Several noble Lords: Hear, Hear!
  Lord Bruce of Donington: My Lords, you must have a little more of it yet. But I observe that one of the irrelevancies, which were referred to in the gracious Speech as being part of Government policy, relates to the continuation of the policy of privatisation; and, indeed, my noble friend Lord Scanlon referred to the same point. I am a little amazed at this. How can it be imagined that the change of ownership of particular sections of industry—usually the profitable parts—will add one extra person to those numbers employed?
  What relevance does it have? It does not even have an intellectual relevance, because, on the one hand, we are assured by the Government, and by noble Lords opposite from time to time, that one of the reasons for the decline in British industry is its lack of competitiveness and its inefficiency. Indeed, it has been said many times that the decline in industry over the last three years—and it clearly dates the decline in output and the increase in unemployment from the advent of this Government—has been largely due to the inefficiencies of private industry. So for one purpose the Government claim that private industry is decrepit, it needs to be thinner, leaner and fitter and, on the other hand, we have the virtues of private enterprise claimed, in order that state enterprises that are working very profitably can become more profitable. There is a little contradiction there and the Government should make up their minds, because it is completely irrelevant as an argument to bring forward for privatisation.
  I was particularly glad that my noble friend Lord Underhill dealt with the question of local authority expenditure—a point that was enlarged upon very effectively, if I may say so without embarrassing him in any way, by the noble Viscount, Lord Ridley—and the sheer idiocy and, indeed, the political unscrupulousness of the Minister for the Environment, who has been busily clobbering local authorities for many years, and who has the audacity to tell them to try to incur an extra £1,600 million of expenditure before 31st March next, which he knows is quite impossible. I thought that my noble friend Lord Underhill made that point very well, and that he was very considerably assisted by the noble Viscount, Lord Ridley.
  I did not see the noble Lord, Lord Cockfield, wince at this projected increased expenditure, which he must know involves the expenditure of revenue items just as much as capital, for the reasons which were explained by the noble Viscount. The reason why the noble Lord did not exhibit any worry was because, of course, he knew it could not happen anyway, and that the attitude of the Secretary of State for the Environment was itself expressed in terms almost identical with those expressed in last week's Economist but expressed loosely by me as sheer humbug.
  The Government's policies put forward in the gracious Speech have very little relevance whatever to the problems facing the nation. It is indeed a problem, and most sensible people know it, to maintain near full employment and at the same time to maintain those ancient individual liberties for which we have all fought; it requires the co-operation of everybody. None

  341
  of us would wish to have full employment accomplished, as it is of course in the eastern states, by reason of sheer state control and dictation. We prize our liberty too much for that. But it is a problem which can be solved.
  Nobody can say that it makes any sense to spend £15,000 million, which is what unemployment is costing us per annum at the moment, to keep people idle when the needs of people are so clamant at this time. There is a way in which the two can be brought together, in which the means of production and the individual working population can be brought together to produce useful things for one another. We may not have the way yet, and there is no monopoly of wisdom. There are in fact alternatives. But practically any alternative is better than the complete inertia and dogma of the worst Government this country has had in centuries.
  10.52 p.m.
  The Earl of Gowrie: My Lords, I am grateful to my noble Leader, Lady Young, for allowing me a half holiday, so to say, from the endless fascination and frustration of Irish politics, and a return to my first interest in economic affairs. Those of us who work on the Danube are always grateful for a day or two in Rome, if that is not a tactless phrase to use in connection with Northern Ireland. I am also grateful because, in spite of its length, this has been an extremely absorbing debate and I have learned a lot from it. It has been, I believe the longest debate on the Queen's Speech for more than 10 years. I will do my best, but I am not sure if, like the Dodo, I shall be able to hand everyone prizes, if only the dubious prize of a mention.
  It is, of course, a very pleasant convention to begin by mentioning the maiden speech of the noble Lord, Lord Gormley. My own first political job was working in the Department of Employment under the then Secretary of State, who was Mr. Willie Whitelaw, and how well I remember those inimitable tones ringing down the passage saying that their owner might be thought not to know anything about anything but in his view Joe was right and the miners were not getting paid enough. Little did we think then that 10 years later we would be debating with the noble Lord in your Lordships' House. I also congratulate the noble Lord, Lord Gormley, on managing in a non-controversial maiden speech to make the news wires, which read, "Gormley raps Britoil sale".
  I would prefer the more elegant and poetic language of my noble friend, Lord Cockfield:
  "Gormley raps the liberation of the North Sea."
  My Lords, if I go on to praise the speech of my noble friend you will probably taunt me with the immortal phrase which earned Miss Rice Davies a place in the dictionary of quotations:
  "Well, he would, wouldn't he?"
  But I have to say that it seems to me that the weakness of the intellectual case against the Government's overall economic strategy is that none of the alternatives on offer—I shall try to deal with some that have been raised today—have really faced those essential truths from which my noble friend and the Government refuse to flinch. They are central and they are simple, and we should all be able to agree on them. They are as follows. Britain has to compete in
  342
  the world as we find it, not as we wish it to be. We have to compete fiercely to maintain our standards of living, whether as individuals or in terms of our social and welfare policies, let alone to improve them. We cannot compete by means of outmoded or overmanned industries, or by paying ourselves wages and benefits on credit. We cannot compete in world markets unless our home base operates within a stable financial climate. It is not just the rate of inflation that matters but the rate in comparison with our competitors and our trading partners. We cannot compete if our political system launches periodic assaults on the econonic system.
  How, for example, would the Labour Party, in Government, be able to pay for improved social services or greater benefits for lower income groups by attacking the sharp end of our economy—the financial services: the City and its occupants for short. These, after all, earn so much overseas and provide such a healthy share of our tax revenue. We cannot achieve the financial and political stability which allows our companies to make sensible forward provision for their trading and borrowing needs if the biggest company of all—the British Government—plays havoc in the financial market by spending faster than our rate of economic growth can sustain.
  In all his eloquent criticisms of the Government I do not think the noble Lord, Lord Diamond, met any of those points, although as former Chief Secretary to the Treasury he did, of course, meet them in Government. We remember how well he met them in Government. It would do an enormous amount for the financial and political stability of this country, and thus for our ability to earn our living and perhaps improve it a little, if political parties would not renege in Opposition on the problems and truths they had to face in Government. Very few Conservative Ministers—except, of course, my noble friend—have put the position with such succinctness as another former Chief Secretary to the Treasury in a Labour Government, Mr. Joel Barnett. Almost six years ago, in November 1976, he said:
  "Our public expenditure has grown faster than our rate of economic growth could sustain. I also believe that this has been an important reason for our generally poor industrial performance, for it has meant that the public sector—that is, both central and local government—has pre-empted financial and manpower resources at the expense of manufacturing industries. That position has to be reversed. It will be both painful and difficult".
  I quarrel with only two things in that statement. Successful modern manufacturing industries do not need anything like the manpower resources of an earlier stage of industrial development. I do not think we should regret this. Of course, the transitions from one type of industrial economy to another are painful. Yet only just over a year ago, when an employment Minister, I often used to reflect that if we were still enjoying the full employment of the 1950s and 1960s I should probably be stumping the country talking about how on earth we might be able to liberate more human lives from the repetitive and tedious tasks of the average manufacturing plant.
  To Mr. Barnett's statement, I would also add the word, "exporting" to manufacturing industries. That is because it is just as respectable in terms of earning the country's living, to manufacture financial services, as it is to manufacture cars. That is true even if you do not go as far as my noble friend Lord Vaizey, who took

  343
  the view that manufacturing industry will continue to be a declining part of the total economy, and if you take the view of my noble friend Lord Caldecote that we cannot live by services alone.
  In general, nevertheless, I find the former Chief Secretary's statement impeccable and while Mr. Barnett is a less than fashionable figure today, the simple arithmetic he chose to confront has not, alas! gone out of style. The Government's response to this simple arithmetic has had to be equally simple and coherent. In our review of public expenditure for 1983–84, we have kept the planning total within the figure of the 1982 White Paper as modified in the last Budget. The figure is £120·7 billion. That is a fact of enormous significance, dry as it sounds—and I do not mean simply as opposed to "wet". It is the first time since 1977—the days when Labour lost control of our destiny and had to hand it over to the IMF—that the annual review has not led to an increase in planned expenditure. It has been, to adapt Mr. Barnett's words, both painful and difficult. But that is the necessary framework for financial stability at home and international confidence abroad, and on these two things our competitive improvement has to depend. We are not like the airline described by the noble Baroness, Lady Burton of Coventry—the airline being conducted, she said, as if money grew on trees. It is also the framework within which any alternatives on offer, any differences in policy emphasis or policy aim, have to take place. Surely the measure of sincerity involved in offering different policies, the measure of sincerity even towards the great social evil of unemployment, lies in facing up to that arithmetic and accepting the necessity of operating within it. I cannot agree with the noble Lord, Lord Kaldor, from whom I have learnt so much in economic debates over the years, that this is a matter of ideology rather than of arithmetic. If we could only agree on that, the debate would be profitable as well as interesting.
  Let me now turn to some of the advice which has been given today and some of the criticisms—most, I think, constructive—which have been made. As we may be about to vote on two of these, let me first consider the points raised by the amendments. It was a pleasure to welcome to the Front Bench the noble Lord, Lord Scanlon, who was extremely kind to me when I was a very fledgling employment Minister. I was involved in training affairs and I am glad that in his otherwise trenchant speech he said that in terms of training this Government's record had been good. I am grateful for that. However, his castigations on inflation and the cost of reducing it, which were echoed even more trenchantly as we would expect of him by his noble friend Lord Bruce of Donington, could not have better been answered than by my noble friend Lord Boyd-Carpenter. I refer to my noble friend's references to Clegg, to the doubling of PSBR shortly before the last general election and after oil liberated Labour from the IMF tie. When the noble Lord, Lord Bruce of Donington, castigates the Government for adding percentage points to inflation by VAT increases, I would point out that these were broadly neutral, in that the Government had campaigned on shifting the emphasis of taxation from direct to indirect taxation—a measure which I for one believe was right.
  344
  In terms of the Government's treatment of pensioners, as I said in an intervention, we have nothing to be ashamed of whatsoever. After all, we started off by restoring the shortfall, achieved by the Labour Government. Full protection has been given and will continue; pensioners are better off in real terms under this Government and our commitment to maintain the real value of pensions and associated benefits from year to year is firm.
  The noble Lord, Lord Scanlon, attacked our denationalisation or privatisation policies or, as my noble friend would say, our liberating policies. He said that industries belong to the people of this country, and that is why presumably he does not want them to be able to participate in their ownership. I agree with him, as I said, in achieving parity of tariffs, but otherwise I am afraid to say that his policies came down to the simple advice that we should borrow more money and abandon the nuclear aspects of defence. There was nothing in his speech about the ratio between pay and jobs and he knows a very great deal about that—and I think we were all aware of that deficit.
  The amendment in the name of the noble Lord, Lord Byers, is certainly welcome in its recognition of the perils of inflation and the perils of any breakdown in free trade. Nevertheless, it calls for additional expenditure, however selectively used, without any indication of how this additional expenditure could be raised. It is a kind of respectable version of Lord Molloy's "spend and prosper" advice. If only we could. It is surely right of the noble Lord, Lord Byers, to urge manufacturers to compete abroad, but, again, additional Government expenditure means high rates of interest for industry and additional cost laid upon industry. As my noble friend Lord Sandford reminded us, additional local authority expenditure means increased rates, which cost jobs. But I certainly endorse what the noble Lord, Lord Byers, said, in that we should buy British wherever we can, though it was curious to hear a Liberal urging us firmly to break the rules of the Treaty of Rome.
  Several noble Lords: No!
  The Earl of Gowrie: My Lords, I may have misinterpreted the noble Lord, but he seemed to be going pretty far in that direction to me, and my noble friend the Secretaty of State for Trade was muttering this in my ear at the time.
  Lord Byers: My Lords, there was nothing that I suggested which incurred any form of protectionism. lt was merely that we ought to shop at home when we can.
  The Earl of Gowrie: My Lords, in that case I am very happy to withdraw my allegations and agree absolutely with the noble Lord. I think that we should do that. I was interested that my noble friend Lord Caldecote, in a remarkable speech, agreed with the noble Lord, Lord Byers, that some upturn in demand would not be inflationary now in view of the relative success that the Government have had in bringing down the overall rates.
  Many of your Lordships dealt with the world economy, and I am glad that most people did not blame everything on the Government. Even the noble

  345
  Lord, Lord Hatch, urged us to participate more in third world economies in order that demand might be increased here. I thought that the speech of the day came from my noble friend Lord Eccles. He said that international reflation is the only way; that inflation is a domestic problem but unemployment is an international problem; and he seemed to be saying, with the noble Lord, Lord Cobbold, "Bring back Bretton Woods". I would point out to the noble Lord, Lord Cobbold, that, of course, when Bretton Woods was formed there was not a Eurodollar market and no petrodollar surplus.
  My noble friend Lord Soames, in another remarkable speech, drew our attention to how important it is to protect our purity as a trading nation. He said that we export 30 per cent. of GDP so the liberal system of trade is to our advantage above all others. We need parity of opportunity. He said that the industrial countries must not retreat into a protectionist shell. Where free trade is concerned, I want to be on the side of the angels, to borrow my noble friend's phrase—but angels surely must not be so blinded by their own light that they fail to discern the presence of devils here and there.
  On pay issues my noble friend Lord Vaizey rejoiced in the demise of the annual wage round, which he saw coming. The noble Lord, Lord Rochester, wanted a very watered down form of incomes policy, as did the noble Lord, Lord Roberthall. I know which I prefer. I would prefer the demise of the annual wage round. The noble Lord, Lord Balogh, was saying: "Come back, Aubrey Jones", and made the interesting observation, which I had not thought of before, that both sides of industry are prone to combine against any incomes policies.
  What was really interesting to me was that it was not until fairly late on in the debate, when we came to the speech of my noble friend Lord Massereene and Ferrard, that very much connection was made between the annual pay round and job losses. I am also glad that my noble friend mentioned the importance of educating young people in the new technologies. I recommend to him a number of our projects, notably the scheme of getting computers into schools. The noble Lord, Lord Underhill, and I have already had a little passage of arms about local authorites. I thought my noble friend Lord Ridley, with all his knowledge, would probably come to my rescue on that, but all he said was that it was difficult to believe in the carrot when you are used to the stick. So maybe I shall have to remain corrected by my noble friend.
  I was sorry to miss the speech of the noble Countess, Lady Mar. I had the impertinence to urge your Lordships to be fairly brief in view of the number of speakers, and Lady Mar took three and a half minutes when I was anticipating eight from her, and that was why I was caught napping. A number of noble Lords—notably, my noble friend Lord Boyd-Carpenter—mentioned the neccesity of getting rid of bureaucratic delays, and he talked about planning problems at Gatwick. I would point out to my noble friend that delays often are in the interests of democratic procedures and objections. Sometimes, I am afraid, they even occur in the Tory heartlands.
  Trade union reform was mentioned by the noble Lords, Lord Rochester and Lord Campbell. In respect
  346
  of my noble friend Lord Campbell, may I say that we shall be debating this in the form of the Green Paper shortly and I would prefer to wait until then to answer him. I very much welcome the fact that my noble friend Lord Boardman spotted that the autumn statement was a radical innovation and that people now can make their Budget representations with a great deal more knowledge than they have ever had before.
  I take the points put to me by the noble Earl, Lord Onslow. We have to work away at this poverty trap difficulty. It is of course extremely expensive. The best answer is to get a more competitive economy and get the overall level of wages up. The noble Lord, Lord Kaldor, told us that a Cabinet Minister made an anti-Government speech in Cambridge last weekend. He did not mention who that was. I am glad to say that I think my own Secretary of State was safely tucked up in Ulster last weekend. The noble Baroness, Lady Burton, asked me for a timetable for the sale of British Airways. I am afraid that has to be put down to being a nice try as my brief tells me to say, "The Government intend to sell British Airways as soon as is practical".
  Having spent so long on other men's flowers may I end by offering a brief wayside dandelion of my own. On the central issue of jobs, we must now get a debate going on the distinction between social and economic needs. For example, in Northern Ireland, as Finance Minister there, I believe I could get more jobs out of £25 million spent on, say, sport, than from £100 million spent in an industry such as shipbuilding, and regrettably I do not see any very great future for shipbuilding in the Province in the long term. We shall return to this and other themes next week when we debate the report of the Select Committee of your Lordships' House on unemployment. Until then, and in view of the fact that most of the support has, I think, been on the Government's side in our setting of priorities for recovery, I hope your Lordships will now reject the amendments, if they are pressed.
  Lord Scanlon: My Lords, I wish to have the amendment standing in my name put to the vote.
  11.16 p.m.
  On Question, Whether the amendment (moved by the Lord Scanlon) shall be agreed to?
  Their Lordships divided: Contents, 44; Not-Contents, 120.

  DIVISION NO. 1

  CONTENTS

  Ardwick, L.

  Galpern, L.

  Bacon, B.

  Gormley, L.

  Bishopston, L.

  Hatch of Lusby, L.

  Blease, L.

  Irving of Dartford, L.

  Boston of Faversham, L.

  Jeger, B.

  Briginshaw, L.

  Jenkins of Putney, L.

  Bruce of Donington, L.

  John Mackie, L.

  Caradon, L.

  Kaldor, L.

  Cledwyn of Penrhos, L.

  Kirkhill, L.

  Collison, L.

  Llewelyn-Davies of Hastoe, B.

  David, B. [Teller.]

  Lockwood, B.

  Davies of Leek, L.

  Longford, E.

  Elwyn-Jones, L.

  Lovell-Davis, L.

  Elystan-Morgan, L.

  McCluskey, L.

  Ewart-Biggs, B.

  Molloy, L.

  347

  Oram, L.

  Stewart of Alvechurch, B.

  Peart, L.

  Stewart of Fulham, L.

  Pitt of Hampstead, L.

  Stone, L.

  Ponsonby of Shulbrede, L. [Teller.]

  Strabolgi, L.

  Underhill, L.

  Rea, L.

  Wedderburn of Charlton, L.

  Ross of Marnock, L.

  White, B.

  Scanlon, L.

  NOT-CONTENTS

  Abinger, L.

  Ironside, L.

  Ailsa, M.

  Kemsley, V.

  Alexander of Tunis, E.

  Kilmany, L.

  Avon, E.

  Kinloss, Ly.

  Balfour of Inchrye, L.

  Kinnaird, L.

  Bath and Wells, Bp.

  Kinnoull, E.

  Bathurst, E.

  Kintore, E.

  Belhaven and Stenton, L.

  Kitchener, E.

  Bellwin, L.

  Lauderdale, E.

  Belstead, L.

  Lawrence, L.

  Bessborough, E.

  Lindsey and Abingdon, E.

  Bethell, L.

  Long, V.

  Boardman, L.

  Lucas of Chilworth, L.

  Boyd-Carpenter, L.

  Lyell, L.

  Brabazon of Tara, L.

  McFadzean, L.

  Brougham and Vaux, L.

  Macleod of Borve, B.

  Caldecote, V.

  Mansfield, E.

  Campbell of Alloway, L.

  Mar, C.

  Campbell of Croy, L.

  Margadale, L.

  Cathcart, E.

  Marshall of Leeds, L.

  Chelmer, L.

  Masham of Ilton, B.

  Chelwood, L.

  Merrivale, L.

  Cockfield, L.

  Mersey, V.

  Coleraine, L.

  Monk Bretton, L.

  Colwyn, L.

  Murton of Lindisfarne, L.

  Cork and Orrery, E.

  Newall, L.

  Craigavon, V.

  Onslow, E.

  Crathorne, L.

  Orkney, E.

  Croft, L.

  Penrhyn, L.

  Cullen of Ashbourne, L.

  Platt of Writtle, B.

  Davidson, V.

  Radnor, E.

  De La Warr, E.

  Rankeillour, L.

  De L'Isle, V.

  Rawlinson of Ewell, L.

  Denham, L. [Teller.]

  Redesdale, L.

  Digby, L.

  Reigate, L.

  Donegall, M.

  Renton, L.

  Drumalbyn, L.

  Ridley, V.

  Dudley, E.

  Romney, E.

  Dulverton, L.

  St. Aldwyn, E.

  Eccles, V.

  Saltoun, Ly.

  Ellenborough, L.

  Sandford, L.

  Elliot of Harwood, B.

  Savile, L.

  Elton, L.

  Selkirk, E.

  Faithfull, B.

  Sharples, B.

  Ferrers, E.

  Skelmersdale, L.

  Forbes, L.

  Soames, L.

  Fortescue, E.

  Strathclyde, L.

  Gainford, L.

  Swinton, E. [Teller.]

  Gisborough, L.

  Thomas of Swynnerton, L.

  Glanusk, L.

  Trefgarne, L.

  Glenarthur, L.

  Trenchard, V.

  Gowrie, E.

  Trumpington, B.

  Gray, L.

  Vaizey, L.

  Greenway, L.

  Vaux of Harrowden, L.

  Gridley, L.

  Vickers, B.

  Hailsham of Saint Marylebone, L.

  Vivian, L.

  Waldegrave, E.

  Harmar-Nicholls, L.

  Westbury, L.

  Hemphill, L.

  Windlesham, L.

  Home of the Hirsel, L.

  Wynford, L.

  Hylton-Foster, B.

  Resolved in the negative, and amendment disagreed to accordingly.
  11.25 p.m.
  Lord Diamond: My Lords, I beg to move the amendment in the name of my noble ally Lord Byers.
  Moved, At the end of the address to insert:
  "but regret the absence of any constructive programme to encourage public and private enterprise and to stimulate employment, without endangering the control of inflation or imposing counter-productive import controls".—(Lord Diamond.)
  The Lord Chancellor: My Lords, the original Question was, That an humble Address be presented to Her Majesty, since when an amendment has been moved by the noble Lord, Lord Diamond, on behalf of the noble Lord, Lord Byers: at the end to insert the words set out in his name on the Order Paper.
  The Question is that this amendment be agreed to. As many as are of that opinion will say, "Content"? To the contrary, "Not-Content"?
  11.26 p.m.
  On Question, Whether the said amendment shall be agreed to?
  Their Lordships divided: Contents, 44; Not-Contents, 117.

  DIVISION NO. 2

  CONTENTS

  Airedale, L.

  Mayhew, L.

  Aylestone, L.

  Morris of Kenwood, L.

  Barrington, V.

  Ogmore, L.

  Bath and Wells, Bp.

  Perry of Walton, L.

  Beaumont of Whitley, L.

  Pitt of Hampstead, L.

  Burton of Coventry, B.

  Roberthall, L.

  Byers, L.

  Robson of Kiddington, B.

  Chichester, Bp.

  Rochester, Bp.

  Diamond, L.

  Rochester, L.

  Donaldson of Kingsbridge, L.

  Sainsbury, L.

  Flowers, L.

  Simon, V.

  Gladwyn, L.

  Stedman, B.

  Hampton, L.

  Taylor of Gryfe, L.

  Hanworth, V.

  Tordoff, L.

  Harris of Greenwich, L.

  Vernon, L.

  Hooson, L.

  Wade, L.

  Kennet, L. [Teller]

  Walston, L.

  Kilmarnock, L.

  Whaddon, L.

  Lloyd of Kilgerran, L.

  Wigoder, L. [Teller]

  McGregor of Durris, L.

  Wilson of Langside, L.

  Mackie of Benshie, L.

  Winchilsea and Nottingham, E.

  McNair, L.

  Winstanley, L.

  NOT-CONTENTS

  Abinger, L.

  Craigavon, V.

  Ailsa, M.

  Crathorne, L.

  Alexander of Tunis, E.

  Croft, L.

  Avon, E.

  Cullen of Asbourne, L.

  Balfour of Inchrye, L.

  Davidson, V.

  Bathurst, E.

  De La Warr, E.

  Belhaven and Stenton, L.

  De L'Isle, V.

  Bellwin, L.

  Denham, L. [Teller]

  Belstead, L.

  Digby, L.

  Bessborough, E.

  Donegall, M.

  Bethell, L.

  Drumalbyn, L.

  Boardman, L.

  Dudley, E.

  Boyd-Carpenter, L.

  Dulverton, L.

  Brabazon of Tara, L.

  Eccles, V.

  Brougham and Vaux, L.

  Ellenborough, L.

  Caldecote, V.

  Elliot of Harwood, B.

  Campbell of Alloway, L.

  Elton, L.

  Campbell of Croy, L.

  Faithfull, B.

  Cathcart, E.

  Ferrers, E.

  Chelmer, L.

  Forbes, L.

  Chelwood, L.

  Fortescue, E.

  Cockfield, L.

  Gainford, L.

  Coleraine, L.

  Gisborough, L.

  Colwyn, L.

  Glanusk, L.

  Cork and Orrery, E.

  Glenarthur, L.

  349

  Gowrie, E.

  Orkney, E.

  Gray, L.

  Penrhyn, L.

  Greenway, L.

  Platt of Writtle, B.

  Gridley, L.

  Radnor, E.

  Hailsham of Saint Marylebone, L.

  Rankeillour, L.

  Harmar-Nicholls, L.

  Rawlinson of Ewell, L.

  Hemphill, L.

  Redesdale, L.

  Home of the Hirsel, L.

  Reigate, L.

  Hornsby-Smith, B.

  Renton, L.

  Hylton-Foster B.

  Ridley, V.

  Kemsley, V.

  Romney, E.

  Kilmany, L.

  St. Aldwyn, E.

  Kinloss, Ly.

  Saltoun, Ly.

  Kinnaird, L.

  Sandford, L.

  Kintore, E.

  Savile, L.

  Kitchener, E.

  Selkirk, E.

  Lauderdale, E.

  Sharples, B.

  Lawrence, L.

  Skelmersdale, L.

  Long, V.

  Soames, L.

  Lucas of Chilworth, L.

  Strathclyde, L.

  Lyell, L.

  Swinton, E. [Teller]

  McFadzean, L.

  Thomas of Swynnerton, L.

  Macleod of Borve, B

  Trefgarne, L.

  Mansfield, E.

  Trenchard, V.

  Mar, C.

  Trumpington, B.

  Margadale, L.

  Vaizey, L.

  Marshall of Leeds, L.

  Vaux of Harrowden, L.

  Masham of Ilton, B.

  Vickers, B.

  Merrivale, L.

  Vivian, L.

  Mersey, V.

  Waldegrave, E.

  Monk Bretton, L.

  Westbury, L.

  Murton of Lindisfarne, L.

  Windlesham, L.

  Newall, L.

  Wynford, L.

  Onslow, E.

  Resolved in the negative, and amendment disagreed to accordingly.
  On Question, Motion agreed to: the said Address to be presented to Her Majesty by the Lords with White Staves.

British Transport Docks Bill
Brought from the Commons and, the declaration of the agent having been deposited in the Private Bill Office (pursuant to the resolution of 25th October last), read a first time, and reported from the Examiners.
Greater London Council (General Powers) (No. 2) Bill
Brought from the Commons and, the declaration of the agent having been deposited in the Private Bill Office (pursuant to the resolution of 14th October last), read a first time, and reported from the Examiners.
Severn-Trent Water Authority Bill
Brought from the Commons and, the declaration of the agent having been deposited in the Private Bill Office (pursuant to the resolution of 14th October last), read a first time, and reported from the Examiners.

Yarmouth (Isle of Wight) Pier Bill
Brought from the Commons and, the declaration of the agent having been deposited in the Private Bill Office (pursuant to the resolution of 14th October last), read a first time, and then read a second time pro forma and committed to a Select Committee.
House adjourned at twenty-five minutes before midnight.

  VACANT LAND: REGISTRATION AND BUILDING POTENTIAL
  VACANT LAND: REGISTRATION AND BUILDING POTENTIAL
  NORTHERN IRELAND ASSEMBLY: OFFICIAL REPORT AND PAPERS
  NORTHERN IRELAND ASSEMBLY: OFFICIAL REPORT AND PAPERS
  THE HOUSING ACT 1980: ENACTMENT OF SCHEDULE 12
  THE HOUSING ACT 1980: ENACTMENT OF SCHEDULE 12
  THE HOUSING ACT 1980: GRANTS FOR FIRE PRECAUTIONS
  THE HOUSING ACT 1980: GRANTS FOR FIRE PRECAUTIONS
  THE HOUSING ACT 1980: GRANTS UNDER SCHEDULE 12
  THE HOUSING ACT 1980: GRANTS UNDER SCHEDULE 12