Sitting of 29 June 1983

Preamble
The House met at half-past Two o'clock
PRAYERS
[MR. SPEAKER in the Chair]
Oral Answers to Questions
  TRADE AND INDUSTRY

    British Steel Corporation
    Mr. Strawasked the Secretary of State for Trade and Industry what representations he has made to the European Community Commission to obtain its early approval of the British Steel Corporation's investment plans.
    The Secretary of State for Trade and Industry (Mr. Cecil Parkinson): I have made it clear to the Commission that its speedy approval of the proposed investment by BSC at Port Talbot is a priority for the Government.
    Mr. Straw: Is the Secretary of State aware that the continuing delay by the European Commission in approving the steel investment plan has already contributed to a loss of jobs in my constituency, at the firm of Clayton Goodfellow? Does the Secretary of State accept that the Common Market has unquestionably cost us jobs in the British steel industry, and that, given the fact that more steel jobs are being lost in Britain than in almost all the other European countries combined, it is imperative that the EC approves the plan without delay?
    Mr. Parkinson: It may reassure the hon. Gentleman to know that although I have been in office for only two weeks I have already had three meetings with the Commission and have pressed the case on it extremely strongly. I hope that the company in the hon. Gentleman's constituency will be the nominated subcontractor when approval is given, but that is by no means certain. We cannot, as a Government, guarantee that, as I am sure the hon. Gentleman understands.
    Mr. Moate: Does my right hon. Friend see the investment plan as part of an arrangement that will lead to the early ending of subsidies to the BSC and the privatisation of part or all of it?
    Mr. Parkinson: My predecessor and I have encouraged Mr. MacGregor and his colleagues to work hard towards making the company viable. They have taken extremely brave decisions on capacity and big steps that should make the company viable. I hope that they will achieve their objective of breaking even next year and phasing out aids. I hope, too, that we can move the company towards privatisation.
    Mr. Hardy: Has the Secretary of State had time to look at the long list of European steel producers who have defaulted, who were supposed to pay fines to the
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    Community? If the right hon. Gentleman has seen that list, does he realise that no British steel producer's name appears on it? Given that fact and the experience of the past three or four years, we are entitled to demand swift and favourable consideration by the Community.
    Mr. Parkinson: I have stated firmly that 47 per cent. of all the capacity reduction in the Community has been in this country and that it is time for other countries to play their part. I have said that any renewal of the article 58 arrangements must be dependent upon clear, concise commitments from other countries to reduce capacity. The Commission accepted that view.

    Regional Policy
    Mr. Arnoldasked the Secretary of Trade and Industry if he will make a statement about the future of regional policy.
    The Minister of State, Department of Trade and Industry (Mr. Norman Lamont): The Government are reviewing regional policy. Officials made a first report early in the year. We asked them to do further work. When they report, we will wish to consider carefully what changes might be made. We will make a statement in due course.
    Mr. Arnold: Does my hon. Friend agree that regional policy now distorts competition and that there is clear evidence of serious anomolies, particularly in Greater Manchester? Does he agree also that we need a fundamental review of the aims and objectives, to get rid of those difficulties?
    Mr. Lamont: I agree with my hon. Friend that regional policy has had a distorting effect in many cases. That is why one of the first things that we did in the last Parliament was to reduce the area of the country covered by regional policy from 44 per cent. of the population to 27 per cent. [HON. MEMBERS: "Not enough."] Some of my hon. Friends say that that is not enough. We are now considering further changes in regional policy. I assure my hon. Friend that the review is fundamental and considers the issues from the point of view not just of the regions but of the impact of the policy on the national economy.
    Mr. Loyden: Is the Minister aware of the devastating effect that the Government's policy has had on employment in Liverpool and Merseyside? When will the Secretary of State make a statement to the House on when the Government will do something to deal with the collapse of industry on Merseyside and the destruction of jobs?
    Mr. Lamont: Merseyside is an example of the expenditure of large sums of money by the Government, but that has not solved its problems. A large amount of Government aid has been injected into the area. The Merseyside task force and its approach are matters for the Secretary of State for the Environment.
    Mr. Silvester: Does my hon. Friend recognise that in any radical approach to this problem he must consider the impact of expenditure by Departments other than his own? Will he assure me that those Departments are included in this review?
    Mr. Lamont: I give that assurance to my hon. Friend. The interface between my Department and the Department

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    of the Environment is one of our major concerns. The inner cities programme has an enormous impact on regional policy. That is one of the major points that we have in mind.
    Mrs. Renée Short: Is the Minister aware of the acute difficulties that we in the west midlands have faced since 1979? Does he realise that in my constituency there is almost 20 per cent. unemployment and that redundancies are being declared every week? What does he intend to do to see that industry in the west midlands is rejuvenated and that the old factories that have disappeared are replaced by new industries? What does the Minister plan to do to co-operate with the local authorities, which can do much to stimulate jobs in the area?
    Mr. Lamont: First, we have removed the penalty that was levied on the west midlands by the IDCs. By removing those restrictions we are helping the west midlands. We have also put enormous sums of money into that area, via the help given to British Leyland and the areospace industry. A lot of money has gone into the west midlands. As the hon. Lady also knows, the Under-Secretary of State, my hon. Friend the Member for Coventry, South-West (Mr. Butcher) has been given special responsibility in the west midlands. He is having discussions with the CBI and local businesses about the way in which our national schemes of assistance can be deployed to great advantage in the west midlands. The best thing that local authorities, especially Labour-controlled local authorities can do is to keep their rates down.
    Mr. Bill Walker: When my hon. Friend considers changes in policy, will he bear in mind the problems of the rural areas, where the small business is the only employer left? Does he agree that we must ensure that small businesses continue to provide employment in the sparsely populated areas?
    Mr. Lamont: Of course I shall bear that in mind. The activities of COSIRA, which are specifically geared to the problems of rural areas, are important.
    Mr. Orme: What will the Minister do for the regions? Every region in the United Kingdom is suffering from the Government's overall economic policy. With unemployment rising, what does the Minister plan to do?
    Mr. Lamont: If the right hon. Gentleman is suggesting that spending bigger and bigger sums on regional policy is the way to tackle unemployment, he is grievously mistaken. We are already spending nearly £800 million on regional policy. Our view is that that sum of money must be spent much more effectively, and with much more discrimination. The way to deal with unemployment is to keep inflation and interest rates down, and to keep Government spending under control.

    British Shipbuilders
    Dr. Godmanasked the Secretary of State for Trade and Industry if he will make a statement concerning the future of British Shipbuilders.
    Mr. Robert C. Brownasked the Secretary of State for Trade and Industry what plans he has for supporting the British shipbuilding industry.
    Mr. Norman Lamont: The chairman of British Shipbuilders has asked the Government for special
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    emergency help to enable the corporation to gain orders in the recession. The Government are considering this request in the context of a corporate plan recently submitted by the corporation. In the meantime, the Government will give careful consideration to specific requests for help on a case-by-case basis, within the framework of the international rules.
    Dr. Godman: The chairman of British Shipbuilders has asked the Government for special emergency help to enable the corporation to gain orders during the recession —[HON. MEMBERS: "Question."] I am about to ask a question. Is the Minister aware that there is a delegation of councillors from Greenock and Port Glasgow, together with shop stewards from Scott Lithgow, Kincaids and Fergusons here today to express their deep concern at the continuing decline of shipbuilding on the lower Clyde? Would it not be socially and politically irresponsible to allow that sad decline to continue?
    Mr. Lamont: We all view with considerable concern the problems that our shipbuilding industry faces. The Government have massively supported our shipbuilding industry. In their last term of office they put no less than £700 million into British Shipbuilders. We have supported the industry. It is up to the industry to become more competitive. I have to say to the hon. Gentleman that the losses that are likely to be reported by British Shipbuilders this year will be up considerably. That is not due just to shortage of demand or the market. It is due also to the performance of British Shipbuilders. There is room for improvement.
    Mr. Brown: Does the Minister agree that the continuance of the British shipbuilding industry is dependent upon the provision of finance by the state, as is the case with all of our shipbuilding competitors? Is he also aware that the Government's attitudes run contrary to those of our shipbuilding competitors? Will he consider for this country an all-embracing maritime policy, backed at the highest level?
    Mr. Lamont: No. I do not agree with the hon. Gentleman. It is true that shipbuilding worldwide is supported by the respective Governments. The Government have massively supported shipbuilding. The £700 million that has been provided is envied by many other industries in our economy. It is not just a question of the Government helping British Shipbuilders. The corporation has to work hard to be more competitive and to get ships delivered on time and to price.
    Sir David Price: Is my hon. Friend aware that, because of lower freight rates throughout the world, it is unrealistic to expect any increase in orders from the Merchant Navy? Consequently, have not the Royal Navy and the Royal Fleet Auxiliary a key role to play in sustaining British Shipbuilders during this difficult period?
    Mr. Lamont: My hon. Friend correctly points to overcapacity and low freight rates in the world. On the merchant shipbuilding side, we have been fortunate in the last few weeks and months in securing some extra orders. The Mexican order for Sunderland Shipbuilders will provide 2,400 man-years of work. The Ethiopian order for Austin and Pickersgill will provide 640 man-years of work. There is a shortage of work for many of our yards. They will have to be competitive and keen to get orders. My hon. Friend talks of naval orders. He will recall that

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    just before the election the Government announced their intention to place orders for a further £600 million worth of ships, including two additional frigates. That will be of considerable benefit to British Shipbuilders.
    Dr. David Clark: Since, largely due to increased productivity, the ship repairing yards on the Tyne are currently making a profit, will the Minister give the House an assurance that those yards will not be privatised?
    Mr. Lamont: I shall not give that assurance. It is questionable whether British Shipbuilders ought to be in ship repairing. Those jobs could be secured, and the people have just as good an outlook, if those yards were in private hands.
    Mr. Hill: Does my hon. Friend agree that it is not just a question of helping British Shipbuilders or British ship repairers? Does he agree that the decline in the British merchant fleet is especially distressing for him, as he is responsible for this aspect of Government affairs? Does he agree also that we ought to have a full day's debate on shipping and ports policy, because at present we have a ragbag of policies? Is he aware that I have asked the Leader of the House for such a debate?
    Mr. Lamont: As my hon. Friend knows, shipping and ports policy are matters for the Department of Transport. He is right to say that the decline of the British fleet is a matter of great concern. It has profound implications for British shipbuilding. That is why we reject the argument put forward by the Labour party that we should compel British shipowners to place their orders in this country, regardless of cost and of their own wishes. British shipping is as important an economic interest to this country as shipbuilding.
    Mr. Orme: Is it not a fact that our main competitors see that their orders are placed in their own shipyards, to the disadvantage of British Shipbuilders? Is it not also the case that the crisis has now reached such proportions that the Government must take action? When is the meeting to take place with Sir Robert Atkinson, the chairman of British Shipbuilders? When does the Minister intend to make a statement to the House? I asked for such a statement last Friday, because, along with others of my hon. Friends, I believe that an early debate is essential.
    Mr. Lamont: I met Sir Robert Atkinson this morning and we discussed British Shipbuilders' proposals to deal with the current situation. The Government's view is that it is important that we respond to the present crisis not just by short-term action but in terms of the corporate plan and an overall view of the business. Too often we have responded to problems in British Shipbuilders by short-term measures. As I said to the hon. Gentleman earlier, the Government are prepared to give British Shipbuilders help on a case-by-case basis to overcome the shortage of orders, but we also wish to discuss with the corporation the future of the business as a whole. As the right hon. Gentleman knows, the new chairman, who starts as deputy chairman at the beginning of July, will be formulating plans for the future, and we shall be discussing those with him as well.

    Industrial Competitiveness
    Mr. Lofthouseasked the Secretary of State for Trade and Industry to what extent the competitiveness of British industry has changed since May 1979.
    The Minister for Information Technology (Mr. Kenneth Baker): According to IMF figures, United Kingdom manufacturing industry's relative unit labour costs were 22 per cent. higher in the fourth quarter of last year compared with the second quarter of 1979, but this figure masks the substantial improvement of about 15 per cent. between early 1981 and the fourth quarter of last year.
    Mr. Lofthouse: Does the Minister agree that the competitiveness of British industry has declined by one third since 1979, partly due to the high exchange rate? What do the Government intend to do about that?
    Mr. Baker: The factors relating to productivity and competitiveness are very great. The exchange rate has certainly had an effect and its relative decline since 1981 has affected competitiveness. The competitiveness of British industry, however, lies essentially in the management and hands of British industry. That is the only way in which to retain our world share of trade.
    Mr. Budgen: Does my hon. Friend agree that any attempt by the Government to hold up the value of sterling against other currencies would be especially disadvantageous to the west midlands and to heavy manufacturing industry generally?
    Mr. Baker: All Governments should be exceedingly modest when considering the external value of sterling. That lesson has been learnt the hard way by successive British Governments since the war.
    Mr. J. Enoch Powell: What is the possible value or meaning of global statistics such as those?
    Mr. Baker: The right hon. Gentleman should address that question to the person who asked it. The statistics are prepared by international and domestic bodies, but domestic competitiveness and productivity can be measured quite clearly and effectively.
    Mrs. Currie: Does my hon. Friend agree that although the British footwear industry, which is active in my constituency, can produce leather goods at prices and qualities to beat the world, it cannot compete with dumped goods from eastern Europe? Will he therefore press for this unequal competition to be altered?
    Mr. Baker: I appreciate the points raised by my hon. Friend. My right hon. Friend the Minister for Trade will be dealing with trade questions. The problems of the footwear industry are well known to the Department. I agree that when goods are dumped the Government and the European Commission have a real responsibility, which they fully accept, to ensure that competition is fair. British industry can compete effectively around the world if the terms are fair.

    Industrial Output
    Sir David Priceasked the Secretary of State for Trade and Industry what has been the change in industrial output between the second quarter of 1982 and the second quarter of 1983.
    Mr. Kenneth Baker: In the three months ended April 1983, the latest period for which figures are available, the all-industries index of industrial production was 1½ per cent. higher than in the corresponding period in 1982.
    Sir David Price: I thank my hon. Friend for that encouraging information. Does one take it that, in the Department's view, this is the spring for British manufacturing industry? Does my hon. Friend accept that lower interest rates would be the best nutrient to turn that spring into an abundant harvest?
    Mr. Baker: The level of interest rates is critical to the level of manufacturing activity and indeed to the strength of the whole economy, but there are other fairly optimistic signs. The CBI survey this week stated that order books were now stronger than at any time since September 1979 and export order books were the strongest since 1980. Certainly the economy has recovered from the trough of the recession in the spring of 1981 and there is solid evidence that recovery is on the way.
    Mr. Wrigglesworth: Does the Minister accept that there is still a long way to go before those industries which currently have enormous unused capacity can be brought fully into use again? What do the Government intend to do to ensure that the capacity available in engineering, petrochemicals, steel and so many other industries is used for the benefit of the country?
    Mr. Baker: If the hon. Gentleman is arguing for a reflation of demand, in my view that is not the policy that we should follow, because there is no evidence of an absence of demand in the domestic economy at present. The ability of our factories to be more gainfully employed and to produce more goods depends on a whole series of factors, including the productivity gains that can be made and the levels of wage settlements. If our major competitors have wage settlements between 2 and 3 per cent. and we persist in having higher settlements than that in both the private and the public sectors, there will be fewer jobs and lower output in British factories.

    Export Credits Guarantee Scheme
    Mr. Chapmanasked the Secretary of State for Trade and Industry if he is satisfied with the operation of the export credits guarantee scheme.
    The Under-Secretary of State for Trade and Industry (Mr. Alexander Fletcher): The Export Credits Guarantee Department's operations are kept under constant review and changes introduced where appropriate.
    Mr. Chapman: In the current talks between the Export Credits Guarantee Department and the British Consultants Bureau to iron out problems relating to extended credit finance, will my hon. Friend use his good offices to ensure a successful conclusion, bearing in mind the enormous contribution that British consultants in the construction industry working abroad make to our economy, as shown by the fact that last year they brought in more than £800 million net in invisible earnings?
    Mr. Fletcher: I am glad to pay tribute to the export work done by consultants on behalf of United Kingdom industry. We have had a number of reports recently regarding the work of the ECGD and we shall be happy to consider them very carefully.
    Mr. Skinner: Does the Minister agree that, as a result of the so-called fair winds of competition, the ECGD has run into a gale and ended up bankrupt and on its knees? Will the Minister enjoy using massive Government intervention to rescue it?
    Mr. Fletcher: The hon. Gentleman presents an entirely false picture. The ECGD had record claims last year, which must bear some relation to the record exports that this country produced, but it is continuing to meet those claims from its reserves.
    Mr. Eggar: Will hon. Friend confirm that it remains a key priority for the Government to reach a consensus about the rates that should be charged by export credit agencies throughout the world?
    Mr. Fletcher: Yes, that is a very important part of our export policy.
    Mr. Archer: Does the hon. Gentleman agree with the export credit committee of the CBI that if jobs are to be saved exporters need more comprehensive and effective support from export credit? If the consensus on interest rates breaks down, will not exporters be even more at risk from subsidised foreign competition? Does the hon. Gentleman accept that the ECGD is a cost-effective instrument for making Britain more competitive? Despite the machinations of the Treasury, will he give an undertaking that that effectiveness will be preserved?
    Mr. Fletcher: We have no intention of reducing the importance of the ECGD's activities. On the consensus arrangements, the Paris talks are still in progress. We hope that they will reach a satisfactory conclusion

    British Steel Corporation
    Sir Anthony Meyerasked the Secretary of State for Trade and Industry what has been the operating loss of the British Steel Corporation during the past 10 years; and what this loss represents in terms of pounds per employee of the corporation.
    The Under-Secretary of State for Trade and Industry (Mr. John Butcher): Between 1972–73 and 1981–82 the British Steel Corporation's trading results after depreciation but before interest, taxation and extraordinary items, showed a total loss, net of profits, of £1,320 million at actual prices. On the same basis, the results measured in pounds per employee each year ranged between a profit of £591 in 1974–75 to a loss of £4,045 in 1980–81 and averaged a loss of £1,139 over the 10-year period.
    Sir Anthony Meyer: When my hon. Friend takes into account what has happened at Shotton and Corby, will he reflect on whether that money might not be much better used launching new industries that have a brighter future —such as service industries—and investment in tourism in which the cost per employee is much lower?
    Mr. Butcher: I read with interest what my hon. Friend said in the debate on the Loyal Address. The existence or otherwise of industries of various types will depend on how different sectors of the economy and different industries within them respond to competition. It surely cannot be true that we should deploy resources from one sector of the economy to another regardless of the performance in those sectors.
    Mr. James Hamilton: Will the Minister bear in mind that the greatest sacrifices that the steel industry has made to the EC have been made by the British Steel Corporation? Is he aware that BSC is now most competitive? Should he not talk about what is now the case rather than about the past?
    Mr. Butcher: It is precisely with the future in mind that my right hon. Friend advanced a pugnacious defence of British steel interests in Europe last week. As part of the corporate plan, we have said that there will be five integral steelworks. My right hon. Friend has also said as strongly as possible that the onus is on our EC partners to reduce their capacity in line with the reduction of capacity in Britain, but mainly with competitiveness as the major guideline.
    Mr. Roy Hughes: Does the Minister appreciate that his hon. Friend the Member for Clwyd, North-West (Sir A. Meyer) has always had a death wish for the British steel industry? Does he agree that that industry is vital to Britain's survival as an industrial nation, especially if there is to be any rebirth of our manufacturing sector?
    Mr. Butcher: Our aim is and has always been to restore competitiveness to the British steel industry, irrespective of whether it is publicly or privately owned. There is no death wish on the part of the industry. If the hon. Gentleman examines figures for the past four months, he will find that sales have increased by 22 per cent. and that liquid steel output has increased by 50 per cent. Therefore, our negotiating position to achieve greater flexibility on quotas, and defending British interests as sturdily as my right hon. Friend has, is right.
    Mr. Orme: Is not the most tragic loss that of 100,000 jobs in the British steel industry? If the EC does not reduce its capacity, what sanction will the Government take against it? Will the Minister stand up for Britain in defence of the industry?
    Mr. Butcher: That is precisely what my right hon. Friend has been doing during meetings in the past two weeks. We defend British steel industry interests. His agreement to the interim quota arrangements depended on a commitment from the Commission that it would get the strongest assurances from our competitors in Europe that they also would reduce their capacity in line with the competitive requirements of the industry.

    St. Helens
    Mr. John Evansasked the Secretary of State for Trade and Industry if he has any plans to review the assisted area status of the metropolitan borough of St. Helens.
    The Under-Secretary of State for Industry and Trade (Mr. David Trippier): No. On present evidence, I am satisfied that the travel-to-work areas within the metropolitan borough of St. Helens are correctly graded. However, I shall continue to keep a close watch on developments there.
    Mr. Evans: I congratulate the hon. Gentleman on his elevation to the Front Bench. I have followed this subject with him for a long time and I wish him well in his new office.
    Mr. Skinner: There is no need for all that.
    Mr. Evans: Does the Minister agree that the answer that he has just given is somewhat at variance with that which his colleague gave to question No. 2? When he reconsiders his answer, will he realise that St. Helens is discriminated against on two counts? First, unlike the rest of Merseyside, it does not enjoy special development area
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    status. Secondly, part of St. Helens — Newton-le-Willows—is the only part of Merseyside that does not enjoy assisted area status.
    Mr. Trippier: I am grateful to the hon. Gentleman for his kind comments despite his being at variance with the hon. Member for Bolsover (Mr. Skinner).
    Unemployment is not the only criterion for assessing whether an area should be assisted or upgraded. Other considerations must be taken into account—such as the overdependence on a traditional industry, the ratio between unemployment and employment and, perhaps, a deterioration in the infrastructure. My hon. Friend the Minister of State said earlier that a review was taking place. It is too early to speculate on its outcome. I take this opportunity to pay tribute to the community of St. Helens' enterprise trust for the work it is doing in the hon. Gentleman's constituency to encourage new business ventures.

    Manufactured Goods
    Mr. Dubsasked the Secretary of State for Trade and Industry what was the balance of trade in manufactured goods between the United Kingdom and Japan in 1982–83.
    Mr. Parkinson: The United Kingdom had a deficit of £2,044 million on trade in manufactured goods with Japan in 1982 as a whole, and £868 million in the first four months of 1983.
    Mr. Dubs: Does the Secretary of State agree that the reason for that imbalance is that, while our markets are wide open to Japanese imports, the Japanese, by one means or another, practise what is effectively a form of trade restriction against our products? What does he propose to do about that, or will he allow it to continue?
    Mr. Parkinson: One of Japan's most effective barriers against other people's goods is that it produces products that are of high quality, sell all over the world and, not surprisingly, sell well in Japan. However, last year we exported £528 million worth of goods to Japan. There are voluntary restraints on Japanese exports of cars, electronic goods and a range of other products. We keep pressure on Japan through the Community to remove the trade barriers. However, the ultimate barrier is the good performance of the Japanese economy.
    Mr. Kenneth Carlisle: Does my right hon. Friend agree that the 11 per cent. ceiling that we now have for the import of Japanese cars has worked well? Would it be right to examine whether we should extend that system to other industries that are clearly under attack from the efficient Japanese?
    Mr. Parkinson: We have a range of restrictions on goods produced by Japan such as video cassette recorders, television tubes and many others. We have just negotiated restrictions on the export of Japanese forklift trucks. I am glad that my hon. Friend confirms that for some time the Japanese have honoured their arrangement in regard to cars.
    Mr. Barry Jones: Has the right hon. Gentleman failed to land the Nissan car project? Is he aware that the shortlisted areas in Britain are desperate for work and would like to be put out of their misery and told what on earth is going on?
    Mr. Parkinson: Of course we want the Nissan project to come to Britain. No decision has been taken. The matter is under consideration. I shall be going to Japan soon to press the case for greater Japanese inward investment and for Japan importing more from Britain.
    Mr. Eldon Griffiths: When my right hon. Friend goes to Japan—I am glad that he is to do so—will he take up with the Japanese their use of the so-called laser beam approach to exports whereby they identify a specific industry, undercut it, try to drive it out of business and thereby attain a monopoly? Will my right hon. Friend work closely with the EC to resist such tactics?
    Mr. Parkinson: That is precisely what we have been doing. A substantial increase in imports from Japan last year was in video cassette recorders, which are simply not made in Britain. [HON. MEMBERS: "Why?"] Because there has not been an industry. If Opposition Members are to be believed, we should deny the British public access to a product that they want to buy but is not made in Britain.
    Mr. Archer: Does the right hon. Gentleman understand that the figures that he has just quoted mean that this year Britain is on target for a £2½ billion trade deficit with Japan? As he has just correctly pointed out, that is not assisted by the EC-Japanese agreement on VCRs, which, although it produces more jobs in West Germany, has been of no benefit to the British? Does he agree that it has simply increased prices here and reduced choice?
    Mr. Parkinson: The right hon. and learned Gentleman is not correct. The video cassettee recorder industry in Britain has produced 20,000 jobs in the servicing and maintenance sectors. We are now moving to the assembly of recorders, there will be sourcing of components and we shall gradually develop an industry. The right hon. Gentleman is wrong to say that there is no employment from VCRs at present. Those imports generate 20,000 highly-paid jobs in Britain.

    Overseas Markets (Free Access)
    Mr. Andrew MacKayasked the Secretary of State for Trade and Industry if he is satisfied that British manufacturers are being allowed free access into overseas countries which enjoy major export markets in the United Kingdom.
    Mr. Parkinson: The Government remain concerned about the inequitable market access offered by some of our trading partners and, together with our Community partners, we are continuing to make every effort to improve the present unsatisfactory position.
    Mr. MacKay: Does my right hon. Friend agree that we must have a policy of free trade but that we must also have a policy of fair trade worldwide? Is it not time that we took robust retaliatory action against the countries that do not allow free access to our manufactures but to which we allow free rein in Britain?
    Mr. Parkinson: We take action against dumping and unfair competition. As a result of pressure from the Government, the arrangements within the Community to deal with dumping have been improved. I remind my hon. Friend that no country exports as much of what it produces as Britain does, and no country stands to lose more if we wreck the open trading system. We depend on it more than any other country.
    Mr. Sheerman: Does the Secretary of State agree that the past four years have provided a completely ineffective response to the unfair dumping of textiles in Britain, which, together with the other criminal policies pursued by the Government, meant that the textile industry was in a serious position? If something is not done about unfair competition there will be a further slide during the next four years.
    Mr. Parkinson: The hon. Gentleman knows that no industry in Britain has more protection from low-cost imports than the textile industry. He knows, too, that the Government drove a harder bargain than any Labour Government could. It is no accident that the textile industry is showing signs of recovery, and I hope that he is pleased about that.
    Sir Paul Bryan: Does my right hon. Friend agree that the only country that gives completely free access to all our exports is Hong Kong?
    Mr. Parkinson: I agree entirely that Hong Kong is the only truly open market, and it is an important and large export market for Britain.
    Mr. Archer: Reverting to the question asked by my hon. Friend the Member for Huddersfield (Mr. Sheerman), does the Secretary of State accept that the European Commission has been completely powerless to prevent substantial Government subsidies to the textile industries of other European countries, especially in France and Belgium? Does he stand by his declaration, as reported in The Observer:
    "You can't be a trade purist any more?"
    Mr. Parkinson: If the right hon. and learned Gentleman believes that we are trade purists, he is extremely ill-informed. I have already mentioned a range of voluntary restraint arrangements, including the multifibre arrangement. We are not trade purists, and those who pretend that we are simply appear ridiculous.

    Steel Industry
    Mr. Moateasked the Secretary of State for Trade and Industry if he will make a statement on the progress of European Community negotiations on steel production quotas with reference to both public and private sectors.
    Mr. Parkinson: I refer my hon. Friend to the answer I gave to my hon. Friend the Member for Bradford, North (Mr. Lawler) on 23 June.
    Mr. Moate: Will my right hon. Friend confirm that he will not allow any new quota arrangements that force further cuts on British steel production? Will he also confirm that he agrees with the view of the European Commission that special consideration should be given to the small and medium-sized, unsubsidised steel producers of Europe?
    Mr. Parkinson: One matter that I pressed vigorously the other day was the need for more flexibility, and especially the need for flexibility in the interests of companies such as Sheerness Steel in my hon. Friend's constituency, where there is demand but an insufficient quota. We are encouraging the British Steel Corporation to make available spare quota to companies such as Sheerness Steel, and we shall continue to do so.

    Ravenscraig and Gartcosh
    Mr. Tom Clarkeasked the Secretary of State for Trade and Industry if he will make a statement on Government policy towards British Steel and on the job future for Ravenscraig and Gartcosh.
    Mr. Norman Lamont: There is nothing that I can add to my right hon. Friend's statement on 20 December last year and to the letter which he sent to Mr. MacGregor on 19 May last, setting out the Government's decision on BSC's corporate plan for 1983–86.
    Mr. Clarke: Is the Minister aware that there is no great merit in claiming that Britain's steel industry has been protected against European Community intrusion if great sections of that industry are to be hived off in American deals? Will he tell Mr. MacGregor that: any suggestion that those deals should involve the closure of the strip mills at Ravenscraig and Gartcosh is completely unacceptable, especially as Minister after Minister has promised an upturn in the economy and in the market? Does he realise that the Scottish people will be watching closely any developments in the industry?
    Mr. Lamont: I note what the hon. Gentleman said about a possible slab deal with the United States. The British Steel Corporation has put no proposition to the Government, and it remains to be seen whether such a proposition will be made. We are not just predicting an upturn in steel production— it has already happened. Steel production has increased.
    Mr. Bill Walker: Does my hon. Friend agree that the Scottish people expect Ravenscraig to be competitive and to have industrial relations that allow it to be so, and that they do not expect the Government continually to pour in money unless the plant is competitive?
    Mr. Lamont: I agree entirely with my hon. Friend and, because of the large spare capacity in the strip business, it is vital that all employees in that area do their best to be competitive. If they do not, there is no future.
    Dr. Bray: Is the Minister aware that the hot-rolled coil costs at Ravenscraig at the end of the first quarter were the lowest in the British Steel Corporation? Has the Secretary of State initiated a review of the medium-term demand for steel because of the proven falsity of the corporation's short-term demand'?
    Mr. Lamont: We have not commissioned a review of medium-term demand for the corporation's products, strip or otherwise, although, as the hon. Gentleman knows, because of our anxiety about the medium-term, we asked the corporation to make its plans on the assumption that steel production would continue at the five integrated plants for the next three years. One must consider the cost of hot-rolled coil from Ravenscraig not just over one quarter but over a period, and ultimately the management of the corporation must judge which is the best plant. The management is best equipped to make such decisions.
    Mr. Orme: Does the Minister agree that Mr. MacGregor had controversial views about the future of Ravenscraig? Has he discussed those views with the new chairman of the British Steel Corporation, and have they altered the Government's policy on the future of Ravenscraig?
    Mr. Lamont: The Government's policy towards Ravenscraig has not been altered. My right hon. Friend the
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    previous Secretary of State made his announcement on 20 December last year, and nothing has changed since then. Neither I nor my right hon. Friend has discussed it with the new chairman.
    Mr. Tom Clarke: On a point of order, Mr. Speaker. In view of the unsatisfactory nature of the reply, I give notice that I shall seek to raise this matter on an Adjournment debate.

    Bridlington
    Mr. John Townendasked the Secretary of State for Trade and Industry if he will review the assisted area status of the Bridlington travel-to-work area.
    Mr. Trippier: No, Sir. On present evidence there is no case for reconsidering the assisted area status of Bridlington, but I shall keep a close watch on developments in the area.
    Mr. Townend: I add my congratulations to my hon. Friend on his appointment. However, I am extremely disappointed by his reply. Is he aware that no fewer than seven special development areas and 36 development areas have lower unemployment than Bridlington, which is only an intermediate area? The nearby towns of Hull and Scunthorpe have a lower rate. Does he appreciate the bitterness felt in Bridlington about its unfair treatment, and will he seriously consider restoring the development area status that was removed by the Labour Government?
    Mr. Trippier: I thank my hon. Friend for his congratulations. It is well known that he is vociferous in his efforts on behalf of his constituents. I have already said in reply to an earlier question that absolute numbers for unemployment is not the sole criterion for judging whether an area should be assisted or upgraded. My hoe. Friend's constituency covers three travel-to-work areas — Bridlington, which is an intermediate area, part of Driffield, which is a non-assisted area, and part of Hull, which is a development area. My hon. Friend the Minister of State said earlier that a review was taking place at the moment, and I repeat that it is too early to speculate on the outcome of that review.

    Competition Law
    Mr. Eggarasked the Secretary of State for Trade and Industry whether he is satisfied with current competition law.
    Mr. Alexander Fletcher: In general I believe the competition legislation to be satisfactory, but my hon. Friend will not expect me to have reached firm views on all its aspects.
    Mr. Eggar: Are not the worst monopolies to be found in the public sector? What steps are my hon. Friend and his colleagues taking to ensure that we have more competition within and among the public sector bodies?
    Mr. Fletcher: My hon. Friend will be aware that under the Competition Act 1980, when public bodies are referred to the Monopolies and Mergers Commission for efficiency audit, it is fully entitled to make any recommendations that it thinks will improve that public body. My hon. Friend may have recently seen a report on the National Coal Board.
    Mr. Campbell-Savours: Is not the success of competition law on policy in many ways dependent upon

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    the willingness of Companies House to provide adequate information on companies? Is the Minister aware that Mr. Hermann Niessen, in Directorate-General III in the Commission, has stated that unless the British Government introduce a postal service for the dissemination of information by Companies House he will take the British Government to the European Court of Justice? Why are the Government dragging their feet in this matter, which is so important for British companies?
    Mr. Fletcher: Leaving aside what the hon. Gentleman says about the Commission, we are examining Companies House, and always endeavour to see how the services that it provides can be improved.
    Sir Bernard Braine: Within his experience, can my hon. Friend think of a more blatant example of restriction in trade, of tacit cartel arrangements and disadvantage for the consumer than the present policy governing European air fares? What will the Government do about them?
    Mr. Fletcher: I note my hon. Friend's point, but he will know that the aviation industry has now been transferred to the Department of Transport. Perhaps he will take the matter up with my right hon. Friend the Secretary of State for Transport.
    Mr. Wrigglesworth: Will the Minister take action to do something about the building society cartel? Is not the control of interest rates by the building societies as a block against the interests of both investors and borrowers? Will his Department take action to refer that cartel to the Monopolies and Mergers Commission?
    Mr. Fletcher: I note what the hon. Gentleman said, and my right hon. Friend the Chancellor of the Exchequer is also interested in this matter.
    Mr. Richard Page: Does my hon. Friend propose any changes to the guidelines governing the Office of Fair Trading and the Monopolies and Mergers Commission?
    Mr. Fletcher: We are not proposing at this point to make any changes in the legislation.
    Mr. John Fraser: Will there be a change of policy so that in future the Department accepts the advice of the Director General of Fair Trading and, later on, if there has been a reference, accepts the advice of the Monopolies and Mergers Commission, contrary to some of the capricious treatment of the commission by the Government in recent cases?
    Mr. Fletcher: The hon. Gentleman will have to wait and see. My right hon. Friend has made it clear that he would wish to accept the advice of the Director General whenever possible, and that in cases where he finds himself in disagreement he will explain the reasons why.

    Manufactured Goods
    Mr. Archerasked the Secretary of State for Trade and Industry what was the balance of trade in regard of manufactured goods for the last period for which figures are available; and if he will make a statement.
    Mr. Parkinson: In the five months ended May 1983 the balance of trade of manufactured goods was in defecit by £174 billion. Growth of imports is evidence of increased industrial activity and rising consumer demand at home, both of which offer increased opportunities to British industry.
    Mr. Archer: Will the right hon. Gentleman now accept that the deficit on manufactured goods is not, as suggested by his predecessor, the result of a freak month, but has become a confirmed part of the economy? In view of the debate on the Gracious Speech, and his own distinctly less gracious speech in the debate, is he now prepared to admit that the signals of an improving future that were scattered about during the election campaign were a flagrant con, and that without the cover up of North sea oil the appalling decline of the past five years could have reached disaster proportions?
    Mr. Parkinson: I do not accept what the right hon. and learned Gentleman says. I know that he bitterly regrets having to admit it, but if he applies any test, whether of growth of GDP or of industrial production, he will see that there is growth in the British economy. The sooner that he and his friends reconcile themselves to this, the better. Now he says that a deficit in manufactures must be evidence that there is not growth, and I find that particularly convoluted logic.
    Two points must be made. First, every day of the week, Saturdays and Sundays included, £120 million of manufactured goods leave this country for overseas markets. That is a substantial achievement, and upon it millions of jobs depend. Secondly, the imports of manufactures, if they prove anything, are evidence that there is no lack of demand in the British economy, which is what the Labour party argued when it said that it would inject another £12,000 million into the economy. The demand is there: it is up to British companies to meet it.
    Mr. Grylls: Will my right hon. Friend, in his new office, use every endeavour to battle against and beat down the non-tariff barriers that are, alas, still evident in the European Community, as he knows, because this is a deterrent to small and medium-sized firms taking full advantage of the Community?
    Mr. Parkinson: I agree, and this is a continuing war of attrition, but one worth fighting. The removal of the barriers will make trade within the Community easier, and the Community is our most important market.

    West Cumbria
    Mr. Campbell-Savoursasked the Secretary of State for Trade and Industry whether he will review the level of regional assistance available to west Cumbria.
    Mr. Trippier: No, Sir. I am satisfied that an appropriate level of regional industrial assistance is available in west Cumbria.
    Mr. Campbell-Savours: Is the Minister aware that our development area status has brought us nothing in four years, apart from a small footwear factory, of which he has special knowledge? Is he further aware that we have failed miserably to attract the high-tech developments that other parts of the country have successfully been able to attract? Why does not the Minister put together a high-tech package, based on enterprise zones and special area status, to enable areas such as mine to benefit from the development that the Government say is the only route for industrial salvation in the United Kingdom?
    Mr. Trippier: The hon. Gentleman should not paint too black a picture. Over the past four years more than £100,000 has been put into the area through regional

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    development grants, which, as the hon. Gentleman knows are 15 per cent. of capital costs. Furthermore, there have been no redundancy notifications in the Workington travel-to-work area this year. As I said earlier, we shall, however, continue to monitor the area closely.

    Pulp, Paper and Board Industry
    Mr. Proctorasked the Secretary of State for Trade and Industry if he will make a statement on the United Kingdom pulp, paper and board industry.
    Mr. Kenneth Baker: I am encouraged by signs of increased activity in the industry. Reports from it indicate that output is beginning to improve on last year's and, at least in some sectors, order books are lengthening.
    Mr. Proctor: How does my hon. Friend foresee the pulp, paper and board industry of the United Kingdom faring within the new merged, sponsoring Department? In particular, how does he expect the competing claims of the printing and paper industries to be reconciled within the Department?
    Mr. Baker: They will be reconciled with my responsibilities as well. The merger of the Departments of Trade and Industry was long overdue, because one cannot look at one part of an industry, such as the paper industry, without taking into account what is happening elsewhere—in this case in the printing and publishing industry. Now that the responsibilities in other industries have been transferred to me through the merger, I can take a much better and more comprehensive view of the interests of Britain as a whole.
    Mr. Orme: What about imports for these industries—are they increasing or decreasing?
    Mr. Baker: There is good news on imports for the industry, because one major plant is about to come on
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    stream. The old Bowater Ellesmere Port plant, making newsprint, has been revitalised by Canadian investment. Another plant is to be built at Shotton. That will reduce the imports of newsprint significantly and is a demonstration that at last substantial investment is going into this industry.

    Steel Industry
    Mr. Hardyasked the Secretary of State for Trade and Industry if he expects any further significant contraction of the United Kingdom steel industry during the next two years.
    Mr. Butcher: The prospects for the United Kingdom steel industry depend on its providing competitive products which its customers want to buy, rather than on any predictions that the Government might make.
    Mr. Hardy: I note the Minister's suggestion that European producers should offer precise commitments as to the future size and structure of their industries, but will he accept that a much tougher approach would be entirely justified and that we should make it very clear that there will be no further contraction of our steel industry or our special steel industry until our European partners have gone a great deal further than merely offering future commitments?
    Mr. Butcher: That has been precisely my right hon. Friend's negotiating point. As I said earlier, my right hon. Friend put his agreement to the continuation of the interim arrangements on the quotas only in order that the Commission could get the firmest assurances from our EC competitors that they, too, would reduce capacity in the light of the competitive requirements of the European steel industry.

Rate Poundages (Scotland)
3.31 pm
Mr. Donald Dewar: I beg leave to move the Adjournment of the House, under Standing Order No. 10, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
"the announcement today by the Secretary of State for Scotland about the use of his powers under recent local government legislation to reduce the rate poundages of certain local authorities in Scotland, irrespective of the wishes of the democratically elected local councillors".
I understand that the Secretary of State for Scotland had, at lunchtime today, a press conference in Scotland and announced his intentions in respect of four councils.— Lothian regional council, Glasgow, Kirkcaldy and Shetland councils—which have been ordered to reduce their rate poundages under the recently amended local government legislation.
I have gleaned information from the press and from talk in the Corridors, although I have heard nothing so far in the House, to the effect that four authorities are still being ordered to reduce their rate poundages by an unacceptable so-called compromise figure. Shetland, for reasons that we can all guess—reasons which are not surprising but not always entirely creditable—has been let off the hook entirely.
The matter is specific by any standards, because we are faced today with an arbitrary decision of the Secretary of State on a fundamental issue of local democracy. It is important because many hon. Members feel strongly about the ruthless and irresponsible attack that has been made on the freedom and rights of councillors, who have a much better mandate from their electorate than the Secretary of State will ever have. The matter is important also because it involves a gross discourtesy—I use those words after some thought—to the House that the Secretary of State should be in Edinburgh, making announcements to the world and his wife, but has not appeared in this House to explain the position. It is offensive and unjustifiable.
I believe that it would be an extremely important step, in defending the rights of hon. Members, if the Secretary of State were forced to give an answer in a debate in the immediate future as to what he has been doing and what he has been trying to avoid by the method that he has chosen.
The matter is urgent because I understand that the four local authorities have been given until 6 July to capitulate on what I believe is a totally unacceptable compromise figure which has been plucked from the air by the Secretary of State. I do not think it is right that they should be forced into submission — which I believe is the intention if they do not capitulate—by orders which are apparently to be steamrollered through the House and which will have the support of only a tiny minority of hon. Members who represent the local authority areas in question.
It is essential that the House should have a chance to discuss the whole matter before final decisions are taken and before the orders are laid. It is clear that the acquiescence of this House, in what is no more than a squalid piece of blackmail, is a threat being used by Ministers to try to force local authorities to give way.
Mr. Speaker: The hon. Member for Glasgow, Garscadden (Mr. Dewar) has asked leave to move the Adjournment of the House for the purpose of discussing a specific and important matter that he thinks should have urgent consideration, namely,
"the announcement today by the Secretary of State for Scotland about the use of his powers under recent local government legislation to reduce the rate poundages of certain local authorities in Scotland, irrespective of the wishes of the democratically elected local councillors."
I appreciate that it is a very important matter in Scotland and elsewhere, but, as the House knows, under Standing Order No. 10 I am directed to take into account the several factors set out in the order but to give no reasons for my decision. I have given careful consideration and I have listened carefully to the representations of the hon. Member, but I have to rule that his submission does not fall within the provisions of the Standing Order. Therefore, I cannot submit his application to the House.
Mr. George Foulkes: On a point of order, Mr. Speaker. I accept your ruling, of course, but would you agree that it is a gross discourtesy to the House that a statement should be made first to the press in Edinburgh and not to the House of Commons, particularly when there are no statements being made to the House this afternoon? It would have been perfectly possible for the Secretary of State for Scotland to make a statement in the House. Can you not use your power, Mr. Speaker, on behalf of the House, to direct the Secretary of State for Scotland in future to make statements in this House and not to the press in Edinburgh?
Mr. Speaker: That is not really a matter for me. I take the view that statements should be made in this House before the press receive them. Nevertheless, it is a matter for the Government. The hon. Member for Glasgow, Garscadden (Mr. Dewar), who is an experienced parliamentarian, will no doubt find other ways of raising the matter.
Mr. Dennis Canavan: I do not want to challenge your ruling, Mr. Speaker, but my hon. Friend the Member for Glasgow, Garcadden (Mr. Dewar) has made a very important point of concern to many people representing Scottish constituencies. I wonder whether you, Mr. Speaker—or the Under-Secretary of State for Scotland, the hon. Member for Edinburgh, South (Mr. Ancram), who is on the Government Front Bench—could tell us whether the House in the near future will have the opportunity to debate this very important matter and to come to a decision so that the views of the elected representatives of the people of Scotland can be expressed, instead of some stooge of a Minister giving out a press notice in Edinburgh—
Mr. Speaker: Order. The point of order should have been addressed to me. The hon. Member for Falkirk, West (Mr. Canavan) was, I think, addressing members of the Government Front Bench who, I am sure, have heard what he said.

BALLOT FOR NOTICES OF MOTIONS FOR FRIDAY 15 JULY
Members successful in the ballot were:

Mr. Ron Leighton

Mrs. Marion Roe

Mr. Hugh Dykes

Orders of the Day
  Queen's Speech
    Debate on the Address

      SIXTH DAY
      Order read for resuming adjourned debate on Question [22 June]
      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 Peter Mills.]
      Question again proposed.

The Economy and Unemployment
Mr. Speaker: I have selected the amendment in the name of the Leader of the Opposition and his right hon. and hon. Friends.
In addition, under the powers given to me by Standing Order No. 35, I have selected the amendment in the name of the right hon. Member for Tweeddale, Ettrick and Lauderdale (Mr. Steel) and his right hon. and hon. Friends for a second Division at the end of the debate.
3.40 pm
Mr. Peter Shore: I beg to move, at the end of the Question, to add:
But humbly regret that the Gracious Speech contains proposals that serve only to reinforce the economic and social policies that have in the past four years grievously weakened British industry; squandered the great asset of North Sea oil; reduced our national income; created mass and still rising unemployment; and which, because they offer no hope for lasting economic recovery, pose a major threat to personal living standards, to the social services that comprise the welfare state and to the future prosperity of Britain.
It is customary to extend the usual congratulations and courtesies to those who have been appointed to high office on their maiden appearances, and so I do. I assure the Chancellor of the Exchequer that he will have a keenly interested audience in the House of Commons when he addresses us presently. He will find it hard indeed to match the record established by his predecessor, the present Foreign and Commonwealth Secretary. The right hon. and learned Gentleman achieved in his last 12 months a notable—but, I suspect, temporary—fall in inflation, but taking his four years as a whole he visited upon our industries, our economy and our people a holocaust of destruction. His policies wiped out one fifth of our manufacturing industry. He virtually trebled the number of unemployed from 173 million when he came in—allowing for the statistical tamperings of the Secretary of State for Employment, and the expansion of short-life job schemes — to a figure not far short of 4 million. Between one in six or seven adults in Britain is today without work, and there are roughly 27 registered unemployed people in Britain for every registered job vacancy. The plight of school and college leavers, of which we are very conscious this month, and that of the
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over-50s is bleaker now than it has been for half a century. In spite of the massive contribution that North sea oil has made to our national income, he has left our country poorer than it was four years ago.
When I consider the right hon. and learned Gentleman's ministerial career—I regret that he is not here to hear this — his authorship and pilotage of the Industrial Relations Act 1971, his co-pilotage of the European Communities Act — that strongly built cage For the British people, the bars of which the Prime Minister, with ever diminishing force, as the Stuttgart summit revealed, is still ineffectively rattling—and when I consider what he has done to the nation and its people as Chancellor of the Exchequer, I do not see how the right hon. Member for Blaby (Mr. Lawson), the new Chancellor of the Exchequer, can hope to equal or emulate a record of such unparalleled failure. I can only say to the right hon. and learned Gentleman, although he is not here, that if, as Foreign and Commonwealth Secretary, by peaceful means he can do as much damage to the enemies of Britain as he has done in his previous positions to the people of his own country, we may yet have cause to be grateful to him.
The new Chancellor of the Exchequer is no stranger to economic affairs. As the Prime Minister told the Daily Express in her interview on 15 June:
"Nigel was an outstanding Treasury Minister. Nigel has a total command, I should think an almost unrivalled command, of almost everything relating to the Treasury".
After such an accolade, he needs no tribute from me. I simply remind the House that as Financial Secretary to the Treasury, as he was from May 1979 to the summer of 1981, he was the foremost advocate of the triple policies of cutting public expenditure, reducing the Government's borrowing requirement, and, most notably, introducing the medium-term financial strategy. His money supply targets have been, as he will recognise, only partially achieved, but at the price of ruinously high interest rates and the greatest overvaluation of the pound sterling that any currency has ever experienced in so short a period.
We know the right hon. Gentleman as a doctrinaire Friedmanite, a supply sider, and an obsessional anti-inflationist. We know, too, his attitude to the impact of those policies on unemployment. As he told the Association of Economic Representatives on 27 January 1982,
"In war, casualties are inescapable, they are neither intended, nor are they unexpected. They are a sign neither of wickedness nor incompetence. The object is quite simply to win the war while minimising the casualties incurred."
Field Marshal Earl Haig could not have put it better.
Like the Prime Minister, to the right hon. Gentleman inflation is an evil and unemployment is a problem. Like her, he rationalises the deliberate creation of unemployment by asserting that by defeating inflation the conditions are created for economic growth and for alleged real jobs. We have had four years of those policies, and instead of growth we have had an unparalleled collapse of the British economy, a contraction of output, and no growth — indeed, minus growth.
At the beginning of a new Parliament, it is right that we should take stock of our national situation. We must judge the new policies—if any—that have been placed before us, and we have to take a view of the future and the prospects for Britain and its people in the four to five years that lie ahead. In the earlier months of this year, during the run-up to the election, we had, not the usual talking up of the economy that we have come to expect in the

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English spring, but a quite exceptional euphoria, with Ministers, CBI and the City chorusing the good news of revival that they at least were able to discern. Of course, there was a bit of good news in the first quarter of this year, following the enforced devaluation of the pound by 14 per cent., which offered some prospect of competitiveness to Britain's industry. The bad news was either ignored or its announcement postponed until after polling day. Since the general election, however, scarcely a day has gone by without fresh evidence that, far from getting better, the prospects for our economy have changed again, and radically, for the worst. I shall mention just four.
First, there was the deferred—fortunately deferred—meeting of the Building Societies Association which pushed up the mortgage rate from 10 to 11¼ per cent. It was a move that we know caused the Prime Minister much disappointment. Why she was disappointed I do not know. Mortgage rates are inevitably affected by comparable interest rates, principally those set or greatly influenced by the Government themselves. When the Government pushed up the bank base rate last November and again in January by no less than 2 per cent., it was nearly inevitable that the building societies would be forced to follow suit, and last week's 0·5 per cent. cut was quite insufficient to offset it.
Secondly, on 15 June the index of industrial production showed that in the three months to April
"the index for all industries other than oil and gas extraction was half of one per cent. above the level in the equivalent period a year ago."
As for manufacturing production, in the latest three months it was 1 per cent. below the level of a year earlier. The only reason why the index was up at all in the past three months over the equivalent period of 12 months ago was the continued growth in the output of oil and gas. So much for industrial recovery.
Third, the following day, 16 June, we had the official figures on capital expenditure for the first quarter of 1983. For all industry, including distribution and services as well as manufacturing, it was 0·5 per cent. higher than it was in the first quarter of last year, while for manufacturing industry, taken separately, it fell by no less than 11 per cent. Manufacturing investment is now 31 per cent. down on what it was in 1979.
Fourth, on 24 June—only the end of last week—we had the official figures of the current account of the United Kingdom's balance of payments. The House should know and absorb the fact that our current balance in the first five months of this year was just £33 million—an annual rate of just over £70 million for 1983 as a whole. Last year —this is the extent of the deterioration—our current account balance was no less than £4,081 million, and in 1981 it was in surplus to the tune of £6,005 million. So in two years we have moved from a balance of £6,005 million to an annual rate this year of about £75 million. Leaving aside oil output, the deficit on our trade in goods, which was already more than £2,300 million last year, has so far reached £3,800 million in the first five months of this year and will probably reach some £8,000 million by the end of this year. In short, with North Sea oil, we are now barely in surplus. Without North Sea oil, such has been the deterioration in our industrial strength, we would be in a state of total crisis.
Mr. Tony Marlow: The right hon. Gentleman is concerned about the balance of payments. I understand that he would seek to reflate the economy considerably. What effect would that have on the balance of payments?
Mr. Shore: The package of measures that is required to give some hope to this country must include measures to assist the competitiveness of British industry. Unless we get a boost in our exports and improve the balance between our exports and imports, present trends will continue through this Parliament and there will be ruin at the end of the day.
The Government like to remind the country that the IMF lent money to the Labour Government in 1976, when our oil production had scarcely started and our balance of payments was seriously in the red, principally because of huge bills for imported oil. My riposte is that, if we did not have today North Sea oil production and exports, the size of our deficit would be such that even the IMF would not have the resources to finance it.
Meanwhile, as a result of the Government's decision to abolish controls over the export of capital, money continues to flood out of Britain. Allowing for the non-repatriation of retained profits in subsidiary countries overseas, we are exporting about £10 billion a year. The effects of that on our balance of payments have been averted so far because of the large North Sea oil surpluses engendered in 1980–82. Now that that surplus has disappeared and the current account is only just in balance—and still deteriorating—I do not see how the outflow of capital can be sustained.
The Queen's Speech has virtually nothing to say about any of those problems. Therefore, we shall expect the Chancellor of the Exchequer to give his assessment of them and to tell us what action he proposes to take to deal with them. The menace that lies in all those figures—the further threats to jobs and prosperity that they represent — stems from the continued and appalling loss of competitiveness that our economy and industries have sustained precisely since Thatcherite policies were introduced just over four years ago.
Our loss of international competitiveness is measured by the IMF's so-called relative normalised labour cost index — the higher the figure, the worse our competitiveness. That figure stood at 111 in 1979 and at 144 in the final quarter of 1982. Devaluation brought a welcome improvement to 130 in the first quarter of this year, but continued high interest rates and a rising pound have brought us back to about 135.
Such productivity in our manufacturing industry and, indeed, in our whole economy as has been achieved by the enormous shedding of labour has been swamped by the effects of an overvalued pound. As the investment figures that I have quoted demonstrate, there is no prospect of a real gain in productivity through higher and improved investment in the period ahead.
Therefore, it is no surprise that imports are flooding in while our exports remain virtually static. The reality of our gravely weakened economy and the Government's efforts to conceal it lie at the heart of the general election debate and the debates that will continue to dominate the life of this Parliament.
The inexorable pressure of low growth, failure to achieve competitiveness, failure to invest in the future and the deteriorating balance of payments further imperil the

583
future of our social services and the welfare state, the living standards of our people and the prospects for lower unemployment.
The problem for the Government can be stated simply. It is that existing public expenditure programmes, both civil and military, cannot be sustained, in spite of the retrenchment and cuts of the past four years, unless there is either a massive improvement in the rate of growth and the performance of the economy or a massive increase in the burden of taxation.
We are all aware of that problem in general terms, but during the latter stages of the recent election campaign there came into my possession two Treasury documents, one by officials and the other by the then Chancellor of the Exchequer, describing and quantifying the problem for the benefit of the Cabinet as a prelude and framework for the Government's White Paper on public expenditure from 1983–84 to 1985–86 which was published in February this year.
The Treasury put forward alternative growth prospects. The first was a sustained growth rate of 2½ per cent. per annum, which, if achieved, would broadly maintain taxes' present 39 per cent. share of GDP. As the House knows, that share has risen from 35 per cent. since 1979.
However, as the Chancellor said in. his paper, such a growth rate could be achieved, if at all, only by
"an expansion of the private sector encouraged by reductions in interest rates and taxes, especially taxes and charges on business, such as corporation tax, NIS or other national insurance charges. It would also be important if we are to achieve this better growth performance to reduce personal taxation so as to improve incentives. We cannot secure the level of interest rates in the private sector if we do not hold the PSBR down firmly. The way forward to better economic performance can therefore only be through reducing expenditure."
Therefore, even on that optimistic scenario, cuts in public expenditure would be necessary to give the incentives, through reduced taxation, that the achievement of that growth rate requires in the Chancellor's view.
Just how wildly improbable a 2½ per cent. growth rate is on present policies can best be illustrated by reminding the House that the achievement of the past four years has been an average minus ¾ per cent. growth in GDP per annum. Even the present so-called year of recovery was estimated in the Red Book to achieve a growth rate of only 2 per cent., and that was well before the announcement of the recent figures that I have quoted showing the deteriorating balance of payments, industrial production and investment.
Mr. Tim Smith: What evidence is there that the right hon. Gentleman's alternative, which was so decisively rejected by the electorate, and which would involve a huge reduction in sterling and massive inflation and Government borrowing, would lead to an increase in growth? The French experience suggests precisely the opposite.
Mr. Shore: We are properly dealing with the Government's policy and the prospects. The hon. Gentleman will have plenty of opportunities, as will the House, to hear what I have to say about alternatives on other, I hope frequent, occasions. Let me complete the argument, because it is important; and now that the election is over, the problem should be faced honestly by hon. Members on both sides of the House.
In the light of the implausibility of a 2½ per cent. growth rate, the Chancellor properly turned, in his paper, to what
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he considered to be the far more realistic prospect of a growth rate of less than 1 per cent. per annum. The consequence of simply maintaining public expenditure programmes with that rate of growth is a £15 billion deficit at 1982 prices before the end of the decade. The implications of that were spelt out by officials in their paper:
"the tax burden would rise from 40 per cent. to 45 per cent. of GDP".
In crude ready reckoner terms the implication is, at least,
"raising the basic rate of income tax to about 45p (more if the tax base was reduced through evasion or disincentive effects). Deduction for tax and NIS together would then be over 50 per cent. on a marginal pound of income for nearly all taxpayers"
or
"abolishing all allowances other than the single allowance (e.g. the married mans allowance, mortgage tax relief. relief on pension contributions, life assurance) and raising the basic rate to perhaps 33p"
or—if this was regarded as preferable—
"raising the VAT to 25 per cent. and doubling the real level of all specific duties"
or
"levying VAT at 25 per cent. on goods which now bear the 15 per cent. rate and those now zero rated (food, fuel, etc.)".
The Chancellor's paper concluded:
"I invite my colleagues to agree that the prospects suggested by the officials' report are unacceptable and that we need to take a new and fundamental look at levels of public spending. More specifically I seek their agreement (a) that (except where work is already in hand) we should as a first step commission further studies along the lines identified by the CPRS in their paper C(82)"—
That is not possible now, is it?—
"as well as any other possibilities which colleagues may care to suggest … (b) that meanwhile to allow ourselves freedom of manoeuvre we should agree to make no further public commitments which would add significantly to expenditure beyond 1985/6 and that we should avoid repeating Former pledges which would otherwise expire; (c) that in considering this year's public expenditure survey we should set particular regard to the longer term implications of our decision especially for the new year 1985/6 and (d) that we should consider further how these difficult issues might best be presented to our supporters in parliament and to the country at large."
Those difficult issues were not presented either to their colleagues in Parliament or to the country. They are central to the discussion of our economic affairs and the proper discussion of national economic policy. They are the heart of our problem.
When I published the documents and asked three pointed questions about their implications for the different social services, the then Chancellor and the Prime Minister —whom I see in her place—were evasive, even by their standards. They accused me of attempting
"to scare those voters"
and simply reaffirmed that
"our fully costed plans of public spending were announced months ago in the public expenditure White Paper and confirmed in our manifesto itself."
The issue cannot be left there. During her interview with Sir—I remind the Prime Minister—Robin Day on 31 May, the point was put to the Prime Minister that
"a serious charge has been levelled at you … and that is that you are trying to con the electorate with what appears to be a relatively moderate manifesto and you are concealing your real intentions. That is the charge. What do you say to it?"
The Prime Minister replied:
"It is an absurd charge. I believe most people know that I have been absolutely honest about what we are going to do and why we are going to do it."

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That honesty seems to have fallen short of any consideration of the real matters that her Cabinet had been debating only a short time before.
On Sunday, 5 June, the day that I released the documents, Mr. Walden interviewed the Prime Minister and asked her:
"Are you prepared to pledge—since you seem very confident about it —quite categorically that you won't cut public expenditure in the lifetime of your next government if you win on Thursday?"
The reply was very interesting. The Prime Minister said:
"Mr. Walden, I have never known in my 30 years in politics any government which has actually cut expenditure below the expenditure of the current year. Can you mention one? I can't."
Mr. Walden then said:
"But I am talking in real terms."
The Prime Minister replied:
"Ah, we no longer budget in real terms. We budget in the way any business budgets. We budget as any household budgets. What is the actual amount of cash I have got? I have got to keep my expenditure within that."
So there we have the first get-out. Just how big a one can be illustrated by the figures for the housing programme. In cash terms this year it is slightly higher than it was in 1978–79. In real terms, housing expenditure has been cut by more than half.
The second clear indication of the Prime Minister's intent was her statement in response to another question:
"We have laid out our plans for the next three years on government spending. They are there for everyone to see and discuss. In a way, I wish more discussion concentrated on those instead of the scares and leaked documents we had."
Indeed, yes, but that has to be read against conclusion (b) of the then Chancellor's paper to his Cabinet colleagues:
"to allow ourselves freedom of manoeuvre, we should agree to make no further public commitments which would add significantly to expenditure beyond 1985/6 and that we should avoid repeating former pledges which would otherwise expire."
The Prime Minister and her colleagues, knowing full well the real choices that lie ahead and determined as they are to avoid increasing taxes still further, have given themselves a completely free hand beyond the fiscal year 1985–86. In the meantime, they are hoping to muddle through—as they have done with the pension uprating this year — by cutting real public expenditure by allowing the rate of inflation to exceed the cash figures that they have adopted in their public expenditure White Paper. However, events may well force a change before then. Some of the implications of their policies are already becoming plain.
With the election behind her, the Prime Minister was asked by my hon. Friend the Member for Blackburn (Mr. Straw), in an intervention in her speech on Wednesday, for a guarantee that she would uprate unemployment benefit in line with prices. She replied:
"No, nor did I give that guarantee during the election, as the hon. Gentleman knows full well."—[Official Report, 22 June 1983; Vol. 44, c. 59.]
I do not think that my hon. Friend did know full well; nor did anyone else during the election campaign. Perhaps the Chancellor will now take the opportunity of telling the House and the nation which social security benefits are to be price-protected and which are not. What about child benefit, sickness benefit, invalidity pensions, and pensions other than the national insurance retirement pension?—[Interruption.]
One thing we can be certain of, and which we shall expect to hear from the Chancellor, is that our most
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regressive tax, national insurance contributions, will increase. The Prime Minister gave another interview in which she said:
"The national insurance contribution is not a tax."
The House will be interested to know that.
"It is an insurance premium that people pay to ensure that when they retire they have a pension, if they are unemployed they have unemployment benefit, and if they are sick they have sickness benefit."
It is against that background — the massive deterioration in our economic prospects this year to which I have referred, and the admitted, though privately held, Government estimates of a £15 billion tax deficit in the years ahead—that we must look at the Government's strategy—[Interruption.] The Chancellor will not get much help from the document which he has just been passed because it deliberately evades the question. That is why it was written in the way it was. The question remains unanswered and that is why we require an answer before the end of today's debate.
There is not much to go on in the Gracious Speech. There is the reiteration of the Government's intention.
"to maintain firm control of public expenditure and a responsible financial strategy based upon sound money and lower public borrowing."
Beyond that, the Government are to
"promote growth in output and opportunities for employment by encouraging industry to be adaptable and efficient, and to compete successfully."
In her opening speech on Wednesday 22 June the Prime Minister listed the items of her strategy. One was to cut the costs of business. The second was to use taxation as an incentive to enterprise and efficient management. The third was to embark upon so-called trade union reform.
Clearly the Government, in so far as they can control the matter, are determined through their money supply policies to sustain the pound at its present uncompetitive level. As there can be no prospect of an investment-led improvement in productivity—I have already cited the figures—the logic of their position drives them into not an anti-inflation policy for wages and salaries, but a policy of real cuts in incomes. We know how the Government intend to go about it. In the public sector, as reports of Monday's meeting with the CBI leaders have indicated, a cash limit of between 2 and 3 per cent. is to be imposed. That of course will be well below the rate of inflation, which will be running at twice that level before the end of the year.
Next is the assault upon the lower paid. Wages council awards have already been set aside by the Secretary of State for Employment and the whole system has been gravely undermined by simply slashing the number of wage inspectors by one third. The manifesto pledges the Government to
"ensure that Wages Councils do not reduce job opportunities by forcing workers"—
I stress "do not reduce"—
"to charge unrealistic pay rates, or employers to offer them."
The young workers' scheme, as we know, subsidises employers, provided only that they pay no more than £40 per week. The new training scheme is to be held to £25 per week, against the Manpower Services Commission's recommendation of £26·50.
The third stage is, of course, the attack upon the trade unions. The legislation of the previous Parliament is to be reinforced. As the Prime Minister put it,

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"The underlying increase in average earnings is still too high in relation to what we produce and the performance of our competitors." —[Official Report, 22 June 1983; Vol. 44, c. 55.]
Mr. John Townend: The right hon. Gentleman has just said that the Secretary of State for Employment set aside wage council awards. Does not he accept that the Secretary of State does not have the power to do so and that he has not set aside any such awards?
Mr. Shore: In the formal sense, the hon. Gentleman is correct, and the Secretary of State does not have the legal power to do that. However, the right hon. Gentleman has great authority, and he took the almost unique step of writing to the chairman of a wages council asking for an award to be reduced, which it subsequently was.
Mr. John Evans: The Secretary of State for Employment wants wages councils to be abolished.
Mr. Shore: The reduction of incomes is at the heart of the Government's strategy of competitiveness. Since Germany and Japan are to be our comparators for price increases, incomes will clearly have to be cut, and cut sharply; for the inflation rates of Germany and Japan are combined with a much more competitive exchange rate than our own and with massive increases in industrial investment. The sovereign cure for our problem of loss of competitiveness is, therefore, under this Government's philosophy, a real and sustained attack upon the living standards of the nation at work.
The other part of the strategy is to be further cuts in public expenditure to close the vast emerging tax gap, which the Goverment's own Cabinet documents have revealed. Whatever the Government may say, the axe will fall on social benefits, on the health and personal services, or on education.
During these past few weeks, which included the general election campaign and, I suppose, really the whole period since General Galtieri committed his act of aggression against the Falkland Islands, there has been a strange unreality about our affairs. It is as though our people had been numbed and bewitched, and their judgment suspended, their emotions and instincts strangely vulnerable to propositions which at almost any other time they would have dismissed with either scorn or abhorrence.
Thus the Prime Minister has been able to communicate her own strange message about a new Victorian age which is somehow to lead us back to prosperity and greatness. It is a myth and a dream. Its reality is continued and terrible national decline, and a deliberate lurch back towards the inequalities, unemployment and much of the poverty of the past. But reality will again obtrude—and soon. The spell will be broken, and the rage and disillusionment of a massively cheated people will fall upon itsprincipal author and her henchmen. The change of political fortunes will come, as Mr. Macmillan discovered after his great victory in 1959, and Mr. Harold Wilson after his, in 1966, with startling suddenness.
It will be our task then to lead the country back to sanity and to hope, and to build a new society and a new economy from the wreckage that we shall inherit.
4.14 pm
The Chancellor of the Exchequer (Mr. Nigel Lawson): I am sorry that there was some hilarity when, in
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order to answer the question raised by the right hon. Member for Bethnal Green and Stepney (Mr. Shore), I sent for a copy of the Conservative party's manifesto. I quite understand why the right hon. Gentleman would not dream of sending out for a copy of his party's manifesto. However, the answer to his question is contained in our manifesto. I refer to the published manifesto—the only manifesto—where on page 26 it clearly states:
"In the next Parliament, we shall continue to protect retirement pensions and other linked long-term benefits against rising prices."
That is our commitment.
Mr. Shore rose—
Mr. Lawson: It is a little early for the right hon. Gentleman to intervene, but I give way.
Mr. Shore: I agree that it is early to intervene, and I am grateful to the right hon. Gentleman for gibing way. He knows that the whole House is very interested in this question. He has given us that rather bland quotation, but we want to know what he considers linked long-term benefits to be, because that is of major importance.
Mr. Lawson: The linked long-term benefits are well known to the House, and do not include unemployment benefit. The right hon. Gentleman began his speech with some courteous remarks about my new job, and I thank him for them. Let me return the compliment by wishing the right hon. Gentleman the success that he deserves in his campaign for the leadership of the Labour party. We all understand that that is what his speech today was really all about.
Unfortunately, my duties at the Treasury prevented me from hearing the earlier speeches made by the two front runners in this interesting contest, the hon. Member for Islwyn (Mr. Kinnock) — the acceptable face of the Official Monster Raving Loony party—who promises to complete the job started by the right hon. Member for Blaenau Gwent (Mr. Foot), and the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley), who possesses a formidable appeal to those for whom Wilsonism is the wave of the future. However, despite his somewhat shop-soiled speech today for those of us who value reason and principle, the right hon. Member for Bethnal Green arid Stepney is our man.
As Secretary of State for Trade, the right hon. Gentleman successfully fought the good fight against import controls and more recently we were reliably informed that he was the only member of the shadow Cabinet to object to the extremist manifesto on which his party was to fight the general election. Of course, he has now given his powerful support to the case that the Government have been making for democracy in the trade unions. So, all in all, the right hon. Gentleman certainly has my vote—although why anybody in his right mind should want the job is another question.
There is always a tendency in the first Gracious Speech debate of a new Parliament for right hon. and hon. Members on both sides of the House to refight the battles of the general election and to rehearse once more the speeches that served them so well and so often on the hustings. That is understandable and we had an example of that today from the right hon. Member for Bethnal Green and Stepney. However, what really matters now is the future. Let me, however, say just this about: the election. The result on 9 June—however unpalatable it

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may have been to Opposition Members—was a clear and unequivocal vote of confidence in the Government's economic policy. Throughout the campaign the economic policies of the other parties were deemed by the electorate to be so unconvincing that they were hardly ever the subject of serious debate. The alliance failed to convince the electorate that it had anything to propose that had not been tried, without success, over and over again since the war. The Labour party, among its other disabilities, conspicuously failed to answer the questions about trade union power that had destroyed its Government in 1979.
Only the Conservative party was able to present a credible and coherent economic policy to deal with the realities of life as they are understood by the people. That is why we were re-elected and that is why we are resolved to continue those policies that have begun to get Britain back on its feet. In contrast to the right hon. Member for Bethnal Green and Stepney, I should like to pay the warmest possible tribute to my predecessor as Chancellor, my right hon. and learned Friend the present Foreign Secretary, who launched those policies in 1979 and whose courage and whose steadfastness in carrying them through during four difficult years richly earned the success that eventually attended them, including, among other things, the lowest rate of inflation for 15 years. I am keenly conscious that few Chancellors of the Exchequer since the war have left that office with their reputations enhanced. My predecessor is emphatically one of that select few.
The Government's economic objectives have not changed in any way since we first took office. Our sights are set on sustainable non-inflationary growth. Our resolution to achieve that objective is unwavering. Our policies have been consistent with achieving it, and they are proving successful. They have earned respect at home and abroad and we intend to persist with them. The essence of these policies is simply stated, and I shall use this first debate of the new Parliament to do that. There will be plenty of complications on the periphery to occupy us later; this is the occasion to reaffirm the essential elements.
First, having achieved a notable success in reducing inflation, we shall continue to set a framework of sound financial policy. The heart of our approach will therefore continue to be the medium-term financial strategy. As the right hon. Gentleman mentioned, I was associated with its conception; I was there at its birth and I shall be proud to see it through its mature years and ensure its longevity.
Secondly, we shall continue to strive to bring about a more dynamic economy — by the introduction of competition where it has hitherto not existed, by improvements in the working of markets and by encouraging the development of a more flexible and responsive economy. The problems with which we have to grapple are far from simple but we will be able to tackle them with renewed vigour in this, our second term. Reinvigorating the supply side is an essential complement to our financial policies if we are to secure the benefits in terms of increased output, which our success in reducing inflation leaves us poised to achieve, and I wish to comment on both these key areas of policy.
The medium-term financial strategy provides the essential framework of financial discipline, and the heart of the strategy is continued downward pressure over the years on both monetary growth and public sector
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borrowing as a proportion of total output. Monetary and fiscal policy have to go hand in hand. The ranges for monetary growth have been adapted to reflect changes in velocity, due in part to changes in saving behaviour and structural changes in the financial system, and I think that everybody would agree that our monetary strategy has been operated flexibly and sensibly in the light of changing circumstances.
The medium-term financial strategy has been extended to embrace narrow as well as broad monetary aggregates, and in interpreting movements in these aggregates account has been taken of other financial indicators such as the exchange rate. But although the form has changed in these respects—and may have to change further in the future as the monetary system continues to evolve — the substance remains unchanged: to maintain the general thrust of a monetary policy designed to reduce inflation.
To achieve the objectives of the medium-term financial strategy has not been, and will not be, easy. The policies on which we embarked in 1979 have required tough and sometimes unpopular decisions. I think in particular of the 1981 Budget which, in the depth of the worst recession since the war, substantially increased taxation to reduce the public sector borrowing requirement by about £3·5 billion.
Dr. Jeremy Bray rose—
Mr. Lawson: I shall give way to the hon. Gentleman shortly.
At the time, we were bitterly attacked on the basis of an outdated and mistaken orthodoxy. At the heart of that orthodoxy—this was indeed the sense or theme of the speech of the right hon. Member for Bethnal Green and Stepney—is the assumption that economic growth can be brought about only by a conscious act of demand management by an expansionist Government. Were that indeed the case, it is difficult to see how mankind ever emerged from the caves to produce a world fit for Keynes to be born in.
Dr. Bray: In the original statement of the medium-term financial strategy, the Government placed great stress on its value in conditioning expectations. Can the Chancellor now say what expectations should be generated by his strategy in respect of the rate of inflation, the exchange rate or competitiveness?
Mr. Lawson: One of the outstanding achievements of the last four years has been the change in expectations, the change to a climate of realism and common sense at all levels of industry, from the shop floor to the board room. In any event, our critics, who are slaves to that old orthodoxy, confidently claimed that the 1981 Budget would inevitably turn the recession into—I recall the phrase very well indeed—"a self-perpetuating downward spiral". That was what they said, but they could not have been more wrong, for ever since then—
Mr. Shore: Really!
Mr. Lawson: The right hon. Gentleman can look up the statistics; we are talking about the past, not projections for the future.
Ever since then, there have been increasing signs of sustained and non-inflationary recovery, at first disappointingly slow but now unmistakeably quickening. With inflation now at its lowest for 15 years, there is enough room in the framework of the medium-term financial

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strategy for a substantial recovery in output and employment. I intend to continue to maintain rigorous control of public sector borrowing as an essential ingredient in providing the right balance between fiscal and monetary policy, with all that implies for interest rates and the health of the economy as a whole.
That in turn requires firm control of public expenditure; otherwise there will be no room for significant tax cuts throughout the lifetime of this Parliament, and there is no scope for relaxation in this context this year, next year or in any year. Our aim will be to keep the growth of public expenditure over the medium term well within the growth of money GDP.
The published plans for the next three years will mean a high proportion of the nation's wealth passing into the hands of Government, either for final consumption by the public sector or for redistribution in the form of cash transfers. The first is a substantial claim on real resources, and both place great demands on public finance. So, in extending the financial strategy forward, towards the end of the life of this Parliament and beyond, we shall be seeking ways of reducing still further the share taken by public expenditure.
Mr. David Winnick: Is the Chancellor now saying that we should be expecting a reduction in unemployment? When he speaks about recovery in output and employment, as he saying that unemployment will come down, leaving aside any playing around with the figures?
Mr. Lawson: Certainly, and the policies on which we have embarked, and which we shall continue to pursue, are the only policies that have any hope of bringing down unemployment, in Britain—[HON. MEMBERS: "When?"] Public expenditure should continue to grow—
Several Hon. Members rose—
Mr. Lawson: As I was saying, public expenditure—
Hon. Members: When?
Mr. Speaker: Order.
Mr. Lawson: Public expenditure should continue to grow, but only in cash terms. Measured in terms of constant prices, it should be roughly level from now on and, as the economy grows, it will fall as a proportion of GDP. Recent figures for central Government borrowing are substantially higher than those for a year earlier, but it must be remembered that this comparison is distorted by the change in the arrangements for local authorities and nationalised industries introduced last summer.
Nevertheless, at a time when the monetary aggregates are growing rather quickly, we shall be watching the course of borrowing closely in the coming months, and I stand ready to take action if our objectives are endangered. It is because of the Government's firm intention to keep a tight grip on expenditure and borrowing that I am confident of further progress in reducing taxes.
What about the Labour party? Its members will not need reminding how they gleefully seized on the opportunity afforded them by the Dissolution to force us to drop a whole range of measures from the Finance Bill, including important tax reliefs announced in the Budget. They thus gave very early notice to the electorate—who duly noted the fact and voted accordingly—of their attitude.
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The House will know already that we are moving swiftly to undo that piece of mischief. Last week I tabled Ways and Means resolutions to pave the way for a short Finance Bill restoring the main tax reductions and dealing with a few other essential measures, and I trust that the House will pass those resolutions tomorrow. The new Finance Bill will then be published on Friday.
I could not reasonably ask the House to consider the remainder of the original Finance Bill proposals in the same time scale, but I am urgently reviewing them so that I can announce as soon as possible, and in as much detail as possible, how we intend to proceed. I have already announced that the oil taxation provisions, which are urgently needed if important North sea developments are not to be delayed, will be introduced in the autumn in a separate oil taxation Bill. Other proposals will be included in the 1984 Finance Bill. Wherever possible I propose to publish draft clauses in advance.
The Government are not in the business of financing inflation either in the public sector or in the private sector. After decades of accommodating policies in which excessive pay awards could be passed on to the public in higher prices, we now have a framework that encourages realism in pay bargaining and in industrial relations more generally.
The rediscovery of financial discipline has forced pay bargainers to face the crucial link between pay and jobs. This link has a positive as well as a negative side. The rates of monetary growth envisaged in the strategy have been set at levels that provide room for substantial growth of output and employment if inflation continues to moderate. Such growth, unlike the short-lived reflationary upswings that we have seen in previous cycles, will be sustainable because it is based on lower inflation. While so much remains to be done, our achievements to date enable us to face the future with confidence.
Looking first at inflation, in 1980 retail price inflation peaked at 22 per cent. A year ago it was running close to 10 per cent. In May of this year it was only 3·7 per cent., the lowest level for over 15 years. This has been achieved without any resort to wage or price controls.
Mr. John Evans: There has been massive unemployment instead.
Mr. Lawson: As we have always said, there may be some temporary rise in inflation to 5 or 6 per cent. by the end of the year. However, there is and will be no sudden resurgence of inflation of the sort that we have seen in the past. The underlying trend has been firmly downwards since 1980 and we intend to keep it that way.
Sound monetary conditions together with firm control of borrowing have enabled falling inflation to be accompanied by lower interest rates. Though, inevitably, there are fluctuations in interest rates, influenced as they are, among other things, by developments in the rest of the world, short rates are down by nearly seven points since the autumn of 1981. This has substantially eased the financial position of Government. Each 1 per cent. of interest rates is generally reckoned to be worth about £250 million to £300 million to industry. We shall seek to ensure that the underlying downward trend in the cost of borrowing is maintained.
Government borrowing in relation to national output, among the highest in the OECD countries four years ago, is now one of the lowest. Again, we must keep it that way.

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Industrial productivity has increased considerably even during the recession and is set to increase still further. For decades, higher productivity has been seen as the key to economic progress. It was not until the 1980s that we succeeded in converting aspiration into reality. Lower inflation creates—
Mr. Bryan Gould rose—
Mr. Lawson: It is good to see the hon. Gentleman back in his place. Lower inflation creates a climate that is favourable to the vigorous control of costs that is essential if we are to see further improvements in competitiveness and sustainable growth both of output and employment.
Mr. Gould: How do the improvements in productivity over the four years of the previous Conservative Government compare with the productivity improvements that were achieved over the four years of the last Labour Government?
Mr. Lawson: They were substantially greater compared with the average productivity improvement in the OECD as a whole. Productivity improvement throughout the world was lower—
Mr. Gould: Answer the question.
Mr. Lawson: —during that period than in the United Kingdom. In relative terms our productivity performance over the past four years has been better than at any time previously, and the hon. Gentleman knows that perfectly well. It is no accident that, on the whole, the countries with the lowest rates of inflation tend over time to enjoy the lowest levels of unemployment. The lesson of the election—if the Labour party is serious, it should really learn it—is that the British people understand that the pursuit of a recovery that is sustainable because it does not spring from artificial reflation, and hence renewed inflation, is the best and only way to tackle unemployment. Reversing the rising tide of unemployment must be a prime objective. To achieve it we must ensure that the recovery that we are now seeing is a lasting one. Hard evidence of that recovery is steadily increasing although it is causing such pain and grief to the Opposition.
Mr. John Evans: There is not a shred of evidence of a recovery.
Mr. Lawson: Only this week the latest CBI industrial trends inquiry pointed to further improvements in the business climate, stronger total order books than in any survey since 1979, and expectations of further increases in output. Figures released only today show an encouraging trend in industrial profits for both North sea and non-North sea companies, which are up 50 per cent. and 20 per cent. respectively from the average levels in 1980 and 1981. Revised GDP figures, also published today, show that total output in the first quarter of the year was about 3·5 per cent. higher than at the low point in mid-1981. For this year, the forecast at the time of the Budget, to which the right hon. Member for Bethnal Green and Stepney referred, was for an increase of about 2 per cent. in national output this year. On the basis of the latest evidence, I should expect an increase of up to 2·5 per cent. this year.
Mr. Shore: I hope that the right hon. Gentleman will not ape his predecessor in treating rather frivolously the major statistics that are published by the Government. There is no point in plundering the one or two factors that are helpful. The right hon. Gentleman is now the Chancellor of the Exchequer, and Britain's fortunes, for good or ill, are now in his hands. He should know that most of the increase in GDP is entirely absorbed by North sea oil production and has nothing to do with the rest of the British economy. Secondly, will he comment on one of the most spectacular deteriorations in our balance of trade in the past 12 months that we have ever known in our history?
Mr. Lawson: I was not aware that the right hon. Gentleman proclaimed the large surplus last year as a great triumph. It is not true that almost all the recovery is due to North sea oil and gas. A significant proportion of it is, but so what? North sea oil and gas is an important part of our economy. It is employing a growing workforce and an offshore supply industry is growing up as well. It is absurd to suggest that it does not count or that it does not exist. It is an extremely important part of our economy. That relates also to the agony that the right hon. Gentleman is suffering over the deficit in trade in manufactures. When in one part of the balance of payments there is a marked improvement, it is only to be expected that there will be a corresponding deterioration in the other components. I remember the right hon. Member for Down, South (Mr. Powell) having to lecture the House many times on the fact that the figures in the balance of payments all have to sum to zero. Therefore, a change in one component leads to a change in the opposite direction in another component. Despite the eloquence of the right hon. Member for Down, South, the right hon. Gentleman has not understood the point. That being so, there is not much point in my trying to educate him.
Mrs. Elaine Kellett-Bowman rose—
Mr. Lawson: The next step is to ensure that the recovery deepens and spreads more evenly throughout the economy and the country. Other countries face the same task. Many of the world's economies, both developed and developing, are convalescing after the fever of inflation suffered over the past decade or more. We shall all need a steady period of recuperation stretching over several years, during which economies can complete the restructing and rebuilding of their productive capacity. Above all, we need to avoid a relapse into renewed inflation and rising interest rates.
That is why, at Williamsburg, the summit countries pledged themselves unanimously to continue with disciplined non-inflationary monetary growth and to the reduction of structural budget deficits. The main burden must lie on individual countries to follow appropriate policies. However, we attach importance to working together with our partners and the International Monetary Fund to ensure convergence on non-inflationary growth and the maintenance of a stable monetary system for the world as a whole.
The United States bears a special responsibility in this context both because of the size of the American economy and because of the importance of the dollar in international financial markets.
The recovery of the world economy, coupled with low inflation and interest rates, is a crucial element in the

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solution of, in some instances, serious debt problems for developing countries. Continuing firm adjustment efforts by the major debtors are absolutely essential also. Most now have programmes with IMF support, and it is important that the fund should have adequate resources to play an effective role.
The Government laid the necessary order. Last week we introduced a short additional International Monetary Arrangements Bill to allow the United Kingdom to participate in the increase in IMF quotas and in the improvement of the general arrangements to borrow agreed in February under my predecessor's chairmanship.
Although lower inflation is a necessary condition for sustainable growth, it is not a sufficient condition. It needs to be combined with a strengthening of market forces, with greater efficiency, more competitiveness and a greater regard for enterprise and self-reliance. Lower inflation greatly assists the achievement of those changes, but it does not of itself bring them about. The individual efforts of those in business and industry at all levels bring them about. Governments cannot guarantee success, but we have a vital role to play in two ways: first, in setting the legislative and fiscal context for business; and, secondly, because the Government, including local government, are a major employer, and are directly responsible for 15 per cent. of the labour force.
The past four years have seen great changes in those areas, but still more needs to be done. We have abolished a whole range of damaging and unnecessary controls—exchange, price, dividend, pay and hire-purchase controls. For the first time for many years, large and small firms are being allowed to breathe again, free from the choking effect of bureaucracy. Investment and pricing decisions are once again in the hands of those best qualified to make them—those running the businesses. The cost of having prevented this in the past—although it cannot be measured directly—is undoubtedly one of the reasons for Great Britain's poor performance. The recurrent burden of prices and incomes policies, the chopping and changing of hire-purchase controls, the whole paraphernalia of so-called demand management, have added to the burdens on managers and struck at the very roots of enterprise. We want none of it.
Mr. Richard Wainwright: Since the Chancellor of the Exchequer is tomorrow to ask the House to pass important Ways and Means resolutions without any debate, will he now be good enough to explain why he has tabled the resolutions word for word as they were tabled three and a half months ago under different economic conditions?
Mr. Lawson: We made a firm commitment at the time of the Dissolution of Parliament and during the election campaign that major measures which we had not been able to enact because of the Dissolution would be brought forward first thing in a new Parliament. We have carried out that undertaking.
Mrs. Kellett-Bowman: Large areas of the north-west are now partaking in a prosperity generated by off-shore gas, not least the area that I represent. Unlike the right hon. Member for Bethnal Green and Stepney (Mr. Shore), we are very grateful for this expansion and that prosperity.
Mr. Lawson: I am most grateful to my hon. Friend for making that important point and I apologise for not giving her the opportunity to make it earlier.
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A good example of what we have done is to be found in tax policy. We have deliberately and substantially reduced the tax burden on employment and business. We have reduced to 1 per cent. the national insurance surcharge, the tax on jobs that the Labour party introduced and then increased to 3·5 per cent. Stock relief has been improved. Corporation tax for small companies has been cut and we aim to do more.
We have helped small businesses in scores of ways, through the tax system and elsewhere. We have promoted schemes which help employees to take shares in the businesses in which they work. We have encouraged innovation and the application of new technology. Over the next five years we shall constantly seek new and imaginative ways to develop these and other initiatives.
We need also to improve the legislative framework in which our businesses operate, and nowhere is this more important than in trade union reform. Getting the labour market to work better requires a transformed climate of industrial relations—one in which individual workers can better see how to further the prosperity of the firms in which they work and, therefore, their living standards and job prospects. We have already legislated on the closed shop, picketing and curbing abuses of trade union power, which were often aimed as much at individual workers as employers.
We need to give trade union members their proper rights and influence over the policies and actions of their unions. We shall be introducing legislation to provide for secret ballots on three key issues—the election of trade union executives, the calling of strikes or support for other industrial action and periodic authorisation of political funds.
Mr. John Evans: Will the Chancellor of the Exchequer confirm that between 75 per cent. and 80 per cent. of strikes are unofficial and last less than three days and that his much vaunted talk of having secret ballots or facing the legal consequences will have no effect on those strikes?
Mr. Lawson: We shall have to see when the law is in place. What the hon. Gentleman and his right hon. and hon. Friends find so difficult to stomach is that these reforms are welcomed by the overwhelming majority of the British people, including members of trade unions.
The Government have direct responsibility for businesses in the state sector. Many have no place there. Some have returned already to the free enterprise sector to which they belong and where they can flourish. Britoil, Amersham International, British Aerospace, the National Freight Company, Cable and Wireless and others are enjoying this new-found freedom to raise funds in the private capital market and to succeed or fail on fair terms against competition. I am glad to say that all of them are succeeding. Competition and efficiency are enhanced, and, above all, quality and service to the consumer are improved. By the end of our second term in office many more state-owned businesses will return to the free enterprise sector where they rightly belong.
Privatisation may be an unattractive word, but the fruits are there for all to see. There is still a long way to go before the British economy is fully restored to wealth, but this is where the prospect for more jobs truly lies. To pretend otherwise and to suggest that there is some short cut to more lasting jobs and some easy way to keep people at

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work in a competitive world, is wilfully misleading. What happened on 9 June showed that the people will not be misled.
Meanwhile, we are faced with the problem of a distressingly high, and still rising, level of unemployment. I fully share the concern expressed by the right hon. Member for Bethnal Green and Stepney and by the House. It is a grave social evil that so many of our young people cannot find work and that many others have their working lives prematurely curtailed. No one in the House would dispute for a moment the need to tackle the problem. Where we differ fundamentally is over the method. The Labour party talks of reflationary packages, of the Government creating jobs by spending more, printing more and borrowing more. The country's post-war history and the current experience of countries throughout the world, and, indeed, just across the Channel, show that this simply does not produce a lasting cure — quite the reverse.
Governments have an important role in easing the transition to a low inflation-high employment economy. The Government are spending substantial sums—some £2 billion this year — on special employment and training measures for this purpose. To reduce unemployment on a lasting basis we need to reduce inflation and costs and to improve productivity. It is precisely because the Government are so concerned about unemployment that we are determined to go on doing just that. Our employment policy is a positive one which aims to create a climate in which jobs will take root and flourish. It is not interested in perpetuating ancient customs with the help of subsidies. It has nothing to do with the cruel hoax of promising to employ more workers with money that we do not have. It is based firmly on sweeping away the accumulated obstacles to employment and allowing business to operate within a reliable and predictable economic and financial framework.
A sustainable increase in jobs depends upon sound money, low inflation and greater efficiency. That will be my objective as Chancellor. I ask the House to reject the Opposition's defeatist amendment as decisively as the people rejected the same claptrap on 9 June.
4.49 pm
Dr. David Owen: Despite profound disagreement with some aspects of the Government's policy and the Queen's Speech, we hope that the Prime Minister and her Government succeed. We have no vested interest in the failure of the Government. If they fail, the country will have failed. [HON. MEMBERS: "You put them there".] We did not put the Government there. Those who put them there, more than anyone else, were those who endorsed the Labour party manifesto, which was decisively rejected by the people.
We speak in the House for 3·5 million voters and on behalf of 7·75 million voters who endorsed candidates standing on the joint programme of the alliance. That voice, 26 per cent. of the electorate as opposed to the 28 per cent. who voted for those who pose on the official Opposition Benches, will be heard in the House and in the country. The Prime Minister has more chance of having a successful Government if she is prepared to widen the base of her support. She needs no reminding that she is supported by only 31 per cent. of the electorate.
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When she was the Leader of the Opposition, the Prime Minister was strident on the issue of the mandate. Before the Gordon Reece voice was invented, on 23 March 1977, when the then Labour Prime Minister claimed that he governed as of right, the present Prime Minister said:
"By what right? The right of a minority Government; the right of supposed mandate based on 38 per cent. of the votes cast or 29 per cent. of the electorate? They govern by no right except the arrogant right of Socialism."—[Official Report, 23 March 1977; Vol. 928, c. 1285.]
I would not be so arrogant as to use the word "right", but the Prime Minister might consider—
Mr. Eric S. Heifer: the right hon. Gentleman was in that Labour Government.
Dr. Owen: I shall deal with that in a moment.
The Prime Minister governs by the moral authority of a supposed mandate based on 43 per cent. of the votes cast, or 31 per cent. of the electorate. I shall reply now to the hon. Gentleman the Member for Liverpool, Walton (Mr. Heffer). I was honoured to serve in that Government. The day after 23 March 1977 the Labour Government broadened the base on which they had support. They went into the Lib-Lab pact—[Interruption.] Yes. It may be hard for some right hon. and hon. Members to remember it, but at that stage they were extremely grateful for having Liberal votes. I was grateful, too.
One of the facts that must be remembered is that the Government then spoke for 58 per cent. of the electorate. They were a much better Government for it. If anybody remembers the Government during the Lib-Lab pact, they will remember that they brought down inflation, carried conviction and were a Government of greater coherence and authority than they would have been if they had continued to speak on behalf of only 29 per cent. of the electorate.
Mr. Michael Colvin: If the right hon. Gentleman feels that the Lib-Lab pact led to a greater consensus of political view in the House, will he explain how the first measure that was passed following the Lib-Lab pact was the nationalisation of the aircraft industry? What mandate did he have from the people for that?
Dr. Owen: I am not saying that we had a mandate on every aspect. All I say is that if the measure went through —Liberals did not vote against—I believe that the decision to create British Aerospace was a sensible rationalisation of industry, although I now support the taking of equity shares in British Aerospace — [HON. MEMBERS: "Oh."] The two are not as incompatible as some right hon. and hon. Members may think.
The hon. Gentleman asked about consensus. Before the Lib-Lab pact was formed, the Labour Cabinet, by a majority, agreed to proportional representation for European elections. Soon after that a measure was put to the House that ought to be put to the present Prime Minister, to introduce proportional representation for the European elections, and 222 hon. Members, including 61 Conservatives, voted for it. It would have been a great deal better for our representation in Europe, our authority, the voice of the people and this country's representation if there had been proportional representation in the European elections.
It is on such issues that the Prime Minister will be judged. She must widen her base and listen to other

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people. She much govern for the good of the whole nation. We shall be a constructive Opposition. We shall not spend our time looking back over the past—I HON. MEMBERS: "All six of you."] Yes, all six of us, but we are joined by 17 Liberals. [Interruption.] We know that the House of Commons, playground as it sometimes is, like last night, will scoff. We know that behind us lie 3·5 million voters in our own right and behind the alliance 7·75 million voters. Of course, the old class-based parties will scoff. The Prime Minister will play her games as she did in the last election, making the extraordinary statement that we should have stayed in the Labour party. Does the House believe that we should have endorsed that manifesto, which we would have had to do had we stayed in the Labour party? The Prime Minister must now speak for the nation.
In many respects, I welcome the Chancellor of the Exchequer to his post. Back in 1966, we were allies on economic policy. [HON MEMBERS: "Oh."] The then editor of the Spectator was a firm critic of deflation and a strong supporter of a competitive exchange rate. I hope and believe that the Chancellor of the Exchequer will remember those days. I shall remind him of an apt quotation. He said:
"We have had the deflationary measures which will create the idle resources."
In those days the right hon. Gentleman worried about idle resources. He went on to say:
"Now therefore is the right time to devalue the pound so that those resources, instead of lying idle at immense human and economic cost, are diverted for producing for export. The greatest of all this Government's economic crimes will be if, when it does decide to reflate the economy, it does so again by reflating demand at home."
Those words were written in July 1966. The House would do well to remember the then unemployment rate of 291,700. It shows the extent of the decline in our fortunes that there are now 3·5 million unemployed, which is unacceptable. Let this be clear to the Chancellor. We shall not tolerate a continued rise in unemployment. The Chancellor was somewhat vague about how he would handle that issue. The crucial question is whether he will keep rigidly to the target range for the money supply announced by his predecessor, set at the time of the Budget at 7 to 11 per cent. I thought that he had talked at times about flexibility. He used an interesting phrase—"The form may have to change." I hope that the Chancellor will not take drastic action to cut back on the monetary aggregates. At the moment M3 is growing at an annual rate of 15·7 per cent. The other main parameters are also growing. He has admitted that the PSBR is overshooting its target of £8 billion, and is probably over £10 billion at the moment. The temptation for the Chancellor might be to increase interest rates to bring the money supply back to target. If he does so, he knows well that that will not only discourage investment but push up the value of the pound, pricing exports out of world markets. I hope that the Chancellor will hesitate before he does that. One of the greatest failings during that past four years of this Government has been the way in which the exchange rate has yo-yoed from $1·50 to $2·40 to the pound, and back to $1·50. The IMF index of relative unit labour cost shows that it would be better if the pound was at the level it reached in relation to the dollar in March of this year, before the rebound.
I believe that the Chancellor of the Exchequer, as opposed to the Prime Minister, might be interested in now
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joining the European monetary system. We are effectively a member of it— [Interruption.] People hesitate about joining the exchange control system, but one of the advantages in joining now, especially if we could join at a slightly lower rate, is that we would not be forced up so much. There is some truth in the argument used by successive Chancellors—I remember when the right hon. Member for Leeds, East (Mr. Healey), used the argument — that the market cannot be bucked. Our currency is peculiarly vulnerable to speculative changes, especially when changes are in prospect in the price of oil. If the Chancellor went into the EMS now, preferably at a lower rate, and perhaps joined as the Italians have, that would allow for more fluctuation. I do not believe in a totally fixed rate; I would wish to be able to change it in a reasonable way. The EMS would effectively ensure that the exchange rate did not, once again, rise to an uncompetitive level. The temptation to allow that to counteract the effects of inflation, with the Prime Minister at his elbow, might be great. It would have grievous and damaging consequences for the economy.
I draw to the Chancellor's attention the topic of capital investment and I do so on the authority of no less a monetarist than Professor Alan Budd. Our motion singles out the need for selective investment because here we have seen one of the most damaging consequences of the financial and monetary controls that the Government have applied. Public spending on goods and services fell between the financial years 1976–77 and 1982–83 by 6·9 per cent. No reduction was achieved in current expenditure. It was planned to fall by 1 per cent. but it rose by 5 per cent. in real terms. Capital expenditure, which was planned to fall by 35 per cent., actually fell by 40 per cent. It would be damaging if the emphasis on financial control continued, and a failure to cut current expenditure meant the further loss of capital expenditure that is so vitally needed for economic growth. The Chancellor knows that.
The Chancellor knows that he has a serious problem. He inherits a public expenditure forward projection based on a cash provision for education, which is planned to rise by more than 3 per cent. in the next two years, health and social services by 4 per cent. and overall programmes by 5 per cent., yet he has in the pipeline inflation rising between 6 and 8 per cent. He shakes his head and implies that it will be lower than that. I hope he is right. He must now offset the effect of the mortgage rise which has added at least 0·4 per cent. to the RPI. The Chancellor of the Exchequer will be fortunate if he manages, during the forthcoming year, to maintain the planned rate of 5 per cent. Otherwise, it means cuts in expenditure.
The Chancellor might say that it is no use promising increased expenditure in every area, and the Social Democrats do not intend to do so. We have singled out areas which must have an increase in expenditure. These are the personal social services as they affect the elderly and disabled, which have not been well served. There has been an increase in home helps of 4 per cent. between 1978–81, but to keep pace with the demographic change, with more people living beyond 80 and more people wishing to live within the community, the home help provision should have risen by more than 6 per cent. When trying to do something about employment, we should not only look at industry. A great need exists for female employment and also a social need to keep people at home.

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I hope that the Chancellor will consider expanding the personal social services to 40,000 home helps and overall 100,000 people working in the personal social services.
I hope, too, that the Chancellor rethinks the commitment in the Gracious Speech to yet further centralisation of Government control of local government. The degree of centralised control of local government that has taken place in the past 20 years is horrendous. I do not offer it as an absolute panacea, but there is no doubt that a fairer voting system would lead to far less extremism in council chambers.—[Interruption.] I hear cries from the Labour Benches. More Labour voters want a change in the voting system now than ever before. It is changing, and it will change, because as they turn out to be the third or fourth party in the House the Labour party will cling to the raft of proportional representation as the only way to survive.
Defence is the other central question facing the country. I must say something about last night's events. The Secretary of State for Defence, the Leader of the Opposition and his deputy protest too much. The reality of the decision over the modernisation of theatre nuclear forces is somewhat different from that which they try to pretend. The fact is that at the NATO summit in 1977 the British Government committed themselves to establishing a working group to examine theatre modernisation—a prudent and sensible decision, taken by all of the NATO countries. When some people give the impression that there was no discussion about those matters, it should be noted that the then Secretary of State for Defence made it clear to the House in November 1977, I think, that we were examining cruise missiles so as to be able to participate in the Alliance discussions. That has never been a secret. It is no use trying to pretend that the cruise missile option was not fully discussed during that period. Of course it was. The decison as to how theatre nuclear weapons were to be modernised was left over, as was always envisaged, to the NATO summit meeting at the end of 1979. There is some disparity between a press release in April and a communiqué —not for the first time, I suspect, in Government circles. What is nonsensical to pretend is that the then Government had not—quite sensibly, in various discussions within NATO and bilaterally with the Americans at the Guadelupe four-power summit—discussed the reality of theatre modernisation. The Conservatives are wrong to pretend that the Labour Government made a commitment to ground-launched cruise missiles. I have looked back through the records and the memorandum shows that I was rather opposed to such a commitment.
I plead guilty to advocating submarine-launched cruise missiles. At that time I was fighting a great tussle, resisting the purchase of the Trident missile system, because I could see that it would have grave and damaging effects on arms control negotiations. I was advocating in its place a minimum deterrent, which is all that Britain needs—a last resort system—that could be handled by submarine-launched cruise missiles. Not everyone agrees with that and I do not want to get into that dispute now. But it is interesting that they are now being fitted into United States submarines, and do provide an effective weapon system.
Mr. Roland Boyes: Does the right hon. Member agree that, except for telephone
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polls, the pollsters predicted the general election result fairly accurately? At the same time, if they were right on that, they were probably right on other questions. One of the questions they asked was whether the British people would agree to the installation and deployment of cruise missiles. Overwhelmingly, the pollsters found that the British people were against cruise missiles. Does the hon. Member agree— I am thinking of some of the points put forward by my Social Democratic opponents—that the Government have no mandate whatsoever to install cruise missiles in Britain this year?
Dr. Owen: Traditionally, we do not break up the issues upon which a Government fights an election. They are endorsed or rejected by the electorate across a broad spectrum of policy. Let us deal with the issue the hon. Gentleman mentions. It is broadly true to say that the opinion polls, which fluctuated on the topic of cruise missiles, have still had a fairly narrow majority of people against. The opinion polls are interesting in that they show that, were the Government to introduce a dual key for cruise missiles stationed in this country, public opinion would dramatically change. Instead of a narrow majority against, there would be a considerable majority ready to accept such a policy. This is another issue on which the Prime Minister must show breadth and vision. She must ask herself why it is that she would carry conviction with the people of this country if she were to have a dual key for cruise missies.
The answer is simple, and it was well understood by an earlier Conservative Prime Minister—Harold Macmillan —when he faced the same choice in relation to the only other comparable weapon system introduced into this country — the Thor missile. It is that the people of Britain would then know not just that there was, as I believe there is, a perfectly viable agreement between the United States President and the British Prime Minister but that there could be no accidental and irreversible launching of cruise missiles from this country's territory without the active involvement of RAF personnel.
I know that many Conservative Members want dual control. The Leader of the House knows it, too, but with the deftness to which we have become accustomed he avoided the moment of decision before the election. With great skill, he avoided a debate in which there would undoubtedly have been a motion on dual key because he feared that the Government might lose the Division. In those days, there were at least 35 Conservative rebels and, in their hearts, probably 150 to 200 more. I do not know what this new Parliament will do, but this issue goes wider than party politics. Would it not help the Prime Minister to know that she had more conviction with the people of this country? It is not enough to go on ranting about joint decision between herself and the United States President. That is not what we are worried about. We want to know the actual mechanism for launch and to be sure that it is controlled.
The greatest concern is about the initiative that needs to be taken on intermediate nuclear missiles in Europe. The United States is increasingly concentrating on the START talks. That is the greatest concern for United States Senators and Congressmen. This House should be concentrating on initiatives in the INF. As my right hon. Friend the Member for Glasgow, Hillhead (Mr. Jenkins) said yesterday, we are prepared to look seriously at the proposal put down by the two joint negotiators in Vienna.

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That proposal has not been decisively rejected, but it would mean a trade-off. It would mean that the United States would not deploy Pershing II missiles, which we know are feared by the Soviets because of the 12-minute maximum in-flight time from European bases to Soviet territory. It would mean the Soviet Union considerably restricting the number of SS20s targeted on western Europe. It would also mean—let us be clear about it—some deployment of cruise missiles, but it need not be a permanent deployment. It would be part of a first phase. Then, one hopes, negotiations would proceed to the complete eradication of cruise missiles.
I regret the rather strange assumption in the Queen's Speech that cruise missiles will be deployed regardless. The 1979 NATO decision was clear. We were to be ready to deploy—to mean it, and to spend money to be ready — but not to deploy unless we were convinced that no satisfactory negotiations were available from the Soviet Union. Neither the Social Democrats nor the Liberals can endorse an unconditional commitment in the Queen's Speech to cruise missiles. We want the negotiations to succeed, as still they may. I profoundly hope that they will, but we shall judge that decision in the light of factors such as the Soviet response, the attitude of our NATO partners, whether there is dual control, and many other aspects.
I want the United Kingdom to be ready to put down initiatives. We should urge the Soviets to dismantle their older SS4s and SS5s, perhaps under an initial two-year first phase agreement. We should urge them, too, to freeze SS20 deployment. The United States would temporarily forgo Pershing II deployment and limit the number of cruise missiles. Bombers would be limited to, say, 300 on each side.
We could then go on to a second stage in which both sides would cut warheads—currently about 11,000 on each side. At that stage we could ask the Soviets substantially to reduce the number of SS20s. We might abandon any plans to deploy Pershing II. At that stage, too, there would have to be agreement on how to handle the question of Chinese weapons, United States nuclear weapons in Asia and the French and British deterrents. Even the Prime Minister, as reported in Time magazine the other day, made it clear that there were conditions in which she would have to consider the number of warheads deployed by Britain if there were major deep cuts. I remind her that, if we reduced the number of warheads to 5,000 on each side, France and Britain would be providing 20 per cent. of them. It is inconceivable that we should not have to cut the number of our warheads in those circumstances.
If the Government's strategy is to have a minimum deterrent, the balance of Trident with current Soviet power is irrelevant. We need sufficient force to pose a credible threat in a situation in which we can no longer rely on NATO. It is strange that we have totally locked ourselves into a highly sophisticated system—the Trident system —which depends entirely on supply and service by the United States when the only time when we would want to use it would be when the United States was no longer linked into us. To many senior service men it is by no means as obvious as the Prime Minister and the Secretary of State for Defence sometimes imply that we should go for the Trident system. Indeed, it was admitted that the C4 system was quite sufficient and that we went for the D5 only because we were locked into American technology.
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The Prime Minister owes it to the House to look constructively and creatively at the whole subject of arms control. Arms control is neither sin nor salvation. To hear the temporary Leader of the Opposition at times, one might think that it was salvation, and the Prime Minister sometimes makes it sound like a sin to endorse arms control, but in fact it is neither. It curbs the perilous competition between the United States and the Soviet Union. It does not end it, but it produces a more ordered relationship and it is essential for world peace.
The Prime Minister has taken less interest in arms control and disarmament than any of her predecessors since the war. As a precedent to emulate, she would do well to look no further than Harold Macmillan, who showed that it was possible to be solid in support of NATO and a friend of the United States and yet to take independent initiatives on behalf of Britain with our allies in this matter, to carry respect in the world and to influence the arms control debate. Too often Britain seems like a cypher of President Reagan. Too often, the British Government's position merely reflects the most hawkish statements in Washington. It is high time that we remembered that the power of the President is not like that of a Prime Minister with a massive majority in this House. He has to negotiate with Congress. He is already negotiating with it on arms control and disarmament, and there is a grave danger that we shall be left behind because even the current President may have to make changes in his arms control posture. I beg the Prime Minister—again on the principle that, whether we like it or not, we shall probably have her for four to five years—in the interests of this country to take a wider vision of her responsibility than she has in the past four years arid to reconsider her position on arms control and disarmament.
On these two central issues—the continued fatalistic acceptance of unemployment and the inability to sense the need to take arms control and disarmament seriously—we shall be constructive but virulent critics of the Government and the Prime Minister. For the rest, I simply urge the Chancellor of the Exchequer to make no hasty decisions and not to become a slave to the monetary aggregates, which would gravely damage the economy of this country. There is now the potential to achieve perhaps 3 per cent. growth. If inflation is held down, unemployment will then begin to fall. Anything less must mean that unemployment will continue to rise.
The Chancellor takes office at a very difficult time for the economy. He deserves good luck and good fortune, but many of us believe that he will not succeed if he blindly adheres to monetarist policies. Of course he must take account of these things — I do not ask him to ignore them—but he must now take account of the need to maximise the resources of this country and to put more and more of our people who want to work back to work.
5.19 pm
Mr. Francis Pym: For the first time in 21 years, apart from a few months in 1975, I speak in the House without either the responsibility or the opportunity of Government office or party position. Like everyone celebrating 21 years, I am thinking of the future and not the past.
During the past two or three weeks, as hon. Members may well imagine, I have persistently been asked to comment on my loss of office. I have resisted the temptation to do so until now because this House is the

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proper place to express such views. The press and television have a vital role to play in our national political debate, but the centre of that debate is here.
It was an honour to serve as Secretary of State for Foreign and Commonwealth Affairs. I had hoped for the opportunity to continue serving the country and the Government in that capacity. Indeed, I expected to do so, but instead I was abruptly dismissed. As some of my right hon. and hon. Friends and others know, that is an acutely hurtful experience. It is all the more so in the light of press speculation which, if not deliberately inspired, was remarkably well informed. In my case, it was as much the manner of the event as the event itself which bruised me. I say this to the House today so that my silence should not be mistaken for indifference. By expressing my feelings this once, there is no more to be said about it. I shall not allow what has happened to colour my approach to the future.
It is the future that matters. I should like to say three things today. The first concerns the interpretation to be placed on the general election. We now stand at the dawn of a new Parliament, which is the right moment to reflect on the meaning of the event that has returned us all here — before it is consigned to the recesses of our memories. It is extremely important at the outset of every Parliament to interpret very carefully the election that has brought it into being. The verdict of the British people is seldom as simple as the sheer numbering of the seats might suggest. That is especially true of this general election.
For the past 60 years two great political parties have held the stage of British politics. At this election, in different ways and to vastly differing extents, a warning has been served to each. There are some hon. Members, but more particularly people outside, who claim that the disastrous performance of the Labour party was due to a manifesto that was not advocated with sufficient vigour or sufficient unity by the party leadership, or even to a manifesto that was not Left-wing enough. If the Labour party listens to those people when deciding its future it will be listening to the same siren voices that have lured it on to the rocks of its present abject defeat. An objective person examining the results of the election must surely conclude that the country wants and needs as an alternative Government a moderate, left of centre party with a clear leadership and clear policies that belong to the future, not the past.
The electorate has made it abundantly plain that if the Labour party fails during this Parliament to become such a party again, it will turn elsewhere for that requirement. What is more, I profoundly believe that that change can occur — if that is what the electorate wants — without recourse to electoral reform. Our system has never yet failed to respond appropriately to the popular will and it will not fail to do so in the future.
I believe that a final warning has been served on the Labour party. It has been served by the massive defection of its own supporters and by the size of the Liberal-SDP vote. If that warning is not heeded, the next general election will indeed break the mould' of British politics. In the meantime, it is my hope — though, I confess, a forlorn one — that the three opposition parties will, between them, somehow provide the strong and measured opposition that every successful Government needs. A coherent voice of constructive criticism from Opposition
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Benches is a vital indeed, an integral — part of the effective working of this House. It would be some irony if the Prime Minister had to begin the next general election campaign by saying that she did not want a landslide.
The warning that the electorate has served to my party is of an utterly different scale and nature but it must still be understood and heeded. In the euphoria of victory, we should not forget that the Conservative party polled fewer votes than in 1979, despite the weakness of the main opposition and despite the political inheritance of the Falklands conflict. It would be churlish indeed not to acknowledge that the victor of the campaign has been the Prime Minister. It was a great victory for her. In that case, the warning is to her as well. I believe that the message of the people to the Prime Minister is this: "We admire your leadership, we admire your determination, we admire your sense of national pride. Will you now please prove to us that you really can use these formidable talents to serve all the people of this country—not only those who can stand on their own two feet but also those who cannot?"
That is why the challenge to the Government is the challenge to nurture and sustain the unity of our nation. The key to meeting that challenge is how the Government cope with what is by far the overwhelming problem on the nation's mind—unemployment.
Mr. Tam Dalyell rose—
Hon. Members: Sit down.
Mr. Pym: The past four years have seen an enormous improvement in our economic competitiveness and the Government are entitled to take a lot of credit for that. And yet for every gain there is a price to be paid. In this case, the price has been the highest level of unemployment for 50 years. That is not the Government's fault. The Government have not caused unemployment, but part of the current level of unemployment is the price that the nation has paid for our greater economic competitiveness. The fact is that many people in Britain have made a sacrifice for a principle that they do not yet understand. The only way in which the principle will be understood and accepted is if we can now demonstrate to the nation that the sacrifice was not in vain.
I am inevitably reminded in this context of the Falklands war. In that instance, the principle for which we fought was understood throughout the nation and all round the world. On that point I am, I think, well qualified to speak. The sacrifice that was made then was not made in vain and the reward for it lay in victory.
The reward for economic sacrifice lies in victory of a different sort. It lies in the victory of hope over frustration. It lies in the prospect of a better life to come. It lies, ultimately, in the tangible fulfilment of that better life. The task of this Government is to give substance to that hope and to create the means for its fulfilment.
If we assert, as we justifiably do, that unemployment is not the Government's fault, we must, equally, acknowledge that neither is it the fault of the unemployed. We must understand their feeling of disillusion and be responsive to it. We must see to it that this country never has to make the choice between being divided but rich, or united but poor. It is our duty to ensure that such a choice never has to be made.
In saying that, I must make it clear that I do not call for a reversal of Goverment policy. I do not disown decisions

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made by the Government of which I was a member. I shall not attack colleagues with whom I worked closely for many years. I shall do nothing other than to help to make this Goverment's tenure of office highly successful. I ask for an imaginative long-term approach to the problem of unemployment, which should become the first priority of economic policy. I ask us all to face the fact that many of the jobs lost during the recession will never return. I ask us to be sensitive to the enormous social and human problems that are with us today. I ask us to acknowledge that the technological revolution on which we have embarked will call for completely new attitudes towards employment, and that finding the policies to meet them will be the great political and social challenge of the rest of this century.
I spoke about such matters two years ago, when some members of my party believed that I was wrong to do so. How shortsighted they were. This third industrial revolution will bring far-reaching changes and we should debate its implications much more deeply and widely. We must pursue sound economic policies, but we must also measure the commitment in the Gracious Speech to
"seek a further reduction in inflation"
against the cost of that in jobs. To have reduced inflation to 4 per cent. is one of the Government's major achievements, but a balance must be struck and the human aspect must be uppermost in our minds. We must concentrate on creating real and lasting jobs. That is the most important task of all, and that is why the Government are right to give all possible incentive and encouragement to the industrial, commercial and business world. That world is the source of all our wealth, as the Prime Minister said last Wednesday, but as the economic recovery will be slow and gradual, let us not become so doctrinal about real jobs that we pay no regard to work that people could usefully do in the meantime. I have always argued that there is good sense in constructive investment in capital projects, and I welcome the development of policy in that direction. It is right to mitigate the worst effects of unemployment with special employment schemes and training schemes, although I ask the Government to keep those schemes under careful scrutiny because they each have problems of their own.
However, even with all that, we still do not have the answer to unemployment. We must consider the possibility of, for example, job-sharing and more flexible retirement arrangements. I know that that is expensive and that it can be done only gradually, but so is it immensely expensive to have so many young people out of work. Again, a balance must be struck. We must re-examine our traditional attitudes towards work and employment. We are entering a new era in which new circumstances will require new thinking and a different outlook. At the same time as the Government are helping to stimulate recovery in industry we must address our minds to the implications of the post-industrial revolution — to the structural change in the scale of employment opportunity. Our traditional ideas about how men and women spend their lives must be revised and new concepts are required. We must ensure that the new prosperity to which we all look forward is a shared prosperity and that the work which creates it is also shared. I ask the Government to take the lead in addressing these great issues of our time.
The need to resolve those problems in a way that unites the country is one message of the election. However, there is also another message, which brings me to the last point
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that I wish to make today. It is the clear view of the overwhelming majority in this country that we need, as a nation, to be strong enough to defend ourselves. But there is equally no doubt that people are still deeply and understandably concerned by the present arms race. They wish to see a strategy based on the twin pillars of firmness and dialogue, and not one based on firmness alone. It seemed to me that over the years the dialogue had become a bit thin. I believed it important to start to talk more to the Soviet Union. I was doing that, and I hope that my right hon. and learned successor will continue the process.
We need to show the Russians that a more constructive relationship could be available. We need to put over to them our point of view and our aims and try to discern theirs. By talking we do not compromise or diminish our own ideals: indeed, we can make our position even more clear. And, even more important, we need to avoid the very real danger of misreading each other's intentions. None of these things is possible unless we talk to each other. I can see nothing to lose in closer contacts, and we stand to gain an understanding that can help all of us. It is something that we need to do, and something that the nation expects us to do.
Today there is a sea of new faces in this House, most of them on the Conservative Benches, many of them representing constituencies that have been Labour strongholds for generations. I have no doubt that they are all aware that they have been elected to think for and to fight for all the people in those constituencies. I ask them to remember the historical role of the Conservative party in this respect. At its best, the Conservative party has always been broad in its view, national in its interest, tolerant in its outlook, constructive in its debate, and unifying in its aim. This is the party that I have always served, and that I shall continue to serve in whatever capacity I can.
5.37 pm
Mr. Donald Stewart: The right hon. Member for Cambridgeshire, South-East (Mr. Pym) made a revealing and powerful speech, and one regrets that it is his first speech from the Back Benches for 21 years. However, during the previous high offices that he has held, one was always certain that he was making a case, although we might have disagreed with it, that was rational and civilised. I especially support his latter point about an improvement in dialogue and progress towards arms control. The country is waiting for that, and the Government would be better served if the Prime Minister was less prone to saying amen to everything that emanates from President Reagan. If we showed a little independence from time to time, the British Government might carry more weight in the negotiations.
I shall discuss the Scottish aspect of the Gracious Speech, such as it is. There was only one sentence on rates, which is a United Kingdom matter, and on roads in Scotland. The Gracious Speech contained almost nothing for Scotland, as was the pattern of the previous two Gracious Speeches. That is not surprising, because the Government got little from Scotland in terms of seats, so their attitude is, "Why should we put anything back?" As long as the people of Scotland continue to vote on a British basis, they are liable, more often than not, to get an English Conservative Government. They are beginning to realise that and to reassess their position.

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This debate is mainly about the economy and unemployment, and Scotland has borne the brunt of the economic failure and mismanagement over the past decade. The Chancellor concentrated on the Government's achievement in reducing the rate of inflation, but he spoke as if this had occurred in a vacuum. There was not a word about the other side of the balance sheet, which was the appalling cost in human suffering through unemployment that went along with the reduction in the rate of inflation. It is obligatory on this Government and this Parliament to reverse that trend. Reduced unemployment will be linked with policies that allow the Scottish economy to grow naturally. This can only be done in Scotland by a Scottish Parliament. That is the choice of the people of Scotland. The Prime Minister blames the high levels of unemployment on world recession, but countries such as Norway, Sweden and Austria have unemployment levels of under 4 per cent. That is the league in which an independent Scotland should be playing.
I have some sympathy for the Labour party in Scotland. It has been stranded high and dry by the collapse of the Labour party south of the Border. It will be difficult for it to break the British connection, which used to be its strength but is now its Achilles heel. Its choice is either to break that connection or to disappear into oblivion. Going it alone, as in the last Parliament, will no longer suffice for the Scottish people. The Liberal-SDP alliance had a good election in Scotland, but more Members here mean increased responsibility on it to press for a Scottish Parliament, as promised in its manifesto. It will be weighed in the balance on its response.
The Gracious Speech says about the Falklands:
"My Government will … discharge their obligations to the people of the Falkland Islands."
Had the Government done their duty to the people of the Falkland Islands at an earlier stage, the war would have been unnecessary. They gave a signal to the Argentine Government that they had lost interest and everything developed from that. Now, enormous sums of money will be spent on the Falkland Islands. I have already spoken about the role of fortress Falklands into the future, and I shall not develop that further today. At the same time, the islands have gained far more than Scotland.
Northern Ireland has gained a form of devolved government that it does not want while Scotland, which is asking for devolved government, is refused it. That is another aspect of the negation of democracy in the House.
The Chancellor of the Exchequer said that oil is an important part of our economy, and that is so. Were it not for the oil from Scottish oilfields, the United Kingdom economy would have had to file its petition of bankruptcy. No other country would tolerate a situation in which, like Scotland, it had become the fifth largest oil producer in the world, with £1 million of revenue passing from Scotland to the Treasury every hour of every day, with so little to show for it. Scotland has become poorer and our economy has been ruined in the process.
As to the stimulation of the economy and the improvement of economic performance, all the old promises have been regurgitated —"increase economic prosperity", "promote growth in output", "reduce unemployment". Such promises are laughable because the Tories has been promising them since 1979 and none of
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them have materialised. The Chancellor of the Exchequer was at it again today, but there is still no evidence that the upturn is on the way.
Such failures are recognised in Scotland and this Government and their policies were rejected firmly by the Scots in the election, when 72 per cent of Scots rejected the Government. They cannot, under any system, claim to have any mandate to rule in Scotland. As outlined in the amendment tabled by my hon. Friend the Member for Dundee, East (Mr. Wilson), the Government should now concede that Scotland has rejected them, and refrain from enforcing legislation in Scotland without gaining the support of a majority of Scottish representatives. The constitutional crisis would be solved if the Government would concede that the Scots want self-government and have voted for it. The people of Scotland want not only self-government but a substantial form of self-government.
The Prime Minister said at the time of the referendum in Scotland:
"A 'No' vote will not kill devolution."
She will have to redeem that promise, and if she does not the Scottish people will oblige her to do so. That is what the political argument in Scotland is about and that is the issue that has come to the fore.
5.45 pm
Mr. David Howell: As, in the lexicon of the right hon. Member for Down, South (Mr. Powell), I am neither a maiden nor a harridan—or not yet any rate, although perhaps that will come—it would be best if I took refuge in Mr. Speaker's injunction, given when he became elected. He made a strong case for brevity and asked Privy Councillors to set an example in brevity in the coming Parliament. I shall do my best to obey that injunction, which is a healthy and desirable one.
I shall steal just 30 seconds of extra time to speak about Mr. Speaker, although he is not in the Chair at the moment. He comes from my town of Guildford, and the people of Guildford draw enormous pleasure from his election as Speaker. I do not know whether my saying so will gain me any future indulgence from the Chair—I suspect that it will not—but it is true and I should like to put it on record.
I warmly congratulate my right hon. Friend, and also my friend of many years, the new Chancellor of the Exchequer on his appointment. I know of no man, inside the House or outside, who is better equipped to grapple with the complexities of the monetary system and financial markets—or with the mumbo-jumbo of some financial analysts—and nobody who is in a better position to recognise the important truth that monetary economics is an art and not a science. It is an important art, but it does not lend itself to the scientific precision and formulae that some believe it should.
The Chancellor has been and will be pressed—we have heard a little of this already today — from the moment of his assuming office and making his first speech in the House, to do something more on the vital and central matter of jobs and to come up with some new solutions and methods to meet the understandable demands from all sides that the appalling level of unemployment be reduced. However, the worst job destroyer is inflation. Right hon. and hon. Members on both sides of the House have said that repeatedly, and they know it to be the case. We have to look not into a crystal ball to prove it, but merely at the

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record of the past and see that, when a nation such as ours has had a relatively higher level of inflation, that is the most certain destroyer of markets, rubbing out jobs, firms, companies and enterprises, yet devised by man.
The Chancellor's contribution to the preservation and creation of new jobs is one upon which he rightly laid emphasis. He has to maintain the battle against inflation and keep inflation down, because that is the arch job destroyer. He is right to put that first. He is right also to say that that is a necessary but not sufficient answer to the search for job opportunities in the future. If he succeeds in his battle against inflation, and I think that he will, that will be a necessary condition for job creation in the future, but it will not be sufficient.
The reality that we have now to begin to face in this coming Parliament is that the unemployment suffered by millions of people in Britain, the threat of unemployment, and the danger that our school leavers will not get jobs, lie beyond the reach of macroeconomics and broad economic strategy, whether of the Keynesian or the monetarist variety. I was interested to see in The Economist two weeks ago that Sir John Hicks, who is certainly no monetarist economist, recognised that, and said that in many senses it could be argued that we have even now, with the appalling levels of unemployment that we suffer, what could nevertheless be called Keynesian full employment; in other words, there is no scope, through generalised talk of inflation, for eating into the unemployment problem or for overcoming the grave difficulties involved. I believe that that is right and that the Chancellor of the Exchequer was right to imply that if we are to go—and, of course, we must—for a high and stable level of employment, which was the objective set in the 1944 White Paper and the objective to which we must return, it must be by changes in the economic structure and by removing—in the rather grim jargon of the economists — the rigidities, in opening up the markets of Britain, and in loosening up the economy generally. That is how the changes must be made. It is in that area, rather than in the general area of economic policy. that we must now press forward faster than ever.
Mr. Jack Straw rose—
Mr. Howell: If I give way to the hon. Gentleman I shall not be able to obey the Speaker's injunction to be brief, and there are many other hon. Members who wish to participate in the debate.
I think that we are right to continue on the path that we have sought, in the context that I have mentioned, in wishing to break up the great monopolies that have ossified our economy and prevented the emergence of a vast range of new opportunities and new enterprises. That applies particularly to the nationalised monopolies, and there is much further progress to be made in that respect.
When I read in The Guardian, of all newspapers, yesterday an editorial advocating that the ownership of the coal industry should now be removed from the state, I really began to think that we were making progress, not just in the actual grind of privatisation and broadening out the ownership of those traditionally Morrisonian state industries, but beginning to win the intellectual battle, even possibly with Labour Members, to get those industries away from state ownership and open them up with opportunities for private enterprise and private capital.
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We also have to do much more than we have so far to encourage small enterprise. The atmosphere has improved for some of them but for many it has not improved at all. There has been a major improvement in understanding in the last four years that small business is not just a side show, but the cutting edge of industrial advance I think that people now realise how vital it is to ensure that we create a policy environment in which small business can prosper. That is relevant not merely in industry and commerce but in agriculture. I am far from happy about the adequacy of opportunities that have been available for the smaller farmer, particularly the livestock fanner.
When the right hon. Member for Glasgow, Hillhead (Mr. Jenkins) was talking yesterday about the common agricultural policy and saying, I think rightly, that on present trends that policy is heading for explosion, he went on to argue—and I believe that it is right—that we shall have to begin to think about developing national support systems for our agriculture. I hope that in our case our national support system will be one that gives the greater benefit to the smaller end of agriculture, just as I hope to see our policies give greater benefit to the smaller end of commerce and industry. That is another area in which, if we are looking for job creation and a positive job creating machine, we should be applying our minds and developing our polices.
As I have said, unemployment is beyond the reach of generalised economic, monetarist or Keynesian policy making. I believe that that has been understood by the Chancellor of the Exchequer. It has also been understood by some Labour Members but not by all, because we still hear the cry, "Please could we go back to a policy of reflation and higher public spending?", which would lead to a still greater loss of jobs than in the past.
Nevertheless, I have two suggestions to make to my right hon. Friends. My first suggestion may sound presentational, but it may help us to open out in the future some prospects for economic development and job creation which we have not perhaps exploited in the past as much as we should. I hope that in the next Budget., and in the public expenditure figures for 1984, we shat put our public expenditure White Paper documents into two separate series, one covering our current spending and one covering our capital investment.
I do not believe that the Chancellor has any room to expand the amount of Government borrowing. I believe that he is right, on the contrary, to go for a smaller level of Government borrowing. But I believe that, if the picture were to be set out in the way that I have suggested, there would be a beneficial effect on funding. It would be understood that some borrowing is for vital basic investment in our infrastructure whereas other borrowing is for current expenditure and current outgoings, which are still running at a formidably high level in many cases too high. It is a presentational move but a first move that I urge on the Government to enable them to fund a given level of borrowing possibly more successfully, because it would be more widely understood that a large proportion of that funding was going into basic Government capital investment, which is a vital concomitant of investment in the rest of the economy and of economic recovery.
My second point concerns unemployment, on which I have some recent fresh experience, having received my P45 in the postbox this morning. I plead with the House that we should try to get away from dealing with the concept of unemployment as a global idea, as a piece of

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rhetoric on its own, as an item to be railed against or apologised for or regretted, so that we wring our hands over it and then pass on to further parts of the debate. If we begin to look at the component parts of our unemployment problem, I believe that we shall begin to see some of the solutions and some of the possibilities opening up which have not been sensibly discussed in the House in the past.
In the last Parliament, my right hon. Friend the Member for Barkston Ash (Mr. Alison), who was an exceptionally effective and sensitive Minister of State at the Department of Employment—he has since been transferred to other duties—made several speeches, both inside and outside the House, in trying to draw the attention of hon. Members and other people to the different component parts of the global unemployment figure. He explained that it was among the under-25s and the unskilled and semi-skilled that the real burden, the real difficulty and the real horror of long-term unemployment lay. If this House can focus on that component part of unemployment and see the policies required to begin to ameliorate it, we shall be making a great advance in our understanding of how to deal with the unemployment problem.
As my right hon. Friend the Member for Cambridgeshire, South-East (Mr. Pym), the former Foreign Secretary, rightly said in his very impressive speech a few minutes ago, in the hearing of the whole House, the very nature of work is changing. The whole pattern of work is changing at a speed and in a way that is probably comparable with the way in which the nature and pattern of work changed between the middle of the 18th century and the middle of the 19th century. That is the size of the revolution through which we are going. If the pattern of work is changing and if the work needs of the future are changing, it is vital for us to look at our present unemployment in its different component parts.
I should like to see the Government begin to move—perhaps quite quickly — towards a White Paper that would be comparable in its importance with the full employment White Paper in 1944, and setting out an understanding, which so far is lacking, of the new nature of the unemployment problem, of the new nature and pattern of employment and where the jobs are to come from, and showing how policies should be shaped in the coming years to meet those points.
Mr. Straw: The right hon. Gentleman has referred twice to the 1944 White Paper and its commitment to full employment. I understood that that commitment, which was accepted by all previous Governments in the post-war period, had been repudiated by the present Government. Does he believe that the Government should subscribe to that commitment to full employment in today's society?
Mr. Howell: The hon. Gentleman is not quite right about the commitment in the White Paper. If he reads it, he will see that it commits the Government to a high and stable level of employment, not full employment in the sense in which it came to be translated in the 1950s and 1960s. It recognises that that has to be achieved, not necessarily exclusively, or even mainly by Keynesian measures of reflation and manoeuvring the aggregates, whether by monetary or other means, but by changes in the processes by which work and workers could come together. It recommends various social and housing
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changes to enable the labour market to work. Subsequently, of course, in many of those areas the labour market was not allowed to work, not least because of the imposition of restrictive practices, and, I am afraid, legislation passed by the hon. Gentleman's party, which had the effect of deliberately and systematically undermining work opportunities. All that has had to be reversed, and that reversing trend must continue.
I have already spoken for longer than I said I would when I spoke of brevity. I have put to the House only some preliminary thoughts on a matter to which we shall return again and again. I had an opportunity, which I greatly appreciate and treasure, during the past four years to help to lay the foundations of what I believe will be a secure and prosperous nation with a high and stable level of employment so that the millions of people within it can live a satisfactory and fully occupied life. I am deeply grateful for that opportunity. In Government I have tried to make progress on capital spending and the nation's infrastructure, which I believe are of vital importance. Much more remains to be said on these matters, but if we can say it in the way and context that I have described we should begin to persuade people outside that we are addressing the issues seriously and in a way that we have perhaps not always done in the past.
6.1 pm
Mr. Michael Meacher: Listening to the Queen's Speech produced for me irresistible echoes of that famous report from the war front, "Situation unchanged, only worse." How the Chancellor of the Exchequer managed to conjure up out of it the fantasies that he produced today of an accelerating recovery is beyond my imagination, when the facts show that almost all of the small recovery in output that there has been over the past two years comes from North Sea oil. In fact, only about 0·25 per cent. comes from an improvement in actual manufacturing output outside the North Sea. I suggest that to call that a recovery is to divest the English language of any real meaning.
There is almost nothing new in the Queen's Speech. Nevertheless, the central point of Thatcherism is that the key dilemma of post-war British economic policy—how to bring about sustainable economic growth so as to begin to reduce unemployment without a surge of inflation—has patently still not been solved. Otherwise one might ask why the NEDC report just before the election, in one of its most dismal forecasts ever, predicted that there would be no new jobs under current policies until at least 1990. Moreover, why did Sir Campbell Fraser, who as president of the CBI is perhaps an independent witness, say that the paper was so gloomy that it should not be published because anyone reading it would want to take the first boat out of the country? Perhaps even more significantly, if a recovery were really brewing, as the Chancellor of the Exchequer sought to make out by talking it up today, why is manufacturing investment — perhaps the best mirror that we have of the future—still stuck at 36 per cent. down on its mid-1979 level, and why did it fall by a further 41/2 per cent. to 5 per cent. in the first quarter of this year?
If the recovery that the Chancellor of the Exchequer wants were to occur, what would then happen to inflation, which is perhaps the one jewel left in the Prime Minister's otherwise distinctly tatty economic crown? How then would she hold down inflation when she has managed to do so up to now simply by terrorising people by high

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unemployent? What if that ugly threat were removed, and unemployment began to come down—where, then, her claim to have somehow exorcised inflation out of the body economic once and for all?
As a huge rise in the money supply has been followed — contrary to all the economic theory—by a continuing fall in inflation during the past few months, any simpleminded claims that inflation in that situation could be held down by monetarist controls, as opposed to outright old-fashioned deflation, have been blown clean out of the water. Or are we supposed to have confidence that the institutionalised trench warfare that passes for industrial relations in this country has undergone a sea change for the better as the Government are always telling us, and that attitudes in industry are now somehow fundamentally different?
Let us consider what happened at Cowley. At the very first whiff of an upturn, disruption returned immediately and wholly predictably because, as David Buckley, the Oxford Transport and General Workers Union secretary put it, "The men are being treated like animals." We know that the Prime Minister calls it the resolute approach, but it is the politics of fear and intimidation, and it has not worked. Nevertheless, I have no doubt that it is the Prime Minister's distinctive brand of politics, and I am quite sure that we shall see a great deal more of it.
The Queen's Speech is a mixture of the boring and the vindictive. It has precious little new in it—certainly no new vision — yet it is full of menace. The Prime Minister's pet hate, the trade unions, are threatened with the curbing of their legal immunities, while the metropolitan county councils and the GLC have been told that if they do not comply they will be abolished. The Prime Minister is always talking about freedom, but all the time she uses state power to extinguish individual freedoms.
The Police and Criminal Evidence Bill is to be reintroduced, bringing back the indiscriminate stop and search in the streets of the old sus law, legalising detention without charge for up to four days, preventing access to a solicitor for up to two days, and legitimising the repulsiveness—if I may put it that way—of intimate body searches.
Even before this election and their huge majority, this Thatcherite Government were quite prepared to use their financial muscle and power over resources to lean on those whom they did not like. That is always the way the bully behaves. They tried to pressurise the citizens advice bureaux by withholding part of their grant. They contemplated trying to reduce civil liberties by making people pay for their own policing. They have used the new National Health Service immigration checks to deter applications for medical aid by putting at risk the applicants' residential status.
Now, even so soon after the election, we are already seeing the arrogance of the Prime Minister, fortified by her huge majority. She does not take long to get to the miners. They are threatened with the axing of 65,000 jobs. The Health Service workers are threatened with privatisation, to teach them a lesson. The Think Tank has been abolished — presumably because of its leaking, which in my opinion is a euphemism for telling people what is really going on in Whitehall under this Administration. Even in this place, not only have the wets been moved or sacked, but the Chairman of the Treasury and Civil Service Select Committee—a very good chairman, if l may say so—is
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now being victimised because of his Committee's recent report which disclosed the secret of the last election, that up to, or more than, half the rise in unemployment is due to the Government's monetarist policies.
The Queen's Speech deepens still further the rapidly sharpening class divide that I believe is already deforming the face of the nation. Just before the election was called, on a day when the Stock Exchange burst through the 700 FT industrial ordinary share index barrier, the number of people living in poverty, depending on supplementary benefits, had just soared to 7 million. That is an increase of 60 per cent. in four years and is in addition to the 7 million people who are earning less than two-thirds of national average earnings and, by any standards, are low paid.
Huge tax handouts have been showered on the already rich, while everyone with incomes below the magical level of £30,000 a year has been forced to pay more tax. Those at the bottom of the pile have had their unemployment benefit cut and taxed and now their earnings-related supplement has been abolished. That is gratuitously nasty. Those people have lost their jobs through no fault of their own and they find that their standard of living has been cut by nearly half.
Perhaps the poor do not yet have to grovel for their benefits, but the concept of insurance entitlement in adversity has been destroyed by the Government, even for those who have contributed through payment of their own taxes. They paid towards that entitlement, but they still find it taken away from them.
Unemployment has increased for all groups. Some might say that it was the only growth industry in this country. According to the EC labour force survey, unemployment among the professional classes is only 3 per cent. in this country, but the level is 18 per cent. among unskilled manual workers. Perhaps inequality, even in misery, is the hallmark of Thatcherite Britain.
Welfare, too, has been polarised between rich and poor. Subsidies through mortgage relief to owner-occupiers has risen considerably per household during the past four years and, as a result of a measure included in the Queen's Speech, will rise again. I have no objection to that, but I do object to the fact that subsidies to poorer council tenants have plummeted from £275 per household to £63 in the past four years. Tenants have not so much been allowed to buy their council houses as virtually forced to buy them to escape soaring rents.
That sort of society is, by any standard, deeply divided and unattractive, and the Queen's Speech will take that unattractive prospect further. Under Thatcherism rampant it will be a mean-minded, callous, get-rich-quick, devil-take-the-hindmost, Robin-Hood-in-reverse society. As the Prime Minister has said, it represents a return to Victorian values, with all the cloying hypocrisy and uncomprehending class antagonisms in which poverty is dimissed as the victim's own fault and women are forced back into a subordinate status and relegated back into the home as a result of the admonishments of the Cabinet's family policy group.
It is an alienating prospect which, as my right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore) wisely said, will steadily repel the British people as they recover from their post-Falklands numbness. I do not believe that that day will be long in coming.
6.13 pm
Mr. Tom Sackville: I am grateful for being allowed to make my maiden speech in a debate in which so many right hon. and hon. Members wish to speak.
I begin by giving a geo-electoral description of the constituency that I am proud to represent. Like many new constituencies, it is not quite what it appears. Only 48 per cent. of it comes from the old Bolton, West constituency, and the remainder comes from the old Westhoughton constituency.
I pay tribute to Mrs. Ann Taylor, the former hon. Member for Bolton, West, and to the hon. Member for Wigan (Mr. Stott), who previously represented Westhoughton, for their work in previous Parliaments. My impression is that they were hard-working, conscientious and popular Members, and it will be a privilege for me to try to carry on their work for all my constituents.
I hope that the three hon. Members for Bolton will work as a team to get a better deal for Bolton. As might be expected, I am already working closely with my hon. Friend the Member for Bolton, North-East (Mr. Thurnham), and I hope to develop a similar working relationship with the hon. Member for Bolton, South-East (Mr. Young). We started on a good footing last weekend, when I assisted him in judging a beauty contest to find the Westhoughton carnival queen. His evident long experience in matters pulchritudinal was an inspiration to the judging panel.
The people of Bolton are rightly known for their humour, optimism and industriousness. A few weeks ago, I visited a jam factory and was told by the manager that 80 per cent. of production goes for export. When I asked whether that meant that he sold into that great tariff-free market, the European Community, he replied. "No—Yorkshire."
The people of Bolton are equally well known for their innovation and enterprise, as the names Whittle, the inventor of the jet engine, and Crompton, the inventor of the spinning mule, bear witness. That spirit of enterprise enabled Bolton to weather the storm of the decline of the textile industry during the 1950s, 1960s and 1970s. Unfortunately, unemployment has shot up by 11 percentage points, to 16 per cent., in the past 18 months.
However, despite that and the fact that Bolton is sandwiched to the east and west by the development areas of Rochdale and Wigan and to the north and south by enterprise zones, the people of Bolton, particularly those involved in these matters, are aware of the limited possibility of job creation by conventional Government aid schemes, welcome though they are.
We in Bolton expect help from the Government in cases where they can have a direct effect on jobs—where they are the customer for local products and services. I take the case of British Aerospace. Some hon. Members may know that the RAF has a requirement for an anti-radar missile, which takes out enemy anti-aircraft systems by homing in on a radar beam.
British Aerospace Dynamics, which employs 3,500 people in my constituency, has done the high-level research and development on such a weapon, but there is a rival American weapons system, and a decision on the purchase of equipment has been repeatedly delayed over the past few months.
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If the American system is chosen, there will be at least 1,000 redundancies at the British Aerospace works, much advanced technology will be lost and never recovered and up to perhaps £500 million in export sales will be lost. The American system would not produce advantages for us, though there would be short-term employment through offset arrangements.
I appreciate that only the Ministers and officials responsible for the decision have the full facts before them when assessing the qualities of the two systems. However, British Aerospace Dynamics, formerly Hawker-Siddeley, has been in Bolton since 1937 and is undoubtedly the flagship of the local engineering scene. It employs 3,500 people and 400 apprentices. Over the past 30 years it has sent thousands of apprentices out into the wider world of industry. It is a model employer which I do not want to see damaged.
The ALARM system, as the British Aerospace weapon is called, was a dominant issue in Bolton, West during the election campaign. The livelihood of about 2,000 families depends on that firm's success. The delays and press speculation have been a black cloud hovering over those people's livelihood. If there were a genuine technical or cost reason why the American system had to be chosen —to put it in other words, if the British system were no good — I think that people locally would accept that. However, if we are to believe the press, the main objection to the selection of the British system has been the result of pressure from our American friends to buy their system, perhaps using it as a lever for larger exports of British equipment to America in future. That is unacceptable. I am sure that with all the facts in front of them Ministers will, as always, come to the appropriate decision and I ask them to do so as soon as possible.
6.21 pm
Mr. Bryan Gould: I congratulate the hon. Member for Bolton, West (Mr. Sackville) on his maiden speech. We look forward to hearing him in equally good form on future occasions and we wish him an enjoyable, if not necessarily long, period of service in the House.
Maidenhood is something that once lost cannot be regained but it is a particular pleasure for me to return to the House and to begin my first speech as the hon. Member for Dagenham by paying tribute to my predecessor. John Parker was the Father of the House in the last Parliament. For nearly 48 years he served both the House and the people of Dagenham faithfully and well. I fear that I have little chance of matching his record of long service, but I hope to cram into a shorter period the same quality of service that he was able to offer.
I am also pleased and proud to be here representing Dagenham. Dagenham is known to several hon. Members for a range of things. I was privileged to attend a recent performance by the Dagenham girl pipers. However, for most people Dagenham is synonymous with Ford. Many in Dagenham say that that ought not be the case and that there are many other employers in Dagenham of great importance. However, the link between Ford and Dagenham serves to emphasise the extent to which Dagenham's economy and prosperity rests on manufacturing industry.
My constituents have suffered with the rest of Britain from the calamity that has befallen manufacturing industry over the past four years. Sadly, we are now familiar with that litany of facts and figures which charts the decline and

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disaster. I want to repeat some of the cardinal points so that their awful significance does not slip by too easily. Manufacturing industry has lost one fifth of its capacity in the past four years. One fifth of British industry has simply been obliterated. Two thirds of the 2 million jobs lost have been in manufacturing industry. They have been lost not because of new technology but because factories have closed down. The remaining 80 per cent. of industry has suffered a loss of competitiveness in relation to its major rivals of up to 25 per cent.
I listened with great sympathy to the speech of the former Foreign Secretary, the right hon. Member for Cambridgeshire, South-East (Mr. Pym). However, he made the mistake of giving further currency, I am sure unintentionally, to the myth that all the sacrifices have been worthwhile because our competitiveness has improved. Time and again one hears Ministers emphasising that point, yet from all the available indices it can be seen that our competitiveness has declined sharply. Little wonder that we cannot sell anything and that our factories are closing down.
For the first time in our industrial history we import more manufactured goods than we export and that imbalance is rising at an alarming rate. The car industry is no exception. It has lost one third of its capacity in the past four years. Ford, which used to be proud of its record as a major exporter, now imports one of every two of its cars sold in Britain from a Ford plant abroad. That is a measure of the decline in the car industry and is an illustration of what has happened to manufacturing industry generally.
There is no mystery about why that has happened. The Government tend to spread their hands wide and say that it is inevitable, that it is the result of the recession or an act of God. Whenever present Government policies have been pursued in the past they have led inexorably to the same results. It happened in the 1920s and 1930s and, going further back, it happened in the in-mediate aftermath of the Napoleonic wars and led to the massacres of Peterloo. It was eminently predictable that output would suffer and unemployment rise as a result of squeezing the economy so tight that nothing moved. Not only was it predictable, but it was predicted. I make the modest claim that I was one of those who predicted precisely those consequences in 1977 and 1978. Therefore, I shall listen to no argument about there being no cause and effect relationship between Government policies and the present perilous state of British industry.
At least we have a glimmer of hope in the arrival of a new Chancellor of the Exchequer. He has some claim to be an economist, unlike his predecessor who simply read the briefs. But there are dark rumours that the present Chancellor was the man who wrote those briefs. I fear that the words of inflexibility and rigidity that he uttered in his speech this afternoon sound the death knell for the hopes of new jobs and new industry for Britain's unemployed. Even so, I beg him to reconsider his predecessor's policies in terms of the real economy. I beg hire not to be put in a straitjacket by a monetary measure of dubious accuracy and significance. I beg him not to follow the Americans in pushing up interest rates. I beg him to cut free the pound sterling from its parity rate with the dollar and to let it fall to a more competitive level. Of course the dollar rate is not the only one that matters; it is simply the one most often quoted. We have suffered from an appreciation against European currencies, particularly the deut-
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schmark. How can Ministers call for a 2 per cent. pay norm when, since March alone, the pound has appreciated by 10 per cent. against the mark, putting up all costs, not just labour costs, throughout industry?
Those may seem esoteric questions but they are not. They matter to my constituents, not only to those 11 per cent. who are unemployed but to those who are working in manufacturing industry and who see the writing on the wall—their jobs threatened. They matter to all of us. It is a myth, assiduously propagated by the Conservative party, that unemployment is the concern only of those who have lost their jobs. Unemployment impoverishes us all. It makes us a poorer country. We have poorer social services, roads, sewers and all the things that a civilised society should have. We have allowed unemployment to rise and we have too easily accepted the fatalistic nonsense peddled by Conservative Ministers. There is no necessity or inevitability about the evil of unemployment. What is odd and aberrant is the acceptance during the past four or five years that little can be done about it. However, for 40 or 50 years prior to that we knew what could be done about it, and we did it. The Chancellor of the Exchequer asks what guarantee there is that growth can be brought about and sustained, but the guarantee lies in our recent history. We had 40 years of a prosperity that the present Government hardly even dream of.
I am not the only one to make such points. I was delighted that during the election campaign the Treasury and Civil Service Committee brought out its report. I was particularly pleased that it took very much my view about the role that the monetarist ratchet of tight money, high interest rates and an over-valued exchange rate had played in bringing about unemployment. I do not flatter myself that my evidence to the Committee persuaded it. It is more likely that it was persuaded by the virtual unanimity of all the witnesses from the academic and industrial world. They all said much the same thing.
I was particularly interested to find that the Ford Motor Company, in addressing itself to such questions, had expressed a view that was remarkably similar to that argued from these Benches. In the evidence that it submitted it began by pointing out that the effect of an exchange rate misalignment on manufacturing industry could be devastating.
The company was asked whether the exchange rate was misaligned. It gave a common sense answer that I entirely agree with:
"Sterling is over-valued because British manufacturing industry is shedding labour and the prospects for that labour being re-employed are at best unclear."
The Ford Motor Company — not me — said that. The consequences of an over-valued exchange rate for the following three aspects of the company's operations were then considered: the company's future capital investment plans, its policy of sourcing the British market from various plants round the world, and its policy on purchasing components. In each case it concluded that the present exchange rate made it impossible for it to take action to benefit the British economy. Indeed, the company went further and stated that if the exchange rate remained out of line for more than six months—we are now talking about a four-year period—there would be a substantial misalignment, which would mean
"a marked rundown in British manufacturing industry over the next ten years."

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That testimony simply cannot be dismissed. It is the evidence of a major multinational manufacturing company, whose political preferences almost certainly do not lie with this side of the House. Nevertheless, the company makes it clear that with unchanged policies, the prospect for our economy is dire. We ignore that evidence and testimony at our peril. It is no good the Government saying that it is nothing to do with them, and that it is a free market. An over-valued exchange rate is the deliberate, automatic and inevitable consequence of the extreme monetarist policies that the Government have pursued. It is the product of a ratchet that tightens the money supply, forces up interest rates and inevitably pushes up the value of the pound.
Unless there is some change in policy, the future viability of the Ford plant at Dagenham will be at risk. Another four years of what the Chancellor of the Exchequer claims as success will leave a major question mark over all of those jobs in my constituency. However, that would not be the only significant result. If the Ford Motor Company were compelled substantially to restrict, or even to close, one of its major manufacturing plants in this country the knock-on effects, and its significance for the rest of the economy could be imagined only too well. I give this pledge: I shall do all I can both in the House and outside to ensure that that does not happen.
6.33 pm
Mr. Maurice Macmillan: I can, I think, welcome the hon. Member for Dagenham (Mr. Gould) back to the House, especially as he has replaced another Labour Member. I have some sympathy with him, having been in his position myself. However, I am sure that he will understand that I give a much warmer welcome to the maiden speech of my hon. Friend the Member for Bolton, West (Mr. Sackville). He spoke both forcefully and vigorously on behalf of his constituency. But perhaps I should give him one word of warning. Ministers and their officials may or may not be the best informed people, but he should not underrate his own sources of information or his own judgment vis-a-vis that of Ministers. However, we look forward to hearing from him again.
I wish to be brief and to refer only to the overseas aspects of economic policy and of the Gracious Speech. In doing so, I must take up a point made by the hon. Member for Dagenham who referred to 40 years of prosperity, which had ended fairly recently. However, he has not made a good comparison. We were then wholly dependent on the captive market of the Empire and Commonwealth, and on its extension, the overseas sterling area. In the past, we seldom exported our goods successfully other than to economies or enterprises for which we had provided the capital, and which we controlled. Perhaps our current rate of overseas investment will bring us again slightly nearer to that position.
I shall discuss the overseas side of Government policy, because the dilemma posed in this debate can be resolved only in the context of the economic policies of the developed and industrialised countries of the world-in fact, broadly speaking, of the OECD. The sustained rate of growth and the low rate of inflation we require must be sustained throughout those countries if there is to be any
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possibility of recreating jobs and of dealing with unemployment—a problem close to the hearts of all who have spoken.
There is an inherent contradiction in the Gracious Speech if it is considered solely in the context of the United Kingdom's economy. For example, it states that the Government will continue to
"maintain firm control of public expenditure and a responsible financial strategy based upon sound money and lower public borrowing."
That is fine, but it would be better still if the Government and the Treasury one day learnt to distinguish between borrowing for capital development and expenditure, and borrowing for current expenditure. If a private business does not learn that lesson it goes bankrupt, and if the Treasury refuses to learn it its economic decisions will be distorted.
That line of policy is, of course, sound, but things can go wrong in the world. For example, it is quite possible that countries such as Japan and Germany could see an even lower rate of growth than at present and that their very low inflation rates might move to the negative and become deflationary. It is possible that nothing can be done to prevent interest rates in the United States of America from increasing. It would be difficult to stop that affecting our own policies especially if the dollar remains strong.
The signs of economic recovery that are being seen throughout the industrialised world may fall away. If such things happen, too rigid an adherence to such aspects of policy as the control of public spending, lower public borrowing and strict monetarism could lead to the danger of deflation, and depression in the old sense of the word.
The other side of the coin in the Gracious Speech can be seen in the desire to increase economic prosperity and reduce unemployment. That, too, is fine, but there is a danger that it may lead us, particularly in difficult times, to measures that are likely, in themselves, to increase inflation. There is a danger of protection and of in effect paying our overseas customers to buy British, by lending them the money which they will never repay, and by giving undue inducements to overseas firms to invest in Britain and so to create more work here. There is even a temptation to keep interest rates low by allowing inflation to rise.
In other words, there is the danger that if we try to create work and deal with the unemployment problem in the wrong way, we shall go back to the old level of inflation, of between 5 and 10 per cent., with no growth or very limited growth. That is why I was pleased to see in the Gracious Speech the statement that the Government intend to seek a further reduction in the rate of inflation. That is essential if a 3 per cent. growth rate, which is what we need, is to be attained.
World pressures could lead to depression on the one hand and stagflation on the other. That is why they must not be ignored in our economic strategy. We must establish in the industrialised free world a more stable system and a more coherent method of dealing with the world economy. That is why I was glad to see in the Gracious Speech that the
"Government will work in close co-operation with governments of other countries and with international institutions to promote international recovery on a non-inflationary basis."
That sounds splendid, but deeds are harder to achieve than words. It means, if it means anything, that a concerted and continuing effort must be made to keep down international

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interest rates, to achieve greater stability in exchange rates — many hon. Members have referred to yo-yoing exchange rates causing difficulties for exporters—to maintain consistent measures against protectionism by way of tariffs or non-tariff barriers, and to promote much more co-operation to achieve consistency in planning for the longer term.
Those aims will not be achieved by themselves or because it has been agreed at Williamsburg or elsewhere that a certain line is the right one to take. We need a greater effort, and I hope that it will come primarily from Her Majesty's Government.
To give us greater standing and enable us to lead in the EC and in the wider context, our first action should be to join the EMS. The experts say that this is the wrong time to do that. It is always the wrong time; the pound is either too high or too low. The pound is today at about its value of four years ago. It is arguable that had we been in the system, the pound would not have suffered the fluctuations we have experienced during those years.
It is hardly an exaggeration to say that the success of the Conservative Government on the economic side and their continued success in reconciling the pressures that could lead to one extreme or the other, including following policies leading to higher unemployment with continuing low inflation, depend on turning the words used at Williamsburg into action. That should be one of their first priorities.
6.44 pm
Ms. Clare Short: I am grateful for this chance to make my first speech, as I prefer to call it, in this House. I intend to follow tradition and speak about my constituency. However, it is impossible for me to follow the tradition of not being controversial, for what is happening in my constituency encapsulates much of the harm done to many parts of the country by the policies of the Conservative Government.
I wish first to pay tribute to my predecessor, Sheila Wright, who was the hon. Member for Birmingham, Handsworth in the last Parliament. I am the Member for Ladywood and a large part of Handsworth has come into my constituency. Sheila Wright worked with me when I was a candidate and she was a Member of Parliament. For a long time she supported and helped me in my work. She is a friend of many years. She worked for the people of Handsworth for five years as a Member of Parliament and, before that, for 25 years as a councillor. The best tribute I can pay to her is the one that was paid during the election campaign by many people in the area who spoke warmly of her, sent their regards to her and remembered all the help she had given to them and their families.
It is a great honour for me to represent Ladywood in this House. It is an honour for all of us to represent our constituencies, but in my case there is an added honour in that I come from Ladywood. I was born there, grew up there, have many friends there and many members of my family live there. Therefore I care about my constituency with the intensity with which people care about the place from which they come. I make the pledge to my constituents that I shall work with all my ability and energy to represent and fight for their interests for as long as I am here.
The people of Ladywood are suffering terribly from the Government's policies. According to the census of April 1981, Ladywood has the sixteenth worst unemployment in
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the British Isles. The male rate of unemployment then was 25 per cent. Unemployment in the country has doubled since then, and the male unemployment rate in my constituency is now 50 per cent. For school leavers it is 95 per cent. People say cynically that it cannot get much worse than being nearly 100 per cent. It can, because the period of unemployment is getting longer all the time; young people leave school and go on a YOP scheme—now being replaced by the youth training scheme, which will be no better, and in many ways will be worse, than the scheme it is replacing—and are then unemployed for ever-lengthening periods.
In Britain as a whole, two out of every three school leavers are unemployed, as are one in four of all under-20s and one in six under-25s. A whole generation is being blighted. Of the total unemployed, more than 1 million have been unemployed for one year or more and more than 500,000 for two years or more. They are living in grinding poverty, and the hopelessness they feel about their future is destructive and intolerable.
Long-term unemployment is growing faster for young people than for any other group. Of the 1 million who have been out of work for one year or more, 250,000 are under 25, and they comprise the group for whom long-term unemployment is growing fastest. That is damaging to the future of the nation. When we damage our youth, we damage ourselves.
Half the population of Ladywood is black and half is white, and we are nearly all immigrants. I am a child of Irish immigrants. The white community is made up of immigrants from Ireland, Scotland, Wales and many other parts of Britain who came to Birmingham in more prosperous days to seek a better life for themselves and their children.
The black population similarly came, more recently, from India, Pakistan, Bangladesh and the Caribbean for exactly the same purpose. We are the same sort of people. We sought out our homes in the west midlands because we wanted to better our lives and those of our families.
Now, everything they hoped for and came to the west midlands to achieve is being snatched from them as a result of the collapse of the west midlands in the recent past. In the 1930s the west midlands escaped much of the suffering that went on in Britain. Today the west midlands symbolises the destruction that is being done to the British economy by Conservative policies.
We were told by the Prime Minister yesterday that recovery is patchy. Indeed it is; there are no signs of recovery in my constituency. As has happened in many other areas since the election, another major closure has been announced and unemployment is rising. It is not true to say that this amount of unemployment, misery and suffering is creating anything good. Nothing is coming out of it except pure destructiveness, and that is not only intolerable but stupid. It is said that productivity is going up. In fact, the less efficient firms are closing down; inevitably productivity goes up, but nothing new is created.
Investment is at an all-time low. That means that we are laying down nothing new for the future. We cannot secure a recovery and a better future without investment and that investment is not taking place. The money that is available is flowing out of Britain to invest in other countries. We have North Sea oil—we are lucky to have it—but it is being wasted. I understand that £17 billion a year is being poured down the drain merely to keep people unemployed.

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These people want to work. They want to be productive and we must recognise that a large part of the nation's wealth is our people and their capacity to produce. We are arranging things in such a way that they cannot produce. We are damaging them and ourselves.
During the election campaign I was asked repeatedly, "Why are the Government doing this to us?" The people in the west midlands see clearly that there is destruction everywhere and that nothing new is replacing it. They said, "It is claimed that the Government's policies are designed to reduce inflation but when we had inflation we all had incomes, our incomes increased and we lived better. We now have nothing and we still have inflation." There are two rates of inflation in Britain and the one for the poor— for those who live in council houses, for example—is still increasing. Nothing is coming out of the Government's policies.
The right hon. Member for Guildford (Mr. Howell), the former Secretary of State for Transport, said that we must get rid of inflation to create jobs, but that is not true. Inflation has been decreasing and more jobs have been destroyed. We have seen that happen in the recent past and we know that we are not creating jobs. The policy is not working.
In answer to the question that was put to me by my constituents, I explained, "We have an extremist and dogmatic Government who are deliberately using unemployment" — that is what monetarism is — "to reshape our society. They are using unemployment to frighten workers, destroy trade unions and cut wages. They have a vision of a more unequal society, a more competitive society. They say that from that will come more efficiency and, therefore, more economic prosperity."
The people of Ladywood, my right hon. and hon. Friends and I reject the Government's policies. We do not want the future that they hold before us. It is not acceptable to us and, what is more, it is not even working.
We frequently hear the excuse that the problem in Britain is the problem of the international economy, over which we have no control. It is clear from OECD figures and American Bureau of Labour statistics that unemployment in Britain has increased massively faster than in any other industrialised country. Britain led the world into recession, but an international recession is made up of individual national recessions. If in turn we each throw our economies into recession, we shall have, of course, a great international recession. We started it and similar policies to ours have been pursued in the United States of America.
We can now start to undo the recession. We can work with international partners to change the world economy. There should be no excuse there. There can be jobs for all, and it is our duty and obligation to organise our society in such a way that everyone can work, make a contribution and get a decent income. Anything less than that is unacceptable.
There are nine old people's homes in my constituency, and I visited them all during the election campaign. They are all desperately short of staff. There are nine old people's homes in a sea of unemployment. People are queuing for jobs all around them, but those responsible for running the homes are not allowed to employ more staff to take care of the elderly. That is the result of public expenditure cuts. Pretence is made that cuts in public
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expenditure are cuts in bureaucrats but that is not so. The cuts lead to reductions in the staff who can care for the elderly and the very young. It is disgraceful and unnecessary.
The great sadness for the people of Ladywood is that they see what is going on in the knowledge that they have rejected it. However, they must continue to suffer because it seems that the rest of the country has to learn the hard way. The Government's policies are not beneficial to any of us.
Racial equality is important to the people of Ladywood. As I have said, half of my constituents are black and half are white. However, we are united in our need for jobs, decent schools for our children, decent housing and proper health care. We need to respect one another. We must respect all the various racial groups in our society and we must work alongside one another, or it will not be a good place in which to live and work.
The black community in Ladywood has been undermined and hurt badly by the Government's actions. The Nationality Act 1982, which was placed on the statute book in the previous Parliament, has made the black community feel insecure and unwanted. That includes the generation which came as immigrants and the generation that is growing up that was born in Britain. These people must be made welcome and be part of our society, or it will be dangerous for us all.
Black people, especially those who originated from the Indian subcontinent, are harassed constantly by disgraceful immigration procedures. Many of them have approached me already to make representations. There are families which want to look after their aging parents and which can afford to do so. They have a house and they want to care for them. However, we do not allow Asian families settled here and which are prosperous to look after their aging parents.
I am making representations to the Minister of State, Home Office about a case which encapsulates all that is wrong with our immigration procedures. It concerns an old man who is a citizen of the United Kingdom and the colonies. He fought for Britain in the first and second world wars. He was made a prisoner of war by the Japanese. He has come to Britain and has been refused entry. He is here on temporary admission while I make representations. That old man is shocked and astounded that the country that he respected, honoured, worked for and fought for will not allow him to come in as a visitor. That is what has been done to a large part of the population in my constituency and it is not good enough. It is not the behaviour of a civilised society and we can do better than that.
I shall draw my remarks to a conclusion in a form that will reflect part of the speech of the right hon. Member for Cambridgeshire, South-East (Mr. Pym), who was the Foreign Secretary in the previous Government. The Government must not think that their increased majority means that they have a mandate for their policies. They were given a smaller vote than that which the previous Government secured in 1979. They did not win a great victory in areas such as Ladywood, where more than 50 per cent. of the people are opposed to them. The intensity of that opposition is great. It is not an exaggeration to say that the Government are hated in my constituency, especially their leadership. People hate them with vigour. This is divisive, destructive and damaging to our society. If there are not changes, I fear for us all.
6.57 pm
Mr. Kenneth Warren: I pay a genuine tribute to the hon. Member for Birmingham, Ladywood (Miss Short). She has brought to the House compassion and a real strength of feeling which reached out to us all. I assure her that that passion and feeling are shared on both sides of the House in our concern for the unemployed. We may have different ways of moving forward to solutions, but we share with her a desire to achieve a solution to the awful ogre of unemployment that strides through our country.
The hon. Lady's speech reflects the prevailing conditions in my constituency, which lies in the much sunnier south; but 20 per cent. of my constituents are unemployed. School leavers are dreadfully concerned about their employment prospects. They are almost scared about the opportunities that some of them will have to find employment. The youth traning opportunities that we provide are good, reasonable and right, but I would not wish any of us to think that they can be a substitute for real jobs when there is a depletion of the training courses.
I served an apprenticeship in a factory and I am conscious that time can often be wasted on training courses. It does not give young people a chance to regain the opportunity of learning in later life. In putting forward the excellent training schemes that have been brought into reality by the Queen's Speech and the promise of legislation to come, I hope that the Government will continue carefully to monitor the schemes to ensure that they are real and relevant to job opportunities and not merely patching up the problems that young people have to face.
I am concerned that there is a feeling—it concerned me throughout the election campaign and it has continued to do so during the debate on the Queen's Speech—that perhaps the House is divided in our determination to conquer unemployment. I do not think that there is a division. If there is, I hope that it will not be allowed to grow. We must acknowledge that for 10, 20 or 30 years we in Westminster have often deluded ourselves into believing that we can solve within the House the problems of unemployment or have professed that they cannot be solved by the House and that they are problems for commerce and industry. Whether we are in Westminster, in industry or commerce, we are all in the battle to defeat unemployment.
Since the second world war we have often created the illusion that we could solve problems that were beyond our powers to solve. In 1944 there was an excellent all-party White Paper based on the belief that during the post-war years we should maintain high and stable employment by demand management. That was generally accepted. Who could think of saying anything against such a concept? The problem was to put it into practice.
We have since the second world war created the illusion at Westminster that Governments of any political persuasion could solve all problems and that all the taxpayer had to do was pay. We seem to have ignored the fact that in the 1950s West Germany became a competitor, in the 1960s France joined West Germany, in the 1970s Japan joined them and now in the 1980s south-east Asia has become a competitor, taking away our jobs to employ their own people. Great Britain was the last country in
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western Europe to recover from the second world war because it did not learn that only it could solve its problems.
In 1955 at the Messina conference we chose to ignore Europe. I believe that the Government sent two civil servants for the drafting of the treaty of Rome. From 1957 to 1973 we manoeuvred around the outside of the European Community and let others get ahead of us in exploiting it. I should like to share with the House my concern about what happened during that period. We seem to have had a unique ability to waste our human and financial resources. We seemed to kindle and rekindle the expectation that the Government could and would solve all problems. Party manifestos said so repeatedly, they suggested that all taxpayers had to do was give the Government their money which they would throw at the problems which would then go away.
The tale of the nationalised industries, particularly the steel, coal, shipbuilding and aircraft industries shows that that waste was perpetuating the illusion that taxpayers' money would solve all problems. If one studies what has happened in the past 20 years, one can see the sources of our present unemployment. Between 1960 and 1980, while this country's productivity increased by just over 2 per cent. per annum, the other 23 OECD countries managed to double their productivity. Those countries are our competitors for markets. Productivity per head in our country today is only two thirds that of Italy, one half that of France and less than one half that of West Germany, the United States of America and Japan. They are all competing for our jobs.
During that 20-year period we increased our wages at about twice the rate of that of our competitors in the OECD. Unit wage costs doubled in our competitor countries but ours increased five times. We began to price ourselves out of markets. Worse still, profitability—a word which will perhaps be applauded on the Conservative Benches but not on the Opposition Benches—dropped from about 13 per cent. per annum in real terms in 1960 to about half that in 1970 and to 2 per cent. in 1980. As a result, manufacturing industry lost the ability to reinvest profits, something which is always being called for.
The only way to obtain money was to borrow more or to increase prices, both of which became self-defeating. Manufacturing industry's profits in this country are running at only one third of the rate of West Germany or the United States. They are the people who can afford to re-equip their factories with the latest equipment and machine tools to keep their employees working. The result was inflation. Over those 20 years our inflation increased on average about twice as fast as that of all our competitors. We are debating the inevitable result tonight —while unemployment in all countries has increased, in this country it has increased at twice the rate.
Our people have paid severely for a long time, not just over the last few years, for a failure by Government, industry, management and trade unions to understand that one cannot create jobs unless one's goods and services are competitive. The disappearance of our markets and the growth of imports is a lesson that we must learn once and for all.
During those 20 years domestic demand in this country rose and, although the cost of living increased, life became steadily better for people. While demand increased by over 50 per cent., our share of world trade decreased by 50 per cent. and our imports doubled. We moved from providing

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the major technical products of the world to becoming one of the major importers of technical products from countries which should never have been allowed to become our competitors.
We move from the Queen's Speech to a period of legislation which will last for 18 months. I hope that the policy put forward by the Government during that time will continue the abolition of price, dividend and exchange control, which we enjoyed during the past four years, and will move towards a reduction in taxation to stimulate further investment and growth of employment opportunities.
I continue to be worried by the fact that the Government take so much of the gross national product to finance the goods and services that they provide. We expect everyone else to cut their cloth according to what they can afford, and the Government should show more strongly that they can learn that lesson. We want to see our health, education and welfare services preserved. I shall fight for them to be preserved. The only way to reduce the proportion that the Government take from the national economy is to increase our output of goods and services and to allow the economy to become steadily more profitable.
There was a brief discussion about regional policy at Question Time this afternoon. It emerged that we are spending over £800 million a year on regional policy. I find it hard to see any jobs arising from that. That £800 million comes from profitable companies and is distributed to those which are unprofitable. In the end the competitiveness of both is reduced and jobs disappear.
I want the Government to study regional policy, which benefits certain parts of the country only. It should benefit all parts. We can do with some benefits in Hastings and Rye.
I should like to see the Government concentrate on the 108 initiatives to help small businesses which we proudly proclaimed in our manifesto, and achieve a more comprehensive and understandable package for those who want to start up small businesses. New sources of employment are more likely to arise from the growth of small businesses than from the resurrection of large companies.
I appeal to the Government to construct a creative purchasing policy for the goods and services that they acquire. They spend an enormous amount of money, over £130,000 million, each year. The Government are the largest single customer of most companies, either directly or indirectly. The style of purchasing by Government and the way in which they spend money can be a tremendous incentive to the creation of goods and services that can have an export viability.
The hon. Member for Bolton, West (Mr. Sackville), who made a valuable contribution in his maiden speech, identified the problem exactly when he talked about the competition between Britain and America over the purchase of a much-needed anti-radar missile to protect our aircraft. There is not only the question of recycling the taxpayers' money through the economy, which means that the British equipment would, in net terms, cost less than the American equipment, but there is the fact that the Government could encourage the company in this country, British Aerospace, to compete more effectively if the Government as a purchaser went for a fixed price contract. At the moment the Government are shying away from such
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a concept. They say, "But you will make a big profit, and that is bad." However, surely a Conservative Government should encourage profit. If someone does better than the target profit that has been agreed, the Government should applaud that, and we in the Conservative party should do so also. The Government need to be more creative about the way in which they purchase goods and services and so become a pace setter for the competitiveness of industry and commerce.
During the four years when I was a parliamentary private secretary serving a Secretary of State, I not only found it a most valuable and unique experience, but was concerned about the way in which the Government practise what they preach. We all believe in education; it is so easy to say so. However, I am gravely concerned whether, having spent many thousands of millions of pounds on education, we are getting a quality of education that is value for money.
At the end of the statutory education period, the real measurement is not only whether there are job opportunities but whether those who have received the education can match it to those job opportunities. In my constituency, over 5,000 people are unemployed. One company recently wanted to recruit 15 school leavers. It asked the jobcentre — which has twice as many job opportunities as a year ago — to ask each of the candidates how many pennies there were in £1 and 50p. Out of the 15, only four got it right. A food factory had 100 job vacancies, but only 50 people applied and only 36 were taken on. An electronics company with 100 vacancies had to scour the country to get people to work in the sunniest part of the United Kingdom.
I am concerned that, when the technical press is awash with advertisements for employment opportunities, so many people remain unemployed. I ask the Government to examine the reasons why people are remaining unemployed, when there are real job opportunities.
I applauded the thoughtful and striking speech of my right hon. Friend the Member for Cambridgeshire, South-East (Mr. Pym). I believe, with him, that the Conservative Government have been given a second lease of opportunity to prove the slogan "Conservative freedom works". However, I believe that in the next five years time will not be on our side for us to prove that. Since 1979, the Government have made wonderful progress in restoring the British people's belief in themselves. The Prime Minister has led us in a way that could not have been excelled by any other person.
The time has come when we Conservatives must match the reality of our power with the proof that we have the ability and the will power to subdue and drive back the ghastly ogre of unemployment which sits at so many people's firesides. That must be our prime duty to our people from this debate onwards.
7.16 pm
Mr. Michael McGuire: I hope that the seat of the hon. Member for Hastings and Rye (Mr. Warren) remains the same after the recent redistribution, one cannot be sure about constituencies or their names. Few fixed points remain.
At the beginning and end of his speech, the hon. Gentleman discussed the theme of unemployment and the Tory attitude to it and I intend to refer to this too. For me the general election was a most unreal event. I had the impression that the Labour party had been in power for the

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past four years, had trebled unemployment, had seen manufacturing investment and capacity reduced by 20 per cent. and apprenticeships fall by 4 per cent. and had created the unemployment of 1·25 million people aged 25 and under, some of whom have never had a job. My right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore) was right in the opening and the peroration of his speech that we did not get our message across. I shall not say that we did not score one or two own goals or shoot ourselves in the foot when we were on the starting line, but the fact was that by a skilful operation, the Tories were able almost to persuade the people that they were voting against a Labour Government who had been in power for the past four years. The old adage is that one does not put in Oppositions as much as vote out Governments.
The theme running through the election that bugged me enormously was the Prime Minister's theme, which came across stridently at times, of harking back to Victorian values. In a wonderful maiden speech, my hon. Friend the Member for Birmingham, Ladywood (Ms Short) talked about the consequences of Victorian values. There were probably some noble values, but essentially it was a time of great hypocrisy, inequality and injustice for the ordinary working people. It was a time of cruel and crushing poverty. The Labour party, of which I am proud to be a member, was founded in 1900 because of those terrible conditions. It seems that it is now a requirement for every Tory to praise the sagacity and wisdom of the 1945 Labour Government. It is almost a prerequisite that they pay tribute. One would think that they were paying tribute to a Tory Government. That great Government of 1945, the first all-powerful Labour Government, swept away for ever, they hoped, those so-called Victorian standards.
The Lord Privy Seal and Leader of the House of Commons (Mr. John Biffen)indicated dissent.
Mr. McGuire: The right hon. Gentleman shakes his head. I do not have to read in books what Victorian values meant. They existed until 1947–48. The Labour Government swept them away. Let me give one example. I am sponsored by the National Union of Mineworkers, of which I am very proud. When I was going round the clubs telling people not to be seduced by the Tory propaganda which seemed to suggest that it was our fault that unemployment had trebled, I said that when a man was injured before 1948 he had to choose between compensation or prosecuting his employer at common law. He had to overcome a formidable difficulty created by the common law—even if he could manage without weekly compensation, which very few people could—known as the doctrine of common employment. He had to overcome a shared danger. One of the great achievements of the Labour party was the sweeping away of that relic of Victorian inequality. I do not think that even the Tories, in going back to Victorian values, would seek to reintroduce it.
Mr. Robert Kilroy-Silk: Does my hon. Friend think that they can understand that?
Mr. McGuire: The Government have been returned to power with a massive majority but, as the right hon. Member for Cambridgeshire, South-East (Mr. Pym) reminded them, with, because of the quirks in our political system of first-past-the-post, fewer votes than they polled in 1979. I am one of the minority of Opposition Members
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who believe that the British public will not let that inequality endure. We must look at proportional representation. I am not sure of the precise form, but I am absolutely sure that we must do it. [Interruption.] I know that my hon. Friend the Member for Great Grimsby (Mr. Mitchell) has not changed his views. He is a great supporter of proportional representation. The present position is that the Government have fewer votes than they polled in 1979 and have an overwhelming majority. I warn them that they cannot be considered to have a mandate to carry on trying to introduce Victorian values which were swept away. If they do, I think they will have taken on one of the biggest legitimate fights of their lives.
The Gracious Speech should be addressing itself—it only touches on the subject—to how we can deal with unemployment. I am fortunate in that since I left school at 14—I hope that my constituents think that I am in gainful employment, although sometimes in voice and in letters they seem to think otherwise—I have never felt the cruel lash of unemployment. When I enterer the House in 1964 we used to boast that there was no unemployment problem if the figure was not more than a quarter of a million. When unemployment came it was always visited or inflicted on my class of people—the manual working class. The great change now is that well-qualified people in good jobs are terrified of losing them. Well-qualified people have been thrown on the scrapheap. That is the change that has come. The cancer of unemployment has created fear across the country. If the Government are serious about tackling the problem, they should put forward constructive proposals to that end.
Do any Conservative Members seriously doubt —I address my remarks particularly to the Leader of the House — that the real figure of unemployment now is 4 million? If we were to use the calculations that the Labour party used when it was in government, that would be the figure. Jobs are still being lost at the rate of 22,000 a month. All the signs are that the position will not get better. Does anybody seriously pretend that, given another two or three years of these policies, when unemployment has grown to 6 million, the Tories will still be sitting on their hands saying, "We are very sorry. We do not want to see people unemployed but there is nothing that we can do about it."? The social fabric of this nation will not endure a Government not wanting to deal with 6 million unemployed, and all Conservative Members know it. What will the Government do to stop the figure going beyond 6 million that it cannot do now? The answer is nothing.
All that is preventing the problem from being tackled in a realistic and sensible way is the stubborn pride of a stubborn Prime Minister and her colleagues. They have used the acronym TINA—there is no alternative. They know that there is an alternative. Provision to combat unemployment had better be introduced as quickly and as sensibly as possible. If that does not happen, the social fabric of the nation will not endure, and strife will follow. Let no one have any doubt about this. The British people will not sit by and see the unemployment figure grow and grow. I ask the Government to take this matter on board. I believe that that is the overriding consideration. It would have been the overriding consideration of the Labour party. We have a plan to deal with it.
The Labour party's great misfortune was that by a combination of skilful advertising and problems that we created, the election was not fought on the real issues. As

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has been said, the electorate was suffering from a post-Falklands trauma. When it emerges from that, it will inflict retribution on the Conservative party. Such retribution will be fully deserved. For the Government to sit back and say that they can do nothing and that employment must continue to grow, is something that the British nation will not tolerate. It will give its verdict much sooner than the Tories think—much sooner than four or five years from now.
7.24 pm
Mr. Michael Howard: I begin, Mr. Deputy Speaker, by echoing the remarks of my hon. Friend the Member for Bolton, West (Mr. Sackville) and of the hon. Member for Birmingham, Ladywood (Ms Short) for being permitted to make my maiden speech today. I am particularly pleased to have caught your eye at such a relatively early stage in the Parliament because it enables me to pay an early public tribute to my predecessor, Sir Albert Costain. He is a much loved man both in the constituency and, as I have discovered during the past fortnight, in this House. He is not a man who seeks the limelight but he has rendered sterling service both to his constituents and to the House. More than 22 years ago he first became a member of the Public Accounts Committee and, I believe, the length of his service since then is without equal in the history of that Committee. During a much shorter period when I was a prospective parliamentary candidate, he was unstinting in his kindness to me. That was somewhat remarkable as he had some cause to be disenchanted with those who, like me, enter the House as practising banisters. On one occasion he was waiting to catch Mr. Speaker's eye but felt constrained to visit the room which was referred to with such affection by Mr. Speaker in his acceptance speech. Before he left the Chamber, Sir Albert entrusted his notes for safekeeping to one of his hon. and learned Friends. When he returned to the Chamber, he was somewhat dismayed to find that hon. and learned Gentleman addressing the House in a most accomplished manner with Sir Albert's notes in his hand and Sir Albert's words on his tongue.
My constituency of Folkestone and Hythe is a richly varied area, containing some 20 miles of coastline, Romney marsh, a most beautiful stretch of the north downs and the two towns that give it its name. Its economic activities are similarly varied. Communications to the continent of Europe are excellent and communications with the rest of England will also be excellent when the missing link of the M20 motorway between Maidstone and Ashford is completed. I am grateful to my right hon. Friend the Member for Guildford (Mr. Howell) for reinstating that project in the road programme when he was Secretary of State for Transport. His successor will hear a good deal from me about the priority to be given to it and the date on which we may expect completion.
I cannot pass from my constituency without reminding the House that it includes, in Hythe and Romney, two of the original Cinque ports which answered the summons issued by Simon de Montfort in the name of King Henry III to send representatives to what is usually regarded as our first Parliament in 1265. They have valued the closeness of their links with their Members of Parliament over the centuries since then and the loosening of those links which would be a consequence of the proposals for
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electoral reform presently being put about would be something I should greatly deplore. When one considers not just the proposals for electoral reform but also those for regional government espoused by the alliance parties and the sympathy with the creation of a federal European state expressed by the right hon. Member for Tweeddale, Ettrick and Lauderdale (Mr. Steel), it is not always appreciated how much the total package of alliance proposals would emasculate the powers of this House. I hope to retain for many years the trust of the people of the Folkestone and Hythe constituency who have sent me here, and I hope to continue to serve their interests in a House of Commons that has not been shorn of its powers.
I understand that there is still a view that a maiden speech should keep its distance from controversy. Although as a practising barrister of nearly 20 years' standing I cannot pretend to be a stranger to controversy, I shall do what I can to honour that tradition in the hope that the two brief points that I wish to make will command such widespread assent that no question of controversy can arise.
In the recent election, it was widely recognised, not only by Conservatives, that strikes and industrial action contribute to the problem of unemployment. Increasing recognition of that in recent years has been reflected in the increasing reluctance of workers to take industrial action. My right hon. Friend the Chancellor referred earlier to the importance of the reform of trade union law, especially as it affects the rights of individual members of trade unions. There is one critical area — critical for the personal freedom of individual workers as well as for the link between strikes and unemployment—in which in my view the legislative support given to the individual is inadequate. I refer to the position of the worker who refuses to join a strike, who may be excluded from his trade union as a consequence and who in a closed shop may lose his job for that reason. It may surprise some of my hon. Friends to know that, despite all the legislation of the last Parliament, it is still possible for that fate to befall a worker and for that worker to be denied any of the compensation or other remedies generally available at law for a worker who is unfairly dismissed.
The Government have not been wholly insensitive to this issue. In some circumstances, set out in the code of practice on closed shop agreements and arrangements which in its revised form came into operation last month, it is likely that compensation will be payable. In my view, however, that is by no means good enough, for two reasons.
First, as a matter of basic individual freedom a worker should be entitled to know without qualification that he cannot be sacked for refusing to strike without being entitled to all the remedies for unfair dismissal provided by our law. That protection is rightly conferred on the worker who is sacked because he is or proposes to become a member of a trade union. The worker who is sacked for refusing to strike is surely entitled to the same protection.
Secondly, in the real world it is stretching credulity beyond breaking point to suppose that a worker faced with an extremely difficult decision and subject to considerable pressure will sit down and go through the code of practice line by line to determine whether the circumstances set out in it correspond with those of the strike in which he is involved. The full absurdity of the situation becomes apparent when one appreciates that the definition of the circumstances set out itself involves very difficult

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questions of law and a consideration of the meaning of statutory provisions recently described by Lord Diplock, sitting in a judicial capacity in another place, as
"most regrettably lacking in the requisite degree of clarity."
That brings me to my final point, which has far wider application than the law relating to employment. When the same case was before the Court of Appeal, the Master of the Rolls made a plea to Parliament which we should do well to heed. He said:
"My plea is that Parliament when legislating in respect of circumstances which directly affect the 'man or woman in the street' or the 'man or woman on the shop floor' should give as high a priority to clarity and simplicity of expression as to refinements of policy."
He continued:
"When formulating policy, Ministers, of whatever political persuasion, should at all times be asking themselves and asking parliamentary counsel 'Is this concept too refined to be capable of expression in basic English? If so is there some way in which we can modify the policy so that it can be so expressed?' Having to ask such questions would no doubt be frustrating for ministers and the legislature generally, but in my judgment this is part of the price which has to be paid if the rule of law is to be maintained."
I do not believe that the refinement of policy which gave rise to the inclusion of some circumstances and the exclusion of others from the code of practice on the closed shop can be justified. Even if it could, I believe that the questions posed by the Master of the Rolls should have been asked. Had they been asked, I believe that the answer would have been to abandon that refinement of policy.
In the first maiden speech of this debate, my hon. Friend the Member for Derbyshire, South (Mrs. Currie) asked for greater simplicity in the law as it affects the right to buy council houses. I endorse that plea, but the area that she identified is not the only one that calls out for such treatment. For the reasons that I have given, lack of clarity in employment law can cause injustice and can damage the economy. I hope that my right hon. Friend the Secretary of State for Employment will introduce measures to alleviate that injustice in the near future and that my other right hon. Friends who bring forward legislation will pay full attention to the plea made by the Master of the Rolls. Many of us on the Conservative Back Benches intend to encourage them to do so in the months and, I hope, years ahead.
7.39 pm
Mr. Jim Craigen: I welcome you, Mr. Deputy Speaker, to your new office as Chairman of Ways and Means. I compliment the hon. Member for Folkestone and Hythe (Mr. Howard) on the delivery of his maiden speech. I noticed that he, unlike his predecessor, held his notes firmly in his grasp although I did not agree with their content. I once visited his constituency some time ago because I took a wrong turning as a result of all the roadworks down that way.
I should also like to pay tribute to my hon. Friend the Member for Birmingham, Ladywood (Ms Short), who made a strong and feeling speech on unemployment. She has a great deal of experience of youth unemployment problems as she is the former director of Youthaid. She made her case exceedingly well.
I was interested in the speeches of two former Cabinet Ministers — the ex-Foreign Secretary and the ex-Secretary of State for Transport. The theme of unemployment seemed to run through both. I do not see the point of the Government publishing a White Paper on
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employment, as the right hon. Member for Guildford (Mr. Howell) suggested, as I suspect that the Government are more interested in hoisting a white flag on unemployment than in preparing a meaningful White Paper on the subject. I would willingly exchange the rate of unemployment in my constituency for that in the constituency of the right hon. Member for Guildford. I have also visited his constituency and recall that it has its share of prosperity.
We have a new Chancellor of the Exchequer who speaks in more strident tones than his predecessor but the message that he hammers out is essentially the same. I noticed that he said that reversing the rising trend of unemployment must be the Government's priority. I also noticed that he said little about how, when and where that would or could be done. He would not give way when I tried to point out that the Treasury figures already forecast another 300,000 on the dole queue. That is a built-in assessment in the Manpower Services Commission's calculations. During parts of his speech I felt that the mechanistic Treasury language was coming to the fore. Indeed, I wondered whether some Treasury official coming up from Brighton on a dull day had pre pared parts of the right hon. Gentleman's speech on how we must go through the agonies of a tight money policy.
Part of my weekend reading was The Sunday Times. There was an interesting article about how exercise is good for one. The author disputed conventional wisdom about dieting. I was interested by the article because I have always followed the dictum of Mark Twain—I get my exercise by walking to the funerals of my athletic friends. The article suggested that, if only we exercised in a certain way and in certain forms, that exercise would be far more effective than dieting, which makes us grumpy and is too much of an obstacle for most of us.
Would it not be a dreadful tragedy if the formulae that have been worked out in the Treasury were proved wrong —as, I believe, most common sense people believe they will be? In our constituencies, as my hon. Friend the Member for Makerfield (Mr. McGuire) pointed out, we see the human effects of the Government's policies. What will the Government do when the oil revenue starts to run out? Indeed, what will the country do when the oil runs dry towards the end of this decade? The previous Conservative Administration were singularly blessed with the windfall of energy from the North sea. The tragedy is that much of the revenue from the North sea has been absorbed by coping with longer dole queues. Several hon. Members have referred to the decline, collapse and, indeed, eclipse, of manufacturing in many parts of the country. If today we had the same level of employment in manufacturing that we had in 1970 we would have no unemployment. That is the measure of the decline in manufacturing capacity.
There is no message in the Queen's Speech about what will be done about our shipbuilding, steel and engineering industries. They are basic industries that are still important in the west of Scotland. In the longer term, those industries will affect our balance of payments. There is talk of returning to Victorian values. We now have circumstances that the Victorians would have shuddered at. We now have a trade deficit in manufacturing. Moreover, the worrying feature of that is the extent to which there is a decline in investment in new forms of manufacturing.
I should have thought that the Government could give a glimpse of hope by saying that they will go ahead with the gas-gathering pipeline and will bring forward some oil

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rig construction. They have already announced that there will be changes in the rate of oil taxation. What faith can we have in a Queen's Speech that talks of increasing economic prosperity, reducing unemployment and seeking a further reduction in inflation when the reverse is happening in each respect?
Several hon. Members have gone on about the relationship between trade unions and inflation. The trade unions are always convenient scapegoats. The decisions taken by the Council of the Building Societies Association sometimes bear more heavily on affairs in households throughout the country than those that are taken by the TUC general council.
I notice that there is no mention in the Queen's Speech of new legislation to deal with the role of building societies. I hope that the Government will not leave it to building societies to sort out their internal affairs, as mortgage interest rates now have considerable influence on the retail price index. I have said that before.
I am depressed most by the fatalism of the belief that Britain will not be able to create gainful employment for its citizens. Have we really run out of work? Many of us can see tasks that need to be done in inner city areas. We notice that virtually no maintenance or repair work is being done by many local authorities on their housing stock because their housing support grant has been slashed. We also notice that Britain imports manufactured goods that we should produce for ourselves and that we are failing to invest in our future.
Moreover, we are not giving our young people the best opportunity in primary and secondary education. It is ironic that a Government who talk about the need for a more skilled and professional work force have cut the number of university places and places at other higher and further educational institutions. I firmly believe that Britain has a great deal to offer its people. The trouble is that the shares are being meted out unequally. The shares are being meted out unfairly between groups of people — like the unskilled, the semi-skilled, the young, the over-fifties and the disabled — and between different parts of the country.
The right hon. Members for Cambridgeshire, South-East (Mr. Pym), for Guildford and even for Surrey, South-West (Mr. Macmillan) talked of unemployment, but they do not know the half of it. They do not understand that when people from many other parts of the United Kingdom talk of unemployment they mean long-term unemployment or permanent unemployment for many people. Millions of people are now no longer able to make their contribution to society as they would like.
On Monday, the House debated the welfare state. Our social security system is based on the contributory principle, and people wish to contribute and to build the social security system so that they can benefit from it when they are sick or retired or whatever. There will be a real funding crisis in the system unless we realise the interrelationship between employment and policies that create full employment and the present position.
The most significant omission from the Queen's Speech is any message of hope for a younger generation that desperately wants to contribute to our society and that has been brought up in the schools to believe that it is part of its duty to contribute towards society. The Government continue to trot out special programmes, which have
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become a political apology for a lack of political preparation and imagination in dealing with the problems of labour market. We now spend £2 billion on those programmes, and I wonder how much of that sum goes towards building up bureaucratic procedures and much paper-passing rather than the creation of permanent employment.
Some hon. Members have referred to the Government's massive majority, which must be the envy of many postwar Prime Ministers, and indeed a few pre-war Prime Ministers. Perhaps, when she was putting the finishing touches to the Queen's Speech, the Prime Minister's head expanded a little. Despite what we say about her, she is human, and she must have taken great pride in the fact that she had a big majority. The right hon. Member for Cambridgeshire, South-East was sacked after suggesting that she should not have it.
I hope that when the Prime Minister listened to Her Majesty reading the speech from the Throne she realised that Britain runs enormous risks, and that the Crown has become the common denominator in the country because so much of the political landscape has been otherwise fractured. We can see that in the House of Commons, in the representation from different parts of the country. I hope that the Prime Minister, who suggested that we should put the "Great" back into Britain, does not continue the policies that she has pursued during the past four years, because otherwise there will be no Britain as we know it.
7.53 pm
Mr. Terence Higgins: I am happy to join the hon. Member for Glasgow, Maryhill (Mr. Craigen) in congratulating my hon. Friend the Member for Folkestone and Hythe (Mr. Howard) on his maiden speech. He talked about his predecessor, Sir Albert Costain, who was held in great affection in the House and whose service on the Public Accounts Committee was important. My hon. Friend spoke with great expertise about trade union law, and it is unlikely that he will escape service on the Standing Committee that will discuss the trade union legislation envisaged in the Gracious Speech. If that is so, the Government Whips are unlikely to welcome his speeches as much as we shall welcome them on the Floor of the House.
Traditionally, the Leader of the House makes the final speech in a debate on the Loyal Address, so I shall begin by making some points that will be of special concern to him, as he acts as the link between Parliament and the Executive. The previous Parliament will be remembered for the Falklands war, but when we look back at it after many years it will also be remembered for the major changes in parliamentary procedure. The creation of the Select Committee system was a memorable innovation that will be of the greatest importance.
As a result of the recommendations of the Select Committee on Procedure (Finance), which were accepted by the Government, the House now has the opportunity to debate the details of public expenditure on the new Estimates days. The old Supply days have been changed to Estimates days and Opposition days. As a result of delay in establishing the new Select Committees and departmental Committees, there may be a slight hiccup before the mechanism is fully operational. However, it was an important innovation that I hope will become firmly established.

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May I make a commercial for the first report of the Select Committee on Procedure (Finance) which was completed just before the general election and which sets out the further reforms that are necessary in our financial procedure if we are to build upon the foundations laid in the previous Parliament. I had the honour of chairing that Select Committee, and the report makes several specific recommendations. The first deals with non-Supply expenditure, which represents about half the total public expenditure, where we propose changes in the debates on rate support grant. Hon. Members have often said that the fact that those orders are not amendable causes them considerable concern, so our proposal will assist the House. We also propose more effective control by the House of long-term projects where the initial estimate may be modest but where, over a period, the total cost may run into hundreds or thousands of millions of pounds. We also recommend for the first time some parliamentary control over borrowing. If Henry V wished to go to war and could borrow the money, there was no parliamentary control. If he wished to raise taxes, he had to come to the House. Borrowing is a substitute for taxation and should be controlled by the House.
The Committee also considered the procedural implications of the so-called Armstrong committee report with regard to a Green Budget, and recommended that there should be a debate after the autumn statement but before the main Budget when the House could express a view. We also called for an early debate on whether the procedures with regard to taxation and expenditure should be brought together.
I hope that my right hon. Friend the Leader of the House will find time for an early debate on all those matters before the recess, because if the House is to have an effective influence on economic policy it must implement those proposals. We must continue the process of reform that has done much to redress the imbalance between the Executive and Parliament and if we carry out those further measures we may reasonably say that the reforms have been brought to a satisfactory conclusion.
Unemployment has been one of the major points of this debate. I begin by congratulating my right hon. Friend the Chancellor of the Exchequer on his appointment, and his predecessor. The new Chancellor has an immensely difficult task. It is clear that the electorate rejected the proposals for dealing with unemployment put forward by both the Labour party and the Liberal-SDP alliance. The electorate did not find those reflationary remedies credible. If we are to tackle unemployment, we must control inflation, and there is no longer a trade-off between the two possibilities. Present unemployment is different from that which we experienced in the post-war period. We have seen, as a result of the economic climate of the past few years, a major reduction in overmanning. Many firms find that they can probably produce as much as they could before with a much smaller labour force. It is not likely that we shall find those firms re-employing those whom they have made redundant. Therefore, we face immensely difficult problems.
There is also a difficult financial problem arising for industry, and this perhaps is a particular responsibility not only of the Chancellor but of the Governor of the Bank of England. Lord Richardson, who is due to retire as Governor of the Bank of England this week, has done a magnificent job during his period of office, and he has held office during some extremely difficult Limes. We all wish
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his successor well. There is a danger that the clearing banks, having over the whole period of the recession clone much to preserve viable firms, may now feel that they can adopt a more restrictive stance. That could be extremely dangerous for future employment. There is a danger that, if finance is not provided for the expansion, the strains on companies may be greater than they have been during the recession.
Therefore, the new Chancellor and the new Governor of the Bank of England have great responsibilities. If we are to provide a long-term solution to the unemployment problem, we must encourage investment, and in particular investment in the private sector. This must necessarily turn on the relationship between the rate of interest and the rate of return obtainable in industry. The reality is that there is too large a gap between those two magnitudes, with the result that we shall not see a rapid upturn in investment.
This brings me to economic management generally. The Chancellor, when he was Financial Secretary, made a number of speeches setting out his understanding of the workings of the economy, at least two of them being remarkable contributions to the general economic debate. The first two years of the Conservative Government in the last Parliament were unsatisfactory in a number of respects. We saw a major wage explosion, particularly in the public sector, that went far beyond the needs of the commitment to fulfil the Clegg obligation. Moreover, we on the Treasury and Civil Service Select Committee described what we then had as a "funny money" policy, whereby the money supply was controlled not with a small gap between taxation and expenditure so that the PSBR could be financed by low interest rates, but with a very large gap. As a result of that large gap and the high interest rates necessary to fund it, we found that we had a considerable degree of deflation. That happened when the Chancellor was Chief Secretary.
Following that, there have been some radical changes in Government policy. In particular, the preoccupation, almost obsession, with M3 was dropped and a broader view was taken. There was also a radical change in the attitude to the exchange rate. It is now important that we should try to discern as clearly as possible what the Chancellor's policy will be. He spoke in general terms this afternoon and left to one side what he described as the details. If we are to analyse these problems correctly, we must look at the details closely.
Our economy is closely linked with that of the United States, and in particular there is a close relationship between our interest rates and those of the United States. There is now a massive prospective American deficit in what is called, in the new jargon, the "our years—roughly speaking, from the end of this year onwards. That creates a danger. While I welcome the reappointment of Mr. Volcker as chairman of the Federal Reserve Bank, the extent to which he is able to reduce interest rates will be severely curtailed by the size of the deficit with which he is faced. That necessarily means that our position will be difficult.
I hope, therefore, that the Chancellor will spell out in rather more detail than hitherto precisely what his attitude will be towards the exchange rate as well as towards interest rates. It is not clear from what he said this afternoon to what extent he is to continue to be preoccupied with the money supply rather than with interest rates. It is a truism in economics that it is possible to control either price or quantity but not both at the same

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time. His statement that he will continue with the medium-term financial strategy is of considerable interest, but we still need to know what position he will take on the relationship between interest rates and the exchange rate.
It is therefore important that the Chancellor should continue to give priority to inflation because without that we cannot hope to solve the problem of unemployment. At the same time, we need to look carefully at a speech that my right hon. Friend made while he was financial Secretary. He said:
"in the world of monetary targets, the level of demand is effectively determined by the rate of inflation. A rate of inflation higher than the monetary target will cause demand to be depressed, as a smaller volume of goods is purchased at a higher price; similarly, a rate of inflation lower than the monetary target will give rise to a boost to demand. In other words, what matters is the rate of change in the real money supply."
I believe that he was right about that.
We have seen what might be called the "Lawson crossover" in terms of the relationship between the rate of change in the money supply and the rate of change in inflation. There is a real prospect, with the rapid fall in the rate of inflation, that we shall see an increase in the real money supply and, as a result, a resumption of steady growth. The problem will arise if the rate of inflation then begins to rise significantly in relation to the monetary targets. We need to look at the arithmetic in some detail. It is clear that a resumption of inflationary wage claims will create a situation in which the rate of inflation will go up and the real money supply will decline in relation to the Chancellor's medium-term financial strategy.
That being so, it is tremendously important that all those in industry, particularly trade union leaders, should appreciate that we are in a competitive environment and have still not, contrary to what was said earlier, got to a point where our competitive position is as good as it was four or five years ago. Consequently, we must exercise restraint on wages if we are to get the economy competitive once more and tackle the problem of inflation.
The hon. Member for Birmingham, Ladywood (Ms Short), in what was a remarkable, indeed passionate, speech, misunderstood, I think, the true nature of the problem. She referred to the past, when there was a high rate of inflation and unemployment was comparatively low. The crucial point is that that was not something that could continue. Sooner or later the country had to face up to reality; and sooner or later we had to realise that the world does not, did not and will not owe us a living. Therefore, we have to reach once more a position where we are competitive and do not go on paying ourselves more than the value of what we are producing. We have to reach a point where companies can begin on the upward path, against the financial background and the financial dangers I have mentioned.
At the same time we must seek to encourage investment. The fall in the rate of return on industrial investment over the years as been disappointing. We have to raise that level. I believe that the Chancellor understands these things clearly. The broad policy that he outlined is the correct one, but we shall have to look at these highly technical matters in considerable detail. General debates are all very well, but at the end of the day these are highly technical matters. The dangers that we
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face are still great, not least internationally, both in relation to international monetary policy and to the international bank indebtedness.
We have some very difficult decisions to make. I wish the new Chancellor of the Exchequer well. I hope that in the course of reforming our financial procedures the House as a whole will give him the support he needs if he is to build upon the foundations which have been laid over the past four years.
8.10 pm
Mrs. M. Beckett: First, I should like to pay tribute to my predecessors. It is thanks to the activities of the boundary commissioners that I, like some other hon. Members, have had more than one predecessor — in my case Phillip Whitehead and Walter Johnson. Both had excellent records of assiduous attention to the needs of their constituents. As I know you will recall, Mr. Deputy Speaker, both were well-respected as well as experienced Members of this House; the two do not invariably go together. In this Session we shall particularly miss the expertise which each of them could bring to bear.
Phillip Whitehead, as a former television producer, had great experience to bring to bear on debates on matters such as cable television. Walter Johnson had great experience of the realities of life in the world of trade unions, of which we have heard rather the other side from Conservative Members. It was Walter's experience of life in trade unions that was perhaps more widely shared in my constituency. It is a constituency with a very proud history of industrial development and industrial activity across a wide range of different industries. It has also, unfortunately—this it shares with other areas with the same characteristics — widespread experience of the exploitation and distress which have all too often gone hand in hand with industrial experience and activity, and which have in the past, as I expect will be necessary in the future, been alleviated only by the activities of properly run trade unions anxious and concerned for the well-being of their members.
I cannot but think that trade unionists in my constituency, should their eyes have fallen on the Queen's Speech, will have been rubbing them in disbelief at one of the Prime Minister's more extraordinary contributions. We are all well acquainted with the fact that, whatever may go wrong in Britain or whoever's fault it may be, it is never the fault of the right hon. Lady. The blame always lies with some other party—[Interruption.] As I am reminded, the right hon. Lady just takes the credit when things go right, and that does not happen very often.
One of the strange reasons that the right hon. Lady gave for the partisan attack on the trade union movement that she seems to be about to mount is that trade unions are
"such powerful agencies for good or harm, for creating new jobs" —[Official Report, 15 June 1983, Vol. 1, c. 58.]
I find it inexplicable that the right hon. Lady, who has spent such energy, time and enthusiasm explaining to all of us why it is beyond the power of Governments to create jobs, can nevertheless assume that it is well within the power of trade unions, and that that is somehow a reason for the activities that she intends to mount in that direction.
It is true that trade unionists today are forced to spend a vast amount of time on the need to try to preserve and create employment, and that many trade unionists have more experience than they would wish of trying

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desperately to create jobs, apprenticeships and opportunities, especially for young people leaving school, of whom so many hon. Members have spoken in the debate, and of trying to create or preserve those jobs in the face of the obstacle course that the Government's economic policies have created for them. The Government are now threatening to increase the series of handicaps in that obstacle course. Despite the excuses and reasons that the right hon. Lady purports to give, it appears, sadly, that we are witnessing yet another of the petty, partisan attacks that we have seen her mount on any group or interest that seeks to oppose her policies.
When we look at the Government's record over the past four years, we are looking also at the record of the struggle of trade unionists to try to fulfil the traditional role of protecting employment and of contributing to employment in the future. One of the sad things which have marked even this debate—and which I fear will mark many of our future debates on the subject if the right hon. Lady carries out her pledge to introduce legislation on it—is that people have been speaking with no understanding and no grasp of the role that the trade union movement has played and will play, or of how ordinary trade unionists, whether shop stewards or members on the shop floor, struggle to find out from their management the facts about how their industry is being affected by the recession, and struggle to discover what contributions they can realistically make, without damaging too greatly the interests of their members, to the survival and future prosperity of their firms. All too often, owing to the divisive nature of our industry, they find that their legitimate interests are snubbed because the interests of the work force are of so little concern to so many managements and shareholders.
It is time that more Conservative Members recognised that trade unionists, finding themselves and their communities faced with the threat of redundancy, are conscious that they are dealing not only with their own but with their children's future. They do their utmost to deal with the problem in that spirit.
In Derby, unfortunately, as elsewhere, the record of developments over the last four years is one of redundancy followed by more redundancy followed by even more redundancy, all within the same firm, until gradually, one after the other, major employers in the constituency have closed. Under the Conservative Government, unemployment in my constituency has more than trebled. When Conservative Members speak so fulsomely of the role of small companies, they seem to forget that small companies go down with the large as their markets and the people to whom they sell their supplies and services disappear.
I have heard a great deal lately about the proud record of the Government in helping to create small companies. All too often, those small companies are created out of the large ones that existed before the Government's economic policies came into effect.
In my constituency, two recent developments are causing yet greater concern. A recent study has been published by the local authority drawing attention not only to the figures for unemployment in the Derby travel-towork area, which are themselves depressing, but to the fact that, when the pattern of unemployment in the area is examined more closely, it can be seen that in the inner city area of Derby, most of which is in my constituency, unemployment is running not at 11 per cent., which is the figure found more widely in the travel-to-work area, but
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at 26 per cent. or more. It is, of course, in the very areas of the inner city, where unemployment is at those levels and at its highest, that all the other worse aspects of deprivation are endured. We shall be seeking, with the local authority, to press the Government very hard for the help that the inner cities need and demand in order even to begin to scratch the surface of the problems faced by the people who live within those areas.
The second matter that is causing great concern is the comparatively recent revelation — as recent as the Conservative party's election manifesto—that not only British Rail, one of the major remaining employers in my constituency, but one of the other major remaining employers, Rolls-Royce, is directly threatened by the Government's industrial policy. The Government's dogmatic and vindictive opposition to public ownership is sufficient in itself to cause dismay, but when, as in my constituency, the jobs of thousands of my constituents and their families depend directly on the results of the Government's policy, the position is seriously alarming.
I think that it was the right hon. Member for Guildford (Mr. Howell) who mentioned the opportunities for private enterprise that the Government's privatisation policy is likely to bring. I fear that the only opportunity for private enterprise that will be created if Rolls-Royce is put up for sale will be the opportunity for its American competitors to buy it so as to close it down and remove a competitor that they much fear in world markets.
In the Serpell report about the future of British Rail, the implications of privatisation and change in the industrial structure are that British Rail should look elsewhere, if necessary abroad, for its supplies of carriages, wagons and locomotives. None of those things holds any great attraction for my constituents. The unemployment that I mentioned is principally among the unskilled and semiskilled. That is bad enough, but now we have the increase in what I shall call technological unemployment. That unemployment is among people who are highly skilled and it is the result of technological change. To add to that, and to the threat of redundancies that we already face, the threat of unnecessary redundancies because of an unnecessary, blind and stupid policy being pursued by this Government is almost too much for people to bear.
Technological unemployment cannot possibly be dealt with without investment, yet as we have already heard several times, investment is falling to about one third of previous expenditure in this respect. Even if we are not to have jobs elsewhere in new manufacturing, we cannot possibly have jobs in other services and service industries which might mop up some of the pool of unemployment without increased investment, particularly on the public side — the very thing against which this Government have set their face.
My hon. Friend the Member for Birmingham, Ladywood (Ms. Short), in a remarkable and excellent speech to which many hon. Members have referred, spoke of the way in which this Government and their leadership are hated in her constituency. I would not go so far as to say that this Government are yet hated, but I can say without fear of contradiction that they are feared, not in the sense that I am sure the Prime Minister would wish, fear out of respect, but for their arrogance and blind and senseless refusal to consider anything that will secure a future in education or employment for our young people.
The Prime Minister has made much of her admiration of the Victorians. I wish that one of the things that she

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admired about the Victorians was the way in which they understood investment in the future. When we look at the parts of the country that are decaying, we are looking at areas where the Victorians had the wit to invest money in projects, the future of which would benefit not just their children but their grandchildren. That wit is something that the right hon. Lady all too clearly lacks.
Every city has landmarks of which it is proud. In Derby one of our prides today is an excellent industrial museum which contains testimony to a rather glorious industrial past. My task and that of other hon. Members on these Benches during the lifetime of this Government is to ensure that under the right hon. Lady we do not reduce our city and the whole country to an industrial museum.
8.23 pm
Mr. Andrew MacKay: I join the hon. Member for Glasgow, Maryhill (Mr. Craigen) in congratulating you, Mr. Deputy Speaker, on your new appointment. Since I last sat in this House, it seems that we have both been reincarnated. Having listened to the debate today, and the speeches of the hon. Members for Derby, South (Mrs. Beckett) and Dagenham (Mr. Gould), and seeing the new Member for Hackney, South and Shoreditch (Mr. Sedgemore) resplendent down there below the Gangway again, as he was before, and seeing my colleagues on these Benches, if the right hon. Member for Down, South (Mr. Powell) said that the House yesterday was in the midst of an ocean of virgins, today we must be seeing the age of the retreads.
I have come back to the House representing the new constituency of Berkshire, East. It is made up of three existing divisions, and I pay tribute to the work of the three Members concerned. I should like to thank my hon. Friends the Members for Wokingham (Mr. van Straubenzee), Windsor and Maidenhead (Dr. Glyn), and Beaconsfield (Mr. Smith) for all their help and consideration during the transitional experience that we have just experienced.
The new constituency of Berkshire, East is large in both area and population. It is based around the exciting new town of Bracknell, which is an invigorating place in which to live and work, with a lot of new industry, much high technology, and, I am pleased to say, relatively low unemployment. It also has many established communities, names that are well known — Ascot, Sunningdale, Sunninghill, Datchet, Crowthorn, Sandhurst and Old Windsor. My electorate is over 84,000. That shows the growth of population in the area, and why it is so important for the House to ensure that there is a Boundary Commission report at least every ten years, so that there is a fair spread of the electorate through each of the divisions that make up our constituencies.
I have already said that I represent a high technology area. We are on the edge of silicon valley. I believe that my constituents will play a major role in revitalising our economy, and that we shall be in the forefront of creating the prosperity that I believe we shall see during the course of this Parliament.
My party has been elected with a great mandate. We have a sizeable majority, but I suggest that this—
Mr. Ronald Davies: It was interesting to hear the hon. Gentleman's description of his constituency.
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Clearly it is a very affluent constituency, one that contains many new industries and a flourishing population. However, does the hon. Gentleman realise that there are many parts of the country that do not share the luxury of having new industries, which do not lie on the edge of silicon valley, and which do not have the prospects that his constituency obviously enjoys? Does he agree that it is his responsibility to ensure that the Government he supports are prepared to follow policies that will ensure that the prosperity that he and his constituency enjoy is freely available to those parts of the country that do not currently enjoy it?
Mr. MacKay: I agree with the hon. Gentleman. Perhaps we should consider why we enjoy that prosperity. We do so because we have encouraged new modern industries, the industries of the future, industries that will create wealth and prosperity and jobs. We also have a first-class work force with a first-class industrial relations record. I suggest that the hon. Gentleman notes those points when—
Mr. Ronald Davies: Will the hon. Gentleman give way?
Mr. MacKay: No. I am sorry, but—
Mr. Ronald Davies: Will the hon. Gentleman give way?
Mr. Deputy Speaker (Mr. Harold Walker): Order. The hon. Member for Berkshire, East (Mr. MacKay) has said that he is not giving way.
Mr. MacKay: Only a short time is available and many hon. Members on both sides still wish to speak. I shall conclude shorrtly and if I give way again it may preclude other hon. Members from taking part.
We live in an exciting age. The responsibility that is inherent in the Government's large majority is well reflected on the Conservative Benches. Those who elected the Government did so because they believed that that would ensure the future prosperity of this country and long-term full employment. They realise that the first duty of any Government is to create the right economic climate to ensure that our great industries are competitive and can operate in the markets of the world.
We have given the voters great expectations and we must not let them down. There are three areas in which the electorate expect much from the Government in the creation of an economic recovery. The first area is unemployment. The only way of creating lasting jobs is to ensure that our industry is competitive, that we produce the goods that people at home and abroad want to buy and do so at prices that they can afford and to a quality that makes them re-order time and again.
That is why I am confident, on behalf of my constituents, that during this Parliament, as we continue our economic programme creating the right climate, we shall create lasting jobs.
The second area where the electors expect much of the Government is income tax reductions. The Conservative Government were elected in 1979 on a manifesto that pledged reductions in personal income tax. We know that we did not fulfil that pledge, and I am pleased that we did not do so, because in the economic climate of that time it would have been dangerous, immoral and wrong to have made cuts in income tax.

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However, I suggest to my right hon. Friend the Chancellor of the Exchequer that, as we create prosperity, it is vital that our wealth creators should benefit from across-the-board reductions in personal taxation which will give a greater incentive to people to work harder and thus create more money.
Mr. Boyes: Will the hon. Gentleman give way?
Mr. MacKay: No.
We must cut income tax for lower-oaid workers. Let us not fiddle with the standard rate; let us raise the thresholds across the board and take the lower paid out of tax altogether. That will give them a great incentive to work.
The final area in which the electorate expects much from the Government is essential services. In the midst of an economic recession, the electorate returned a Conservative Government because they understood why we make public expenditure cuts. We are immensely proud of making many of those cuts. [HON. MEMBERS: "Shame."] We were cutting out waste and bureaucracy. I know that Labour Members are in favour of waste, bureaucracy and jobs for the boys.
Mr. Boyes: Will the hon. Gentleman give way?
Mr. MacKay: No.
People have regretted the cuts in essential services, in hospitals and schools, but they understand why they have been made. Education is an investment in our future and I believe that more funds must be made available for our hospitals. Therefore, I hope that when we create sufficient prosperity the Government will ensure that more money is allocated in areas where there is considerable need. That will be greatly appreciated.
As I said at the outset, we have been given a tremendous mandate. There is great responsibility with such a large majority, and rightly, there are high expectations. I am delighted to be back on the Conservative Benches to help and observe the Government achieving our economic prosperity and, as a result, being elected in five years' time for a third term in office.
8.35 pm
Mr. Austin Mitchell: First, Mr. Deputy Speaker, I congratulate you on your appointment. It is a pleasure to see you in the Chair.
Secondly, I congratulate the hon. Member for Berkshire, East (Mr. MacKay) on his return to the House. I remember our confrontations of four years ago when he was a Member in previous incarnation. In those four years the country has become poorer and unemployment has trebled. Manufacturing production has fallen by one fifth and the hon. Gentleman has not aged a bit. Clearly, his economic views have not changed from the views that he propounded four years ago, either. Like his Government, he has learnt nothing and forgotten nothing — which does not augur well for the economic problems that Britain is about to face.
Thirdly, I congratulate the Chancellor. He has taken over, rather like a receiver taking over bankrupt stock, from the most disastrous Chancellor that Britain has had since the war and probably this century. The previous Chancellor has gone, as Foreign Secretary, to face on the international scene the consequences of his policies—high interest rates that have produced the international debt crisis that the developing world is facing, domestic deflation which has meant a depression of the demand for
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primary produce of the developing countries, and the collective refusal to act to take the world out of a depression for which he was partly responsible as Chancellor.
The previous Chancellor has moved on, leaving the right hon. Member for Blaby (Mr. Lawson) to cope with the consequences of his policy which the Saatchi and Saatchi-isation of politics describes as the consequences of success. In fact, they are the consequences of disastrous failure. They are the consequences of the tragic decline that Britain has experienced in the past four y ears under the previous Chancellor's policies. The right hon. Gentleman takes over as Chancellor with the sky black with chickens coming home to roost from the policies of the past four years.
In welcoming the Chancellor I have no great hopes that he will learn the lessons of the past four years. It is true that he is not a theoretical, doctrinaire, dogmatic monetarist. He is worse. He is a monetarist who makes it up as he goes along with the same enthusiasm with which, as editor of the Spectator in the 1960s, he espoused expansion and devaluation. He is the principal author of, and the sole remaining believer in, the medium-term financial strategy, and that qualifies him for the epithet of still being crazy after all these years.
The Chancellor will find that there is no escape from the consequences of his legacy. In some ways the previous Chancellor attempted to wriggle out from the strict rigours of the medium-term financial strategy like a middle-aged man wriggling out of a corset. He had managed to escape in part, but it will now be fitted back again. He was able to escape in part because the election victory that the Government have just enjoyed was in large part a consequence of denouncing the Labour party's expansionary policies when they were unveiled by my right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore) only to grab them and use them for their benefit to get the Government returned.
Labour Members have consistently advocated an expansion of the economy and a devaluation strategy for the pound sterling. In fact, the Government have massively increased domestic credit. There has been a huge domestic credit expansion over the past 15 months. In the 15 months to the end of March the domestic credit expansion was some £20,709 billion. In other words, it was twice the increase in the money supply and twice the rate of increase in the money value of output.
There has been that massive increase in domestic credit during that period, more than double the amount needed to finance current transactions. There has also been a substantial devaluation and fall in the pound sterling. Both of those policies, which the Government denounced when they were put forward by the Labour party as portending the onset of economic disaster, were seized on by them as auguries of recovery, because the credit expansion triggered off asset speculation, particularly in the price of shares, to the benefit of the Government's friends. Indeed, during the past 18 months there has been a dramatic increase in the price of shares and some movement towards an increase in the price of houses.
The fall in the pound sterling meant a recovery in demand, and apparently better export prospects. When those two things were happening, the Government seized the opportunity to go to the country in a general election. Unfortunately, they did not allow those two policies to affect the economy's underlying problems, because there

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was no fall in interest rates, which would have allowed the domestic credit expansion to channel through into investment, and thus into growth and jobs. It was frittered away in asset speculation. The Government also began energetically to attempt to reverse the devaluation in the pound sterling. Indeed, the pound has been pushed up since March by about 10 per cent. In other words, the increase in the value of the pound against European currencies in a few weeks is higher than the common external tariff that we would have to face if we came out of the Common Market. The Government told us that that tariff would cost 2 million jobs, yet they have let the pound rise to a higher level than the tariff barrier that we would have to face. Thus, there has been an increase of about 10 per cent. with, apparently, not a care for the consequences for industry.
We now have a new Chancellor of the Exchequer who must cope with the consequences. I am fearful for the future of interest rates, because although the Government proclaim their intention and determination to reduce interest rates, all the signs are that with the money supply figures, the economic situation and the moving American economy as they are, interest rates in Britain will rise. Whether those who voted for the Government were householders, borrowers in hock to the bank, possessors of hire purchase contracts or industrialists wanting to borrow, they should know that the automatic consequence of a Government who put money before people, who manage the economy through money supply figures, and who believe that sound money is more important than the real economy of jobs and production, is high interest rates prolonged into the future, with all their crippling effects on the economy and all the consequences in terms of overvaluation of the pound sterling.
The constant prating from the Conservative party about competitiveness, and making ourselves more efficient and productive, completely ignores the chain tied by the Government to the foot of our competing manufacturing industry by the continuous overvaluation of the pound sterling, which is going on even now. The pound is still enormously overvalued compared with our principal competitors. We cannot be exposed to the blast of industrial competition and free trade with the Common Market while at the same time carrying the burden of that overvaluation. We could perhaps have one or the other, but we cannot have both at once because that is disastrous for the manufacturing economy of jobs. That is another of the chickens that must come home to roost.
Perhaps more immediately important is the balance of payments problem that the country has suddenly, but predictably, run into as a result of this Government's policies. During the past four years we have seen a rapid erosion of our industrial base, source of the manufacturing exports and international trade that we rely on for survival in the world, to pay for our imports and to provide jobs in this country. That has been decimated during the past four years and we are now seeing the consequences in the looming balance of payments problem. Indeed, the problem will get worse, because as the manufacturing base declines, imports will rise remorselessly, particularly if they are encouraged, as they are, by an overvalued exchange rate. The Government have wasted the God-given benefit of oil, which gave us the potential to expand, and was like an overdraft facility to allow us to do what
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we have never been able to do since the war—to grow continuously and to invest. It has been frittered away on a flood of manufactured imports, which have destroyed jobs in Britain, and the tax benefits have been used for the unemployed thus created.
Conservative strategy has been deliberately to depress and deflate the economy, destroying jobs as a discipline to the work force. The consequences we face include a balance of payments crisis. Whereas other countries have managed to build up their exports and competitiveness in such a way as to survive the increases in oil prices, we have frittered away our opportunity and the deflation which the Government have gone in for voluntarily, even enthusiastically, as a discipline on the workers will be forced on them again as a consequence of the balance of payments crisis which their policies are creating.
Imports will continue to grow because our manufacturing base will continue to decline as a result of Conservative policies, and as it declines, our ability to pay our way in the world will decline. That is the most depressing consequence of the four wasted years under the previous Chancellor of the Exchequer.
Even more alarming is the inevitability of cuts in Government spending, or increases in taxation, as a result of the policies that have been pursued. We do not need leaked papers from the Cabinet, the Think Tank or the Chancellor of the Exchequer to tell us—it is common sense—that we cannot finance an increasing burden of taxation to pay for unemployment. Each person unemployed costs about £5,000 a year in taxes not paid in and benefits paid out. That cannot be financed on a shrinking productive base.
The only way in which the current burden of expenditure for the welfare state, defence and everything else can be financed is by expanding the economy, by beginning to rebuild British industry and by the country generally starting to grow. But if the Government try to finance all of that on a declining productive base, they will have to go in for cuts.
In that context, it was interesting to see how cunning the Conservatives were during the election campaign by producing a manifesto that was full of escape clauses. How dilatory were the media and the pundits who, while busy hounding the Labour party in respect of its policies, did not ask what would be cut, if the Conservatives became the government again, as a result of the inability of Britain to finance an increasing burden of taxation on a shrinking productive base. That question was never asked and the Conservatives were allowed to get away with it. It was one of the most feeble efforts by the media to ask questions at election time.
Cuts are now inevitable and the new Chancellor of the Exchequer will have to clean up the mess if he is to continue his predecessor's policies, which are bound to mean further industrial decline and more cuts. We in Britain need a new beginning. We need a new Chancellor with a new insight and a determination to expand and rebuild so that we can compete in the world and support the burdens of the welfare state. Instead, we have a new Chancellor who believes in the strategies that produced this ruin in the first place. If we have had disaster up to now, it will be disaster cubed as a consequence of the Conservatives' failure to change their policies.
That disaster will lead on inevitably to decline. There is no conceivable way that the policies of the present Government can lead to the national greatness, growth and

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economic expansion that they have been promising. How can a policy of depressing investment and cutting expenditure on research, design, development, training skills and everything else that is necessary to make a country competitive in the world lead to growth, expansion and jobs? From where are the jobs to come, anyway? It is impossible for the policies to lead anywhere except to decline.
The policies of the Government will lead the country into a semi-retired—one might call it a Denis Thatcher — economy, in which those with wealth benefit and grow fat and those who produce the wealth are thrown into idleness as resources are wasted and productive capacity closes down. The country will then continue to decline, posturing in the vainglorious attitudes of the Prime Minister.
The Government tell us that we are an example to the world because we are about to expand. In fact, we are the laughing stock of the world, because we are destroying our manufacturing industry, the only factor that will allow us to survive, expand and carry the burdens of the welfare state. The country wants the welfare state and it is something that any advanced and respectable society must have. It is one of the inevitable consequences of the 20th century. It is everyone's right and we cannot finance it without investment. Industry, on which all else rests, is being destroyed or has been destroyed. That which remains will be destroyed as a consequence of the Government's policies.
The CBI has sat back and sung supine hymns of praise. In effect, it has told the Government to continue with the medicine. There can be no greater love than that a man shall lay down his firm for his prejudices in the way that British industry has been doing for the past four years. There can be no greater incompetence either.
This is not altogether the fault of industry. The fault lies with the Government, who knew nothing about industry or jobs. They might have known about law, financial manipulation. advertising and public relations. They knew nothing about the real world of industry, jobs, people, under-employed resources and waste of lives. We know the consequences of their policies and they will continue. They are felt by the people that Labour Members represent. Conservative Members who are grinning so asininely and sitting on their fat fortunes do not feel the consequences. But they will, for they lead remorselessly to decline and disaster.
8.52 pm
Mr. Michael Colvin: May I congratulate you, Mr. Deputy Speaker, on your appointment as Chairman of Ways and Means? We have heard an interesting speech from the hon. Member for Great Grimsby (Mr. Mitchell). I know that the hon. Gentleman used to represent Grimsby. One day, perhaps, the electors permitting, and if he is in the House for long enough, the adjective "great" may be used to describe him. As for his speech, I am afraid that he is a very much better journalist than he is an economist.
I pay tribute to the powerful speech of my right hon. Friend the Member for Cambridgeshire, South-East (Mr. Pym). I welcome his reference to the need to face the structural change in employment in this country. His speech was a clarion call for new attitudes to unemployment, and I trust that it will be heeded.
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I congratulate my hon. Friend the Member for Bolton, West (Mr. Sackville) on his maiden speech and on becoming a powerful addition to Conservative Members who speak on behalf of the aerospace industry. I echo his call for a decision in favour of the ALARM anti-radar missile. There is no acceptable excuse for not buying British in this case.
Before Conservative Members go overboard with self-congratulation on the general election result, we should perhaps remember that it is now the custom in British elections to vote for negative reasons. The electorate no longer says, "We shall vote for this party because we believe in what they say and what they are proposing to do in their manifesto." Most people, although not all, vote for certain parties because they cannot stand the thought of the alternative.
In 1979 the main election issues were prices and misuse of trade union power. Where there was a positive vote for the Conservatives in 1979, it was because our party was thought to be the only one capable of bringing down the rate of inflation and curbing excessive trade union power. We have not disappointed our supporters on either count. In the election which we have just concluded, the main issue was jobs. That was true in the new constituency of Romsey and Waterside, which I am now proud to represent. I pay tribute to my hon. Friends the Members for Eastleigh (Sir D. Price) and New Forest (Mr McNair-Wilson), who used to represent the areas which now form the constituency that I represent. Happily, the) are both still in this place.
Even with an unemployment level of over 3·5 million, there was still a landslide victory for the Conservative party. It is therefore almost impossible to find anywhere to sit on the Conservative Benches during Question Time. Why did we win so convincingly I think it was because people have become realistic. During the election they realised that there was a world recession; that things would be bad whoever was in power; that we were living through a second industrial revolution; and the truth of what the Prime Minister has said, that a quick remedy to the problem of unemployment would be a quack remedy. They realised that the long haul back to international competitiveness was bound to lead to higher unemployment in the short term, and that the Government are the first to have had the courage to reject the so-called full employment, demand-controlled policies followed by Governments of all persuasions since 1945 — policies responsible for putting off the day of reckoning which was bound to come.
Many of the unemployed voted Conservative because they could not believe what the Opposition were saying about providing more jobs while their policies seemed likely to destroy jobs. They voted Conservative because they believed that in the long term we had more credible answers to cutting dole queues than our opponents. But — this is the big "but" — the real debate about unemployment, how to face up to the structural change taking place, how to cope with the microchip and the problem of a growing proportion of elderly people in employment was never really touched on in the election campaign. No one was bold, brave or perhaps even silly enough to ask whether we would ever see full employment again in Great Britain. The answer may well be no. Consequently, no one ever asked the supplementary question, "What should we be doing to counter the threat of permanent, long-term unemployment levels in the

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millions?" Therefore, no one spoke during the election campaign about the way in which we will have to adapt to a completely new employment scene. To the question:
"Will Great Britain ever work again?"
the BBC in an excellent television programme at the weekend, answered with the words:
"Perhaps, but only if it is a very different Britain."
If we wish to avoid further trouble with unemployment we must not repeat yesterday's mistakes. We have 3·5 million unemployed today because of the failure to move with the times when most of our competitors are doing so. We have had a lack of adaptability, which is probably organised labour's fault. We have seen a lack of foresight, which is management's fault. Too much of the profits of firms is being taken out, and not enough reinvested, and that is the shareholders' fault. We have a lack of incentives, too many controls and a failure to face up to the changes in business, which is probably Government's fault, although many controls have gone and many more will go.
For too long we have been pointing the finger of blame at one another. We must admit that we are all to blame. Where do we go from here? First, we must accept that we face a jobs crisis. It has been said that crisis and opportunity are the same things. We must therefore seize this opportunity for change for all we are worth. We must accept that employment in manufacturing industry is unlikely to increase. Output could rise by 25 per cent. without any new jobs being created. New investment will be in machines and not men.
Secondly, we must accept that if industry can create more work, it will have a multiplier effect—jobs will be created elsewhere, but largely in the service industries and information technologies.
Thirdly, we must accept that a new hothouse business environment is required in our university and polytechnic campuses if we are to generate the new technology ventures required to beat overseas competition. Anyone who has been to Stanford university at Palo Alto in California, which became "silicone valley", or visited Boulder or Colorado Springs, knows what I am talking about. We must encourage our professors with bright ideas to capitalise and profit from them. There is nothing wrong with that.
Fourthly, greater job mobility is a must— not just movement within the firm, from one skill to another, but more mobility from one employment to another. That means more rented accommodation and transferability of skills and pension rights. It is ridiculous that people get locked into jobs because it is impossible to move their pension from one firm to another. We must prepare the younger generation during their years of education for more frequent changes in jobs in their adult lives.
Fifthly, training must be more broadly based. The youth training scheme is a splendid start and will stay permanently with us. No one knows for how many different jobs youngsters will now have to train. Gone are the days when, on average, workers in Britain had two jobs and one career in a lifetime. We are now moving towards the United States average of six jobs and two careers in a lifetime of work. That calls for a major rethink on training and retraining. We need new attitudes towards certain jobs and pay. The young must not be fussy about what they do. Any job is better than none, even if the pay is low. A good reference is the passport to a better job. We
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must accept that there can be status and dignity in all work, no matter how ordinary the task. We must abolish the wages councils at the earliest opportunity. At present they are no more than a way or destroying jobs by law.
Sixthly, if any job is better than none, surely half a job is also better than none. We must have another look at the Government's job-splitting scheme. It was launched in January this year, with 50,000 full-time jobs to be split, but only a handful of applications have been approved. There is not sufficient incentive to share work. Perhaps the restrictions on social security payments are too stringent. Job splitting and work sharing are here to stay. We need a better scheme to stop a good idea being stillborn.
Seventhly, there is still much talk about lowering the retirement age. Inevitably that will come, but to begin with an extension of the job release scheme, whereby those leaving employment make way for youngsters coming in, must be a better way of tackling the problem.
Finally, we must look again at regional aid policy to see whether grants to assisted areas might be related more to the number of jobs created than to the amount of capital invested. Capital intensive industries create wealth, but too often that wealth is transferred out of the region, and the multiplier effect for jobs is lost to the local population.
I have tried to cover a wide area in a short time. In doing so, I have accepted the obvious, that proper overall management of the economy is the key to greater prosperity and more jobs. Nothing will improve unless there is confidence in Britain. The parliamentary strength of the Conservative party is a measure of the vote of confidence that the Government received on 9 June.
9.7 pm
Dr. Jeremy Bray: Today's debate has shown that this Parliament will be an interesting one. We have had realism and passion on Opposition Benches and trite complacency on Government Benches. To do him credit, the hon. Member for Romsey and Waterside (Mr. Colvin) tried to give a note of realism to the problems that the Government face. Ministers showed no interest at all in his remarks.
I welcome the fact that the Chancellor of the Exchequer's first act was to reduce interest rates when the money supply was moving further outside the target range and the exchange rate was rising. By that simple act the Chancellor signalled that he will not defend the naiveties of which he was the principal author in the original statement of the Government's medium-term financial strategy in 1980. In the Financial Statement and Budget Report, the Government said:
"there would be no question of departing from the money supply policy, which is essential to the success of any anti-inflationary strategy."
The rule was no sooner stated than it was breached in the first year, first by the structural changes in the money market. made by the Government, and then in 1981, when the Chancellor of the Exchequer clearly shifted interest rates because of their effect on industry and the exchange rate rather than because of any considerations of money supply. The new Chancellor was the first to adopt a revisionist attitude to his own dogmatic orthodoxy when, as Financial Secretary, in his speech to the Zurich Society of Economics in 1981, which I am sure he will remember, he indicated a move away from sterling M3 as the sole monetary indicator. But it was not before enormous damage had been done to the competitiveness of British

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industry. The irony is that the Government most committed to the view that inflation is the root of all evil in society caused the biggest surge in inflation in any major industrial country in modern times, in the markets that matter most—for its exports.
The Prime Minister is a poor shopkeeper. She should know that shopkeepers who charge too much for their goods go out of business. British firms have been going out of business in their thousands because she has been forcing British industry into charging prices abroad that are too high. She has achieved stable prices and lower inflation at home at the deliberate expense of pushing British industry out of export markets. Is that good shopkeeping? Is that what she learnt in the corner shop in Grantham? If it is, hundreds of thousands of British industrialists could teach her a thing or two about the facts of trade in the modern world.
The Chancellor is made of more sophisticated stuff than his predecessor or the Prime Minister. He has told us that inflation is not to be measured by prices or by his own tax and price index but by the underlying growth in the money supply. Can he tell the House how big an inflationary surge we can expect as prices catch up with the money supply increase that has taken place since 1979? Or will the House get an acknowledgement that, with structural change and variations in velocity of money, to which he referred in his speech, the idea of targeting on the money supply was a disastrous and hideously expensive mistake?
Not for the new Chancellor the simple comforts found by the previous Chancellor in the conventional platitudes of the Finance Ministers and Heads of Government club. Not for him the solace found by his predecessor in the sad spectacle of the collapse of the ill-prepared Mitterrand Government into restrictive measures as, Canute-like, they refuse to face the realities of exchange rate adjustment and inflation. Even so, he will have noticed that for all its window-dressing, the EMS, by acting as a managed crawl, has kept the French franc and the Deutchmark within a far more stable band of competitiveness than sterling, with the result that it is very unlikely that French industry will be slaughtered as British industry has been in the past four years.
Where are we to go? Not, I hope, into the EMS in an attempt to make sterling fit its archaic design. Nor yet will the Chancellor want to leave British industry floating with no guide for its expectations in the type of vacuous formula that he put forward this afternoon when asked him about the expectations that British industry could form over its future competitiveness. If we wish to see the arguments and analyses that the Chancellor needs, they are spelt out in successive reports of the Treasury and Civil Service Committee in the previous Parliament, from our report on monetary policy in 1981 to our final special report on international monetary arrangements, published during the general election campaign with its two drafts, one the draft of the Chairman, the right hon. Member for Taunton (Mr. du Cann), which I think that the Prime Minister probably improperly saw before she should have, and the other my own consolidated amendments to the latter part of the Chairman's draft.
The chairman's draft
"represents the general line which the Committee would have taken if time had permitted it to complete the necessary work".
Those are not my words. They are the precise terms that the Committee agreed unanimously and that were recorded by the Clerk at the Committee's last meeting on 11 May,
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the proceedings of which were published only this week. Those words appear in the Chairman's draft of the special report of the Committee circulated to members of the Committee on 11 May. Now that the election is over, I am sure that they remain the terms in which the whole Committee would commend that report to the House for consideration.
The influence of Select Committee reports depends on the quality of the arguments and the evidence that they contain, not on any ex cathedra authority. That is as it should be. In his first actions, the Chancellor has already shown how much influence is exercised, even on this Government, by the arguments that we put into that report. Those arguments are certainly receiving the attention that they deserve from the technicians in Government as well as from international organisations and other bodies outside.
A sentence from the Chairman's draft echoed around the headlines during the election period. It was:
"Thus something under half the rise in British unemployment may plausibly be ascribed to the world recession".
Even if, on consideration, the Conservative majority on the Committee had insisted on the deletion of such sentences, the indictment of past Government policies would have remained. It is inseparable not only from the whole thrust of that inquiry but from the conclusions of the Committee throughout the last Parliament.
If there are lessons to be learnt, it is that Government and Opposition should appoint to such important Committees intelligent Members who are prepared to work hard and preferably Members who have some knowledge of the subject. There was a majority of such Members in the Committee in the last Parliament and I trust that there will be in this Parliament. That is more important than the particular prejudices with which Members may start, as the processes of careful inquiry will often change those, but they cannot remedy stupidity, laziness or lack of interest on the part of any Members with whom the Government may try to pack such Committees to neuter the examination of Government policies.
I am sorry if the right hon. Member for Taunton is not to continue as Chairman of that Committee. He gives outstanding service to the Committee, to the House and to his party. If a new Chairman must be found, and if the best solution of leaving it to the Opposition is unacceptable, I hope that the right hon. Member for Worthing (Mr. Higgins) will think twice before he accepts the chairmanship. He was not at his best on the Committee, and he showed again today the confusion into which he sometimes lapses in handling the more difficult arguments with which the Chairman will have to cope. With his particular interests, there will be no lack of opportunity for him in transport, procedure or elsewhere, and there is no lack of suitable candidates on the Conservative side. I do not expect to continue on the Committee in this Parliament, but I wish it well in its important role as the central focus of economic inquiry in the House today—which the Government, as they fall into further economic disarray, need more than any previous Government did.
Returning to the argument of the report on international monetary arrangements and the unusual circumstances of its publication, it is fair to refer to the major points of criticism made by Treasury officials of the Chairman's draft. They far exceeded their proper function of correcting errors of fact. The most interesting suggestion that they made was that in fact there might not be an

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intermediate position between a rigid, fairly narrow exchange rate range and no effective target at all because the exchange market would force the authorities to behave in one way or the other. I hope that the Chancellor will pay attention, as this is an important problem for him now. That suggestion could be taken to mean either of two things. It could mean that because a fixed exchange rate is unthinkable, due to the huge volume of potential capital flow, no exchange rate target is practicable, or it could mean that if an exchange rate target is chosen which is compatible with the fundamentals and is kept compatible with them—that is, with expected relative inflation rates and the current balance of payments—the exchange rate will be highly susceptible to official influences and the target will be rather closely followed with speculation stabilising rather than destabilising.
If the Chancellor examines carefully the way in which monetary policy in Germany and Japan has been conducted and what have been the objectives of those Governments in maintaining competitiveness, he will find that there is something to learn. The argument of Treasury officials here is probably sound and their conclusions are probably right.
I wrote my consolidated amendments to the Chairman's draft to answer the criticism of Treasury officials. I trust that both drafts will be examined by Treasury officials and that, when they try to help the Chancellor sort out the rather muddled state that he has inherited—as shown by his speech today—practical steps will be taken to guide him through what I think he does not quite understand is the state of the Treasury to which he has returned.
The practical conclusion on which the Chairman's draft and mine agree is that it is possible and necessary to pursue a policy that combines the objectives of stabilising competitiveness and restraining inflation, consistent with achieving a reasonable level of activity and economic growth. I believe that it is better to make explicit the objectives of full employment, stable prices and growth, with intermediate targets being the current balance and competitiveness, and the relative priorities to be attached to each.
Treasury officials are polishing up the methods for the operation of such a strategy, as are others in Britain and abroad. It will be no use to the government to retreat into a philistinism which, in the bold, brave days when they came into government in 1979, they rejected. If they now think, as a result of experience of Government, that their majority automatically confers on them wisdom that the failure of their economic policies in the past four years has shown was missing, they are mistaken. The changes of direction in the formulation of their basic economic strategy have shown this. It is open to the Chancellor—he is an intelligent fellow—and his fellow Ministers to think seriously about these matters. If they take the trouble to listen to what I suspect an increasing number of their Back Benchers will soon tell them, they will be able to learn from experience. To judge from the attitude of the Prime Minister, however, I am not too hopeful.
We shall listen carefully to what the Chancellor says. Most of all, we shall watch what he does. If he makes as many mistakes in this Parliament as the Government made in the previous one, nothing will be able to save the economy from destruction.
9.18 pm
Mr. John Silkin: It has been said that, of all the set pieces in the parliamentary year, the debate on the Address is the most theatrical. In this, the first presentation of the new Parliament, we have a new Speaker and a new Chairman of Ways and Means. I offer my congratulations to both. They symbolise the enormous change in the cast list since the previous presentation.
However, the change has been reflected in a greater collection of maiden speeches than I can remember—31 in all. Right hon. and hon. Members who have already spoken have paid justifiable tributes to all those who have spoken on previous days. I am sure that the House will forgive me if I do not recall each one. However, to judge from the high quality of maiden speeches made by my hon. Friends, the Prime Minister can count herself lucky that we did not win another 50 seats, or she would have been in for an extremely difficult time from the start.
I pay special tribute to two old friends—my hon. Friends the Members for Houghton and Washington (Mr. Boyes) and for Greenock and Port Glasgow (Dr. Godman). Both made impressive speeches, and it is good to see them here. I also welcome my hon. Friend the Member for Stoke-on-Trent, Central (Mr. Fisher), who made an excellent speech of which his distinguished father must be very proud. There were two maiden speeches from the Government Benches today. The hon. Member for Bolton, West (Mr. Sackville) paid tribute to Ann Taylor, of whom we are very fond and whom we miss greatly. Unfortunately, I missed the speech of the hon. Member for Folkestone and Hythe (Mr. Howard), but I understand that it was extremely interesting, and we hope to hear from him again soon.
The Opposition maiden speech today was by my hon. Friend the Member for Birmingham, Ladywood (Ms. Short), who has the double distinction of being the wife of Alex Lyon, an old friend of ours whose loss we deeply regret, and in her own right a formidable orator who had much to tell us about her constituency. If that is the strength of her first non-controversial speech, please may we have many more?
The Gracious Speech opened the sequel to the Prime Minister's 1979 theatrical offering. Part one, as it was produced during the past four years, bore little relation to the storyline promised in advance by the author. Time will tell whether part two conforms more closely to the bland text proffered in June 1983, of which the Chancellor of the Exchequer did not have a copy and for which he had to send to the Box. The Prime Minister's scheme for the immmediate future is one with which we are familiar, even if some of the major characters have been replaced by more stereotyped figures, perhaps better fitted to her plot.
The Prime Minister is intent on writing a role for herself as a major counter-revolutionary figure of the 20th century. The Liberals and members of the SDP—those of them that are still here—call themselves the mould-breakers, but the real mould-breaker is the Prime Minister. [HON MEMBERS: "Hear, hear.") I would not cheer quite so soon if I were on the Conservative Benches. Hon. Members must wait a little.
The last time that the Labour party experienced two consecutive general election defeats, one of its foremost thinkers, Anthony Crosland, concluded that the Conservative party aimed to preserve the present, not to reinstate the past. That may have been true in the 1950s,

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and it may have been true of the Tory party of Harold Macmillan and Rab Butler, but it is as plain as a pikestaff that matters are different today. The present Conservative party has dared to attempt the very thing that Crosland did not imagine was possible. It has taken up an ideology, become dogmatic and entrusted its leadership to people deeply attached to the values of a bygone age.
Under the Prime Minister's leadership, the Conservative party has abandoned the middle way of Harold Macmillan. It has been done ruthlessly and efficiently, and the major protagonists of the middle way now sit on the Back Benches. We had a good example of that this afternoon in what I believe—most right hon. and hon. Members will agree with me—was one of the great speeches of this debate. It came from the right hon. Member for Cambridgeshire, South-East (Mr. Pym). For many years he and I have shadowed each other, fought each other and disagreed with each other in a variety of different occupations, starting with the Chief Whip's job or even earlier. In all cases, we have learnt respect and affection for each other and the respect and affection that I bear him are based upon his great integrity. That integrity came through in his speech.
I do not accept the right hon. Gentleman's warning to my party, although every party that loses a general election should be warned and should look into its own soul to see where it went wrong, but I accept his warning to his own party. He stood there, in all his humanity and humidity, and said that the Conservative Government had gained fewer votes than they had in 1979, and that is the case. He went on to say that he regarded the Conservative party as a party that should serve all the people and not just those who can stand on their own two feet. That was an attack on the Prime Minister's philosophy, and a justification of his philosophy and of his belief in Macmillan's attempt years ago to preserve the middle way. Unfortunately, the right hon. Gentleman is out of date in the Tory party today. The Tory party may have gone too far. Even St. Francis would not have been able to keep the chairmanship of the 1922 Committee under the right hon. Lady the Prime Minister.
It is noticeable that there has been no press comment about the takeover of the Tory party by Right-wing militant extremists—such phrases are always left to the attacks on the Labour party. I cannot recall reading anywhere any press criticism of the Prime Minister for her extremism, even when she backed the candidature of a former member of the National Front. That is strange, for the Prime Minister's policies are extremist. It is for this reason that her view of freedom is so dangerous to the preservation of democracy. That she has a narrow view of freedom was illustrated the other day by her remarks about what lies at the heart of Tory philosophy and the link that she makes between liberty and property ownership.
The Prime Minister defines liberty in terms of the right to buy council houses at a good rate in all circumstances. She does not define it in terms of the right to work, the right to a living wage or the right to economic security, and these are the fundamentals of liberty. She draws a line between those in employment, earning average or above average wages, on the one hand, and the low paid, the chronically sick and the young jobless, on the other. She encourages not freedom but selfishness, and, what is worse, a selfishness that can flourish only in the short term, for unemployment, as my hon. Friend the Member for Dagenham (Mr. Gould) reminded us today, affects the
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stability of the whole country. The waste of human resources and skills embodied in this philosophy threatens the livelihood and even the security of the fortunate themselves. That was why the riots in Brixton, Toxteth and Bristol a few years ago were warning signs. Do not let us run away with the idea that another four years of this philosophy will make us immune from those things.
In 1848 or 1849, Simon, the medical officer of health for Manchester—the first such and a man to whom the country owes a great debt because he brought preventive medicine into the community and abolished such things as cholera and smallpox—was asked to report to the city fathers on the riots of young people in Manchester in 1848. He said—I have not the exact words but his point came to this—that society should not be too surprised if those whom it treats as outcasts eventually refuse to live by society's rules. His report represented good Victorian values, not bad ones.
The Prime Minister restricts freedom to those individuals who have drawn the lucky numbers in the lottery of life. We are asked to approve the philosophy of the rat race. A rat race is no less a rat race because some rats are luckier than others.
The Prime Minister's view of the appropriate role for Government to play in the economy is a throwback to the days of Adam Smith. She wishes to restore a competitive market in which only the rigorous pursuit of self-interest ensures survival. She believes that a world dominated by the market place is the best of all possible worlds. That theory was blown apart 50 years ago in Britain by the theories of Keynes. In America it was destroyed by the practical success of Roosevelt's New Deal.
The Prime Minister has chosen to open her second term of office by discerning virtue in the distress which millions of innocent people are being caused by her policies. President Roosevelt's second inaugural address contained a different lesson. He said:
"We have always known that heedless self-interest was bad morals—we now know that it is bad economics".
Roosevelt understood that public problems cannot be solved by private solutions. Despite all the arguments by the Secretary of State for Employment, there is no bike big enough for 4 million unemployed to ride.
Boosting private health insurance and private education, and denying funds to the National Health Service and state schools is not an extension of freedom, either. What we are witnessing today is the ship of state, like a mark II Titanic, steering full steam ahead for the iceberg while the captain draws encouragement from a flourishing trade in leaky lifeboats.
As my right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore) said in opening, the Labour party does not deny that the mechanism of competition can bring beneficial results. It can be a spur to efficiency and innovation. However, as he said, imports are flowing into Britain and we face the humiliating fact that the first manufacturing country in the world now imports more manufactured goods, under this Government, than it exports. That is the fallacy of relying upon the market place and of not relying upon the community as a whole. A superior, a more ethical and a more equitable result is gained if competition is placed within a broad social framework. Concern for the community and its most needy members has to take precedence over self-interest and the pursuit of profit.

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The kind of society that the Labour party wants to create is one in which the market is no longer the master but the servant of society's needs. Certainly market forces have a role to play in seeing that those needs are met, but that role should be a subordinate one — a relatively minor means to an end. The market mechanism is worshipped by the Government as an end in itself, and 4 million people are being ritually sacrificed in its name.
It is absurd for the Prime Minister and the Conservative party to defend their policies on the ground that they are setting the British people free. They are not extending liberty; the truth is quite the opposite. We are experiencing the gradual emergence of a more authoritarian society. The discipline of fear—in particular of the sack—has been resurrected. It is that threat that is being used to coerce workers and their families and to secure obedience at the workplace.
The autonomy of local government is being throttled by centralised direction from Whitehall, backed up by sanctions. While capital is permitted to become ever more concentrated, the rights of organised labour to act in concert to defend working people are being destroyed.
Finally, the defence of British freedoms against attack from abroad is being mortgaged to a dangerous dependence on nuclear missiles. I read with enormous interest the speech of the right hon. Member for Down, South (Mr. Powell). What he said was logical and exact. In fact, he has been saying it ever since March 1967, when he spoke for the Conservative party as its principal defence spokesman. The conclusions that he reached are right and they are argued correctly, but it seemed to me that he missed the point, for what makes matters worse is that dependence on nuclear missiles inevitably involves restricting to a very small number participation in decision-making. The power goes to a secretive elite, and further limits the public's right to know what measures are being taken in their name. Despite the embarrassed hedging when the question was raised in the television programme that we all saw, the Prime Minister evidently believes that some of those decisions would be shared between herself and President Reagan. The reality is that only one person would make the decision, and that person would be in Pennsylvania avenue, not Downing street.
The Prime Minister is intent on pursuing her theme throughout the life of this Parliament. So what kind of society will she have created at the end, if she gets her way? We shall be even more divided into two nations, for the Government's overriding concern is to reward the fortunate and penalise the poor, the sick, the needy, and those who are without work. The also-rans will get nothing. They will not even be noticed, other than to be blamed for their own misfortunes.
When mass unemployment has become established as a permanent feature of the landscape, and all today's excuses have run out, when the Prime Minister can no longer blame the trade unions or the welfare state or the world recession for Britain's self-inflicted wounds, she will have to invent some new excuses. Unemployment will be blamed on the unemployed themselves. They will be classed as greedy and work-shy. Poverty will be blamed on social security scroungers. The loss of skills which should be for the service of the whole country and which will have gone abroad, enriching other countries, will be
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blamed on failure to compete. Finally, when all her plans have brought nothing but desperation and despair, she will end up by blaming the British people.
The Government have a large majority, but there will be no peace in the House of Commons. We on the Opposition Benches will expose the iniquities of the Tory programme, as it unfolds. We shall challenge and refute the spurious logic on which that programme is based. We can assure the House about that. Our opposition will be total, absolute and unremitting.
Mr. George Foulkes: Hear, hear.
Mr. Silkin: That is a small start, but it is a beginning. I shall tell the Prime Minister something else, and I hope that it will give her something to think about during this parliamentary session. Yes, we were beaten, but yes, we were right.
9.38 pm
The Lord Privy Seal and Leader of the House of Commons (Mr. John Biffen): I rise to conclude this sixth and final day of the debate on the Loyal Address. I join the right hon. Member for Lewisham, Deptford (Mr. Silkin) in congratulating you, Mr. Speaker, and the Chairman of Ways and Means on your accession to offices that will be of central importance in our proceedings in the Session ahead. I wish you well in the exercise of your duties.
This debate is always a major parliamentary occasion, setting forth, as it does, the Government's programme for the Session. It is an occasion which is further elevated when it follows a general election campaign, in this case one which will perhaps be decisive for the future shape of British politics.
I believe that over the past week the House has matched the occasion. The pageantry of the speech from the Throne has been balanced by sustained argument in the Chamber about the merits of the legislative proposals in that speech.
I congratulate my hon. Friends the Members for Torridge and Devon, West (Sir P. Mills) and for Crosby (Mr. Thornton) on their speeches proposing and seconding the Loyal Address. They made speeches consistent with the traditions of the occasion and I hope to return to the speech of my hon. Friend the Member for Torridge and Devon, West later in my remarks.
Since then, there have been 31 maiden speeches. Many have observed the convention of avoiding overt conflict. Others have, mercifully, been the authentic voices of controversy fresh from the hustings. Time alone does not permit me to give individual congratulations, but I warmly join the right hon. Member for Lewisham, Deptford in welcoming those hon. Members to the House and to our future debates.
In that context, I must express the hope that the future speeches of those hon. Members will pay some regard to the virtues of brevity and a regard for others also hoping to be called in debate. On the first evening's consideration of the motion before us, the hon. Member for Linlithgow (Mr. Dalyell) was quick to remind us of his formidable crusading skills. His speech lasted exactly 60 minutes. That, I suppose, is a new and daunting measurement of Back-Bench speaking time—an hour equals "one Tam". As an opening bid, I request hon. Members to construct their speeches in mere fractions of that unit.
Mr. Tam Dalyell: There is a very simple remedy. My speeches would be much shorter if the Prime Minister would explain the truth of her actions. [Interruption.] What answer is to be given not only to me, but to my right hon. and learned Friend the Member for Aberavon (Mr. Morris), a very careful Queen's counsel who set out a formidable list of questions? In particular, I will promise to speak very briefly if the Prime Minister will explain why she did not consult her Foreign Secretary. [Interruption]
Mr. Speaker: Order.
Mr. Biffen: I note the hon. Gentleman's opening bargaining position about the future length of his speeches and the issues that will be at stake in our negotiations. It will be a courtesy to the House if I leave it at that.
I shall touch on three topics in the substance of my speech. First, I shall make a generalised comment on House of Commons procedures and Committees. That is appropriate in view of my responsibilities as Leader of the House. Secondly, I shall comment on economic policy and unemployment — the topics specifically chosen for today's debate. Thirdly, I shall conclude with a reference to the wider political issues that could be resolved by this Parliament, of which this Session is but the beginning. Indeed, I hazard a prediction that this will be a watershed Parliament. A new political landscape is being created.
Since I have accepted the self-imposed discipline of a 20-minute winding up speech, the House will appreciate that I must deal with each matter succinctly. First, let me say a word on House of Commons affairs. The hon. Member for Berwick-upon-Tweed (Mr. Beith) asked last week:
"When does the Leader of the House propose to set up a Procedure Committee".—[Official Report, 23 June 1983, Vol. 44, c. 155.]
As the Liberal Whip, the hon. Gentleman knows better than most that any decision to set up such a Committee is the consequence of a well-understood process of consultation. If I were to seek to pre-empt that process, it would be counter-productive and to no advantage. Therefore, in this matter I will naturally follow the conventional procedures.
I am, of course, well aware of the interest that has been shown in a range of topics that might be considered for reference to a Procedure Committee. The interest has come from all sides of the House and I am seized of the concern that has been expressed.
Another matter of interest is the reconstitution of our Select Committees. I hope that it will be possible to announce the membership of several of these shortly. Those will include the Committee of Selection, the Committee on European Legislation and the Statutory Instruments Select Committee.
I realise, however, that there is an even sharper interest in the reconstitution of the departmental Select Committees. I am anxious to proceed with reasonable haste. The Select Committees are playing a substantial and increasing role in the House of Commons. However, their appointment will necessarily be a matter for consultation and there are, of course, some 150 new Members. No doubt the Committee of Selection will wish to consider this factor in reconstituting the Committees. This argues for a modest pause while the House becomes familiar with its new composition. I hope the House will feel that this measured caution is rooted in sound sense.
664
Finally, in respect of House matters, hon. Members will have noted the important proposals for procedural change contained in the report published recently of the previous Session's Select Committee on Procedure (Finance), of which the Chairman was my right hon. Friend the Member for Worthing (Mr. Higgins). That report put forward several major recommendations which would among other things radically alter Budget procedures and the nature of the annual Finance Bill. We shall be giving detailed consideration to those proposals. In due course I hope that there will be an opportunity for hon. Members to express their views.
Mr. Robert Hughes: Will the Leader of the House make it clear now that he intends to abandon the farce of a Committee which looks at a Member's pay which only creates considerable embarrassment for every hon. Member who, before an election, is faced with the claim that the last thing that he did was to put his salary up by 40 per cent., and the claim, immediately after the election, that the first thing he intends to do is to put his salary up by 40 per cent?
Mr. Biffen: I hope that the House will have an early opportunity to consider that subject.
National economic issues have dominated today's debate which has centred on the motion in the name of the Leader of the Opposition, to which unemployment problems are central. The Conservative party's proposition is clear. There must be a revival in economic activity as a precondition for a reduction in unemployment. That view is elaborated in the Queen's Speech in the phrase which refers to
"a responsible financial strategy based upon sound money and lower public borrowing."
In the closing minutes of the debate on the Queen's Speech I invite the House to consider three important factors that are at the heart of our general economic performance and that must be a precondition to a revival in employment. I refer to inflation, the level of pay settlements and industrial relations.
During the election campaign and in today's debate the Government put forward an impressive record in the reduction in the rate of inflation. At its current level of 3·7 per cent. it is the lowest for 15 years, indeed, the lowest since March 1968. It has come down from a peak in May 1980 of just below 22 per cent. and that is a success of which we can be justly circumspect, placing it alongside, as we must, current rates of inflation in Italy of over 16 per cent., and in France, which, probably as near as any other Western economy essays the Labour party's policies, where the figure is now 9 per cent. in the test of inflation, there is good achievement and grounds for optimism.
With regard to the second matter for consideration, pay settlements, the average earnings figures for April, which have been cited by the Treasury, are 7·25 per cent. They show a steady fall since the pay round of 1980–81. I invite those who like to look beyond Government figures to justify the approach in the strategy to bear in mind the CBI's latest figures, which show that pay settlements in manufacturing industry are now running at 5·7 per cent. for the period since January 1983, and are broadly matched by similar figures in the public sector. Again, that figure gives rise to measured satisfaction, particularly considering that the French equivalent is more than 12·5 per cent.
The third area in which reasonable progress is being made is that of industrial relations. In 1982, 5·3 million

665
working days were lost through industrial action, which compares quite strikingly with the figure of 12 million days for the annual average in the preceding 10 years—[Interruption.] That is all part of the real working Britain, the evidence for which, judging by the noise, is so distasteful to the Opposition. Opposition Members talk to us about the real industrial world. I have also cited aspects of the real industrial world but, because they bear a message of hope, they are bitterly resented by the Opposition.
Policies dealing with inflation, pay and improved industrial relations are the preconditions for success, not its guarantors. As my right hon. Friend the Chancellor of the Exchequer said today, there are also other issues, including the legislative and fiscal framework for business. A balanced assessment of all such matters will conclude that we are beginning to see some real tangible signs, which lead to the hope of a general recovery in the economy. The evidence that I would cite —[Interruption.] There is nothing like bad news to elicit satisfaction from the Opposition, and nothing like good news to add to their misery in the post-election neurosis.
The latest CBI report states:
"Firms' expectations for their volume of output remain positive for the fifth successive survey, in line with the information on orders and stocks."
Of course, it is a policy that requires patience. That is why it is so unpopular with the Opposition. They want us to desert the element of patience and to run for a public spending spree in what would undoubtedly be an ill-fated attempt to buttress that policy. Of course, we shall resist those siren calls.
The reason for that was well embodied in the remarkable speech made by my right hon. Friend the Member for Cambridgeshire, South-East (Mr. Pym). He said that recovery was slow and gradual. That was meant, and accepted, as a compliment. The hothouse recovery, shortly to end in disaster, has been documented more than enough in our post-war world. In a most formidable and memorable speech, my right hon. Friend advised Conservative Members that there was a message about how Conservatives should conduct themselves. He said that he was drawing upon our traditions as a party in saying that it must be national in its interests and unifying in its aim. We are more than delighted to echo that observation. [An hon. Member: "who is 'we'?"]. The unity of the Tory party on these Benches is in most striking contrast to the agonies and divisions that characterise the Opposition Benches. I thought that my right hon. Friend's words echoed remarks made from this Dispatch Box in a debate on the Gracious Speech after the quite remarkable defeat of the Labour party in 1931. I hope that no Labour Member will find the name of Stanley Baldwin a cause for ribaldry — unless the Labour party is in such disarray that it thinks that this is the last night of the proms, and not the conclusion of a major political debate. Baldwin said:
"We cannot be led away by the hope that our difficulties are going to be solved by the action of other people. In these matters we have to rely upon ourselves—our Government, the House of Commons and the people of this country." — [Official Report, 13 November 1931; Vol. 259, c. 459.]
Those words are as relevant today for this nation as they were when he said them. There is this abiding judgment: politics is more than mere law-making. It is also style, tone and the ability to gather together loyalties to enable the
666
navigation of the whole apparatus of state. It is our success in doing that, under the inspiration of our Prime Minister, which has set us so successfully apart from the Opposition Benches.
I have been considering a range of issues which I believe will bear upon the levels of future unemployment. Without doubt, these economic and social matters are central to our political fortunes. I suggest, however, that ultimate political fortunes go even wider than economics. In these closing minutes, therefore, I will touch on the factors that could make this a watershed Parliament.
I say at once that this side of the House is conscious of its electoral triumph. It is also alert to the dangers of that success. The point was made at the outset of the debate by my hon. Friend the Member for Torridge and Devon, West when he said:
"large majorities are matched by large responsibilities. Whatever the position may be, there is no change in the underlying problems of the nation." — [Official Report, 22 June 1983; Vol. 44, c. 42.]
Those words serve a warning that the euphoria and commitment of the hustings can never replace the disciplines of daily administration. Constantly to be reminded of that is the challenge to these Benches. The contents of the Queen's Speech, I believe, live up to the concern of my hon. Friend. The Treasury Bench must balance a policy of reform and a sense of continuity. That is the hallmark of British public life. In so doing, over the past four years or so we have shifted the centre ground in British politics, and we invite the Opposition to accommodate themselves to the new landscape.
Thus I conclude on the prospective fortunes of the Opposition. This Parliament will be decisive for the Labour party. The proposition can be put simply. Are the Labour Benches prepared to make substantial adjustments, or do they cling to the ancestral faiths? When German Socialism was in crisis a generation ago the reaction was fundamental. In the Bad Godesberg programme in 1959 the German Socialists specifically disavowed any Marxist connection and accepted the broad framework of the social market economy. That challenge awaits the Labour Benches.
As the proposals of the Queen's Speech are put into law, the Opposition will have the chance to indicate that it recognises that a new political consensus is being created. It involves a recognition of Britain's international trading and military alliances, trade union reform and the acceptance of a mixed market economy.
As this Parliament proceeds, alliance Members below the Gangway opposite will join with us in watching how this debate evolves, for I do not think that there will be any misunderstanding about the nature of the problems implicit in the economics and politics of this Parliament. Challenge besets us all. If the Treasury Bench does not rise to that challenge, our destination is Opposition. But if the Opposition fail, their fate is oblivion.
Question put, That the amendment be made:—
The House divided: Ayes 207, Noes 375.

Division No. 2]

[10 pm

AYES

Adams, Allen (Paisley N)

Atkinson, N. (Tottenham)

Alton, David

Bagier, Gordon A. T.

Anderson, Donald

Banks, Tony (Newham NW)

Archer, Rt Hon Peter

Barnett, Guy

Ashdown, Paddy

Barron, Kevin

Ashley, Rt Hon Jack

Beckett, Mrs Margaret

Ashton, Joe

Beith, A. J.

667

Bell, Stuart

Holland, Stuart (Vauxhall)

Bennett, A. (Dent'n & Red'sh)

Home Robertson, John

Bermingham, Gerald

Howell, Rt Hon D. (S'heath)

Bidwell, Sydney

Howells, Geraint

Blair, Anthony

Hoyle, Douglas

Boothroyd, Miss Betty

Hughes, Mark (Durham)

Boyes, Roland

Hughes, Robert (Aberdeen N)

Bray, Dr Jeremy

Hughes, Roy (Newport E)

Brown, Gordon (D'f'mline E)

Hughes, Sean (Knowsley S)

Brown, Hugh D. (Provan)

Hughes, Simon (Southwark)

Brown, N. (N'c'tle-u-Tyne E)

Janner, Hon Greville

Brown, R. (N'c'tle-u-Tyne N)

Jenkins, Rt Hon Roy (Hillh'd)

Brown, Ron (E'burgh, Leith)

John, Brynmor

Bruce, Malcolm

Jones, Barry (Alyn & Deeside)

Buchan, Norman

Kaufman, Rt Hon Gerald

Callaghan, Rt Hon J.

Kennedy, Charles

Callaghan, Jim (Heyw'd & M)

Kilroy-Silk, Robert

Campbell, Ian

Kinnock, Neil

Campbell-Savours, Dale

Kirkwood, Archibald

Canavan, Dennis

Lambie, David

Carlile, Alexander (Montg'y)

Lamond, James

Carter-Jones, Lewis

Leadbitter, Ted

Cartwright, John

Leighton, Ronald

Clark, Dr David (S Shields)

Lewis, Ron (Carlisle)

Clarke, Thomas (Monkl'nds W)

Lewis, Terence (Worsley)

Litherland, Robert

Clay, Robert

Lloyd, Anthony (Stretford)

Cocks, Rt Hon M. (Bristol S)

Lofthouse, Geoffrey

Cohen, Harry

Loyden, Edward

Coleman, Donald

McCartney, Hugh

Conlan, Bernard

McDonald, Dr Oonagh

Cook, Frank (Stockton N)

McGuire, Michael

Cook, Robin (Livingston)

McKelvey, William

Corbett, Robin

MacKenzie, Rt Hon Gregor

Cowans, Harry

Maclennan, Robert

Craigen, J. M.

McNamara, Kevin

Crowther, Stan

McTaggart, Robert

Cunliffe, Lawrence

McWilliam, John

Dalyell, Tarn

Madden, Max

Davies, Rt Hon Denzil (L'lli)

Marek, John

Davies, Ronald (Caerphilly)

Marshall, David (Shettleston)

Davis, Terry (B'ham, H'ge H'l)

Martin, Michael

Deakins, Eric

Mason, Rt Hon Roy

Dewar. Donald

Maxton, John

Dixon, Donald

Maynard, Miss Joan

Dobson, Frank

Meacher, Michael

Dormand, Jack

Meadowcroft, Michael

Douglas, Dick

Michie, William

Dubs, Alfred

Mikardo, Ian

Duffy, A. E. P.

Millan, Rt Hon Bruce

Dunwoody, Mrs G.

Morris, Rt Hon A. (W'shawe)

Eadie, Alex

Nellist, David

Evans, loan (Cynon Valley)

Oakes, Rt Hon Gordon

Evans, John (St. Helens N)

O'Brien, William

Fatchett, Derek

O'Neill, Matin

Faulds, Andrew

Orme, Rt Hon Stanley

Field, Frank (Birkenhead)

Owen, Rt Hon Dr David

Fields, T. (L'pool Broad Gn)

Park, George

Fisher, Mark

Patchett, Terry

Flannery, Martin

Pavitt, Laurie

Foot, Rt Hon Michael

Pendry, Torn

Forrester, John

Penhaligon, David

Foster, Derek

Pike, Peter

Foulkes, George

Powell, Raymond (Ogmore)

Fraser, J. (Norwood)

Prescott, John

Freeson, Rt Hon Reginald

Radice, Gilos

Freud, Clement

Randall, Stuart

Garrett, W. E.

Redmond, M.

George, Bruce

Rees, Rt Hen M. (Leeds S)

Gilbert, Rt Hon Dr John

Richardson Jo

Godman, Norman

Roberts, Allan (Bootle)

Gould, Bryan

Roberts, Ernest (Hackney N)

Hamilton, James (M'well, N)

Robertson, George

Hamilton, W. W. (Fife Central)

Robinson, G. (Coventry NW)

Harrison, Rt Hon Walter

Rooker, J. W.

Hart, Rt Hon Dame Judith

Ross, Ernest (Dundee W)

Hattersley, Rt Hon Roy

Ross, Stephen (Isle of Wight)

Haynes, Frank

Rowlands, Ted

Heffer, Eric S.

Ryman, John

Hogg, N. (C'nauld & Kilsyth)

Sedgemore, Brian

668

Sheerman, Barry

Tinn, James

Sheldon, Rt Hon R.

Varley, Rt Hon Eric G.

Shore, Rt Hon Peter

Wainwright, R.

Short, Ms Clare (Ladywood)

Wallace, James

Short, Mrs R.(W'hampt'n NE)

Warden, Gareth (Gower)

Silkin, Rt Hon J.

Wareing, Robert

Skinner, Dennis

Weetch, Ken

Smith, C.(Isl'ton S & F'bury)

Welsh, Michael

Smith, Rt Hon J. (M'kl'ds E)

Wigley, Dafydd

Soley, Clive

Williams, Rt Hon A.

Spearing, Nigel

Wilson, Gordon

Steel, Rt Hon David

Winnick, David

Stewart, Rt Hon D. (W Isles)

Woodall, Alec

Strang, Gavin

Wrigglesworth, Ian

Straw, Jack

Young, David (Bolton SE)

Thomas, Dafydd (Merioneth)

Thomas, Dr R. (Carmarthen)

Tellers for the Ayes:

Thompson, J. (Wansbeck)

Mr. Austin Mitchell and

Thorne, Stan (Preston)

Mr. Allen McKay.

NOES

Adley, Robert

Churchill, W. S.

Aitken Jonathan

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

Alexander, Richard

Clark, Michael (Rochford)

Alison, Rt Hon Michael

Clark, Sir W. (Croydon S)

Amery, Rt Hon Julian

Clarke Kenneth (Rushcliffe)

Amess, David

Clegg, Sir Walter

Ancram, Michael

Cockeram, Eric

Arnold, Tom

Colvin, Michael

Ashby, David

Conway, Derek

Aspinwall, Jack

Coombs, Simon

Atkins, Rt Hon H. (S'thorne)

Cope, John

Atkins Robert (South Ribble)

Cormack, Patrick

Baker, Kenneth (Mole Valley)

Corrie, John

Baker, Nicholas (Dorset N)

Couchman, James

Baldry, Anthony

Cranborne, Viscount

Banks, Robert (Harrogate)

Hon Nicholas

Batiste, Spencer

Critchley, Julian

Beggs, Roy

Crouch, David

Bellingham, Henry

Currie, Mrs. Edwina

Bendall, Vivian

Dicks, T.

Benyon, William

Dorrell, Stephen

Berry, Hon Anthony

Douglas-Hamilton, Lord J.

Best, Keith

Dover, Denshore

Bevan, David Gilroy

du Cann, Rt Hon Edward

Biffen, Rt Hon John

Dunn, Robert

Biggs-Davison, Sir John

Dykes, Hugh

Blackburn, John

Edwards, Rt Hon N. (P'broke)

Blaker, Rt Hon Peter

Eggar, Tim

Body, Richard

Emery, Sir Peter

Bonsor, Sir Nicholas

Evennett, David

Bottomley, Peter

Eyre, Reginald

Bowden, A. (Brighton K'ton)

Fairbairn, Nicholas

Bowden, Gerald (Dulwich)

Fallon, Michael

Boyson, Dr Rhodes

Farr, John

Braine, Sir Bernard

Favell, Anthony

Brandon-Bravo, Martin

Fenner, Mrs. Peggy

Bright, Graham

Finsberg, Geoffrey

Brinton, Tim

Fletcher, Alexander

Brittan, Rt Hon Leon

Fookes, Miss Janet

Brooke, Hon Peter

Forman, Nigel

Brown, M. (Brigg & Cl'thpes)

Forsyth, Michael (Stirling)

Browne, John

Forsythe, Clifford (Antrim S)

Bruinvels, Peter

Forth, Eric

Bryan, Sir Paul

Fowler, Rt Hon Norman

Buchanan-Smith, Rt Hon A.

Fox, Marcus

Buck, Sir Antony

Franks, Cecil

Budgen, Nick

Fraser, Sir Hugh

Bulmer, Esmond

Fraser, Peter (Angus East)

Burt, Alistair

Freeman, Roger

Butcher, John

Fry, Peter

Butler, Hon Adam

Gale, Roger

Butterfill, John

Galley, Roy

Carlisle, John (Luton N)

Gardiner, George (Reigate)

Carlisle, Kenneth (Lincoln)

Gardner, Sir Edward (Fylde)

Carlisle, Rt Hon M. (W'ton S)

Garel-Jones, Tristan

Carttiss, Michael

Gilmour, Rt Hon Sir Ian

Chalker, Mrs. Lynda

Glyn, Dr. Alan

Chapman, Sydney

Goodhart, Sir Philip

Chope, Christopher

Goodlad, Alastair

669

Gorst, John

Luce, Richard

Gow, Ian

Lyell, Nicholas

Gower, Sir Raymond

McCurley, Mrs Anna

Greenway, Harry

McCusker, Harold

Gregory, Conal

Macfarlane, Neil

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

MacGregor, John

Griffiths, Peter (Portsm'th N)

MacKay, Andrew (Berkshire)

Grist, Ian

MacKay, John (Argyll & Bute)

Ground, Patrick

Macmillan, Rt Hon M.

Gummer, John Selwyn

McNair-Wilson, M. (N'bury)

Hamilton, Hon A. (Epsom)

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

Hamilton, Neil (Tatton)

McQuarrie, Albert

Hampson, Dr Keith

Madel, David

Hanley, Jeremy

Maginnis, Ken

Hannam, John

Major, John

Hargreaves, Kenneth

Mallins, Humphrey

Harvey, Robert

Malone, Gerald

Haselhurst, Alan

Maples, John

Havers, Rt Hon Sir Michael

Marland, Paul

Hawkins, C. (High Peak)

Marlow, Antony

Hawksley, Warren

Marshall, Michael (Arundel)

Hayes, J.

Mates, Michael

Hayhoe, Barney

Maude, Francis

Hayward, Robert

Mawhinney, Dr Brian

Heath, Rt Hon Edward

Maxwell-Hyslop, Robin

Heathcoat-Amery, David

Mayhew, Sir Patrick

Heddle, John

Mellor, David

Henderson, Barry

Merchant, Piers

Heseltine, Rt Hon Michael

Meyer, Sir Anthony

Hickmet, Richard

Miller, Hal (B'grove)

Hicks, Robert

Mills, Iain (Meriden)

Higgins, Rt Hon Terence L.

Mills, Sir Peter (Devon, West)

Hind, Kenneth

Miscampbell, Norman

Hirst, Michael

Mitchell, David (Hants, NW)

Hogg, Hon Douglas (Gr'th'm)

Moate, Roger

Holland, Sir Philip (Gedling)

Molyneaux, James

Holt, Richard

Montgomery, Fergus

Hooson, Tom

Moore, John

Hordern, Peter

Morris, M. (N'hampton, S.)

Howard, Michael

Morrison, Hon C. (Devizes)

Howarth, Alan (Stratf'd-on-A)

Morrison, Hon P. (Chester)

Howarth, Gerald (Cannock)

Moynihan, Hon C.

Howe, Rt Hon Sir Geoffrey

Mudd, David

Howell, Rt Hon D. (G'ldford)

Murphy, Christopher

Hubbard-Miles, Peter

Neale, Gerrard

Hunt, David (Wirrat)

Needham, Richard

Hunt, John (Ravensbourne)

Nelson, Anthony

Hunter, Andrew

Neubert, Michael

Hurd, Rt Hon Douglas

Newton, Tony

Irving, Charles

Nicholls, Patrick

Jenkin, Rt Hon Patrick

Nicolson, J,

Johnson-Smith, Sir Geoffrey

Normanton, Tom

Jones, Gwilym (Cardiff N)

Norris, Steven

Jones, Robert (Herts W)

Onslow, Cranley

Jopling, Rt Hon Michael

Oppenheim, Philip

Joseph, Rt Hon Sir Keith

Oppenheim, Rt Hon Mrs S.

Kellett-Bowman, Mrs. Elaine

Ottaway, Richard

Kershaw, Sir Anthony

Page, Richard (Herts, SW)

Key, Robert

Parkinson, Rt Hon Cecil

King, Roger (B'ham N'field)

Parris, Matthew

King, Rt Hon Tom

Patten, John (Oxford)

Knight, Gregory (Derby N)

Pattie, Geoffrey

Knight, Mrs. Jill (Edgbaston)

Pawsey, James

Knowles, Michael

Peacock, Mrs Elizabeth

Knox, David

Percival, Rt Hon Sir Ian

Lamont, Norman

Pink, R. Bonner

Lang, Ian

Pollock, Alexander

Latham, Michael

Porter, Barry

Lawler, Geoffrey

Powell, Rt Hon J. E. (Down S)

Lawrence, Ivan

Powell, William (Corby)

Lawson, Rt Hon Nigel

Powley, John

Lee, John (Pendle)

Prentice, Rt Hon Reg

Leigh, Edward (Gainsbor'gh)

Price, Sir David

Lennox-Boyd, Hon Mark

Prior, Rt Hon James

Lewis, Sir Kenneth (Stamf'd)

Proctor, K. Harvey

Lightbown, David

Pym, Rt Hon Francis

Lilley, Peter

Raffan, Keith

Lloyd, Ian (Havant)

Raison, Rt Hon Timothy

Lloyd, Peter, (Fareham)

Rathbone, Tim

Lord, Michael

Rees, Rt Hon Peter (Dover)

670

Renton, Tim

Taylor, John (Strangford)

Rhodes James, Robert

Tebbit, Rt Hon Norman

Ridley, Rt Hon Nicholas

Temple-Morris, Peter

Ridsdale, Sir Julian

Terlezki, Stefan

Rifkind, Malcolm

Thatcher, Rt Hon Mrs M.

Rippon, Rt Hon Geoffrey

Thomas, Rt Hon Peter

Roberts, Wyn (Conway)

Thompson, Donald (Calder V)

Robinson, Mark (N'port W)

Thompson, Patrick (N'ich, N)

Roe, Mrs Marion

Thome, Neil (Ilford, S)

Ross, Wm. (Londonderry)

Thornton, Malcolm

Rossi, Hugh

Thurnham, Peter

Rost, Peter

Townend, John (Bridlington)

Rowe, Andrew

Townsend, Cyril D. (B'heath)

Rumbold, Mrs Angela

Tracey, Richard

Ryder, Richard

Trippier, David

Sackville, Hon Thomas

Trotter, Neville

Sainsbury, Hon Timothy

Twinn, Dr Ian

St. John-Stevas, Rt Hon N.

van Straubenzee, Sir W.

Sayeed, Jonathan

Vaughan, Dr Gerard

Shaw, Giles (Pudsey)

Viggers, Peter

Shaw, Sir Michael (Scarb')

Waddington, David

Shelton, William (Streatham)

Wakeham, Rt Hon John

Shepherd, Colin (Hereford)

Waldegrave, Hon William

Shepherd, Richard (Aldridge)

Walden, George

Shersby, Michael

Walker, William (T'side N)

Silvester, Fred

Walker, Rt Hon P. (W'cester)

Sims, Roger

Wall, Sir Patrick

Skeet, T. H. H.

Waller, Gary

Smith, Tim (Beaconsfield)

Walters, Dennis

Soames, Hon Nicholas

Ward, John

Speed, Keith

Wardle, C. (Boxhill)

Speller, Tony

Warren, Kenneth

Spence, John

Watson, John

Spencer, D.

Watts, John

Spicer, Jim (Dorset W)

Wells, Bowen (Hertford)

Spicer, Michael (Worcs, S)

Wells, John (Maidstone)

Squire, Robin

Wheeler, John

Stanbrook, Ivor

Whitfield, John

Stanley, John

Whitney, Raymond

Steen, Anthony

Wiggin, Jerry

Stern, Michael

Winterton, Mrs Ann

Stevens, Lewis (Nuneaton)

Winterton, Nicholas

Stevens, Martin (Fulham)

Wolfson, Mark

Stewart, Allan (Eastwood)

Wood, Timothy

Stewart, Andrew (Sherwood)

Woodcock, Michael

Stewart, Ian (Hertf'dshire, N)

Yeo, Tim

Stokes, John

Young, Sir George (Acton)

Stradling Thomas, J.

Sumberg, David

Tellers for the Noes:

Tapsell, Peter

Mr. Carol Mather and

Taylor, Teddy (S'end E)

Mr. Robert Boscawen

Question accordingly negatived.
Amendment proposed, at the end of the Question, to add:
But humbly regret that the Gracious Speech contains no evidence that the Government, though only commanding the support of 31 per cent. of the electorate, has any intention of moderating its policies to make them acceptable to the majority of British people; and in particular call upon the Government to launch a programme of selective capital investment to reduce unemployment and improve the environment; to raise the standard of social services to help the elderly and the disabled; to abandon its plans to encroach further upon the independence of local government, and instead to transfer substantial powers and responsibilities, currently exercised by the centre, to the nations and regions of Britain; and to strengthen conventional forces while taking an initiative with our allies in relation to the INF and START talks to achieve multi-lateral nuclear disarmament.—[Mr. Beith.]
Question put forthwith, pursuant to Standing Order No. 35 (Calling of amendments at end of debate), That the amendment be made:—
The House divided: Ayes 23, Noes 366.

Division No. 3]

[10.19 pm

AYES

Alton, David

Ross, Stephen (Isle of Wight)

Ashdown, Paddy

Steel, Rt Hon David

Bruce, Malcolm

Stewart, Fit Hon D. (W Isles)

Carlile, Alexander (Montg'y)

Thomas, Dafydd (Merioneth)

Freud, Clement

Wainwright, R.

Howells, Geraint

Wallace, James

Hughes, Simon (Southwark)

Wigley, Dafydd

Jenkins, Rt Hon Roy (Hillh'd)

Wilson, Gordon

Kennedy, Charles

Wrigglesworth, Ian

Kirkwood, Archibald

Maclennan, Robert

Tellers for the Ayes:

Meadowcroft, Michael

Mr. A. J. Beith and

Owen, Rt Hon Dr David

Mr. John Cartwright.

Penhaligon, David

NOES

Adley, Robert

Clark, Sir W. (Croydon S)

Aitken Jonathan

Clarke Kenneth (Rushcliffe)

Alexander, Richard

Clegg, Sir Walter

Alison, Rt Hon Michael

Cockeram, Eric

Amery, Rt Hon Julian

Colvin, Michael

Amess, David

Conway, Derek

Ancram, Michael

Coombs, Simon

Arnold, Tom

Cope, John

Ashby, David

Cormack, Patrick

Aspinwall, Jack

Corrie, John

Atkins, Rt Hon H. (S'thorne)

Couchman, James

Atkins Robert (South Ribble)

Cranbourne, Viscount

Baker, Kenneth (Mole Valley)

Critchley, Julian

Baker, Nicholas (Dorset N)

Crouch, David

Baldry, Anthony

Currie, Mrs. Edwina

Banks, Robert (Harrogate)

Dicks, T.

Batiste, Spencer

Dorrell, Stephen

Beggs, Roy

Douglas-Hamilton, Lord J.

Bellingham, Henry

Dover, Denshore

Bendall, Vivian

du Cann, At Hon Edward

Benyon, William

Dunn, Robert

Berry, Hon Anthony

Dykes, Hugh

Best, Keith

Edwards, Rt Hon N. (P'broke)

Bevan, David Gilroy

Eggar, Tim

Biffen, Rt Hon John

Emery, Sir Peter

Biggs-Davison, Sir John

Evennett, David

Blackburn, John

Eyre, Reginald

Blaker, Rt Hon Peter

Fairbairn, Nicholas

Body, Richard

Fallon, Michael

Bonsor, Sir Nicholas

Farr, John

Bottomley, Peter

Favell, Anthony

Bowden, A. (Brighton K'ton)

Fenner, Mrs. Peggy

Bowden, Gerald (Dulwich)

Finsberg, Geoffrey

Boyson, Dr Rhodes

Fookes, Miss Janet

Braine, Sir Bernard

Forman, Nigel

Brandon-Bravo, Martin

Forsyth, Michael (Stirling)

Bright, Graham

Forsythe, Clifford (Antrim S)

Brinton, Tim

Forth, Eric

Brittan, Rt Hon Leon

Fowler, Rt Hon Norman

Brooke, Hon Peter

Fox, Marcus

Brown, M. (Brigg & Cl'thpes)

Franks, Cecil

Browne, John

Fraser, Peter (Angus East)

Bruinvels, Peter

Freeman, Roger

Bryan, Sir Paul

Fry, Peter

Buchanan-Smith, Rt Hon A.

Gale, Roger

Buck, Sir Antony

Galley, Roy

Budgen, Nick

Gardiner, George (Reigate)

Bulmer, Esmond

Gardner, Sir Edward (Fylde)

Burt, Alistair

Garel-Jones, Tristan

Butler, Hon Adam

Gilmour, Rt Hon Sir Ian

Butterfill, John

Glyn, Dr. Alan

Carlisle, John (Luton N)

Goodhart, Sir Philip

Carlisle, Kenneth (Lincoln)

Goodlad, Alastair

Carlisle, Rt Hon M. (W'ton S)

Gorst, John

Carttiss, Michael

Gow, Ian

Chalker, Mrs. Lynda

Gower, Sir Raymond

Chapman, Sydney

Greenway, Harry

Chope, Christopher

Gregory, Conal

Churchill, W. S.

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

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

Griffiths, Peter (Portsm'th N)

Clark, Michael (Rochford)

Grist, Ian

672

Ground, Patrick

McNair-Wilson, M. (N'bury)

Gummer, John Selwyn

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

Hamilton, Hon A. (Epsom)

McQuarrie, Albert

Hamilton, Neil (Tatton)

Madel, David

Hampson, Dr Keith

Maginnis, Ken

Hanley, Jeremy

Major, John

Hannam, John

Mallins, Humphrey

Hargreaves, Kenneth

Malone, Gerald

Harvey, Robert

Maples, John

Haselhurst, Alan

Marland, Paul

Havers, Rt Hon Sir Michael

Marlow, Antony

Hawkins, C. (High Peak)

Marshall, Michael (Arundel)

Hawksley, Warren

Mates, Michael

Hayes, J.

Maude, Francis

Hayhoe, Barney

Mawhinney, Dr Brian

Hayward, Robert

Maxwell-Hyslop, Robin

Heath, Rt Hon Edward

Mayhew, Sir Patrick

Heathcoat-Amery, David

Mellor, David

Heddle, John

Merchant, Piers

Henderson, Barry

Meyer, Sir Anthony

Heseltine, Rt Hon Michael

Miller, Hal (B'grove)

Hickmet, Richard

Mills, Sir Peter (Devon, West)

Hicks, Robert

Miscampbell, Norman

Higgins, Rt Hon Terence L.

Mitchell, David (Harts, NW)

Hind, Kenneth

Moate, Roger

Hirst, Michael

Molyneaux, James

Hogg, Hon Douglas (Gr'th'm)

Montgomery, Fergus

Holland, Sir Philip (Gedling)

Moore, John

Holt, Richard

Morris, M. (N'hampton, S.)

Hooson, Tom

Morrison, Hon C. (Devizes)

Howard, Michael

Morrison, Hon P. (Chester)

Howarth, Alan (Stratf'd-on-A)

Moynihan, Hon C.

Howarth, Gerald (Cannock)

Mudd, David

Howe, Rt Hon Sir Geoffrey

Murphy, Christopher

Howell, Rt Hon D. (G'ldford)

Neale, Gerrard

Hubbard-Miles, Peter

Needham, Richard

Hunt, David (Wirral)

Nelson, Anthony

Hunt, John (Ravensbourne)

Neubert, Michael

Hunter, Andrew

Nicholls, Patrick

Hurd, Rt Hon Douglas

Nicolson, J.

Irving, Charles

Normanton, Tom

Jenkin, Rt Hon Patrick

Norris, Steven

Johnson-Smith, Sir Geoffrey

Onslow, Cranley

Jones, Gwilym (Cardiff N)

Oppenheim, Philip

Jones, Robert (Herts W)

Oppenheim, Rt Hon Mrs S.

Jopling, Rt Hon Michael

Ottaway, Richard

Joseph, Rt Hon Sir Keith

Page, Richard (Herts, SW)

Kellett-Bowman, Mrs. Elaine

Parkinson, Rt Hon Cecil

Kershaw, Sir Anthony

Parris, Matthew

Key, Robert

Patten, John (Oxford)

King, Roger (B'ham N'field)

Pattie, Geoffrey

King, Rt Hon Tom

Pawsey, James

Knight, Gregory (Derby N)

Peacock, Mrs Elizabeth

Knight, Mrs. Jill (Edgbaston)

Percival, Rt Hon Sir Ian

Knowles, Michael

Pink, R. Bonner

Knox, David

Pollock, Alexander

Lamont, Norman

Porter, Barry

Lang, Ian

Powell, William (Corby)

Latham, Michael

Powley, John

Lawler, Geoffrey

Prentice, Rt Hon Reg

Lawrence, Ivan

Price, Sir David

Lawson, Rt Hon Nigel

Prior, Rt Hon James

Lee, John (Pendle)

Proctor, K. Harvey

Leigh, Edward (Gainsbor'gh)

Pym, Rt Hon Francis

Lennox-Boyd, Hon Mark

Raffan, Keith

Lewis, Sir Kenneth (Stamf'd)

Raison, Rt Hon Timothy

Lightbown, David

Rathbone, Tim

Lilley, Peter

Rees, Rt Hon Peter (Dover)

Lloyd, Ian (Havant)

Renton, Tim

Lloyd, Peter, (Fareham)

Rhodes James, Robert

Lord, Michael

Ridley, Rt Hon Nicholas

Luce, Richard

Ridsdale, Sir Julian

Lyell, Nicholas

Rifkind, Malcolm

McCurley, Mrs Anna

Roberts, Wyn (Conway)

McCusker, Harold

Robinson, Mark (N'port W)

Macfarlane, Neil

Roe, Mrs Marion

MacGregor, John

Ross, Wm. (Londonderry)

MacKay, Andrew (Berkshire)

Rossi, Hugh

MacKay, John (Argyll & Bute)

Rost, Peter

Macmillan, Rt Hon M.

Rowe, Andrew

673

Rumbold, Mrs Angela

Thompson, Patrick (N'ich, N)

Ryder, Richard

Thorne, Neil (Word, S)

Sackville, Hon Thomas

Thornton, Malcolm

Sainsbury, Hon Timothy

Thurnham, Peter

St. John-Stevas, Rt Hon N.

Townend, John (Bridlington)

Sayeed, Jonathan

Townsend, Cyril D. (B'heath)

Shaw, Giles (Pudsey)

Tracey, Richard

Shaw, Sir Michael (Scarb')

Trippier, David

Shelton, William (Streatham)

Trotter, Neville

Shepherd, Colin (Hereford)

Twinn, Dr Ian

Shepherd, Richard (Aldridge)

van Straubenzee, Sir W.

Shersby, Michael

Vaughan, Dr Gerard

Silvester, Fred

Viggers, Peter

Sims, Roger

Waddington, David

Skeet, T. H. H.

Wakeham, Rt Hon John

Smith, Tim (Beaconsfield)

Waldegrave, Hon William

Soames, Hon Nicholas

Walden, George

Speed, Keith

Walker, William (T'side N)

Speller, Tony

Walker, Rt Hon P. (W'cester)

Spence, John

Wall, Sir Patrick

Spencer, D.

Waller, Gary

Spicer, Jim (Dorset W)

Walters, Dennis

Spicer, Michael (Worcs, S)

Ward, John

Squire, Robin

Wardle, C. (Boxhill)

Stanbrook, Ivor

Warren, Kenneth

Stanley, John

Watson, John

Steen, Anthony

Watts, John

Stern, Michael

Wells, Bowen (Hertford)

Stevens, Lewis (Nuneaton)

Wells, John (Maidstone)

Stevens, Martin (Fulham)

Wheeler, John

Stewart, Allan (Eastwood)

Whitfield, John

Stewart, Ian (hertf'dshire, N)

Whitney, Raymond

Stokes, John

Wiggin, Jerry

Stradling Thomas, J.

Winterton, Mrs Ann

Sumberg, David

Winterton, Nicholas

Tapsell, Peter

Wolfson, Mark

Taylor, Teddy (S'end E)

Wood, Timothy

Taylor, John (Strangford)

Woodcock, Michael

Tebbit, Rt Hon Norman

Yeo, Tim

Temple-Morris, Peter

Young, Sir George (Acton)

Terlezki, Stefan

Thatcher, Rt Hon Mrs M.

Tellers for the Noes:

Thomas, Rt Hon Peter

Mr. Carol Mather and

Thompson, Donald (Calder V)

Mr. Robert Boscawen.

Question accordingly negatived.
Main Question put and 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 presented by Privy Councillors or Members of Her Majesty's Household.

Vietnamese Refugees
Motion made, and Question proposed, That this House do now djourn.—[Mr. David Hunt.]
10.34 pm
Mr. Keith Best: This debate, which I am pleased to initiate, is about people who have fled from oppression, made this country their home, and for whom I have the highest regard and respect. Their valour and determination are an example to us all. When considering the problems of the Vietnamese refugees, we must ask what sort of country they have come from. What has caused thousands to take to small boats and face the perils of the sea? It is an intolerable régime in comparison with which the fear of the unknown and the dangers of the ocean are preferable.
It is often argued in defence of Communist régimes that, while they deprive their people of liberty, they at least provide them with social and economic justice—adequate food, clothing, education and health care. In relation to Vietnam's Communist régime, the assumption that Communist régimes provide social and economic justice is false. In Vietnam today, goods and services are allocated according to one's political status and one's economic class. Party members have first priority, Government officials and those designated working class come second, and everybody else last. Special restricted access stores are a fact of life in Vietnam. The leading party members have the best local and imported food available to them. High-ranking people have their own special stores where medium quality produce is available to them. Low ranking and ordinary citizens are excluded from those stores altogether. That is certainly not socioeconomic justice.
Food purchases are in any case limited by ration cards. For the common citizen, the official food ration is insufficient and must be supplemented, but as wages are too low to enable the purchase of food on the black market common citizens are too often compelled to sell their property and personal possessions to supplement their diet with black market purchases.
This system of ranking citizens and allowing them special privileges is also extended to medical supplies. Medical care in Vietnam is administered with similar concern for social and political status. For example, the best hospitals are reserved for party members and their families. The Vietnamese Communist régime has complete control over its people by having a near monopoly over the allocation of the most basic goods and services. It is a régime that elicits loyal service from its party apparatuses by appealing to the most primitive material instincts—offering them economic and social privileges.
The Vietnamese Communist party administers a totalitarian régime whose domination of the population rests upon an all-pervasive police network, backed by an armed militia. After America withdrew from Vietnam in 1975, many leaders were apprehensive about their future under a Communist régime. The north Vietnamese leaders did not want to create a bloodbath in their efforts to conquer south Vietnam—they wanted the takeover to be as painless as possible. However, in May 1975, all members of the armed forces and civil administration of

675
the defeated Government were ordered to register with the new authorities. In June, they were called upon to report for "re-education".
These re-education camps are forced-labour camps, employing political indoctrination. The inmates include not only military, police and intelligence officers, but former Government officials and staff of non-Communist political parties. Those put into these camps have never been charged with any crimes. The whole process of arrest and detention lacks any legal basis. It cannot be determined how many people are in these labour camps, but it is estimated that 200,000 people in the south are in them.
In addition to the re-education camps there is the prison system. Most of the south Vietnam intelligentsia has been arrested and herded off to these prisons. The north Vietnamese want to absorb former writers, journalists, and lawyers from the south Vietnamese Government. To the new authorities, the precise attitude one had toward the former régime is irrelevant.
Apart from the re-education camps and the prison system, a third element in the network of special punishment devised by the Communist régime is the system called new economic zones. These are previously uncultivated and uninhabited areas of the countryside, usually barren, to which certain categories of the population are sent because they are considered potentially disloyal. These categories include relatives of re-education camp inmates, ethnic Chinese, and urban capitalists.
In Vietnam today, the concept of privacy has been abolished, both by the public security apparatus and by the military. It is everyone's duty to watch and report on all citizens who display subversive behaviour. This type of surveillance leads to a society of mistrust. Also, practically, people have been stopped from travelling to different parts of the country.
It is not hard to understand why the Vietnamese people want to leave their country. The problem is that the Communist party does not want them to leave. To leave Vietnam one must have the Government's approval. Anyone apprehended while attempting to leave the country illegally is automatically sent to prison or a re-education camp for a period determined by the local authorities. However, since the victory of the north Vietnamese army, many people have been prepared to take the risk in leaving illegally.
For the first few weeks after the conquest of the south in 1975, people thought that life under the new Communist régime might not be horrific. However, by late 1975 it became evident that the re-education system and prison system were there to stay. Out of desperation, many concluded that they had to find a way to leave.
As Vietnam is surrounded by three other Communist régimes and the ocean, departure by boat was the only possible solution. In 1975, 378 people reached another south-east Asian country by boat from Vietnam. In 1976, that figure had increased to 5,247. In 1977, there was a massive increase to 15,690 people who left by boat.
In December 1977, the Vietnamese army launched its first major attacks against the Communist régime of Pol Pot in Kampuchea-Cambodia. However, China supported the Pol Pot Government and it was at that point that the Vietnamese Communist leaders decided that their local ethnic Chinese minority was a potential danger. At the same time, the north Vietnamese started a separate campaign of harassment against ethnic Chinese residents.
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Most ethnic Chinese who owned businesses were prohibited and many were sent to the new economic zones to start again. Thus, the incentives for ethnic Chinese to leave were enormous.
In the south, the number leaving by boat increased dramatically, averaging 5,000 a month. In 1978, the number rose to 12,540, and by late 1978 the number was up to 21,505.
The situation for the ethnic Chinese became worse in December 1978. In late 1978, Vietnam launched a full-scale invasion of Cambodia, overthrowing the Pol Pot régime and driving it west to the Thai border. In response to that action, China invaded Vietnam in 1979. The war failed to weaken the Vietnamese Government, and its only result was to heighten the anti-China hysteria of the Vietnamese Communist leaders. They began an all-out racist pogrom against Vietnamese ethnic Chinese residents.
The Vietnamese leaders turned the refugee problem into a successful business. They placed high taxes on visas and added high costs to identification papers. For example, the Vietnamese Communists made about $4 million profit on each ship that left.
The Vietnamese Communist régime exercises its power without any regard for the most fundamental values of the majority of its citizens, and continues to engage in overt racial discrimination against its ethnic Chinese minority.
In January 1979, the British Government responded to appeals from the United Nations High Commissioner for Refugees and the Governor of Hong Kong by agreeing to a quota, by selection, of 1,500 refugees from camps in Hong Kong, Malaysia and Thailand. In addition, during 1979, over 1,400 refugees rescued at sea by British ships were admitted to the United Kingdom.
Through the summer of 1979, the exodus of boat people increased until it was clear that a major international effort was necessary to avoid severe disruption to many countries bordering the South China sea.
In response to that situation and to the growing pressure of refugees in Hong Kong, our Prime Minister took the initiative which led the Secretary-General of the United Nations to call an international conference at Geneva during July 1979. At that conference many countries agreed to take quotas of refugees, the United Kingdom itself agreeing to an additional quota of 10,000 refugees from Hong Kong.
There are now 16,000 Vietnamese refugees settled in Britain. They need support and help to integrate themselves into an environment which is a completely new way of life compared with that from which they have come. There is a different language, a different climate and culture. On a more mundane level, there are planning controls for building, whereas they have been used to building where they please in their own country. They are community-minded and like to live in groups, although many have been dispersed throughout the United Kingdom.
The purpose of the British Committee for Vietnamese Refugees, of which I am the chairman, is to try to deal with the problems confronting the people and to smooth their transition into their new lives. I pay tribute to my secretary, Madame de Roland-Peel, and also to the very considerable hard work and assistance of the other voluntary organisations, principally the British Refugee Council, formerly the British Council for Aid to Refugees, which has written to me about tonight's debate, the

677
Ockenden Venture, and the Save the Children Fund. All have played a tremendous part, as has the United Nations High Commissioner for Refugees.
One major concern for families already settled here is how they can be joined by their families who are still in Vietnam. The Government there are sometimes reluctant to let them go and can sometimes extort enormous sums in return for granting an exit visa. Even when there is such a visa, there can be intolerable delays.
I hope that my hon. and learned Friend the Minister of State, Home Office will urge the Government to put the maximum pressure on the Vietnamese Government to release citizens who have been given by our Government visa promise letters to enter this country. Since 1981, the Home Office has changed its policy towards relatives in Vietnam wishing to join their families here. My hon. and learned Friend's predecessor told me in a letter of 15 June 1981:
"our policy on family reunion for Vietnamese refugees has hitherto been more liberal than for other refugees but now that the numbers of Vietnamese resident in the United Kingdom has risen to over 14,000, the same standards must be applied to Vietnamese as are applied to refugees from other parts of the world. This means that in future we will admit the spouse and the unmarried children under 21 of refugees and look sympathetically on a case by case basis on other relatives who can be regarded as members of the nuclear family. It is unlikely however that unmarried adult brothers, sisters or more distant relatives who are not normally dependent on the person here will be admitted."
The problems and needs of those people have not changed, but, by administrative act, their status has changed. Yet those relatives need to be treated in a far more humane and careful way than other relatives of refugees, not least because Vietnamese refugees are escaping from tyranny and, in some cases, death. I urge the Government to adopt a more flexible approach to ensure that relatives can join their families here.
It is right to pay tribute to the many local authorities that have played a role in accepting a few families each and providing local authority accommodation for them. I accept that it is the primary responsibility of local authorities to have a major part in resettlement programmes for Vietnamese refugees, but what incentive will the Government give them to fulfill those responsibilities? For example, will funds be made available to ensure that those services are established and monitored? What assistance will be given to local authorities that have within their boundaries a small number of families whose dispersal and resulting isolation are a major cause of concern?
We have seen recently the tragedy of Vietnamese suicide. Depression and isolation, leading to psychiatric disturbance, are problems which we must face up to. Will my hon. and learned Friend the Minister of State urge the DHSS to recruit and train Vietnamese doctors in psychiatric medicine to provide a basis to cope with the increasing number of psychiatric problems experienced by Vietnamese refugees settled here?
Unemployment is a great worry and affects about 83 per cent. of Vietnamese refugees, although they are a hardworking and industrious people and I am greatly impressed by the way in which, for example, former Vietnamese army officers and those of high social status are prepared
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to undertake menial jobs in this country rather than be unemployed. I think, in particular, of a Vietnamese ex-army colonel who is now a car mechanic.
Greater support is needed. We need to establish a scheme to train Vietnamese business men in Western business practices to act as advisers for Vietnam refugees who wish to set up and run small businesses here. Perhaps we should even have a scheme for providing capital on special terms for Vietnamese setting up small businesses, as suggested by the British Refugee Council.
Part of the problem of unemployment is the language difficulty. As acknowledged in the Home Office research and planning unit paper 13 "Vietnamese Refugees" published last year,
"one of the main factors to affect the employment opportunities of the refugees is their proficiency in English".
I pay tribute to the Government for funding the extra cost of English tuition by local authorities in reception centre areas. That was a major contribution towards helping refugees learn English. But will the Manpower Services Commission make provision for fully integrated job training and English language schemes? What plans are there for further support in adult education in the English language?
I end by saying something about what my committee is doing which will be a lasting monument to the courage of the people who have come here as refugees. It is a memorial. The royal borough of Kensington and Chelsea has generously made available to us a site on the banks of the Thames at Cremorne gardens, Lots road, near Chelsea creek, for Vietnamese boat people memorial. We are trying to raise the necessary funds through our charitable organisation. The statue has been designed. It is in the form of a woman holding a child in her arms emerging from the sea. It is symbolic of the emergence of new hope for a people who had nearly lost all hope. It will be a focus for the Vietnamese here and a permanent reminder of their brave countrymen, women and children who chose privation and death in their search for freedom rather than the human indignity of tyranny and fear.
Let that be a memorial for us to a courageous people and a constant token of remembrance of how fortunate we are to live in freedom and that freedom is often won at only a very high price.
10.50 pm
The Minister of State, Home Office (Mr. Waddington): I am grateful to my hon. Friend the Member for Ynys Mon (Mr. Best) for placing on record what life is really like in Vietnam today and explaining why so many Vietnamese have risked their all to leave their homeland. He has also given us the opportunity to look at the problems that face Vietnamese refugees in Britain and I pay tribute to his work as chairman of the British committee for Vietnamese refugees and of the Vietnamese refugees charitable trust, two of the several voluntary bodies that have already done so much to provide practical help to those who have sought refuge in this country from Vietnam.
My hon. Friend mentioned the position of relatives of refugees already here who have been granted entry visas by the United Kingdom but who have not been given exit visas by the Vietnamese authorities under the orderly departure programme worked out between the United Nations high commissioner for refugees and the Hanoi government. Our embassy in Hanoi works closely with the

679
United Nations high commissioner and is doing its best to improve the flow of arrivals. The overall monthly rate of departure to all countries under the programme was substantially higher in the first five months of this year than last year. I know that about 100 relatives from Vietnam were expected to arrive in this country today and that the refugee agencies here expect a further 50 arrivals in the next two weeks or so.
Britain's policy is to admit a spouse and minor children only, with sympathetic consideration of any exceptional circumstances which sponsors suggest merit the admission of other relatives. I appreciate and sympathise with the disappointment and distress felt by many Vietnamese over those criteria, but I regret that given our other commitments in the refugee and general immigration fields it has not been possible to agree to any widening of them. I assure my hon. Friend that one only has to be for a short period of time in the office that I occupy to recognise how great those pressures really are.
The decision to accept the Vietnamese here was a humanitarian response by the Government on behalf of the whole community. Our selection criteria for refugees from Hong Kong were humanely drawn. Our only stipulations were that the refugees themselves should wish to come to this country; that in the opinion of the voluntary agencies it would be possible for them to settle; and that they were not personally unacceptable. Indeed, very few people who wished to come to the United Kingdom were rejected.
That generous approach, together with the fact that the United Kingdom programme began rather later than those of some other countries has itself contributed to our present difficulties. Few of the Vietnamese accepted by Britain had any sort of knowledge of English or Western culture, many come from the north, of peasant stock and were in Western terms quite unskilled, and some had been previously rejected for settlement by other countries. To those considerable disadvantages we must add a tragic background of war and hardship, the divisions within their own community and the fact that before their arrival there were virtually no people of Vietnamese extraction in Britain. In short, the task of establishing themselves and adjusting to life in the United Kingdom was far more formidable than that which normally faces refugees.
My hon. Friend referred to the employment problem. It is perhaps the most serious problem of all. The Vietnamese are a proud and industrious race and want to work. But they have arrived at a time of worldwide recession and the odds have been heavily against them. It was found in research initiated in 1981 that even after several months' intensive practice in reception centres and further language teaching in their new places of settlement, 79 per cent. of the refugees had little ability to communicate with British people. Moreover, the typical Vietnamese refugee is far less likely to come from the professions or the managerial classes than a refugee from other parts of the world, and the result is as my hon. Friend said, an unemployment rate in excess of 80 per cent.
Happily, the ability and determination of the Vietnamese, together with their tradition of self-help, means that the picture is not all black. A recent study suggests that at least 60 per cent. of those who actually found jobs have held them down successfully despite their problem with language. Some girls have already qualified as nurses; an acupuncturist, trained in China, has now set up in practice in Derby; two fish and chip shops and a small plastics firm are being run by Vietnamese in
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Peterborough, and there are take-away food shops in other parts of the country. But the success stories are still far too few: for most the reality is unemployment.
Since 1979 the joint committee for refugees from Vietnam has steered the efforts of the three main refugee agencies responsible for the original reception and settlement programme. We are deeply in the debt of the British Refugee Council, Ockenden Venture and Refugee Action and we owe a tremendous amount, too, to the many statutory and voluntary bodies, churches, housing associations, voluntary support groups, teachers, employers, social workers and neighbours who helped with the initial settlement and who are now continuing to support the Vietnamese community in its efforts to adjust to life in this country.
The first source of help for the Vietnamese outside their own community comes from the local support groups, which can help to supply many of the answers to the day-to-day problems that arise. But clearly they cannot provide a comprehensive service for the Vietnamese, nor help the statutory services to tackle problems calling, for example, for skilled interpretation in Vietnamese or Cantonese, and an understanding of Vietnamese customs and of their way of life. In some areas where there are few Vietnamese families, little community support has developed, and it may in time make a great deal of sense for some of those Vietnamese families who are settled in parts of the country far away from other Vietnamese, to move to areas in which there are larger Vietnamese communities. But even in some inner cities where Vietnamese communities may be comparatively large, such as in London, there may still be few volunteer support groups. Inevitably, too, there are limits to the knowledge and skills of some groups, and to their ability to respond effectively or act with the statutory authorities in the more complex situations that now call for their help.
The refugee agencies' field workers who were originally responsible for locating offers of housing and making arrangements to ease the initial stages of Vietnamese families' arrival in their new homes have now very different work to do: there are currently 42 field workers, including 10 Cantonese speakers and 21 Vietnamese speakers. Many of them are Vietnamese themselves. Their role has been crucial in bridging the language and comprehension gap. They are already being called in by the Vietnamese, by support groups or by the statutory agencies to help with family crises; they also do a great deal of interpreting when called upon by courts, the police, the health services, local authorities or local DHSS and Department of Employment offices. They work to boost the efforts of local voluntary support groups who are trying to develop the Vietnamese community's own resources.
I could speak at length about what is being done by statutory and voluntary bodies by way of language teaching and training for employment. My hon. Friend mentioned the MSC. I understand that there are many MSC projects directed to providing language and skills teaching. He suggested the possibility of giving help to set up Vietnamese in business. I am not sure that it is right to think in terms of special efforts to assist sections of the community in that way, but I assure him that many parts of the business opportunities programme are relevant when it comes to providing opportunities for people anxious to set up in business here, be they Vietnamese, other refugees

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or others who are without work. I was interested to hear his remarks about a memorial and I wish him well with that venture.
As for the various other matters my hon. Friend mentioned, rather than race through my notes in the
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minutes remaining, I should prefer to study carefully what he said, and I shall answer in writing all the other interesting points he raised.
Question put and agreed to.
Adjourned accordingly at one minute past Eleven o' clock.

ENERGY
  Atomic Energy Authority Constabulary
  Atomic Energy Authority Constabulary
  Vale of Belvoir
  Vale of Belvoir
EDUCATION AND SCIENCE
  School Transport
  School Transport
  Chief Inspector of Schools
  Chief Inspector of Schools
  British Post-Graduate Medical Federation
  British Post-Graduate Medical Federation
  Teaching Materials
  Teaching Materials
TRADE & INDUSTRY
  Newton Aycliffe
  Newton Aycliffe
  British Steel Corporation
  British Steel Corporation
  Manufactured Goods
  Manufactured Goods
  Falkland Islands Company
  Falkland Islands Company
  Regional Policy
  Regional Policy
  Industrial Knowledge
  Industrial Knowledge
  Production and Design Engineering
  Production and Design Engineering
  Llanwern Steelworks
  Llanwern Steelworks
  UNCTAD VI
  UNCTAD VI
  Coal Use
  Coal Use
  Export Statistics
  Export Statistics
  Wolverhampton
  Wolverhampton
  Tourism
  Tourism
  West Midlands
  West Midlands
  Levenmouth
  Levenmouth
  Spain (Motor Vehicle Tariffs)
  Spain (Motor Vehicle Tariffs)
  Multi-fibre Arrangement
  Multi-fibre Arrangement
  Manufacturing Output
  Manufacturing Output
  New Technology
  New Technology
  British Leyland
  British Leyland
  Northumberland
  Northumberland
  Copyright
  Copyright
  Company Liquidations (Directors)
  Company Liquidations (Directors)
  Rockwell Graphics, Preston
  Rockwell Graphics, Preston
  Emergency Industrial Assistance
  Emergency Industrial Assistance
  Regional Policy
  Regional Policy
  Science Parks
  Science Parks
  Insolvency Law
  Insolvency Law
  Factory Closures
  Factory Closures
  Computers
  Computers
  Assisted Area Status
  Assisted Area Status
  East Midlands
  East Midlands
  Car Parts
  Car Parts
  Manufactures
  Manufactures
  Tokyo Round (Inorganic Chemicals)
  Tokyo Round (Inorganic Chemicals)
  Common Commercial Policy
  Common Commercial Policy
TRANSPORT
  Air Tariffs
  Air Tariffs
  A11 (Suffolk)
  A11 (Suffolk)
  A38 (Flyovers)
  A38 (Flyovers)
SCOTLAND
  Forth and Clyde Canal
  Forth and Clyde Canal
  Employment Statistics
  Employment Statistics
PRIME MINISTER
  Public Records (Declassification)
  Public Records (Declassification)
  National Economic Development Council
  National Economic Development Council
  Management and Personnel Office
  Management and Personnel Office
  Chevening House
  Chevening House
HOME DEPARTMENT
  Bingo
  Bingo
  Leeds Prison
  Leeds Prison
THE ARTS
  Museums (Purchase Grant Schemes)
  Museums (Purchase Grant Schemes)
  Museums and Galleries Commission
  Museums and Galleries Commission
NATIONAL FINANCE
  War Loan Stock
  War Loan Stock
  Capital Gains Tax
  Capital Gains Tax
  Exchange Rates
  Exchange Rates
  Tax and Prices Index
  Tax and Prices Index
  Mortgage Interest (Tax Relief)
  Mortgage Interest (Tax Relief)
  Objects in Lieu of Tax
  Objects in Lieu of Tax
  Ancillary Finance Bill
  Ancillary Finance Bill
  Manufacturing Industry (Competitiveness)
  Manufacturing Industry (Competitiveness)
WALES
  Welsh Office (Staff)
  Welsh Office (Staff)
  Water Pipelines (Renewal)
  Water Pipelines (Renewal)
AGRICULTURE, FISHERIES AND FOOD
  Common Agricultural Policy
  Common Agricultural Policy
EMPLOYMENT
  Factory Closures
  Factory Closures
  Employment Statistics
  Employment Statistics
  Wages (Deductions)
  Wages (Deductions)
  Community Programme (Cumbria)
  Community Programme (Cumbria)
  Youth Training Scheme
  Youth Training Scheme
  Chemicals and Inflammable Goods (Safety Regulations)
  Chemicals and Inflammable Goods (Safety Regulations)
  Advisory, Conciliation and Arbitration Service
  Advisory, Conciliation and Arbitration Service
  Special Employment Measures
  Special Employment Measures
  Labour Statistics
  Labour Statistics
ENVIRONMENT
  Environmental Protection
  Environmental Protection
  Kirkby Town Football Club
  Kirkby Town Football Club
  Building Research Establishment
  Building Research Establishment
  British Board of Agrément
  British Board of Agrément
  Peak District National Park
  Peak District National Park
  Rate Rebates
  Rate Rebates
  Leicester
  Leicester
SOCIAL SERVICES
  Grants and Allowances
  Grants and Allowances
  Geriatric Provision
  Geriatric Provision
  Sickness Benefit
  Sickness Benefit
  Till Discrepancies (Deductions)
  Till Discrepancies (Deductions)
  Urgent Needs Payments
  Urgent Needs Payments
  Drug Costs
  Drug Costs
  Lithotripter Kidney Stone Machine
  Lithotripter Kidney Stone Machine
  Retirement Age (Costs)
  Retirement Age (Costs)
  International Population Conference
  International Population Conference
  Rubella
  Rubella
FOREIGN AND COMMONWEALTH AFFAIRS
  Law of the Sea (Convention)
  Law of the Sea (Convention)
  Iran
  Iran
  Disabled People
  Disabled People
DEFENCE
  Falkland Islands
  Falkland Islands
  Trident II D5
  Trident II D5

Preamble
The House met at half-past two of the clock: The LORD CHANCELLOR On the Woolsack.
Prayers—Read by the Lord Bishop of Derby.
Several Lords—Took the Oath or Affirmed.

Ministerial Undertakings in Parliament
The Earl of Kinnoull: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will consider establishing independent machinery for monitoring non-statutory undertakings given by Ministers during the passage of legislation.
The Minister of State, Privy Council Office, and Minister for the Arts (The Earl of Gowrie): My Lords, it is obligatory on Ministers to honour any undertakings that are given by them to Parliament on behalf of the Government during the passage of legislation, or at any other time. I do not consider, however, that monitoring procedures on the lines suggested by my noble friend would be either practicable or necessary.
The Earl of Kinnoull: My Lords, while I am grateful for my noble friend's Answer, would he agree that in recent years it has become the practice, with contentious legislation passing through this House, for Bills often to become festooned with ministerial undertakings, undertakings which are not written into the Bill? As a reforming Chamber, is it not odd that there is no apparent central record of such undertakings? Should there not be a central record? And should there not be a record available in the Library?
The Earl of Gowrie: My Lords, I should have thought that there was such a central record of undertakings. It goes by the name of Hansard. Parliament is well placed to keep an eye on what Ministers say during the passage of legislation. Of course there is a whole ministerial range, from sympathy to commitment, and allowance would have to be made for that.
Lord Cledwyn of Penrhos: My Lords, I am grateful to the noble Earl for that answer, but can he go further and say whether or not there is in existence a body of evidence that non-statutory undertakings are in fact being disregarded in relation to specific legislation or to a range of legislation?
The Earl of Gowrie: My Lords, I do not have any evidence of that, though I shall take up the point which the noble Lord the Leader of the Opposition has made. It may be that Ministers must discipline themselves about the undertakings which they make. On the other hand, we would not want them to be so non-committal as to bore your Lordships or Members of another place.
Lord Byers: My Lords, would not the noble Earl agree that a responsibility is placed upon the noble Lord concerned who has asked for the assurance to follow it up in the name of the House?
The Earl of Gowrie: My Lords, that is a very wise point. I hope that my noble friend and others will take note of it.
Lord Leatherland: My Lords, does the Minister recollect that some time ago an undertaking was given by Ministers to abolish local rates? When is that likely to come about?
The Earl of Gowrie: My Lords, as I remember, that undertaking was given by Ministers in their party political guise rather than as Ministers. It is the job, surely, of politicians to test their commitments against the hard facts of government when they get there and to try to tailor their programmes to what they find.
Lord Leatherland: My Lords, is the Minister saying that when he makes a promise he does not intend to carry it out?
The Earl of Gowrie: Not at all, my Lords, but debates on taxation take place in all political parties at all times. It is thoroughly desirable that they should do so, otherwise we should end up with ever escalating rates of tax.
Lord Hooson: My Lords, would not the noble Earl agree that one of the worst habits of Ministers is to give an undertaking as to their understanding of the meaning of clauses in Bills which has no effect whatsoever on the interpretation of that legislation when it later comes to be interpreted by the courts? That is the way which is often used by Ministers of all parties to avoid further debate on the clauses of a Bill.
The Earl of Gowrie: My Lords, the parliamentary draftsmen are very adept at helping us out of the holes we dig for ourselves in that respect.
Viscount St. Davids: My Lords, what is to be done to Ministers who break their undertakings? In these days of possible hanging and flogging, will Ministers be suspended, or will they be handed to the Lords with White Staves?
The Earl of Gowrie: My Lords, Ministers are answerable to your Lordships and I think your Lordships know very well what to do with them.

Parliamentary Voting: Lords Spiritual
2.46 p.m.
The Earl of Onslow: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether Lords Spiritual have the right to vote in parliamentary elections.
The Parliamentary Under-Secretary of State, Home Office (Lord Elton): My Lords, Lords Temporal are disqualified from voting at parliamentary elections at common law. The question of whether Lords Spiritual can vote at parliamentary elections has never been expressly considered by the courts.
The Earl of Onslow: My Lords, after 800 years of the existence of your Lordships' House (or is it 700? I am not quite sure) is it not time that this particular point was clarified? Is my noble friend aware that I would agree—I hope he is aware that I would agree, but, if not, is he so aware—that 26 votes are not going to have a catastrophic influence upon the outcome of a parliamentary election? Furthermore, is it not verging on the irresponsible to take it upon oneself to produce a new piece of constitutional law—which, I believe, took place in the electoral district of Vauxhall at the last election?
Lord Elton: My Lords, I agree with the first inference of my noble friend's supplementary question: that the votes of the entire Bench of Bishops would not reverse what would otherwise be the outcome of any general election. I therefore feel that the outcome of any other inquiries is of academic rather than constitutional significance.
Lord Shinwell: My Lords, the noble Lord the Minister has just stated that the matter of Lords Spiritual voting in general elections has never been considered by the courts. Is it a matter to be considered by the courts? Is it not a matter to be decided by the House? Could this matter not be decided by a simple vote? If there is no one prepared to do that, then I am prepared to move that in future Lords Spiritual be precluded from voting in parliamentary elections unless every one of us is entitled to the same privilege.
Lord Elton: My Lords, I recognise the enthusiasm of the noble Lord to defend constitutional propriety. I understand that the courts became the proper arbiters of electoral procedure some time towards the end of the last century, although I am open to correction on the date. It is also generally accepted that it is not up to Members of this House to determine the composition of another place. However, as I said before, the impact of 26 widely scattered votes is hardly likely to do that.
The Lord Bishop of Derby: My Lords, while thanking the noble Lord the Minister for his interesting replies, and speaking as one who since becoming a Member of this House has always regarded himself as a disqualified person—and who has been helped along the path of sanity and virtue by seeing the letter "L" against his name in the register of voters and by not receiving a polling card—may I ask whether the noble Lord the Minister is aware that neither the most reverend Primate the Archbishop of Canterbury nor any other Lord Spiritual has any desire or intention to take this matter any further, and nor will any of us in future knowingly go against tradition and custom in this matter?
Lord Elton: My Lords, I am much obliged to the right reverend Prelate for his question. I am certain
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that we can depend on the Prelates always to restrict themselves to the paths of sanity and virtue.
Lord Underhill: My Lords, does the noble Lord the Minister not agree that it is not a question of whether or not 26 individual votes would have any effect on a general election but rather that every Member of this House is free to take part in voting in this House—including the Lords Spiritual, and we welcome the fact that they do take part—and therefore we should all be in the same position when it comes to voting in parliamentary elections? Is not that the important issue? Do the Government recognise that; and if they do recognise it, will they do something?
Lord Elton: My Lords, if the noble Lord's envy is excited by the possible defection by the Bishops' Benches from the powers of abstinence, I hope that his fears will now be allayed by the assurance he has just been given by the right reverend Prelate the Bishop of Derby.
The Earl of Onslow: My Lords, is it not quite unsatisfactory that the Constitution should in effect be altered by the right reverend Prelate the Bishop of Derby promising that Bishops and their successors will not vote in general elections? That is not legally binding. Furthermore, would it not be advisable that this matter should in effect be sorted out by taking it to the courts? We cannot leave the Constitution in the vague situation that exists at the moment.
Lord Elton: My Lords, the answer given by my noble friend to the previous substantive oral question impinges on this. My noble friend Lord Onslow has imputed to the right reverend Prelate a promise, when he made only a statement of intent. As to bringing this matter before the courts, I really feel that this is a case of de minimis non curat lex.
Lord Nugent of Guildford: My Lords, is my noble friend Lord Elton not aware that an undertaking by one of the Lords Spiritual is probably more reliable than undertakings of noble Lords who are Ministers, which we were discussing a little earlier?
Lord Elton: My Lords, I understand that although the Bishops are Lords Spiritual they are not Peers. This means that we are not all equal, and my noble friend Lord Nugent of Guildford obviously agrees that they are, in this respect at least, slightly our superiors.
Lord Mowbray and Stourton: My Lords, my noble friend Lord Elton suggested that if the 26 Bishops were to vote that would have little effect. But is it not the case that if 26 Lords Spiritual were all to announce in public before a general election their view on how they thought the vote should go this would have an enormous effect on any general election, with people taking the advice of such wise and holy men?
Lord Elton: My Lords, if my noble friend belonged to my Church he might believe that it was even more effective if they were to pray about it.
Lord Avebury: My Lords, does the noble Lord the Minister not agree that there is likely to be indepen-

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dent non-statutory machinery in a higher place for monitoring non-statutory undertakings by the right reverend Prelates?
Lord Elton: My Lords, there is only one place higher than this; I do not know when the noble Lord intends to go there.
Lord Oram: My Lords, is not the right to vote a much more serious question than some of the questions and answers have implied today, in view of the history of the struggle to get that right to vote? If in any way the law is in doubt, should not the Government legislate to remove that doubt? Do not the Acts perfectly describe certain other categories of people who are disqualified from voting, and would it not be appropriate to so define those who sit on the Bishops' Bench?
Lord Elton: My Lords, I can really only return to my earlier answer, that I do not think this is a matter of such great importance—philosophic importance, yes—but in practical importance, not sufficient to engage the time of both Houses of Parliament in research and legislation.
Viscount St. Davids: My Lords, should this matter be moved in any direction at all, would it not be better to move it in the direction of giving us all votes, and this removing us from the somewhat surprising category of aliens, infants, certified lunatics and convicted felons, and—
Lord Elton: My Lords, I was hoping that the noble Viscount would continue after the conjunction and provide me with time to devise an answer to the first part of his question.
Viscount St. Davids: My Lords, I will do so willingly. I was further going to suggest that perhaps the noble Lord would have the support of the Opposition in this because they are determined as soon as they possibly can to make us into "disa-peers".
Lord Elton: My Lords, I am suspicious of measures which have the support of the Opposition.
Lord Jenkins of Putney: My Lords, would not the noble Minister agree that if one once starts legislating about the House of Lords who knows where it may end?
Lord Elton: Yes indeed, my Lords.

Heavy Goods and Passenger Vehicle Testing
2.58 p.m.
Lord Underhill: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what is the present situation concerning the proposed transfer to the private sector of the testing of heavy goods vehicles and passenger vehicles.
Lord Lucas of Chilworth: My Lords, good progress has been made in the negotiations with Lloyd's Register of Shipping for the transfer of vehicle testing to Lloyd's Register Vehicle Testing Authority. These include the arrangements for the transfer of staff and assets, the terms for occupation of the testing stations, the conditions under which the new body will be authorised to carry out vehicle testing, and financial matters.
There have also been consultations with the trade unions on the terms and conditions of employment for staff who transfer to the new authority and about the special payments they will receive on leaving the Civil Service to compensate for any worsening in their terms of employment. The trade unions are now consulting their members on the Department's offer of special compensation, and they will report back on 6th July.
Because of the need for the unions to consult widely and because of the delay of some weeks caused as a result of the election process, it will now not be possible to effect the transfer on 1st July, as we had hoped. I shall hope to be able to tell your Lordships a new date for transfer quite shortly.
Lord Underhill: My Lords, while I welcome the fact that the unions are being consulted, which I hope other sections of society will follow very carefully, particularly in view of the debate to follow, can the Minister say whether there have been any problems or difficulties which have arisen in these negotiations with Lloyd's Register, because it is now nearly 12 months since discussions started? If there are hindrances from a body which does not seem to be over-enthusiastic about taking over these responsibilities, would it not have been best to leave the testing where it is, as is desired by all operators, haulage and public service, in both the private sector and the public sector?
Lord Lucas of Chilworth: My Lords, the noble Lord, Lord Underhill, will, I am quite sure, recall that negotiations opened in June of 1981, with an approach to Lloyd's, and seriously in May 1982. It was, of course, only in the Transport Act 1982, which was passed by your Lordships in October of that year, that the full proposals of the Government were made known. So far as I am aware, there are no difficulties with these negotiations, to which the noble Lord has quite properly drawn your Lordships' attention, that cannot be overcome. So far as I am aware, Lloyd's remain extremely keen and are pursuing the negotiations for transfer with energy and enthusiasm.
Lord Mowbray and Stourton: My Lords, is there not a possibility that the public suspects there are quite a few vehicles escaping the necessary tests? In other words, there are not enough testing stations. If what is suggested in the Question were to come about, would it result in more loopholes being closed, or not?
Lord Lucas of Chilworth: My Lords, I am sure my noble friend will recall that there are 91 stations and that there are about a thousand people engaged in testing. Only those vehicles which are operating illegally would escape the testing. The Government have always felt that a transfer into the private sector would bring about greater efficiency. It would perhaps enable this particular job to be done rather better than it can be done under Government auspices. I do not

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believe that, after transfer, there would necessarily be any more, but perhaps no less, vehicle operators who slip through the net of testing.

Mortgage Interest Rates
3.2 p.m.
Lord Pitt of Hampstead: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what is their attitude to the recent increase in mortgage interest rates.
The Chancellor of the Duchy of Lancaster (Lord Cockfield): My Lords, the Government regret that the building societies have decided to raise the recommended rate of interest to be charged to their borrowers. The building societies have to make their decisions in the light of the demand they face for mortgages and the flow of funds from depositors. These are matters for the commercial judgement of the societies and not for the Government.
Lord Pitt of Hampstead: My Lords, while I thank the Minister for that reply, it is obviously intended to indicate that the Government have no policy on mortgage interest rates. Am I right in assuming that?
Lord Cockfield: My Lords, rates of interest, as we have made clear on many occasions, are affected by market forces. It was market forces in the present instance which led the building societies to increase their recommended rate of interest.
Lord Kaldor: My Lords, will the Minister confirm that it was due to market forces that within 24 or 48 hours of the building societies raising their mortgage rates the big commercial banks proceeded to do the same? Why did they not do so before?
Lord Cockfield: My Lords, this merely illustrates the way that the market can, in fact, work. The banks have been tending to withdraw from the mortgage market. That has been one of the factors that has increased the demand on the building societies. That in turn has led the building societies to feel that they need a greater inflow of funds. It is to encourage that inflow that they have increased the rates they are paying to depositors.
Lord Bruce of Donington: My Lords, is the noble Lord aware that his answers to the questions put by my noble friend constitute a complete justification in his mind for the action taken by the building societies? Therefore, will the noble Lord explain how it is that the Government wish ostensibly to dissociate themselves from the action that has occurred, bearing in mind that the working of market forces to which the noble Lord referred is, of course, the policy of Her Majesty's Government?
Lord Cockfield: My Lords, if I understand the noble Lord's argument correctly, he is now claiming that he
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is convinced by the reasons advanced by the building societies for their decision to raise interest rates. I was doing no more than explaining the circumstances that led them to take that decision. The decision, as I made clear in my reply to the original Question, was a decision taken by the building societies and not by the Government.
Lord Beswick: My Lords, can the noble Lord explain why, if the market forces are absolutely paramount, he regrets the fact that they operate?
Lord Cockfield: My Lords, there are plenty of things that one regrets in this ife, even if they are not one's own responsibility.
Lord Molloy: My Lords, is the noble Lord aware that in another place the Prime Minister, to her great credit, stated quite clearly that not only was she distressed at the rise in the mortgage interest rate, and showed her disapproval, but also she was disappointed? Why should there be one Conservative view in another place and another view here seeking to make excuses for the building societies deciding to raise interest rates and on which the Prime Minister said she was most disappointed?
Lord Cockfield: My Lords, I do not understand the distinction that the noble Lord is trying to draw between disapproval and regret. It seems to me that they both express the same reaction. I was simply trying to assist the noble Lord who asked the Question to understand the circumstances which led to the building societies taking their decision. However, it remains the responsibility of the building societies and not the responsibility of the Government.
Lord Renton: My Lords, why do not the present Government follow the practice of their predecessors in allowing the building societies to fix their own rates in accordance with the law of supply and demand?
A noble Lord: Their predecessors were a Tory Government.
Lord Cockfield: My Lords, my noble friend is entirely right in this matter. While I would not attempt to speak for the Opposition, I understand that they did not attempt to fix the rates of building society mortgage interest.
Lord Stewart of Fulham: My Lords, the noble Lord will have noticed that this increase occurred shortly after polling day and not shortly before. Does he ascribe that to market forces or to providence?
Lord Cockfield: My Lords, certainly that was not a matter in which the Government were in any way concerned. It is inevitable that certain events occur before polling day and certain events occur after polling day. I have no doubt that the fortunes of the Opposition stand much lower today than they did before polling day.
Lord Kennet: My Lords, does the fact that today the Government have come to regret and disapprove of

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the operation of market forces, as British Governments did in the 1840s, mean that they will shortly begin to intervene in those operations, as British Governments did in the 1850s and 1860s?
Lord Cockfield: My Lords, I am not answerable for what the British Government may or may not have done in the 1850s and 1860s. If the noble Lord wishes to pursue that subject it is a matter singularly appropriate for the party to which he belongs.
Lord Kaldor: My Lords, does the noble Lord attribute to market forces the desire of the commercial banks to take away business from building societies? That is a new phenomenon. Does he agree that the building societies' move was forced on them by the policies of the commercial banks and that the commercial banks in turn responded so as to neutralise the effect on them of the building societies' action?
Lord Cockfield: My Lords, as the noble Lord says, there has undoubtedly been competition between the clearing banks and the building societies for mortgage business. I can see nothing wrong in that.
The Earl of Onslow: My Lords, have we not seen the disastrous result—especially during the time of the previous Government—of, I believe, the Callaghan Administration trying to subsidise mortgage rates directly? Did not that have a distorting effect on the market? Furthermore, surely this question arises because the Americans have such an enormous budget deficit and are having to borrow so much and are forcing interest rates up all over the world. Does the Minister agree that the sooner we get those down the more likely we are to have sustained and profitable growth?
Lord Cockfield: My Lords, I am grateful to my noble friend for what he has said. As regards the first part of his question, I have no information about what the Labour Administration may have done. On the second part of his question, it is a matter of regret—if I may be forgiven for using such a phrase—that American interest rates have tended to pull up interest rates elsewhere in the world.
Lord Plant: My Lords, do I understand from the reply of the noble Lord the Minister that the Government will refrain from increasing interest rates for the Savings Bank and savings certificates, over which they have some control?
Lord Cockfield: My Lords, they are really two quite different matters. So far a National Savings Certificates are concerned, obviously a decision is taken by Government, but it is a decision which is taken against the general background of market rates.
Lord Pitt of Hampstead: My Lords, would not the Minister agree that in fact the right to buy, by increasing the demand for mortgages (40 per cent. of which are handled by building societies), has put greater pressure on the building societies? Could not the Government help in two ways in connection with that? The first is by increasing the amount available for mortgages through the local authorities and the second
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is by increasing the amount available for mortgages through the Trustee Savings Bank.
Lord Cockfield: My Lords, the noble Lord is now straying very far from the original Question on the Order Paper.
Lord Pitt of Hampstead: Not at all, my Lords. It is quite relevant.
Lord Cockfield: My Lords, the noble Lord is now straying very far from the original Question on the Order paper and he is putting forward proposals for the generation of mortgage funds from other sources. It is certainly not the intention of the Government themselves to go into the field of lending money on mortgage.
Lord Derwent: My Lords, have we not by now squeezed all the juice that is possible out of this Question?
Lord Cockfield: My Lords, I am grateful to my noble friend. I should myself have said, "out of this lemon."

Dinner
Lord Denham: My Lords, it may be for the convenience of your Lordships to know that dinner will be available at the usual time this evening.

Procedure of the House: Select Committee
The Chairman of Committees (Lord Aberdare): My Lords, I beg to move the first Motion standing in my name on the Order Paper.
Moved, That the Select Committee on Procedure of the House be appointed; and that as proposed by the Committee of Selection the Lords following, with the Chairman of Committees, be named of the Committee:—

Airey of Abingdon, B.

Allen of Abbeydale, L.

Ampthill, L.

Aylestone, L.

Belstead, L.

Boyd-Carpenter, L.

Brandon of Oakbrook, L.

Byers, L.

Denham, L.

Cledwyn of Penrhos, L.

Glenamara, L.

Hailsham of Saint Marylebone, L. (L. Chancellor).

Hampton, L.

Hylton-Foster, B.

Jacques, L.

Kennet, L.

Llewelyn-Davies of Hastoe, B.

Maybray-King, L.

Nugent of Guildford, L.

Oram, L.

Ponsonby of Shulbrede, L.

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Renton, L.

Rugby, L.

Skelmersdale, L.

Strabolgi, L.

Wells-Pestell, L.

Whitelaw, V. (L. President)

Wigoder, L.

—(Lord Aberdare.)

On Question, Motion agreed to.

House of Lords Offices: Select Committee
Lord Aberdare: My Lords, I beg to move the second Motion standing in my name on the Order Paper.
Moved, That the Select Committee on the House of Lords Offices be appointed and that as proposed by the Committee of Selection the Lords following, with the Chairman of Committees, be named of the Committee:—

Ailesbury, M.

Airedale, L.

Ampthill, L.

Ardwick, L.

Avon, E.

Banks, L.

Beloff, L.

Belstead, L.

Birk, B.

Bishopston, L.

Boyd-Carpenter, L.

Brandon of Oakbrook, L.

Byers, L.

Campbell of Croy, L.

Cathcart, E.

Cholmondeley, M.

Cledwyn of Penrhos, L.

Cullen of Ashbourne, L.

Darling of Hillsborough, L.

David, B.

Davies of Leek, L.

De La Warr, E.

Denham, L.

Diamond, L.

Donnet of Balgay, L.

Eccles, V.

Elton, L.

Fisher of Rednal, B.

Greenway, L.

Hailsham of Saint Marylebone, L. (L. Chancellor)

Hylton-Foster, B.

Ilchester, E.

Jacques, L.

Kennet, L.

Kimberley, E.

Kinnoull, E.

Listowel, E.

Lloyd of Hampstead, L.

London, Bp.

Lucas of Chilworth, L.

McIntosh of Haringey, L.

Mar, C.

Minto, E.

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Molloy, L.

Mowbray and Stourton, L.

Nicol, B.

Nugent of Guildford, L.

Orr-Ewing, L.

Ponsonby of Shulbrede, L.

Reilly, L.

Sandys, L.

Sherfield, L.

Soames, L.

Stradbroke, E.

Tordoff, L.

Trumpington, B.

Wells-Pestell, L.

White, B.

Whitelaw, V. (L. President)

Wigoder, L.

—(Lord Aberdare.)

On Question, Motion agreed to.

ADDRESS IN REPLY TO HER MAJESTY's MOST GRACIOUS SPEECH
Debate resumed on the Motion moved on Wednesday last by the Duke of Norfolk—namely, That a humble Address be presented to Her Majesty as follows:
"Most Gracious Sovereign—We, Your Majesty's most dutiful and loyal subjects, the Lords Spiritual and Temporal in Parliament assembled, beg leave to thank Your Majesty for the most gracious Speech which Your Majesty has addressed to both Houses of Parliament".
3.12 p.m.
Lord Cockfield: My Lords, we come now to the final day of the debate on the gracious Speech. It was illuminated at the beginning by the speeches of the noble Duke and Earl Marshal and by my noble friend Lady Airey. We have also heard a number of maiden speeches: from my noble friend Lord Quinton, the noble and gallant Lord, Lord Cameron, and the noble Lord, Lord Ogmore. They were all interesting, entertaining and well informed. Today we look forward with interest to hearing maiden speeches from my noble friends Lord Ingrow and Lord Bauer.
We now embark upon a new Parliament. We need therefore to chart the course ahead. The gracious Speech indicates the course we will be following in the coming Session. But we need to look further ahead than that. We said when we first came into office that we were embarking on policies which would require not one Parliament but two. That second Parliament has now been vouchsafed us.
We achieved much in the first Parliament. Tough decisions which were then taken—for example, in the 1981 Budget—have been justified by events. Inflation is down to 3.7 per cent. Interest rates are down by nearly seven percentage points since the peak in the autumn of 1981, and, if I may say so, the recent increase in building society mortgage rates needs to be seen against declining interest rates elsewhere. Public expenditure has been brought under control.
As we now enter our second Parliament, therefore, the keynote of economic policy is one of continuity

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and consistency of purpose. We need to build a new prosperity for our people. We have set our feet on the right path. We must follow that path to the successful future it offers.
"Political economy", declared Adam Smith, "proposes first to provide a plentiful revenue or subsistence for the people, or more properly to enable them to provide such a revenue or subsistence for themselves". That statement, written 200 years ago, is just as valid today. The object of economic activity is the creation of wealth—not just individual wealth but, in the words of Adam Smith, "The wealth of nations". The two are in fact inseparable. National prosperity depends upon individual prosperity.
Governments cannot themselves create wealth. They can only create the conditions in which individuals create wealth; and individuals in turn have to take advantage of these conditions.
We spent our first period in office in laying the foundations: in establishing the right framework within which the economy would operate. That requires principally three things: stable prices, lower interest rates and adequate incentives. We have made progress in all three directions. It has been painful. No one would deny that But you cannot reverse a trend which has existed—and indeed grown worse—over time without pain.
Whether inflation can be exorcised altogether, and for all time, is a matter of debate. But what is undeniable is that no economy can stand the sort of inflation that we saw in the late 1960s and the 1970s. Inflation reflects expectations. The quicker we can remove the expectations, the quicker we will remove the evil itself. We now have the lowest inflation rate for over 15 years—a great achievement, but we must not rest there. Both Western Germany and Japan—our two principal competitors in the manufacturing field—are still doing better than we are.
Interest rates in turn reflect inflation. High interest rates, indeed, flow from high rates of inflation and reflect many of the same causes. The link is particularly pernicious. When inflation falls, interest rates often lag behind. As a result, we are left—at least in the short run—with untypically high real rates of interest, not only in this country; the same is true elsewhere in the world. It is only when we can convince people that the fall in inflation is permanent, and will continue, that real rates of interest will come down in the way that they ought to do. It was the big fall in interest rates after 1931 which led the way out of the great depression. We may well see the same again.
The most effective of all incentives is a reduction in the level of taxation, both for individuals and for businesses. At the outset of the last Parliament we were able to reduce the basic rate of income tax to 30 per cent., and the grossly excessive top rates of tax. At the end of the Parliament we increased the personal tax allowances by a figure double the rate of inflation.
As the gracious Speech makes clear, the attempt by the Opposition to push up taxes as a prelude to the election will now be reversed in a new Finance Bill. The people have made their choice, and it is a wise choice. Further reductions in taxation are a high priority, but these must depend upon prudent management of our finances.
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In the business field we are in course of reducing the rate of the national insurance surcharge to 1 per cent. from the 3½ per cent. at which it was fixed by the last Labour Administration. I use the word "last" in the historical sense, although it might well prove to be in the prophetic sense as well. When ultimately the national insurance surcharge disappears, its going will be lamented by few.
In all, we have introduced over 100 measures to assist business, including the new Business Expansion Scheme which was included in the Budget just before the election.
This then is what we have achieved in our first Parliament. As the gracious Speech indicates, we now propose continuing down this path. Our policies will be directed to securing continued progress on inflation through firm medium-term monetary and fiscal policies; and creating a more dynamic and competitive economy.
In this connection it is important that the proportion of the national income pre-empted by government—and I use the term "government" in the widest sense—should be reduced. Few people realise how immense has been the growth of the public sector in our own lifetime. In 1936—the last pre-war year unaffected by rearmament—central Government expenditure amounted to £850 million. Today it amounts to well over £100,000 million—an increase in real terms of eight and a half times. Today 7 million people are employed in the public sector—30 per cent. of the total employed population. In 1936 the figure was three quarters of a million—a mere 5 per cent. of the employed population.
After the war, the public sector was launched on a path of expansion. This continued way beyond the point when both prudence and our own deteriorating fortunes should have dictated reining back. By 1975–76 public expenditure had risen to a peak of 46 per cent. of our national income, and public borrowing reached 10 per cent. of national income.
We have been determined to reverse this trend towards pre-emption by Government of an ever increasing share of national output. The ratio fell last year and our plans, which are published in the Financial Statement, envisage it falling steadily to 41½ per cent. by 1985–86. Public sector borrowing has also been reduced substantially. This year we expect the figure to be 2¾ per cent. of national income—one of the lowest figures in the developed world; and we must keep it that way.
There is one particular facet of the growth of the public sector that I wish to refer to in more detail; that is the question of the nationalised industries. At this distance of time it is difficult to recall the high hopes of a new industrial dawn which nationalisation raised in the early post-war period. The state industries, it was said, were going to provide huge economies of scale. They were going to eliminate supposedly wasteful competition. They were, it was claimed, going to give workers a much closer sense of identity and involvement with their industries.
Tragically, the reality has proved very different. Few of the anticipated economies of scale actually materialised. Insulated from market pressures, the state industries have in general become characterised by

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overmanning, low productivity, industrial disputes, and heavy financial losses. Productivity generally in these industries has tended to grow significantly slower than elsewhere in the economy, while both wages and prices have tended to increase faster.
The ideal of public service, which underlay the original concept of nationalisation, has also long since disappeared. Labour relations in the nationalised industries are, if anything, worse than in the private sector. In many industries the attitude to the public generally, and the willingness to inflict hardship on ordinary people, in pursuit of wage claims or other grievances, is deplorable.
Much can be done—and has been done—to tighten up the scrutiny, monitoring, and management of the nationalised industries. But we remain convinced that the best incentive to an improved use of resources comes from opening up new areas to market forces wherever this can be done. The most effective way of doing this is by returning industries to the private sector—"privatisation", as it is somewhat inelegantly called.
We have already transferred to private sector ownership, in whole or in part, Cable and Wireless, Associated British Ports, British Aerospace, Britoil, British Rail Hotels, Amersham International and the National Freight Corporation.
In this Parliament we propose to carry the process further. British Telecom, Rolls-Royce, and British Airways; substantial parts of British Steel, of British Shipbuilders, and of British Leyland; as many as possible of Britain's airports; and British Gas Corporation's oil assests—all these will be transferred to the private sector.
There are of course some success stories in the public sector. Most of them are companies or industries en route for privatisation, where the prospect of a return to the private sector has acted as a spur to efficiency and enabled top class private sector management to be recruited. The latest—and outstanding—example of this is British Airways, which has been turned round from heavy loss into profit. This, I may say, is an argument for privatisation, not against it.
The essential job for Government therefore is to provide the right framework; and that is what we are doing. But it is not sufficient just to provide the right framework. People have to take advantage of it. They have to be willing and anxious to make the fullest use of the opportunities offered. This, indeed, is happening and there is plenty of evidence that this is so. There has, for example, been a remarkable increase in productivity: around 17 per cent. since the end of 1980. Cost competitiveness has improved by some 20 per cent. since early 1981.
The exchange rate now stands very much where it did in 1979. Consequently, the whole of the loss of competitiveness which now remains is due primarily to the excessive rise in earnings which occurred principally in 1979 and 1980. Since then there has been a dramatic and welcome reduction in the level of pay settlements. But unless we can bring settlements down to the level achieved by our principal
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competitors we will remain vulnerable in both domestic and overseas markets. It is no good complaining about the rising tide of imports if the explanation lies in our own failure to produce the right goods of' the right quality at the right price.
But there is another and very important aspect to the question of the level of pay settlements. During the period when there was little or no growth in output, those in employment increased their incomes at a rate significantly higher than the rate of inflation. The resulting loss in competitiveness led to reduced output and increased unemployment. Excessive pay settlements have thus been one of the major causes of unemployment.
If unemployment is to be reduced—and it must be—pay settlements must also be reduced to enable our goods to be sold on a competitive basis at home and abroad. This is a lesson that union leaders and pay negotiators simply must learn in their own interests and in the interests of their members.
Much else needs to be done. We must reduce our costs, including costs imposed on industry by Government. We must continue to improve productivity by better working methods, by the elimination of restrictive practices and by the application of new technology. We must improve the quality and the design of our goods. We must take full advantage of the great extension in training facilities we are now providing. The new youth training scheme for which we have provided £950 million this year is based on the provision of 460,000 places, and we are on course to attain that figure.
We must encourage innovation and ensure that we are in the forefront of the new technology-based industries. Provision for "Support for Innovation" through the Department of Trade and Industry has risen from less than £60 million in 1978–79 to £230 million in the current year, an increase of 135 per cent. in real terms. In addition to this, £185 million was set aside in the Budget for a special innovation package, including a successor to the highly successful small engineering firms investment scheme and a scheme to encourage and speed the commercial exploitation of innovative products and processes.
We are now beginning to see the benefit of the measures we have taken in a steady if modest growth in output. Total output has recovered by some 2½ to 3 per cent. since the spring of 1981. This is not, I may say, confined to oil or even to special sectors such as housing. Consumer spending is up by 3 per cent. on last year. The CBI's industrial trends inquiry shows, for the fifth month in succession, increasing output and improving order books both for home and export. There are clear signs of a general recovery in world output particularly in the United States where expectations of growth have been revised sharply upwards, and also in Canada and Germany.
The prospects for world trade have improved. Although the international debt situation still causes anxiety, many of the largest debtors have now undertaken adjustment programmes, often with IMF assistance and under IMF surveillance. The Williamsburg summit sounded a note of optimism

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reflecting confidence in prospects for recovery. If I may read from the Williamsburg declaration, it said:
"The recession has put our societies through a severe test, but they have proved resilient. Significant success has been achieved in reducing inflation and interest rates: there have been improvements in productivity: and we now clearly see signs of recovery."
The success of a country; of its culture, its political institutions, its economy, does not depend entirely on material factors. It reflects also the outlook of the country, the spirit of its people. The difficulties which overtook us in the 1970s were not entirely material difficulties. Those difficulties were important. But we faced also the corrupting influence of the great growth in trade union power, the destruction of incentives through massive increases in taxation, the demoralising effect of great extensions of state power and expenditure. All this sapped our will to fight, to make our way in an increasingly difficult, dangerous and fiercely competitive world.
Perhaps the most important thing we have done since 1979 is to change this outlook completely, and I hope permanently. We all of us need to recognise that the prime responsibility rests upon ourselves, as individuals, and that success, whether individually or for the country as a whole, depends on a determination to seize the opportunities which are now available to us. It is in that spirit that I commend the gracious Speech to your Lordships.
3.38 p.m.
Lord Bruce of Donington Lord Bruce of Donington rose to move at the end of the Address to insert:
"but deplore that the gracious Speech contains no relevant proposals to assist manufacturing industry or to reduce unemployment".
The noble Lord said: My Lords, the moving of this amendment becomes necessary because we on this side of the House, when we were able to read the gracious Speech, detected within it no constructive proposals for the advancement of the country's welfare in terms of the wealth that it produces and, indeed, of the individual welfare of its citizens.
The amendment is not moved because we expected the Government to list within the gracious Speech a whole series of specific measures calculated to aid manufacturing industry. It is not moved for that reason at all. It is moved to enable us to ascertain from the Government how they propose to deal with the appalling situation within the country after four years of their rule.
I must say that I was struck by the almost incredible complacency with which the noble Lord, Lord Cockfield, approached the situation as it now exists. If I may say so without any offence whatever, he made the same speech as he has made on numerous occasions before. The style has become more elegant with practice but the content remains precisely the same. Indeed, we on this side of the House have answered it so many times that I personally do not intend to respond on this occasion. He has already, in fact, been answered.
The whole spirit of the gracious Speech was encapsulated by the noble and learned Lord who sits on the Woolsack. He said yesterday:
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"In one sense I fully accept the appraisal of it by the noble Lord, Lord Cledwyn, as the mixture very much as before, but perhaps with a second dose of the same medicine.".
He continued:
"we believe, and believe quite simply, that the correct strategy is to make Britain one of the most efficient—I should prefer to say the most efficient—industrial countries in the Western world."—[Official Report, 28/6/83; cols. 129–130.]
That is why this amendment deals with the question of the Government's policy towards manufacturing industry. And of course closely linked with the whole future of manufacturing industry is the future of the unemployed themselves. They are both inseparably linked.
Nobody would have thought, listening to the sonorous optimism of the noble Lord opposite, that over the last four years British industry has taken a most devastating hammering under their rule and that there now exist, officially, 3.2 million unemployed after the suitable adjustments that have been made to the method of collecting the statistics. Indeed, there are probably nearer 4 million actually out of work at this time. I should have thought that that would have made the noble Lord a little anxious about the future.
Moreover, the noble Lord's anxiety could perhaps have extended even further than that, because he knows just as well as I do, and just as well as anybody in the banking community in the United Kingdom knows, that we are far from out of the international banking crisis which the noble Lord referred to on a previous occasion and tried to ride down. Already, as he knows if he reads the press, many of the loans that have been rescheduled are once again in default and the banking system is at present under very severe stress indeed. In fact in some parts of the Western world it exists only by the adaptability of the accounting profession in those countries taking a rather more sophisticated view as to what in fact comprises a loss that ought to be written off now or a loss that can be more conveniently written off over a period of time.
On listening to the noble Lord, one would not think that he had apprised himself of the trade figures for last month, which show that, for the first time since the Industrial Revolution, this country has become a net importer of manufactured goods. Of course the immediate point that occurs—and I must put it to the noble Lord and I trust that the noble Earl, Lord Gowrie, will reply to it in due course—is whether it really matters that there should be a deficit in manufactured goods. I observe that, in The Times of a day or so ago, a leader came out with the surprising observation that:
"Net imports of manufactures should be regarded as the logical, and indeed necessary, counterpart to net exports of oil and services".
I do not know whether that is the view of the Government. The old "Thunderer" has been known in the past, under somewhat less propitious circumstances, to be the voice of the Government. It goes on to say:
"Britain's deficit on manufactured trade is an acceptable feature of the economy. It reflects our natural endowment and improves industrial efficiency".
Therefore, the first question I ask the noble Lord is whether that does, in fact, reflect the Government's policy. I am bound to say that it certainly does not reflect the considered view of your Lordships' Select Committee on Science and Technology, whose report

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we shall be debating next week and on which I will not, of course, enlarge in any detail today.
But, pursuing the matter in completely non-partisan terms, let me read to your Lordships the important and considered observation that they make on this aspect of the matter. They talk of Britain's industrial decline and they say:
"This decline threatens serious consequences. The United Kingdom cannot do without a vigorous and successful manufacturing sector. Our future standard of living and ability to pay for public services depend on it. Britain's natural resources have, for a long time, been insufficient for our prosperity, although they are now temporarily boosted"—
and I would venture to emphasise the word "temporarily"—
"by oil and gas from the North Sea".
Your Lordships' Select Committee continued as follows:
"Our service industries are strong and valuable, but they cannot create enough wealth on their own. As the Minister for Information Technology said, 'Manufacturing industry provides about 25 per cent. of our GDP and 25 per cent. of jobs but it provides 75 per cent. of our visible trade exports. If we were to replace the contribution made by manufacturing industries to the balance of payments, we would need to increase our exports of services by £60 to £70 billion a year. To do that we would have to increase our share of world exports of services quite dramatically from under 10 per cent. to over 50 per cent. and that is really a wholly impossible task at the moment. So without manufacturing industry Britain could not survive'."
That is the view of your Lordships' Select Committee.
We on this side of the House do not pretend, and never have pretended, that manufacturing industry in the United Kingdom is wholly, or should be wholly or even substantially, dependent upon continued subsidy or propping up or protection by the state. We have never believed that. Quite clearly, the future of manufacturing industry in the United Kingdom lies in the hands of its management. Nor is it wholly a question of cost. It is a question of design; it is a question of research and development; it is a question of selling techniques and selling energy; it is a question of after-sales service and, above all, it is a question of managerial organising ability, managerial energy and managerial qualities of leadership. For once I shall be constrained to agree with the noble Lord opposite; these cannot be and should not be the responsibilities of Government.
All other things being equal, if one were to say that the whole scale of British industry and its fortunes was dependent upon the abilities of its managements alone, I am afraid that the last few years present a very sorry picture in that field—in the field of management, not within the operation of the ordinary working operative in the factory. A fish rots from the head, not from the tail. It is noteworthy that those very so-called captains of industry who, with the active support of the Government, are now calling for wage rises limited to 2 per cent. or something of that kind, should over the last year or so have been busily awarding themselves in their boardrooms rises of between 13 per cent. and 25 per cent. This is not always an example of good leadership.
Therefore, the task of the Government is a limited one. It is to take such action in a variety of fields, in so far as they are able, to arrest the present decline—the
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situation which we have reached—and to reverse the trend. I shall give examples to the noble Lord in case he finds himself carried away on an automaton of his own making. It is a question of interest rates and, closely associated with interest rates, the exchange rates. It is a question of the adequacy or otherwise of research and development support. In some cases, it is a question of direct financial assistance, where this can be fully or adequately justified on national and even on social grounds. Where it is possible, it is a question of initiating policies calculated to stimulate demand. It is also a question of purposeful planning—not haphazard determination—of the nature and extent of public expenditure.
It is not sufficient for Governments to talk merely in global terms. There is always bound to be a very significant amount of public expenditure. It is important that it is planned; that it is not determined as a battle merely between departments, but that a thorough review is made as to where it should take place and also as to how industry will be affected by it. It is also important that Governments can help in promoting better industrial relations. Industry is also entitled to expect from Government protection against dumping. I hesitate to mention the term "protection" too much, because I know that under all circumstances there is a large number of ideological free traders present in your Lordships' House. It is also their business to act, in so far as they can, to reduce the rate of inflation.
But before the present Government start their new term, surely they have to do one thing—they have to try to learn from their own past mistakes. This is important when starting out in any sphere. None of us is perfect; all of us make mistakes. All parties make mistakes; all Governments make mistakes. One of the characteristics of the noble Lord, Lord Cockfield, is that, to the best of my knowledge, on any of the occasions on which he has addressed your Lordships' House he has not so far admitted to the Government ever having made one mistake. I think that this is a weakness, and therefore I must ask the Government whether, in the interests of manufacturing industry, they intend to rectify mistake number one that they made. It was the biggest howler committed by any Government, and it is now widely acknowledged as such. It was the raising of the minimum lending rate to the height of 17 per cent. on 15th November 1979. This is now acknowledged in practically every circle of economic thought—yea, even unto the City—as being one of the most idiotic steps ever taken, because of course it had most disastrous consequences.
One of the consequences was the rapid and progressive rise in the rate of exchange that inevitably followed the flow of funds into this country. We also know what the consequence of that was. When money flowed into this country at that very high interest rate not only did it make nonsense of the noble Lord's money supply figures domestically—in fact, there has not been one year when the target of money supply has been kept to—but it imposed on the recipient banks the necessity of relending it at a profit, which they promptly and progressively did to various countries of the world, including South America, where, as we all know, they followed closely on the heels of the arms manufacturers and advanced them large sums of

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money. They are now in danger of going in default. But that is a separate subject.
Suffice it to say that the consequences on manufacturing industry were very considerable indeed. Members of the CBI know quite well, as do noble Lords opposite who are in industry, that there were difficulties. I do not speak of things that they do not know; I am not even speaking in party partisan terms. They all know what happened. It made it very difficult to finance the acquisition of new assets. Investment in new assets was very difficult indeed to embark upon because of the very high interest rates. Also, there were troubles in financing stocks.
Any business man knows that the larger the batches of commodities or goods that are made for production, the lower the unit costs. This is always the case. The fixed overheads are normally within certain tolerances—and I shall refer to them—and are known. If one is forced to produce in smaller batches then inevitably the unit costs go up. If the unit costs go up—and to that there has to be added the extra interest charges that are incurred in respect of such borrowing that is necessary, aside from that, to stock finance—it is quite easy to see that the burden and the pressure on profit margins are very great indeed. This, of course, is what happened to industry. Any industrialist in the country can confirm it. Indeed, it lies behind the representations that the CBI was making only last week to the Prime Minister, and which it has been making for some time, including the interventions which have been made in this House over many years.
Then there are the other difficulties that have arisen precisely because of the very high exchange rate. This, first, acted as a subsidy to imports into this country and has exerted a further competitive pressure by subsidised imports on the products of our home industry. I am talking in quite non-controversial terms. We all know that this is exactly what has happened. We all know, too, that it has acted as a considerable hindrance to exports.
When one comes to consider the position in terms of the dollar against the pound—it was about 1.56 to the pound in mid-1979 and it was up to 2.40 in 1980–81—one can understand the extent to which this was a hindrance to exports. Although the figures were not of the same dimensions in Europe, it is beyond argument that there was this subsidy to our imports. In the event the result was quite devastating. In the result, manufacturing in this country dropped by nearly 20 per cent., investment dropped by some 40 per cent. and unemployment rose from 1·2 million to the figure at which it is now, at any rate officially after adjustment, of 3·1 million.
These are results of a simple mistake. It was very silly to raise the interest rates, which, according to the noble Lord, are part of the normal supply and demand. They go up at will. They did not in this case. The Government put them up quite deliberately. There was no response to market forces. They did it deliberately, and they made a mistake. If there is any doubt about that one need look only at the most recent report of the House of Commons committee dealing with Treasury and Civil Service matters. What it said was this, if your Lordships will bear with me:
"The United Kingdom is still the most open of the five large non-communist economies. This makes us particularly vulnerable
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to variations in external demand, whether caused by fluctuations in the exchange rate or by the world business cycle. The importance of both factors is illustrated by recent experience. Before the appreciation of sterling and the world recession, in the first quarter of 1979, unemployment in the United Kingdom was 5.9 per cent. By the third quarter of 1982, it had risen to 12.9 per cent. Over the same period, unemployment in the 15 major OECD countries rose from 5.1 per cent. to 8.3 per cent. Thus something under half the rise in British unemployment may plausibly be ascribed to the world recession. But why should the rise in unemployment in Britain have been so much greater than in any other comparable economy? Dr. Emminger. the former President of the Deutsche Bundesbank, referring to the level of the real effective exchange rate of sterling in 1980–81, stated:
'This is by far the most excessive overvaluation which any major currency has experienced in recent monetary history … The large real appreciation of sterling from 1979 to 1981 was probably the most important single element in that period's British economic policy, as concerns its effects both on domestic inflation as well as on British trade, production and unemployment'."
What we should like to know now is whether this policy is to be continued; whether they are going to do the same thing again.
The other complaint that British industry has is the rates burden. This comes to the Government's determination of their own financial policies. Precisely because of the unemployment and the recession, for which they are very largely responsible by their own mistakes, the strain on the services provided by local authorities has been very much greater. At the same time the Government have reduced the amount of central aid to local authorities, thus in part helping to raise rates, which are indeed another of the burdens of which British industry complains. Therefore, we want to know whether these policies are going to be continued.
There are many other factors, and there have been many other mistakes that have been made. There has been failure to protect legitimate business trading interests. That has been so in particular, as your Lordships remember, where we have had competition with the newly-industrialised countries, particularly South Korea, where we deliberately sacrificed a British order on the basis of grossly unfair quotations submitted to the Central Electricity Board. Other countries protect their industries to some degree. Take, for example, the United States, which has recently imposed a new duty on steel coming from the United Kingdom. A 19.3 per cent. tax has now been put by the United States on certain items of British steel. As we all know, even within the European Community protection does not necessarily take a formal tariff form; it often takes other physical forms on one pretext or another. British industry feels entitled to some protection.
It is quite clear from what the Prime Minister has said that some of the more optimistic statements which have been made by the noble Lord this afternoon are not believed in by her. She does not believe that there is going to be any substantial improvement in manufacturing industry. Otherwise, she would not have said a short while back that she would be surprised—only surprised—if unemployment reached 4 million. About 18 months ago the former Chancellor of the Exchequer was expressing surprise if the figure ever got to 3 million.
The Government have no real plan to deal with the current situation at all. They hope that as and when

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the time comes for them to be called to account they will once again be entitled to receive all the benefits that they enjoyed in the recent election of what amounted to a Conservative Party censored press, as well as the efforts of Saatchi and Saatchi. Unless they avoid these mistakes, unless they speedily redress them by taking steps to reduce the rate of interest and to reduce also the overvaluation of the pound sterling, they will not succeed. They will find themselves caught in a trap.
I have not this afternoon been talking about the programmes of my own party or of the Social Democrats, or of the Liberals. I have tried not to treat this as a partisan occasion. I have really been trying to help the noble Lord. I hope the noble Lord will be able to help himself, and I hope that the Government may be able to take heed, because, otherwise, before we are all very much older they are going to reap the whirlwind. I beg to move.
Moved, as an amendment to the Motion; at the end of the Address to insert:
"but deplore that the gracious Speech contains no relevant proposals to assist manufacturing industry or to reduce unemployment".—(Lord Bruce of Donington.)
4.10 p.m.
Baroness Seear: My Lords, as you will know, I also propose to move an amendment at the end of this debate. I do not intend to read the amendment as time is already passing very swiftly. I will speak to it now and it will be taken at the end of the debate.
I should like to say what a pleasure it is to see the noble Earl, Lord Gowrie, in his former position as the spokesman for the Government on economic matters. We very much welcome the opportunities that we shall have for debate and discussion with him.
In speaking to the gracious Speech this afternoon, I hope we shall remember that the general election is behind us, that the Government are elected, presumably with at least four years ahead, and the problems facing not only the Government but the country are still of a very serious nature indeed. Exaggeration, omission and references to unfavourable conditions are the natural order of the day during election campaigns, but the campaign is over. We from these Benches, while disagreeing with many of the points which appear in the gracious Speech—and perhaps still more with many of the points which do not appear—wish to be as constructive as we can in putting forward proposals to deal with what we all know, if we are honest, is still a pretty black picture.
There are certain points of considerable importance which concern us on these Benches. I think I speak for our allies on what the noble and learned Lord the Lord Chancellor referred to as the mountain in his speech yesterday. when I say that we recognise the importance of reducing inflation still further and, what is even more important, the importance of keeping it down once it has been reduced, Stability, and stability in expectations—and I will refer to that again—is certainly one of the most important achievements if there is to be recovery in this country.
We welcome the fact that at no point have the Government weakened on their opposition to protec-
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tionist measures. I accept that some of us have an ideological commitment, as the noble Lord, Lord Bruce of Donington, said, to the principle of free trade so far as it can be operated in the world today. The retreat into protectionism and economic nationalism going on all round the globe is one of the most serious threats to recovery and any continuing recovery that we may have. We applaud the fact that the Government resist the temptation to resort to the easy policy of a protectionist way out.
Having said that, when one reads the gracious Speech it can only strike all but the most optimistic monetarist as astonishing that, in the face of what must be approximately 4 million unemployed, the only reference to unemployment in the gracious Speech is in the optimistic expectation that improvement in the efficiency of industry will lead to an increase in employment. One can ony say two things. In the very long run, other things being equal—which they are not—this might well be true. I shall refrain from the more than threadbare quotation from Lord Keynes which most people usually make at this stage in a comment about "the long run". However, can anybody seriously believe that the human, social and, indeed, economic problems caused by unemployment can be left without positive constructive action by interventionist measures from Government to cure them as long as it will take for market forces to bring about a recovery in employment?
In the not so long run, improvement in the efficiency of industry, so far from leading to an increase in employment, will lead in some areas to still further reduction in employment. We recognise that this has to be so. But the fact that this has to be so is an argument for interventionist methods to try to do something to ease the present unemployment position.
In response to a question in your Lordships' House last week, the noble Viscount the Leader of the House said in relation to the Government's determination to stay inside the European Community that the Government had a mandate from the country to do this. Of course in relation to the Economic Community he was right to say that the Government have a mandate from the country to continue British membership. But the Government have no such mandate for their monetarist policies. The reason the Government have a mandate from the country to stay inside the European Community is that to the less than 43 per cent. vote that the Government received from the electorate—I am not referring to all those entitled to vote but to those who actually did so—was added the 25 per cent. who voted for the far more long-term committed Alliance members who have supported the European Community from its very initiation; a vote which gave the Government nearly 70 per cent. of the electorate behind them for continuing inside the European Community. That is indeed a mandate; but there is no such mandate for the Government's monetarist policies because the 25 per cent. who voted for the Alliance policies voted for a degree of cautious intervention because they give such high priority to the problems of unemployment.
One of the many differences between the Government on the one hand, the Labour Party on the other—I shall not have three hands—the Conservative

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Party, the Labour Party and the Alliance, is that the Tory Party believes that if it attends to inflation employment will look after itself. The Labour Party believes that if it attends to unemployment then it need not worry about inflation. How that is done I have never quite understood. The policy of the Alliance all along has been to say that unemployment and inflation are two facets of one problem and that every policy and every Government action taken to deal with one facet of the problem must also take into account the consequences of the other. Every step taken to reduce inflation must be seen also in terms of what that step does to improve or diminish employment. Similarly, every step taken to improve employment must take into account the effect it has on inflation. It is this holding together of these two vital aspects of the problem which is characteristic of the policies of the Alliance.
How are we going to do this at one and the same time? This is the challenge. At one and the same time we must control inflation and get unemployment down within a time-scale that is acceptable and reasonable. The noble Lord, Lord Bruce of Donington, was talking about the problem of unreliable exchange rates and the interest problems associated with unreliable exchange rates. Nowhere in the Queen's Speech nor in the speech of the noble Lord, Lord Cockfield, has any mention been made of Britain's relationship to the EMS. Surely the time has come when we should take full membership of the EMS because of the advantages of stability to currency that that will give. We do not have the degree of control—
Lord Vaizey: My Lords, I wonder whether the noble Baroness would accept for a moment that the volatility of the exchange rates of some of the countries who are full members of the EMS has been considerably greater than the volatility of sterling. How would she reconcile those two facts?
Baroness Seear: My Lords, temporarily this may be so, but the best hope for getting any kind of stability in exchanges rates is for countries to work together on it. Of course, we should like them to work on a wider scale even than the EMS, but that is not open to us to do at the present time. We have the option here and now to go into the EMS, and that at least is a step in the right direction and a step which, in our view, should now be taken.
Having gone into the EMS and established, at last, in the eyes of our European partners that we are in fact genuine members of the Community and intend to stay there and play our part to the full—and that, in itself, I suggest, might have a stabilising effect on some currency rates; for people would then know where we stood, which is something that they have not known for so long—could we not proceed with more constructive economic policies at the European level? We know the Government believe that there should be a switch from the payments made to agriculture and that that switch should be made to industrial policies inside Europe. If we were members of the EMS, if we were showing that we were, at last, good Europeans—something which we have not shown—we could be taking the lead in the development of industrial policies on a Community
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scale to deal with many of the issues which, on a national scale, we are otherwise unable to cope with.
Research and development in many of the new industries is far too expensive, as, as long as two years ago, great experts made absolutely plain in debates in your Lordships' House. We are in a position now to give a much greater lead in this kind of development inside Europe for developments which cannot be made at a purely national level.
Then, surely the Government must see that an increase in public expenditure of a moderate and carefully calculated kind, particularly in the construction industries, to deal with improvements in the infrastructure—the railways, the sewers, the roads—which are long overdue, can begin to have a real impact on the level of unemployment. We know that the Prime Minister is a great believer in Victorian virtues. I understood that one of the characteristic Victorian virtues was a belief in the policy that a stitch in time saves nine. The failure to deal with public investment which is long overdue means that it will cost a great deal more when we do have to do it. We cannot indefinitely delay this kind of investment. To start now in the construction industry to increase the amount of money that was put into it just before the election, and to have a really sustained effort in the industry (which has a big knock-on effect on other industries in job-creation terms) would do a very considerable amount to begin to pull down the level of unemployment, which, unless such action is taken, will not come down by itself.
Of the money that we are already spending, to which the Government are already committed, are we really spending it in the wisest possible way? We have the special regional expenditure running to over £800 million a year—a considerable sum of money. Is this really the way in which that money can best be used? Modern studies of unemployment suggest that the identification of unemployment problems by regions is, today, out of date; that there are black spots of unemployment in regions which rank as being relatively economically strong and that there are areas in the had regions in which unemployment is, in fact, relatively not serious.
Is it not time that we reviewed the whole issue as to whether regional policy of the kind that we have had is really what we want today and whether the money spent in this direction—and I am not here necessarily asking for more money; I am asking for investigation as to whether this is the best way to use the existing money—could not be used to reduce unemployment by putting it in other directions? I would suggest one or two such directions. There are a number which will occur to your Lordships. For example, there is the development of job sharing, to which the Government gave a partial nod of approval when it was suggested in the report of your Lordships' Select Committee. More money put into making it easier for people, particularly those in the older age groups, to share jobs would be a way in which the problems of unemployment could be modified for a considerable number of people. It might be much better to do this in black spot areas than to spread this money more widely throughout the regions.
Again—and this is an issue to which I hope we shall return perhaps later in today's debate—there can be

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little doubt that there is a great deal of economic activity going on in what its critics call the black economy but I prefer to call the hidden economy. Certainly, I am rather in favour of the hidden economy. There is only one thing wrong with it so far as I know. The people who take part in it do not pay their taxes and the rest of us have to pay the taxes instead. That is unfortunate, but the work they do is genuine wealth creation, the services they render are genuine services, the money they earn adds to income. We simply do not know how big an increase in the GNP there is because of what goes on in the hidden economy.
I would suggest that it is a serious job to be tackled and that we should try to find ways to bring the hidden economy into the open. If we had set about trying to create a black economy, we really could not have done it better. What have we got? We have got a marginal rate of tax of very nearly 40 per cent. when a man gives up a job in the hidden economy and comes into open employment. On top of that, we have got a VAT of 15 per cent. If one adds those two together. the incentive to continue to work in the hidden economy and not to take a regular job and to start paying taxes is very high indeed. We do not know the measure of this problem. I suggest that one reason why the Labour Government failed to make the problem of unemployment take off in the election is that there is a great deal more work going on in the hidden economy than anybody has been prepared to admit.
Let us recognise that this is something which is going on, that it is not really a very had thing but that there are better ways of getting this work done than by allowing it to continue in the form in which it is at the present time. One suggestion that I should like to float—it may not be acceptable, and I dare say it will not be acceptable: but it is just one way of seeing how we might get over this problem of so much work going on on which taxes are not paid and from which we cannot extract people—is that for the people who leave unemployment and go into paid employment (and. after all, it is not difficult to identify them) there should be a tax and national insurance holiday for a period of time so that it really is worth their while to leave the hidden economy and come into paid employment. This is, I think, a new suggestion. It may strike the Government as a peculiar one; but somehow or other we have got to tackle this issue, and we should then have a much better idea of what the unemployment position really was.
Finally, the noble Lord, Lord Cockfield, made a great point of the fact that inflation had to be controlled and would not rise only if there was control over pay settlements. The Government have done nothing, and there is nothing in the gracious Speech to suggest that the Government have any plan about what they propose to do when recovery does begin and when jobs begin to become pentiful—and that time will come, I believe, at any rate in some sectors and in some areas—to see that wages do not rise again. Wages have been held down because of the fear of unemployment. It is not Government policy. It is, in effect, the market forces to which the noble Lord pays such tribute. What is he going to do and what are his Government going to do when they succeed in getting people hack into employment? Does he believe —
Lord Vaizey: My Lords, the noble Baroness made great play at the beginning of her speech with the fact that the minority of the population voted for the Conservative Party. Will she not agree that the Labour Party was bitterly opposed to an incomes policy, as was the Conservative Party also, and that, by her own parity of reasoning, only 25 per cent. of the population voted for an incomes policy?
Baroness Seear: My Lords, that is perfectly true but that does not mean it might not be right. The Government were claiming it was on the basis of their mandate. I would say to the noble Lord, Lord Vaizey, that he anticipates me. I have not yet mentioned an incomes policy and I was about to say something which he might not expect from me in respect of incomes policies. The Alliance believe, and I believe, that some form of incomes policy in the future will be necessary, but let me say immediately that I think it will have to be a great deal more flexible than the incomes policies that we have known in the past. The aspect I wish to stress—because I know perfectly well that the Government will not take the slightest notice of what anybody says about an incomes policy—is that the best way to control increases in wages is to see that the highest number of people possible have a real stake in the undertakings in which they work, because they then do begin to realise that putting wages up does not give them any benefit in the long run.
There is nothing in the gracious Speech about any aspects of what we have come to call, rightly or wrongly, industrial democracy. The Government have a wonderful opportunity now; and. after all, they say that they believe in a property-owning democracy, which not only includes letting people buy their own houses but also allowing them to have a real stake in the organisations in which they work. In anticipation of the fact that wages are going to be the problem in the control of inflation, when the time comes that they have got employment going again and still have the problem of inflation to deal with, can the Government now work out a really substantial plan to increase the stake of employees in their undertaking either through wider share-ownership or through more profit-sharing, so that the advantages are there and people are really convinced in terms of their own interest? That is why I said a moment ago to the noble Lord. Lord Vaizey. that I did not intend to put the accent on incomes policies but on something which really must appeal to this Government, Who believe in incentives and in people's ownership and who I believe have proved that they did very well out of encouraging home ownership. If they have done so well out of the encouragement of home ownership cannot the Government proceed to do equally well out of the encouragement of industrial ownership?
4.33 p.m.
Lord Ingrow: My Lords, on Thursday in the debate on the humble Address we discussed, in a simplified phrase, the security of the nation. Yesterday we discussed the kind of society we wanted, and today we are talking about how to achieve those objects and aspirations, for it is industry and business in the widest terms which have to create the necessary wealth. I should like, if I may, to comment on smaller

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businesses. I believe they should be mentioned and that they have a very important part to play in achieving the objects of the gracious Speech. I have spent all my working life in smaller businesses in the splendid county of Yorkshire.
It is a great honour to be a Member of your Lordships' House and I would wish in every way to uphold its high traditions, and in particular today, by being completely non-controversial, despite the hazard posed by the amendments; any contravention would be entirely, and I hope forgivably, accidental. Certainly, though, I warmly endorse a desire to see unemployment reduced, not merely on social and humanitarian grounds—I hope that may be conceded to me—but also surely on commercial grounds, because my trade is such that it prospers when my customers are earning. Nevertheless, if I could see stable costs ahead, stable raw materials, stable services and stable rates—it seems a far cry today from my time as a local authority finance chairman when one could recommend a rate scarcely increasing from year to year:—and stable beer duty (what an opportunity for a new Chancellor of the Exchequer to be the first since the late Lord Amory to reduce it)—if I could see those or other stable costs ahead, my own industry and others would certainly look forward to progress and development and to the benefits which would flow in employment and other fields. Stable costs are the precondition for success.
Governments can help smaller businesses directly and indirectly: indirectly by encouraging good young people to enter industry, by making it a respectable priority for careers masters to recommend—not to become good minute writers incapable of taking decisions, but able and practical people who can mix with and have respect from all those in the business concerned and who can adapt to a very different life from that in a government or professional office. We need them.
Directly, Governments have begun to recognise the merits of small businesses. There is still perhaps too great a tendency to listen to the pleas of the large concerns, with large staffs to lobby for them. These latter seem, with great respect, rather like Oliver Twist—always asking for more—and they still are. Perhaps in the light of what has already been said earlier, instead of worrying too much about competition provided by imports, they should be more concerned to ask themselves why so many customers who are free to choose prefer other products to their own.
Still, Governments do now help, and seek to help, smaller businesses, and we are all grateful for this. I would, however, ask them to think a little about the balance of taxation. As a generalisation in industry, a smaller proportion of profits is paid in corporation tax as a company gets larger. This may not be entirely for the benefit of the Exchequer and it does not in fact seem quite as fair as it might be. The more labour-intensive merits of smaller companies should not be ignored—indeed, rather perhaps encouraged—especially at times like this.
This Government have proposals for a reduction in the amount of corporation tax paid by companies making less than half a million pounds annual profit.
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These proposals are, happily, being reintroduced in another place and in the circumstances we may expect them to be enacted. The business expansion scheme, which my noble friend Lord Cockfield referred to, also has much to commend it. When these ideas, which may command general support, leave the politicians they are really quite simple. By the time they emerge after the Inland Revenue have had their hands on them, they are unnecessarily complicated; and this applies in other fields of taxation too.
It seems very important in our interests that if Government proposals are to be effective, Governments should watch closely to see that they are not destroyed in transition from idea to parliamentary Bill—if necessary taking advice from accountants and others at the sharp end—and that the resultant taxes management Acts are as simple as possible and correctly interpret the Government wishes.
Further down the scale, many one-man businesses are today started by people whose skills are practical and useful rather than academic or balance-sheet orientated. Although they must pay their due taxes, it must be realised that paperwork may not be their strongest point and that without their success there would be no jobs for administrators and tax collectors, who might even have difficulties themselves when confronted, for example, with plumbing repairs, such as many one-man businesses do.
One of the advantages of being in a small business is that one sees for oneself the extraordinary proliferation of rules, regulations, consents, inquiries, inspectors and whatever which have developed down the years. One wonders how we survived in the past. All these burdens bear heavily on small businesses, which cannot afford to carry the specialist staff to deal with them. Relief would be helpful indeed.
What I say now—there is no collusion with my noble friend Lord Cockfield—is that our aim in small businesses is to provide what our customers want, when they want it, at a price and quality of which they approve. Anything a Government can do, if not always to help and encourage at least not to allow any department actually to hinder, will be more than welcome. It will enable us to play our part in economic recovery and in developing our society as we would wish. We seek this understanding and appreciation, and we will do our share.
4.41 p.m.
Baroness Lockwood: My Lords, it is perhaps appropriate that I should have the privilege of following the noble Lord, Lord Ingrow, and of congratulating him on his maiden speech. I do so as one Yorkshire person to another. Indeed, were we Lords Spiritual we might even have been tempted to cancel out each other's vote at the last general election, because we both happen to come from the same parliamentary constituency. It is always surprising and rewarding to hear maiden speeches and to see the way in which Members of this House bring their own individuality to their maiden speech, despite the inhibitions of the occasion. I am sure that the speech of the noble Lord, Lord Ingrow, was no exception. We shall all look forward to hearing him speak again on many occasions, bringing the benefit of his experience in industry and in local government and, of course, his

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plain Yorkshire common sense to bear on our discussions.
In this debate on the gracious Speech I want to concentrate not on the broad economic front which has been sketched out by the three Front Bench spokesmen but on the interaction between education and industry. In his introduction the noble Lord, Lord Cockfield, spoke of the need for us to improve the quality and design of our goods, to take advantage of new technology and to be innovative. These factors rely essentially upon our education and training system and upon the interaction between that system and industry.
There are three ingredients to competitiveness. Many noble Lords are concerned about the competitiveness of British industry. One area in which it is absolutely vital that we do not trail behind others is in the provision of education and training. There are three factors of which we need to take account in this area.
First—I know this will not be popular with the Front Bench opposite—it is absolutely essential that we should devote more of our resources to education and training instead of, as in the past few years, eroding the education service. Not only must we make good the damage of recent years; we must also be prepared to make further investment in educating and training young people—and people generally through the process of continuing education.
Secondly, there must be a greater partnership between industry and education, particularly at the higher levels of education. I was very interested to see in today's newspapers a reference to a report by ACARD which suggests that between £15 million and £30 million a year more must be spent if we are to destroy the traditional British barriers between universities and industry.
Thirdly, there must be greater understanding within the education system of what industry. particularly manufacturing industry, is all about, and what it requires of young people in terms of the demands it will make upon them: the skills, the talents and the quality which the education system needs to develop.
If we look at these three areas, without denigrating in any way what is being done, much of it excellent, we cannot fail to see that great gaps exist. On resources, at both school and higher education level, we have seen economies imposed which do not make sense when, time and time again, we are telling one another that the opportunities of tomorrow will be in areas where education and training are at a premium. Yet two years ago we witnessed an almost suicidal cut-back in higher education. It was purported to be aimed primarily at the arts and the humanities—areas which it was thought were not so closely related to economic and technological development. But in effect those cuts damaged some of our most progressive and technologically orientated universities. Even the objective of the cuts appears not to have been achieved.
Bradford University, with which I have a personal as well as a geographic connection, is a case in point. This is an excellent, innovative university with a bias towards engineering and technology and with very
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strong links with local industry. Yet Bradford was among the worst sufferers. In order to cope, over the three-year period, with the imposed cut of 25 per cent. in recurrent funding and the 20 per cent. cut in student numbers, the university had to phase out some 12 courses, 11 of which were sandwich courses involving at least 12 months' experience in industry for the students concerned. Furthermore, it has had to abandon the sandwich element in eight other courses.
This brings me to my second point. Here the impact of the cuts has been not just to reduce the number of courses and the number of places but to weaken the interchange between university and industry. The close and continuous co-operation with industry that sandwich courses stimulate has reinforced the work of the technological universities at all levels in both teaching and research. It is no wonder, therefore, that Bradford University is concerned that a valuable link with industry is being impaired. It is just this kind of interchange between experience and learning, practical application and research. that we cannot afford to curtail—which, indeed, we must extend.
Not only the universities but the polytechnics, too, have been considerably squeezed. Ironically, their raison d'ere was the provision of more technologically and scientifically based education, both at degree and sub-degree level, with roots in local and regional industry. In view of the already apparent shortage of skills in certain areas and in certain industries, despite the high level of unemployment, the technician level of education and training is equally as essential as the higher levels. Here, the polytechics have a very important role to play.
Recently I visited Huddersfield Polytechnic—one of the "good" polytechnics in the Yorkshire region—whose links with industry are excellent. This was apparent in the development of the new CADCAM centre for computer-aided design and computer-aided manufacturing, where a number of small firms not able to afford their own expensive equipment, or not certain whether or not it was appropriate for them to have such equipment, were learning together with the polytechnic staff the techniques of computer-aided design and manufacture. Simultaneously, they were also involved in their own problem-solving.
Again, I would say that this is the kind of co-operation that we need to develop and extend. Yet again we ask the question: what is happening to the polytechnics? Whereas the universities found their numbers actually controlled and reduced, the polytechnics found that their finances were being curtailed, yet they were being told to increase their student numbers. The number of students in polytechnics has increased very considerably over the past few years.
One of the ironies of the present employment situation for young people—and it is only a small consolation—is the increase in number of those who are seeking post-school qualifications, including degree level qualifications. As I have said, they are being squeezed into the polytechnics but without compensating funding being made available to the polytechnics. The whole question of funding of higher education needs to be looked at very carefully.

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My third point concerns the need for the schools really to understand what industry is all about. In this context I am referring to the schools system, because it seems to me that our careers education in schools is sadly lacking. One can be critical of it in all sorts of ways. For example, there is its failure to take on board the changing work pattern of women and the need to broaden the career horizons of girls in order to fit that pattern. But the real and fundamental criticism must be directed at the inadequacy and under-resourcing of the careers service in schools. There appear to be no coherent or adequate training provisions for careers teachers: no priority or prestige attached to the posts; and no overall concept of what can be included in this part of the school curriculum. As with all services, the provision is patchy. Despite inadequate resources, some schools do a good job, but generally it is the Cinderella of the education service.
We now have a new initiative in the form of the Manpower Services Commission's technical and vocational educational initiative. We are told that this is to be experimental and that it is hoped that the initiative will provide pointers to that which might be developed on a broader scale in other areas. I am not convinced that this new scheme is the best use of available resources; and I am in sympathy with the evidence given by several educational bodies to the House of Commons Select Committee on Education, Science and the Arts. They appeared to be almost at one in their views on this new experiment, particularly in their fears that the new scheme could be a divisive element in the schools involved, and that all pupils—and not just a minority—should benefit from more education about industry.
The noble Lord, Lord Cockfield, mentioned the youth training scheme, and I would be the very last person to deny young people—girls as well as boys—the opportunity for training, particularly as an alternative to a move straight from school into unemployment. I therefore support the scheme, with all its faults. But, once again, it seems to me that, just as in the higher sector, with the pressure of qualified young people wanting to move into universities and polytechnics so, too, here at this level, the Government are more concerned with mopping up the unemployment figures than with establishing a training system that meets the needs of industry and of young people. The scheme originally envisaged by the Manpower Services Commission under the New Training Initiative was far more relevant to those two needs than is the current scheme, which, tragically, has been emasculated in order to meet the overriding needs of youth unemployment.
I return to my three points—the essential ingredients to a sound basis for a competitive economy. These are, first, a greater understanding of industry within the education system; secondly, a greater partnership between higher education and industry: and, thirdly (a factor on which the first two have a crucial dependence), a greater share of resources devoted to education and training. At some stage the Government have to raise their sights beyond the short-term expedient of mopping-up unemployment and to the task of creating real opportunities for employment and of providing a coherent strategy for investment in education and training. That investment must be
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comparable with the investment of competitor countries, and it has to be geared to the long-term industrial and economic needs of this country.
4.59 p.m.
Lord Bauer: My Lords, my request for indulgence is more than a customary formality. The main reason for it is all too audible, despite all my efforts to master the language. Addressing such a distinguished Chamber, hallowed by great tradition, I also stand in awe.
The occasion recalls an episode in the 1680s. By then, the Republic of Venice was small fry in power politics. However, Louis XIV wished to involve her in one of his schemes and invited a special envoy to impress him with the novel splendours of Versailles—a building which today would no doubt be called an architectural breakthrough. After showing him around, the King asked the envoy what had amazed him most. "That I should be here", the man replied. But perhaps it is, after all, less surprising that I should be here. There are many others here, some even from my native Hungary, to confirm that Britain is an open society, as it has been for centuries.
The Queen's Speech and Monday's debate in the other place make clear the Government's commitment to the welfare state. "The Conservatives have won re-election on a wet programme in the hands of a dry Prime Minister", said an article in The Times of 11th June. It then recalled Disraeli's familiar remark about "Tory men and Whig measures". Thus, it seems that spending on welfare services, especially on the NHS, is to be maintained or increased. Yet in 1982/83 public spending on all social services was already over 50 per cent. of total Government spending, and not far short of 30 per cent. of the national income. And, unlike spending on defence or law and order, the larger part of this expenditure is not on purposes which have to be undertaken by the state rather than by private citizens for themselves.
This brings me to my main theme about the welfare state. The fundamental issue is not economic. It is moral. I say this although I am an economist. The issue is the responsibility of people to manage their own affairs. This was clearly recognised in a thoughtful leader in The Times on 5th October 1982 on the eve of the Conservative conference, with a message addressed to all parties. and which was reiterated in another leader on 27th June.
Old age, ill health, the raising of children, interruption of earnings, housing for the family—are these not all contingencies of life to be paid for out of income whenever possible? When prices are reasonably steady, responsible people should normally be able to provide for these contingencies themselves. Except perhaps for a small and dwindling minority of the poor, they do so, notably by saving, as they do for holidays, or by insurance, as they prudently do for the potentially crippling losses of fire or burglary. The welfare state redistributes responsibility between the agents of the state and private persons. State financed old-age pensions, health care, education, housing, welfare, unemployment pay and other social services are not chiefly transfers from rich to poor. In Britain as elsewhere in Western Europe the poor and the ordinary wage earners are very heavily taxed. For

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instance, taxes on the poorest fifth of the population represent about one-fifth of their incomes.
Is it not the case that while adults manage incomes, children receive pocket money? The operation of the welfare state tends to reduce the status of adults to that of children. Does it not also undermine the cohesion of the family which this Government are supposed to strengthen? There will always be people with misfortunes for which they cannot provide. They and their families must be helped by relatives, friends, voluntary societies and, acting as a safety net of last resort, by the state. But all this is very different from universal, unconditional, comprehensive health care and other components of the welfare state. The debate ought to be about the individual's and family's responsibility for their own affairs. Consideration of the economic effects of the welfare state is secondary, though it would reinforce my general argument. Advocates of income support for the very poor should give priority to reducing taxes on them, which incidentally would also increase the incentive to work.
Are we really to believe that many people are in penury? In spite of the heavy taxation of both rich and poor, 98 per cent. of all households have television, over two-thirds in colour; over 90 per cent. have refrigerators; three-quarters are on the telephone; most have some form of central heating. and also holidays of a kind undreamt of by their parents. One half of wage earning families have motor cars. Do not these figures imply that the statistics about large-scale child poverty are either misleading or else suggest failure of the central responsibility of parents for their families' condition, perhaps encouraged by welfare spending?
Heavy state spending on welfare in various ways contributes to the erosion of the value of money, a risk against which many people cannot protect themselves. They therefore support state provision for the contingencies of life even though they recognise it as unsatisfactory and would prefer personal provision. The welfare state increases the dependence on the state. By politicising life it creates friction, encourages conflict and undermines democratic cohesion.
The Government plan to maintain and even expand the welfare state, especially the NHS. If the Conservative Party is indeed wedded to this policy, it could be said of it what Livy said of Hannibal when Rome was for the taking: "You know how to gain victories but not how to use them".
To be a Member of your Lordships' House is a rare privilege. I believe that the independence it confers imposes an obligation, perhaps even in a maiden speech, to question consensus views which have not always served us well. This belief has informed my speech, which may have been a little controversial, but I hope was not provocative.
5.8 p.m.
The Lord Bishop of Lincoln: My Lords, it was only as I arrived at the House today that I discovered that I was to have the honour of speaking directly after the noble Lord's maiden speech, but I was handed a copy of his entry in Who's Who to help me and I discovered that his name stands between that of two Bishops; so
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he may not, as he keeps this company, find it surprising that a Prelate in your Lordships' House should rise and congratulate him on his speech. The noble Lord referred charmingly to his mastery of the language and also to his distinguished origins, but I feel he has given us the best of both worlds, because while we are able to welcome him here as a British citizen he has also been able to give us a Hungarian rhapsody on the subject of the welfare state. I remember a few months ago reading an article that he and a colleague wrote in The Times about Government aid which I found very interesting. I am sure there were as many different responses to the article that he wrote as there are Members of your Lordships' House. He has said that he has tried not to be provocative, as is our custom. I think we can all look forward very much to the contribution that he will make to the liveliness of your Lordships' House.
I can understand that when a Government come to power in a very serious economic crisis and when that Government have a clearly articulated theory to apply to that crisis, and when on top of that not only their opponents but members of their own party and, indeed. some in their own ranks oppose that theory, then that Government so placed have to put all their intellectual and emotional energy into seeing their policies through because they believe there is no alternative. It appears to me that over the past four years the Government have done that. We have to recognise and salute some of the results of what they have done.
However, I believe that that very concentrated expenditure of intellectual and emotional energy leaves very little energy over for engaging with the costs of that programme and their implications. Those costs, as has already been said, are very serious, very wasteful and of major human, social and political importance. I feel, therefore, on being given a renewed mandate—albeit with about 40 per cent. of the votes cast in the election—I pray that the new Government might bring their energies into a wider balance and make the greater alleviation of the costs of their policies a serious part of their programme.
If the results of the policies of the past four years could be seen to be really and convincingly effective that might put the cost of the policies in a more acceptable light. For instance, the problem of very high unemployment can only be solved by renewed competitiveness in the economy leading to real growth. So if the policies of the past four years could be unequivocally shown to be making the economy more efficient and more productive that would be seen as directly ministering to the problem of unemployment. But in spite of the rays of hope that we have been given in the past few days—though I fancy on a rather narrow and shaky basis—it appears that there are serious questions to be asked about the effectiveness of these costly policies.
Much blame for unemployment is naturally put on the world recession and we are told we are not alone in this crisis. But I think it is true that unemployment has risen in the United Kingdom twice as fast as among our main competitors. That means that half the damage cannot be blamed on the world recession. It is sometimes claimed that. while unemployment is an unquestionable tragedy and an unquestionable waste,

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it does have the effect of bringing down the level of wage settlements. That is true, but the current pay round of 7 per cent. on earnings is 2 per cent. higher than the 4½ to 5 per cent. in the United States, West Germany and Japan; which still leaves us uncompetitive. But the costs are not only in human terms of unemployment. As we know, they are in terms of manufacturing output and in investment in plant and machinery. I think the 1983 Budget Report said that, outside manufacturing industry, there has been no.
"marked improvement in productivity growth since 1979".
I do not say these things on party political grounds. That is not my business. However, I do say them on grounds of what I call social morality because these actualities of the economic and political scene are what make or mar the common good; that is to say, the reasonable, decent human life of our people. Concern about that is a moral concern which is shared by all feeling people, and not by any means just by those who stand in the Christian tradition. Every Government always in this sense have moral responsibilities embedded in their responsibilities of office. The management of human affairs is always a balancing act between what is efficient, on the one hand, and what is humane, on the other, and since both minister to the common good and both—not just what is humane but what is efficient—are moral categories the two things have to be kept in balance. If one is just efficient at the expense of being humane one has a strike, while if one is humane at the expense of efficiency one goes bust. Neither contributes to the common good.
It is my belief that in their urgent and very proper efforts to remedy our crisis by means of their own very clearly held theories the Government have over balanced in the direction of hoped for efficiency at serious cost. I feel there are serious questions to be asked on whether that efficiency has really been efficient.
In conclusion, I turn to two particular issues which relate to this. The first is unemployment and the second is industrial relations. I hope that the new Government—and I echo what the noble Baroness. Lady Seear, has already said—will come more readily to see that grievously high unemployment cannot just wait for market forces to put it right. I recognise and applaud some of the things that the Government are trying to do. For instance, I refer to the very large sums of money they are putting into the community programme, the youth training programme, and to the encouragement they are giving to such things as job splitting. But I hope that the Government will more readily listen to those responsible and very authoritative voices raised in favour of a planned expansion in certain areas of potential wealth. I have in mind the CBI's document on unemployment and the document on unemployment produced by Members of all parties in your Lordships' House which point to areas where expansion could take place without inflation in labour-intensive industries such as construction, as suggested by the noble Baroness, Lady Seear, and, by the CBI, in tourism.
I hope that the Government will give continuing urgent attention to the whole new area of information services allied to electronics where imagination and
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flexibility will be vital ingredients in the development of what could be one of the main areas for job creation. I hope that that imagination will include the development of flexible measures to facilitate investment in support of enterprise and risk in those areas.
As regards industrial relations, I can understand that when the Government came to power they believed there were many things among the attitudes, policies and practices in our national life which needed confronting. They have been confronted by the conviction that the cleansing winds of economic forces should be enabled to flow unimpeded through the market place. But confrontation is a very blunt instrument unless it is allied to real political sensitivity; by which I mean that the market place is not just a place of abstract economic mechanism which if left alone will set things right. True political sensitivity recognises that the market place is full of people—the millions of men and women in our industry, commerce and services—the reality of whose working lives is lived out within comparatively small working groups; where things are not at all abstract but are very concrete and where not least among those realities are their own attitudes, their own feelings and their human and social potentialities, however laced with the ordinary human frailties. This potentiality of human beings is the greatest resource in the market place. To confront it rather than seek its co-operation is, in the long term, practically foolish and morally wrong. since it is to go in the face of humanity and what it can do and be for the general human good.
There is a politics of recovery as well as an economics of recovery. There will be no recovery so long as the two are not kept in balance. I believe that the apparently intended legislation on trade union reform is a huge irrelevance to what really needs working on in this area, and that is, as has already been said, greater participation on the shop floor, on the office floor and in the places where managements and trade union officials have to negotiate and consult. That is essentially a matter for industry itself and I think not for legislation, but it is surely something that could be importantly encouraged and supported by Government creating a context of concern and urgency about those things and by giving effective recognition and support to those managements and trade unions which are bending their energies urgently in those directions; and there are many.
I fancy that the Government have thought that consensus is wet, and it sometimes is; but I also feel that now. on this side of the last four years and the things that have happened, there is the possibility of a new context in which new sorts of consensus could be explored and discovered to the great benefit of our industry, commerce and national life, and I pray that the Government may give their mind to that and act upon it.
5.21 p.m.
Lord Hatch of Lusby: My Lords, it is pleasantly my opportunity to congratulate both maiden speakers this afternoon: the first, Lord Ingrow (by a coincidence I am another Member of your Lordships' House who was brought up in his area of Yorkshire), and the second, Lord Bauer. whose uncontroversial—perhaps in inverted commas—speech I warmly welcome, but I

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am glad that he has got it over. I greatly anticipate the controversial speeches that he will make. To judge from his writings, they will certainly associate him with those of us who believe that this should be a House in which politics is discussed.
I am not, for the same reason as my noble friend Lord Bruce of Donington gave, going to deal with the opening speech from the Government by the noble Lord, Lord Cockfield, except to make two short comments on it, the first at the beginning and the second later in my speech. It would appear that the noble Lord has lost his speech writer for the past four years, and he has been making the same speech ever since. The noble Lord made one reference which struck me as somewhat puzzling. He said that the Government's policies had produced pain. To whom: to the noble Lord, to us or to those who suffer the pain associated with the problems about which the noble Prelate so movingly spoke and who many of us have encountered during our tours around the country during the course of the general election? I am reminded of the quotation from the elegy of Thomas Gray:
"To each his suff rings: all are men.
Condemn'd alike to groan:
The tender for another's pain.
The unfeeling for his own".
I wonder to whose pain the noble Lord was referring.
Neither do I intend to make much reference to the gracious Speech, which seems somewhat to resemble the thinness of a Dickensian gruel. This is no reflection upon Her Majesty but on her speechmaker, who. I believe, resides at No. 10 Downing Street. On reading the gracious Speech, there seemed to me a callousness, a complacency, almost a contempt for the sufferings which I believe most of us in this House have witnessed during the last few weeks and which are being experienced by a large percentage of the people of this country—not just the unemployed but the 6 million in the poverty trap. one-parent families and those who are on waiting lists for hospitals, clinics and houses. One does not find any reflection of that in the gracious Speech. I notice that the gracious Speech costs 75p. Rarely can so much have had to be paid for so little.
I should like to address myself directly, through the House of course, to the noble Earl who is to wind up. I do so with a great deal of pleasure and anticipation. I begin by asking him to accept my congratulations on the post to which he has been appointed. It would appear that La Belle Dame sans Merci has at least relented sufficiently to give him a department in which. I have no doubt, not only will he be happy but he will have a very constructive career. He has chosen, or been chosen, to come down from the realms of the arts into the hurly burly which he left a year or two ago, of economic policy.
I ask the noble Earl to recall the debate which we had in this House, shortly after the last general election in 1979. on 19th June. It was not on the gracious Speech of that time but on a Motion which the Government bravely brought forward dealing with the Budget. I quote to him the single point to which I should like him to address himself. My question was:
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"The whole thrust of what I was saying was that 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? And if they have the same consequences. What is his policy then?"
The direct and relevant part of the answer I received from the noble Earl was:
"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".—[Official Report, 19/6/79: col. 954–5.)
I should be very interested to hear in the noble Earl's winding-up speech whether he considers that the analysis that I gave in that debate has proved to be more or less valid than the answer that he gave.
I refer the noble Earl to one or two facts: first, money abroad. Has money gone abroad since the removal of exchange control? What has happened? I quote to him the figures from his own department. Unfortunately they are not up to date. but that is the responsibility of the Central Statistical Office. The comparison between 1979 and 1981 reads as follows. During those two years total United Kingdom gross domestic fixed capital formation at current prices rose by under 15 per cent. The net outward direct investment overseas by United Kingdom companies, other than oil companies, rose, first in Western Europe, by 700 per cent. and in North America by about 40 per cent. That happened between 1970 and 1972. In 1979 I suggested that it would happen again: it has done, and I would ask the noble Earl to address himself to that fact.
The money released, the money which, according to Conservative philosophy as the noble Earl agreed I had correctly described it in 1979, is freed by the reduction in the top level of taxation and by the removal of exchange controls, instead of going into investment in British industry, has gone into investment abroad. But it has gone abroad to the developed countries in Western Europe and in North America. Very little of it has gone to where our potential customers remain, unable to buy our goods, in the third world.
Secondly, what has happened to manufacturing trade? My noble friend Lord Bruce pointed out that this year, for the first time since the beginning of the industrial revolution, we have a deficit in our balance of manufacturing trade. This brings me to the second reference that I would make to the speech of the noble Lord, Lord Cockfield. When the noble Lord, Lord Cockfield, talks about the increase in retail purchases this year, I should like to remind him that, although during the past year retail purchases in Britain have risen by 6 per cent., they have very largely gone on imported manufactures because manufacturing in this country during the same period has actually fallen. One can add to that the facts that over the four-year period from 1979 to 1983—the period of the previous Government—GDP in this country fell by 3 per cent., manufacturing output fell by 20 per cent., and manufacturing investment fell by 36 per cent., These are the facts to which I feel the noble Earl will wish to address himself in the light of our previous exchanges four years ago.
I should like to refer again to the Government's pleasure, which has been expressed this afternoon, over the analysis of the British economy which the CBI

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has recently issued. I believe that it is false, and that it has been shown to be false. Noble Lords who have read the financial pages of the Guardian today will have seen a reference to the specific example that the CBI has seen fit to give of the prosperity of British industry—the chemical industry. While the CBI talks about this being a strong industry because it has had an increase of 3 per cent. in its exports during the past year, it does not mention—or perhaps it does not know—that there has been an increase of 10 per cent. in the import of chemical products into this country during the same period, and that during the past two years investment in the British chemical industry has fallen by over 30 per cent.
What then is the record of the policy which the noble Earl and I debated four years ago? What has happened? There have been 34,000 bankruptcies. I would say to the noble Lord to whom I previously referred—the noble Lord, Lord Ingrow—that if he is concerned with small businesses, he should look at the record of the Government whom presumably he supports. Being a fellow Yorkshireman, I would hope that he has wandered on to the wrong side of the House. He should look at the record of the Government in regard to bankruptcies in small companies over the past four years. He will find that every single month there has been a record number of bankruptcies.
My noble friend Lord Bruce has already mentioned—and no doubt other noble Lords will mention—the fact that this policy has led to unprecedented unemployment, with the tremendous suffering that that has caused. There are also the social consequences of that policy. There have been savage cuts in housing, and the undermining of the health and educational structures. Most amazingly of all, whereas one of the main election platforms of the Government was the restoration of law and order, and they made a great claim of knowing how to organise the police force and deal with crime, during the past four years crime in this country has increased by 25 per cent.—
Lord Molloy: Market forces.
Lord Hatch of Lusby: As my noble friend says, my Lords, this is the consequence of market forces.
In addition to the social consequences, which again I thought the right reverend Prelate dealt with so movingly, there have been individual meannesses. There has been the deduction of 5 per cent. from unemployment benefit. There has been the decision to increase pensions by only 3.7 per cent., when the Government themselves say that by the time of the increase there is likely to be an inflation rate of 6 per cent. Surely it is not enough for the Government to say that that will be restored the following year. How many old-age pensioners will have died during that year?
There is also the breaking of the promise made by the Prime Minister in the election period of 1979 that prescription charges would not be raised. Prescription charges have been raised. They have been raised by 600 per cent.: and that is another of the small meannesses which has added to the social cost of the economic policy which has been followed over the past four years.
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The noble Earl will recall that in the debate following the previous election I said quite clearly that I considered that the Government had a mandate to put their policies into practice. I believe that they have had that mandate renewed in the election earlier this month, despite the fact that their proportional vote was less than it was in 1979 and that more than half the electorate have declared against their policies. Nevertheless, by our system the Government have a mandate to continue—they never really said anything other than that they would continue them—the policies which they have followed over the past four years.
I should like to ask the noble Earl to address himself to the question: what are the Government going to do about the consequences of the policies of the past four years? When are the Government going to say at what stage their policies will result in reduced unemployment? When are the Government going to say that their policies will result in a restoration of health to the manufacturing industry of this country? We have no reason to suppose that the consequences of the continuation of these policies will be any less tragic than over the last four years. Nevertheless, I should like to hear the noble Earl say how and when these policies will result in the consequences that the Government have claimed will result from what the noble Lord, Lord Cockfield, calls this period of pain.
We are conscious of the fact that more than half the electorate voted against the Government's policy. I admit fully that we did not succeed in persuading the electorate to adopt an alternative policy. Nevertheless, it is our constitutional duty and our political duty to be vigilant over the interests of that half of the electorate that voted against the Government. I can promise the noble Earl that we shall be vigilant. We shall ask these awkward questions. I hope that we shall get some answers this evening.
5.41 p.m.
Lord Boyd-Carpenter: My Lords, it was refreshing to hear the last few words in particular of the noble Lord, Lord Hatch of Lusby, when he indicated his determination to carry out his constitutional duties as a Member of this House. It is perhaps fortunate for him, from that point of view, that the party to which he adheres was so unsuccessful at the late election that it has proved impossible for it to relieve him and the rest of us of those constitutional duties. I can only congratulate the noble Lord, Lord Hatch, on the flexibility of his mind which can switch at one moment from supporting the abolition of this House to as admirable an exposition of the duties of a Peer as any of us could have wanted to hear.
The noble Lord, Lord Bruce of Donington—I speak as a connoisseur of his speeches, to which I have listened with increasing pleasure for almost 40 years—seemed rather out of form today. He was really extraordinarily kind to the Government. Indeed, he went out of his way in terms to say that the speech of my noble friend Lord Cockfield was unanswerable. At least, he could not answer it. He was not going to try. That is really a remarkable performance for someone who speaks from the Opposition Dispatch Box.

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As the noble Lord will recall, he spent most of his speech, not criticising the policy that we are debating on the Queen's Speech and on the amendment that he himself is putting forward about what is to be done in the coming year or years, but on a quite interesting analysis of the monetary policy of nearly four years ago in the autumn of 1979—I shall, of course, give way to the noble Lord, but it may help him if I pose the point first. I am sure that he will agree. His was a most interesting commentary on the economic policy of four years ago. It is rather surprising that it should form the main weight of his argument in relation to the policy of the coming year.
Lord Bruce of Donington: My Lords, I am grateful to the noble Lord for giving way. I am sure that he would not wish to mislead the House. The reason that I did not reply on this occasion to the speech delivered with such eloquence by the noble Lord, Lord Cockfield, was, as I explained, that I had already replied to it many times and I did not propose to reply to it again. There was no question of my being incapable of answering it. Indeed. I have repeated the answer ad nauseam, and so far I am bound to say I have not received satisfactory replies from the noble Lord.
Lord Boyd-Carpenter: My Lords, I am surprised that the noble Lord should base his failure to criticise my noble friend's speech and argument on the grounds that he has not so far received an answer to his criticisms. If this House was to conduct itself generally on that basis our debates would be a great deal shorter but they might he somewhat less informative.
Any doubts among those who sit on this side of the House as to whether this debate is sufficiently controversial have been quickly removed by the speech of the right reverend Prelate the Bishop of Lincoln. The right reverend Prelate made a most interesting speech. He will not, I am sure dispute that it was highly controversial. I make no complaint about that. Indeed, I certainly could not, since my episcopal grandfather in this place, the then Bishop of Ripon, made an extremely strong speech the best part of 100 years ago in this House against Mr. Gladstone's last home rule Bill. I am glad to say that such was his eloquence and that of his colleagues that the Bill was thrown out.
I have no quarrel with the right reverend Prelate that he should have exercised his rights as a Member of this House controversially to criticise the Government. I am sure, however, that he accepts that this exposes him to the possibility that those of us who take another view may seek, however courteously, to controvert his argument.
In the first place, the right reverend Prelate had a rather curious argument about the level of employment in this country. He accepted that there is a world recession that has created a great deal of unemployment in the world. He said, perfectly truthfully, as regards the last year or two, that our rate of unemployment had risen faster than that of most other countries. Therefore, he said, you can only use half the argument of the world recession. The explanation for the other half must be that it is your fault. With great respect, that argument contains a fallacy.
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The world recession does not hit every industrial country in exactly the same way. If it happens, as with this country, that we are more dependent upon our export trade as a proportion of our total economic activity than any other major industrial country in the world, we are, of course, hit harder by a world recession than are countries that are more dependent on their domestic market. With great respect, that was therefore an extremely facile argument—one that your Lordships. I think, should hesitate to accept.
A world recession does not bite evenly and proportionately at the same time on every country. Its impact varies in accordance with the way in which that country's economy is organised. I hope that on reflection the right reverend Prelate will feel that that criticism was unfair.
The right reverend Prelate went on to say that he would have been better disposed towards the policies of this Government in the coming year if, in his view, they had been more successful in the last four years. The right reverend Prelate forgets two things. He forgets that, right from 1979, my right honourable friend the Prime Minister has made clear that her policies for restoring the economy of this country, after many years of error and misgovernment, would take two Parliaments. She has made that abundantly clear. To insist, therefore, on judging these policies by the results of one Parliament is surely, as a matter of definition, quite unfair.
Secondly, the right reverend Prelate did not even refer to what has been the great achievement of the Government: that is, their very successful efforts to contain and reduce inflation. Inflation is now at its lowest point for some 15 years. It is fortunate that it is not a little longer than that, or I would have to say that it is at its lowest point since I left the Treasury, and that might seem a little conceited. But the effort to reduce inflation has been remarkable successful—I shall give way to the right reverend Prelate, but I can perhaps put the point to him first.
It has removed a factor that erodes a society. Inflation of the level it was a few years ago is utterly damaging to individuals and to the standards. including the moral standards, of a people. The fact that the Government's policies have so far reduced our inflation level—not as far as I should like to see it reduced and I hope that they will reduce it still further—to the lowest level for 15 years is surely an achievement to which, if one is fairly viewing the results of the last Parliament, one would wish to give weight. Does the right reverend Prelate wish to intervene?
The Lord Bishop of Lincoln: My Lords, I am grateful to the noble Lord for giving way. I just want to point out that at the beginning of my speech I did say that there were a number of Government achievements which I would very much want to salute and it was exactly that particular one which I had in mind, although I did not specify it: perhaps I should have done so.
Lord Boyd-Carpenter: My Lords, I am very obliged to the right reverend Prelate for making that comment which is a very fair answer. I hope, equally, he will

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reflect on it himself in order to see whether the experience of the last Parliament does not give greater grounds for confidence than he was, I think, prepared to admit as regards the continuation of these policies in the present Parliament.
There was one other matter that the right reverend Prelate raised to which I would like to refer. He mentioned the forthcoming trade union legislation. I think he would agree with me that he referred to that in very critical terms. He will correct me if I am wrong, but I think he used the word "confrontation" and he certainly indulged in a most elegant paragraph about the importance of human nature and human beings. But I wonder whether the right reverend Prelate has really studied this matter. If he looks at the gracious Speech he will see that the proposed legislation is foreshadowed as being such as to give members of trade unions more control over their unions. How does the right reverend Prelate construe that as being confrontation? How does he construe it as being any reflection on the rights of the individual? It is surely designed in order to increase the rights of the individual.
I know that the right reverend Prelate, as an industrial chaplain, has great experience of industry. I, too, have a certain amount of experience. But both of us must know that the unions' power over their individual members can in certain circumstances be very oppressive, and I am not thinking necessarily solely of the closed shop, although it can be in that context. Why the right reverend Prelate should take such exception to a proposal to give trade union members more control over their unions is something that I find a little difficult to understand, except on the inconceivable hypothesis that he has not really directed very much attention to the subject.
So we have a situation now in which the Government are continuing with a policy which they have been applying over the last year or two and which seems, judging by the results, judging by what has actually been achieved, and judging in particular by the successful battle against inflation, difficult to criticise and it therefore makes one sympathise with the care and caution of the noble Lord, Lord Bruce of Donington.
However, there is much more to be done, as I am sure my noble friend Lord Cockfield would agree, and it is to some of those matters that I should like to invite his attention. Before doing so, there is one reflection on the general election to which I would invite your Lordships' attention. It had one very interesting consequence which made me look up the last speech which was made by the late Mr. Aneurin Bevan in another place on 3rd November 1959. He said:
"I would describe the central problem falling upon representative government in the Western world as how to persuade the people to forgo immediate satisfactions in order to build up the economic resources of the country … How can we persuade the ordinary men and women that it is worthwhile making sacrifices in their immediate standards or forgoing substantial rising standards to extend fixed capital equipment throughout the country?"—[Official Report, Commons, 3/11/1959; col. 862.]
Whatever can be said of the decision of the electorate at the last election, they were offered by the colleagues of noble Lords opposite and by the colleagues of noble Lords on the mappen terraces and in the
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Liberal party all sorts of benefits including increased social security benefits and the reversal of various expenditure cuts. They were offered all those things, and yet the result was the return of the present Government by a substantially increased majority. Party considerations wholly apart, I find that a very reassuring reflection indicating the maturity and growing sophistication of the electorate. The electorate are not as easily taken in, cajoled or bribed as they were perhaps even a few years ago by offers of benefits, but can see clearly, increasingly clearly, where the policies of a Government are aimed and whether it is worth backing them even though it may involve temporary sacrifices.
I find that very reassuring for the whole future of this country and it goes in parallel, as your Lordships will be aware, with the increasing wisdom and good sense of the members of trade unions when they are invited to take industrial action. There have been several cases recently in which the leaders of the unions have sought to induce their members to take industrial action, but the members have had the good sense to refuse. These I think, are both aspects of the same thing: of the fact that the people of this country, perhaps to some extent as a result of the troubles we have been through together, are developing increasing powers of judgment and good sense in viewing either political parties or industrial leaders on either side from the speeches that they make. Anyway, that was a reflection that I wished your Lordships to consider before proceeding to the directions in which I hope my noble friend will be able to indicate the Government will be going further.
There is no doubt—and here perhaps I may be allowed to speak as an industrialist—that one of the burdens on the British economy today is some of the nationalised industries. I am referring to their high charges, their susceptibility to industrial disputes and their unreliability as regards deliveries. Those are handicaps to those of us in the rest of industry. Let us take as an example the coal industry. Not only does profitable private industry have to be taxed in order to subsidise the coal industry and keep unprofitable pits in production, but it also has to pay more for its electricity because the electricity boards are induced by the Government to take British coal rather than oil or other sources of energy and therefore produce electricity at a higher cost than that for most of our European neighbours.
If the Government, as I am sure they do, wish industry to become tougher, more competitive and more efficient, we need a certain amount of assistance in dealing with the damage inflicted on us by some parts of the nationalised industries. Your Lordships will have seen in the report of the Monopolies and Mergers Commission the extraordinary case of the South Wales colliery which was producing coal at a cost far in excess of the price at which it could be sold. The Treforgan colliery was producing coal which was sold for £48.20 a tonne and it cost £153 a tonne to produce, the balance of course being made up by the taxpayer. That cannot be allowed to continue.
I am sure that the Government will not allow themselves to be threatened by anybody in that industry into producing subsidies on the scale necessary to enable wholly uneconomic pits to

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continue in production. The colliery that I quoted was one specially mentioned by the Monopolies and Mergers Commission. The commission also mentioned that there were 31 other unprofitable collieries in South Wales. I hope the Government will think that the profitable side of industry, struggling with many problems, including energy costs and taxation, needs a little more help in relief from these burdens.
Lord Molloy: My Lords, if the noble Lord will give way, there is a great deal of truth in what the noble Lord is saying about the mining industry, but I am sure he would wish to acknowledge that, if there is one industry where the law of diminishing returns applies most savagely, it is coal mining. It is brought home when you are a coal miner. When you get out of the cage to work the second shift each day you have another 10 yards to walk, another 10 yards to crawl, to reach the surface where you start your work, and when you cut that first chunk of coal you are seeing something that no other human being has ever seen. You have to carry it much further back; new rail lines for drams have to be laid, new pit props installed. So every bit of coal must be dearer. I know that the noble Lord will appreciate that because he is a fair man.
Lord Boyd-Carpenter: My Lords, if the noble Lord will allow me to say so, that was a most eloquent intervention and deeply moving in its character, but of course completely irrelevant to the point which I was making. I have the greatest admiration for the miner. I have been down pits, as I am sure he has. Indeed, as a boy I was brought up in the knowledge that men risked their lives under unpleasant conditions in the pits in order to sustain the economy of this country by mining coal. I would not wish that to be misunderstood.
However, one returns to the point—which I shall repeat for the benefit of the noble Lord—that to produce coal at a cost about £100 a tonne more than it can be sold for is an economic nonsense and a burden on the generality of the British economy. I hope that the noble Lord is sufficiently sensible and experienced to appreciate that.
The other burden—and I must not detain your Lordships too long—that falls very heavily on industry is that of rates. I was delighted to see that the Government plan to introduce a Bill to restrain rate increases. I am only sorry that I read those words as not necessarily including taking power to compel rate decreases because there are certain local authorities in this country to which that process could very properly be applied.
I am equally delighted to see that preparations are going on for the abolition of the Greater London Council, which contributes so heavily to the rate burden on the citizens of London. It is a very serious matter. Major companies are moving their offices out of London because the rate charged on the office buildings is excessive. The Greater London Council has on its facade facing the river a great poster saying "London's Unemployed: 353,000". There is a certain sort of Freudian significance in the GLC erecting that poster perhaps indicative of the fact that in its
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conscience it knows that it, to a considerable degree, is responsible for that very unemployment in London. I am delighted to see that it is intended that the GLC shall be abolished.
The other day I was sent by my local council, Kensington and Chelsea, in which area I reside, a short note pointing out that although Kensington and Chelsea reduced their rates, the GLC was putting them up very substantially, and so was ILEA. I should like to put this point to my noble friend. The GLC is spending a great deal of money now. It will take some time for legislation to abolish it to be introduced and to go through. I would ask my noble friend to consider some restraint on its rate imposition powers—perhaps a separate Bill will do that—and also to exercise some restraint on the financial liabilities that it is likely to incur.
The GLC employs a very large number of people, many of them at very high salaries. If' more of these are to be engaged to fill vacancies during the interval between now and the dissolution of the GLC, very heavy burdens will fall on the ratepayers by way of payments of compensation. If we are to set some relief for ratepayers of London, then indeed we very much want some restriction placed upon the GLC.
The policy of the gracious Speech, the policy of going for an efficient, competitive industry, involves the only answer there is to the problem of unemployment. I would say to noble Lords opposite that it would be quite wrong to infer that those of us on this side of the House, or elsewhere, feel any less keenly about unemployment than they do, or are any less sensitive than they are to the humiliation, apart from the hardship involved in being unemployed. On the contrary, we wish to see the population of this country fully employed, but we believe it will only be effected if our industry is able to produce the right goods at the right price with the right delivery dates and able to sell them competitively in the markets of the world. It is no use moaning about imports if the foreigner can produce goods and send them here at a price lower than that of our home producers. The answer is to get our own prices down by our own efficiency, by our own high productivity and by the relief that the Government can give on the lines that I have indicated, and perhaps otherwise, to take the financial burdens off British industry.
But it seems to me that this Government are proceeding on the right lines, that the policies they are courageously following and followed in the previous Parliament are right, and that the ship of state will shortly be moving, in every sense of the term, into blue water.
6.8 p.m.
Viscount Hanworth: My Lords. I should like to speak today on union reform, and although I speak from these Benches my concern is not with any proposals that the SDP are formulating but with a personal attempt to analyse and define the difficult problems facing the unions and any Government. What distresses me is that the Labour Party and the unions as a whole should set their face against any reform, except perhaps those which increase their powers and immunities but not their essential role in

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our society. Responsible, efficient and, in the popular sense, democratic unions are a must for the recovery of industry and of much else in our national life. Is it too much to ask that we should move forward in this direction without the rancour of party politics and prepared positions before we decide what should be done? Alas! it almost seems so.
A few years ago it could rightly have been said that management was still living in the 19th century, and this was most certainly true of its labour relations. It has made efforts to correct this, and to a considerable extent it has succeeded; but the unions, in spite of encouragement, have largely failed to do so. For a long time their older generation have continued to think in terms of the battles they so bravely fought in their early days, and with the help of old-fashioned management the "them-and-us" syndrome has continued long after it should have been irrelevant. The sad thing is that the younger generation find it easier to adopt old-fashioned, entrenched attitudes than to move forward to positive, pragmatic, clear thinking.
Before discussing further where I believe unionism is breaking down let me unequivocally say that I believe that, with our free enterprise system, exploitation of members of a company will often occur unless there are the checks and balances which good unions can provide. Today we have the problem that extremists have managed to move into union positions at the shop floor level. Some such extremists wish to destroy our existing society as their first objective, and will create trouble as a route to this end. This problem really must not be dismissed any longer by the sick joke of "reds under the bed"; it is far too important.
It has led to a strange paradox where, on the one hand, more senior union representatives cannot control, let alone discipline, some of their extremist shop stewards: on the other hand, they have to agree to disciplinary action and fines against those of their members who step out of line with the actions of those uncontrolled extremists—all, of course, in the name of "solidarity". Even more deplorable are the bully-boy tactics of the extremists.
Turning to a higher level in the union hierarchy, it should be recognised that under the existing system the unions with industrial clout can dictate to the Government at the expense of all of us, including the less privileged unions. I would not wish to consider the merits or otherwise of Mr. Scargill's case, because I am simply arguing the need for reform. However, it does appear (as has been said by the last speaker) that he believes that there is a case for opposing closures regardless of the fact that we must all pay for grossly uneconomic coal production. Collective bargaining, which at one time seemed to be a war cry, is after all the law of the jungle. The weak, whether companies or workers, go to the wall. I ask: is this right? It most certainly is not the pure socialist ideal. It cannot, surely, in a civilised society, be where we want to go.
I am sure that we should take notice of what others think of our unions. The American newspaper, the Christian Science Monitor, says
"They are renowed worldwide for being tough, old-fashioned, keen on feather-bedding, for resisting technological progress, and for being prone to strikes and jurisdictional disputes".
Another unsatisfactory aspect of the present situation is, in my view, the over-dependence of the
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Labour Party on union funds. This is now particularly anomalous when in the last election it appears that more than half of the union membership did not vote for the Labour Party. I personally should like to see a much greater contribution by the Government to parties' funds. The over-dependence of the Conservatives on funds from the City is, I believe, also unhealthy. The noble Lord, Lord Houghton, made a most excellent speech about this subject yesterday, and I hope that all those who are interested will read it.
I suggest that in dealing with this difficult problem of union reform we would all do well to look at the union structure and functioning of West Germany. It is we who set it up after the last war. Two things immediately stand out: the relatively small number of unions, and the fact that agreements between parties are legally binding. As regards the latter point, I believe that we are nearly the only Western country where this is not the case. What one would have hoped for was reform from within the unions, without outside interference. Governments have tried this approach. Unfortunately, it seems to lead nowhere. The TUC, even if it had the wish to make reforms, has most certainly not the power to do so.
Finally, it is my hope that all concerned will put the national interest first and consider how reforms to our unions can best be brought about. I submit that reform should not be a matter for debate: the question is the best way of moving forward. There is no easy panacea. Unless we have on all sides men with breadth of view and a recognition that something needs to be done, I fear that this nation will continue on a downward course or we will relive the traumas of the strife at the end of the 1920s.
6.16 p.m.
Lord Marsh: My Lords, I regret that as a result of an absence of a few minutes I missed the speech of the right reverend Prelate, who I gather made references to the Government proposals in respect of trade union reform. I gather that he was less than enthusiastic about some aspects of that matter. However, I was cheered by the noble Viscount who has just sat down, because I find my own views very much in common with his. The present protected and uniquely privileged position of the trade unions today is completely outdated and is in many cases the basis both of a completely irresponsible misuse of a unique power and of privilege which is available to no one else.
I found the gracious Speech rather disturbing in that one respect. It would be absurd to suggest—and I think few people do—that all our industrial problems, or even most or many of them, stem from this outdated structure of the British trade union movement. One of the problems of this place is that those of us who have been in various parts of Parliament over many years know too much about each other's private views on political issues, and there are many noble Lords in this House. I know, not members of the governing party, who share the concern felt by many other people about the role of the trade unions in the present circumstances.
There is an urgent need—not just a need but an urgent need—to bring the trade union movement in

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this country into line with the modern world. It is not only absurd but is not surprising that the very things which form the basis of the complaints which many people make about the British trade union movement are themselves based on legislation enacted before any of us in this House were born: legislation in different circumstances, at different times, to achieve different purposes than are faced today.
The Government have already begun to tackle some of the problems. That is worth saying, because they have gone further than have any previous Government. Indeed, in the past I was a member of Governments which virtually offered the trade union movement almost anything it wanted for the basis of an agreement blessed by "Mr. Solomon Binding": and it did not work. People were concerned and worried that if they moved in this area, important though it was, it would cause great upheaval in the nation and there would be too much trouble.
That has not happened. In fact, the opposition to the Government's policies has been minimal. It has been minimal because there is a great groundswell of public feeling in all parts of the political spectrum behind the need, and the feeling that there is a need, for reform. To say that the opposition has been minimal is not to underestimate the progress which has been made. But having said that, there is still a very long way to go in the significant changes, the fundamental changes, which are required.
Over the last few weeks a number of trade union leaders have stated quite openly that they will seek to use their considerable industrial power to obstruct the policies of a Government returned with a massive majority only a matter of days ago. Had a Labour Government been returned and, in the days after its return, speeches been made urging that some other group in our society should go on strike—perhaps industry might use its position to seek to obstruct the Government's policies or the army might decide that it did not approve of the defence policies of the Government—that would be regarded as intolerable. It is an indication of the size of the problem that, when trade union leaders say something that would be totally unacceptable if it came from the lips of anybody else, it is regarded almost as the norm. That is the danger of it.
I well understand that many people were less than ecstatic about the Prime Minister's massive and increased majority. But disappointment with an election result does not give any group the right to take extra-parliamentary activity to frustrate the result of that election. Even having risen to the dizzy heights of general secretary of the National Union of Mineworkers does not allow anybody to make statements of that type in a democracy.
For some of the trade union leaders—not all of them—the explanation is that they are the prisoners of wondrously, magnificently inflated egos. They are tortured by delusions of adequacy. Others on the ultra-Left are motivated by the ideological commitment way to the Left of any Communist Party in Western Europe. It is absurd to say that the Labour Party has been infiltrated by Communists. That is not so at all. Most of the people who have quite openly infiltrated
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the Labour Party in recent years from the Socialist Workers' Party and Militant Tendency—and this is the reason that the Socialist Workers' Party did not run candidates for the last election—are way to the left of any European Communist Party. Indeed, if they tried to peddle the policies of the Socialist Workers' Party or Militant Tendency in the Soviet Union, they would rapidly find themselves languishing in a Siberian labour camp, which only goes to prove that there is some good in everyone.
The only reference to trade unions which I can find in the Gracious Speech is,
"A Bill will be introduced to give trade union members greater control user their unions".
That has been overtaken by events. All the candidates for the leadership of the Labour Party are in favour of greater control over the unions by their members. But I should like to go further than that. I think that because they are so important to our society it is high time that the rest of us had a hit more control over organisations as large and as powerful as these. Collectively, we expect to have some control over industry. Nobody objects to that. Why is it believed, and on what basis of argument, that in this one area of economic industrial activity alone it is almost indecent for anyone to suggest that the rest of society should have some say in how they conduct their affairs?
The noble Lord, Lord Cockfield, spoke of the corrupting influence of the massive increase in trade union power and the need to improve working practices. I think that most of us would be in total support of both those propositions. But the scale has been tipped, the balance of power has been shifted to such a point that industry cannot achieve that itself. It does not have the power to do so. In my view, we shall not make real progress until the unions are held financially responsible through their central funds for the damage they inflict upon others, where they brutally exercise power in breach of agreements that they have themselves signed. I think the only answer in the ultimate is that, just as anybody else must be held responsible for actions which damage others, so also should the unions. The need is for procedure agreements, such as there are in virtually all industries now, which are signed by both sides and where actions for damages can be attached to the unions' funds if they breach those agreements.
If any employer were stupid enough suddenly to cut the wages of his staff by some incredible amount in breach of an agreement, he would be sued. I know something about this, for I have a couple of writs around my ears at the present time in another capacity. That is quite right, but in the case of the trade union movement there is no recourse at all.
Many books have been written and many speeches have been made about this problem. There are people who specialise in the whole subject of British industrial relations. There are academics, lawyers, politicians and a whole host of people. I should like to take a few moments, if your Lordships will allow me, to cite the current specific example which highlights the problem and the difficulties with which we are faced. That is the current dispute in the Financial Times newspaper.
At this stage, I have to declare an interest as chairman of the National Newspaper Publishers'

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Association; though I am not speaking on its behalf, I hasten to add. There is insufficient time to go into the details of this dispute, as they are always fairly complex. Indeed. I am not really concerned with the details, but with the principles and problems which this particular dispute highlights.
This dispute concerns 24 men earning £305 a week. Sixteen of these men do not work full time with the newspaper and they can work for other newspapers where they can pick up £120 a week. Thus there is a situation where someone could earn £425 a week. Let us establish at the very beginning that we are talking about people who can hardly be described as oppressed, exploited or living at Dickensian living standards. Those rates were agreed in the belief that they would be paid for by increased productivity. There was no argument about that and that is how the increases were given.
The union has refused any productivity improvements and has demanded not the maintenance of jobs, but still more jobs. One can make many criticisms about the national newspaper industry in this country and, as chairman of the NPA, I am bound to say I can add to some of them. But the suggestion that the industry is under-manned is not the criticism which would come easiest to mind. The unions decided that they wanted more jobs and they wanted an increase of another £25 a week on top of that. If that had been agreed, they would, in four months—because, to set the picture of this, the last increase was in February—have had increases of over £70 a week: an increase of 27 per cent. in the earnings period and a complete refusal to consider increased productivity.
In case anyone doubts this, the general secretary of the National Graphical Association, who is a very nice and decent bloke, expressed his view. He was worried that people might not understand where the union stood on this issue, so he wrote to the Guardian newspaper. I quote:
"The NGA will not self-fund productivity deals by selling men, more particularly at a time of high unemployment. Our prime responsibility is to protect jobs, and this we have sought to do. The company would wish us to diminish our labour force."
Here is a situation where very highly paid men are flatly reneging on every procedure agreement they have signed. They are quite different from the noble Lord who opened the debate. They are not on the noble Lord's side. They do not believe in improved working practices. That is totally outside their view. They are quite prepared to take the money for the improvement, but they do not produce the improvement. So, for the employer faced with that situation, what happens? The men have withdrawn their labour in complete breach of the procedure agreements. They talk about the freedom of the press in this country, but during the general election they deprived a quarter of a million people of the opportunity to buy the newspaper of their choice—a highly specialised newspaper. They have so far cost that paper and that company over £4 million and they are threatening—not wicked capitalists nor Conservative Governments, but they—the jobs of 2,000 people there; because no company of that size can continue to lose £4 million and to make losses on that scale.
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Why do I raise this? I raise it because there is nothing the management can do about it, nothing at all. The management of the Financial Times have made approaches to all the party leaders—that is a bit optimistic, for a start—and they have made approaches to the TUC. They have made approaches to the officials of all the trades unions concerned; they have had a number of meetings at ACAS and are having another today. The fact of course, and the reason that I raise this, is that no one can do anything about it because any trade union can pursue that sort of policy regardless of the consequences and it is above the law, it is above any power of Parliament. That cannot be a sensible situation or a tolerable situation. And it is but one of many examples of the urgent need for legislation to redress the total imbalance. It is not a question of bashing trades unions or removing trades unions. It is a question of producing a balance between them where sensible agreements can be reached.
I think that on every test of public opinion, including the result of the last election, this Government have a clear mandate to change the state of affairs, to restore some balance in the situation. I would express the hope that the Minister when he winds up will be able to give us an unequivocal assurance that the Government will, in this Parliament, seek to change a situation which is manifestly unjust, on any sort of basis of morality, and is highly damaging to the management of British industry.
6.32 p.m.
Lord Kaldor: My Lords. I regret not being able to continue in this cosy vein of bashing the unions and talking about the awfulness of the British working man. I am not even going to say that I disagree with everything that has just been said. What amazes me is how it is that some people suddenly come to see the light. They were blind for most of their lives, they were blind when they were members of the Labour Party, blind when they were members of a Labour Cabinet, and then, suddenly, a revelation comes to them.
Lord Marsh: My Lords, if the noble Lord will allow me to intervene, this is called learning from experience.
Lord Kaldor: My Lords, learning from experience is essentially a method over time. It is not something that one can do overnight. If the noble Lord can produce some evidence of how he slowly and gradually came to his present views and how he expresses them, I think that we should all be interested. I wish temporarily to change things round so that, instead of criticising the British Labour Party or the unions, I will criticise Her Majesty's Government and Mrs. Thatcher's policies. However, before I do so I should like to say, just because my speech will be so critical of Mrs. Thatcher, that in one respect I consider that she had a happy thought in elevating one of my ex-countrymen, the noble Lord, Lord Bauer, to your Lordships' House, thereby laying once and for all the slur that all ex-Hungarians are Left-wing intellectuals; although she may not have succeeded quite in her parallel desire to show that not all Hungarians are controversial.
Following these remarks I should like to begin by taking my cue from the remarks of the noble Lord, Lord Boyd-Carpenter, concerning the general election.

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Different observers see the same events in different ways and I think that my observations will not be quite the same as those of the noble Lord. The general election was very remarkable. It showed a remarkable contrast to almost all earlier elections in this country. I say this for two reasons. It was the first election in which carefully planned publicity and advertising played a major role and was the cause of a marked inequality between the contending parties.
The Conservative Party's campaign was both lavish—lavish in the sense that it must have cost an enormous sum of money which under our present laws (in contrast to constituency elections) need not be disclosed—and professionally of a very high quality. It was triumph for Saatchi and Saatchi, who must have made millions on account of it. I do not mean that they were paid millions by the Conservative Party. I think that they must have earned millions on account of the advertising value of this election campaign which. I am sure, must have attracted to them very important new clients.
We learned from the BBC on "Panorama" the other day, of the careful and systematic organisation of the election at Conservative Party headquarters, an organisation led by experts in publicity who were specially brought over from America and who carefully monitored every thing that was happening in all the constituencies and who monitored all the speeches made at all the local meetings through large batteries of television sets. They had large bevies of girls taking down in shorthand everything that was being said at the little meetings at some of which half a dozen people were present—only to have splashed next morning in banner headlines across the press how one of the Labour leaders defaulted on the Labour manifesto because he had said at a meeting that it might be a good thing to offer the Polaris missile to the Russians in exchange for some concessions. I do not think that it was a very daring remark, but it was a wonderful occasion for showing that the Labour Party was terribly disunited. To me it was all George Orwell coming true—except that it happened one year earlier, not in 1984. And for "Big Brother" one must read "Big Sister".
The second and even more remarkable feature of this election was that, unlike earlier elections in this country, it was not fought on the Government's record, except insofar as Labour speakers kept on bringing up the 3½ million unemployed, which Tory speakers promptly attributed to unavoidable external causes—the world recession. It has often been said of British elections, particularly since the war, that people vote against the existing Government far more than in favour of the policies of the opponents. But this time, thanks to the carefully orchestrated publicity and the extreme partiality of the media, the election was fought on the Opposition's programme and not on the Government's record. of which almost nothing was said.
We had the unique spectacle of witnessing what I regard as the worst Government that we have had in this century—worst by all measurable tests except one, which is often mentioned but which I do not regard as terribly important—winning the largest parliamentary
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majority in this century except for the coupon election in 1918 or the National Government election in 1931. And if the opinion polls are to he believed—and on their recent record they must be believed—the popularity of Mrs. Thatcher had nothing to do with her home or foreign policies. It was the exclusive result of the romantic and patriotic appeal of the Falklands war. Up to that point, her popularity rating was the lowest of any Prime Minister since opinion polls began. Then it shot up in a matter of two weeks from 22 per cent. to over 60 per cent., and it has stayed there solidly ever since.
All this pushed into the background the incredible bungling and incompetence with which the economic affairs of the nation had been conducted since May 1979. This was most succinctly put in a leading article in the Guardian during election week. With your Lordships' permission. I should like to quote the critical passage:
"The charge against Mrs. Thatcher this week is not one of malevolence but of weakness and stupidity. Her failures—and the failures of the Government—are those of perception and intelligence, of intellect and human understanding. A government that sits on its hands and its economic primers whilst sterling touches 2.40 to the dollar and British industry dies on the bough in the face of such absurdity is a government of profound doctrinaire stupidity".
That was in a leading article on 6th June. No one could accuse the Guardian—not even Saatchi and Saatchi—of extremist Left-wing views.
I should like, if I may, to quote a more authoritative source—a recent publication of OECD. This stated:
"the near coincidental timing, in the United Kingdom, of North Sea oil development and severe disinflation was unfortunate."
That, of course, is diplomatic language. I will put it more directly. It was a national misfortune that Mrs. Thatcher and North Sea oil came on stream more or less at the same time. For North Sea oil meant a resource boom, involving a sudden fall in oil imports and a sudden increase in oil exports—a turn-round of 10 billion in three years—and unless this is accompanied by an expansion of domestic demand of the same order of magnitude. either by a large increase in public investment or a large remission of tax, or both, the gain from this valuable new source of wealth will be lost since it will lead to a corresponding diminution of existing sources of wealth, which give the same value-added but provide many times the number of jobs provided by the new source of wealth by which they are replaced. In other words, unless this is combined with an expansionary policy—if I may use the dreaded word, unless it is combined with reflation—the new wealth from oil does not enrich the nation because it destroys existing sources of wealth to the same extent. In Britain it meant a 15 to 20 per cent. fall in manufacturing output and a two million loss in civilian employment, three-quarters of which was in manufacturing.
Of course, we had to have the negative balance of manufactures with the rest of the Common Market. How else could they have paid for the five billion pounds worth of oil Which they are buying from us annually? But if there had been an expansion of total demand instead of a contraction, the policies of disinflation or deflation, this negative balance would not have been at the expense of domestic output and employment in manufacturing industry.

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Mrs. Thatcher, with her monetarist ideas and her natural predilection for the virtues of economy and parsimony which she inherited from childhood, could not have appeared at a worse moment on the stage of British history. It was just a coincidence, for she and her Chancellor introduced highly deflationary Budgets in succession. The OECD in Paris estimates them to be the equivalent of 6 per cent. of the gross domestic product and three times as large proportionately as has been incurred over the same period by any other member of OECD. And she did that at a time when the very opposite was required if Britain as a nation was to derive a net benefit from the discovery and exploitation of North Sea oil.
Mrs. Thatcher could hardly be blamed for not understanding the full implications of this problem. There was nobody with the mental sagacity who was able to give her the right advice among her chosen coterie of personal advisers. The abandonment of Keynesian economics, the abandonment of the commitment to full employment and the elevation of inflation to the role of public enemy No. 1 could not have come at a worse moment, whatever the merits of these things.
Britain was almost the only industrial country in the world which in the circumstances of the early 1980s could have opted out of the world recession; and, more than that, could have brought about a second industrial revolution, with tremendous implications for her own future. In doing so she would also have greatly benefited her partners in the Common Market, and not just Britain. So far from unemployment in Britain having been the inevitable result of the world recession, as the Government claim, it was the Government's own policies that were largely responsible for creating the 1980 downturn in the world economy. A large part of the unemployment generated by British policies occurred not in Britain but with her trading partners—in Germany, France and other countries of the Common Market. This is what happens if you leave things to the free play of' market forces. which the noble Lord, Lord Cocktield—I am sorry he is not here at the moment—is so particularly fond of as a principle. In many cases, leaving things to the free market forces produces the worst possible result, not the best result.
But now that the harm is done and the contribution of manufacturing industry to our national output has deteriorated as much as it has been improved by North Sea oil, our freedom of choice is far more circumscribed. In the three years 1980 to 1982 we had a cumulative current account surplus of £14 billion—a petro-dollar surplus: or, should I say more accurately, a petro-sterling surplus. This is the measure of our net contribution to the world economic recession; and in a European context the effect was very substantial indeed. But now, thanks to the spread of the recession—and if we did not initiate it we have certainly aggravated it—our balance of payments will soon he back in the red. Only this year the Treasury has officially estimated that we shall have a surplus of —1½billion, but now it looks more likely to be zero. We shall soon be hack to the good old situation—our accustomed posture—of being always on the verge of a balance of payments crisis. Once that happens the chances of North Sea oil being used to improve our
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long-run economic prospects will have faded away. It will therefore probably be true of Mrs Thatcher's second Administration that they will not do the wrong thing nearly as often (if at all) as did her first Administration. And why not? It is because their freedom of manoeuvre to make mistakes will be far more severely constrained.
6.50 p.m.
Lord Harris of High Cross: My Lords, it is a new experience for me to follow the noble Lord, Lord Kaldor, with whom I have had some disagreements in the past. But on this occasion I think it might be best to respect the informal economists' protection society by not immediately following his speculations on Saatchi and Saatchi, George Orwell and sundry other matters, which I found rather difficult to follow. Rather, I would start by congratulating the noble Lord, Lord Bauer, on what I thought was a notable contribution to our discussion. I look forward to further such uncontroversial speeches from that quarter. For the present, I would only add that I thought his cogent criticism of the welfare state for robbing individuals of responsibility was by no means lacking in true concern and compassion, which is often interpreted in a different way by the Labour side of this House.
In a rather different mood, I enjoyed the typically combative performance of the noble Lord, Lord Bruce of Donington. When I am listening to him I always think that he is somebody I should like to have with me in a tight corner, but until he faces the right way I have decided that it would be better to keep out of tight corners. I can agree with him from the Cross-Benches on one matter: that the gracious Speech is sadly lacking on the major issue of unemployment. Even if we allow, as I would, that the official statistics include a good deal of voluntary unemployment, as well as ignoring the black market, about which the noble Baroness. Lady Seear, spoke, the lack of job prospects remains, in my view, a dark shadow, especially over the lives of young people. But on this occasion the noble Lord, Lord Bruce of Donington, turned aside to offer some interesting reflections on past Tory failures. Some of his criticisms on the exchange rate might be seen with hindsight to have some justice, but he overlooked telling us what proposals he had in mind to support his amendment calling for relevant measures to reduce unemployment.
In anticipation of this coy modesty, I had to turn once again, for what the Labour Party called "New Hope". to their election manifesto. There we find two main lines of action against unemployment. The first is the promise of what they call "a massive programme for expansion", with increased public spending on investment, social services and most other things they can think of. This is the plausible Keynesian panacea, of which we got a whiff from the noble Lord, Lord Kaldor. It is the doctrine that I dutifully imbibed with my beer at Cambridge after the war and went on for some years trying very hard to believe.
The alluring theory was that increased monetary demand would draw idle resources into employment. Alas! repeated experience showed that once the trade union highwaymen got wind of this extra money on

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the road, they perfected their "stand and deliver" act, whereby the greater part of the extra money got diverted into higher wages. It is to this spectacular wages snatch over the 1960s and 1970s that I trace our record of accelerating inflation and rising unemployment. Indeed, the Labour Party manifesto actually acknowledged this very danger. It sought to fend off the risk of inflation with all that stuff about "a national economic assessment"—that is to say, a powwow with the highwaymen—which was code language among the faithful for another incomes policy.
Like a fifth or sixth marriage, it represented a triumph of hope over experience. The last time Mr. Healey walked up the aisle with the TUC it was in the name of the social contract. The outcome was that, between 1974 and 1979, total national spending increased by 130 per cent. over five years. But, of that massive spending spree, less than 10 per cent. went to raise output, while 110 per cent. went to boost prices. The modest rise in output was not enough to stop unemployment more than doubling under Labour—from below 600,000 to approaching 1½ million.
If we turn to the present Government, we find that the last Conservative Chancellor did not reduce demand but only the rate at which it increased. Thus, from 1979 to 1982, total spending still rose by 45 per cent. over the three years. The result was that prices increased by 50 per cent. and output fell by around 4 per cent.. with unemployment again doubling from 1½ million to 3 million.
From all this I deduce, by logic which I have not time fully to elaborate, that the Government's target for monetary growth of 7 to 11 per cent. this year is perfectly consistent with declining inflation and increased output—only so long as the additional spending is not absorbed by higher costs.
We are therefore brought back to confront the central importance of labour costs as a cause not only of inflation but also of unemployment. I have some hope for at least silent agreement from the Labour Benches, because their manifesto promised further measures against unemployment, which rather gave away the whole trade union game. Thus, in addition to expanding demand, Labour promised a second line of action in the form of what it specifically called "employment subsidies". These were to be given to firms which avoided redundancies or created new jobs. But why subsidise wages if they are not already too high? Here was a frank admission that labour costs are above the market value of labour's contribution to output and are therefore at least one cause of unemployment.
This truth is illuminated by OECD figures which show that, by 1981, labour costs in Britain had grown to absorb over 80 per cent. of GNP, compared with around 70 per cent. in France, Germany and Japan. Precisely the same trend is revealed by other indications of declining long-run profitability in British industry. Thus, if we exclude North Sea oil, we find that the average real rate of return on capital in Britain fell from above 10 per cent. in the 1960s to 5 per cent. in 1979 and 2 or 3 per cent. more recently. We really cannot escape the conclusion that a major
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domestic cause of avoidably high unemployment is the rise in labour costs per unit of output and the resulting decline in profitability. Such a shift in rewards must reduce the incentive to employ more people. At the same time, it reduces the funds available for investment which would create jobs directly in new buildings and plant, or indirectly by improving efficiency and sales in competition with foreign suppliers.
We all say, and endlessly repeat, that we deplore the economic and social consequences of unemployment. But suppose we cared above all else for bringing lasting jobs to those who are genuinely seeking work, would we really go into the Lobbies again to preserve the wages councils which we know, at the margin, price young people out of the market? Suppose we cared less for maintaining outdated political prejudices, might we not think of new ways to encourage employment, mobility, investment and, if I dare say it, entrepreneurship? What about such measures as repealing stamp duties, reducing the tax on capital transfers, on stock options, on portable pensions? Not least, what about ending the taxation of low incomes, which now reduces take-home pay to little, if anything, above the value of social benefits?
As a gesture, for my part, I would overcome my deep doubts and distrust about further Government intervention and even agree to some new programme of public spending, if only it could be shown not to make things worse by raising taxes and other costs elsewhere so as to damage existing employment.
My concluding thought is that an agenda for radical reform to reduce unemployment would range far wider than the measures outlined in the gracious Speech. Certainly it would include action on nationalised industries, trade unions, and local authority spending—for the reasons so splendidly developed by the noble Lord, Lord Boyd-Carpenter, and my noble friend Lord Marsh. But it would extend to long-overdue measures to reduce Government spending and taxes—especially for misdirected welfare, which was so powerfully exposed by the noble Lord, Lord Bauer, from the Government Benches.
7.1 p.m.
Lord Campbell of Alloway: My Lords, in opening this debate the noble Duke the Earl Marshal brought out on parade some of the skeletons in our industrial relations cupboard—some of them have no identity discs. Perhaps the underlying problem in industrial relations is as suggested by my noble friend Lord Cockfield today—that the future is put to the hazard by unrealistic wage claims, thus affecting profit potential and employment prospects. These matters are strictly relevent to the amendment tabled by the noble Lord, Lord Bruce of Donington: but in his speech the noble Lord sought to concentrate on allegations of mismanagement of the economy. While not accepting the Keynesian theory, he did not refute the assertion that the underlying problem affecting manufacturing industry and the reduction of unemployment is unrealistic wage claims.
In economic and industrial affairs the gracious Speech heralds a policy of continuity and consolidation generally—in particular, those measures to give trade union members greater control over their

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unions. The content of the Bill is left wide open, as is the door to consultation. If there is to be constructive dialogue on the matters canvassed in the Green Paper, on matters already debated on more than one occasion in your Lordships' House (and again mentioned in today's debate by the noble Viscount, Lord Hanworth), would it not be wrong and unwise to anticipate the White Paper, which it is understood will be forthcoming in the autumn?
In all this, however, a measure of clarification would be welcome, if possible, when my noble friend Lord Gowrie winds up this debate; clarification in the sense of a very broad assurance not intended to prejudice the prospects of successful consultation. But as a basic principle—and surely one may not govern or oppose a Government without principles—there is no doubt that the object of the Bill, whatever form it may take, is not, as asserted by certain noble Lords opposite, to slight the trades unions. Its object is to stand guard over certain fundamental democratic precepts. The justification arises only on account of practices of oppression and abuse, by which in the past the trade unions, alas, have done themselves and their members a not inconsiderable disservice. Hence the need for legislation and the need to set such legislation in its true perspective.
This perspective could—even within the life span of this Administration—envisage one comprehensive statute written in intelligible English which could command a degree of acceptability commensurate with its status; a statute in which provision could be made for matters of current concern and of future importance, some of which have already been touched upon in this debate, such as extended worker participation in both the public and private sectors. Why should not the house-owning democracy become the share-owning democracy? Here I go along the road taken by the noble Baroness, Lady Seear. Such as, resolution of public sector disputes, especially in the essential services, and the resolution of inter-union recognition disputes. Such as, the avoidance of certain restrictive labour practices, especially in the case of some craft unions, possibly in context with redundancy. Such as, job sharing and extended assistance to all unemployed who genuinely travel in search of a job. Such as, extended jurisdiction of the industrial tribunals so that they may deal not only with questions of unfair dismissal but also with breaches of the employment contract itself. There is also the question of financial responsibility for breach of procedure agreements—the point touched upon by the noble Lord, Lord Marsh. There could also, perhaps, be some regulation of resort to the block vote—a system that would cause an ancient Athenian to shudder in his shrouds.
The rectitude of the "step by step" approach in the past is not to be questioned; only the relevancy of its ambit to future steps. We build upon an ancient structure devised to accommodate conditions prevailing at the beginning of a century which will soon reach its close—conditions which no longer exist and will never exist again. I take the point put more cogently than I could have put it, by the noble Lord, Lord Marsh, that there is an urgent need, and that this need requires objective and constructive recognition.
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Furthermore, the case for consolidation in the form of a comprehensive reappraisal one day is unanswerable. It is as unanswerable as the concept that such a statute should be intelligible. But legislation has its limitations. It cannot create jobs. It cannot increase productivity. It cannot ordain economic revival. And it cannot infuse that spirit of partnership without which none of those ends may be achieved. But such a partnership in which the trade unions play their part cannot exist without a degree of individual surrender on the part of each member in favour of the institution, the trade union.
In this there is no paradox. The dream of Beatrice Webb is now a reality, and collective bargaining which in the last resort allows and must allow for collective industrial action, is indispensable to the economic health and wealth of the nation. And here, alas, I differ from the views expressed by the noble Viscount, Lord Hanworth, on this. But the practical problems of ballots, to call for and to call off a strike, to call for or call off other forms of industrial action, are far from imagined; they are real. However, this is neither the time nor the occasion upon which to discuss the matter further.
Beatrice Webb, however, did not envisage that the trade unions should either aspire to govern in substitution for constitutional government or decline consultation with government on matters of common concern. Have such aspirations and attitudes been laid at rest to die, or merely to slumber in repose? It is idle today to speculate, because we are not concerned to rake over ideological battlegrounds, to unearth bones of old contention with the trade unions; and because, even if we take note of the extant threat on the part, not of the trade unions—I stress that—but of certain trade union leaders to smash the Tories by so-called extra-parliamentary action, the only probable effect today would by not to smash the Tories but to smash the Labour Party as a viable Opposition.
Flexibility is in no way inconsistent with resolve. This is why both what was said and also what was left unsaid in the gracious Speech is much to be welcomed. I am sure that the noble Lord, Lord Marsh (and I understand his position; I understand his sincerity and I understand the situation of which he spoke) would agree with me—I hope he would—in saying that it is not by law that we draw upon our reserves of goodwill; it is not by law that we can harness the full potential or our native skills, or indeed foster this bond of partnership with the unions. No, my Lords, it is not by law, but by the spirit of man and steady government.
7.13 p.m.
Viscount St. Davids: My Lords, in the course of the last few months we have heard a great deal about unemployment. In fact, the subject would long ago have exceeded the bounds of boredom if it was not so deadly serious. The only thing that amazes me about it is that nobody appears to have defined either what full employment is or what unemployment is. Let me quote some examples. In ancient Rome there was indeed full employment among the slaves; indeed, it was a lifetime of full employment. One could not say that they had an enormous amount of job satisfaction. They were perpetually in revolt. But full employment they did have.

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Or take Soviet Russia. They boast that they have got full employment, and they are right. It is quite easy to provide it by their method. First of all, with the aid of the Communist Party and subservient trade unions you cut wages down to a minimum, you then compel all firms to take on extra workers. It costs the firms nothing for the simple reason that what is happening is that the workers already employed are in fact paying for the extra workers; that is where the money comes from. Then of course they can abolish unemployment pay, an enormous benefit for the Government; and that, of course, incidentally gets rid of the poverty trap. They can then make unemployment illegal, and the scene is complete.
There are, of course, the disadvantages that you have totally abolished liberty and that you have produced an industrial picture in which all advance is practically impossible. The seize-up of Soviet industry is such that it is only by quietly violating its own rules that it manages to keep going at all. Those are not the sort of pictures that we see as good, although they are in fact cases of full employment.
In the days when I called myself a socialist I was sometimes asked which brand of socialist I was, and I used to say that I was a Gilbertian socialist. I have since rejected the word "socialism", but I continue to call myself a follower of the great W. S. Gilbert. Let me give your Lordships a small quotation to mull over, and you will understand why:
"When everyone who feels inclined
Some post may undertake to find
Congenial with his peace of mind
Then all shall equal be".
As you see, no compulsion, no compulsion even to work, but job satisfaction very heavily underlined. I believe that is the direction in which we should be moving. I have ceased to believe, however, which I believe Gilbert did believe, that full employment will ever be possible.
I think I understand why, It may be a strange thing to say. I think your Lordships will understand if you will let me say it. In every community in which there has been a large level of democracy and leisure it has happened because that community has been able to stand on a platform of slavery. Ancient Athens was very much a case in point. If the Athenean democrat went in for politics he had the time, the leisure; he also had the time and leisure to indulge magnificently in sport and in art. But it was because the slaves below him were doing the work and keeping him on the standard of life which enabled him to do this.
I will not go through the whole of history for your Lordships; it really would be most unfair on the House. But let me give your Lordships one other case. In the last century there were no slaves in the old sense but there were a great many wage slaves. They had no unemployment benefit to fall back on. If they were out of a job they starved. If your Lordships go round London, as I am sure you often do, you will see all over the place hundreds—at one time there must have been many thousands—of little houses that were built in that century. They are easily identifiable. Some were for better-off people, some were for the less well-off people and some were for people who were little more
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than semi-skilled artisans. One need only read Dickens to see the picture.
One thing that every one of these houses had was a room or some place for a servant girl. Those girls cleaned out, lit and stoked the fires. They carried up the hot and cold water and did a number of other tasks. Why are they not there now? What has happened? Hot and cold water comes out of taps. We no longer have to stoke fires because one turns a switch on and off. It is all done by machinery. That is why the girls are no longer there. That was the start of the position we are now moving into where we no longer have wage slaves. The machines do it.
Gilbert's day was probably the last moment at which the machine had not taken over. The movement started slowly and is now going faster and faster. We are now making machines. We do not make cows, horses or sheep. They reproduce themselves. The machine is about to do the same. When machines make themselves we shall all have a great deal more leisure.
The one thing that we must not do is call ourselves unemployed. Let us go back to that servant girl. If we brought her into our day and showed her the unemployed with their unemployment payments, supplementary benefits, family allowances and council houses with their television sets, would she call them unemployed? No, they bear no resemblance to the picture that she saw of unemployment. She would call them ladies and gentlemen of leisure because that is the class in her day which corresponded to them.
In her day there were a great many people living on very small incomes. Some of them were living on pensions—private or public—and some were living on small amounts of interest from investments. Some were living on small rents from properties. They were a very mixed lot. The only thing they all had in common was that they were paid and lived on what they were paid but they did not work for it. What did they do? Some of them no doubt did nothing and wished to do nothing. Many would have taken jobs if jobs had been offered. But a great many worked very hard. They were the backbone, the troops, who formed and were the founders of many great charities and great institutions and were at the start of many great projects which were commenced in that century. They were not top men. The top men were no doubt Peers or people in high positions. However, they were the real body of people who did all these things.
They did something else. Looking upon themselves as people of leisure, they were enormously valuable. Artists, sculptors, poets and writers are notoriously apt to starve, but being the people they were and having this leisure, they produced a great burst of art for which we are now grateful.
That is what we must do now. We have to make people understand that if they are never to be employed, in the sense of living by being paid for doing a job, they are not unwanted and that they are the seed corn of the country and thus enormously' valuable. How would I promote this? First, I should make it possible for unemployed men and women to earn a considerable income. which is not as high as an actual living income, but without losing their right to unemployment benefit. The old age pensioners can already earn a considerable sum before losing benefit.

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That would have several effects. It would bring a great deal of our hidden economy to the surface. That would be of benefit, and I very much agree with the noble Baroness. Lady Seear, on that.
Another point is that when a person starts a business of the smallest size it is often able to support only one man. Often it can support only half a man. There are many men who would be small businessmen if, when they started a business, they could find the income that is needed to eat for the first month or so. Let them do that and I think we shall see a further burst of small businesses, as the Government wish.
Another thing I should do is allow the unemployed to work for long periods for charities. I give one example from a field I know very well. On the inland waterways, we have had large gangs of volunteers digging away and repairing old, broken, rotting waterways. They do not get paid for it. The amount of work they do is extremely valuable. They learn a great deal in the course of doing it. They develop the habit of hard work and, when they have done the job and it is completed, they go away leaving a working waterway around which develops a whole number of solid jobs. They are real jobs not only involved in looking after the waterway but all sorts of ancillary jobs. I believe there are many other fields such as that.
We must consider that in the future there will be many people working at jobs for which they are not paid. A very great writer and futurologist, Mr. Arthur C. Clarke, has said that the truly civilised man is the man who will work hard although he does not have to do it for a living. I believe that our real task is to civilise humanity. That, in the end, may prove much easier than trying to provide full employment.
7.29 p.m.
Viscount Trenchard: My Lords, we have indeed lived, and are still living, through a period of pretty unique industrial history, with some enormously violent changes which have taken place in the 1960s and 1970s and are still taking place in the 1980s. At the risk of boring your Lordships, I am afraid that I am going to put my gramophone record on again, which in my view makes it abundantly clear—and this follows very much the line of the remarks of my noble friend Lord Boyd-Carpenter—that it is the years of fool's paradise in the 1960s and 1970s that have caused unemployment today. I agree with those who say that unemployment has not all been caused just by the world recession of very recent years. But that recession caught out the country, which had become progressively more and more uncompetitive over those fool's paradise years.
We had between 1960 and 1978 lost half our world market share and we had also lost similar shares of many of the markets for our own manufactures here at home. The figures were that we were knocking on 20 per cent. of world markets in 1959. By the late 1970s we were in the 9 per cent. ball park.
Our ills were indeed of long-standing, as my noble friend Lord Boyd-Carpenter has pointed out. Why is it that ills of this degree of long-standing did not show up more quickly? The reason is that this period of the 1960s and 1970s was unique in industrial history, and, in my view, will probably remain so. After the appall-
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ing second world war and the period following it when half the world was getting back to normal, we had the most unique period of growth that the world has ever seen. The world market in those two decades, when we lost half our market, doubled, and that is why, with our half market share, our production stayed more or less constant and our standard of living even edged up. The proof of this is shown very clearly in the fact that during these years 13 extra countries passed our wealth, as indicated by gross domestic product per head, making 16 ahead of us by 1978, with Portugal and Spain only just behind us.
So much for the growth policies of past Governments in the 1960s and 1970s. I say this against the kind of policy that I understand the noble Lord, Lord Bruce of Donington, and the noble Lord, Lord Kaldor, have recommended today of stimulating demand. What did it do? It in fact merely sucked in imports, and the fact that it was doing so—the fact that it was failing totally—was masked because the world market was growing so fast, and we were missing this unique opportunity of growth as country after country passed us. It is for that reason that I do not agree with the noble Viscount, Lord St. Davids, who has just spoken, that reinstating full employment is a hopeless task. It is a long-term one, but if we had fallen from only a 20 per cent. share of world markets to 12 per cent. we should today have the least had unemployment record of any of the free countries of Europe.
I do not believe it impossible to reach that 12 per cent. share of world markets again. Of course the employment will be different, the problems of our old industrial areas still acute and the problems of shortage of modern electronic engineers very great. But, overall, the employment position would be quite different. I believe that 12 per cent. is not an idle thought, because we are now today proved to be competitive. Why do I say that when there are still figures being bandied about which suggest that we are still less competitive than we were in 1975 or 1978? I in fact know the origin of those figures. Indeed, I worked rather hard to get them produced in order that my then Secretary of State should realise just how uncompetitive we were. However, they are not a fair comparison today for reasons which, at this hour, it would take me too long to go into. But I say that they are proved to be erroneous because in fact over the last 12 months our industrial production record has been better than the records of virtually all our industrial competitors.
Where, in the latest figures available up to December, January and February, they are still down against the previous year in industrial production outside construction, we are level-pegging in those months. We have a better record: it is a couple to three percentage points better than the average of them. You cannot do that in a recession (which is still with us) and not be competitive overall. I say "overall", of course, because it is not in each industry that we are growing. In some we are still falling. But we are proved competitive, and the latest surveys which have been mentioned today of the CBI and others merely confirm that that is so. Our share of markets has not declined further, and indeed it is edging up. You simply cannot do that, as every industrialist knows, if you are not overall competitive.

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Do we need growth in the manufacturing or in the service industries? We need it in both, but I support those who have underlined the importance of the manufacturing industries for a reason additional to those mentioned already. That is that in my rough estimation half the service industries of this country are fairly dependent on our manufacturing base.
Do we need fast or slow recovery growth? Of course, if world production grows, and if we are regaining our share, there is then a double chance of it being slightly faster. We certainly do not want false growth: the growth of a plant that is deluged with nitrogen. I have a feeling that the policies that noble Lords opposite are recommending are very close to that situation—only for "nitrogen" one should read "printing money". That would bring inflation back and spoil it all at this point. We do of course want growth as fast as we can get it in a competitive way to relieve the awful stresses of unemployment, and to do it in time for the decline of our oil supplies, which are of great value to us today. One wonders whether it is going to happen at a rate which is fast enough; and one wonders whether the whole of industry has yet realised the degree of change that exists now in this country as a base for competitive manufacturing.
The exchange rate has been mentioned today. Of course, it is not the only thing that has changed. When the noble Lord, Lord Bruce of Donington, mentions it in terms of its strength being caused—it was the only reason that he gave—by a 17 per cent. interest rate (which at that time was only a 2 per cent. real interest rate because the inflation stoked up by the latter years of the last Labour Administration had inevitably pushed inflation to that level again) he is of course leaving out many of the factors which influenced the exchange rate at that time. Perhaps it is not just our possession of North Sea oil that should be mentioned but the fact that there was a world-wide oil crisis; a near panic. Any international financier who put his money in a country that did not have an oil supply at that time was perhaps in need of having his head tested. This moved the exchange rate.
How much can Government do about exchange rates? Internally in Government at that time I argued that toss over and over again with academics and with my colleagues. I have to say that I was convinced in the end that one can do comparatively little about the exchange rate. Your exchange rate is what the world thinks your pound is worth; and, with a panic oil situation in the world, there was very little that we could do to stop money flowing in at that period.
I have to say—very quickly—to the noble Baroness, Lady Seear, that I do not believe that the EMS and our entering it will to any extent alter the degree to which governments can affect the exchange rate—
Lord Bruce of Donington: My Lords—
Viscount Trenchard: My Lords, if the noble Lord will let me finish my point about the exchange rate, I shall then give him an opportunity to intervene. I believe that we had a period of aberration in exchange rates, due to the factors that I have mentioned and sonic others which there is not time to mention. I believe that is was an aberration, and I think, and
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hope, that industry will realise that, while there always could again be major crises, it is unlikely that there will be the same violent fluctuation in the exchange rate and a violent strength in sterling again in the future.
Lord Bruce of Donington: My Lords, I am grateful to the noble Viscount. There is only one point I wish to raise with him. He mentioned the effect of the oil situation upon the exchange rate. Perhaps I ought to refer him to the second report of the committee of another place on Treasury and Civil Service affairs. It considered that question, and in its report came to the conclusion that the influence of the oil situation at that time on the rate of exchange was not an important factor.
Viscount Trenchard: My Lords, I am aware of the many different opinions that there were at the time and that there have since been; there will always be different opinions on that question. I have given the House my opinion, with the benefit of having listened at the time to the academics, as well as to my colleagues and to experts.
Today, with the exchange rate that we have, we also have completely new attitudes and productivity records, which, bearing in mind that they have been achieved with little or no growth in many cases, are remarkably good. Five per cent. up on the back year is the average, with 12½ per cent. up since 1979 in production per person hour. To achieve that in the middle of a world recession with no growth augurs extraordinarily well for the future.
Therefore I believe that there are many opportunities. They are beginning to show—even in recently unfashionable industries, from the chemical industry to the textile industry and even in industries such as the newsprint industry, in which, I notice, two big international firms are to open plants in Wales. So I hope that there will be a growing realisation of the fact that this country is now a very good base for manufacturing industry, notwithstanding the problems which still exists in a minority of industries, which the noble Lord, Lord Marsh, has mentioned.
I believe that there will be a key period of test for this country's banking and financial system as to the support that it will need to give to the growth of British industry in many different areas. I regard it as a total red herring to say that a good deal of money has gone, and will continue to go, in overseas investment. There is money enough to support good projects. We are seeing more and more good possibilities, and I hope that our financial and banking system is aware that it is going to have a period of enormous opportunity to help forward our efficient industries.
I must not keep your Lordships longer. I believe in free trade. With the exports that we have I cannot possibly do otherwise. But I also believe in fair trade. British Ministers and civil servants must be careful not to lean over backwards too far to be fair, and they must bargain hard in the world to ensure that we get fair trade. I do not believe that this will affect our exports. I am delighted that in the gracious Speech there is mention of combining the Department of Industry and the Department of Trade. In my period in office too much time was taken by Ministers and high-powered civil servants arguing protection against

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non-protection, from one end of Victoria Street to the other. I am delighted that the departments have been combined under my then sometime adversary, but colleague, too, Cecil Parkinson, who was in No. 1 when I was in No. 123.
I support most strongly the remarks of my noble friend Lord Boyd-Carpenter on the effects that arise from the fact that there is still a long way to go in making our nationalised energy industries competitive. The effects of their uncompetitiveness in the past and their pricing policies when pressure was put on them by Government have done harm to the competitive position of manufacturing industry. I consider that, though a difficult problem, this is something which the Government must face up to and must study: and they must find a way of preventing our manufacturing industries from being handicapped.
Let me say quickly to the noble Lord, Lord Marsh, how much I agree with his remarks. We have had a hang-up on the question of trade union agreements and their enforceability since the final débâcle of the 1971 Act. Those who have studied the detailed reasons for the failure of that Act know that it is not impossible to conceive that what the Donovan Commission recommended over 13 years ago should now be possible; namely, at least the enforceability of procedure agreements.
In the past I have had the good fortune to be responsible for factories at home and abroad, and I have to say that the most industrially important difference that exists, in terms of its effect upon industrial efficiency and productivity, is that concerning the reliability of agreements. This question can completely erode one's management effort. It can take up all the spare time which one's management should be using to move with the times and introduce new methods and change. All that time can be used renegotiating agreements which have been signed only recently, as was clearly indicated in the example which the noble Lord, Lord Marsh, gave to the House.
To those who believe that the law is not an answer to this problem I would say that the law is not everything, that attitude is far more important, and that a change of law will not overnight change attitude in the residual areas where it is not yet changed. But attitudes are changing. Let us get the law about trade union agreements right. I say that because, if over the last 60 years there had been no law against robbery, we would not all have been thieves, but robbery would have spread; and so in the trade union world this problem has spread. It is not universal, and attitudes are coming right for other reasons. But let us once again look at the agreement situation.
In conclusion, I would say that I was sorry that the old argument about British management being incompetent and substandard has once more raised its head. In my opinion it is not true. It is a product of our own tendency towards self-criticism. I am now going to indulge in that tendency and say that we could not possibly have been clever enough to put all our geniuses into the professions, the City, agriculture, retailing, the armed services, and the Civil Service—all of which are the envy of the world—and all our idiots into manufacturing industry.
7.49 p.m.
Lord Balogh: My Lords, it seems to be the tradition of this House to start with congratulations to Ministers, maiden speakers and others and to explore their advantages without being too detailed on the disadvantages. I make these introductory remarks with a heavy heart. I have to commiserate with the country upon the choice of company that it has elected to govern. As Walpole exclaimed:
"They now ring the bells. but they will soon wring their hands".
I had prepared a better and more jocular introduction but the noble Lord, Lord Kaldor has shot my Yugoslav-Hungarian fox. Only the bare bones remain.
What we are now witnessing is not a mere change in the urgency of pursuing action between two parties with a common base towards approaching problems. Mrs. Thatcher's Tory predecessors limited their intervention on economic and social policy to conservation. She, on the contrary, is willing and, indeed, eager to reverse the trend towards social reform. With her smashing victory, a fundamental change has abruptly been incorporated into Conservative policy-making. The 1926 to 1978 period of relative tolerance was violently displaced by a revival of a sort of totally un-Tory Herbert Spencerian philosophy that has not been accepted in any advanced country outside England. Thus she acquired an irresistible power centre and she continues to move the country into complete reversal of the basic direction of policy.
The Government formed their policy first on stemming and then on rolling back increases in the "socialistic" public sector, hoping to profit. In fact, apart from defence, they will lose. They secured, through fiscal means, a regressive distribution of the national income. As the main features of the philosophy and action became clear, chiefly through the 1980 Budget, the Keynesian economists, involving in those days the largest part of the profession, predicted a steady deterioration of the economic outlook. This prediction, unfortunately, has been fully borne out by events. The remorseless worsening of the economic situation and prospects give the lie to Mrs. Thatcher's bouts of optimism followed dutifully by her Chancellor, Ministers and ex-Ministers. There is a horrid sense of déja vu as one recalls Hoover's drift into total bankruptcy, which was regularly accompanied by the optimistic talk of that unfortunate American President.
The policies of the monetarist school produce a débâcle in human terms in this country greater, for a large minority, than the Great Depression. Nor can the excuse be made that there has been insufficient use of the weapons advocated by the monetarist school. The unemployment figures testify to that failure. The trend is still upwards although the actual shrinkage has for the moment been slowed down and halted, probably due to restocking.
The unworldliness of the monetarist school had been demonstrated clearly by the fact that it denied the very possibility of cost-push inflation. Yet this has been proved to be one of the main factors. The monetarists ignored that the structure of the economy in the main industrial countries has altered. Pure competition no longer dominates an increasing sector of the economy. more especially of manufactures. I

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was interested to hear the noble Viscount, Lord Trenchard's remarks on manufacturing. I had been under the impression that for the first time in 400 years the British balance of manufactured goods was negative. I do not know how the noble Lord can explain how that harmonises with what he says.
Viscount Trenchard: My Lords, what I said was that our industrial production outside construction had a better performance in the last 12 months than all our main industrial competitors, based on the last three months for which figures are available. That is correct. The change in our balance of payments in visible trade, analysed correctly by the noble Lord, is due to the years of fool's paradise during which, as I tried to explain, we lost half our share of the world market. Then, when the recession came, we were caught out and the chickens came home to roost with the result that the noble Lord has indicated.
Lord Balogh: My Lords, I do not think that that is an explanation. It is a re-statement of facts. Pure competition no longer dominates an increasing sector of the economy, more especially manufactures. In fact, Conservative policies in all affected countries from America to Germany were, and are, based on indefensible hypotheses. Mrs. Thatcher claimed that the Government were able to dominate the complex economies of the country and manage the entire system through the money supply, albeit that Mrs. Thatcher's most ardent partisans were unable to define that slippery concept.
The exceptional steadiness of the progress of the mixed economies under Keynesian auspices is beginning to be appreciated, although not by officials. The social and political menace of a perpetual mass unemployment is beginning to replace inflation as the main obstacle to prosperity and harmony, although the need and the possibility of price and incomes control still excites horror.
More incomprehensible even than the monetarists' approach to the problems of adjustment to domestic change were their recommendations to cope with the problems of the international market and its relation to domestic problems. The neo-classical world would demand perfect competition, but perfect competition is a shrinking area. All post-war history points to the conclusion, however, that both on the side of labour and of manufacturing enterprise oligopoly increasingly dominates. This necessarily means growing, upward pressure on costs, the most important being salaries and wages. In the longer run, and in socially and politically advanced countries, this means accelerating inflation, with its harmful effect on class and professional harmony. It could not be tolerated for long.
Two systems eventually emerge to suppress inflation. It could be done by force, cutting the legal and economic or financial and military support of the trade unions. Alternatively, it would be dealt with in a more mature and civilised way by general agreement. The former can be operated by outlawing the unions; or the Government could, by internal legislation, create a deflationary atmosphere and thus increase unemployment and push the balance of power against
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the unions. The alternative would be an agreement to limit the increase in incomes to be compatible with the increases in productivity. It would mean forgoing the most important strike weapon, and it would have to be achieved by strenuous negotiation.
It now seems clear that the Government are changing from their reliance on pressure of a general kind, monetary and fiscal, to force. The shape of their measures of restrictions is to do away with the immunity for torts committed by their members. It is to be feared that this means sliding down the slippery slope of doing away with all safeguards. Their outlawry will be effective and will engender extreme bitterness. Some of the interventions of noble Lords have demonstrated how far one can go in unfortunate remarks which just yield greater conflict.
However, it should be said quite emphatically that the Labour Party and the unions have to a great extent brought the crisis on their own heads. The menace of inflation has been growing ever since 1960. It was also clear that full employment would accelerate the process. Professor Robinson, as early as 1938–39, predicted and outlined the nature of the problem. Michael Kalecki and I published warning articles as far back as 1943, and we both insisted on the need for an effective incomes policy if unemployment was to be avoided. In my pamphlet Labour and Inflation I pointed to the need for involving the representatives of the workforce in production and distribution programmes. Without a firm conviction that justice would be done to reasonable demands and that the planning of income distribution would not be used for unilateral repression of wages, co-operation of the unions could not be expected and that would make the policy impossible.
More must be said about the foreign exchange market, which has been touched upon by the noble Viscount. Lord Trenchard. I do not believe that the Bank of England is incapable of controlling the market, provided the pressure is upwards. Downwards pressure is a problem and a very different situation. But upward pressure would mean the acquisition of a vast amount of liquid reserves which at present would not be very unfavourable to Britain, because our situation is so delicate that we need large amounts of reserves. To say that the Bank of England cannot print enough sterling in order to acquire dollars shows an incredible ignorance of how the City works.
It seems from the gracious Speech that the Government wish to continue with their drive for freer trade and services. The history of the post-war years since 1945 has shown how foolish it is to hope for great advantages. Advantage goes to the strong; disadvantage goes to the weak. We have not had any assurance that our relative weakness can and will be eliminated. In fact, the international markets became the most important source of change for the worse. At first the impact of the IMF was temporary only, and even that had to be suspended until it was supported by Marshall Aid. The oil price explosion changed all this. It created vast amounts of short-term balances which could be, and were, shifted about irrespective of the development of production patterns or productivity, although the latter were influenced by the former. They were the result of loss of confidence and panic by

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the bankers and other financial agencies which searched desperately for security, unobtainable under the circumstances without international co-operation, which was not forthcoming.
Changes in stocks and the oil balances were especially unstable, and could violently flow to and fro. These fluctuations in the locus of reserves had nothing to do with the real situation; for example, the current balance of payments. They could immensely destabilise the basic situation. As I have said, the Bank ought to have stabilised the exchange by buying up the dollars which were forthcoming. It is the avoidance of inflation for which the British, indeed the Anglo-Saxon, Governments strive. But they will not have success until they have better means of controlling or at least influencing savings and investment.
The unions, instead of collaborating on their terms, repudiated all efforts to achieve a new balancing system. Their leaders showed open hostility and stood out for free collective bargaining which had no hope of success. I was savagely attacked at the Labour Party Conference of 1970 by Jack Jones for advocating incomes policies. In 1969 Mr Callaghan himself all but brought down the then Labour Government by making impossible the evolution of an incomes policy.
So long as the national income continued to grow the fatal problems due to an explosive sterling crisis could be avoided. Unfortunately the balance of payments continued to worsen despite the discovery of oil and gas. In consequence the British Labour Government had to have recourse to the IMF, though it is now clear that this was a mistaken calculation.
In the outcome the union leaders did not join the Government in persuading their members of the need for restraint. The unfortunate Mr. Callaghan now went to the other extreme and tried to impose a 5 per cent. upper limit on wage increases. The winter of discontent followed and with it the victory of Mrs. Thatcher.
The policy of deflation, high rates of interest and cuts in public expenditure was now consistently pursued and proudly acclaimed. The first phase of developing a forcible policy started, based on repressing wage demands in the public sector and creating a deflationary atmosphere in the private sector. The suppression of inflation, of which one is so proud, was at the cost of both terrible unemployment and bankruptcy. The bargaining power of the unions was weakened, and is to be further weakened, by legislative action.
Mrs. Thatcher and her minions claim that the present deflationary policy cannot be relaxed because that would involve the ruin of the painfully sought stability, the creation of a base for "real" expansion, mainly thought of in terms of increases in private consumption and investment, while the expansion of public investment remains abhorrent. In fact, the policy implies bitterness on the part of the workforce, and the ensuing industrial action is more than likely to lead to an acute class struggle.
Unfortunately, neither side of industry has as yet accepted the inescapable need for an incomes policy, the only alternative being mass unemployment. The timid statement in the Labour Party's election manifesto of 1983 has had little relevance to this
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problem; it promised welcome increases in social services, but did not deal effectively with the problem of how to pay for them.
The laissez-faire Conservatives claim that incomes policies have invariably failed. But they failed mostly because they were used as temporary emergency measures. Where they were used on the basis of a consensus, as a long-run remedy to the dysfunctioning of the system, they did not fail at all, as Sweden and Austria demonstrate. Indeed, the guide posts introduced by President Nixon in America were only too successful and they were abolished because of their success, not because of failure. With the laissez-faire reactionaries in command in the United Kingdom and the United States, we can expect a rapid deterioration in the social atmosphere. Yet a reflationary policy is impracticable it' the main industrial countries do not act simultaneously, because otherwise exchange crises would follow. Alas, there is no chance of a happy ending.
8.15 p.m.
Lord Monson: My Lords, two or three speakers in yesterday's debate touched upon the question of rates, but it seemed to me that taxation, whether it be local government taxation in the form of rates or central Government taxation, is essentially an economic rather than a social matter. I was glad to note today that the noble Lord, Lord Boyd-Carpenter, apparently took the same view. Therefore, I make no apologies for bringing up this subject again this evening.
I heartily welcome that section of the gracious Speech which foreshadows the introduction of a general power for the limitation of rate increases for all local authorities, wherever this may be necessary in order to protect the ratepayer. I welcome it all the more because in October 1980 I moved amendments to the Local Government Planning and Land (No. 2) Bill with exactly this purpose in mind. On that occasion my sole supporter from the Conservative Benches—although I hasten to say a most able supporter—was the noble Lord, Lord Ellenborough, who I am glad to see in his place this evening.
The Government, in the person of the noble Lord, Lord Bellwin, expressed some sympathy with the motives behind the amendments, but then went on to pour a large bucket of cold water on them, albeit in the most courteous and patient manner which we have come to expect from the noble Lord. Lord Bellwin. Some objections, doubtless entirely valid, were of a technical or drafting nature; but the main objections were ones of principle. The amendments were described as a severe step which would have significant implications for local democratic responsibility for determining levels of expenditure, and which would lead to central Government usurping the traditions of local democracy.
Yet now, lo and behold, 32 months later, the unthinkable has become not only thinkable but feasible and, indeed, desirable. It is good to know that ideas put forward from these Benches occasionally fall upon fertile ground, and good to know that the Conservatives are sometimes prepared to execute a graceful U-turn in a good cause. For, make no mistake, about it, it is a good cause. People who are

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affected only marginally or not at all can afford to laugh; indeed, they can afford to derive enormous amusement from the spectacle of extremist-dominated local authorities making lavish grants to organisations with names—and here I continue a tradition recently inaugurated by the noble Lord, Lord Marsh, from these Benches—like "Penge Pederasts against Polaris" or "Finsbury. Foot-Fetishists against the Falkland Islanders". But it is not so funny if you happen to live in a modest house or flat in one of the less affluent parts of London and are obliged to pay rate increases—not rates—in the region of £250 to £300 per annum in consequence of these and other extravagances.
I have here a letter, published in the Evening Standard, from someone who has a small two-bedroomed flat located in the London borough of Haringey who has just had his rates increased by £3.50 to almost £25 a week. This is by no means the most extreme example of the sort of thing which has been happening. It is very curious that whenever a Chancellor of the Exchequer, of whatever political persuasion, rises on Budget Day to impose—as chancellors tend to do—an extra 2p on a packet of 20 cigarettes, plus an extra 4p on a gallon of petrol, and an extra £5 per annum on the annual road fund licence, the balloon goes up. There are banner headlines in the popular press and frequently outraged leading articles. There is much fury and indignation (whether synthetic or genuine, I cannot tell) in Parliament, even though—and this is the point—these measures add no more than perhaps £25 a year to the average family's expenditure.
Yet, when that very same family has its rates bill increased by no less than 10 times that amount, they, that is to say the family, are expected to grin and hear it. and the media and Parliament for the most part remain mute. Protection for these unfortunate ratepayers cannot come quickly enough, and I very much hope that the proposed law will come into force in April 1984 rather than in April 1985, as predicted in the press.
This leads naturally to the question of central Government taxation, also touched upon in the gracious Speech by reference to a forthcoming Finance Bill. One can wholeheartedly welcome the reductions in the tax burden on higher incomes since 1979, extolled by the noble Lord, Lord Cockfield. One can welcome them objectively as well as subjectively, since the reductions do no more than bring Britain into line with other civilised industrialised nations as regards tax rates on higher incomes.
Where the Conservatives have done far less well is in their treatment of those at the lower end of the earnings scale. There can be very few industrialised countries in Europe or elsewhere where a single person pays tax and National Insurance at a combined rate of 39 per cent. on every pound earned in excess of £35 a week. Married people do not fare very much better.
Such is the burden of earnings-related National Insurance contributions now that, taken in conjunction with the substantial concessions on unearned income made in this year's Finance Bills, we have the unusual situation whereby anyone with an income of
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between £49 a week and £248 a week is actually better off receiving it in the form of unearned—that is to say, investment—income than as earned income, even on the assumption that the recipient of the unearned income pays optional Class 2 National Insurance contributions.
I am sure that the Government will have to abandon their objective of a standard rate of income tax of 25 per cent. What with the time bomb of an aging population, with fewer and fewer people of working age having to support more and more dependants, taken in conjunction with the twin time bombs of the ever rising costs of medical care in real terms and ever rising defence costs in real terms. I believe that the 25 per cent. standard rate must be a pipe dream. A gimmicky, and incidentally highly inconvenient, reduction of the standard rate by 1 per cent. or 2 per cent. to, say, 28 per cent. or 29 per cent. would fool nobody and please almost nobody.
No, my Lords, any funds that the Chancellor can find for income tax relief over and above the annual indexation which we have now rightly come to expect ought to be directed at easing the direct tax burden on those at the bottom end of the earnings scale. I was delighted to hear eminent economists such as the noble Lord, Lord Bauer, and my noble friend Lord Harris of High Cross agree with me on this point. This might best be done by reintroducing the lower rate band of income tax as both the Liberal Benches, mainly in the person of the noble Baroness, Lady Seear, and I have often urged in this House since the regrettable abolition of the lower rate band about three years ago. I suggest that a rate of 20 per cent. on the first £1.000 of taxable income would be the ideal to aim for here.
Another possibility would be some abatement of national insurance contributions at the lower end of the scale. It is after all ridiculous, is it not? that someone earning £32 for, say, a 20-hour week and who was given a rise of £1 per week must effectively pay tax at 300 per cent. on that extra pound—because his national insurance contribution rises from nil to £2.99. Whatever method, or combination of methods, is chosen, reduction of the direct tax burden on the lower paid must surely be the Chancellor's top priority when he comes to frame his next Budget. Not only do the well-known disincentive effects of the poverty trap make this imperative, but also the simple demands of natural justice.
8.25 p.m.
Viscount Chandos: My Lords, I must first apologise for being unable to attend the beginning of this debate, which was due not to a faint heart when faced with a long but distinguished list of speakers but a commitment at work which I could not break. I am sure I shall read the speeches which I missed with as much enjoyment as I have had listening to the speeches I have heard today. With 12 more noble Lords due to speak tonight before this debate can be wound up, I shall be very brief. Another reason for being so brief is that the gracious Speech comes after an intensive and wordy election campaign in which the economic record of the Government was a central focus of attention.

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My noble colleagues and allies, and many other noble Lords on this side of the House, have already pointed out to your Lordships that fewer people gave a vote of confidence to the Government's record and anodyne manifesto than voted for their brave new world in 1979. Nonetheless, whatever allowances are made for the effect of the Government's scare tactics about voting for the Alliance, of the Labour Party's disarray, and of the confusion created by the cockeyed electoral system, a substantial number of people, rightly or wrongly, were persuaded that a further term would produce the prosperity that a first term had not.
The noble Lord, Lord Boyd-Carpenter, reminded your Lordships that the Prime Minister had always said that she needed two terms to achieve economic success, and that it would be unfair to judge her after less. I therefore propose on this occasion to leave your Lordships, along with the rest of the country, to wait not perhaps four or five years but at least a little longer to judge whether the undoubted costs of the Government's programme bring forth any, or all, of the promised fruits. I doubt that they will, and all the evidence from industry suggests that they will not. I fear that in two terms the Government will merely do twice, or three, or four times the damage they have done in one.
Not everyone in the country, moreover, will be able to await and watch the outcome with the same equanimity or in the same comfort as those who will still have employment or other means of support. I hope moreover that the country will at least in the months and years to come be given the chance to judge the facts more fairly and accurately than occurred during the election campaign.
At the beginning of the campaign a Conservative Party political broadcast on television claimed that unemployment had risen much faster in West Germany over the last year than in the United Kingdom. What the Government neglected to tell their audience was that in the previous three years unemployment in the United Kingdom had increased twice as fast as in West Germany, and twice as fast as the average for the whole of the European Community. It seems to me in this case, therefore, that the Government manipulated figures and made selective comparisons so blatantly that it makes the author of the supposed Hitler diaries look like a diligent historian.
Manipulation of figures and selective quotations sounds a familiar phrase. They were the words used by the Prime Minister on "Panorama" during the campaign, not about her own party's deeds but those of her opponents. The Prime Minister said that she hated phoney figures. phoney and dishonest figures designed to mislead. Your Lordships can see quite clearly how she and her Government have indulged in that very selective quotation and use of dishonest statistics.
For example, in the same programme Mrs. Thatcher claimed that the need to increase prescription charges in 1979. only weeks after she had said that she had no intention of doing so, resulted from her discovering that the books left by the outgoing Government were so much worse than she had expected. There was, for instance, 22 billion
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dollars of foreign debt. Not only was that figure available publicly to any A-level student of economics, but I am sure the distinguished economists in your Lordships' House would confirm that foreign debt is totally irrelevant to the financing of domestic expenditure.
I fully support the amendment proposed by my ally, the noble Baroness, Lady Seear, and urge your Lordships to support it, too. I should like to add one specific regret to the general one included in the amendment. and that is that the gracious Speech made no reference to any proposals for industrial democracy, apart from the suggested union reforms. The Government placed great weight during the election campaign on their support for multilateral disarmament rather than unilateral disarmament. It is. Therefore, doubly sad that they so resolutely advocate unilateral reform of restrictive practices and not multilateral reform. Whatever changes are needed in the working of the trade unions can and should be matched. at least one for one, with changes in the role which employees can play at work in management and decision-making, and, in turn, with a higher share in the consequent benefits and profits.
Last night I saw the noble Lord, Lord Harris of High Cross, explaining on television the apparent support in the country for the policies of the new radical Right. I am sorry I missed the noble Lord's contribution this evening, because perhaps he enlarged on those reasons. The noble Lord said on television that collectivism and socialism were dead and that young people were excited by libertarianism. I would not presume to use my comparative youth to contradict the noble Lord, Lord Harris, but I would ask your Lordships whether the evidence you have found, during the election campaign and otherwise, confirmed that view. For my part I have found many young people—for example, those 50 per cent. of school-leavers who will not get a job this year—facing little excitement and a great deal of dull. demoralising depression. I suggest to your Lordships, as my colleagues in the Alliance have done incessantly, that there need not be such a stark choice between crude collectivism and unbridled libertarianism. The policies advocated by the radical Right were enumerated on the television programme last night and the influence of their proponents on this Government was demonstrated. The Adam Smith Institute, for instance, apparently recommends that BBC Radio I be sold off. Perhaps the Prime Minister would also like Sir Robin Day to be sold to the highest bidder.
The only significant omission from last night's programme was the most recent addition to the radical Right's illustrious ranks—the Kenny Everett school of economic affairs. It has added to its forward-looking defence policy a recommendation that combines the promotion of free markets with the principle of privatisation to produce a radical type of electoral reform. The sheer efficiency of the free markets will, by the end of the Government's second term, allow the population of the country to express quite adequately all their preferences and wishes without the expensive, inefficient process of general elections. I am sure that this school will not have the influence on the Government that other members of the radical Right appear to have. But I urge your Lordships to support the

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amendment of the noble Baroness, Lady Seear, to demonstrate unease at the proposals of all the radical Right and to warn the Government to tread carefully and temperately.
8.35 p.m.
Lord Vaizey: My Lords, following the speech of the noble Viscount. I urge your Lordships to vote in exactly the opposite direction on the Motion standing in the name of the noble Baroness, Lady Seear, on the Order Paper. It is to that amendment that I wish to devote the greater part of the few remarks with which, at this late hour. I shall detain your Lordships. It is not right and proper in the present sad condition of the Labour party to address one's remarks to the amendment standing in its name on the Paper.
When I listened to the eloquence of the speech of my noble friend Lord Cockfield, I was persuaded that the Government's policies for economic growth rested largely upon the basis that economic and social improvement in this country, as in any other country, depended largely upon the nerve and initiative of new and up-and-coming business people who would bring better management and raise productivity by allocating resources wheresoever it seemed they could productively be used. Clearly here there is a divide between people on one side of the House and those on the other, but I am convinced that this is and always has been the main engine of economic growth. Moreover, I think there is substantial evidence about us that those businesses that have attempted to follow this course have proved successful and have proved to be extremely popular. The name of Marks and Spencer springs to mind, but there are many other firms big and small throughout the kingdom that have never sought to defend their business profits upon the basis of monopolistic regulation.
I also took great heart from the speech of my noble friend Lord Cock field and from the gracious Speech itself that we would begin to see, at last, the break up of this great monolithic iceberg of the nationalised industries which have managed to provide such a degree of disillusionment to those who supported the ideals of worker participation. of worker support and of broad general public service which accompanied the passage of the nationalisation Acts through Parliament in the 1940s.
When I listened to the speech of the noble Baroness, Lady Seear—which I did with such attention that I was moved to rise to my feet twice to interrupt her flow of eloquence-I found myself in substantial agreement with the first part of what she had to say. If one is seeking to encourage enterprise and productivity in the economy, it is essential to reduce inflation and. if possible, to eliminate it, for stability in expectation of the value of money is, in many respects, a precondition of any successfully operating free market system. Sustained experience of inflation over lengthy periods is hound to be destructive of the basis on which free business can conduct its affairs or individuals can either save or make arrangements for their own future. which is the aim of the radical Right. as I understand it, and of those who support the present Government.
I was also in great sympathy with the noble Baroness when she spoke of the overwhelming vote of the
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people of this country against protective measures. It was my impression as I went around during the election that in the first week of the election campaign we on this side of the House won the defence issue overwhelmingly and in the second week I think we won the unemployment debate. I very much agreed with the noble Lord. Lord Boyd-Carpenter, when he referred to the sophistication of the electorate. Certainly the members of the electorate with whom I spoke all seemed to have a pretty shrewd idea of what was at issue, whether or not they were for or against the Conservative party.
However, I departed from the noble Baroness's proposals, which are embodied substantially in the amendment, though not in specific detail, on three or four major points. First, I genuinely disagree with the phrase that she used that there are about four million unemployed. It is all a matter of definition. No one really knows how many people actually are unemployed in the sense that they are actively seeking work at the prevailing wage rates, partly because of the extent of the black economy, partly because of married women who might or might not choose to go out to work if work were available at a suitable time and place, and a whole range of examples which the noble Baroness and other members of her Select Committee went over for Session after Session in your Lordships' committee rooms.
Personally, I think that the whole question of unemployment is fundamentally misconceived of when people talk about 3 million or 4 million: we were presented with an abundance of evidence that unemployment is a residual, it is a flow and not a stock, and it is better measured as a period between which a person loses employment and a person gets another job rather than as so many millions. It would be much clearer if we were to say that it takes a person on average three weeks, or three months or three years to get a job. That is the reality of the situation. It is towards the greater efficiency in the working of that labour market, it seems to me, that the ultimate solution of the problem of unemployment lies. That is my first point of disagreement with the noble Baroness.
Secondly, although personally I am persuaded by the arguments that one hears in Sub-Committee A of your Lordships' Committee on European Communities on the European money supply, which is currently sitting, that full membership of the European Monetary System for the United Kingdom would probably be in the better interests of our country, it is a very narrow balance, a very technical affair, and I am by no means persuaded that the fact that the Government have not belonged to it in the full sense in the past four years is of any great significance. Of far greater significance, I think, has been the Government's courage and boldness in abolishing exchange control—which has been strongly attacked by the Opposition on the grounds that it takes jobs away from this country and hands them to foreigners. But I think that in the long run it has done an enormous amount for confidence in British business and British enterprise and, above all, in the standard of living of British people because it must necessarily follow that, by putting our money where there is the biggest return, in the long run the economy as a whole does better.
Baroness Seear: My Lords, I promise not to interrupt the noble Lord more than once. I should like to point out, since he is opposing my amendment specifically, that at no point did I mention exchange control and, in fact, at no time has the fact that my Party opposed exchange control ever come into the argument. I am glad to hear that he marginally agrees with my arguments about the EMS.
Lord Vaizey: My Lords, it is a great delight to find the noble Baroness and myself on the same side. I am delighted that the Alliance now declares that it would not reintroduce exchange controls in any circumstances. That is an important statement if the serious debate is to be between the Alliance and the Conservative Government, as I think it will be increasingly in the future.
Perhaps I may apologise if I misunderstood the noble Baroness. I thought that she was arguing that membership of the European Monetary System would have helped us substantially. I was trying to point out that the one major step which the Government actually took right at the start of their period in office had been of far greater significance than the comparatively minor matter of joining the European Monetary System. That, I think, is an essential point. If the noble Baroness did not make it, then I rather wish that she had.
I should like to turn to a point that she made, substantially, which is the need to pour more public money into the construction industry. I am glad that the noble Baroness did not raise the other red herring which was raised in the report of the Select Committee, from which I myself dissented, that we should employ hundreds of thousands more people in the National Health Service at the going rate determined by COHSE. That, I think, would have been a source of even lower productivity in the National Health Service. In the construction industry, into which it is alleged that public money should he poured, one must begin to ask on what criteria public money would he allocated—presumably at less than the going rate; in other words, earning less than the return that it would get now if the market put it in.
The noble Baroness specifically mentioned the railways. Apart from a few railway fanatics, who believes that there is a long-run future for the whole British Rail empire as it at present exists? No serious economic case has yet been made out for railway electrification. What we are asking the Government to do in this case is to override the commercial judgment even of British Rail, which one would not put all that high in the list of managerial genius, in order to create work in an industry which undoubtedly has a very dubious future—for the very simple reason that the consumers have voted with their feet away from the railway towards the roads, which may be something that the pro-railway lobby is against but is a fact both on the freight side and the passenger side.
Another example which is repeatedly brought up is sewers. I really possibly positively doubt whether the cure of unemployment will depend entirely on the replacement of the inner London sewers, in connection with which the noble Lord, Lord Bowden, frequently suggests that, if a Salvation Army band
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marks time, it will disappear downwards because the road will collapse.
Nor do I think that the money should go into council houses. All the evidence is that people want less council housing and more private housing. There is a whole series of cases which one goes through individually case by case; and the general case for supporting the construction industry by large-scale public intervention on any individual level fails to meet the criteria of commercial viability upon which the whole of the Government's present programme is, I think, soundly and solidly based.
Lord Molloy: My Lords, I should like to refer to the point that the noble Lord made about people wanting to have houses but not council houses. In the past 150 years since Disraeli really organised the first principle of council housing, there was nothing whatsoever to stop the private sector from building homes, if they could do so at prices which the ordinary folk could afford. They failed on that. That was recognised by Disraeli and by subsequent Governments and. to house our people, the council house was introduced because of the total, complete and absolute failure of the private sector. Is that right or wrong?
Lord Vaizey: My Lords, I have an enormous respect and affection for the noble Lord, Lord Molloy, but he is completely and utterly wrong. The great majority of the people of this nation are actually housed in houses which have been built privately by speculative builders and. given the chance, anybody who can buy a council house in which they happen to live will do so as soon as he possibly can in the face of the opposition, sometimes, of the local authority.
I was trying to see how far the Alliance programme would fit in with the major structure of the Government's policy as I understood it, which I supported. I certainly agree with what the noble Baroness said: that regional policy in this country is out of date and has almost certainly been a failure. The unemployment black spots to which she referred are the same now as at the time of the Jarrow marches. Since that time, we have had incessant Government regional policies under Governments of all colours. I agree with her strongly that a policy review of regional support is urgently needed: but it certainly does not argue for greater public intervention.
The area of the country with the most massive unemployment is Northern Ireland, which, as the noble Earl who is to reply to the debate very well knows, is, in public expenditure terms, one of the most socialised states this side of the Iron Curtain. If public expenditure cures problems, Northern Ireland should be as a prosperous as Switzerland. When one looks at the case for further expanding public expenditure. I seriously think it is weak.
If I may, I will refer to the speech of the noble Baroness, Lady Lockwood, with much of which I agreed. She said that the Government must devote more to education and training, whereas they have in fact pursued a policy of cuts. That means really that the noble Baroness has swallowed propaganda and not facts. The expenditure per head on education has risen inexorably year in, year out, under the Government, and the massive new training programme is the largest

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training programme which has ever been introduced. A much more interesting question, to which your Lordships have from time to time devoted your attention, is whether or not all the money that we have spent on education has proved worth while. I think that I can speak with some authority on this as I have gone into the figures inexorably year after year. It has been one of the great disappointments of the whole post-war period that the millions and millions and millions which successive Governments have sunk into the educational system have literally sunk, without any major positive benefit to a very large section—a deprived section—of the manual working class who leave school at the minimum leaving age. That is the area to which, with great respect to the noble Baroness, we would be wiser to devote our attention.
I would conclude this speech (which is already overlong) by referring, if I may, to the eloquent speech of the right reverend Prelate the Bishop of Lincoln, to which I listened with great respect and with much of which I sympathised. I almost said inadvertently "subsidised"—and of course as a loyal Anglican, I actually do subsidise indirectly the Bishop's heavy expenses. What he asked the Government to do was to weigh the benefits of its economic success, if I may briefly summarise his speech, against the costs of its policies. In this context, I take it that by "costs" he means the costs of having a substantial number of unemployed persons. He then referred in very eloquent terms to such abstractions as "market forces".
We have tried now, for years and years, since the outbreak of the Second World War, to deal with the economic problem of this country and the misallocation of resources by Government intervention, by the bureaucratic process. If experience has told us anything, it has told us that on the whole that system has not worked. Experience has shown us—and it is all around us to see—that on the whole the market system has worked. I know that no system is perfect, whether it be a bureaucratic or a market system; but this is the first Government we have had for many years which has said: "For goodness' sake, let the forces of the market try to clear the market and try to satisfy the consumers' needs".
I am personally absolutely convinced that this is the right way to tread. I should like the Government to march a little faster but, on the other hand, the alternative seems to me to he a combination of muddle, of ideas drawn from hither and thither, which make no coherent programme at all and which are based purely upon the assumption that public expenditure increases on a very large scale would he wrong but that public expenditure increases on half that scale would be right. I fail to see the logic of that course of reasoning, and for that reason alone I ask Your Lordships to reject the noble Baroness's amendment.
8.53 p.m.
Lord Spens: My Lords, by this time of night most of the points I wanted to make have already been covered, so I shall not he all that long. But I do want to make reference to both the maiden speeches we have heard tonight. The noble Lord, Lord Ingrow,
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who I see is not here at the moment, declared himself in favour of small businesses, and that warmed me very much because that is an area in which I have tried to do something to help. The noble Lord, Lord Bauer, said things about the welfare state with which I am very much in sympathy. But, much more than that, what pleased me about the fact that he has made his maiden speech is that this now frees him to become an active member of our little all-party repeals group, in which I hope and believe he is going to play a very prominent part.
One thing has not yet been mentioned so far as I know, and that is the position of the self-employed. I just want to say this about the self-employed—who I think number something like 2 million of the working population. For several years now, from the beginning of 1981 in fact, I have been trying to get a review made of the Class IV national insurance contribution. When I raised this subject in, I think, 1981, the noble Lord, Lord Cockfield, referred me to a discussion paper which was going to solve the problem. I raised the question again in January 1982, and the problem was still under discussion. So far as I know, it is still under discussion now, in June 1983, and we have not heard how the Class IV national insurance contributions are going to he dealt with. So I just want to give notice that I shall he raising the question again during the course of this Session unless I hear that some alleviation is going to be made to the self-employed on this particular matter.
Going back to matters which have already been raised on trade union reform, the gracious Speech says that a Bill will be presented to help to encourage members to take more responsibility for their unions; and that is excellent so far as it goes. I think we were warned by the noble Lord, Lord Campbell of Alloway, that we ought not to anticipate the White Paper which is shortly to come out on this, but I do not think that is right. I want to anticipate that White Paper, because I believe that it ought to contain at least three points, the first one being that secret ballots should be held for all important appointments inside the unions and that those appointments should not run for more than a reasonable period of years. The second one is that full negotiating procedures ought to be complied with by the unions before they call a strike. The third one is that in the case of any important strike which is going to hurt the general public there should be a secret ballot before that strike is called.
If those three points appear in the White Paper, I shall he happy; but, of course, we are not going nearly far enough in our reform of the unions, and I do support very much the speech which was made by my noble colleague Lord Marsh on this subject. I had to lunch with me today an American attorney and his delightful wife. I asked the attorney what the situation was in the United States about union immunity from tort and contract. He said there was no immunity, and he was very surprised to hear that unions have complete immunity in this country. That, I am sure, is something that we really have got to get put right. At the moment, any member of the public can have his whole business ruined because of some strike by some union which has nothing to do with him. I see that my noble friend Lord McCarthy wants to ask me a question.
Lord McCarthy: My Lords, the noble Lord is being unfair to the Government, Surely he would accept that as a result of the 1982 Act there is no immunity in tort and there is no immunity for individuals any more.
Lord Spens: No, my Lords, I am not a practising lawyer any more these days; so I will not argue on that. But surely the immunity is still there so far as third parties are concerned, and those are the people I worry about because I am one of them—and so are all of you, at times.
I turn now to unemployment. I have been anticipated by the noble Viscount, Lord St. Davids, who unfortunately started to speak while I was out of the Chamber. However, he made a point which I want to emphasise. Despite agreeing very much with my noble friend Lord Vaizey in his description of unemployment as a flow rather than as a mere statistic at any point in time, I want to press the point made by the noble Viscount, Lord St. Davids. I do not believe that we shall ever get back to full employment in the foreseeable future.
Four years ago, almost to the day, I made a speech in this House on unemployment. I stuck my neck out and said that unless the Government did something about it (this was at the beginning of the first Administration of our present Prime Minister) there would he at least 3 million unemployed by 1984. That figure has been reached a little earlier than 1984. Unless the Government do something about unemployment, I think there will he 5 million unemployed by 1988.
The total number of jobs in this country is declining. The technological advances that we make are all aimed at removing the human element from manufacturing. The argument is that there will be sufficient new service industries coming along to mop up the lost jobs, but even those service industries will not employ very many humans. The time has come when we ought seriously to think about how we are going to treat a permanent number of persons who may never get a job during the whole of their working lives. I do not believe we can leave that just to chance. I should like a new Beveridge plan to be created. I respectfully put that point to the Government as one of their objectives in this Parliament.
9.3 p.m.
Lord Molloy: My Lords, I rise to support the amendment so ably moved by my noble friend Lord Bruce of Donington:
"but deplore that the gracious Speech contains no relevant proposals to assist manufacturing industry or to reduce unemployment".
I believe that is vital. Unless we rebuild our manufacturing industry and get it out of the mess that this Government have got it into, we shall never be able to do anything about unemployment and build the kind of society which was outlined so admirably this afternoon by the right reverend Prelate. In his speech the right reverend Prelate directed us along the path we have to traverse in order to build a civilised society. Many of his criticisms are applicable to the Labour Party, the Conservative Party and the Liberal Party Therefore, we should take serious note of what the right reverend Prelate had to say.
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I want to comment briefly on two contributions, one from the noble Lord, Lord Boyd-Carpenter, the other from the noble Lord, Lord Vaizey. I am absolutely amazed that the noble Lord, Lord Vaizey, disagreed with me. He has great experience of local government. I know that, like me, he has spent hours trying to knock down filthy, wretched, stinking slums in Fulham and Hammersmith in order to provide homes for people who cannot afford to buy their own homes. It was Disraeli, a Conservative Prime Minister, who first thought of council houses. The noble Lord, Lord Vaizey, did not know that when he was lecturing at Brunel. He knows that now. He can take back some other information with him. One hopes he will no longer mislead students up there. The point is that people could not afford to buy their own homes but that local authorities could buy homes for them. Those people paid it back in rent, through the council.
Noble Lords, in particular the noble Lord, Lord Vaizey, ought to note that when I was in local government 50 per cent. of British families in this realm of ours were housed by local authorities. It hurts me when I realise that under this Government our building programme has slipped below the standards of 1925. But I do not suppose it gives many of your Lordships a great deal of trouble. We all have somewhere nice and comfortable to go home to. But there are tens of thousands of people in this realm of ours today who have nowhere to go home to. Many families—I beg your Lordships to listen to this, in particular the noble Lord, Lord Vaizey—in the queen of the suburbs, the London Borough of Ealing, are this night living in the backs of wrecked motor cars. I do not think that that is either amusing or anything to be proud of.
The other point I wish to make refers to the battle against inflation. It is said that this is a great victory. Is it? It is a victory, but it is very much a Pyrrhic victory. The trouble with our debate tonight is that it seems to have been dominated by economics—a dry subject. After my noble friend sat down, with the exception of the speech of the right reverend Prelate, there was hardly a spark of humanity or concern. We are talking about people. We are not talking about inflation just for the sake of it. As unemployment increases—I hope that the noble Earl, Lord Gowrie, does not think that this is amusing—
The Earl of Gowrie: My Lords, I was not laughing; I was blowing my nose.
Lord Molloy: My Lords, I am glad that the noble Earl has finished blowing his nose. He can listen to this. The creation of unemployment has led to an increase in the number of suicides. Economists always seem to miss out on these statistics. The number of suicides has increased. So has the number of divorces and the number of split families. I believe that it is this kind of thing which can destroy our nation. It is not so much an economic problem as the evil effects of the appalling inefficiency in running this country that we have had from the Tory Party. They are the great inaugurators. They have inaugurated, all right. Under their stewardship we have seen the lowest production, the highest imports, the highest number of bankruptcies, and the highest unemployment. It is not so much a black economic death but a true blue one from which we have been suffering.

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Another element that causes me great concern is the sins of the Labour Party, which allowed the party to be thrashed most soundly. It is not a bit of use saving that the Government did not have so many people voting for them this time. The fact of the matter is that under our system, it does not matter which party won and which party had the same majority as that achieved by the present Government, they all would have said, "That is the system and we are entitled to our majority". The present Government are quite entitled to say that too, because they achieved a massive majority.
One of the crimes of the Labour Party is that they have not yet established themselves—although I hope they will in due course—in the role of being Her Majesty's official Opposition. I am disturbed, too, at the massive domination that the Prime Minister has over her Government and over her Cabinet. I will not take any thing away from her in that she has remarkable powers of leadership, but it is almost growing into something dictatorial. I am reminded of what Alexander Pope had to say in one of his poems:
"Yes: I am proud, I must he proud to see Men not afraid of God, afraid of me.".
That is not a healthy comment for me to be able to make about the Cabinet, because there is a reply:
"The great honour of that boast is such.
That hornets and mad dogs may boast as much.".
Therefore, I believe that it is in this House that we can muster an Opposition not simply to oppose but able to propose another point of view so that Ministers in this House will be able to say, "There is something in that point of view and we ought to take this point back to ministerial meetings of the Cabinet". That is the great advantage of this particular House and the great role that we have to play. That is a compliment to all sides of the House.
We have suffered under four years of Toryism and under three years of monetarism, although they have abandoned that line now. But that was a blight that put Britain in the worst position among any of our competitors, notwithstanding the world recession. The claim that Britain had weathered the storm better than most of our competitors has been shown during this debate to be wholly untrue. According to the OECD, British industrial output fell by 11 per cent. whereas the average in developed countries was only 4 per cent. The savage effect of the tax on our health and education services has produced, even since the general election, new figures which show that another thousand doctors are on the dole. That cannot be right, can it? There must be something wrong if this sort of thing happens. The worst aspect of this kind of unemployment is not merely people being out of work but that jobs have been destroyed; families have been smitten, and the nation is in very great danger.
The Government won their first general election in 1979 with the slogan "Labour Isn't Working". Immediately they won, they presided over the steepest rise in British unemployment since the early 1930s. I find it remarkable that they won this election with the aid of possibly the most biased media outside the Soviet Union—that in my country. That helped enormously to blind people to the real truth—together
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with the inability of my party, although I regret having to say this, to put their case properly.
In the 1979 Budget, a rise in VAT—a measure needed to balance the effect of cuts in income tax to help the rich—meant a severe attack on the poor and ordinary people. It meant an increase in the cost of living to the poor—and then the unions were chastised for attempting to defend their members. Many things have been said today by the noble Lord, Lord Marsh about the trade unions—about them being so myopic and conservative—and I agree with a great deal of that which he said. But I cannot and will not agree, after the Chancellor of the Exchequer made a savage attack and lowered the standard of' living of millions of people in the same Budget that gave massive tax cuts of thousands of pounds a year to the well off, that the trade unions should remain silent. Had they done so they would have been despised by anyone with a bit of guts under his belt.
I want to deal very briefly with a few items concerning public ownership and privatisation. Time will not allow me to go into detail, but I want to deal with the principle of North Sea oil and gas and the fact mentioned in the gracious Speech that there will he further development of these. I think we are all agreed that North Sea oil and gas play a vital role in the economics of our country. Since 1979 we have received£20½billion from North Sea oil revenues. What have the Government done with it? Have they used it to prime the pump of our economy so that it could get more efficient, to develop new techniques and technologies, to support our social services? No, none of these things were done. With all that£20 billion none of that was done; not a halfpenny was spent on new technology, not a halfpenny on our universities, not even a halfpenny to support our social services. Were there tax concessions, apart from their friends being given nice big handouts? Was there help for either public or private use in the economy? None of these things were done.
The whole lot went to pay for the unemployment that the Government created, the businessman's Government;£20 billion pouring in from North Sea oil went to pay for the unemployment that they set out to create. If the cost of an unemployed person is£5,000 and the increase in unemployment is two million over a given period of years, the cost equals£10 billion a year, which soaks up all our North Sea oil revenues. That means—and I think most economists would agree—a profligate form of housekeeping. Nothing was invested in new industry and technologies.
And we have seen that there is even worse to come, because to pay for unemployment we are rapidly overproducing North Sea oil. It seems to me that the Government have anticipated more unemployment and that is why they are seeing to it that there is quicker development of North Sea oil. This is no prudent measure to extend oil energy self-sufficiency for years ahead, but rather to have enough money to pay for the increase in unemployment.
There is also the incident of the British National Oil Corporation making hundreds of millions a year for the British taxpayer, and that meant that North Sea oil was caring for our future. Surely there is nothing

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wrong in that, It is no good hating a thing because it is publicly owned. Do we really say that if something belongs to the state we are "agin" it? Who is anti-Royal Air Force, anti-army, anti-navy, anti-police? Let us have a balanced approach. There are some things which the Labour Party think about nationalising which I believe are an absurdity, but there is an equal absurdity in the Conservative Party when they look at certain vital aspects which in my judgment ought to be under public control and under proper democratic control by the Parliament of the people.
There are so many things I would like to go into, but time will not allow. I just say in conclusion, in regard to the criticisms poured on the Government when one realises that we are suffering from a terrible economic sickness, that it might be easy to quote, now the election is over, from newspapers which would normally support the Opposition parties, but I want to give one quote from the Daily Telegraph:
"From the age of the smokestack to the era of the microchip. That is how the Tory manifesto describes the problems of transformation facing Western economies today. Sadly, for parts of the British economy, the last four years have seen a different kind of transformation—from the age of the smokestack to the era of the demolition gang. Yet the Government seems so apparently satisfied with its first term that its programme for re-election can he summarised in just three words—'same again, please'."
That, my Lords, I believe is the thing that is really frightening; that is the thing which is most perturbing. That is the reason why I support, and I hope the House will support, my noble friend's amendment to the Motion.
I conclude with this word of warning to my own party. I want to be as fair as I can. I have criticised the Government and, in the interest of true democracy, I should forthrightly point out some of the errors I have seen in my party. We in the Labour party should not seek universality nor immortality for our ideas. Integrity and vitality are more important. Our Holy Grail is the living truth which is alive and can change.
We have a heavy responsibility on this side of the House and I hope that we shall have co-operation. Only in this country could a Member of the Oppositition make this plea. That is what I mean when I talk about Great Britain—that I can say this sort of thing. Despite the massive majority in the other place, we shall not have to appeal but shall be entitled to expect that the party opposite will see that our entitlements as Her Majesty's loyal Opposition are filled to the point where there can be no complaint. That, perhaps, is where this Chamber might flourish longer; or if not longer, can give a better example than some of the things that have already started happening in another place.
If my party does not cherish integrity when it has this responsibility in Opposition, we shall see in change an excuse to eschew our socialist philosophies. I have no time whatsoever for the militant extremists. No man in my party is a true democratic socialist if he has no sense of decent patriotism for this island race. I want to make that quite clear. At the same time, I do not want us to get rid of our socialist philosophy for opportunism. If we do that we will simply exchange the inspiration of the pioneer for the reward of the lackey. In doing that we shall not release the fetters that hind us in Opposition. They are fetters to which we are entitled. But they will only fetter us to a certain
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degree, because in a proper democratic society we shall accept them until the people free us from them and then, one day, we shall take over as the Government.
That is the spirit and the message that this House can send not only to the country and not only to the other place. Even at this moment where we are facing grave danger, let the principles and spirit of British democracy in all our parties shine forth with, at all times, a fundamental benediction that we can confer on our thinkings with the grace of any form of Almighty help. But in all our debates it is people and the individual who must be at the centres. There should be no particular "ism", whether socialism or capitalism, and no particular party. When we can do that we will build up the economic strength of our country and at the same time give the courage which our people need and which they in their endeavours can then show as an example to the rest of the world.
9.24 p.m.
Lord Thomas of Swynnerton: My Lords, I express my regret that I was not here earlier this afternoon to listen to the many distinguished speakers, and particularly the maiden speech of my noble friend Lord Bauer. I shall read his speech with great care, and look forward to his future contributions. I shall certainly look forward to reading the first speech made by a Hungarian-born Peer—I speak with no disrespect—who is not an economist.
I wish to make three points. One is a debating point, the second is a point which your Lordships may well think sanctimonious, and the third is a liberal point in the broadest sense of that sometimes rather over-used word. My first point derives from the concluding words of the noble and learned Lord, Lord Elwyn-Jones, in his speech yesterday, which formally was on a different topic but which nevertheless seemed to colour a good many of the speeches made from the other side of the House today. He suggested, deriving from a remark which he said he had heard from the late Lord Butler, that the Conservative Party had lost its heart. If that remark was indeed made by the late Lord Butler it is a formidable accusation, particularly since it apparently comes from someone who, whatever his heart was, certainly had a very good head. That suggestion has been made so often that it deserves a very vigorous response.
Is it heartless to consider that the only way in which the problem of unemployment can be solved is to recreate a climate in which jobs can be provided? Is it heartless to suggest that inflation causes as much damage to society as any other complaint, including unemployment? Is it heartless to question the validity of nationalisation, bearing in mind that the nationalised industries have not had a very good record in terms of production or of labour relations? Is it heartless, therefore, to put forward the idea that denationalisation might be a very good thing on a large scale, thereby increasing competition and serving the consumer? Surely those are not heartless suggestions.
Equally, it does not seem to be particularly heartless to think that competition and choice can play a part in medicine. I also think that it is quite wrong to suggest that all the old shibboleths of the 1940s and 1950s should not he re-examined. Surely that is exactly the sort of thing that the late Lord Butler would have

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demanded at an earlier stage in his life. Whatever he may have said in 1979 when he was out of power, certainly so far as I remember, he did not seem at all reluctant to warm his hands at the bonfire of controls which he himself had lit in 1951. Although that may seem a debating point. I think it is a very important one.
The second point I want to make derives from something that has been referred to in the course of today. It does not actually derive from the gracious Speech, but, as those who have referred to it have suggested. I believe that it should. I am referring to what Neville Chamberlain might have called, if I may paraphrase him, a near-at-hand country of which we know nothing. It is a country whose wealth is extremely obscure, and we are quite undecided whether it is a good country or a bad one. If your Lordships are thinking that I should have made this speech in the foreign affairs section of the debate on the Address in reply to the gracious Speech, you are misunderstanding me. The country to which I am referring is that to which the noble Baroness, Lady Seear, referred; namely, the black economy—a country of great importance.
It is important because of its connection, as the noble Baroness suggested, with unemployment. It is important because of its connection with industry. Perfectly plainly there are new industries which will derive from this sector of the economy. It is important from the point of view of statistices. After all, if the noble Lord, Lord Cockfield, is right in a reply to me in this House not long ago, something like 7½ per cent. of the GNP may be supposed to be in the black economy. That is a very large percentage, although it is not as large as that which was suggested by some American economists, including Mr Milton Friedman, who no doubt, had he been an Englishman, would be in this House and who is certainly an adviser to this Government. They have suggested that this figure may be as large as 14 per cent. It may be even larger than that. These are enormous figures. The total may be as much as £30,000 million, or £30 billion, which, if correct, would give a tax return of at least £8,000 million—if I am not doing my arithmetic wrongly. If these figures are completely excluded from the statistics, surely a very strange game is being played by economists, statisticians, and those who draw conclusions from them.
This subject is also important because of its relation to law and crime. Here I differ strongly from the inference drawn by the noble Baroness, Lady Seear. In his speech yesterday, my noble and learned friend the Lord Chancellor, pointed out that a country riddled with dishonesty is unlikely to be effective. I am not suggesting that we are riddled with dishonesty, but it certainly seems as though we are wriggling with it.
I know that there are many people who consider that the black economy is a sign of life and vitality and an indication that even in the most overtaxed community the enterprising will survive. Nevertheless, I think it also is an indication of the fact that the state can create very strange objets d'art indeed, because in my opinion the black economy is an indication of just how far we as a nation have slipped from standards that we had in the past.
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I have one example, which I think is an overwhelming one. When, like many other countries, this country abolished the slave trade in the early part of the 19th century, it was vigorously fought in this House and in another place. It was so fought because the slave trade was by far and away the must advantageous export trade in the nation at the time. However, in 1808 the slave trade was abolished, and immediately afterwards it was completely abandoned. There are no instances of charges made under the Slave Trade Act, and indeed no instances of historians suggesting that British traders continued with that traffic after the Act abolishing it. In every single European country—France, Spain. or Portugal—which also carried on the slave trade at that time there was no such universal indication that the law was being properly carried out. I suspect that now we should be in a very different position, since in terms of abiding by the law we are at least no better than many of our neighbours.
There have been made various suggestions—some made by the noble Baroness, Lady Seear—as to what should be done about it. Mr. Arthur Seldon, the luminous colleague of one of our most luminous noble Lords here, the noble Lord, Lord Harris of High Cross, has suggested that the whole problem could be very effectively solved by having what one might call a two-tier day, whereby up to four o'clock one worked on taxed endeavour, and what one did after that would be free of tax.
A Minister in another place has suggested that perhaps the solution would be to cut the maximum rate of tax to 50 per cent. or even 40 per cent. and impose very high levels of penalties on anyone who broke the rules. Others have suggested that it might be beneficial to introduce a standard rate of tax of about 18 per cent. with no perks at all—a very important point. There are all kinds of very good suggestions.
My suggestion is one of, I should have thought, suitable gravity for the lateness of the hour. Your Lordships will be aware that the Conservative Government elected in 1979 were remarkably reticent in their use of a well-known instrument, the Royal Commission. I believe that a Royal Commission on this subject would serve the nation extremely well. The complete uncertainty of the size of the problem, the entire division on whether the practice is a disgrace or an invigorating sign, the overall uncertainty as to what to do about it, and the obvious fact that, whatever is done about it, it cannot be done very quickly, would suggest that it is a good subject for that particular, rather heavy, mechanism.
My third point, which I mentioned initially as being a liberal one, derives, you will be relieved to know, my Lords, from the Queen's Speech. You will observe that on the first substantive page, there is a commitment by Her Majesty's Government in these words:
"They will urge the need to preserve and strengthen an open world trading system".
Those are firm and invigorating words. This is a subject on which we could have many debates of great length. Very often, Governments—even Conservative Governments and. I must say, even Conservative Governments elected in 1979—find a number of reasons to avoid carrying out the principles of which

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they were completely convinced. I remember one of my favourite quotations from the late Lord Shelburne which I find, alas, increasing reason to use in politics. He wrote in his memoirs that,
"it requires no small labour to open the eyes of either the public or of individuals but, when that is accomplished, you are not got a third of the way. The real difficulty remains in getting people to apply the principles which they have admitted and of which they are now so fully convinced. Then springs the mine composed of private interests and personal animosity".
In a world and a nation that has seen a good deal of its food removed from the open market, for very good reasons, no doubt, through the European Economic Community, and which has seen, through the multifibre arrangement, a certain percentage of its clothing removed from the open market; that has begun voluntary export restraint in a variety of ways and that has continued the export credit guarantees regardless, there is no doubt that a good deal of room exists for reconsideration. This is particularly desirable, surely, in a country that, after all, still depends for 30 per cent. of its GNP on exports—a remarkable and unique percentage in the world, bearing in mind that such a country, so dependent, is surely more interested in the promotion of an open trading system than any other country in the world.
9.38 p.m.
Lord Ezra: My Lords, I had not intended to come along tonight and speak about nationalised industry but to range more widely on our economic affairs. However, as a number of noble Lords opposite have severely criticised the nationalised industries—particularly the noble Lords, Lord Cocklield, Lord Boyd-Carpenter and Lord Vaizey—and as I appear to be the only speaker in today's debate with first-hand experience of nationalised industry. I feel that I should say something about it. I hope very much that their criticisms were not directed at people who work in the nationalised industries. I can say, from my long years of experience that the management and the people who work in those industries are as good, as efficient and as effective as those who work in any other part of British industry. If there was any suggestion that those who happen, by chance or desire, to work in nationalised industry are somehow second-class industrial citizens of our country, I hope that the noble Earl, Lord Gowrie, will make clear that this is not in the Government's mind to say.
I am worried, too, about the approach to the nationalised industries that supposes that somehow, by waving the magic wand of privatisation, all problems will disappear. That is a complete over-simplification. What noble Lords opposite need to do before they criticise the nationalised industries too severely, is to address themselves to the sectors in which the nationalised industries happen to be operating.
As a matter of fact it is only a limited number of the nationalised industries that are in great difficulty. No word was said by the noble Lords opposite who joined in this criticism, about those that are making a success of their affairs such as the gas industry: the ports industry, recently transferred to the private sector; the telecommunications industry, about to be transferred; the airports industry and so on. What needs to be recognised, particularly in the case of coal, the railways and steel, is that they happen to be in sectors which the
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world over are in difficulty, What we must face up to is the basic problem in those sectors. It is not the accident of ownership which has created those problems.
If we compare the British coal industry with the coal industries in Germany, Belgium and France, which is a fair comparison to make because we are operating in similar conditions, similar geologies, it will be seen that in financial terms the cost to the country of producing a tonne of coal in Britain is far less than it is in those other countries. Yet two of those industries are theoretically in the private sector.
Let us take the steel industry and compare it with the steel industries in the other countries of the Community. Let us take Belgium and the Cockerill Company which is theoretically privately owned, and yet for per tonne of liquid steel produced in Belgium there is far more public money infused than in the case of Britain. What that proves is that in those particular sectors it is not a question of ownership; there happen to be real problems in those sectors.
Where I fear we tend to be going wrong from time to time in this great country of ours is that we do not properly identify the problems. Let us take the state of the economy at the moment. References have been made to the recent CBI survey. I happen to have taken the trouble actually to read it. They certainly say that:
"The overall improvement in the economic situation noted last month is reported to have continued.… However"—
and this was not referred to on the other side"—
"sectoral and regional variations remain. Output levels in total appear to be rising from a low base, although capacity utilisation is reported to remain low for most firms",
and so on. In other words there is a very real qualification in the report that is made.
Let us look at the regional position. As regards the South-East it says:
"There is optimism over prospects for the next six months, although wide variations between sectors and companies remain".
Let us move further North and see what they say as regards Yorkshire and Humberside:
"The slow improvement in orders and output appears to he improving but progress is patchy and hesitant in general engineering, metal fabrication, and civil engineering".
Let us take the North-West which will be my final quotation because of the hour. It says:
"The North West seems to be marking time with only isolated signs of recovery apparent".
The situation to which we need to address ourselves at present in Britain is that there is a very delicate amount of recovery and that it varies according to sectors and according to regions. The most marked regional improvement is in the South-East and as we move north it diminishes. The most marked sectoral improvement is in retailing and high technology. As you move into the heavier end of industry it is not yet very noticeable. Of course, there are individual firm exceptions, but that is the broad picture. I contend that that is the situation to which we ought to be addressing our minds. We ought to be seeking to galvanise this delicate plant so that we can spread the measure of recovery. I am sorry that this should appear to be amusing.
Lord Vaizey: My Lords, I was amused because if you galvanise a delicate plant it will inevitably die.
Lord Ezra: My Lords, I shall consult the noble Lord, Lord Vaizey, on my horticultural phraseology. All I was saying was that I thought this delicate state of affairs needs to be dealt with in such a way that we can spread—I hope that that will be permissible—the degree of improvement that is apparent in certain regions and in certain sectors.
Matters have been mentioned in the course of this long debate which I believe need to be attended to rather more seriously than the Government suggest they would like to. Let us take the question of the cost of money. Although the rate of interest has come down, it is still more than twice as much as the rate of inflation. On that basis it is very difficult to see how the normal industrial concern can borrow and invest money. Let us take the question of the rate of exchange. It has been contended that there is very little that the Government can do about it. But what worried me about the recent Williamsburg conference was that there was an opening there to raise this whole issue of getting more stability in rates of exchange throughout the world, and it was apparently deliberately not taken up by our Government. Take the question of the tax on employment, which the Government have quite rightly, reduced by a substantial degree. This national insurance surcharge should be totally eliminated. It is quite wrong that we should
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have any tax on employment at a time of gross unemployment. Therefore, here are three areas which I believe should very seriously be tackled.
The final area, which I think should be looked at in connection with getting industry moving again, is the infrastructure. Of course, nobody would recommend—certainly not from these Benches—that there should be an unlimited capital expenditure splurge. But debates in your Lordships' House have shown that there are parts of the infrastructure—the water and sewerage industries, the road undustry, the railways and housing—which need a certain degree of improvement. That improvement should be undertaken now. Let us get the fabric of our country right so that we can participate in the developing improvement in the world economy, and so that we can provide worthwhile additional employment.
In conclusion, I should like to contend—and I have kept myself strictly to 10 minutes—that, first, we address ourselves to the real problems and that we try to put out of our minds doctrinal considerations. We are faced with a situation far more serious in our country than that. We have the real chance of recovery—I will not deny it—but it is a delicate proposition; it needs to be handled with care, but also with determination. I hope that both in our public enterprises and in our private enterprises the Government will seek to make sure that they apply policies which will push forward this developing situation in a sensitive but effective manner.
9.50 p.m.
The Lord Bishop of Norwich: My, Lords, I am glad to follow the thoughtful and irenic speech of the noble Lord, Lord Ezra, because he has brought us to the seriousness of our debate. We are of course debating in fact what is in the Queen's Speech and coming towards the conclusion of long days of debate. I want to draw particular attention to a phrase in the Speech:
"My Government will pursue policies designed to increase economic prosperity and to reduce unemployment".
Clearly those go together.
"My Government will promote growth in output and opportunities for employment".
Again they go together. But I want to draw particular attention, and to one specific instance as an example, to.
"The improvement in training will he sustained. The special employment measures will continue to assist those out of work".
First, I must ask your Lordships if I may make my apologies for not being here in the first half of the debate. I had to preach in Peterborough Cathedral for their St. Petertide annual festival for the whole diocese. For reasons unknown to myself the whole diocese of Peterborough appeared to need heartening, and they felt that they could not be heartened without the presence of one of your Lordships from this Bench. Therefore, with your permission I went to hearten them and came straight back, aided immensely by the speed and power of the nationalised industry called British Rail, which helped me tremendously and got me here only a mere 14 minutes late on my arrival. I therefore missed 14 brilliant minutes of an earlier speech, and I am sorry.
I should like to draw attention to one particular instance which I believe illustrates the breadth of what we are doing. If I am accused of a constituency speech, as I believe in the other House that sort of thing is called, I only plead that I speak from particular knowledge. Some years ago, in 1979, at the beginning of the Youth Opportunities Programme and projects, we set up in Norwich, with the aid of the community, with the support of the city, and particularly with the energetic support of our own diocese and of the five clergy of our diocesan industrial mission, a Youth Opportunities scheme which has led now to a pilot scheme of the new Youth Training Scheme, which is really only just about coming into action now. Because we are ahead I wanted to share this one vignette, with your Lordships, because I believe that we are always tempted to speak in the widest terms, and I am coming to distrust generalities and to prefer actualities. I wanted therefore to make one comment in this way.
We built up this new youth training scheme from our own youth opportunity projects, and the MSC have put money into it. We have now got a magnificent factory at a very low rental, and there we are setting up the start of this new project which I shall have the privilege of opening next week at 12.30 on Thursday, 7th July. I should be delighted if some of those of you who have a strong concern for the employment of young people and a deep interest in youth training schemes, and a desire to be well informed about the ongoing throbbing life of East Anglia—and we throb as best we can: whether we can
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grow plants is a different matter, but we throb—could be there. You would then be on the television because we are making a video film of the whole thing, and this might help whatever party allegiance any of us have here. I of course from these Benches speak only in the national interest.
So far—and this is the encouraging thing I want to share with you—in our detailed study of how far we have got, within the three types of project groups that we have been working on amongst our youngsters—building, carpentry and painting and decorating—98 of our trainees left during the year and 49 of them went to full-time employment, having gained not only a little expertise but quite a hit of confidence. I believe that these small, local, not very enormous schemes, if they honeycomb the country under this imaginative Government scheme for youngsters, will help to overcome this tremendous sense of leaving school with a fear of no future. We are finding that our youngsters are overcoming that in that way. Placement trainees, who have been employed in a variety of community service organisations—homes for the elderly, hospitals and so on—achieved a higher rate of success with regard to employment, with 59 of them leaving for full-time jobs, and a further 10, making a total of 69 at the end of a 12-month training period. Of the 187 trainees who left during the year, 108 moved on to full-time employment: that is, approximately 58 per cent.
I give those facts and figures, which we may read more easily in Hansard than take in at this time of night, because I believe we have here a little light, a little flame, which is an example and which could catch across the country. We cannot just talk in the widest terms of the great movements of employment and economics, but we can do something where opportunities are given.
I want to pay my tribute to the work of the Manpower Services Commission, which has set us up, and also to my own five industrial missioners. The right reverend Prelate the Bishop of Lincoln knows more about industrial mission than I do: he has been in it for years and years, and understands how these things work. The youngsters are gaining confidence in this work. The two points I should like to make to the Government in that respect is that the sum we give to the young trainees has, as far as I can see, not changed since the YOP was set up. In the very useful paper (which was read as a Statement in this House) concerning the compassionate development of grants in the social security benefits, and the uprating of them, there were five areas which the Minister will remember were mentioned, but still the youngsters in the first YOP, and now in the youth training scheme, have not had their small, modest amount of money increased. As some of those youngsters come from villages outside a big city such as ours, quite often the modest sum given to them is eaten up by transport into a centre. I think that if one could consider even a small allowance area within a grant to these youngsters, that would be helpful.
The other point at which I hope the Government will look is the question of those who train our youngsters. They are paid a very small sum, and,

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because they are drawn from those who are out of work, the salaries that are paid are approximately 50 to 75 per cent. of the sort of salaries they could command if they had been in work or if they were in work.
In general terms, I believe that the YTS projects, as they begin to grip across the country, will be a true part of what the gracious Speech suggests will be done about training and about our youngsters, and will bring hope and encouragement to the boys and girls on which the future of our nation depends. My Lords, I stop at nine minutes, one minute before the noble Lord, Lord Ezra, by which I hope I gain some merit on earth if not in heaven; and once again I invite your Lordships to a buffet lunch on Thursday.
10 p.m.
The Earl of Onslow: My Lords, how pleasant it is to agree with the right reverend Prelate the Bishop of Norwich. He must be very right when he speaks of the importance of youth training, the importance of small businesses and the importance of small things. Perhaps the Church of England is coming back to being the Tory Party at prayer—and I bet he did not vote, as well. Edward Crankshaw, in an excellent book. The Fill of the House of Hapsburg said that Hungary produced nothing but beautiful women and dashing regiments of light cavalry. My noble friend Lord Bauer disproved that theory with an excellent maiden speech on the subject of the social services.
The noble Lord, Lord Ezra, was saying that he hoped my noble friends Lord Boyd-Carpenter, Lord Vaizev and Lord Cockfield were not attacking the people who worked in the nationalised industries. Of course, they were. Trains do not run by themselves; coal does not come out of the ground as if by deus ex machine: it is produced by people who work in it and organise it. If one is attacking an institution, then of course one is attacking the people. We cannot separate an attack on the people from an attack on the industry —or perhaps "criticism" is a better word.
Her Majesty's Government are very proud of their record on inflation, and very rightly so. They are proud of the increase in productivity in the private sector, and very rightly so. My noble friend Lord Ingrow pointed out that the growth of small businesses was a major factor in the taking up of unemployment, and it is absolutely right that this should be emphasised. My noble friend Lord Cockfield emphasised that wages are part of the pressure on price rises. Wages are part of the causes of unemployment. Why then are we, with our tax and social security systems, so muddled that the cost of employing a worker can under certain circumstances double, but that worker's weekly spending power can increase by perhaps£5 or even nothing, or in certain circumstances decrease?
According to tables in the Treasury and Civil Service Committee of another place, a man with a wife and two children, if he is paid£60 per week, has a net spending power of£72.53. If he is paid£120 per week it increases to£77.92: in other words, the equivalent of an over 90 per cent. marginal rate of tax. The situation
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is even worse at the bottom end. Net weekly spending power actually decreases with every£10 per week increase up to£100: that is, a£70 wage produces£72 net weekly spending;£80 produces£71.48;£90,£71.02, At£100, it goes back to£72.77.
Slightly different calculations perhaps, ones actually updated by DHSS, tax benefit model tables as at April, refer to a married man in work with two children aged 4 and 6. His income falls from£74.12 when his wage is£54 per week to£72 when his wage is£90 a week. The increase starts to rise again, but for some extraordinary, reason hiccups between£94 and£95 by falling£1.14. With three children, the increase falls between£54 and£99 and does not reach its old level until the wage is doubled to£108. The same table shows that there is another glorious drop in it. A married man, unemployed, with two children, with a previous wage of£50 has a benefit of£84.68. However, if his previous wage was£100, his benefit is down to£64.97. How on earth do we get ourselves into such a ridiculous situation? It is neither sensible, nor equitable nor anything but crass stupidity.
We all know that this poverty trap, together with the unemployemnt trap and the pension trap, is caused by the meeting of tax thresholds, indexed benefits such as family income supplement. Supplementary, benefit, free school milk et cetara, and work expenses. The Treasury and Civil Service Committee pointed out in paragraph 4.25:
"In all, the total United Kingdom figures for 1979 must he nearer 10 million and today it must he higher still".
We are talking now in terms of around 25 per cent. of the adult population for whom the reward mechanism has ceased to function properly. My noble friend Lord Trefgarne, at column 940 of Hansard on 24th November last, said it was 3½per cent. I regret to inform my noble friend that he was very badly advised.
No one has attempted to deny those figures. The Treasury admitted in evidence to the committee that the number of families facing marginal rates of 100 per cent., or even more, was 30,000. If extra benefits such as free school milk are taken into account the figure rises to 50,000. Nearly 700,000 families face 50 per cent.; nearly 5,000 families pay 60 per cent. or more at marginal rates. For comparison with high income families, there are 270,000 families in the 50 per cent. hand and there are only 70,000 in the 60 per cent. hand. My Lords, please do not think I am in any way advocating that we should reduce those top bands.
What I am advocating is that the present financial disincentive to work must be changed. If a basic income guarantee scheme were to be introduced, or a tax credit scheme—after all they were part of the Tory pledges in the 1974 election. I think—it would really pay to work. It would be possible, with the abolition of all social security benefits and the abolition of all tax allowances and thresholds, to produce a scheme which was cash negative. In other words, I think in the year 1982 we are talking about£68 billion worth of income transfer which was cash negative, in the jargon of the economists. For example, taking a married man with two children and one on the way, there would he two adults at£15 a week and one householder at£17 per

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week and one expectant mother at £12 a week. In other words, the child's basic income guarantee is payable from the thirteenth week of pregnancy. There would also be two children at £12. This would produce an income of £83 per week. Any income at all over that would be taxed on a sliding scale from 30 per cent. to 60 per cent. together with a £10 wage tax. This would also have the benefit of making part-time working profitable; it would make work sharing profitable; it would make retirement work profitable and it would make wage increases real wage increases. You cannot have a system where somebody's wage goes from £54 to £100 and he gets absolutely nothing in his pocket and the poor wretched employer gets a 100 per cent. increase on his wages. That is dotty. So what one is asking for is a real increase in the worker's wage at lower cost to the employer. This would have a magic effect on inflation and would be a real incentive for working people.
The present system is unfair and unjust to 25 per cent. of the adult working population. The Government, as my noble friend Lord Thomas of Swynnerton said, and contrary to what the opponents say, are a compassionate, caring and intelligent Government. Will they not bend their collective mind to cleansing this Augean stable and recognising that an efficient and streamlined industry is vital to our welfare? I suggest that a streamlined and efficient tax credit s system is also vital for our welfare. I would remind Her Majesty's present advisers of the words of St. Augustine:
"Remora Jusficia old quid regna nisi-magna latrocinia".
My Lords, I did not know the quotation: I was told of it, and I will translate it. It says:
"If you omit justice, governmental rule becomes little better than robbery".
The present tax benefit scheme omits justice and in some cases verges on "latrocinia".
10.9 p.m.
Lord Diamond: My Lords, the noble Earl will be glad to know that in the proposals made by the Alliance at the recent general election we put forward a scheme which would go so far as is practicable and possible to meet the difficulties which he himself has so well illustrated. He will appeciate from the fact that the scheme which his own Government proposed nearly 10 years ago has not been implemented that there are many practical difficulties, which are well understood in your Lordships' House, if we are to provide a net below which those on very low incomes cannot fall. Nevertheless, we attempted this, and much more, in the proposals which we made.
I know that everybody is very anxious to reach the stage of coming to a vote on our proceedings. Nevertheless, I hope that noble Lords will bear with me for two minutes while I express on behalf of my colleagues, as this is the first opportunity we have had to do so, our deep appreciation of the way in which the noble Baroness, Lady Young, carried out her responsibilities as Leader of this House, and in particular our appreciation of the deep understanding which she had of her trustee position as guardian of our conventions and interpreter of our wishes. It is only in that way that the unique and precious quality which
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we enjoy in this House, of being able to govern ourselves by our own self-discipline, is maintained.
I wish also to extend a very warm welcome—I am speaking to a fairly empty Bench, but I am sure that these remarks, which are meant just as sincerely, will be conveyed to him (we understand very well the absence of Ministers at this hour)—to the noble Viscount who is to he our new Leader. I have known him for very many years. On the basis of that knowledge, I want to assure him that he has our full respect and our total confidence in his ability to lead this House.
I now want to turn, following the excellent precedent set by the noble and learned Lord the Lord Chancellor, to one or two of the points which have been established by the recent general election. The first point which has been established beyond question is that there is no longer any possibility of our withdrawing, in the foreseeable future, from the European Community. I am sure that this is welcomed by most of your Lordships.
The next point which the general election established is that the abolition of your Lordships' House is no longer an issue. Indeed, as I understand it from the BBC, the only outstanding question is whether the Prime Minister is prepared to recommend the record number of Labour aspirants which has been proposed by the right honourable gentleman who led his troops into the recent battle with banners flying, saying "Down with the House of Lords!"
What was also established by the general election was the firm position of the Alliance on the political map for all time. That could have been held in question by some who felt that a new party, in particular my own party, was perhaps a flash in the pan and that by-election results do not prove very much. But general election results do. It is now the case that every voter throughout the length and breadth of Great Britain has been made familiar with the phrase "the Alliance". Indeed, one in four of such voters voted for the Alliance, notwithstanding the fact that about one-half of the candidates and agents were without any previous experience and that we were denied, through lack of funds, many of the normal processes of communicating with the electorate. This is a matter to which the noble Lord, Lord Kaldor—whose attention I am sure I have—referred. In any event, this will go on the record in Hansard, and I can assure him that we spent in the Alliance about one quarter of the amount of money that the Labour Party spent and about one-tenth of the amount which the Conservative Party spent. The results were achieved against that background.
We enjoyed no paymaster either of the Right or the Left. What we did enjoy was the liberty to pipe tunes of our own calling. What has been established beyond argument is the injustice of the present voting system. That has been established in a way that no words or arguments could have underlined to the same persuasive extent. It has been shown to be a system under which at the last general election something like one-fifth of the electorate were effectively disenfranchised. In my view, it is no longer a question of whether we shall remove our present obstacle to democracy but simply, when?

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I wish to make three fairly short points on the economic situation. I can think of nothing more important to our economic situation, as many of us pointed out in recent weeks, than the fact that we should continue our membership of the European Community, to which I have already referred in the context of this economic debate. I hope I may say once more that I felt it right to follow the precedent set by the noble and learned Lord who sits on the Woolsack and followed by so many other speakers in your Lordships' House.
The first point I wish to make relates to the claim of the Government (and whenever we have a Government speech on these occasions we hear these great claims made) that they and their policies are responsible for the slight glimmer of improvement that we see in our economic situation. The simple fact is that that improvement, modest though it is—and it is certainly there—has been achieved in spite of and not because of the Government's policies. We entered this recession earlier than other countries and should have come out of it earlier than most other countries. As the noble Lord. Lord Cockfield, twice mentioned in his own speech. there has been an improvement in the world situation and we are lagging behind it. Had it not been for the obstacles put in the way of economic recovery by the Government's policies, I have no doubt that our expectation of growth would be much more in line with the Americans than the present miserable forecast which we are being given.
The second point I wish to make relates to the argument that is so frequently used by the Government, concerning the greater competitiveness which they claim has been achieved by their policies of denying industry the means of full development. Of course, there has been some improvement in efficiency, and of course we should all strive at all times for improvements in efficiency. But their idea of greater competitiveness depends on the extraordinary notion that those other nations which have already achieved a far higher level of efficiency than we have should simply sit down and wait for us to catch them up while we slowly improve our own efficiency. Of course, that has not happened. We have made some improvement, they have made some improvement, and our relative position is no better than it was.
The third point that I wanted to make was in relation to that part of the amendment to which I am now speaking—the amendment moved so well by my noble ally on the Liberal Front Bench, Lady Seear. In that amendment, we deliberately exclude the policies for revitalising industry and the economy proposed by the Labour Party. I want to go through the arguments shortly, stage by stage, as to why we have put that in our amendment, and why I particularly, who am not, unfortunately, lacking in experience on this sad topic, desire to underline it.
It is the sad but actual fact that when a Labour Government takes over in a Western country the international business and financial community is alerted. I would put it no higher than that. But there is created a greater sensitivity than previously existed. It is particularly the case that that is so in present times because of the French experience.
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The Labour manifesto proposed, first, that there should be a contrived slide in the sterling exchange rate. My Lords, that is a most dangerous proceeding. It is very easy to start an avalanche; it is impossible to stop it. The second proposal was that there should be a measure of exchange control; that is to say, a warning to the potential foreign investor that if he were so incautious as to put his money into this country he might never be able to get it out.
It was against that background of sensitivity and lack of confidence that the Labour manifesto was proposing a level of borrowing of so many extra millions as would undoubtedly have resulted in gross inflation, and more than that, would have resulted in such a run on the pound as would have prevented any Labour Government, has it succeeded to office, being able to implement its policies. It is that experience which some of us enjoy—if that is the right word—and it is that danger which we wanted to underline in excluding from the proposals made in our amendment the quite ridiculously far-fetched inflationary proposals made during the general election by the Labour Party.
There is no doubt that we need a stimulus to the economy. There is no doubt that industry is begging the Government to give it. There is no doubt, therefore, that I hope that those of your Lordships who are able to do so will support the amendment put down in the name of the Alliance when it comes to a vote.
10.25 p.m.
Lord McCarthy: My Lords, I begin by congratulating our twin maidens this evening, the noble Lord, Lord Ingrow, and the noble Lord, Lord Bauer. They produced lucid and interesting speeches and I hope that we hear them often again. As regards the first noble Lord, I was particularly interested in the discussion that he gave us of the problems of aiding small businesses. As regards the second maiden speaker, I particularly enjoyed the distinction he drew between what he called non-controversial statements as against non-provocative statements. I hope that he tries to make that distinction again in this House, although I cannot promise that he will meet with the same result.
It is quite reasonable to expect the note of triumph, with touches of derision, which we had from Members of the party opposite in this debate. Theirs was an excellent result. Theirs was an excellent election and I am quite sure that if we had had an election result as excellent we should probably have been as insufferable as they were tonight. It was quite natural for them to congratulate themselves both generally and in particular.
I should like in particular to congratulate the noble Earl, Lord Gowrie, who is the only wet to come back from the Siberia of Northern Ireland: and not only to come back but to come back to the only job in the Government for which I think one should charge a fee. It appears to be a real transformation and is like those moments at the end of Shakespeare's late comedies when everything is suddenly transformed by a mixture of lyricism and mysticism and all the good men get

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their deserts. In any case I am glad that he has that job if for no other reason than he seems to be almost the only occupant of that job, certainly on his side of the House, as far as I know, who has seen the inside of Covent Garden on a non-opera night. That in itself is an achievement.
However, we have to get to the debate and it is only reasonable and natural for us to say why we are not satisfied with the gracious Speech. As my noble friend Lord Bruce of Donington said in his opening speech, it is because we have the mixture as before. The noble Lord, Lord Cockfield, told us that the Government once again are to proceed by controlling public expenditure and that once again they are to operate what they now call the medium term financial and monetary strategy. The Government are to continue to pursue, if not to overtake, tax cuts and they will continue to privatise areas of the public sector. In other words—and this is our problem—they are to continue with all those measures and all those approaches which in the last Parliament produced a 25 per cent. cut in manufacturing employment, an 18 per cent. cut in manufacturing output, the highest rate of bankruptcies in our history and the highest level of unemployment. All the forecasters now—not just those from this side of the House—including the mad monetarist from Merseyside, Professor Minford, say that this will produce an increase of between 1 million and 1.5 million in unemployment over the next two years.
Those are the policies that we are to have. We are bound to ask, if this is so—and the noble Lord, Lord Boyd-Carpenter, stressed the way that the Government and the Tory Party had told us that all this was coming to us—why did the Government not say so at the last general election? For example, why did they not say in 1979 that we were to have a doubling of the unemployment rate? As the noble Lord, Lord Molloy, said, why did they not say so in the 1979 general election? In particular the Government went around saying, "Labour is not working and the Conservatives will get you back to work". They never told the electorate then that they would have substantial increases—in fact doubling—in unemployment, with all the consequences that have been spelt out by noble Lords on this side of the House. They did not say at the last election how long this would continue. I ask the noble Earl who is to reply: until when?
We have been told from this side of the House—and it is right—that the previous Chancellor said that we would not have 3 million unemployed; and he was wrong. We have been told—and it is right—that the Prime Minister said that she did not think that there would be 4 million unemployed; she could be wrong. Let us suppose she is wrong and we got to 4 million, 4½ million, 5 million or 5½ million. This is my first question, and I have many more. Would the noble Lords on that side of the House still be coming to this House and saying that they had nothing to offer us but continuing control of public expenditure, continuation of the medium-term financial strategy, a continuation of the pursuit of tax cuts, and so on? Is that what they would be saying?
It seems that that is what the Prime Minister would be saying. In the present situation, with the present level of unemployment and the present policies, she
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made the most astonishing statement on 22nd June.
She said:
"There is plenty of demand in Britain"—
I will say that again—
"There is plenty of demand in Britain and it is up to British industry to produce the right goods to meet it".—[0fficial Report, Commons, 22/6/83: col. 55].
That is her policy. Is it their policy at a time when the applicant-to-vacancy ratio is 30:1? We can blame ourselves, we can blame the trade unions, but we cannot blame the headmistress.
This is another question I should like to ask the noble Earl, because I want to know whether he goes along with it. The Prime Minister also sought to make a distinction between what she called "real" jobs as against, I suppose, unreal jobs, and "genuine" work as against, I suppose, fake work. She said that the Government were only interested in real or genuine jobs and not unreal or fake jobs. What is a real job and what is an unreal job? What is a fake job? What is real unemployment and what is fake unemployment?
I wish to put before the House today an agreement among the Opposition parties about what should be done at least so far as jobs are concerned. I thought that the noble Baroness, Lady Seear, was moving in that direction, although I must say that the last speaker, the noble Lord, Lord Diamond, went in the contrary direction. But, whatever he may say, there is an agreement on this side of the House that there are a lot of real, non-fake jobs which the Government could now begin to create. Does the noble Earl say they are all fake?
For example, what about a few more nurses to look after the chronically sick, the elderly and the disabled? Are those fake jobs? Is that what the Prime Minister says? What about a few more chaps, and ladies, too, to clean the public lavatories in our inner cities? Is that unreal work? There could be a few more tax inspectors. The Inland Revenue Staff Federation calculate (and they are careful men) that as a result of the loss of a few hundred tax collectors we have lost £3 billion a year in taxes through an increase in tax evasion. If we put a few thousand tax inspectors to chase some of the tax evaders, is that unreal or fake work? What is the view of the Government? Suppose that we had a few workers who had been declared redundant from our shipbuilding industry or elsewhere to fill in some of the holes in some of the roads on the North-East coast.
With great respect to the noble Lord, Lord Vaizey, suppose we did something about the sewers. I do not know why he is so totally unconcerned with the state of the sewers. I do not know what he does with the sewers and how frequently he uses them. I think that the sewers are very important, and they are in a very bad state. Suppose we employed a few people who had been declared redundant to look after the sewers, to repair them? Is that fake, unreal, work? Suppose, we had a few home helps to look after a few old people?. Suppose we had—a terrible thing—a few dinner ladies, whether with or without a trade union card. Is that fake?
If all these extremely interesting, important and vital tasks, all grossly undermanned, are all to be called unreal, we know why. There can be only one reason

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why. It is because at the moment they are all in the public service sector; and that is what the Prime Minister cannot stand—the public service sector. If by some accident of history some of them had been in the private service sector—and this is another of my questions—would that have been real, or fake? Is it not what these people do but who employs them that is the critical point for the present Government?
Of course, the noble Earl may say I am just picking up the Prime Minister's turn of phrase. The "Queen of the Night" has an unfortunate turn of phrase. I accept that; and it is not really the turn of phrase that we should listen to, it is what is behind it. What she is really saying is not that they are unreal or fake, but that we cannot afford any more of these people. This is the point. Here I would refer—and I am trying to build bridges—to the report of a Select Committee of your Lordships' House, under the chairmanship of the noble Baroness, Lady Seear, on the problems of long-term unemployment. That report showed that, bearing in mind the fact that every person on the register costs us £5,000 a year—a fact which your Lordships' Select Committee established and which the Treasury has not denied, though previously it was saying that they cost £3,000 a year—in net terms we could place 500,000 people in jobs for about £ 1½billion; in other words, half the money that we lose in tax evasion as a result of not having those tax inspectors. So it cannot be that we cannot afford it; at least, it cannot be that we cannot afford it in direct terms.
At this point it might be said by the noble Earl—I am trying to help him—that he is not saying that we cannot afford it in direct terms, but that we cannot afford it because it will have an inflationary consequence and will crowd out employment in the private sector. We could have a long argument about this. but at this time of night I would say only one thing. To say that, is to say that there is no hope of any significant reduction in unemployment for the foreseeable future; that even if we wait until 1988 there is no chance of any significant reduction in the level of unemployment.
As the noble Baroness said, there is a very real sense in which one can argue that the majority of the electorate do not agree with that view. In particular, if your Lordships read The Times and what Mr. Routledge says about the leaked minutes of the NEDO meeting on 4th May, you will see that the CBI does not agree. The House of Commons Treasury committee, on which there is a Conservative majority, does not agree; and I doubt whether the whole of the Cabinet agrees that, whatever the level of unemployment and however long it lasts, nothing can or should be done to increase jobs in this country if they must be jobs in the public sector. I doubt very much that the majority agrees.
I listened carefully to what the noble Lord, Lord Thomas of Swynnerton, said about the black economy. I agreed with much of what he said. I did not, however, agree with what appeared to be his attempt to argue that there were certain features of the black economy which meant that we should not worry so much as we might otherwise do about the level of
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unemployment. I say to him that the part of unemployment that we worry about mostly is the long-term unemployed. Most people in the black economy, God bless their hearts, are craftsmen—and craftsmen look after themselves. Most craftsmen have already got one job and are moonlighting. They have second jobs, third jobs and fourth jobs. Long may they survive. They are the kings of the black economy.
The people we are worried about and for whom we should like to find jobs in the public sector are the long-term unemployed. They include young people, disadvantaged people, coloured people and people aged 50 or over in development districts who have been declared redundant and who have no effective skills. These people have no scope for work in the black economy. Therefore, the black economy is no solution. The solution is a steady expansion of the kind of work in the public sector that I have mentioned and which your Select Committee suggested.
What stops it, my Lords? What stops it, I suggest, is an obsession among a minority of Ministers of this Government, all of whom, unfortunately, have central responsibility for the economic management of this Government, who believe that there must be further substantial tax cuts. They have a rather primitive and rigid approach to the size of the PSBR. They are equally committed to a 3 per cent. increase year by year in the size of our defence budget. If those three things are put together, there is no chance of any expansion of public employment. That is the combination that prevents our doing anything.
We do not say this because of any animus against the private sector. We have no animus against the private sector to match the animus against the public sector of some Members opposite. Quite the contrary, We would argue that the increase in productivity which is so essential in the private sector and which, I readily admit, has happened under this Government, has been the result for the most part of labour-shedding in the private sector. It has arisen from the fact that the rate of redundancies has been faster, sharper and longer than the rate of decline in output. If we are to get hack to anything like the levels of competitive labour loading of our major competitors, for example, in Germany and Japan there will have to be far more redundancy and a much greater reduction in the size of our manufacturing labour force than anything we have seen so far.
If one looks around the world, those countries that have done best—for example. Japan—have a smaller proportion of their total working population now employed in manufacturing industry than ourselves. There is no solution to the problem of unemployment, in overall terms, in thinking that one is going to raise the overall size of employment in the manufacturing sector. Indeed, even in the private service sector, as noble Lords on this side of the House have mentioned, the effect of capitalization, of investment and of all kinds of movement towards more capital intensive systems of production means that one cannot look to those areas to solve the problems of unemployment.
Why do the Government still resist this? I believe that there are three reasons. First, they have to say, as we admit, that, whatever the results of this policy economically, it has produced for them, in political terms, a magnificent victory. It has enabled them to

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say that in domestic policies, they have a parallel to the resolute approach that they adopted in respect of the Falklands.
Secondly, any alternative approach, any approach which went very far, which began to generate significantly increased levels of demand in the economy, would mean that one fine day they might have to ring up Mr. Lionel Murray—and the one thing that this Government do not want to do is that. But the main reason, as I have said before, is that the inner core of the Government, the economic Ministers of this Government, subscribe now to a particular view of the economic problem of this country which I call a simple version of the comparative cost theory combined with a labour theory of pricing. Basically, they believe that the main reason—indeed, sometimes when they talk it seems the only reason—why this country has fallen behind is that we are uncompetitive in terms of our relative costs, and most particularly and above all in terms of our labour costs. That is said to be the central reason for our economic decline.
Therefore, the long-term solution to this problem can only be found in a series of long-term measures. The date at which these long-term measures will solve this problem we are never told. Indeed, that is another question that I would like to ask the noble Earl. We have legislation against trade unions; we have the abolition of wages councils; we have a refusal to honour EEC directives to protect workers; and we have the use of youth unemployment to introduce measures such as the Young Workers' Scheme, in an attempt to drive down the general level of wages, and all because a lot of people in this Government, or the significant people in this Government, believe that the only way in which this country can survive is if we can lower our level of relative costs and in particular our level of relative labour costs.
Meanwhile, of course, nothing can be done. Nothing can be done until these long-term policies work their way out except, of course, to manipulate the exchange rate. The trouble with manipulating the exchange rate is that you are not quite certain which way you want to manipulate it. The governor is told to keep it high to restrain import prices and to protect the balance of payments, but not too high or we will destroy manufacturing industry and raise unemployment. Yet every other short-term measure, apart from these long-term measures, has in fact been disregarded and thrown out of the window by this Government. The assumption behind all this is that we face a cost competitive situation in which the main reason why we have not been cost competitive is labour costs.
I am sure that the noble Earl is tired of listening to me giving him quotes from books, in particular quotes from hooks about industrial relations and books about the labour market. Nevertheless, I am going to recommend finally to him one last book, because it enables me to answer some of these points. It is a recently published tome by three authors, Williams, Williams and Thomas and it is called, Why are the British Bad at Manufacturing? It is published by Routledge & Kegan Paul, Paperback, £7·75. This little book brings together a whole lot of surveys from a whole lot of people and they make a number of points. If the Government would take on board at least some
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of these points they would understand some of our complaints.
First, this book indicates that the relative uncompetitive nature of the British economy since the 1960s has had little to do with comparative labour costs, certainly since the 1967 devaluation, and certainly since the devaluation of the 1970s, because if we take into account the effect of devaluation we find that we have been competitive in terms of comparative costs for most of the time. Moreover, changes in labour costs and changes in comparative costs measured against changes in exchange rates are not related to improvements in relative market share. Germany held on and increased its market share when its cost position worsened throughout the 1970s. The United States lost 50 per cent. of its market share at a time when its relative cost position improved.
Furthermore, this study suggests that Britain's problems in manufacturing industry—and, after all, that is the subject of our amendment—arise very largely not because of price factors, not because of cost factors, but because of a whole series of non-cost factors: because of the fragmentation of our domestic market, because of the availability, or greater availability, of medium-term risk capital for most of our major competitors, because of the disastrous consequences of the merger boom of the 1950s and 1960s and, above all, because of the failure of successive Governments—both Labour and Conservative—to turn the National Economic Development Council into an effective planning mechanism.
If he reads this book, I do not ask the noble Earl to agree with all of it. All I am saying is that here is a respectable study which suggests that a large part of our trouble, both under the last Government and under this one, arises from the fact that the Government have an over-simple view of the operation of an advanced capitalist economy which over-stresses the role of labour costs, partly from prejudice and partly from ignorance, which over-stresses the effects of cost anyway, and which bears very little relationship to the kind of factors which have defeated the attempts of successive Governments to preserve and advance the interests of British manufacturing industry.
Therefore, in conclusion, although the Government can reasonably and naturally congratulate themselves on the results of their appeal to the country, it is one thing to win on a policy and it is another thing to show that that policy will work. We would argue that where that policy is not based on prejudice, on ignorance, it is founded on an over-simple cost -dominated view of the working of our economy. Those who agree with us will support us in the amendment that we have put down tonight.
10.53 p.m.
The Minister of State, Privy Council Office, and Minister for the Arts (The Earl of Gowrie): My Lords, if I could chose a single text to put the Government's policy to the noble Lord, Lord McCarthy, succinctly and clearly. I would choose a sentence from the speech of our first maiden speaker, my noble friend Lord Ingrow, who said:
"If I could foresee stable costs, there would be benefits leading to employment."

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My noble friend speaks from experience there, and who am I to gainsay him? That is what we are about and I could not put it better than that. I also very much enjoyed the maiden speech of my other noble friend Lord Bauer, who I know slightly and look forward to meeting again on many occasions. At any rate, I did enjoy it while it was going on; later I became a bit rattled because my noble friend Lord Thomas congratulated the maiden speaker on not being an economist. Whereas, I understood that at last we had a Hungarian economist of our own!
It seems to me that the voice of opposition to the Government (at least at this stage in the Parliament) will most effectively come from those who take the view of my noble friend Lord Bauer and the noble Lord, Lord Harris of High Cross, who were attacking the way we have built into the system of the economic life of this country what, in a rather chilling phrase, Mr. Neil Kinnock called
"a dependable equity of organised compassion".
Mr. Kinnock obviously thinks organised compassion a good thing. It certainly is very expensive and the recipients of the compassion are those who pay for it.
As this is the last day of the debate on the humble Address, I should like quickly to add my compliments to my noble friends who moved and seconded the Motion. I was delighted that both my noble friend the Duke of Norfolk and my noble friend Lady Airey gave time and emphasis to the problems of Northern Ireland. As an outgoing Minister there, I should like to thank them for the interest they took and the support that they gave me. I certainly found their private as well as their public counsel invaluable. Indeed, I remember an occasion when a public speech in your Lordships' House by my noble friend the Duke of Norfolk became a cause celebre in an Irish general election.
I note, too, that at the end of her delightful speech my noble friend Lady Airey talked great sense about the contribution of the world of the arts, which I now inhabit, to our national economy. How much I agree with what she said. Indeed, the connection of her remarks to today's debate is that, as manufacturing sheds labour as a result of the competitive pressures towards greater automation, the future of employment is woven into the worlds of creativity, play and leisure as well as more traditional concepts of employment. Surely we should not regret this but welcome it. Of course the period of transition brings the problems of transition. People are brought up in one way with a given set of expectations, and then as grown ups they find these inadequate or different and so adjustment is painful and difficult. There are then stresses and strains on the social and political system, but let us not forget that there can and must be immense gains in liberating ourselves from the old industrial economy as well.
If I do have a criticism of today's debate, for all its interest and expertise, it is that I felt that rather few speakers, with notable and honourable exceptions, faced up to a central truth about our economy in these last years of the 20th century. I certainly exempt from this my noble friends Lord Trenchard and Lord Vaizey, and indeed the noble Lord, Lord Spens, and the noble Viscount. Lord St. Davids, from the Cross-
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Benches. This central truth is that a new industrial revolution is taking place in this country. It is not ahead of us, it is under way. It is not confined to us, but is taking place in the open societies of the West, and among all our allies and competitors. It is having great effects on the close societies to the east of us, as it will surely have on the developing world.
If we can get the pace of our adaptation right, and if we can afford to ease the stresses and strains of transition, this revolution can be a benevolent one both at home and abroad, liberating us all from the dreary cycles of traditional production and consumption. and allowing more people that surplus of leisure on which civilisation has always depended. But if we get the pace of that adaptation wrong, we shall not be able to avoid those stresses and strains, because the new industrial revolution is with us in any case. Nor shall we be able to afford to ease them. As my noble friend Lord Thomas said, all the old shibboleths therefore need to be re-examined.
As the new Administration takes office and submits its programme to critical scrutiny by Parliament and people, it is, I think, fair to look at our proposals in terms of two questions. First, will this or that proposal, or this or that item of expenditure, allow us to participate competitively in the new industrial world and so continue to earn our standard of living, which includes of course our standards of welfare services, or, better still, to improve that standard of living? Secondly, will this or that proposal, or item of expenditure, ease the position of those who, through no fault of their own, are caught in the painful machinery of an economy changing gear? I believe that if we use these questions as the lens through which to examine policy, the debate can continue to be meaningful and useful. but it will not be so if we continue to hanker after the questions and answers that pertain to an altogether different industrial world, and therefore to a different political economy.
I do not want to be especially partisan this evening—we have all been able to indulge ourselves in this enjoyable form of politicking over the last month or so—but it seems to me that the really depressing thing about the party opposite in its present state is that it is simply not posing the relevant questions of policy, let alone finding the right answers. For all the nice things he said about me in my new job—for which I am grateful—I thought this very much as I listened to the interesting but, in my view, deeply conservative speech of the noble Lord, Lord McCarthy.
I come now to the issues put to me in this debate as I see them within this overall broad framework. I was asked by the noble Baroness, Lady Seear, about the issues connected with capital spending, and other noble Lords put these points to me. I shall be coming to the points made by the noble Lord, Lord Bruce of Donington, in a moment. This is a highly seductive argument. I think the short answer is that, as the wealth-creating sector grow, there is more money available for capital projects. I agree with those who feel that our infrastructure needs improvement, but the Prime Minister's point about sustainable employment—in answer to the noble Lord, Lord McCarthy—could not be better illustrated than by experience in Northern Ireland. Northern Ireland is a place where relatively small market towns are linked

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by major motorways, admirably produced and enjoyable to drive along, but not capable of sustaining jobs once the infrastructure has been improved in that way. It is not so much a distinction between real and fake jobs, as that all jobs must be sustained by the wealth generated to create them.
The noble Lord, Lord Bruce of Donington, asked me about the trade figures. Indeed these were disappointing, but rather less disappointing when one examines them, as the main reason for the deterioration was the large increase in the imports of what are called erratics, like precious stones, ships and aircraft. There is some substantial evidence, therefore, that the pick-up in the economy—a delicate plant, I would agree with the noble Lord, Lord Ezra—is causing companies to purchase at an increased rate.
The noble Baroness, Lady Seear, gave me notice that she would talk about the EMS. I think this argument was very nicely rehearsed by my noble friend Lord Vaizey. In the ranks I have always been a pro rather than a con, but I do not think that the argument in favour of going in is yet overwhelming. Certainly it is one that the Government keep under constant attention.
A substantial part of the debate was devoted to our work in terms of training. I said that a major item of the Government's philosophy and policy was that, while we cannot prevent changes from taking place, we can try to spend money to help those who are caught by the changes to adapt to them. Young people are obviously in the forefront here. Even the noble Baroness, Lady Lockwood, in quite a critical speech, conceded that much that has been done is excellent and the right reverend Prelate, the Bishop of Norwich, gave us an admirable commercial for the MSC's work in his area. It is a great pleasure to me to be back in this area of work as a spokesman on employment in your Lordships' House.
The Government understand that, if we are to compete effectively in domestic and international markets, we must have better training arrangements, flexible and adaptable to meet the new needs of industry and commerce. This new training initiative was the first time that training policy in this country had been considered as a whole. It makes the terms of the amendment in the names of the noble Lords, Lord Bruce and Lord McCarthy, rather astonishing when one thinks of the money and effort going into a training scheme on this scale—nearly £1 billion into the Youth Training Scheme and we can add to that the £800 million in regional policy and the Department of Trade and Industry provision of £230 million for innovative industries. I rather agreed—to score an own goal—with some of the strictures on regional policy which were made by the noble Baroness and I shall bring them to the attention of the new Minister.
The noble Lord, Lord Molloy, said that not a ha'penny was going into innovation or into the new industrial revolution. But we have over 100 information technology centres being established at present. We have the microprocessor application project, to which £85 million has been allocated: and we have the micros in schools scheme, which leads all primary schools, secondary schools and initial teacher-training colleges to obtain at least one micro computer for educational purposes. I am not sure, but I think that
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this is unique among the Western countries. It is certainly an achievement of the Department of Trade and Industry and of my right honourable friend the Secretary of State. We have, too, the new blood initiative, which involves the creation of over 200 new lectureships in universities in these hard-edged subjects, the majority of which will be in areas of direct relevance to manufacturing industry; and we are very aware of the fact that some of the great new industrial centres in America have grown up round university research and university work in this field.
I now come to another substantive part of the debate, which concerned our proposals for industrial relations legislation. My noble friend Lord Campbell seemed to suggest that the Government were being rather titillating and less than clear about what they were proposing. I am glad to try to rebut that charge. Broadly, the legislation will cover three issues. It will give trade union members the right to elect the members of their governing bodies, their executives, by voting in secret ballot; it will make immunity for calling a strike or other action in breach of contract conditional on a trade union holding a pre-strike ballot; and it will require unions with political funds to seek the approval of their members once every ten years for the retention of those funds and for the continuance of the union's political activities. My right honourable friend the Secretary of State for Employment will be inviting the TUC to discuss the steps which the union movement itself will take to ensure the right of union members to decide whether or not to contribute to a political party through their union subscriptions.
My Lords. I really cannot accept that this is a confrontation. I certainly agree with my noble friend Lord Boyd-Carpenter that this legislation is really overdue, and moderate in its proposals. The right reverend Prelate the Bishop of Lincoln, the noble Viscount, Lord Hanworth, and the noble Lord, Lord Spens, all seemed to give their approval to a step of this kind.
In a very entertaining and trenchant speech, the noble Lord, Lord Marsh, raised a point about industrial relations legislation. Could I just say to the noble Lord, Lord Ezra, that he was not the only person with experience of nationalised industry who took part in the debate today. I do not know how much joy I can give to the noble Lord, Lord Marsh—and I am sorry to say this because the Financial Times happens to be my favourite newspaper—but I think the noble Lord left out one difficulty about legislating along the lines of procedure agreements that I think he would like. We have done it before and we were let down, if I may put it that way, by the employers themselves. It seems to me that we have a wide scale of consent for our industrial relations legislation proposals among union members, as evidenced by the election result. I am not yet confident that we have that degree of consent from employers, and the whole difficult question of where power actually lies within a given industry or a given union is one which is side-stepped by proposals for procedure agreement legislation. But we should like to get on top of it, and, if the noble Lord and his colleagues can help us, I know that my right honourable friend is proposing to consult specifically on this matter before taking any further steps.

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The noble Lord, Lord Hatch, the noble Lord, Lord McCarthy, and others asked the Government when things were going to get better. It has been the whole burden of our policy that we should set a framework and that after that it was up to our people, in whom we have every confidence, to make use of greater financial stability as well as, we hope, an improved world situation to take advantage of a better climate to produce more and sell more.
I think the point was answered by no one so well as by my noble friend Lord Trenchard—whom I should like to declare for these purposes "man of the match", if I may—when he, denied, as I deeply regret, access to formal Government statistics, nevertheless was able to inform me about the last two or three months' figures of industrial production and unemployment in comparative terms. In January 1983 they were up 0.4 per cent. and in February up 1.8 per cent., as against minus 2 per cent. in France, minus 3.8 per cent. in Germany, minus 6.4 per cent. in Italy, minus 3.5 per cent. in the EEC as a whole and minus 5.4 per cent. in the United States. I do not have figures for Japan, but the previous month was minus 1.7 per cent. and minus 4.1 per cent. in the OECD average. Again, turning to employment, in February in percentage terms we were up 11.9—much too much, I agree—while France was up 4.8; Germany was up 31.4; the United States, up 23.1, and Japan up 20 per cent. There I think we have some indicators, first, of the scale of the revolution—because this is not simply recessed unemployment, which I mentioned earlier. Secondly, it appears that our competitiveness is at last starting to improve. I am most grateful to my noble friend for the information he gave me.
Finally, may I come to the point made by my noble friend Lord Onslow. He was very eloquent about the poverty trap, and he is right to point to it, because it remains one of our most intractable problems and one of our greatest disincentives for getting more people off the benefit and unemployment register. The long-term solution of such traps is best achieved by maintaining public spending restraint, thus allowing tax thresholds to be increased, as well as by sustained economic performance leading to higher real earnings. I think what I have said about the poverty trap applies to the black economy as well. So long as in this country we elect to have the safety net, as it has been called, there will be difficulties of this kind at the margin.
We have had a long debate and I must come to an end. I apologise to those noble Lords whose points I may not have dealt with, but I will certainly write to them. I am aware that this Government, like all Governments, are permanently on trial and that they will be judged not just on what they achieve but on what the British people achieve during their period in office. I agree with the noble Lord, Lord Diamond, on that at least. I believe, however, that in our first term we achieved those conditions for greater financial stability without which the maintenance of our present standard of living—let alone any improvement in it—would be quite impossible. These conditions we are resolved to maintain.
In the mid and late 1970s, the period of our greatest inflation, commentators all round the world were
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observing us with fascination. We were, I remember reading, to be the first "drop-outs" of the new industrial world. Now we are still the subject of much fascinated commentary, but it is as a people with a new determination and purpose, a new style of political leadership, a new realisation of the hard facts of life in the late 20th century. I believe we can harness this new purposefulness as well as the discipline and indeed the difficulties that will continue to grow with it to the new industrial age, to the wealth it can generate and to the freeing of civilisation from drudgery and decline. Of course, it will not be easy, but there is no reason why it should not be fun—a quality much underestimated in economic as well political life.
I certainly find a lesson here in my own new Ministry. As a trading nation, we cannot afford decline, and as a pluralist country, but one underpinned by a Christian Constitution, we are firmly enjoined against despair. I hope your Lordships will feel purposeful and cheerful enough to follow the Government into Lobbies tonight.
Lord Bruce of Donington: My Lords, we on this side of the House are most grateful to the noble Earl and his noble friends for having confirmed the observations made yesterday by the noble and learned Lord on the Woolsack: that all we have is the mixture as before. I beg to move the amendment standing in my name.
11.16 p.m.
On Question. Whether the amendment (moved by the Lord Bruce of Donington) shall be agreed to?
Their Lordships divided: Contents, 38; Not-Contents, 112.

DIVISION NO. 1

CONTENTS

Ardwick, L.

Llewelyn-Davies of Hastoe, B.

Bacon, B.

Lockwood, B.

Balogh, L.

Longford, E.

Beswick, L.

McCarthy, L.

Birk, B.

McIntosh of Haringey, L.

Bishopston, L.

Mishcon, L.

Boston of Faversham, L.

Molloy, L.

Brooks of Tremorfa, L.

Oram, L.

Bruce of Donington, L.

Pitt of Hampstead, L.

Caradon, L.

Ponsonby of Shulbrede, L [Teller]

Cledwyn of Penrhos, L.

Collison, L.

Rea, L.

David, B. [Teller]

Shackleton, L.

Elwyn-Jones, L.

Stewart of Alvechurch, B.

Galpern, L.

Stewart of Fulham, L.

Hatch of Lusby, L.

Stone, L.

Houghton of Sowerby, L.

Strabolgi, L.

Jeger, B.

Underhill, L.

Jenkins of Putney, L.

Wedderburn of Charlton, L.

Kaldor, L.

NOT-CONTENTS

Abinger, L.

Brougham and Vaux, L.

Airey of Abingdon, B.

Buxton of Alsa, L.

Avon, E.

Caithness, E.

Bauer, L.

Campbell of Alloway, L.

Belhaven and Stenton, L.

Campbell of Croy, L.

Bellwin, L.

Cathcart, E.

Beloff, L.

Chelwood, L.

Belstead, L.

Cockfield, L.

Bessborough, E.

Coleraine, L.

Boardman, L.

Colwyn, L.

Boyd-Carpenter, L.

Cork and Orrery, E.

Brabazon of Tara, L.

Craigmyle, L.

357

Crathorne, L.

Masham of Ilton, B

Cullen of Ashbourne, L.

Merrivale, L.

Davidson, V.

Mersey, V.

De La Warr, E.

Middleton, L.

Denham, L. [Teller]

Molson, L.

Dilhorne, V.

Mowbray and Stourton, L

Drumalbyn, L.

Moyne, L.

Eccles, V.

Murton of Lindisfarne, L.

Ellenborough, L.

Norfolk, D.

Elton, L.

Norwich, Bp.

Enniskillen, E.

O'Hagan, L.

Forester, L.

Onslow, E.

Fraser of Kilmorack, L.

Orkney, E.

Gainford, L.

Portland, D.

Gardner of Parkes, B.

Rankeillour, L.

Gibson-Watt, L.

Rawlinson of Ewell, L.

Gisborough, L.

Redesdale, L.

Glenarthur, L.

Renton, L.

Glenkinglas, L.

Romney, E.

Gowrie, E.

St. Davids, V.

Greenway, L.

Salisbury, M.

Gridley, L.

Sandys, L.

Hailsham of Saint Marylebone, L.

Savile, L.

Skelmersdale, L.

Harris of High Cross, L.

Spens, L.

Hastings, L.

Stodart of Leaston, L.

Henley, L.

Swinton, E. [Teller]

Home of the Hirsel, L.

Teviot, L.

Hornsby-Smith, B.

Thomas of Swynnerton, L.

Hylton-Foster, B.

Thorneycroft, L.

Ingrow, L.

Tranmire, L.

Killearn, L.

Trefgarne, L.

Kinnaird, L.

Trenchard, V.

Kitchener, E.

Trumpington, B,

Lauderdale, E.

Tryon, L.

Lincoln, Bp.

Ullswater, V.

Lindsey and Abingdon, E.

Vaizey, L.

Long, V.

Vickers, B.

Lucas of Chilworth, L.

Vivian, L.

Lyell, L.

Weinstock, L.

Macleod of Borve, B.

Whitelaw, V.

Mancrofrt, L.

Windlesham, L.

Marley, L.

Wynford, L.

Marsh, L.

Young, B.

Marshall of Leeds, L.

Resolved in the negative, and amendment disagreed to accordingly.
11.24 p.m.
Baroness Seear: My Lords, I beg leave to move the amendment standing in my name on the Order Paper.
Moved, at the end of the Address to insert:
"but note that the Government obtained the support of only 31 per cent. of the electorate, and regret the absence of practical measures in both the public and the private sectors to give effect to the Government's stated aim to increase prosperity and reduce unemployment without recourse to the policies advocated in the Labour Party manifesto."
11.25 p.m.
On Question, whether the amendment (moved by the Baroness Seear) shall be agreed to?
Their Lordships divided; Contents, 46; Not-Contents, 112.

DIVISION NO. 2

CONTENTS

Airedale, L.

Banks, L.

Amherst, E.

Burton of Coventry. B

Amulree, L.

Byers, L.

Avebury, L.

Chandos, V.

Aylestone, L.

Denbigh, E.

358

Diamond, L.

Morris of Kenwood, L.

Donaldson of Kingsbridge, L.

Ogmore, L.

Esher, V.

Perry of Walton, L.

Evans of Claughton, L.

Roberthall, L.

Ezra, L.

Robson of Kiddington, B.

Flowers, L.

Rocester, L.

Foot, L.

Sainsbury, L.

Gladwyn, L.

Seear, B.

Grey, E.

Tordoff, L.

Hampton, L.

Wade, L.

Hanworth, V.

Weidenfeld, L.

Harris of Greenwich, L.

Whaddon, L.

Kennet, L. [Teller]

Wigoder, L. [Teller]

Kilmarnock, L.

Winchilsea and Nottingham, E.

Kirkwood, L.

Lloyd of Kilgerran, L.

Winstanley, L.

McGregor of Durris, L.

Winterbottom, L.

McNair, L.

Young of Dartington, L.

Mayhew, L.

NOT-CONTENTS

Abinger, L.

Lincoln, Bp.

Airey of Abington, B.

Lindsey and Abingdon, E.

Avon, E.

Long, V.

Bauer, L.

Lucas of Chilworth, L.

Belhaven and Stenton, L.

Lyell, L.

Bellwin, L.

MacLeod of Borve, B.

Belstead, L.

Mancroft, L.

Bessborough, E.

Marley, L.

Boardman, L.

Marsh, L.

Boyd-Carpenter, L.

Marshall of Leeds, L.

Brabazon of Tara, L.

Masham of Ilton, B.

Brougham and Vaux, L.

Merrivale, L.

Buxton of Alsa, L.

Mersey, V.

Caithness, E.

Middleton, L.

Campbell of Alloway, L.

Molson, L.

Campbell of Croy, L.

Mountgarret, V.

Cathcart, E.

Mowbray and Stourton, L.

Chelwood, L.

Moyne, L.

Cockfield, L.

Murton of Lindisfarne, L.

Coleraine, L.

Norfolk, D.

Colwyn, L.

Norwich, Bp.

Cork and Orrery, E.

O'Hagan, L.

Craigmyle, L.

Onslow, E.

Crathorne, L.

Orkney, E.

Cullen of Ashbourne, L.

Pitt of Hampstead, L.

Davidson, V.

Portland, D.

De La Warr, E.

Rankeillour, L.

Denham, L. [Teller]

Rawlinson of Ewell, L.

Dilhorne, V.

Redesdale, L.

Drumalbyn, L.

Renton, L.

Eccles, V.

Romney, E.

Ellenborough, L.

St. Davids, V.

Elton, L.

Salisbury, M.

Enniskillen, E.

Sandys, L.

Forester, L.

Savile, L.

Fraser of Kilmorack, L.

Skelmersdale, L.

Gainford, L.

Spens, L.

Gardner of Parkes, B.

Stodart of Leaston, L.

Gibson-Watt, L.

Swinton, E. [Teller]

Gisborough, L.

Teviot, L.

Glenarthur, L.

Thomas of Swynnerton, L

Glenkinglas, L.

Thorneycroft, L.

Gowrie, E.

Tranmire, L.

Greenway, L.

Trefgarne, L.

Gridley, L.

Trenchard, V.

Hailsham of Saint Marylebone, L.

Trumpington, B.

Tryon, L.

Hastings, L.

Ullswater, V.

Henley, L.

Vaizey, L.

Home of the Hirsel, L.

Vickers, B.

Hornsby-Smith, B.

Vivian, L.

Hylton-Forster, B.

Weinstock, L.

Ingrow, L.

Whitelaw, V.

Killearn, L.

Windlesham, L.

Kinnaird, L.

Wynford, L.

Kitchener, E.

Young, B.

Lauderdale, 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.
House adjourned at twenty-five minutes before midnight.

  ADMIRAL MERINO: VISIT TO BRITAIN
  ADMIRAL MERINO: VISIT TO BRITAIN