Sitting of 9 March 1983

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

    Lisbon Agreement
    Mr. Brocklebank-Fowlerasked the Secretary of State for Foreign and Commonwealth Affairs what discussions have taken place with the Spanish Government since 9 February about the implementation of the Lisbon agreement; and if he will make a statement.
    The Secretary of State for Foreign and Commonwealth Affairs (Mr. Francis Pym): As envisaged when I agreed with the Spanish Foreign Minister last December that we should aim to implement the Lisbon agreement this spring, there have been further contacts at official level with the Spanish Government. The Spanish Foreign Minister is coming to London for talks on 16 and 17 March as part of his introductory visits to western European capitals, and in the course of our general discussions I expect that the Lisbon agreement will be raised again. It remains my wish that that agreement should be implemented in the spring.
    Mr. Brocklebank-Fowler: I thank the Foreign Secretary for that reply and I welcome the visit to this country of the Spanish Foreign Minister. Whenever the agreement is implemented, will the right hon. Gentleman recognise that Gibraltar's future is dependent upon its being economically viable? Will he renew his efforts within his Department, in co-operation with the Overseas Development Administration and the Ministry of Defence, to ensure that a proper development plan for the colony is worked out with the Government of Gibraltar?
    Mr. Pym: Yes, I have that in mind. The implementation of the Lisbon agreement will be of economic benefit to Gibraltar. That is one reason why I trust that it will be implemented. As the hon. Gentleman knows, £13 million has been set aside by the ODA as a contribution towards Gibraltar's 1981 to 1986 development programme. The Government have the economic future of Gibraltar in mind.
    Mr. McQuarrie: My right hon. Friend will be aware that the Lisbon agreement was signed on 10 April 1980. Since then there have been numerous promises from the Spanish Government that the agreement will be implemented without fail. My right hon. Friend will be aware that the Spanish Government opened one gate as a passage for Spanish and Gibraltarian nationals but not for
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    tourists. When he meets Senor Moran in this country in March, will he discuss with him the full implementation of the Lisbon agreement? That involves the opening of the border, freedom of air space and the opening of the Algeciras-Gibraltar ferry.
    Mr. Pym: I have already discussed this matter with the Spanish Foreign Minister. I have no doubt that in the course of his visit next week this subject will be raised again. The implementation of the agreement will be to everyone's advantage. The British Government have regretted that it has been postponed more than once and it is hoped that it can be implemented in the coming spring or early summer.
    Mr. George Robertson: Does the Secretary of State agree that one of the principal lessons of the lead-up to the Falklands war was the danger involved in negotiating in a fog without any clear idea of what the Government were looking for as an outcome? As both parties to the Lisbon agreement are pursuing different objectives regarding sovereignty, is there not a danger that we might be negotiating in a vacuum similar to that which led to the trouble that created the Falklands conflict?
    Mr. Pym: I do not imagine that there will be the difficulty that the hon. Gentleman suggests. The Lisbon agreement was signed by both parties and is of mutual benefit. The position of each party is well known and understood to the other. The British Government are aware of the views of the Spanish Government on Gibraltar. The Government are aware of their responsibilities to the people of Gibraltar and we shall certainly stand by them.
    Mr. George Cunningham: On a point of order, Mr. Speaker. Traffic arrangements are in force in Parliament square which are causing hon. Members delay in getting from one side to the other. In my case, it was 10 minutes. That was at the beginning of the sitting of the House. The delay is said to be due to a lobby of the House this afternoon by the AUT.
    May I invite you, Mr. Speaker, in accordance with the resolution that the House passes at the beginning of each session, to give instructions to the Serjeant at Arms to instruct the police that preference must be given to getting hon. Members into the House. The lobby must not have precedence in Parliament square.
    Mr. Speaker: I am much obliged to the hon. Gentleman. I shall ensure that a message goes out saying that, as far as possible, hon. Members must not be impeded on their way to the House.

    Bolivia
    Mr. Russell Kerrasked the Secretary of Stale for Foreign and Commonwealth Affairs if he has any proposals to strengthen political relations with Bolivia.
    The Minister of State, Foreign and Commonwealth Office (Mr. Cranley Onslow): Her Majesty's Government welcome the return of democratic government to Bolivia. We shall continue to work for close and friendly relations.
    Mr. Kerr: Given the very welcome moves towards a more democratic Bolivia—which is among the poorest countries in Latin America—will the Government give an assurance that they will adopt an ever more independent

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    stance towards that troubled continent, with a view eventually to being able to strike a pose that is independent of America?
    Mr. Onslow: I do not accept the implication that we are in some way tied to America's coat tails in that continent.
    Mr. Robert Hughes: In everything.
    Mr. Onslow: The hon. Gentleman may say "in everything", but that just shows how little interest he takes in such issues.
    Mr. Winnick: Does the Minister agree that the Bolivian Government should be congratulated on agreeing to extradite Barbie to France, where he will shortly be tried for crimes against humanity? Would it not be wrong for one of the most notorious Nazi mass murderers, Walter Rauff, to escape justice, although he was responsible for the deaths of tens of thousands of people during the last war?
    Mr. Nicholas Winterton: So was Joseph Stalin.
    Mr. Cryer: Twenty million Russians died fighting against Facism during the last war.
    Mr. Winnick: Will the Minister therefore ensure that representations are made to the Chilean Government for Rauff to be extradited to Europe, where he, too, can face justice?
    Mr. Onslow: I do not see how that issue can arise on question No. 2.
    Mr. Speaker: Order. I appeal to hon. Members below the Gangway to have their private chats outside the Chamber.
    Mr. Clinton Davis: The Opposition also welcome the overthrow of the military Fascist junta in Bolivia and its replacement by a democratic Government, but is the Minister aware that Bolivia's economy is still heavily beleaguered and that it is in desperate need of assistance? Will he consider giving assistance to the tin-mining industry, in particular, and any other form of aid that would rescue the Bolivians from their present plight?
    Mr. Onslow: We already give Bolivia more than £1 million annually in aid. We are reviewing our aid programme to Bolivia with a view to seeing what further assistance we can provide within the resources available. Obviously, the question of assistance to the mining sector would arise in that context.

    Cyprus
    Mr. Norman Atkinsonasked the Secretary of State for Foreign and Commonwealth Affairs if he will now seek to raise with the Security Council the question of the continuing military occupation of Cypriot territory by Turkish troops.
    The Minister of State, Foreign and Commonwealth Office (Mr. Douglas Hurd): We do not intend to raise the Cyprus question at the Security Council. If Cyprus is debated in the United Nations General Assembly our policy will be guided by the need to support the intercommunal talks being held in Nicosia. We believe that these offer the best hope of a solution to the Cyprus problem.
    Mr. Atkinson: Does the Minister agree that there will be no agreement at the intercommunal talks without the authority of General Evren's junta in Ankara? Will not the rest of the so-called free world think it a tragedy that this Government in particular, as a guarantor power, are unwilling to raise the question in the United Nations when they know that Turkey has been in breach of United Nations resolutions for nearly nine years? Is it not time for an initiative?
    Mr. Hurd: No, Sir. The intercommunal talks under the chairmanship of the United Nations representative, Dr. Gobbi, started again yesterday. A debate at the United Nations would not help the talks, and we look to the talks for progress.
    Mr. Beaumont-Dark: At the same time, will my right hon. Friend address himself to the matter of the Greek community troops? Will it not cause further racial disharmony to differentiate between the two problems?
    Mr. Hurd: I think that the withdrawal of the Turkish troops will be part of an eventual settlement, but it must be part of a settlement and not a pre-condition.
    Mr. Moyle: Is the right hon. Gentleman aware that we agree with the Government that any solution to the Cyprus problem must be agreed between the communities on the island, and that communal talks are the best way of going about that? Is the Minister further aware that a great and growing number of Greek-speaking Cypriots regard the intercommunal talks as a block to progress on the Cyprus problem? Will the right hon. Gentleman bear in mind that progress is essential and therefore that the Government's attitude should not be one of total detachment from the talks?
    Mr. Hurd: We are not detached from the talks. We are not parties to them round the table, but we do what we can to help them forward.

    Argentina (Arms Supply)
    Mr. Litherlandasked the Secretary of State for Foreign and Commonwealth Affairs whether he will bring forward proposals to prevent the supply of arms to Argentina.
    Mr. Pym: We shall continue to seek to limit arms sales to Argentina. We have made clear to our allies and friends our strong views on any continuation of such sales by them in present circumstances, in particular when Argentina has not agreed to a definitive cessation of hostilities. But it is not possible to prevent Argentina from buying arms altogether.
    Mr. Litherland: Does the Foreign Secretary honestly believe that the general public—especially those who lost loved ones—will accept that reply, when four frigates are being manufactured in Hamburg with Rolls-Royce engines, and when Exocets are being manufactured in France with United Kingdom components? Does the right hon. Gentleman agree that the Government are supplying a potential enemy with the sort of weapons that cost 240 British lives in the Falklands war? The Government made a tremendous blunder once, but there will be no whitewash next time.
    Mr. Pym: The Government regret that the German Government have not felt able to prevent the delivery of

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    the first of those warships. We have made our views plain to the German Government on several occasions. The Government appreciated the position taken by the Federal Government during the conflict, not least over arms deliveries to Argentina, which were stopped at the time. In that, I share the hon. Gentleman's view. The hon. Gentleman also referred to Exocets, but there are things known as contracts and we have given commitments that it would be wrong to break. Hon. Members should remember that Exocets are supplied to countries all over the world and also to the Royal Navy. We have stated as strongly as possible our firm conviction that arms should not be supplied to Argentina at present. In the last analysis it is for other Governments to decide their policies. However, we have done our best to influence them.
    Mr. Healey: Does the Foreign Secretary accept that his reply was one of stupefying hypocrisy? The Government are arranging to provide the Argentines with the money to buy arms wherever they wish and, in addition, they are insisting that Rolls-Royce should fulfil its contract to provide essential items of equipment for the warships that Germany is supplying to Argentina. It is a little indecent of the Government to be wrapping themselves in the Union Jack over the Falklands issue when they are financing the purchase of arms to fight British troops by a Government who still insist that they are in a state of war.
    Mr. Pym: I have told the House the truth. It might be nicer for us all if it were different, but it is not. As my right hon. Friend the then Secretary of State for Defence made clear in the House on 22 November, the Rolls-Royce engines were part of a long-standing contract with a NATO ally, and in making them available we made it clear that we would be concerned about early delivery and we have sought to prevent that. The right hon. Gentleman mentioned loans to Argentina, but the Chancellor of the Exchequer has made it clear in the House that the Argentine Government's capacity to buy arms is likely to be reduced significantly by the introduction of the IMF programme attached to its loan. The programme includes conditions which require substantial adjustments in the Argentine economy, which will reduce rather than increase the scope for the purchase of arms. We have done everything we can to try to prevent the sale of arms to Argentina.
    Mr. Healey: If it were not for the loans that the Government are making to Argentina, the Argentine Government's ability to buy arms would be enormously reduced. The Argentine Government have made it clear already that the conditions—
    Mr. Speaker: Order. The right hon. Gentleman must ask a question and not submit—
    Mr. Healey rose—
    Hon. Members: Sit down.
    Mr. Speaker: Order. The same rules apply to every hon. Member. The right hon. Gentleman must ask a question and not enter into a debate.
    Mr. Healey: I apologise, Mr. Speaker, for not having couched my remarks in the appropriate interrogatory form, which I shall now do. Does the Foreign Secretary accept that the Argentine Government's ability to buy arms abroad would be enormously reduced if the British Government were not lending them money? Have not the
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    Argentine Government already made it clear that any conditions attached to the IMF loan will not inhibit them from continuing to buy arms abroad—including arms to which British firms have contributed essential items of equipment? Does the right hon. Gentleman agree that his hypocrisy, and that of the Prime Minister, is beyond—
    Mr. Speaker: Order. The right hon. Gentleman knows that it is wrong to accuse anyone of hypocrisy. It is hard to be an hon. Gentleman and a hypocrite. The right hon. Gentleman—
    Mr. Cryer: It was a general remark.
    Mr. Speaker: Order. No it was not, it was a personal remark addressed to the Minister. I always allow general remarks to pass. The right hon. Gentleman must not in this Chamber accuse anyone of being a hypocrite.
    Mr. Healey: In deference to your earlier ruling, Mr. Speaker, I was not accusing the Prime Minister or the Foreign Secretary of anything—I was asking the right hon. Gentleman about his judgment.
    Mr. Pym: If there is hypocrisy about, it lies with the right hon. Gentleman. The IMF, to which we are a party, made a loan to Argentina and to many other countries. The IMF does not make decisions on a political basis, as the right hon. Gentleman well knows. A decision was taken and we were a party to it. If we were to reject it on political grounds there could be enormous trouble in other countries where the IMF is needed. As I said earlier, there is no doubt that the conditions imposed by the IMF in connection with the loan will inhibit Argentina.
    Mr. Speaker: The Foreign Secretary will understand that he is not free to accuse the right hon. Member for Leeds, East (Mr. Healey) of being a hypocrite. I am sure that he would wish to do as the right hon. Gentleman did, when he withdrew any suggestion that he called the Minister a hypocrite.
    Mr. Pym: I said "If there is hypocrisy about".
    Dr. Owen: Will the Foreign Secretary confirm that the British Government authorised British banks to lend money to Argentina because they feared the consequences of financial collapse on the internal stability of Argentina? Having made that decision, which was wise, is it not logical that the Government should open discussions with Latin America and Argentina to avoid the consequences of fortress Falklands and a future war with Argentina?
    Mr. Pym: I am not sure that that follows. The United Kingdom has played its full part in the international financial arrangements and discussions, not only in connection with Argentina, but with Mexico, Brazil and other countries. That is in the general interests of our country.
    Mr. McCrindie: I understand all the difficulties to which my right hon. Friend referred, but is it not true that Argentina is replacing, almost with impunity, many of the weapons lost during the Falklands war? Accepting that the source of supply of the new weapons appears to be our partners in the EC, will my right hon. Friend redouble his efforts—perhaps through specific discussions—to curb the flow of weapons to Argentina?
    Mr. Pym: I share my hon. Friend's anxiety. I am doing everything that I can. I shall constantly look for ways of making further and, I hope, more effective representations.

    Lebanon
    Mr. Englishasked the Secretary of State for Foreign and Commonwealth Affairs whether he has received any indications from the Israeli and Syrian Governments and the Palestine Liberation Organisation leadership that they have agreed to withdraw their forces from Lebanon under appropriate guarantees and that their withdrawal would be peaceful.
    Mr. Pym: The Israeli and Syrian Governments and the Palestine Liberation Organisation have all indicated their readiness in principle to withdraw their forces from Lebanon. However, all have set conditions which have so far prevented the progress so urgently needed. We fully support United States efforts to secure a peaceful withdrawal of these forces from Lebanon as soon as possible.
    Mr. English: What action is the Foreign and Commonwealth Office taking?
    Mr. Pym: I am supporting the United States. I am representing our views to that country and also to the European Community. The Ten have acted on behalf of all members, including ourselves. We have made direct representations. We are in close touch with the Lebanon Government. We are taking all the steps of which we can think.
    Mr. Walters: Has my right hon. Friend's attention been drawn to a statement by Israeli Foreign Minister Shamir that occupied Arab territory cannot be described as either occupied or conquered because it is part of Israel? What steps does he intend to take in response to that?
    Mr. Pym: The Government have made strong representations direct to Israel, as have the Ten. I raised the matter during my recent visit to the United States. One of the conditions that must be fulfilled if the peace-making process is to begin is that Israel must change its policy on the Reagan plan. We are doing our best to persuade Israel to do that.
    Mr. Healey: What is the right hon. Gentleman asking the United States Administration to do?
    Mr. Pym: The United States has the greatest influence with Israel. It is necessary for the Israeli Government to change their attitude in certain respects—such as withdrawal from the Lebanon, accepting the principle of sitting around a table to negotiate on the basis of the Reagan plan, and their policy on the West Bank.
    The Arabs should come forward with a proposition that makes the possibility of peace negotiations realistic. We hope that during the next few weeks King Hussein and others will come forward with such a proposition. However, there need to be changes in the Israeli position also.
    Mr. Healey: But what is the Foreign Secretary asking the United States to do to secure the results that most of us on both sides of the House want?
    Mr. Pym: We are asking the United States to use its full weight and influence to cause Israel to change its policy. Exactly how it does that is a matter for the United States. We have made direct representations to Israel.

    Mr. Anatoly Shcharansky
    Mr. Radiceasked the Secretary of State for Foreign and Commonwealth Affairs whether he has received any further communication from the Soviet Government about Mr. Anatoly Shcharansky.
    The Under-Secretary of State for Foreign and Commonwealth Affairs (Mr. Malcolm Rifkind): We have received no direct response from the Soviet authorities to my right hon. Friend's request made to the Soviet ambassador on 7 February for Mr. Shcharansky's release. However, Mr. Shcharansky's case was raised during the recent visit of the Soviet Deputy Foreign Minister, Mr. Ryzhov.
    Mr. Radice: Is the Minister aware that the Opposition are opposed to the denial of human rights wherever that happens? Will the Minister and the Foreign Office continue to raise the question of Mr. Shcharansky in any way possible?
    Mr. Rifkind: I am well aware that the Government have the support of the vast majority of hon. Members on both sides of the House. Human rights has been a major issue raised by the British delegation to the Madrid conference that is currently taking place.
    Mr. Whitney: Does my hon. Friend agree that what is happening to Anatoly Shcharansky shows the falsity of the Opposition's stance on nuclear disarmament? Is not one-sided disarmament based on complete equality of human rights in the East and the West—which manifestly is not the case?
    Mr. Rifkind: There is no doubt that the denial of human rights in the Soviet Union is one of the fundamental difficulties that prevents the West trusting the objectives and speeches of the Soviet leaders. There is no doubt that an improvement in human rights would make a major contribution to improving relations between East and West.
    Mr. George Robertson: Does the Minister realise that many Opposition Members do not accept the extravagant language used yesterday by President Reagan when he described the Soviet Union as having the aggressive impulses of an evil empire? Nevertheless, is he aware that we despair at the continued harassment of such dissidents as Anatoly Shcharansky and the Estonian Mrs. Lagle Parek, who was arrested last week in Tartu? Is he further aware that he will have our continued support in calling for their liberation, as he will also have if he uses his influence to moderate the language used in Orlando, Florida by the President of the United States.
    Mr. Rifkind: There are at least 2 million Afghan refugees who find that President Reagan's comments accord with their experience of the Soviet Union. I agree with the hon. Gentleman's views on human rights.
    Mr. Rhodes James: Is my hon. Friend aware that this is not, and should never be, a party matter? Is not genuine and profound concern felt in the House for those deprived of their human rights in the Soviet Union or elsewhere? In addition to Mr. Shcharansky, will my hon. Friend comment on another case—alas one of many—that of Dr. Begun?
    Mr. Rifkind: I received a close friend of Dr. Begun who was travelling to the United Kingdom seeking the

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    support of Western Governments for representations to the Soviet Union. Arising out of that visit we have made representations to the Soviet Union both at Madrid and in other forums.
    Mr. Arthur Lewis: Might not the Soviet Government be more amenable to reason if the Government took action to release the 5,000-odd British people who have been in prison for over two years, for whom nothing has been done, and who have not even had a mock trial? Will the Minister have a word with the Home Seretary to see whether something might be done about it?
    Mr. Rifkind: The hon. Gentleman does himself and this country a disservice by seeking to make the spurious and superficial comparison that he has.
    Mr. Arthur Lewis: Ask the 5,000 in prison.

    Turkey (Academic Freedom)
    Mr. Sheermanasked the Secretary of State for Foreign and Commonwealth Affairs if he will make representations to the Turkish Government about the curtailment of academic freedom in that country.
    Mr. Hurd: We would not condone the restriction of academic freedom in any country, but we have no plans to make representations about academic freedom in Turkey. The administration of Turkish universities must be a matter for the Turkish authorities.
    Mr. Sheerman: Does the Minister agree that it is an appropriate day to talk about academic freedom, with today's lobby by the higher education world? Academic freedom, wherever it is under threat, is of serious concern to democratic countries such as this. What is going on in Turkey is surely of interest to the Government and this country, when a NATO ally is purging all those who do not agree with it from the university world and putting them in goal. Are not the human rights of an ally alongside whom we would be willing to go to war even more important than the human rights of a potential enemy?
    Mr. Hurd: We have drawn to the attention of the Turkish Government from time to time our concern about violations of fundamental human rights.
    Sir Patrick Wall: Are not the Labour party's continued attacks on NATO allies to be deplored? Is it not a fact that the Turkish Government have restored law and order in that country and are now moving rapidly towards parliamntary and democratic government?
    Mr. Hurd: My right hon. Friend is right. The new Turkish constitution has been approved by an overwhelming majority. Elections are due in October. It is good progress.
    Mr. Moyle: While we all appreciate the right hon. Gentleman's noble Friend the Minister of State's going to Turkey and falling asleep in the middle of a lecture on Anglo-Turkish diplomatic relations, is not something more active required of the Government in the light of what the Turkish Government are doing? Turkey is a member of NATO—in the same alliance as we are—and therefore should not Turkey be defending academic, trade union and press freedom? Should we not be urging it to do so as the price of remaining part of NATO, which makes it Turkey's responsibility to defend these freedoms?
    Mr. Hurd: It must be for the Turks to decide how their universities should be run.
    Several Hon. Members: Mr. Shcharansky?
    Mr. Hurd: Mr. Shcharansky has been in prison for many years. These people are not in prison.
    Mr. Heifer: Yes they are.
    Mr. Hurd: The question on the Order Paper relates to the dismissal of a number of academics. We make the Turkish authorities aware of our concern for fundamental human rights and the visit of my noble Friend, to which the right hon. Member for Lewisham, East (Mr. Moyle) referred so slightingly, was an opportunity, which he took, to make that point.

    Middle East
    Sir John Biggs-Davisonasked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on efforts for a middle east settlement.
    Mr. David Watkinsasked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on progress towards peace in the middle east.
    Mr. Pym: We are approaching the time when crucial decisions must be made by the parties directly concerned in the search for a peaceful settlement. We have encouraged King Hussein and the Palestine Liberation Organisation to reach agreement soon on a joint approach to negotiations, and have urged Israel to reconsider her rejection of President Reagan's proposals. We continue to give full support to United States efforts to make progress both on the Arab-Israel problem and on the withdrawal of foreign forces from Lebanon.
    Sir John Biggs-Davison: While I acknowledge my right hon. Friend's efforts, is not the middle east conflict that is most dangerous to British interests that between Iran and Iraq? What is being done in that regard? Has my right hon. Friend any information about the initiative of the peace committee of the Organisation of Islamic Conference?
    Mr. Pym: The dispute between the Arab countries and Israel in the middle east and the war between Iran and Iraq are both contrary to British interests. They are destabilising, not just in that region but throughout the world. Therefore, it is in all our interests to take every step that we can to try to solve the one problem and stop the war in the other case. No effort to stop the war has so far been successful. The efforts of countries that are closer both to Iraq and Iran than Great Britain have so far failed. We and our friends are doing our best to use all our influence to try to bring that war to an end.
    Mr. Watkins: Will the Secretary of State consider a British initiative to try to revive the Geneva conference under joint American-Soviet chairmanship as a meeting place for all parties to the conflict in the middle east? Does he accept that peace in the middle east is far too serious a problem for the world to be a matter of such serious confrontation? It should be a matter for East-West co-operation.
    Mr. Pym: I agree entirely with the hon. Gentleman about the gravity of the position. Perhaps his first suggestion could be considered, but I believe that the next

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    few weeks are particularly critical. We shall see whether King Hussein, the PLO and other Arab countries can put a position to the United States that would have an effect upon future negotiations. I do not believe that this is the appropriate moment to consider the hon. Gentleman's suggestion, but it could be considered later.
    Mr. Alexander: Does my right hon. Friend agree that the serious expansion of Israeli settlements on the West Bank is impeding the likelihood of a successful outcome to the Palestinian question? Is he aware that 60 per cent. of the 85 or so settlements there have been erected during the past four years? To propose to increase the Israeli population sixfold on the West Bank does no service to peace in the area.
    Mr. Pym: I agree with my hon. Friend. As I believe I have made clear before, we regard the Israeli policy as illegal. It is contrary to the Reagan plan, which we still believe, as does practically every other country, is the right basis on which to start the peace-making process. A freeze would be essential as a minimum before the peacemaking process could begin. I share my hon. Friend's views on this matter.
    Mr. Greville Janner: Will the right hon. Gentleman reassure the House that the Government remain firm in their intention not to receive leaders of the PLO at top level while it remains determined not even to recognise Israel's right to exist?
    Mr. Pym: We have made our position clear on that subject.
    Mr. Speaker: Mr. Christopher Price.
    Mr. Hurd rose—
    Mr. Speaker: Order. I do not think that the hon. Member is here.

    Angolian Minister of External Relations (Visit)
    Mr. Proctorasked the Secretary of State for Foreign and Commonwealth Affairs if he will list the subjects discussed during the visit of His Excellency Senhor Paulo Teixeira Jorge, the Angolan Minister of External Relations, to the United Kingdom on 10 to 13 February; and if he will make a statement.
    Mr. Carmichaelasked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on the result of his recent discussions with the Foreign Minister of Angola.
    Mr. Onslow: There was a full and useful exchange of views both on bilateral relations and on important current international issues. The details of our talks must remain confidential, but I can tell the House that the questions discussed included the release of the British mercenaries imprisoned in Luanda; the possibilities for expanding the friendly relations that already exist between Angola and the United Kingdom; and the possibilities for progress in reaching a settlement of the Namibia question.
    Mr. Proctor: Does my hon. Friend agree that the remarks made by the Angolan Minister while in this country with regard to Angolan mercenaries were helpful? I have a constituent in prison in Angola. Will my hon. Friend and other Ministers maintain the momentum so that the release of my constituent and others will be effected at an early opportunity?
    Mr. Onslow: I agree with my hon. Friend that Senhor Jorge's comments were encouraging. His forecast that it might be possible to resolve the problem before the end of the year was welcomed by all those who are concerned with this problem. We shall try to get things moving forward. I do not want the House to feel that this matter should become the centrepiece of our relations with Angola.
    Mr. Carmichael: Did the Minister discuss assistance in the removal of Cuban troops from Angola by the United States? Does he agree that that is wrong and against the spirit of resolution 435? Is not the independence of Namibia a matter for the United Nations and not Angola?
    Mr. Onslow: The Angolan Government made their view clear to us and they understand our view. We believe that this is an opportunity to resolve a wider problem affecting southern Africa. It would be a great pity to let the opportunity pass.

  EUROPEAN COMMUNITY

    European Commission (Powers)
    Sir Anthony Meyerasked the Secretary of State for Foreign and Commonwealth Affairs when he next expects to meet the President of the European Community Commission to discuss the powers of the Commission.
    Mr. Pym: I next expect to meet the President of the Commission at the Foreign Affairs Council on 14 and 15 March, but I have no plans to discuss the powers of the Commission with him.
    Sir Anthony Meyer: Does my right hon. Friend agree that by far the best way to make the European Community acceptable to the British public is to extend the number of common policies that have been agreed, in particular in relation to energy, transport and the removal of barriers to internal trade?
    Mr. Pym: The Commission's powers are laid down in the treaties. I see no need to change them, but I do see the need for an extension of common policies. One of the elements of our policy in the Community is to seek that widening of common policies in areas such as my hon. Friend mentioned.
    Mr. Ioan Evans: Does the right hon. Gentleman agree that the hon. Member for Flint, West (Sir A. Meyer) has been the most consistent supporter of the EC in the House? Will the Foreign Secretary raise with the President of the EC the question of the use of Euro-funds and the selection procedure adopted in the new Clwyd constituency in North Wales, under which the Euro-Member was put on the short list by the Conservative Central Office?
    Mr. Pym: I think that I should consider that carefully before I act upon the hon. Member's advice.

    Regional and Social Policies
    Mr. Leightonasked the Secretary of State for Foreign and Commonwealth Affairs what response to his proposals for the future of European Community regional and social policies has been made by other European Community Foreign Ministers.
    Mr. Hurd: The response to our ideas for improvement has been reasonably encouraging. Proposals for a new regional fund regulation embody the principle of

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    concentration on areas of greatest need. The Commission has announced a study of how the Community can help overcome urban decline and proposals for a revised social fund, stress the training needs of young people.
    Mr. Leighton: Do not those funds have an intimate connection with Britain's quest for more equitable budget contributions? Did not the right hon. Member for Sidcup (Mr. Heath) think that they would compensate us for the excessive payments that we make to the agriculture fund? With the enlargement of the Community will not Britain be in deficit, even on the regional and social funds? Is not the prospect for the coming year further bitter wrangling and haggling? What is the Government's policy?
    Mr. Hurd: I do not agree. The British share of the social fund increased from £130 million in 1979 to £257 million last year. Our share of the regional fund increased from £163 million in 1979 to £250 million last year. I hope that the hon. Gentleman is satisfied with that solid progress.
    Mr. Russell Johnston: Nevertheless, is not the point made by the hon. Member for Newham, North-East (Mr. Leighton) valid? If the regional and social funds are to have any effect a large amount will have to be spent in the countries that will join the Community. How can the Minister expect an improvement in the regional and social funds without an enlargement of the budget?
    Mr. Hurd: There has been the improvement in the British receipts from the two funds that I illustrated. We hope that the two funds will be further increased. We believe that the finance can be found by pulling back and restraining the rate of growth of agriculture expenditure.
    Mr. Marlow: What evidence does my right hon. Friend have to make him believe that the European Community is more efficient in its expenditure on regional and social policies than Her Majesty's Government?
    Mr. Hurd: The performance of both the funds, and the attitude of Ministers in successvie British Government to them, show that they play a useful part in supplementing what we do ourselves.
    Mr. Heifer: Has the right hon. Gentleman read the speech by Commissioner Tugendhat at yesterday's European assembly in which he said that it is likely that CAP spending next year will be 20 per cent, above what it is this year and that it will be virtually impossible to give Britain an adequate refund on its budget contributions? How can we talk in terms of money being available, for the social fund, for example, if we are to be faced with added burdens in relation to the overall contribution?
    Mr. Hurd: Commissioner Tugendhat was drawing the Parliament's attention, rightly, to the fact that agriculture spending needs to be brought under control and that there are risks of it increasing, after a period when it has been held relatively steady. He was right to do that, and that is why my right hon. Friend the Minister of Agriculture, Fisheries and Food is taking a stern line in the present price-fixing discussions.

    Development Policy (TUC Discussions)
    Mr. Roy Hughesasked the Secretary of State for Foreign and Commonwealth Affairs if he will consult the Trades Union Congress about the future development of the European Community.
    Mr. Hurd: My right hon. Friend had a meeting on 5 January with the international committee of the Trades Union Congress. Its members did not raise with him the development of the European Community, but we would be happy to hear their views.
    Mr. Hughes: Does the Minister appreciate that the trade unions realise that Great Britain can no longer sustain the burden of membership of the Common Market? Is he aware that the trade unions bear in mind the £1 million a day membership fee, the inflationary food costs and the extra 2 million to 3 million unemployed, all of which have occurred since we joined the Community?
    Mr. Hurd: We see signs that trade union leaders increasingly realise that withdrawal from the Community would put at risk hundreds of thousands of jobs in Britain.
    Mr. Budgen: Is my right hon. Friend aware that in the west midlands we do not want the development of the EC to take place through the development of the regional or social funds, but we should like the EC to do its present limited jobs better? Is my right hon. Friend further aware that, in particular, we should be grateful for a great deal more speed in renegotiating the extremely unfair trading agreement between the EC and Spain?
    Mr. Hurd: I certainly agree with my hon. Friend's second point.
    Mr. Hafer: How does the right hon. Gentleman conclude that the trade unions are not urging withdrawal when, in their economic review, they make it clear that they intend to urge withdrawal precisely because the Common Market is a burden on the British people?
    Mr. Hurd: I read with interest an article by Mr. Lea, the TUC assistant general secretary, in The Listener on 20 January in which he argued in favour of co-operation on a western European basis. I am not sure whether all trade unionists have grasped the implications of the hon. Gentleman's paper, in which he argues in favour of putting up barriers, not only against our EC customers, but against EFTA customers, which would affect not 43 per cent. of our exports, but 60 per cent.

    Heads of Government Meeting
    Mr. Spearingasked the Secretary of State for Foreign and Commonwealth Affairs when he expects to publish the list of topics to be considered at the Heads of Government meeting of the European Community to be held on 21 and 22 March.
    Mr. Hurd: There is no set agenda at European Council meetings, and Heads of Government are free to raise any items of concern to them. Heads of Government will no doubt in March discuss the reports that they called for in December on measures to improve the internal market; Commission proposals in the field of research, innovation and energy; youth unemployment; and enlargement of the Community. My right hon. Friend the Prime Minister will raise the budgetary question.
    Mr. Spearing: Is it not a fact that as long ago as last November Herr Kohl, when Chancellor, said that he wished to raise the matter of the Genscher-Colombo plan and the draft Act of European Unity at a time when he was President of the Council? Since the plan envisages giving greater powers to the Commission, to the assembly and to

    835
    European assembly persons, would that not diminish the powers of this House? Since the powers of those institutions and persons has increased, is increasing and should be diminished, should not Her Majesty's Government say to Herr Kohl, "Nein danke schõn?
    Mr. Hurd: I think that the hon. Gentleman is working on an old version of the document. We debated it in the House last summer. Since then there have been further discussions. We had a discussion on 1 March in Bonn. The document that is now being considered does not have any of the effects that the hon. Gentleman describes.
    Sir Derek Walker-Smith: Will the Heads of Government make it clear beyond peradventure at the meetings that the powers of the various institutions of the Community are expressly limited by article 4 of the treaty to those that are conferred by the treaty, and cannot be expanded without amendment of the treaty, with all the formalities that that requires?
    Mr. Hurd: My right hon. and learned Friend is perfectly right. I am sure that that view will be expressed by the Prime Minister whenever appropriate.
    Mr. Jay: Will the Heads of Government at those meetings discuss the proposals of the Strasbourg assembly to hold its discussions in this country on Northern Ireland? If all else fails, could we use the Prevention of Terrorism Act to keep out those undesirable aliens?
    Mr. Hurd: No. Sir, but we hold to the view that it is no part of the job of the European Parliament to deal with the internal constitutional affairs of a member state.
    Mr. Russell Johnston: Does the Minister remember saying in the House in December 1977 that although he was then opposed to the introduction of the proportional system in elections, he wanted it the second time round? What is he doing about encouraging Heads of State to take action on that matter?
    Mr. Hurd: There has been a great deal of discussion about that. I reported the discussions at the last Council of Ministers to the House. None of the Ministers concerned sees a chance of reaching agreement on a uniform electoral procedure this side of the 1984 election.
    Mr. Cockeram: Is my right hon. Friend aware that those of us who wish to see co-operation between this Parliament and the European assembly believe that the functions of this Parliament have been usurped by certain Members of that assembly, as has been demonstrated by the recent tendency? Does he agree that if co-operation is to continue, that practice must cease?
    Mr. Hurd: It is important that the European Parliament should operate and be seen to operate within the powers conferred on it by treaty.

    Budget Contribution
    Mr. Mylesasked the Secretary of State for Foreign and Commonwealth Affairs what progress has been made in reaching an agreement on the British contribution to the European Community budget.
    Mr. Pym: The Commission has put forward its ideas for dealing with the budget problem in the context of a reform of the Community's financial system. Discussions
    836
    are continuing in the Foreign Affairs Council, and the subject will be raised at the European Council on 21 and 22 March.
    Mr. Myles: Will my right hon. Friend confirm that there is widespread understanding of the British contribution problem by our European partners—in fact, far more than by many hon. Members? Does he agree that the efforts by himself and our hon. Friends in trying to get a sensible solution by reasoned negotiations is the best way forward?
    Mr. Pym: There is an understanding of the British position. I am glad to say that the Foreign Affairs Council has come to the positive conclusion comparatively recently that a fundamental change is needed in the financial system. The Commission has put forward a Green Paper with various suggestions in it. We shall address ourselves to that at the Council meeting next week and at subsequent meetings.
    Dr. Owen: Does the right hon. Gentleman accept that a permanent solution to the British budgetary contribution problem, which is very necessary, would be easier to achieve if, at the European Council meeting, or before, the British Government showed a readiness, particularly in view of the dramatic fall in the value of the pound sterling, to enter the exchange rate mechanism of the EMS?
    Mr. Pym: That is an entirely different question. To be frank, I do not think that such a move, were it to be made, would have any bearing on the discusssions that we shall have. Perhaps it should, but in my view it would not.
    Mr. Heifer: Is the right hon. Gentleman aware that he would get full support from hon. Members on the Labour Benches for not entering the EMS? Does he realise that we would consider entry to be a great mistake by the Government? As the Prime Minister has made all sorts of private statements, which seem to have leaked into the press, to the effect that sooner or later the Government would be prepared not to pay contributions unless a settlement is reached, and since everyone seems to be sympathetic to us, what are we going to do about it? They are not doing anything about it. What do we intend to do about it?
    Mr. Pym: What has happened so far is that over three years we have had a repayment of over £2,000 million, which is not a bad start. We must negotiate a new agreement now. I do not disguise from the House the fact that it will be difficult. We have shown already that we are prepared to take action. We shall do so. It is also fair to say that in a world recession it is more difficult for countries to make such adjustments than when there is growth in the world economy. At any rate, we shall pursue negotiations on the budget and a permanent change in the financial system with all the vigour at our command.
    Mr. Bowen Wells: Will my right hon. Friend confirm that, in pursuit of a solution to the budget problem, there is a proposal to increase the European development fund? If so, what effect would that have on the Overseas Development Administration budget?
    Mr. Pym: That proposal is not germane to the basic consideration of a change to the financial system.
    Mr. Carter-Jones: Could we now clear up once and for all who in the EC is responsible for funding schemes for aiding the disabled and the frail elderly? Can that be spelt out loud and clear?
    Mr. Pym: I should like notice of that question, so that I can give the hon. Gentleman an accurate reply. I shall write to him.

    European Commission (Administration Costs)
    Mr. Colvinasked the Secretary of State for Foreign and Commonwealth Affairs if he is satisfied with the cost of administering the European Commission; and if he will make a statement.
    Mr. Hurd: The cost does not seem excessive, although, as with most public bodies, there is always room for improvement.
    Mr. Colvin: Is my right hon. Friend aware that in the bureaucracy of the Commission in Brussels there are only 9,000 employees, which is fewer than in most London boroughs, so it is not at all as excessive as some hon. Members may occasionally accuse it of being? Will my right hon. Friend use his best endeavours to ensure that reports emanating from Brussels are produced in future in a more concise form, because at present they give the impression of being utterly bureaucratic?
    Mr. Hurd: I sympathise with my hon. Friend's second point. If he has specific examples, I should like to pursue them. With regard to his first point, at the end of last year there were 9,283 employees of the Commission. About one third of them were interpreters. That is under half the staff employed by the Greater London council.
    Mr. Hoyle: Can the Minister say how much of the cost is due to the slush fund that it is reported Members of the European Parliament are using to stand as candidates for the House of Commons, as in north Wales and Clwyd?
    Mr. Hurd: No. Sir.
    Mr. Bill Walker: Does my right hon. Friend agree that the problem within the European Community, in its administration of funds, is that we see many documents and hear about many funds that we would not sanction in the House, which causes disturbance and make it difficult for those of us who want the Community to be effective?
    Mr. Hurd: If my hon. Friend has specific points that he would like to raise, he should do so. All sorts of suggestions are floated either in the Parliament—I think that I know what my hon. Friend is talking about—or in the Commission. What counts is not what is floated in speeches but what is approved by the institutions of the Community, particularly by the Council of Ministers.
    Mr. Arthur Lewis: The Minister asked hon. Members to raise specific matters with him. Can he take specific action to stop the gravy train that seems to go backwards and forwards in the Community and the dishing out of our taxpayers' money to supply the European assembly people with gold and silver medallions? Would it not be better to spend that money on old-age pensioners, sick and disabled people, let the assembly people come back, and let those who receive fat pensions pay for the medallions instead of their being provided at the expense of the British taxapayer?
    Mr. Hurd: My hon. Friend's question was about the Commission and so are my answers.

    "Britain in the European Community: a Positive Approach"
    Mr. Knoxasked the Secretary of State for Foreign and Commonwealth Affairs how many copies of the booklet "Britain in the European Community: a Positive Approach", referred to in his answer of 9 February, Official Report, c. 997, were printed.
    Mr. Hurd: Twenty thousand copies were printed in English, 7,500 in German, and 4,000 each in French, Italian and Dutch. The booklet is going well.
    Mr. Knox: Is my right hon. Friend aware that some of us are rather disappointed that there is no reference in the booklet to Britain participating in the exchange rate mechanism of the EMS? Does he not believe that that would contribute to the unity of Europe and greatly benefit the British and other European economies?
    Mr. Hurd: My right hon. Friend the Foreign Secretary has just commented on that point. I should not like to add to what he said.
    Mr. Ioan Evans: Rather than have a publication which simply gives the advantages of membership, would it not be better for the Government to provide an objective publication which catalogues both the advantages and disadvantages of membership of the Common Market? Will he consider the fact that, whereas the Government's publication refers to a fundamental reform of the CAP, the EC publications, which are also circulating in Britain, talk of the CAP being a cornerstone of the Market? Will the Government clarify the advantages of the CAP.
    Mr. Hurd: The hon. Gentleman has heard many times that we accept the principles of the CAP as set out in reasoned form in the Treaty of Rome, but we believe that the way in which it is operated at present is expensive and that if it continues in that form it will exhaust the resources of the Community. That is one reason why we are pressing hard for change.

Butter Sales (Soviet Union)
3.32 pm
Mr. Teddy Taylor: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
"the announcement yesterday by the European Commission of a decision to renew export subsidies for butter sales to the Soviet Union".
The matter is certainly specific, as we are all aware that subsidies for exporting cheap butter to Russia were suspended following the invasion of Afghanistan and that the ban was renewed as a result of the repression of liberty in Poland. Yesterday, the Commission announced that that policy was to be changed.
You may wonder, Mr. Speaker, why it is important to allow these special butter subsidies when subsidies are now available to the Soviets for most other foodstuffs and wine. Vast quantities of cheap subsidised wine and food are being exported to the Soviet Union and those sales have rocketed. In 1978, less than 500,000 tonnes were exported, whereas in the three following years exports increased to 1 million tonnes, 2 million tonnes and then, in 1981, 3 million tonnes.
Naturally, as you are aware, Mr. Speaker, there is continuing public alarm and anxiety about the Soviets getting such vast quantities of food at about half the price that we pay in Britain. That is a continuing issue and nothing that would justify an application under Standing Order No. 9.
The importance of yesterday's decision stems from the fact that the Commission, which is the executive and administration of the Common Market, has taken upon itself the right to reverse a major political decision that was arrived at by member states. The British Government have made clear their utter opposition to the sale of subsidised food exports to the Soviet Union, as have most other member states. I believe that it is of major constitutional and political importance when such decisions and policies are reversed by EC civil servants.
The issue should have urgent consideration because if the House does nothing, British civil servants in the intervention board for agriculture will be obliged, within the next five days, to pay subsidies to any exporter who wishes to send cheap subsidised butter to the Soviet Union.
840
There is no other parliamentary opportunity for the issue to be debated in that limited time. The sums are considerable. In 1981, our civil servants had to pay out to British exporters £7,671,551, the sole purpose of which was to subsidise food for Russia.
There is a strong body of opinion among all parties in the House and the electorate that it is outrageous that we should be forced to pay taxes to ensure that the Soviets receive vast quantities of food and wine at about half the price that we must pay in our shops. That, however, is not the issue on which I want permission to adjourn the House. The issue is simply that the Commission's decision to reverse a political decision of member states is a significant further step towards the erosion of national decision making. Moreover, it is another step away from decisions being made by elected representatives. For that reason, and that reason alone, I believe that this is an important matter which should have urgent consideration. I hope that you, Mr. Speaker, will approve my application.
Mr. Speaker: The hon. Member for Southend, East (Mr. Taylor) gave me notice before 12 o'clock midday that he might seek to make an application under Standing Order No. 9 this afternoon.
The hon. Gentleman 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 yesterday by the European Commission of a decision to renew export subsidies for butter sales to the Soviet Union".
The hon. Gentleman has drawn the attention of the House to a serious matter. As the House knows, under Standing Order No. 9 I am directed to take account of the several factors set out in the order but to give no reason for my decision.
I have listened carefully to the hon. Gentleman's representations, 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.

BALLOT FOR NOTICES OF MOTIONS FOR FRIDAY 25 MARCH
Members successful in the ballot were:

Mr. William Hamilton

Mr. Bob Cryer

Mr. Donald Anderson

Quadrennial Parliaments
3.36 pm
Mr. Austin Mitchell: I beg to move,
That leave be given to bring in a Bill to dissolve the present Parliament immediately; and to provide for general elections to be held at intervals of not more than four years unless a majority of the House of Commons votes for an earlier dissolution.
This is a modest little measure which seeks to bring Britain into line with such democracies as Australia, Austria, Denmark, West Germany, the Netherlands, New Zealand, Norway and Sweden, all of which have maximum parliamentary terms of four years or less. It would remove us from the linger-longer league of Bulgaria, Czechoslovakia, the Ivory Coast, Monaco, Pakistan, South Korea, Romania, Sierra Leone, South Africa, Tunisia and Zaire, all of which, like us, have five-year terms or longer. Not only would it fulfil a basic democratic right to have Governments and Members of Parliament who were more frequently accountable, but it would allow the system to adjust better to what has emerged as a basic feature of British politics—the volatility of the electorate. That volatility is partly a product of the steady erosion of traditional allegiances on both sides of the electorate, and partly a product of economic failure which has led to comparative and now absolute decline. The electors have expected to become better off, but Governments have failed to deliver and the result has been increasing alienation.
Such circumstances combine badly with a five-year term because the result is that, deprived of real control by an over-long five-year term, people generate massive swings against the Government in polls, by-elections and massive third party protests because irresponsibility is amplified by impotence, through the long-term Parliament.
Governments always claim that they want longer to do a more fundamental job of reform, but usually one of two things happens. Sometimes they become unnerved and short-term considerations take over. The Government might go through a euphoric phase of doing what they want for two years, spend the rest of their term back-pedalling and, as is usual, end up going to the country early. They say at the beginning that they want 10 years to do the job and then take only three or four. That process devalues Parliament, because Parliament is a freeze frame of public attitudes and party allegiances of previous years which is increasingly less relevant. The Government read the mood of the public not through Parliament but through opinion polls, pressure group democracy and the other devices which are displacing Parliament.
The second thing that can and does happen—it has happened with this Government—is that the Government put their head down in pursuit of disastrous wrong-headed policies that cannot be checked because the elections are a long time away. They continue to pursue such policies whatever the consequences.
There is a marked contrast between the impact of wrong-headed monetarist economic policies on Britain and on the United States of America. Similar policies were implemented later in America, but the American Government, because they were far more sensitive to public opinion and because of the frequency of the elections, began to back-pedal on those policies much earlier than would a British Government, who were free from such considerations by the long Parliament in which
842
they could operate. The American Government began to expand the money supply and to introduce deficit financing as though it was going out of fashion to fight the depression that they had produced, whereas our Government are still pursuing their policies. Their resolute approach to other people's firms, jobs and future has been pursued because there is no effective check on the Government. A shorter parliamentary term would provide that check.
I wish us to move towards the chartists' dream of annual Parliaments, but as I am a moderate man—
Mr. Robert Rhodes James rose—
Mr. Mitchell: —I propose a four-year term, which will pass power back to the people.
The second part of my proposed Bill would effectively remove from the Prime Minister the power to decide, almost alone and unchecked, the date of the general election. That date affects all our careers and futures, but it is decided by one person on our behalf. At present, too much power is concentrated in the hands of the Prime Minister, who is already much too powerful in the system. It also loads the odds in the electoral process even more in the Government's favour. The Government already have the machinery of news management and the ability, if they wish, to manage the economy to suit their electoral fortunes. No doubt in next week's Budget we shall see part of that process.
The Government's power is great enough and they should not have the opportunity to seize opportunistically what they may believe is a temporary advantage or a passing popularity and go to the country. Previous Prime Ministers may have exercised that power in such a disastrously wrong way as to make it a power to commit political suicide, but the power itself is wrong. In 1970, my right hon. Friend the Member for Huyton (Sir H. Wilson) got the election date wrong. In 1974, the right hon. Member for Sidcup (Mr. Heath) got it wrong, and in 1979, my right hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) got it wrong. There is some reason to assume, and indeed every reason to hope, that the present Prime Minister will get it wrong in the same way.
Fixed-term Parliaments, which the Bill suggests, would remove the present spectacle of a Government suddenly becoming coy and flirtatious about the date of the election, when all the logic of what they have been saying should make them persevere to the bitter end. That is the basis of the policy that they have put before the people. Yet their coyness and flirtatiousness about the timing of the election has disastrous effects on the economy and on the valuation of the pound, which is central to the economy.
Mr. Rhodes James rose—
Mr. Mitchell: My Bill would remove that prospect. A fixed-term Parliament that could be dissolved early only by a vote in the House would spread power down from the Prime Minister to the parties, which must be the central instrument of government, and would allow the collective wisdom that is present in all parties, even mine, to exercise itself on a major decision that affects the future of all members of that party. I would not wish the Prime Minister to throw away the implications of the resolute approach for a quick dash to the country, but my Bill would stop the spectacle of her being torn between duty and convenience.

843
I envisage four-year terms, with early dissolution only on a vote of the House. The Bill does not specify whether that would be a vote for dissolution or a vote of no confidence in the Government.
During the past 100 years, the life of Parliament has been reduced from seven to five years, but five years is still too long. Power has been concentrated in the hands of the Prime Minister, but that power is now too great. My Bill deals with both problems, and its main importance is in shortening the life of Parliament so as to place power with the people, where it belongs.
Mr. Rhodes James rose—
Mr. Speaker: Does the hon. Member for Cambridge (Mr. Rhodes James) wish to oppose the Bill?
Mr. Rhodes James: Before the hon. Member for Grimsby (Mr. Mitchell) sat down, I wished to ask him a question—
Mr. Speaker: Order. There can be no interventions in a speech on a ten-minute Bill. If the hon. Gentleman seeks to oppose, of course I shall call him.
Mr. Rhodes James: On a point of order, Mr. Speaker. The hon. Gentleman referred to the chartist movement and annual Parliaments. The chartist movement—
Mr. Speaker: Order. That does not sound like a point of order for me.
Mr. J. W. Rooker rose
Mr. Speaker: Point of order, Mr. Rooker, who may be more successful.
Mr. Rooker: I rise to oppose the Bill, Mr. Speaker, to bring the matter to a conclusion. Before I heard the speech of my hon Friend the Member for Grimsby (Mr. Mitchell), when I entered the Chamber, on balance, I was inclined to vote for it because we must have serious discussions about fixed-term Parliaments. However, my hon. Friend has palpably failed to make his case and, therefore, the Bill should proceed no further and the House should not give my hon. Friend leave to bring it in.
Question put, pursuant to Standing Order No. 13 (Motions for leave to bring in Bills and nomination of Select Committees at commencement of public business):
The House divided: Ayes 42, Noes 130.

Division No. 90]

[3.40 pm

AYES

Alton, David

Johnson, Walter (Derby S)

Beith, A. J.

Jones, Dan (Burnley)

Bradley, Tom

Lofthouse, Geoffrey

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

McNally, Thomas

Canavan, Dennis

Marshall, D(G'gow S'ton)

Carter-Jones, Lewis

Maxton, John

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

Meacher, Michael

Foulkes, George

Mitchell, Austin (Grimsby)

Freud, Clement

Mitchell, R. C. (Soton Itchen)

Ginsburg, David

Morris, Rt Hon A. (W'shawe)

Grimond, Rt Hon J.

Morton, George

Hamilton, James (Bothwell)

Owen, Rt Hon Dr David

Horam, John

Park, George

Howells, Geraint

Pavitt, Laurie

Hoyle, Douglas

Ross, Stephen (Isle of Wight)

Hughes, Simon (Bermondsey)

Sandelson, Neville

Johnson, James (Hull West)

Spellar, John Francis (B'ham)

844

Steel, Rt Hon David

White, Frank R.

Stewart, Rt Hon D. (W Isles)

Whitehead, Phillip

Torney, Tom

Varley, Rt Hon Eric G.

Tellers for the Ayes:

Wainwright, R.(Colne V)

Mr. Russell Kerr and

Weetch, Ken

Mr. Joe Ashton.

NOES

Alexander, Richard

Knight, Mrs Jill

Anderson, Donald

Lamond, James

Atkinson, N.(H'gey,)

Leighton, Ronald

Banks, Robert

Le Marchant, Spencer

Beaumont-Dark, Anthony

Lewis, Arthur (N'ham NW)

Bennett, Andrew(St'kp't N)

Lewis, Ron (Carlisle)

Bennett, Sir Frederic (T'bay)

Litherland, Robert

Bevan, David Gilroy

Mabon, Rt Hon Dr J. Dickson

Biggs-Davison, Sir John

McCusker, H.

Blackburn, John

McElhone, Mrs Helen

Body, Richard

McQuarrie, Albert

Bottomley, Peter (W'wich W)

McTaggart, Robert

Bowden, Andrew

Marlow, Antony

Brotherton, Michael

Marshall, Jim (Leicester S)

Brown, Michael(Brigg & Sc'n)

Marten, Rt Hon Neil

Budgen, Nick

Mason, Rt Hon Roy

Burden, Sir Frederick

Mawby, Ray

Campbell-Savours, Dale

Mawhinney, Dr Brian

Carlisle, John (Luton West)

Maxwell-Hyslop, Robin

Chapman, Sydney

Meyer, Sir Anthony

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

Mikardo, Ian

Cohen, Stanley

Molyneaux, James

Concannon, Rt Hon J. D.

Monro, Sir Hector

Cormack, Patrick

Montgomery, Fergus

Costain, Sir Albert

Mulley, Rt Hon Frederick

Crawshaw, Richard

Murphy, Christopher

Cryer, Bob

O'Halloran, Michael

Cunliffe, Lawrence

Orme, Rt Hon Stanley

Dean, Joseph (Leeds West)

Parris, Matthew

Dixon, Donald

Porter, Barry

Dormand, Jack

Powell, Raymond (Ogmore)

Dorrell, Stephen

Prescott, John

Duffy, A. E. P.

Proctor, K. Harvey

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

Race, Reg

Emery, Sir Peter

Rhodes James, Robert

English, Michael

Roberts, Ernest (Hackney N)

Evans, Ioan (Aberdare)

Roberts, Gwilym (Cannock)

Evans, John (Newton)

Rooker, J. W.

Fell, Sir Anthony

Sheerman, Barry

Fookes, Miss Janet

Shepherd, Colin (Hereford)

Forrester, John

Skeet, T. H. H.

Foster, Derek

Skinner, Dennis

Fraser, Rt Hon Sir Hugh

Smith, Sir Dudley

Fry, Peter

Smith, Tim (Beaconsfield)

Golding, John

Spearing, Nigel

Gorst, John

Spence, John

Gow, Ian

Spriggs, Leslie

Graham, Ted

Stanbrook, Ivor

Greenway, Harry

Stokes, John

Grieve, Percy

Taylor, Teddy (S'end E)

Grist, Ian

Thorne, Neil (Ilford South)

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

Thorne, Stan (Preston South)

Harrison, Rt Hon Walter

Townend, John (Bridlington)

Haynes, Frank

Townsend, Cyril D, (B'heath)

Heddle, John

Viggers, Peter

Higgins, Rt Hon Terence L.

Walker, B. (Perth)

Hill, James

Walker-Smith, Rt Hon Sir D.

Holland, Philip (Carlton)

Watkins, David

Hoyle, Douglas

Wells, Bowen

Hughes, Robert (Aberdeen N)

Welsh, Michael

Hughes, Roy (Newport)

Wheeler, John

Irvine, Rt Hon Bryant Godman

Winnick, David

Janner, Hon Greville

Winterton, Nicholas

Jay, Rt Hon Douglas

Johnson Smith, Sir Geoffrey

Tellers for the Noes:

Jones, Barry (East Flint)

Dr. David Clark and

Kimball. Sir Marcus

Mr. David Stoddart.

Question accordingly negatived.

Public Expenditure
[Relevant document: Third report of the Treasury Civil Service Committee, House of Commons Paper 204, Session 1982–83.]
3.57 pm
The Chief Secretary to the Treasury (Mr. Leon Brittan): I beg to move,
That this House takes note of the White Paper on the Government's Expenditure Plans 1983–84 to 1985–86 (Cmnd. 8789).
Mr. Speaker: I have selected the amendment in the name of the Leader of the Opposition.
Mr. Brittan: We are today debating one major component of the Budget. The other half will be presented to the House next Tuesday. Cmnd 8789, which sets out our plans for expenditure for the years to 1985–86, was published on 1 February. This earlier date of publication followed a recommendation from the Treasury and Civil Service Select Committee in its report on budgetary reform, which I am glad we were able to meet. I am sure the whole House would wish me to express our thanks to the Select Committee for the great effort it has made in publishing its report on the White Paper in time for this debate.
A new economic forecast will be published next week with the Budget, and I cannot anticipate that, but before discussing the White Paper I should like to look briefly at where the economy stands. As we forecast last autumn, 5 per cent. inflation has been achieved early in 1983; this is some three percentage points lower than the figure we were projecting at the time of last year's Budget. The inflation path may be a little more bumpy this year, reflecting in part the relatively small price increases experienced during much of 1982, but we shall certainly continue to maintain sound financial policies.
Output levels, particularly in manufacturing, remain disappointing. That is partly due to the substantial fall in world trade last year, but total domestic demand has continued to rise fairly strongly—most recently because of higher consumer spending—and output in some sectors, such as construction, North sea oil, consumer goods and distribution, has also been increasing. The latest CBI trends inquiry indicated a significant improvement in manufacturers' order books and in expectations about output. Recent indicators from the United States point to the beginnings of a modest recovery in world activity, and most outside forecasts currently see a growth in the United Kingdom's gross domestic product of some 1·5 per cent. to 2 per cent. in 1983.
The level of unemployment, however, is tragic and worrying. It is a tragedy that we share with many industrialised countries. We assume in the public expenditure White Paper that adult unemployment in Great Britain will average a little over 3 million next year and, as is the convention, that it will stay at that level in each of the two following years. We state quite plainly, however, that the unemployment levels in the later years may turn out to be lower than that if developments in the world economy are favourable and developments at home—notably by way of a continued reduction in pay settlements—permit.
I emphatically reject the claim in the Opposition amendment that unemployment is set to rise towards the
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4 million mark. For one thing, there is the substantial amount of money that the Government have allocated to special employment and training measures. In 1983–34 we are planning to spend some £2 billion on such measures—five times as much as in 1979–80. These measures are currently reducing the unemployment total by about 360,000—
Mr. Nigel Spearing: But not unemployment.
Mr. Brittan: From this year all unemployed 16-yearolds can look forward to a year's useful training under the new training scheme. But we all recognise that unemployment is a deep-seated problem and it will take a long time to check and reverse it. If that is to happen, it is essential that we build on the underlying strengths of the economy. I utterly reject the idea reflected in the amendment that any lasting improvement could be achieved by a massive increase of public spending.
Mr. Peter Shore: A moment ago the right hon. and learned Gentleman referred to checking and then reversing unemployment. Are we therefore to understand that he accepts that unemployment will go on rising and that he cannot even now predict when it will be checked, let alone reversed?
Mr. Brittan: That depends on what the right hon. Gentleman means by checking. The Government of which the right hon. Gentleman was a member made no more attempt to predict unemployment levels than the present Government do, and I very much doubt whether any future Government would be so foolish as to engage in such a task. It is possible, however, to give a general picture of what one expects, and that is what I have done.
The medium-term prospects in fact depend critically on further progress in reducing inflation and containing costs. Our pursuit of balanced fiscal and monetary policies is an essential precondition for economic growth and an increase in employment which can be sustained. The Opposition parties now seem to have a common approach to the economy, although the Labour party's figures are rather more extravagant than those proffered by the alliance, so it is fair to address to both parties the same three questions. The House will listen eagerly for the answers.
First, both Labour and. the alliance want to increase public spending and borrowing on a massive scale. Yet Labour wants lower interest rates and the alliance no higher interest rates than now. How can they pursue both objectives simultaneously? How can they spend and borrow more without higher inflation or higher interest rates or both?
Secondly, how do the Opposition parties think that the markets would react? Do they think that reversal of the present policies of monetary and fiscal restraint would have no effect on confidence, interest rates and inflation?
Thirdly, the Opposition parties are keen on assuming pay restraint. That is what they feed into the model. They admit that without that pay restraint their plans could not work. Labour hopes for a deal with the unions. The alliance wants—or at least wanted until recently—a statutory incomes policy. But could and would the unions deliver, and could and would a statutory incomes policy last? Why should either approach work now when both have broken down in the past?

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Against that, our approach is clear. We aim to reduce, both in the short and the longer term, the share of the nation's output taken by the public sector. Reduced expenditure will help to keep down the level of taxation, and by limiting the Government's need to borrow it will help to keep down interest rates. Both of these are necessary for a lasting industrial recovery.
That does not mean that the actual level of public spending must necessarily fall. The plans in the White Paper show the cash total of expenditure rising from £119·6 billion in 1983–84 to £132·3 billion in 1985–86. The Select Committee report suggests that there may even be a small increase in real terms. But although the absolute level of expenditure is important, whether it is expressed in cash or in constant prices, it is less important than the share which public expenditure takes of the whole national output. We wish to ensure, against the background of our wider policies, that that share is reduced.
Perhaps the most important single fact in the White Paper is, therefore, that the ratio of public expenditure to the nation's output—the GDP ratio—is now planned to fall. Between 1979–80 and 1981–82 it rose from 40·5 per cent. to 44·5 per cent. as we grappled with the effects of the recession, high rates of inflation and the legacy of commitments, especially on pay, left by the previous Government. The White Paper shows the ratio falling this year to 44 per cent, and again to 42·5 per cent. in 1983–84. This ratio is the measure of the burden which public expenditure places on the rest of the economy.
The White Paper therefore marks the turning round of a long and damaging trend. The first step has been to stay within the levels of expenditure originally planned. In cash terms there is no doubt that, compared with earlier plans, the plans for future expenditure have been substantially reduced. The planning total has been cut by £1·1 billion in 1983–84 and by £1·2 billion in 1984–85. When comparing that with the preceding years, in which again and again as a result of the annual survey plans were regularly increased, the contrast is indeed striking. It is certainly true that because of the Government's success in reducing the rate of inflation the available cash will now go further, but in my view that should be warmly welcomed. It in no way detracts from the fact that the previous cash plans were reduced.
Mr. Tam Dalyell: How much cash for contingencies will be available after the increasing and horrendous cost of the commitment in the south Atlantic has been met?
Mr. Brittan: The hon. Gentleman's intervention comes as scant surprise, but I think that he will find the answer in the White Paper.
Mr. Dalyell: Exactly.
Mr. Brittan: It might be argued that we should have made even bigger cuts—that is the implication of the criticism that spending has increased in cost terms—but if programmes were automatically adjusted downwards when inflation fell there would be strong demands to increase them if inflation were to rise. The prospects for inflation were among the many factors which we took into account in preparing the plans. We felt able to reduce the plans by about £1 billion each year, but I do not think that we would have been right to go further.
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The plans also show that the annual rate of increase in expenditure has slowed dramatically. For 1978–79, the last full year of the Labour Government, expenditure increased by 15·8 per cent. and was on a rising trend. For 1982–83, the rate of increase is 8 per cent. and falling. We plan to reduce it to 4·7 per cent. by 1985–86. So the apparently inexorable rise has been halted. That is a major benefit of the fall in inflation which our policies have brought about.
Mr. Peter Tapsell: Does my right hon. and learned Friend agree that the best way to reduce public expenditure as a proportion of the gross domestic product is to get growth in the economy, which makes the whole thing so much more painless? Has my right hon. and learned Friend observed the estimates that if, for instance, the United States economy grew not at the projected rate for the next 12 months of 4 per cent. but with an increase only to 5·2 per cent., the projected budgetary deficits in the United States, which are at the root of so many of our financial problems in the western world, would disappear?
Mr. Brittan: Of course, if the economy grew faster it would be possible to increase spending without increasing its share of the economy, and that would be desirable. However, if I may turn the argument, it seems to me that when the economy has not been growing the achievement in reducing the proportion of public spending is the more remarkable. I take pride in it.
Some fears have been expressed that these planned levels of expenditure may be based on over-optimistic forecasts of the rate of inflation and wage settlements, and mistaken estimates of future levels of underspending and possible contingencies. I do not share those fears. The movement of inflation is notoriously difficult to predict with accuracy more than a year ahead, but I do not think that it will be found that the provision we have made for inflation is inadequate or unrealistic. On pay, which accounts for some 30 per cent. of total public expenditure, we have, as the White Paper says, provided in 1983–84 for average increases of 3·5 per cent. If settlements exceed this level, then—as last year—the excess will have to be absorbed by economies elsewhere in programmes.
As to underspending, it is true that in the plans for 1983–84 we have assumed that, over the programmes as a whole, there will be net underspending of £1·2 billion. This "general allowance for shortfall", as it is known, is not in any sense an innovation as some seem to have suggested. Seven out of the last nine public expenditure White Papers included such a provision. It is to be expected, for example, that in a largely cash limited system there will normally be some underspending as programme managers aim to keep just within their cash limits. Equally, there are other areas—local authority current expenditure is an example—where in recent years, to our great regret, there has been chronic overspending. More recently, in 1982–83, we have been faced with quite serious capital underspending by local authorities and the nationalised industries. Together these factors led to a net shortfall in programmes in 1982–83 which, at the time of the White Paper, was estimated at £700 million.
I regret the fact that the local authorities have given priority to current over capital spending, and that nationalised industries have not used the full resources that were made available to them, but not all underspending is necessarily bad. Some of it is an unavoidable consequence of the recession. Some of it results from the lower prices

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or improved efficiency and that is to be welcomed. What is regrettable is the underspending that results from slippage in planning, delay in letting contracts, late deliveries, or postponement—for whatever reason—of capital projects that could earn a satisfactory rate of return. My right hon. Friend the Prime Minister wrote to local authorities and nationalised industry chairmen in November explaining the Government's concern at the present level of underspending. Changes are also now being made in the capital allocation procedures for local authorities which are specifically designed to combat underspending in future. Corrective measures have therefore been taken but it will take time for these to have effect. We have therefore thought it right to continue to make provision for shortfall for 1983–84. It is a difficult matter of judgment, but in the light of recent experience I believe that the provision is of the right order.
There have, for example, been a number of changes in the circumstances of nationalised industries since the figures in the White Paper were prepared. The current outlook suggests that in the coming year, 1983–84, the industries' requirements in aggregate may fall well below the external financing limits announced at the end of the last year. This is something that we shall watch closely. In the case of British Telecom, where there is a large undershoot against EFL this year, a substantial reduction is currently under discussion. If similar circumstances arise for other industries, we would certainly need to consider whether their EFLs should also be reduced.
Mr. Douglas Jay: If the Chief Secretary regards 'the ratio of public expenditure to national income, as he apparently does, as almost the most important aim of economic policy, how does he explain the fact that the Government have failed to reduce it after nearly four years?
Mr. Brittan: I did not say that it was the most important aim. I said that it was the measure of the share of national resources taken by public spending, and as good a measure of that as one could get. I made it clear earlier that the ratio went up in the early years of the Government. Had the right hon. Gentleman been following me—I am sorry if I was not clear enough—he would have heard me give the reasons clearly. I referred to the recession, to inflation and to the legacy of commitments on pay inherited from the Government that the right hon. Member supported. There is no secret about this, but we are changing that and the proportion is coming down. I am entitled to point that out, and it is a fact. Sometimes one wonders, when listening to Labour Members, whether their complaint is that public spending is too high, or that it is too low. They cannot have it both ways.
It has also been suggested that we may have made an inadequate provision for contingencies. Again, I could not accept that. The contingency reserve for 1983–84 is set at £1·5 billion, compared with £2·4 billion in 1982–83. We have been criticised for having that too low. In retrospect, it is clear that the size of the reserve was set too high in both those two years. When we set those figures we had little of the experience of cash planning that we now have. This year, in spite of the Falkands war, less than £1·4 billion out of the £2·4 billion has actually been used, and we are very close to the end of the year. After careful consideration we felt fully justified in reducing the reserve
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to £1·5 billion to 1983–84. That is realistic in the tight of experience. We have said that we shall review this figure in the context of the Budget before it is set finally as a control figure for the year.
Mr. Michael Meacher: Is it not the case that the contingency reserve was used up to the smaller degree that it was last year because the rate of inflation fell faster than was anticipated at the time of the last Budget? Is it not also the case that now the reverse is likely to be true, so that the reduction in the contingency reserve is quite unrealistic? Secondly, is it not equally wrong in producing a shortfall of £1·2 billion if his right hon. Friend the Prime Minister is successful in ensuring that local authorities spend nearer to their full total? Therefore, on both these grounds are not both these deductions unrealistic, and are not the Government trying to pretend that there w ill be a reduction in public expenditure when they know that there will be no such thing?
Mr. Brittan: The hon. Gentleman is wrong on both scores. With regard to the shortfall, the estimate that we have given allows for all the recent action that has seen taken and does not just cover local authorities but the totality of programmes. That is a reasonable estimate to make. I do not accept the hon. Gentleman's explanation of why the contingency reserve was not fully spent. It seems fantastic that the hon. Gentleman takes no account at all of the fact that not only has the contingency reserve been used so far to the tune of only £1·4 billion out of the £2·4 billion, but that that was at a time when we fought the Falklands war, with all the expenses that that involved. To suggest in those circumstances that it is unrealistic to set a contingency reserve of £1·5 billion lacks credibility. It also lacks credibility when it comes from the mouth of somebody whose essential criticism is that the Government are not spending enough. It is time for the hon. Gentleman to make up his mind what his criticism is.
The message of the White Paper, as it relates lo the global picture, is that public expenditure is under firm control and that planning totals have been held. I see no grounds for thinking that the plans are unrealistic, because of likely movements in pay and prices, because they are too heavily dependent on shortfall which may not arise or because too little has been set aside for contingencies. I am satisfied that the plans for 1983–84 are robust and we do not expect them to be exceeded.
So far, I have spoken mainly about the broad aggregate of public expenditure. It is also important to look at its composition. That is the focus of the Opposition amendment. The composition of public expenditure is dominated by the four big programmes of which social security, at nearly 30 per cent. of the total next year, is by far the largest. Its size is determined by three main factors: demography, the level of unemployment and the level of benefits. Pensions have been fully price protected in accordance with our pledge. Indeed, between November 1978 and November 1982, they went up by 68 per cent. compared with a rise of 61 per cent. in the RPI. We have also helped families by increasing child benefit and one-parent benefit.
The Government have increased the provision for health services every year since we came to office. The plans for 1983–84 continue that growth. The sum of £100 million is being provided for increases in the level of

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service. From 1978–79 to 1983–84, the growth in services is expected to amount to 7·5 per ent. which substantially exceeds the increase required to reflect demographic changes. For the years after 1983–84, the growth in services will depend upon movements in pay and prices as well as on the scope for further improvements in efficiency.
Mr. Arthur Lewis: Will the right hon. and learned Gentleman give way?
Mr. Brittan: Not at the moment. I must make some progress.
In the case of the third big programme, education, the position is somewhat different. This is growing more slowly because of falling school numbers. But pupil-teacher ratios are now at their lowest ever level and authorities may even be able to improve on them during the plan period if they can contain their costs. However, given the size of the school population, existing patterns of education, and, above all, the fact that educational expenditure is largely the responsibility of individual local authorities, there are severe limits on any Government's ability to change the pattern over the period of a public expenditure survey.
I have put defence last, although it is the second largest programme and, under this Government, has grown faster than the rest. I make no apology for that growth. The growth over the last few years and the growth planned for the survey period reflect the Government's priorities. Despite our efforts, the proportion of defence expenditure in the United Kingdom is far exceeded by that in the Soviet Union. NATO is faced with a potential threat of increasing numerical superiority and increasing sophistication. Defence provision also reflects the need to deter any renewal of hostilities in the south Atlantic.
Mr. Michael English: Is it not true that the percentage of gross national product spent by our NATO allies in Europe is less than ours?
Mr. Brittan: The measure of defence expenditure that one can apply varies enormously. One can talk in absolute terms; one can talk in real terms. I shall give the hon. Gentleman the figures later if he wishes to have them. I am making a serious point. The measure of defence expenditure that one applies—expressed as a percentage of GDP, in absolute terms or per head of population—will give different outcomes to the question that lies behind what the hon. Gentleman stated.
We have been criticised for spending too little on capital. I want to deal with this. It is wrong to take the view that Governments decide to spend a certain amount on capital and a certain amount on current, in that sense. The Government have to decide how much they want the various spending authorities to spend on defence, on education, on health, on social security and on all the other programmes. If, for example, school rolls are falling, one would expect the school building programme to reflect this. If, as a matter of policy, we encourage people to buy their own homes we would expect that, too, to be reflected. It is not a matter of capital expenditure being good and current expenditure being bad, quite apart from the fact that the definitions do not reflect common parlance of what capital expenditure is and what current expenditure is.
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Not all capital expenditure is investment in productive equipment. Most nationalised industry investment falls within this category, but most nationalised industry investment is financed from internal resources—that is, out of the depreciation fund and retained profits of the industry. It is only the net balance which the industries borrow from Government that appears in the public expenditure planning total. The capital investment of the industries themselves is determined by market considerations. No sane person would wish deliberately to encourage the industries to embark upon a course of investment in uneconomic facilities.
In any event, whatever the nature of the spending in the nationalised industries or elsewhere, whether it is classified as capital or current, to the extent that it is not financed by internal resources, the money has to be borrowed. Whether we like it or not, it is the total level of that borrowing that exerts pressure on interest rates.
Another large component of capital expenditure can be described as social infrastructure. The hospital building programme is perhaps the most important part of this. It receives a large share of the total Health Service budget. Forty-seven new hospitals are under construction or about to start in 1983–84. Water supply and sewerage is another important element to which attention is often drawn. We have made provision that should allow capital investment by the regional water authorities to increase by 30 per cent. between this year and 1985–86. A detailed look at the programmes is essential if one is to make a balanced judgment about the Government's expenditure plans. It is no use complaining about the grand totals unless one is prepared to say, in detail and with illustration, how one would arrange things differently. I recognise, of course, that the Treasury Committee report had to cover the whole battle front and to do so speedily in order to inform the debate.
Mr. Shore: The right hon. and learned Gentleman has mentioned detailed and specific expenditure programmes. Will he now say what precisely he has in mind in the social security provision, with particular reference to the iniquitous table outlining the extent of the proposed clawback of the pension uprating in November 1983?
Mr. Brittan: As the right hon. Gentleman will observe from a careful reading of the White Paper, the further announcement in relation to that which is foreshadowed will be made in the context of the Budget. I cannot clarify the matter further at this stage. The right hon. Gentleman looks indignant, but he will not have to wait long.
I was saying that the Treasury Committee report had to cover the whole battle front and to do so speedily. It is for the departmental Select Committees to look at the detail of the individual programmes and to give the House the benefit of their views. I ask for one thing and one thing only. It is that where they propose additional expenditure, they will tell the House what savings they would make to offset it.
Given the economic circumstances, it is an impressive achievement to have slowed down the growth of expenditure in real terms and to have begun to reduce it as a ratio to GDP. We have done this through a combination of difficult policy changes and ceaseless vigilance in the management of programmes. We have made a deliberate choice of priorities and tried to pursue

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them consistently. We have reversed the trend by which public expenditure was increased inexorably every time programmes were being reviewed.
I do not claim that we have yet reduced expenditure in real terms. I do assert that public expenditure as a proportion of national product has begun to fall. By reducing the Government's need to tax and to borrow, this careful control has contributed to the increasing financial soundness of the economy, of which the falling rate of inflation is the most obvious evidence. I believe that the Government can justifiably take pride in bringing expenditure under control in a period of world recession, thereby contributing to the eventual process of recovery.
4.30 pm
Mr. Peter Shore: I beg to move, to leave out from "House" to the end of the Question and to add instead thereof:
"declines to approve the White Paper on the Government's Expenditure Plans (Cmnd. 8789), which, while increasing defence expenditure, imposes further cuts on social and community services, attacks the standard of living of retirement pensioners and which, far from using public expenditure to help reduce unemployment, allows its further growth towards the four million mark".
Having listened to the Chief Secretary, I have reached the conclusion that a capacity for self-deception is probably a condition of ministerial survival in the madhouse that the Treasury has become in the past four years. If it is not self-deception, this is deception of a truly disgraceful kind. I leave aside the question of blame. If any Member of this House, contemplating the ruin of so much of our industry and the despair of so many of our people, were to deliver a speech reeking of such complacency and self-satisfaction, I should be amazed. However, that is what we have had. The right hon. and learned Gentleman has again pointed to his illusory and secondary targets, slapping himself on the back for having achieved some hypothetical change in money figures, whereas in the real world the evidence of failure on a truly colossal scale is all around us.
I shall not bother with the main points in the right hon. and learned Gentleman's speech. Instead, I shall deal with the real subject of this debate. We are examining the fifth and almost certainly the last public expenditure White Paper that this Government will present to Parliament. I shall have a certain amount to say about its contents—its sins of omission as well as its sins of commission. However, I shall go further than that. This White Paper must be seen in the context of those that have gone before. It must be seen and judged as a crucial part of an overall economic strategy—one that I believe has failed, as events have demonstrated, with the most grievious effects on Britain and its people.
The economic failure is the root cause of the "new wave" of hostile thinking on public expenditure, on the future of the welfare state and on the mixed economy. That thinking first emerged in the long lecture delivered by the Chancellor of the Exchequer to the Conservative political centre in Cambridge last July. The lecture was followed in September by the massive but authentic leaks from the now notorious Think Tank report. That thinking has been further developed and, again, was massively leaked to The Guardian newspaper in the new ministerial studies of the family and the welfare state only a few weeks ago. I shall comment on these matters later.
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Any debate on the Government's public expenditure plans is, of course, of major importance. As the Chief Secretary said, it is almost one half of the budget. We are dealing with about 44 to 45 per cent. of our total national expenditure, a sum which this year is more than £119 billion. The disposal of such a sum between different uses itself reveals the priorities and values of the Government of the day. In the broader context that I have just outlined, those values become startingly clear, as I shall demonstrate.
However, I begin today with two issues which, while small in finance or resource terms, are large in the values that underlie them. I refer to the proposed clawback of the alleged overpayment to pensioners and other long-term social security beneficiaries in last November's uprating, and to the failure to make provision to restore the five point cut in unemployment pay that goes back to November 1981.
We are dealing with sums which, in this financial year, would amount to no more than £250 million, or roughly one quarter per cent. of the total £119 billion worth of public expenditure. Nevertheless, on clawback, in spite of the strongly and repeatedly expressed opposition in this House, the Government in the White Paper have obstinately restated their intentions. It specifically subtracts from the total of social security expenditure in 1983–84 the figure of £180 million, in 1984–85 the figure of £500 million, and in 1985–86 the figure of £600 million. The subtraction or "adjustment"—to use the language of the White Paper—is explained in a footnote as follows:
"this line"—
the line with the figures—
"reflects the Government's decision to adjust the public expenditure provision for the social security programme to take into account the fact that provision for the rise in prices in the benefit uprating in November 1982 was higher than the actual rise".
What I demand today—I rose to question The Chief Secretary about it a few moments ago—is a categorical statement from the Government that they will abandon the whole shoddy and mean enterprise of clawing back money from old-age pensioners and other beneficiaries. To take away another £1·40 a week is a particularly shameless proposal when one recalls that, by severing the link between pensions and average earnings, the Government have already, by Act of Parliament, deprived pensioner couples of more than £2 a week. This £1·40 will be an additional denial of their pay.
I come to the second issue. The treatment of the unemployed—the failure to uprate unemployment pay against inflation in 1981 and subsequently the failure to make it good—is, if anything, a still more shameless act. It was originally justified as a temporary measure, to last only until unemployment and other short-term benefits were brought into income tax. It is simply outrageous that, having brought such benefits into tax as from last summer, the Government, with some £500 million per annum of additional tax revenue, should still fail to restore that five per cent. cut. It is worth £2 a week to a married mart who is out of work.
I said at the beginning that while those two issues were small in amount they were highly significant in revealing the values and priorities of the Government. The Government either do not know or do not care about the needs and wants of a large and hard-pressed section of our people.

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I shall now comment on the general shape of the public expenditure White Paper. Most of the figures in it, as the Select Committee on the Treasury and Civil Service pointed out in its report, are presented in cash terms only. As it rightly says,
"Given the lack of explicit inflation forecasts in the White Paper, it is not possible to convert the 1984–85 and 1985–86 cash plans into cost terms on any authoritative basis".
I certainly concur with that view.
Unlike last year the White Paper contains a table—the last in volume 1—which gives public expenditure in cost terms that at least enables us realistically to judge against provisions in the previous six years the provisions made for the coming year, 1983–84. In cost terms—near enough to constant prices—total public expenditure, the planning total, will rise this year by £807 million or by 0·8 per cent. Of that £807 million increase, no less than £757 million is accounted for by increased defence expenditure and £264 million by increased social security payments, mainly to finance the further rise in the number of people out of work. Those two items exceed by some £200 million the total increase in public expenditure planned for 1983–84. Therefore, it follows that other programmes have been cut.
It is revealing to see where the largest cuts have been imposed. This year education and science, which really is investment in the future, is reduced by no less than £620 million. Direct assistance for industry, energy, trade and employment is reduced by £465 milliion; transport by £226 million; and lending to nationalised industries is cut by £282 million, implying, I suspect, further price increases.
Mr. Arthur Lewis: Do those cuts take into account the 12 per cent. increase in the salaries of all those in the top-paid jobs in the nationalised industries which is back-dated to last April? How can those people receive a wage increase back-dated to last April when the sick, disabled and unemployed cannot?
Mr. Shore: I well take my hon. Friend's point. It is for the Minister who replies to the debate to answer not only that question but the larger one that is implicit in it as to whether there will be further price increases in the nationalised industries as a result of this major cut in lending to them this year.
This year we are told, as one of the main points from the White Paper, that total public sector capital expenditure in 1983–84 at £11·25 billion is planned to be 12 per cent. higher than the outturn expected for last year. The Chief Secretary dwelt upon that. Expenditure on construction is expected to rise by 10 per cent. to £10·25 billion. That will elicit somewhat cynical laughter from anyone who recalls last year's White Paper. We were told then that the total public sector capital expenditure would be £11·25 billion this year. However, total public capital expenditure was not £11.25 billion but £11 billion and total expenditure on construction rose not by 13 per cent. but by only 7 per cent. That 7 per cent. increase in expenditure is simply in cash terms and by my reckoning of the proper figure to apply for inflation in that period that cannot mean anything but a tiny increase, if any increase at all, in real construction expenditure.
Mr. English: Does my right hon. Friend realise that one of the causes of that is simply the Government's use
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of euphemism? They always say that local authorities' capital expenditure will rise by a certain amount when they mean borrowing authorisation, but they do not give the local authorities the money.
Mr. Shore: My hon. Friend speaks with a considerable knowledge and is absolutely correct. In a sense, the initiative is shared between central and local government, but it is not the same thing to give a borrowing requirement as to authorise capital expenditure, let alone to see that it is taking place.
A central weakness of the White Paper is its failure—planned failure—to stimulate the economy and reduce unemployment. The forecast or assumption for unemployment during 1983–84 is for yet another rise of 280,000 out of work. When we had this discussion a year ago, the Chief Secretary said then what he said today, that it really is only a kind of necessary accounting formality. That will not do. The right hon. and learned Gentleman was right last year when he said that the forecast assumption was for an increase of 300,000—a slight under-estimate of what happened. The truth, as he knows well, is that the trend is remorselessly upwards. All that remains in doubt is not whether unemployment will rise, but the pace and extent of that rise in the year ahead. When the right hon. and learned Gentleman suddenly produces, as it were, out of his hat, the information that 350,000 young people are being kept on special or temporary subsidised schemes, he is simply emphasising my point. If he adds another 50,000 to that number, what has he achieved? He will have increased the number of what used to be called phoney jobs, not the real jobs that the Conservatives said they would create when they were complaining bitterly four years ago about 1·3 million unemployed, under the last Labour Government.
I said that the White Paper was the fifth in a series. It is right to look now at what the complete pattern of the Government's public expenditure reveals. Over the period 1978–79 to 1983 84—I am referring to the Government's figures—in cost terms expenditure has increased by just over 5 per cent. Defence expenditure has risen over this period by 23 per cent.; law and order by just over 30 per cent.; and social security—largely because of the massive increase in unemployment—by 21 per cent. Expenditure on housing, the principal victim of Government cuts in the same period, has been reduced by just over 55 per cent. or by some £3 billion; overseas aid has been reduced by 15·5 per cent.; on environmental services—drains, water supply and sewerage—it has been reduced by over 8 per cent.; and education and science by 6·5 per cent. Those are crazy priorities.
The House will not fail to note that, in spite of the Government's declared intentions, public expenditure—however inadequate in total and however perverse in its priorities—has increased. The Chief Secretary will recall that when he made his first speech on a public expenditure White Paper on 9 April 1981 he was presenting a White Paper that showed
"a planned fall in real terms by 1983–84 of 4 per cent. compared with current levels."—[Official Report, 9 April 1981; Vol. 2, c. 1124.]
That has not happened. Indeed, with national income declining, public expenditure has taken not a smaller but, inevitably, a larger share of GDP in every year that the Govenment have been in office. The proportion stood at 41 per cent. when the Government took over. The right hon. and learned Gentleman used that figure himself. It

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reached 43 per cent. in 1980–81 and 44·5 per cent. in 1981–82. It was shaved to 44 per cent. this last year, and I suspect that when the Budget figures are presented the Government will confirm what we were told today, that it will be 43–5 per cent. in 1983–84.
Mr. Brittan: The right hon. Gentleman must accept that those figures belie the statement that he made a second ago that the proportion increased every year under the Government. That is not true. This year it went down and next year it will go down. The right hon. Gentleman uses euphemisms such as "shaving" but he cannot ignore two years' figures like that.
Mr. Shore: In every year since the Government took office, public expenditure has taken a higher proportion of the GDP than it did previously. Having reached a peak of 44·5 per cent., he hopes that this year there will be a reduction of 0·5 per cent., but I am a little dubious about that. The Chief Secretary is entitled to the triumph of that correction, and I willingly concede it to him.
The explanation of what has happened is well understood by the House, although I am not sure whether it is understood by the Government Front Bench. The attempts to cut public expenditure on goods and services have reinforced the recession which the Government's money supply and high tax policies originally induced. The consequence of the recession has been to reduce national output by no less than 5 per cent. in the past three to four years. At the same time, and as an inevitable consequence of the recession, unemployment has risen to its present calamitous level. Recession and unemployment—however meanly the Government seek to treat the unemployed—impose heavy costs on both sides of the financial account.
Social security payments have risen by more than £5 billion. At the same time, large additional sums have been necessary to sustain the basic industries and community services rendered unprofitable by so large a collapse of demand for their products. The railway, steel and coal industries come to mind. The loss in tax revenue and national insurance contributions by those previously at work brings the total cost of 3·5 million people unemployed to something of the order of £17 billion a year. In November 1979 the Government in their first expenditure White Paper gave their diagnosis of Britain's economic malaise and its remedies. According to them,
"public expenditure is at the heart of Britain's present economic difficulties."
According to the Government, that led to the growing burden of taxation and borrowing. The White Paper states:
"High Government borrowing has fuelled inflation, complicated the task of controlling the money supply, raised interest rates and thus denied the wealth-creating sectors some of the external finance they need for expansion."
It was that thinking that underlay the medium term financial strategy with the original proposal to cut Government expenditure by 5 per cent. in real terms. That was what they set out to do, and to reduce the public sector borrowing requirement to 1·5 per cent. in 1983–84.
It has all proved illusory, has it not? Public expenditure programmes have been cut but, overall, public expenditure, for the reasons I have stated, has risen. The public sector borrowing requirement has been cut but only through a truly massive increase in taxation. Interest rates, far from falling, have reached unprecedentedly high levels during the Government's term of office. Even today, when world interest rates have fallen sharply during the past
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eight to nine months, bank base rates in London remain at 11 per cent., 2·5 per cent. higher than the American equivalent rates and imposing on industry and other borrowers a real interest rate burden of no less than 6 per cent.
Far from Government borrowing
"denying the wealth-creating centres of some of the external finance they need for expansion"
industry, flattened by recession, has massively contracted its investment plans. Investment in manufacturing continues to fall and billions of pounds of surplus British capital is flowing overseas.
What is more, the Government have no expectation of eventual success. November's autumn statement somewhat hesitatingly forecast a rise in output of 173x00B7;5 per cent. in 1983 together with a continued rise in unemployment. February's OECD report on the British economy forecasts the same figure for 1983 and as much as 1·75 per cent. in 1984. Apart from Professor Minford, I know of no forecaster who predicts anything other than the most moderate growth for Britain in the years ahead.
It is this that brings me to the notorious Think Tank report whose contents appeared in The Economist and The Observer last September. What many commentators missed in their understandable concentration on the devastating options for future cuts which the Central Policy Review Staff report volunteered was the assumption about growth not just for the next two years but from now until 1990. The report covered those years. Since the report predicted public expenditure, on present policies, claiming some 45 per cent.—it might even be 44 per cent.—of the GDP for the rest of the decade, and since on present policies public expenditure is rising by about 1 per cent. per annum, it must be assumed that the GDP growth assumption for the rest of the decade is of the order of 1 to 1·5 per cent.
Then we come to the most remarkable discovery of all. Faced with not only the experience of failure of the past four years, but with their best estimates of continued failure for the rest of the decade, the authors of the paper and the Government drew not the obvious conclusion that the policies themselves were radically wrong, but that to make them successful a massive new attack on the welfare state would have to be mounted. That was the genesis of the notorious options on which public comment has focused and which the Government have sought to conceal. The House will recall them. First, there was the option for a major reduction in pensions and other benefits; secondly, that of putting an end to the present system of state funding of higher education and the introduction of a scheme of educational vouchers. Third was the replacement of our still substantially free National Health Service with new schemes to encourage the private health sector and to finance the residual state sector by a new health insurance scheme.
The problem is how to sell that to the country. That is what the new philosophy of the family and individual responsibility is all about. Where Professor Alan Walters has failed, perhaps Mr. Ferdinand Mount can succeed. If the country could be brought to believe in the virtues of "individual responsibility" and "family care", would the present welfare services really be necessary? If people can be encouraged to save—if, as the Chancellor stated, children can be trained to manage their pocket money—surely the Government can retrench on national insurance and other pensions arrangements. If some

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parents can be persuaded to finance more of their children's education, then the state sector will be less demanding of financial resources. If more women stay at home, will it not enable reductions to be made in the personal social services and perhaps cut the unemployment figures?
The Prime Minister gave the most direct evidence of the new Conservative thinking in her last long television interview with Mr. Brian Walden. He put it to her specifically:
"What sort of Britain do you eventually want? Am I wrong when I say that what you seem to be looking for is a more self-reliant Britain, a thriftier Britain, a Britain where people are freer to, act, where they get less assistance from the State, where they are less burdened by the State"?
The reply was:
"Yes, very much so; and where people are more independent of the State."
She went on proudly to proclaim what Mr. Walden had called her Victorian values: the values that existed when, according to the Prime Minister, "our country became great"; the values that existed when the rich
"gave great voluntary things to the state"
and displayed what the Prime Minister called
"this great benefaction feeling that we have in Britain."
The right hon. Lady reminded us that in Victorian times they provided homes—Peabody buildings are still there as a monument—founded voluntary schools, endowed hospitals, built town halls and civic buildings. None of them, of course, was a charge on public expenditure.
That was not a very adequate philosophy for the 1880s and it certainly bears no relevance to the needs of Britain in the 1980s. We wholly reject it. We believe that the community has a responsibility to all its members and that our people enjoy more freedom and are ready for more responsibility when their basic needs are met. The poor, the sick, and the old are not enslaved by community provision, but liberated by it from the limitations and pressures of want. Moreover, we believe that public expenditure in its many different forms plays a crucial role in the economy's total performance. It is simply madness to seek first to turn off and then to dismantle this major engine of growth—the public sector of the British economy.
So we reject the White Paper, the failed economic policies that underly its provisions, and the new philosophy that has been dredged from the past to conceal Britain's economic failure and to justify a new root and branch assault on the major achievements of postwar Britain.
It is on all that that we shall vote tonight.
5.1 pm
Mr. Edward du Cann: Much of the last part of the speech made by the right hon. Member for Stepney and Poplar (Mr. Shore) seemed to be totally supportive of the proposal made by the Liaison Committee of Select Committee Chairmen that the policy recommendations and the investigative work of the Central Policy Review Staff should be made available to Select Committees for serious examination. There is undoubtedly a whole series of questions with which the House will have to grapple sooner or later in relation to the increased cost of welfare provision, and notably pensions. The sooner that we
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grapple seriously with those issues and work out precisely how to handle the future instead of making party-political and emotive points, the better.
I agree with the right hon. Member for Stepney and Poplar in one respect. He is right to say that the White Paper is part of a series and so it is appropriate to take a long view of it. I should like to recommend some variations on the policies of my right hon. and learned Friend the Chancellor of the Exchequer, as delineated in the White Paper. However, before doing that I congratulate and thank my right hon. and learned Friend the Chief Secretary on two counts. I congratulate him, first, on a clearer presentation of the expenditure plans in this year's White Paper. Of course, there are still shortcomings, as the Treasury and Civil Service Committee's report states. Notably, paragraph 3 states:
"We regard them as a useful start in the process of improving the format and content of the White Paper and are glad to note"—
in the words of one of the distinguished Under-Secretaries in the Treasury—
"that the Treasury very much hope they 'can do a lot more next year'."
More specific recommendations are made in paragraphs 4, 5 and 6. They are clearly spelt out and I am sure that they will receive my right hon. and learned Friend's attention in the months ahead. Therefore, we need spend no time on them now. Nevertheless, there has been an important and significant development that is of help to the House, and in that respect I regard my right hon. and learned Friends the Chancellor of the Exchequer and the Chief Secretary as significant reformers. We are in their debt.
Second, I congratulate my right hon. and learned Friend the Chief Secretary especially on the earlier publication of this White Paper. The Treasury Committee made a recommendation to that effect and my right hon. and learned Friend was good enough to accept it. As he said, earlier publication has enabled the Treasury Committee to evaluate the Government's proposals and to report to the House on them before this debate. I hope that this process and the report will be of assistance to the House. Indeed, my right hon. and learned Friend was good enough to say that they were. They are certainly a proper and constructive use of a Select Committee's capabilities. After all, this arrangement must enable the debate in both the House and the country to be better informed and I hope that we shall make a better judgment about the Budget, for which this debate is of course the trailer.
There are three chief evils in the British economic scene. The first—to which my right hon. and learned Friend the Chief Secretary referred—is inflation, that monstrous scourge. The whole country rejoices at its reduction to more tolerable levels, but there are still uncertainties. I draw the attention of the House to those sections of the report that bear on this issue, and especially to those relating to the assumptions on which the Government rely. In some respects, they are questionable.
Alas, what is undoubted is that public sector inflation remains at double the rate of private sector inflation. As Arthur Seldon has recently pointed out, the public sector is a mere euphemism for the Government. It follows, therefore, that in its fundamental task of disciplining the growth and expanse of the Government and their creatures the Treasury has not yet had the comprehensive success—although it has had some success—that my right hon. and learned Friend's supporters had hoped for and

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expected. I regret that, but it is a fact. Our nation's economic recovery is thereby impeded and delayed. That area of our national affairs requires more of the attention and enthusiasm for which the Chief Secretary is particularly noted. In future, I hope it will receive it.
As the Chief Secretary rightly acknowledged at the beginning of his speech, the second evil is unemployment. Its present level of 3,250,000—which is forecast to rise this year—is utterly intolerable. Even if we had to reduce overmanning, even if robotics, computerisation and the like will inevitably be increasingly used while human beings are used less, and even if there had to be still more of a shift from the older to the newer industries, the present levels of unemployment are intolerable. I also repeat my conviction, which I have stated before in the House, that we could readily do more to give our people hope.
The report clearly shows the appalling decline in capital investment. The Chief Secretary devoted much of his speech to that. Paragraph 19 states:
"A recurring theme in our earlier Reports has been disappointment about falling shares of fixed investment in the overall expenditure total."
My right hon. and learned Friend the Chief Secretary was right to say that inevitably the Select Committee took an aggregate rather than a closely analytical view. He was also right to say that there was no time to do more than that.
However, I think that the following point is right. The paragraph continues:
"we note that the fixed investment share of total expenditure is planned to rise over the 1983–84 financial year; but even allowing for this, and for the distorting effect of revenue from council house sales … it will still be about two percentage points beneath the ratio which prevailed in 1978–79. It remains our view that much more needs to be done".
The truth is that a substantial shortfall has become the yearly norm. The right hon. Member for Stepney and Poplar was right to point that out. The picture is the same however one analyses the figures.
It is the same in the nationalised industries. Paragraph 20 states that the Committee viewed with deep concern underspending on capital investment by the nationalised industries. It goes on to say that:
"in 1982–83 it is estimated to amount to £600 million. Of this £308 million is attributable to British Telecom alone."
The same applies to expenditure by local authorities. Paragraph 21 states:
"A similar high level of capital underspending is evident in the local authorities programmes. This is estimated to amount to £1·3 billion in 1982–83, compounding a shortfall of £¾ billion in 1981–82. Again given this level of underspending there is reason to doubt whether the plans for 1983–84 of £3·9 billion … will be realised."
That puts the matter modestly.
I have a letter from the chief executive of my local authority. I noted what my right hon. and learned Friend said about the instructions given to county councils and others, but I ask the House to mark the following words:
"Over the last ten years or so local government has been plagued by a succession of changes in its capital programming arrangements which have eroded its ability to programme effectively its investment."
The letter gives specific instances, and I shall send it to my right hon. and learned Friend.
Unemployment benefits and additional allowances—especially supplementary benefit—this year alone will cost £5 billion. The House may think that the actual cost of unemployment is considerably higher, and it will be
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higher this year. How much better if a large proportion of that cash were used on capital expenditure to create real jobs, rather than paying people for doing nothing.
I have argued before that a drive to mobilise private capital to finance public works projects is feasible. I have no doubt about that—whether the subject be the Channel crossing, the Severn barrage or many other small items. All that we lack is the imagination and the will. I am sad beyond expression that both are apparently lacking.
In the meantime, the decline in Britain's manufacturing capacity continues. Manufacturing output in 1982 was 14 per cent. below the 1979 average. The decline has gone too far. I was in Birmingham yesterday, and I was told about the demise of the foundry industry. I heard about one company that used to make engine blocks for the Rolls-Royce engines used in Chieftain tanks. The engine blocks are now being made in Germany. If we wish to use tanks on a future military venture, I suppose that we will have to ask permission of the Germans before we can build the tanks. That is one example of how the decline in our industry has gone too far—no doubt other hon. Members can relate others. It is time to cry halt and to attempt to reverse the process. I am sure that it can be done.
In our society there are too many commentators and too few producers; too many consultants, officials, advisers, talkers, administrators and hangers-on, and too few doers. That brings me to the third and greatest evil in our economy. It is the size of Government and its appendages.
There have been some switches from expenditure to revenue. My right and hon. learned Friend took the House through the figures in the White Paper. Paragraph 32 of the Select Committee report states:
"The Government's financial position is in no way improved by this kind of change even though the public expenditure figures are thereby reduced."
It is clear from table 1 of the report that, in real cost terms, public expenditure continued to grow between 1981–82 and 1983.
As my right hon. and learned Friend hinted in his speech, whether public expenditure has continued to rise as a proportion of GDP is more difficult to assess, partly because it depends on the level of GDP. But it. is undoubted that public expenditure as a proportion of GDP has risen greatly during recent years—from 40½per cent. of GDP in 1979–80 to 43 per cent. in 1980–81 and to 44½ per cent. in 1981–82. According to chart 16 of the White Paper, it is scheduled to fall to 44 per cent. in 1982–83. It had previously been estimated to be 45 per cent. in table 22 of the autumn expenditure statement. I am not sure which of the two figures is the more reliable.
My right hon. and learned Friend is right to say that the proportion appears to be falling by a small margin, having risen considerably over several years. He may be right that there is a turn round. I hope that he is right. But whether it rises a little or falls a little is not the main point. I regret having to tell my right hon. and learned Friend that the Government have failed to do more than simply sip at the harsh economic medicine that they have poured down the throats of us all.
I want the Goliath of today's Government—the public sector—to be cut down to its essential functions. There, is substantial irony in the fact that it is the House of Commons on an all-party basis—not the Government—which has done most in taking the initiative in insisting on a higher degree of competence in the public sector. It has

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done so in the development of the new departmentally-related Select Committees and the continuing flow of recommendations from the Procedure Finance Committee. On Monday we shall begin the process of giving the House the opportunity of better scrutiny of Estimates than it has had in past years. I pay tribute to my right hon. Friend the Member for Worthing (Mr. Higgins), who is Chairman of the Committee. Last, but not least, there is the Bill to modernise and develop the work of the Exchequer and Audit Department and to insist on a higher degree of effectiveness and value for money in the state sector. When those initiatives have been well carried out, we must begin on the process of internal audit in Government Departments—something that badly needs tackling. The Government and their satellites—however we describe them—should be the mainspring of our economic advance. My complaint is that too often they are a dead hand on the economy.
We are engaged in a fearful struggle to maintain and, if possible, to improve the standard of life and prospects of our people in a world that is uncertain and desperately dangerous. Economically, we are living on the edge of a volcano. The recent crisis in bank lending has shown how fragile is the present position. My determination, and that of the whole House, is that we make better progress. Already, Britain's productivity gains—of which we all boast—are being matched by our trading competitiors. Time is not our ally. I support the Government's objective wholeheartedly, but I repeat that we must make better progress. We appear to be faltering a little. We must not fail, because if we do all that has gone before will have been in vain. I will not contemplate that prospect.
5.18 pm
Mr. Richard Wainwright: In everything but name, today's proceedings are part of the Budget debate. With the present state of the British economy, and with unemployment at its present level and on its present trend, the public spending part of the Budget is, this year, the most important part. That is borne out in the view, for example, of the National Institute of Economic and Social Research. It has sketched out the impossibility of British industry responding quickly to a tax stimulus, and has said that the Chancellor of the Exchequer could devote as much as £2·5 billion this year to reducing income tax—and yet have fewer than 20,000 additional jobs to show for it at the end of 12 months. I believe that the NIESR is right when it says:
"Per pound of additional borrowing, increases in public expenditure on goods and services are the most effective means of raising output and employment."
Hence the importance of this White Paper and the debate. As the right hon. Member for Taunton (Mr. du Cann) has just pointed out, it is unfortunate that the White Paper, like some of its predecessors, cannot be regarded as wholly reliable. I was surprised to hear the Chief Secretary claim that public expenditure is under control. It suggests that, to the Chief Secretary, having public expenditure out of control means that expenditure is exceeding plans and targets. Some of us regard falling seriously short of planning targets as equally important.
Perhaps the Chief Secretary is not familiar with the tragedy of the big order that never arrives or of the skilled workers who are waiting desperately for fresh work to be
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put in hand, only to find that the order for the Government Department or local council is not forthcoming or will be delayed so long that they must be laid off.
It is unfortunate to find that there is insufficient control of public spending at present in the sense that underspending has become serious. I do not wish to repeat matters illustrated clearly by the right hon. Member for Taunton but I too shall refer to the report of the Treasury and Civil Service Committee. I draw the attention of the House to paragraph 22 where table 3 shows clearly that in 1981–82 direct expenditure on new construction fell short between the estimated outturn and actual outturn by no less than £800 million. In 1982–83, the same item, leaving out nationalised industries, fell from a planned £8,550 million to an estimated outturn of £7,411 million only. That is a huge difference, and it is no wonder that the industries most intimately involved are sceptical of public expenditure plans.
In the same paragraph the Treasury Committee states:
"It seems unrealistic to plan for local authorities to spend an extra 10 per cent. in the forthcoming year when capital spending has been on a declining trend for four years past".
The British Aggregate Construction Materials Industries, which represents industries which rely on construction orders, told the Chancellor of the Exchequer in a letter the other day:
"the construction industry must remain sceptical of there being any real rise in capital construction despite a planned 10 per cent. rise in 1983–84. The public capital construction budget has fallen in real terms by an average of 3 per cent. per year since the government took office."
I hope that the Treasury and other Departments are fully aware this year that serious shortfall is as grievous an administrative error as excess spending. I hope that they will understand the tragedy, in terms of jobs lost, skills wasted and futures blighted, of this massive underspending. What is needed at present is not shortfall, but greatly expanded capital spending—not by inventing needs and giving people temporary jobs, but by dealing with the massive and obvious neglect of our public assets, which anyone who travels around the country can see.
Mr. Nigel Forman: I agree with the hon. Gentleman's bias in favour of public spending, but does he agree that an underspend of £1·3 billion this year represents about 1 per cent. of the total, and that in the private sector that would be considered a fairly good control of spending?
Mr. Wainwright: It depends upon which part of the private sector one is using as the yardstick. I should hope that our better organised companies, large and small, could do better.
The serious aspect of this is that the shortfall is concentrated in the capital spending and fixed investment sector, where I believe it is least excusable, because there is a need at present for an expansion of capital spending on public assets of lasting value and importance.
Construction and civil engineering are important because it is estimated reliably that approximately one unemployed person out of every eight—covering both sexes—has at some time been associated with construction and civil engineering. That illustrates the extent to which a typically British skill is flat on its back through lack of a demand which only the public sector can supply at present. There is a need not just for the hardy annuals of water supply and sewerage—important though they

865
are—but for a mass of smaller schemes which cannot be categorised broadly: such as schemes for heat conservation, flood control, the prevention of erosion of our east coast and, above all, long overdue attention to our housing stock. I stress these points because there is evidence, as shown by the Treasury Committee report, that the Government are not primed to undertake such massive capital projects.
The House should worry about whether capital planning by Government Departments has fallen apart so much during these three years of neglect that we no longer have the plans ready for early execution to put people back to work on such schemes. The Government's deplorable habit of blaming local government for much of the shortfall has been illustrated in the White Paper. As the hon. Member for Nottingham, West (Mr. English) pointed out, the use of the word "allocation" would appear to the reader to mean that the Government had presented local councils with the cash for schemes when all that they have done is to give them borrowing consent.
One does not have to be an expert on local government to know that borrowing consent is worth little by itself. It may be worth nothing if the prevailing rate of real interest on the money and the running costs associated with the project are together so high as to put intolerable burdens on local councils' current expenditure. Many councils have had to lay aside with heavy hearts important capital projects because the revenue costs, including interest charges, would be too great for their budgets. It seems to me humbug for a Government who control the rate support grant to belabour local government for alleged neglect of capital spending.
Not only in fixed investment and material capital spending should there be a substantial expansion. The Liberals and the Social Democrats regret that the White Paper does not contain provision for a larger expansion of the personal social services. We believe that one of the functions of modern government is to help those who wish to serve their fellow citizens, especially when they want to take on such vital jobs as home helps, ancillary health workers, therapists and the like. That cannot be done by the market. It cannot be done for ordinary people, on a private hiring basis. It must be a function of government.
We should have liked at least a further £250 million allocated to such domiciliary services, primarily because so many people are not receiving the care that they should have in their declining years or in their chronic sickness. It is expensive to treat the sick and elderly institutionally, and less happy for them. Enormous savings financially and, more important, a great increase in the sum of human happiness could be achieved by an expansion of the relatively low-cost work force which keeps a regular eye on the elderly in their own homes or cares for the sick. I am talking about long-term, lasting jobs costing relatively little and with no import content.
This year public expenditure should be the main feature of our national Budget. We should have a Budget for jobs, to get Britain back to work. However, I fear that when the other side of the Budget is revealed next week it will be a Budget for votes.
5.32 pm
Mr. Chris Patten: I shall deal with a few of the remarks by the hon. Member for Colne Valley (Mr. Wainwright) later, but first I should like to make the obvious observation that when one looks at public
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expenditure White Papers one is reminded of how innocence is one of the first casualties of life within these walls. Until I arrived here, I thought that control of public expenditure was a subject of almost all-consuming interest among right hon. and hon. Members, particularly those on the Opposition Benches who place such store on what the right hon. Member for Stepney and Poplar (Mr. Shore) called the locomotive in our economy—the public sector. The interest today is a little constrained, but I have no doubt that hon. Members will flood in after I have sat down.
Until I arrived here I also thought that what the economic and constitutional textbooks told us about the control of public expenditure was true. That shows just how green I was. Having listened to some of the speeches about public expenditure by the right hon. Member for Heywood and Royton (Mr. Barnett) and having react his excellent memoirs—which I hope are now in their fifth or sixth edition, rather than remaindered at John Menzies—I am aware how important to the control of public expenditure are concepts such as "deep massage" and "mirrors", to which the right hon. Gentleman refers in his admirable and frequently quoted book.
I wish to be as courteous as possible to my colleagues, but it has to be said that, although the White Paper is not without some of the effects produced by devices such as "deep massage" and "mirrors"—the Treasury Committee in its excellent report draws attention to some of them—it would be unfair to argue that the Chief Secretary's achievement was solely in the manipulation of such instruments.
My right hon. and learned Friend the Chancellor has put the damper on public expenditure. No one can argue with conviction against that proposition. Nevertheless, there has been a rise in public expenditure, and that rise is likely to continue. It has much to do with the recession and little to do with any lack of vigour or rigour by my right lion. and learned Friend. The recession has pushed up social security expenditure, for reasons which most of us concede. Exactly the same problem arose in the 1930s when public expenditure as a proportion of GDP grew remorselessly year by year.
The extent to which the policies on which Treasury Ministers have hung their hats are responsible for the recession, and therefore in part responsible for some of the effects of the recession on the control of public expenditure, will be the subject of increasingly lively debates for many years to come. Although one trips delicately round the subject today, I am sure that there will be ample opportunity for us to offer our observations on the subject at frequent intervals in the next decade and beyond.
I wish to concentrate on capital expenditure as part of public spending. My right hon. Friend the Member for Taunton (Mr. du Cann) addressed himself to that. Some people see the Government's line on capital expenditure in the public sector as representing some inconsistency in the overall strategy that the Government have followed since 1979. Consistency is, perhaps, an overrated quality. Most right hon. and hon. Members appear to believe in that proposition—some more than others—and follow it in practice even more than in theory. It is unfair to expect complete consistency from Ministers in implementing strategy. There are larger inconsistencies, to be sure, in the management of public expenditure, for example, in the Think Tank Report, to which the right hon. Member for

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Stepney and Poplar addressed a number of remarks. That report was issued a few months ago and described several ways in which we might turn back the clock to the 1880s. The right hon. Gentleman said that he did not much care for the way that society was run then. Nor did Disraeli, so he has that in common with a former leader of the Conservative party.
We were told that the issues raised by the report were essential to the control of public expenditure. Now we are told—and I believe it—that, without such draconian nonsense, public expenditure is under control. That is, perhaps, one inconsistency, but I am grateful for the way in which things have turned out.
Another larger inconsistency or contradiction is in the international sphere. It is obvious that we have a gruesomely tight fiscal stance. Apparently we are all depending on a more expansionary fiscal and monetary policy in the United States to drag us down the tunnel into the light of day which, as we know, follows night.
Mr. Dalyell: There was an extremely well written article in The Times about the Falklands by the hon. Gentleman. My recollection is that he came to a different conclusion. In his two despairing paragraphs at the end he said that defence public expenditure was not under control. There he stands, if I am not wrong, wearing his penguin tie. Does he really think that expenditure in the south Atlantic is under control?
Mr. Patten: I shall be delighted to come to that point in due course when I refer to defence expenditure. I must correct the hon. Gentleman on an ornithological point. This is a hawk rather than a penguin tie. He will appreciate that it is an entirely suitable bird for me to decorate myself with. Next week it will be an elephant seal. I promise the hon. Gentleman that I shall come back to the south Atlantic later. I have one or two informed prejudices about that subject, as, I am advised, does the hon. Gentleman.
The point that I wanted to make is that we are apparently dependent on the United States, with a deficit of £200 billion and a more expansionary monetary policy, to drag us out of a recession when we are reluctant to attempt it ourselves by a little more expansion. Somewhere in the middle of that argument the intellectual coherence becomes a trifle unravelled.
The inconsistency to which I wish to draw attention concerns capital expenditure. I think that it is an inconsistency. I was not entirely convinced that the Chief Secretary had made the conversion which I had assumed from the White Paper the Government were making. Doubtless he has now disappeared to a more important meeting down some corridor of power, so it is difficult to clarify that point. Perhaps the Minister will do so when he winds up. Not long ago—1981 is a good time for picking out quotations—we were warned off the grass about capital expenditure. There was widespread feeling, as the Treasury conceded, that capital spending in the public sector should be increased. That widespread feeling was given a sharp dressing down by Treasury Ministers and in Treasury briefings.
I shall not trouble the House with a large number of quotations, but I shall draw hon. Members' attention to a speech by the Chancellor of the Exchequer in Bradford on 1 June 1981 and, more to the point, a background brief that was distributed widely in the House by the Treasury a
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couple of weeks later. It set out in a helpful and no-nonsense way—although not much of a common-sense way—the thinking that apparently lay behind the Government's argument about capital expenditure. The argument lay on the cruder shores of monetarism and went something like this: any distinction between capital and current expenditure is irrelevant, because what matters is the total amount of money that the Government require and how that money is financed. There was a lot more about crowding out and one or two other concepts that we hear slightly less about these days.
It is conceivable that my right hon. and learned Friend the Chief Secretary has made one or two similar speeches along those lines since then. His speech was a little like that today. We want to be charitable, just as we want to be sparing in our diligence in going through his previous speeches, and make the assumption, which I am sure is justified, that the Government's position has changed. It seems like that from the public expenditure White Paper. In the glossy volume one—the Cecil B. de Mille version—among the main points from the White Paper that are set out at the beginning of page 2 is this:
"Total public sector capital expenditure in 1983–84 … is planned to be 12 per cent. higher than the outturn expected for 1982–83. Expenditure on construction is expected to rise by 10 per cent. to E10¼ billion."
I take it that those facts have been put there for the purpose of demonstrating the Government's good sense in increasing capital investment. I take it that we should regard that as a conversion of sorts:
"joy shall be in heaven over one sinner that repenteth".
That is welcome news so far as it goes. It represents a policy response to the criticism that has been made not only of this Government but of Governments for almost a decade. I looked up some of the reports of the general Sub-Committee of the old Expenditure Committee. In its report on the 1977 White Paper on public expenditure, the Sub-Committee criticised the composition of public expenditure between capital and current and blisteringly criticised a decline of 18·4 per cent. in the share of capital spending between 1976–77 and 1978–79. The Sub-Committee said:
"The Government is thus itself acting like those industrialists it criticises for failing to invest. Indeed, even worse, it appears to be cutting capital expenditure and selling off productive capital assets (eg BP shares)"—
let us not forget that we are talking about the Labour Government—
"in order to sustain current expenditure, the classic action of an ailing industrial company. The results will inevitably be felt in every public service and also particularly in the construction industry"—
to which the right hon. Member for Stepney and Poplar referred—
"upon which unemployment is being differentially imposed. This recent action also, of course, is only the latest of a long series of similar actions by successive Governments"—
that is a perfectly reasonable point—
"stemming back at least to the public expenditure cuts of December 1973."
The Sub-Committee went on to say that the situation under the Labour Government reflected "the Government's political priorities." Precisely. That is what the Labour Government did on the front of capital expenditure. This Government, the last one and the one before have found it consistently easier to cut capital spending than to cut current spending. Therefore, as

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private investment in this country has sunk like a stone, so too has public sector investment, which should have compensated for the private sector fall.
I hope that what we see in the White Paper is the start of a different attitude to capital investment. I hope that, however inadequate it is as a start, it represents the first step on the road back to more sensible levels of capital investment in the public sector. If it represents those things, we owe a great deal to my right hon. Friend the Member for Taunton, who has consistently argued for a more sensible attitude to capital investment in the public sector. We also owe a great deal to the Committee that he has chaired so well, the Select Committee on the Treasury and Civil Service, which has also argued along those lines.
The Treasury Committee in its excellent comments on the White Paper is right to temper our enthusiasm for what has now belatedly happened. It does so, for example, in paragraph 19 and a number of succeeding paragraphs. It states that we have not yet travelled very far and that any increase in capital investment in the public sector is all too likely to be missed because of underspending. That point is brought out extremely well in the evidence annexed to the report by British Aggregate Construction Materials Industries. It is stated that the industry
"welcomes the planned increases in spending but remains wary of the government's ability to deliver. There is need for better control of capital spending: continual monitoring, ability to switch to reserve projects when main programme projects get unavoidably delayed, less rigid application of cash limits (eg by carryforward) which are a project manager's nightmare, less panic measures such as November's instruction to local authorities to 'spend, spend, spend'. The fact that the construction industry, and the Treasury Committee, have to repeat the same sermon year on year, indicates that the government remains a convinced unbeliever in sensible capital financial management."
It is difficult to avoid the conclusion that one should say amen to that.
I have two further points to make, during the second of which I shall come to the comments of the hon. Member for West Lothian (Mr. Dalyell) after he referred to my tie. The Ministry of Defence is one of the hardest hit Departments when it comes to rolling underspend and carrying forward underspend from one year to the next. That point was made perfectly reasonably by Sir Frank Cooper, the retired permanent secretary to the Ministry of Defence, in, I think, a radio interview last weekend. He said that underspending over about a decade in the Ministry of Defence equalled one major capital project. That is how serious underspending in the Ministry of Defence has been.
The Ministry of Defence has devised, or attempted to devise, all sorts of ways to circumnavigate the problem of cash limits which, once again, defy what one reads in the text books. Last year, it was able to use the phases of the moon. For various calendar reasons, there were 13 possible pay days in 1982, so the Ministry of Defence included an extra one in the financial year 1981–82. That point came to the attention of the Defence Committee belatedly when we were examining the winter Supplementary Estimates. When the Ministry of Defence discovered an underspend of about £250 million in 1981–82, it paid £250 million worth of contractual obligations on the last day of March for the 1982–83 financial year. I suppose that using the moon in that way is one way of getting round the existing system, but we
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should have a more organised and coherent way of rolling expenditure forward than occasional displays of Sir Frank Cooper's commendable initiative.
The hon. Member for West Lothian will agree that the public expenditure that the House votes should be adequately controlled. He and I can disagree—no doubt we do—about whether we are right to have such a substantial financial commitment in the south Atlantic. I believe that it is unfortunate, but inescapable, that we have that commitment. We can argue on that point. I do not believe that that commitment is nearly as substantial in terms of pound notes as the hon. Member has sometimes argued, but I imagine that neither of us would argue other than that the expenditure that the House votes should be used sensibly, both for the good of those whom we represent and for strengthening the British economy. That is why some of what my right hon. Friend the Member for Taunton said earlier is so important.
Another important point was also brought out by the evidence that was given to the Treasury Committee, notably the memorandum from the British Road Federation. I am surprised that that evidence has not been mentioned so far. The Government must note the current account expenditure implications of capital investment decisions. Current expenditure implications exist. One reason for the underspending in the past year or two that the Committee brought out is that the Government have not recognised those implications. They will have to if they are serious about underspending in the future.
I welcome the small increase in capital expenditure that is represented by this White Paper. I hope that it will be larger in the future. I hope that the Government will do a bit more about the problem of underspending, especially bearing in mind the condition of the British economy. It is hardly overheated. Moreover, I hope that, in future, the control of public expenditure will owe more to practical common sense—the types of things to which my right hon. Friend the Member for Taunton referred—and less, to quote the right hon. Member for Heywood and Royton now that he has returned to the Chamber, to massage, mirrors and barely comprehensible theory.
5.54 pm
Mr. John Horam: It is always pleasant to follow the hon. Member for Bath (Mr. Patten) because he always makes a civilised speech. I admire the deft way in which the criticisms of the Government are also criticisms of the previous Labour Government. His speeches are therefore put within the code of acceptable criticism from Conservative Back Benchers. I shall not press that point as I do not wish to discourage him from making other speeches of a similarly trenchant kind.
My central quarrel with the Government is that they do not appear to live in the real world when it comes to their economic policies. They do not ask themselves what is going on in the factories, offices, showrooms and export markets, in product development, research, management training and trade union co-operation and then ask themselves how they can help increase industry's confidence to plan on a more long-term basis and how they can help industry by encouraging enterprise and enhancing the skills that we deploy in the market place. Instead of that practical, down-to-earth approach, they seem to fix their gaze, as in a trance, on various intermediate financial

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targets such as the public sector borrowing requirement, sterling M3 and other arcane matters of which the public have little knowledge.
This approach reached its apogee when the right hon. Member for St. Ives (Sir J. Nott), in one of his previous incarnations, was Secretary of State for Trade shortly after the Government doubled VAT. He pointed out from the Dispatch Box that the doubling of VAT could not possibly increase prices in the high street because it would lower the PSBR. Moreover, he said that as though it were an obvious truth. The Government have got themselves into absurd circumstances by following those financial targets so closely and averting their gaze from what is happening in the real world.
I sometimes wonder why the Government have got themselves into this position. Even some Conservative Members have speculated about that recently. Some people argue that it is a cynical exercise, that monetary targets have been erected with the ultimate aim of dealing with trade unions and that a way out of these problems can be found by creating more unemployment. I believe that the recently published book written by the right hon. Member for Chesham and Amersham (Sir I. Gilmour) lends some substance to that theory. I have not read it yet, but I look forward to doing so with an eye to quotations for my leaflets at the general election.
Perhaps the Government are following intellectual fashion. We all know that there has been a great intellectual renaissance of the monetarist point of view. However, it is curious for the Conservative party to become a slave of intellectual fashion. I thought that they were always somewhat anti-intellectual. Indeed, they have been known, rather patronisingly, as the stupid party. It is strange that they should be hooked on the current vogue. That demonstrates the weakness of their view of what they are about. The Secretary of State for Energy believes that modern Conservatism is all about the monetarist view of the economy. That demonstrates a lack of understanding of the Conservative party's philosophical base. However, that is a matter for the Conservative party.
The Government seem to misunderstand that the real issue is not so much monetarism as a real understanding of the market in economic policy. I agree with those who have advocated a greater appreciation of the market, the Institute of Economic Affairs and other bodies. One of the Labour party's faults is that it has not understood the role of the market. But monetarism and the market should be separated. It is a pity that the Government entwine the two and assume that one inevitably encompasses the other.
Perhaps the Government are in this rather strange recherché intellectual position because most Ministers in charge of the Treasury and other leading Departments do not have much understanding or knowledge of business. That fact has been mentioned recently in the Chamber and it is probably true. Most Ministers are barristers or journalists with little experience of running a small or large business. That is a great disadvantage, as Conservative Members have said. The hon. Member for Chippenham (Mr. Needham) made a trenchant speech to that effect during a recent economic debate.
The result of the concentration on intermediate financial targets rather than on the real economy is that the economy has become rather like a business run by accountants. In fairness to the Government, I must say that
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the books are in not too bad a shape, but the business is rapidly going bankrupt. That is the real problem. Manufacturing output is nearly 20 per cent. lower than it was in 1979, and is at its lowest level since 1963. Car production is lower than in any year since 1957. Steel production is lower than in any year since 1950, and the number of houses completed last year was the lowest since 1947. The recession is deep because of the tendency to ignore what is happening in the real world.
The Government's approach is reflected fully in the White Paper that we are discussing. The emphasis is on financial control, and there is a superficial appearance that all is well. That surface impression is especially important this year, which may well be an election year, because the Government must seem to be always in control so that they can give away some money, while reassuring the City that little is changing and that nothing is being given away. The purpose of the exercise was explained clearly by the Chief Secretary to the Treasury a few days ago, when he made two successive speeches, saying in the first—with great pride—that expenditure was clearly under control, and in the second that there would be no giveaways or quick fixes. Those statements implied that he had fixed the expenditure by means of mirrors or massage, so that he could give the impression that it was under control and that there was still some room for giveaways.
The Chief Secretary's speech showed that, for once, it is more interesting to listen to the monkey than to the organ grinder. The Chancellor of the Exchequer seems to have sunk into Chancellor's purdah and, with his usual lack of eloquence, is happy to eschew words altogether in the runup to the Budget—[Horn. MEMBERS: "Cheap."] It is not cheap. The Chancellor probably relishes the pre-Budget period because he need not say anything about the economy. He says little enough at the best of times.
The surface impression is thus glittering but deceptive. The truth is more gloomy. As has been said three times in the debate, the White Paper reveals a substantial and continuing decline in capital expenditure since the Government took office, which has done great damage to industry and deepened the recession. The White Paper gives the impression that the Government are planning an increase in capital expenditure next year, but planned increases in capital expenditure during the past few years have often led in reality to underspending, so that there is widespread scepticism about whether planned increases will lead to real increases when the day comes.
It is interesting that such general scepticism in industry has been voiced widely. Indeed, never in the history of economic debate has British Aggregate Construction Materials Industries been so widely quoted as it has in this debate. That group says that, as the 14 per cent. promised increase in construction capital expenditure in 1982–83 was translated into a 6 per cent. actual rise, it remains sceptical about the effects of a planned 10 per cent. increase in 1983–84. That scepticism is fair. The Government should recognise that it is vital to consider not only financial markets—they spend much time worrying about opinion and confidence in those markets—but industrial confidence. Industrialists believe that, for all the words mouthed by the Government, there will be no real increase in capital expenditure. If they plan accordingly, we shall not have a real increase in capital expenditure. The Government should pay more attention to industrial confidence instead of being so obsessed with financial markets.

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Much of the increase in capital expenditure depends upon an increase in local authority capital expenditure, but the latter has revenue implications. Will local authorities step up their capital spending while the Government's attitude to revenue expenditure and the means of controlling it remains the same? Much underspending, both in local authority areas and in Government areas, follows over-long bureaucratic and consultative processes. When I was a Minister at the Department of Transport, trying to improve the rate of progress on the motorway that has been planned for years or even decades to link the M1 and the M5 south of Birmingham, the real obstruction was not lack of Government finance but a series of consultations, leading to resolutions that were challenged in the High Court by local opposition groups. Many civil servants were tied down for months, if not years, by those consultations and the bureaucratic paperwork that flowed from them. The Government must either increase the number of civil servants working on the matter to ensure real progress, or they must try to slim some of the overelaborate consultation procedures. They are doing neither, but are exhorting local authorites to get a move on with their capital expenditure. The result will be the same lack of progress that happened under previous Governments. It will not be enough.
The Government wish much of the increase in capital expenditure this year to come from an increase in spending by nationalised industries. However, as the representatives of those industries—especially British Telecom—said to the Treasury and Civil Service Select Committee when it examined the White Paper, they have underspent because they face a much tougher market. The expected demand has not materialised and, as prudent business men, they have cut their planned capital expenditure. If demand does not rise, that will be the case next year. We do not expect much growth, and the nationalised industries will soon undershoot their external finance limits. Therefore, we cannot expect an increase in capital expenditure from this source. The outlook is rather gloomy, and the extent to which we can improve the economy on that front is likely to be small.
The Government have substantially cut aid to industry. Hon. Members on both sides of the House must agree that such aid should be handled with care. In recent years, much of the aid has not been well spent, but, whatever one's view of that, it is foolish to cut such aid in the depths of a recession. Only this morning I read in a national newspaper an article by Dr. David Storey of Newcastle university, who wrote a book called "Entrepreneurship and the New Firm", in which he said that many of the companies that have gone bankrupt during the past two or three years are the medium-sized companies—employing perhaps 250 to 1,000 people—who supply the large companies, or the giants of the economy. If demand ever recovers, those medium-sized companies will not be there to produce the components for the large companies, and the result will be an influx of imports.
That is a real fact in the real world, yet the Government have cut the financing of the very agencies that were developed by previous Governments to help restructure industries and companies that were fundamentally sound but in difficult short-term financial straits. As a result, those agencies no longer exist to help deal with that real industrial problem.
The same is true of regional aid. In my own area of Tyneside, there are now predictions that under present
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policies unemployment in the Northern region will average more than 20 per cent. in a year or two and that in the foreseeable future many young people will never become employed. Consequently, the north-south distinction will become larger. I worry enormously about what is happening in our great provincial cities, because it is clear that the Government have no interest in, and provide no resources for, any meaningful or coherent regional policy.
Whatever one's view about the share of public expenditure in GDP—there can be differences of view about that in the long term—it is foolish to decrease public expenditure during a recession. It is right to increase it, and the Government's failure to do so has further pushed the economy down. That is a fundamental point. It appears that they are about to add insult to injury by bringing forward a Budget that will do very little for industry but will concentrate on putting more money into the pockets of those with jobs rather than helping industry and the jobless directly.
This is, of course, an election year, and I suspect that the Prime Minister is looking for that sort of election help from the Budget. Equally, she is aware that the Government's promises on taxation have been so massively belied by their performance that she must feel under some pressure to restore her previous image as a tax cutter by concentrating the resources available on income tax cuts. That will not be good for industry or for the future of our country. It is a cynical exercise that is typical of the mean-spirited attitude now rampant in the Conservative party, and it will do the country no good.
6.13 pm
Mr. Reg Prentice: I listened with interest to the speech of the hon. Member for Gateshead, West (Mr. Horam). He and I were good friends in the days when we were on the Right wing of the Labour parry, from which we have both since escaped, and I was looking forward to hearing from him about the SDP's policy on public expenditure. I say without offence that we did not hear much policy. We heard many interesting comments and some mild criticism of both the present and previous Governments. However, the hon. Gentleman's speech was thin on policy, which in a sense is typical of SDP speeches in the House.
Above all, we should face up to some hard and difficult questions of national priorities. I have always felt that the annual debate on the public expenditure White Paper ought to be one of the major debates of the parliamentary year. That is not a fashionable view. The House is not full of hon. Members clamouring to speak. In the past, we have devoted one day to this debate and four and a half days to the Budget debate. I have often felt that we have got it the wrong way round.
Our examination of the public expenditure White Paper should make us face up to two vital subjects. The first is the proportion of the GDP that ought to be spent publicly, whether we have got it right, whether we should alter it, and, if so, in what direction. The second is the broad choice of priorities within that total of public spending. The decisions contained in. the White Paper create the parameters for all Government policies and, indeed, for the Budget itself. In that sense, they are more fundamental.
Within Government Ministers have some of their most tense and difficult arguments about the allocation of public

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expenditure. Anyone who has had experience of arguing for a departmental programme—perhaps across the table from the right hon. Member for Heywood and Royton (Mr. Barnett)—is aware of the grave problems involved and the clashes on priorities, not just between departmental Ministers and the Treasury but among departmental Ministers.
Rightly and inevitably, those are difficult problems facing Government. The House should catch up with that process, and we should have similar debates on the Floor of the House. However, we are all liable to the occupational disease of climbing on to bandwagons in favour of more spending on fashionable good causes or fashionable demands for tax relief. That enables us to dodge the priority issues presented to us. In my few remarks, I hope to approach one or two of the different problems that now face the Government and the country.
I congratulate my right hon. and learned Friend the Chief Secretary and his colleagues on the White Paper. He had every right to claim that the Government have altered the trend by which the share of the GDP going to public expenditure was increasing substantially year by year. We now have stability, with the target figure being 0·5 per cent. lower next year than in the current year and a further 0·5 per cent. lower in the following year. It is easy to poke fun at that, as some hon. Members have done, by claiming that that cannot be estimated with accuracy. Indeed it cannot, but it is a plan for stability with regard to the ratio that goes to public spending. In that sense it is a considerable advance on the records of previous Governments of both parties.
We are also entitled to contrast the figures in front of us with the last figures in the forward planning of the Labour Government during their last year in office. They set a provisional figure for 1982–83, but the outturn for 1982–83 is £7 billion less than the figure contained in the Labour party's plans. A difference of £7 billion is an average difference of £10 a week for a family of four, and that is a lot of money. That is the difference between what is happening now and what was planned by the outgoing Labour Government.
The Labour Government consistently spent more than they planned, and that comparison takes no account at all of the enormous additional promises—the billions of pounds of promises—that have been made by the Labour party since 1979, over and above what it was planning to spend when in government.
The 44 per cent. of gross domestic product devoted to public expenditure is still far too much. One is not entitled to say that unless one has ideas about how to reduce it. That is very difficult, and one has to face the choices. It is a very large chunk out of people's income, a very tight restriction on the freedom of the wage-earner or salary-earner to spend what he has earned and a major disincentive to extra effort. For those reasons, I look forward to a time when we shall spend less of the GDP on public expenditure, preferably because the GDP is larger but also because, where necessary, we have pruned some of the public spending programmes still further.
I wish to make four specific points, each with a slightly different emphasis, about spending priorities.
First, some 30 per cent. of the total public expenditure recorded in the White Paper goes on public sector pay. In some of the vital services, such as the National Health
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Service, the proportion is much larger. If there was one reason why, in their first two years of office, the Government disappointed public expectations by not bringing down public expenditure as they had hoped, it was the excessive pay awards made by the Clegg commission.
It is easy to speak with the benefit of hindsight, but I wish that the Conservative party had made, before the general election, a pledge to disband the Clegg commission. I wish that when we came to office we had disbanded it and had looked afresh at all the outstanding pay issues with greater attention to the public interest. However, that is water under the bridge. In the more recent past, public sector pay has been under better control and it is essential that it should stay that way. It is essential that the 3·5 per cent. pay limit that the Government have suggested for the coming pay round should be adhered to and that Conservative Members should support the Government, if necessary, in their determination to resist those in the public services who try to break that limit.
I go a little closer to the concept of a formal incomes policy than Ministers have tended to do. I do not think that at present there is a need for formal machinery of the kind established by Governments of both parties from time to time since the end of the war. Inevitably, however, the Government have an incomes policy in the public sector. The 3·5 per cent. and the figures that preceded it are evidence of such a policy, but do the Government have sufficient means to enforce it?
I was worried by the outcome of the water industry dispute. It did not matter very much in itself. The numbers involved were small. The main lesson for the workers must have been that it would take them a very long time to make up the wages lost during the five weeks of the strike, and that the whole thing had not been worth while. That dispute, however, must not be a pattern for the future. I am confident that it will not, but I should have been happier if the Government had had power to set the settlement aside.
In the case of the teaching profession, the Government have that power. Some years ago I piloted through the House the Remuneration of Teachers Act. That Act provides for arbitration. It also provides that Parliament can set aside the award of an arbitrator if it is in the national economic interest to do so. Since then, I have taken the view that the minimum that the Government need is a similar power in respect of all public sector employees.
I believe that the water unions, because of their bad faith and the way in which they behaved, should have been punished by such a resolution of both Houses. I shall address myself, however, to the importance of public sector pay for public expenditure in the future. I do not expect a positive response from the Government today and I realise that Ministers are not thinking along those lines, but I believe that it is an option that they may need to examine for the future either in the form that I have suggested or in some similar form.
My second point relates to the social security budget. I had ministerial responsibility in that area for nearly two years. Social security is the largest single item in the entire public expenditure White Paper. In the coming year, the total amount of money transferred from three quarters of the population who pay to the one quarter who receive will be some £33 billion. That is an enormous sum. Labour Members always speak as though those in receipt of

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national insurance benefits are the poorest people in the country, but that is not so. Many of the three quarters who pay for the benefit are poorer than many of the one quarter who receive them.
The social security budget has increased for a number of reasons. It has increased partly as a result of higher unemployment, which we are all dedicated to reduce, an aim that is more likely to be achieved if a Conservative Government remain in office. It has also increased for demographic reasons and because successive Governments have increased benefits in line with, and often by more than, the rate of inflation. It will increase rather less next year and the following year due to the Government's success in dealing with inflation, which is greatly to the credit of the Government and, indeed, of the whole country.
Total expenditure on social security has also risen because successive Governments have added new benefits but have never or hardly ever abolished a benefit. They have also enlarged the ground rules for claiming benefit but have seldom if ever narrowed them. I believe that in the immediate future and for some years to come the Government must be absolutely rigid in resisting demands for further enlargement of the benefits available. Many worthy pressure groups put forward a good case—for a special allowance for blind people, for a better deal for war widows, for more generous death grants, and so on. Seen in isolation, each of those cases is a strong one that we would happily accept and many hon. Members sign early-day motions supporting them. Nevertheless, if the aim is to control public spending and this is the largest single item—it has grown out of all proportion to other items and far more rapidly than the ability of the country to pay for it—it must be kept under control by a rigid refusal to give way to pressure of that kind.
The capital element in the programme has been discussed at some length and I welcome the figures in the White Paper, although I understand why they have been knocked by hon. Members on both sides. There are many reasons why figures for increased capital spending may not be fulfilled in practice, due to underspending, late starts and other problems of definition. Nevertheless, as my hon. Friend the Member for Bath (Mr. Patten) said, the figures are a policy response—a signal by Government for higher capital spending this year, within a relatively stable public expenditure position, to the extent of 12 per cent., with a specific figure of 10 per cent. for construction projects. I hope that that can be achieved and maintained over the years.
I have vivid recollections of the time when I was Minister of Public Building and Works and had to deal with the construction industry, and of its constant representations to me and other Ministers about the devastating effect on the industry of switches in Government policy and stops and starts in capital programmes. It depends for more than half its custom on the public sector and has been subjected to sudden demands to increase activity and then sudden cuts in activity by both Labour and Conservative Governments. The irony has been that, because of the time scale involved, those cuts or increases have taken place so much later that the economic circumstances have often been very different from those when the original decision was made.
The construction industry is vital to this country and to any future economic growth for which we plan. I have seen research which shows that if we are to have a given
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degree of economic growth we have to have growth in the construction industry 1 per cent. or 2 per cent. a year higher than in the economy as a whole. One key to that must be consistent demand from the public sector. No. Government have achieved that in recent years and I hope. that this Government will be more successful in future.
My final point concerns overseas expenditure. I do not want to talk about the defence programme, which is clearly the biggest item in this category. I welcome the renewed implication of the 3 per cent. growth of expenditure on NATO, and the fact that the Falklands expenditure will be additional. However, I wish to say a word about table 2·2 in the second volume of the White Paper, which deals with the overseas aid programme and other overseas services. This is a small part of the totals that we are discussing. The aid programme is about 1 per cent. of total public spending and the other items are only about 0·5 per cent. if one excludes the European budget, which is rather a special case.
I welcome the modest increase in the overseas aid programme shown in the White Paper, but this programme was cut disproportionately by the Government in their early years. This led me into a rare abstention in a debate on the subject last year. I do not want to have a wide debate on the subject now, but I emphasise to the Minister and his colleagues that the case for doing more for overseas aid and for some of the other overseas services referred to in the table is a moral case, but also a case of our self-interest.
We have 5,000 British specialists working abroad on technical assistance problems, and that is very much in Britain's interest, as are the thousands of overseas students at our universities, technical colleges and polytechnics, paid for by our overseas aid programme. The fact that the Commonwealth Development Corporation is a success story is in Britain's interests, and so is the work of our overseas broadcasting and of the British Council. All of these objects should have been provided for rather more liberally in recent years and should be provided for rather more liberally in future years. I repeat that this is only a small proportion of public spending. Whatver else we economise on, it must be in terms not of a little England philosophy or a little Europe philosophy, but of a global philosophy. There are enormous dividends both commercially and diplomatically for Britain if we work along those lines.
I welcome the White Paper; it is basically a success story. I hope that there will be many similar success stories in the years to come.
6.34 pm
Mr. Joel Barnett: Listening to the right hon. Member for Daventry (Mr. Prentice) is difficult. I am a fairly even-tempered fellow, but it is difficult to restrain oneself when one recalls where he spent his political life. I shall return to some of the points that he made.
I apologise to you, Mr. Speaker, and to the Chief Secretary and my right hon. Friend the Member for Stepney and Poplar (Mr. Shore) because, as I am Chairman of the Public Accounts Committee and had to be there, I was unable to be present at the start of the debate.
I agree with the right hon. Member for Daventry on one point. This public expenditure debate should be —unfortunately it is not — one of the most important debates in the year, when we discuss what should be the

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total level of public expenditure and what should be the priorities in it. The House might have listened to the right hon. Member for Daventry with rather more respect if, instead of just saying, as one would have expected him to do, that he would have liked the Government to give a little more overseas aid, he had condemned them for what they have done to overseas spending.
The right hon. Gentleman quoted some of the differences in public expenditure since the Labour Government left office in 1979, but he did not quote the cost terms in table 1·14, which shows that the overseas aid programme was £1·108 million in 1979 and in 1982–83 is £892 million. I for one would have listened to the right hon. Member with much greater respect if he had condemned his Government outright.
Mr. Prentice: I said that I had abstained from voting in a Supply day debate on this subject, but in that debate I criticised the Government on precisely the ground referred to by the right hon. Gentleman. I am not saying that the right hon. Member should have known that. I merely take the opportunity to point it out to him. I should listen to him with more respect on this subject if he had been more eloquent on it in the past. I never heard him make speeches from the Opposition Benches in favour of overseas aid. Perhaps he did so, and perhaps I am mistaken.
Mr. Barnett: I was not a Minister for Overseas Aid and did not leave the Labour party for the reasons that the right hon. Gentleman gave.
Mr. Prentice: The right hon. Gentleman should do so.
Mr. Barnett: Despite all the cuts that I had to make as Chief Secretary to the Treasury, the level of overseas aid was considerably higher in 1978–79 than it is under the Government whom the right hon. Gentleman now supports. I have nothing to withdraw from what I said about the right hon. Gentleman. If it helps his conscience to make an occasional speech saying that he would like to see more spending on overseas aid he is welcome to do so. The plain fact is that under the Government whom he now supports overseas aid has been reduced substantially. I hope that he is pleased with that.
I apologise to the Chief Secretary for not having been here to hear him speak, but I understand that he put forward a complex argument about whether public expenditure had increased or reduced. In volume one of the White Paper the Chief Secretary boasts, as he has done frequently, that he has public expenditure under control. This time it is because his plans for public expenditure in this year's White Paper are £1 billion lower in 1983–84 than they were in last year's public expenditure White Paper. He considers that to be "control". I do not take it as being a form of controlling public expenditure to claim that one has brought planned public expenditure down by £1 billion.
Even on the Chief Secretary's basis of cuts equalling control, the Treasury and Civil Service Select Committee points out that there has been an increase of 6·2 per cent. in real terms since 1978–79. The Treasury Committee goes on to refer to the figures in the White Paper—the right hon. Member for Daventry referred to them as well—of public expenditure as a percentage of GDP. The Committee
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referred to the figures in the public expenditure White Paper which show that public expenditure is even less under control.
The right hon. Member for Daventry quoted the fact that public expenditure would come down by 0·5 per cent. of GDP. That is true, but in 1978–79 public expenditure under the same definition was 41 per cent. of GDP, and for 1982–83 the estimate—there is no actual figure—is 44 per cent. The actual figure, as a percentage of GDP in 1981–82, was 44½ per cent., exactly the figure it was in 1976–77, the "Year of the IMF", as it has been called, when we were described as probably the most profligate Government who had ever existed. The same percentage of GDP is the latest figure in actual terms. If the estimate turns out to be right, it will this year be 0·5 per cent. less.
In current circumstances, I do not complain that public expenditure is too high. My complaint is that the case made by the Chief Secretary that public expenditure levels are under control is nonsense. Even the cut of £1,000 million that he claims in 1983–84 is the result of fiddling the figures. His claim is meaningless. If the same contingency reserve had been used as was used last year, there would have been no cut at all. If, as we now know, the shortfall had been changed by a few hundred million pounds, and if certain estimates in some of the budgets of other Departments had been changed, it would be possible to show that public expenditure was another £1,000 million up or down.
It is possible to play around with the figures when someone in the Treasury, at a meeting with the Chief Secretary, says, "Do you not think that we can best say that we have it under control if we cut it by a billion?" However, after examining the matter, it looks like the same figure, or even a bit more. On the ground that something has to be done, it is decided to adjust the shortfall, reduce the contingency reserve and make one or two other changes. It can then be claimed, "We have got it down by £1,000 million and now have control of public expenditure." Obviously, by that process, the Chief Secretary has satisfied the right hon. Member for Daventry, but I doubt whether he satisfies anyone else.
I do not complain that public expenditure is not under the kind of control that the Chief Secretary pretends. When one is spending £120,000 million a year there is bound to be some waste and some inefficiency. One cannot have total control. The fact is, however, that public expenditure is not under control in any real sense of the word. My concern is over the great harm done by the Chief Secretary to the concept of public expenditure control. It is a concept that I strongly support. The right hon. and learned Gentleman does real harm by equating control with haphazard cuts, yet he goes on doing it.
No real thought is given in these debates, or within the Treasury, to what should be the total level of public expenditure as against private consumption and what should be the priorities within that total level. This applies to all Governments. It applied to the Labour Government. One tends to play about on the margin. Because so many departmental budgets have been fixed and are treated as sacrosanct, all one does by increasing or reducing public expenditure a few thousand million pounds in a year is to play about on the margin.
I tried hard, during my period of office, to get some better understanding of the need to re-examine fundamentally the priorities within a given level of public expenditure. I cannot pretend to have succeeded, but this

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Government have not even tried. The result of the concept of control espoused by the Chief Secretary is that those most affected by the cuts—local authorities, trade unions, former spending Ministers and those aspiring to be spending Ministers—blame cash limits, value for money audits and effectiveness and efficiency audits as the cause of their misery. That is wrong.
The real cause of their misery arises from a number of factors. The money does not exist because our rate of economic growth has been so poor. To pretend that the fault is due to the mechanisms that are being improved to control public expenditure is so false that I regret that the idea was given a boost by the Chief Secretary arguing that he has public expenditure under control.
The savings obtained by better control of public expenditure should not, and especially in current circumstances must not, mean a cut in public expenditure. Because so many people who care deeply about public expenditure and want it increased have fallen for the argument of the Chief Secretary, they now, like him, equate control with cuts. This is a serious matter.
I wish to make a brief plea for higher levels of public expenditure. This might be considered strange, coming from a former Chief Secretary who spent more than five years cutting, cutting and cutting again. However, the circumstances, to put it mildly, are very different today, although not entirely. Any increase that is now made in the level of public expenditure will still have to be strictly controlled. Indeed, I hope that what happened between 1974 and 1979 will be a powerful warning to those who may have it in mind to plan for huge increases in public expenditure. They could find happening again what occurred in 1974–75, when we increased public expenditure by 9 per cent. in real terms.
Because we did not have the rate of economic growth to match that expenditure, at a time when there were also massive increases in money incomes, it meant that I spent the following five years carrying out the unenviable task of cutting, cutting and cutting again. I hope that no one is under any illusion that if, as I trust, a start can be made on increasing public expenditure it can be done in a wholly unconstrained and unrestrained manner. It cannot. I hope that if no other lesson is learnt from the past, that lesson has been taken very much to heart.
The position today is very different, both in economic terms and in regard to the state of so much of the nation's capital assets. No one with eyes to see can dispute the need for more public expenditure in many areas where private expenditure can never be a substitute. There is an obvious need for more public spending on our roads and our railways if we are to prevent total chaos in our transport system. This cannot be left to the haphazard working of the free market system. Whatever political view one holds, the idea that any sensible transport system can be left to the haphazard working of the free market must be seen for the nonsense that it is.
It is equally obvious that more expenditure is needed on the National Health Service. The free market can provide something towards having a private health service, but this can never meet the needs of more than a trifling proportion—a small minority—of the number of people in this country. At times like this, not to be spending more on the National Health Service is almost criminal.
Few who see the state of much of our housing in the major cities will doubt the need to provide decent accommodation. In a comparatively affluent society,
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people should not expect and hope to live in a trouble-free society when so much of our housing is in such a terrible state. The private sector can make a contribution, especially with some assistance from public sources, but if we are to help the millions of people who in 1983 still live in appalling conditions there is no substitute for substantial increases in public expenditure. I was interested to hear the plea of the right hon. Member for Daventry on behalf of the construction industry, and I hope that his Government will take note of it.
Room must be found to improve the lot of people who are dependent upon benefits, although the amount of money available will inevitably be small, even if the rest of the community are willing to hold back their demands. If we spend as much as I want to spend on the increased capital expenditure that we so desperately need, the amount that will be available for the rest of the economy—whether one does it under a national economic assessment or any other assessment—especially in the earlier years before we get reasonable growth will inevitably be minimal. However, priority must be given to the areas of capital expenditure, a few of which I have mentioned today.
I said that I would be brief, and I shall. I end with a plea to the Government. Additional expenditure on capital at this time is not Keynesian, it is not anti-monetarist, it is not Labour, Liberal or Conservative. It is just plain common sense. I desperately hope that the Government will be led to do something about it, perhaps even by some Conservative Members.
6.51 pm
Mr. Stephen Dorrell: The House will have listened with rare amusement to the right hon. Member for Heywood and Royton (Mr. Barnett) describing the tricks of the trade in creating the illusion that public expenditure is either lower than it is or under better control than it is. He speaks with a rare authority and, as my hon. Friend the Member for Bath (Mr. Patten) suggested, some of the tricks that the right hon. Gentleman admitted to using as described in his book are the same methods that my right hon. and learned Friend the Chief Secretary used in parts of his White Paper, and for which he is now criticised by the right hon. Gentleman. The circle has been squared.
My right hon. and learned Friend, in opening, said that this White Paper on public expenditure covers half o f the nation's budget. That point has been made by several speakers in the debate. It is therefore important to consider this White Paper from two different viewpoints. First, we must consider it from the point of view of the way in which it decides our national priorities, and, second, we must consider it from the point of view of the effect that the total budget, half in the form of public expenditure and half in revenue raising, will have on the economy.
I want to mention one or two detailed aspects of the priorities that are delineated in the White Paper. The first concerns defence. I am glad that the Government did not allow themselves to fall into what I regard as the trap of regarding the Falklands expenditure as part of the defence budget, and therefore, in effect, diverting resources that were previously committed to the defence of Europe. We are committed by NATO to a 3 per cent. real increase in defence expenditure, and the Government are right to

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regard the extra and unavoidable expenditure incurred as a result of the Falklands campaign as being in addition to that 3 per cent. growth target.
The second is also a foreign affairs matter, and was made with considerable authority by my right hon. Friend the Member for Daventry (Mr. Prentice). I am glad that after several years in which, regrettably, the Government saw fit to reduce expenditure on overseas development that trend is now being reversed. I associate myself with what my right hon. Friend the Member for Daventry said about the importance of that item in our national expenditure. If I had to choose which pound brought more security, the pound spent in our defence budget or the many fewer pounds spent in our overseas development budget, I would find it a hard choice. This country's security interests are supported in a very real sense by our expenditure both on defence and on overseas development. I welcome the priorities that the Government are now giving to both items.
I also welcome another item of increased expenditure for which my right hon. Friends on the Front Bench have perhaps not taken enough credit. It is the substantially increased expenditure on health and personal social services during the lifetime of this Government. We can measure it in a number of different ways, but they all demonstrate a significant total increase in the amount of resources committed to that end. I welcome that, particularly in view of the Government's commitment to ensuring better value for money out of the increased resources. The announcement made by my right hon. Friend the Secretary of State a few weeks ago about opening the ancillary services of the NHS to subcontracting is part of that commitment, as is their commitment to a half per cent. efficiency target within the Health Service. Those two examples form part of a strategy of a substantially increased provision in the health and personal social services, of which I am sure that every Conservative Member has every right to be proud.
There are two items under one budget heading about which I am less happy. They come under the social security budget. When any hon. Member tells us in the House of his enthusiasm for a social security project, he is always well advised to remember the enormous scale, to which my right hon. Friend the Member for Daventry referred, of our social security budget today. Nevertheless, the Government should reconsider—I hope that they will do so before next week's announcement—the present policy, announced in the autumn, on the 5 per cent. abatement introduced nearly two and a half years ago on unemployment benefit, and the 2 per cent. "overpayment" made to recipients of state benefits in November 1982. The revenues from the taxation of unemployment benefit are now coming in, and the 5 per cent. abatement was introduced as a specific attempt to get the revenue effect of that tax increase before the tax actually fell. My hon. Friend the Member for Bath rightly says that it was introduced in lieu of taxation. We now have the taxation and the cut in lieu of taxation. That is unfair on those who receive unemployment benefit, and I hope that my right hon. and learned Friend the Chancellor of the Exchequer will put it right next week.
There is an arithmetical case for arguing that the recipients of benefit should receive more than the inflation entitlement in November 1982, when they received 2 per
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cent. more than the inflation rate over that period, but I am sure that that argument would be lost on almost all those recipients. They already find it difficult to understand why the increases announced in March are not paid until November. It would be an impossible task to explain to them that not only were they announced six months earlier, but that they will be reduced because of a mistake that was made 18 months earlier. When my right hon. and learned Friend makes his announcement next week, I hope that he will bear that in mind.
I want to move on to the broader considerations of the effect of the public expenditure White Paper on the economy. My right hon. and learned Friend the Chief Secretary concentrated on the share of the gross domestic product that is accounted for by public expenditure. No Conservative Member and, I suspect, few Labour Members would argue with the proposition that that is important. Of course, it is important that we do not allow public expenditure to run wildly ahead of the ability of the productive resources of the economy to pay for it. However, it is a mistake to imagine that that is the only, or even in some circumstances the main, criterion for the level of public expenditure. It is too simplistic to say that public expenditure is bad and that private expenditure is good. Indeed, there are many cases in which we would argue that public expenditure is good. One of the purposes of achieving a growing economy is to allow us to provide improved public services. It is not the fact of public expenditure that is bad, but when public expenditure rises faster than the ability of the economy to pay for it. That means that perhaps the most important single consideration in fixing the level of public expenditure is not the short-term share of public expenditure in GDP but the impact of public expenditure programmes on output.
It is perfectly normal to consider the revenue-raising effect of the Budget on output but, for some obscure reason, we are discouraged from considering the effect of public expenditure on output. Anyone who wants to argue that a particular attitude to public expenditure would have a desirable impact on output will find himself in a Catch-22 position.
If public expenditure is dealt with in the context of the White Paper we are told to wait until the Budget because it is then that we make our macro-economic judgments, but when Budget time comes along we are told that public expenditure was fixed at the time of the public expenditure White Paper. We are in the absurd position that we cannot consider both sides of the Budget together and their impact on total economic output. I hope that when my hon. Friend the Minister of State replies to the debate he will consider the impact of the various proposals in the White Paper on output and also the representations made to him by hon. Members during the debate from that point of view.
The most obvious of those representations was made by many hon. Members about capital expenditure. The Government have repeatedly let it be known that they are sympathetic to the arguments on capital expenditure, particularly to the arguments on the construction industry. Perhaps it is significant that table 1·13 in volume 1 of the White Paper specifically isolates the impact of the decisions in the White Paper on the construction industry. The Government are obviously showing an interest and I welcome that. However, in doing so it is only right that we should also refer, as various hon. Members have, to the fact that in table 1·8 it is clear that the total gross domestic fixed capital formation by the public sector has

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been on a strongly declining trend in recent years. That, as many hon. Members have suggested, is regrettable and, more important, damaging.
We were advised earlier that if we wanted to argue for increased capital expenditure we should produce specific examples of where that capital expenditure could be directed to useful economic and social effect. I want to isolate two such areas that have not yet been commented upon. First, it is often said that the Government have cut expenditure on housing. In so far as they have cut expenditure on indiscriminate current subsidies to occupants of state-owned housing, I welcome it. But in so far as that cut is reflected in the declining new build of specific types of accommodation which are needed and which people want to occupy and pay for, I can see no rational defence for that. Many hon. Members have experienced in their constituencies the lack of old and single persons accommodation. In our present economic circumstances there is a strong case, not for the indiscriminate building of council houses in places where they are not needed but for a discriminating policy to increase resources for the building of housing units that are required in the 1980s.
A similar position arises for school building. Since 1980–81 expenditure on school building has fallen from £376 million to £229 million next year in cash terms. In real terms the cut is dramatic. We all know that school rolls are falling and that that is an argument for cutting unnecessary current expenditure. However, once again we all have in our constituencies examples of 19th century school buildings that are insanitary and more expensive to run than their modern replacements would be. Therefore, there is a strong case for increasing capital expenditure on such projects. Neither my proposal for housing nor for school building will have a major short-term impact on public sector current revenues because both could be to a large extent self-financing. They would create extra work for the construction industry which would be extremely welcome. When I argue the case for the construction industry, I am aware that I am arguing a popular case that has been argued many times before.
In conclusion, I want to enter a caveat on the case for capital expenditure. It is easy to be over-simplistic and argue that capital expenditure is good and that current expenditure is bad. At the end of the day we must remember that capital expenditure is a cost and not a benefit. We exist, and the economy exists, to consume, not to invest. One of the great mistakes of state socialist planned economies is so to hold down the level of consumption and to insist on diverting resources into capital investment so that they cannot create the consumption to make the capital pay for itself. Capital expenditure is welcome and, as I have just argued, we should commit extra resources to it. Do not let us imagine, however, that it is the only kind of public expenditure that can be beneficial to our economic circumstances, or that it is the only acceptable way of influencing the total output.
If, as I said at the beginning, we judge the public expenditure White Paper by its impact on the economy as a whole, we should also look at other types of public expenditure which can have a desirable effect on economic output. That is why I do not apologise for my remarks earlier about social security and unemployment benefits and short and long-term benefits. If it is right—I believe that it is—to increase personal allowances in the Budget
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in order to channel more spending power into the pockets of the relatively low paid in our society because of the impact of that on demand, exactly the same argument applies to increasing the transfer payments which, if anything, go to an even lower income bracket in our society. The impact on output for which I am looking can be largely obtained by capital expenditure, but do not let us overlook the impact that some current expenditure can have on that as well.
I make it clear to the House that I am not arguing, and never would argue, for reckless reflation. The right hon. Member for Heywood and Royton was explicit and authoritative when he pointed out the dangers if that were to go wrong. The limitations on our freedom to manoeuvre in the British economy could not be more clear. It is to live in cloud-cuckoo-land to believe that we can dramatically expand the British econorny against the background of a deep recession overseas. 1 do not argue that because it is an impossible case to sustain. I welcome the Government's continuing commitment to personal tax cuts. That should not be the Government's only priority. The House should not ignore what my right hon. and learned Friend the Chief Secretary described in his opening remarks as "half the nation's budget". We should not ignore the impact that that may have on the economic performance and the level of output from the British economy.
7.11 pm
Mr. Tam Dalyell: My right hon. Friend the Member for Heywood and Royton (Mr. Barnett) and the hon. Member for Loughborough (Mr. Dorrell) referred to the construction industry. Before the Minister of State goes for a well-earned supper, let me ask him a question. He is one of the few hon. Members who is an engineer. The Institution of Civil Engineers sent out 250 invitations to MPs to attend a seminar last Monday at Great George Street but the hon. Member for Folkestone and Hythe (Sir A. Costain) and I were the only hon. Members present.
Several speakers, including the chief executive of the Severn-Trent water authority and Mr. Bill Devanay of Strathclyde, stated that to maintain standards, but not to improve them, before the end of the century Britain would have to spend about £40 billion on the replacement needs of our superb but crumbling Victorian sewerage inheritance. The Institution of Civil Engineers will put the results of this seminar to the Government.
The institution gave several remarkable figures. It stated that for every £100 million spent on sewers £50 million would be recouped because of the labour intensity of the work. More people would be employed and would pay tax and other money into the Revenue. Therefore, there would be less unemployment benefit to pay out. I do not say that that figure is correct, but will the Minister say that he will pay great attention to the document from the Institution of Civil Engineers when the Government receive it?
I move from the enormous figure of £40 billion to a figure of £20,000. My bemused constituents read on the front pages of the Scottish newspapers on Monday that Heriot-Watt university, which is partly in my constituency, was being fined £20,000 in terms of a cutback in grant for the he:.nous crime of exceeding its number of engineering students. It is incredible folly that

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this country fines its technological universities for having a few more engineering students—many to do with the North sea—than they should have.
It has been brought to my attention this week—on seven occasions I have introduced a kidney opting-out Bill—the doctors face terrible problems. They have to make decisions between life and death and say who goes on to dialysis and who does not. I echo the speech of my right hon. Friend the Member for Heywood and Royton about capital expenditure.
At 4.24 pm today the Chief Secretary to the Treasury said that the defence expenditure reflects the need to deter any resumption of hostilities in the south Atlantic. This is not the time or the place to argue my views on the Falklands, but the Government are living in a world of unreality if they think they will ever, in the absence of negotiating sincerely on sovereignty, against which the Prime Minister has set her face, get a cessation of hostilities.
The opinion of Lord Montgomery, who does not share most of my political views, is that a civilian Government in Argentina will be more difficult to deal with than the junta. They will have their pressure groups just as we have the Falkland Islands committee. Many people in an infant parliament in Buenos Aires will be happy to see the military establishment concerning itself with the issue of the Malvinas rather than with trying any type of countercoup against an infant democracy. The Chief Secretary envisaged a preoccupation with internal affairs which a British Government, in the absence of negotiation on sovereignty, will not get. If Argentina sees the threat of bee sting attacks as a way of draining our resources, heaven help us.
I wish to reflect on the figures in paragraph 2.1.3 on page 4 of the White Paper. The provision includes £624 million for 1983–84, £684 million for 1984–85 and £552 million for 1985–86. This drains sterling away at a dizzy rate. It costs £250,000 for each Hercules journey from Ascension to the Falklands. General Thorne says that in no way can the Hercules journeys be cut. The professional opinion of the GOC is that we have reached the limit in reduction in ships, men and in cutting back the air bridge.
The cost to the taxpayer is horrendous. I interrupted the Chief Secretary because I fear that in the next few months or years, if we do not negotiate, it is I who will be proved right, not the Government's estimates. The irony is that the more we develop the Falklands, the more we aggravate Argentina. The drain on our resources is out of all proportion. Britain continues building up assets which it will find difficult to leave.
We hear that the islanders are jittery. Mrs. Velma Malcolm said on "Panorama" that the islanders will miss the tranquillity that attracted people to the Falklands in the first place. If the policy is to give the islanders confidence, we must have a credible defence force. This will cost billions of pounds. We cannot do other than give our forces the best when we know that Argentina is scouring Europe, transferring that sinister arms office from the Vauxhall Road to Germany.
Argentina may have been frustrated in its efforts to buy Exocets through a gentleman in the Sudan, through Mr. Klein the arms dealer in New York, and through Mr. Karl
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Villavicienza, the arms dealer of Hamburg, by Mr. Peter Durish of The Observer, but. even now it is making inquiries about the Israeli Gabriel missile.
The Prime Minister said:
"The additions to the defence budget for the replacement of equipment lost in the Falklands conflict will be based on the full cost of replacement and will be spread over the period of procurement".—[Official Report, 20 October 1982; Vol. 29, c. 134.]
I wonder whether the Prime Minister has any idea of the depth of expenditure to which we are committed.
The hon. Member for Blackpool, South (Mr. Blaker) said that
"the costs of the Falklands campaign as well as the costs of replacing equipment lost of any future garrison will be met out of moneys that will be in addition to the 3 per cent. annual rate of real growth."—[Official Report, 21 October 1982; Vol. 29, c. 197.]
On 26 October, in response to question No. 1, the Prime Minister told me that
"the replacement of lost equipment is estimated to be about £700 million."—[Official Report, 26 October 1982; Vol. 29, c. 885.]
On 28 October the Minister of State for the Armed Forces referred in columns 473 and 474 to £700 million this year and a further £900 million over three years.
I shall give the Chief Secretary just one example. There must be a replacement for the type 23 destroyer. The original estimate for each of those light destroyers was, until a month ago, £65 million. I am not criticising the Navy, but because of its understandable demands the figure has now risen to £85 million. I am told that we shall be extremely fortunate to obtain any replacement for the type 23 for under £100 million. The real cost of modern arms is increasing at an exponential rate.
On 7 March I asked the Secretary of State for Defence
"what assessment he has made of the damage to military equipment from the effects of storms on ships in the South Atlantic and consequent rattling in the hold and of the cost of repair of such equipment."
The Under-Secretary of State replied:
"We cannot afford the time or staff in the Falklands to estimate the cost of damage which might have been caused by storms in transit."—[Official Report, 7 March 1983; Vol. 73, c. 304.]
I do not complain too much about that answer, but I am told that the cost of damage to sophisticated equipment is enormous.
The Minister of State for the Armed Forces said that
"an additional £424 million has been provided for 1983–84 to cover garrison costs, including capital equipment."—[Official Report, 11 November 1982; Vol. 31, c. 205.]
On 21 February, the Minister said:
"Information about the breakdown of expenditure is not available in the exact form requested. However, on the above basis, the estimated extra cost of transportation (including requisitioning and charter of ships, and fuel costs) is about £300 million on Defence vote 1. Some additional transport costs will fall on vote 2, but these have not been identified separately. The estimated extra cost of works services is about £40 million, while the cost of overtime and other special payments is expected to be about £50 million."—[Official Report, 21 February 1983; Vol. 37, c. 368–69.]
Those are not trifling figures compared with the cuts imposed on universities and the cutbacks faced by most social work departments of local authorities.
Even water has to be transported, at expense, from the northern to the southern hemisphere. On 31 January I asked the Secretary of State for Defence
"how much fresh water has been transported to the Falkland Islands and by what means; and whether the vessels concerned have used port facilities in Rio de Janeiro."
The Under-Secretary replied:

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"It is not in the national interest to disclose information about the size or supply of our garrison on the Falkland Islands." —[Official Report, 31 January 1983; Vol. 35, c. 37.]
That may be so, but the costs of those ships are mind-boggling and are referred to in column 655 of 23 December 1982. In the winter Supplementary Estimate of the Ministry of Defence for additional expenditure on fuel, the charter and requisitioning of ships, and cold weather clothing, the cost came to a cool £371 million.
With reference to the speech made by the right hon. Member for Daventry (Mr. Prentice), the fact is that there is a 23·3 per cent. increase in real terms in defence spending as between 1978–79 and 1983–84. That coincides with a 1·2 per cent. fall in the gross domestic product and cuts of 6·4 per cent. in education spending, 54·8 per cent. in housing and 15–5 per cent. in overseas aid. That takes Britain back to the same position it was in in the mid-1960s when we had to carry defence expenditure for our considerable east of Suez commitment. Those of us who remember 1965 and 1966 can recall all the arguments in the Labour party about that. I am indebted to Dr. Paul Rogers and Malcolm Chalmers of the University of Bradford, who say:
"The figures so far presented, however, may understate the likely increase in the defence burden. For the Ministry of Defence in 1982 successfully argued for an allowance to be included in its budget for 'the relative price effect'—that is, the extent to which defence costs rise at a rate faster than prices over the whole economy. Thus the 1982–83 defence cash limits incorporated a higher figure for inflation than those for other sectors of public spending. The present plans for three per cent. per annum real growth in non-Falklands defence spending appear to assume that the future relative price effect is zero. Historical experience suggests that it is more likely that defence equipment costs will rise on average at 6–10 per cent. above and total defence costs at 2–4 per cent. above the general inflation rate. Were this to happen, the government would be obliged to either (i) make substantial cuts in planned defence commitments or (ii) accept a further increase in the defence burden."
Like many Labour Members, I am concerned about the denuding of some commitments to NATO that we would regard as important.
An example of particular costs can be found in the Official Report for 28 February 1983. I asked the Secretary of State for Defence
"at what cost he bought the British Rail Sealink Ferry St. Edmund for work in the Falklands Islands area."
The Under-Secretary of State for the Armed Forces replied:
"This is a commercially confidential matter between the Ministry of Defence and Sealink."—[Official Report, 28 February 1983; Vol. 38, c. 60.]
However, it is fairly common knowledge that the figure was £7 million plus. Again, I asked the Under-Secretary of State for Defence
"what estimate he makes of the cost of a second 'Coastel' floating hotel for soldiers living in unsatisfactory conditions in the Falklands Islands."—[Official Report, 28 February 1983; Vol. 38, c. 60.]
I am not in any way criticising the establishing of a second Coastel. All of our colleagues who have been there complain about the conditions in which the service men are living and it is no part of my case to criticise individual service men or groups of service men. Indeed, I feel strongly about the conditions that they have to put up with. The Coastels have a tremendous sewerage problem—[Interruption.] The hon. Member for Bath (Mr. Patten) has been to the Falkland Islands and he will not disagree with that.
Mr. Chris Patten: I was going to say that as far as I know the sewerage problem with the Coastel is not as great as that with the Rangatira—which has a particularly unattractive smell—and some of the other craft that service men are having to live on. The sooner that we can get the Coastel into place—I hope before winter—the better, because our service men are not living in very good conditions.
Mr. Dalyell: I take that point, which agrees with what I was told by my hon. Friend the Member for Dunfermline (Mr. Douglas) and others.
On 12 January I asked the Secretary of State for Defence how many service communication personnel were stationed at Ascension Island for various dates between June 1981 and May 1982. Again, I was told that it would not be in the national interest to disclose that information. However, it is a major operation on Ascension Island and enormously expensive. It is also expensive to charter foreign ships. I asked the Foreign Secretary
"if he will make a statement on the terms of the charter of the. Swedish ship Linne."—[Offcial Report, 31 January 1983; Vol. 36, c. 21.]
The Minister of State, Foreign and Commonwealth Office, replied:
"The Linne was engaged by the Crown Agents, on behalf of Her Majesty's Government, to transport materials and equipment from Sweden and the United Kingdom for rehabilitation work in the Falkland Islands. The engagement started when the, vessel commenced loading at Helsingborg on 11 November 1982 and ended with final discharge of all cargo at Port Stanley on 5 January 1983."—[Official Report, 31 January 1983; Vol. 36, c. 21.]
The Ministry of Defence should be candid with the House about how much all those ships are costing.
In Hansard on 14 February, in column 3, the Prime Minister gave my hon. Friend the Member for Batley and Morley (Mr. Woolmer) a whole list of ships that had been chartered. They included the Contender Bezant under the Bermudan flag, the St Helena under the St Helenan flag, the Stena Inspector under the Cayman Islands flag and the Sandshore under the Norwegian flag. Ships directly chartered were the Corona, the Cortina and the Vinga Polaris under the Swedish flag, the Hans Maersk under the Danish flag, the Marianne under the Swedish flag, the Hulda Maersk under the Danish flag, and the Natalie under the Federal German flag.
I was told on 31 January that the Grey Master would serve as a temporary replacement for the RFA Sir Galahad and would be named the RFA Sir Caradoc, and that the Lakespan Ontario from Canada would serve as a temporary replacement for the RFA Sir Tristram and would be named the RFA Sir Lamorak. I understand from Jim Slater of the National Union of Seamen that there are 25 merchant ships under the British flag. What can the cost be?
In answer to a question on 3 March I was told:
"The number and cost of sorties needed to complete the Zeus radar project cannot be accurately predicted because they depend upon such factors as weather conditions and the local availability of natural materials such as aggregate."—[Official Report, 3 March 1983; Vol. 38, c. 232.]
If we are to shift aggregate by helicopter, would it not be better to send it to help some of the desperate housing conditions in the inner cities rather than to somewhere 8,000 miles away?

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On 28 January I asked about the cost of the radar station. The Under-Secretary of State for the Armed Forces replied:
"It is not the practice to give information that could reveal our operational capability."—[Official Report, 28 February 1983; Vol. 38, c. 61.]
It is no secret that the concrete is being carried by helicopter. When I suggested that mules would do the job more cheaply, I was told that the conditions were unsuitable for poor old mules.
On 3 March the Leader of the House wrote me a civil letter when I asked about the cost of the airfield. He said:
"I think my best course is to recommend to you the replies to these Questions. Our policy is to spend what is needed to defend the Islands, support the garrison and reinforce it quickly if necessary; this requires a better airfield than the present temporary and restricted facilities at RAF Stanley. How much the necessary improvements will cost, neither we nor anyone will know until we have received tenders; these will shortly be invited from contractors experienced in this sort of construction work, and in the meantime I would not take too much account of the figures quoted on 'Panorama'."
The figure quoted on "Panorama" was £350 million, but the Daily Express puts it at £880 million. I am told by experts at London airport who had something to do with the construction of the runway at Edinburgh, which is not as difficult as Port Stanley, that a figure of almost £1,000 million would not be far out. We understand that Cabinet Sub-Committees are discussing the issue.
We must be clear about what we are letting ourselves in for in the long term. On 28 February I asked the Secretary of State for Defence
"how long he estimates it would take to construct a military airport in the Falkland Islands capable of accepting long-distance jets such as Tristars."
The Minister of State for the Armed Forces replied:
"Depending on site and the construction programme, a strategic airport capable of operating wide-bodied aircraft could be built in a couple of Falkland summers."
We are trying to construct Stansted in Stanley. The runway will be the size of the third London airport. It must have instrument landing system category 3B because of the fog. There must be the capacity to land with 75 metre visibility. One detail that has not been taken into account is the corrosion associated with the 3B instrument landing system. We are talking not about thousands, tens of thousands or hundreds of thousands of pounds, but about millions of pounds.
On 28 February I asked
"on how many occasions since 1 January Hercules aircraft have had to return to Ascension Island without landing at Port Stanley on account of bad weather over the Falklands."
The reply was:
"It is not the practice to give such operational information."
The truth is that we all know that there have been diversions to Brazil. We all know that the hazardous journey has happened at least half a dozen times. The hon. Member for Bath has done that journey—I have not. The idea that we can continue to do that for the lifetime of the youngest among us is preposterous.
On 28 February I was told:
"The cost of providing the necessary landing and other aids will be estimated with the cost of other airfield improvements in the Falkland Islands."—[Official Report, 28 February 1983; Vol. 38, c. 61–62.]
I have been in this place sufficiently long to remember what the late Tony Crosland had to say about Stansted
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when he spoke from the Government Front Bench—the subject is not unfamiliar to my right hon. Friend the Member for Stepney and Poplar (Mr. Shore).
I have been told by the Minister that doors have been modified on some hangars to facilitate opening and closing in high winds. Building hangars in the Roaring Forties, 8,000 miles away, when there is no good will from the near continent, is an expensive operation.
The Minister for Overseas Development, who was previously a Minister at the Home Office, told me that the main existing jetty at Port Stanley was barely satisfactory to meet the heavy demands made on it, but he was not aware of any specific British harbour requirement that applied to jetties.
I wish to raise a delicate issue under the heading of overseas expenditure. It is the only time that the House can legitimately discuss expenditure under the Foreign Office Vote on the security services. It is probably true that the publicity surrounding Mr. Klein in New York and Mr. Villavicienza in Hamburgh has temporarily put a spanner in the works of Argentina's attempts to get 30 Exocets through a leading politician in the Sudan, but it will be only a slight, inconvenient hiccup. The military establishment that wants the Exocets will find another route. Aerospatiale is a willing seller and will connive as it did through Herve Colin during the months of May and June 1982—or Argentina will pursue its efforts to get hold of the Israeli Gabriel missiles.
Geoffrey Gibson, one of the leaders of the AngloArgentine community, said in the magazine "The World Today":
"Mrs. Kirkpatrick would find this very complacent. Americans were ironically far more unpopular in Argentina than the British, who were after all just pirates hanging on to their ill gotten gains, whereas the Americans were traitors to the Americas! The American Chamber of Commerce's telegram to President Reagan from Buenos Aires deploring the American decision to back Britain was almost hysterically angry compared to some quite mild missives from the British Chamber of Commerce to Mrs. Thatcher begging her to jaw rather than war."
The Anglo-Argentine community is plainly interested in this matter. This country has lost a great deal of revenue. People in the United Kingdom tend to assume that we can wait 10 or 15 years for Argentine and our elections. If we do, we are in danger of having a Franks situation all over again. We should take note of what is being said in Latin America.
I return for a moment to overseas expenditure. From table 2.2, I notice that overseas representation will be increased between 1977–78 and 1983–84 from £166 million to £327 million, overseas information from £56 million to £128 million in 1983–84 and external relations from £57 million to £149 million in 1983–84. That covers the security services. I gave oral evidence to the Franks committee and some of my colleagues think that I have submerged myself too deeply in this subject, but I believe that our security services are justified in being bitterly angry about accusations that they let the country down.
Any careful reading of the Franks report reveals that the security service did their job superbly well. I shall not go into details, but I shall refer colleagues to paragraphs 147 and 152. Paragraph 152 states that the Prime Minister, in her own handwriting, scribbled over the message from our ambassador to Buenos Aires:
"we must make contingency plans."
That meant military contingency plans. The security services performed extremely well by breaking the code

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earlier than Sir Terence Lewin has admitted. He said that we knew about the Argentine dispositions on 8 June. I believe that the security services broke the code in mid-April, or late April. I believe that the "General Belgrano" and its escorts received orders from Admiral Inaya to return to port in the belief that peace would break out. That is now proved by the fact that pilots of the aviation naval and the fleet air arm are accusing the admiral of treachery because he ordered the "General Belgrano" and the escorts back. When, before lunch on Sunday 2 May at Chequers, the Prime Minster ordered the "General Belgrano" to be sunk, she was under no misapprehension about the orders to the Argentine fleet, because the security services, possibly with US help, had broken the code superbly and were able to tell Downing Street and Northwood what the orders were.
Furthermore, I believe that the security services had discovered, with American help, that there was a meeting of the military council of Saturday 1 May in Buenos Aires, not at army headquarters but at the military club when the officer corps and the powerful army council forced the dipsomaniac alcoholic Galtieri, for such he was, to order the withdrawal from the Malvinas. I believe that this had been known for some hours at Chequers on Sunday 2 May. I believe that Parliament is the proper place to say these things, particularly when we are discussing the Vote for the security services.
And, now, should not the French have tipped us the wink at least that Exocets, ostensibly being sold to a Sudanese politician, were earmarked for the Argentine? Was the Foreign Office alerted by an arms dealer in Kent or Hampshire about the roles of Mr. Klein of New York and Mr. Karl Villavicienza of Hamburg in the deal? On what basis was the telephone number of either MI5 or MI6 given to the British arms dealer? Was it to allow him to contact security services about an arms deal involving Exocets which could be damaging to our forces? I do not know the answer. The Observer newspaper stated that this telephone number was available.
I do not expect a reply this evening, but I expect the Foreign Office to consider two matters: first, the breaking of the code at an early stage, before the order to sink the Belgrano—it should reflect on that—and, secondly, whether The Observer journalist Mr. Peter Durisch is right or wrong when he says that the British arms dealer attempted to contact the secret service in order to scupper the deal involving the 30 Exocets destined for Argentina through the fraudulent and fudged end-user system, and that the secret service did not care and did not bother to investigate. The Foreign Office should make a statement about this story. It raises basic issues about our secret services.
I thank my colleagues for their patience. This is the only occasion upon which one can legitimately raise such matters in the House.
7.46 pm
Mr. Nigel Forman: I shall not follow the hon. Member for West Lothian (Mr. Dalyell) in his detailed interest in what went on before and during the Falklands campaign, because I want to focus my remarks on some aspects of the Government's expenditure plans, the White Paper, and the points which arise from it, and also on the Opposition amendment. I am glad to see the right hon. Member for Stepney and Poplar (Mr. Shore); that is fortuitous.
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I listened carefully to the right hon. Gentleman, and I heard nothing resembling a powerful argument in favour of his amendment. Naturally, he made a colourful and rhetorical case against the Government, as one would expect from the Opposition Front Bench. However, there was not much substantial argument—which I think is significant—in support of his amendment. The reason is, possibly, that if he studies the words of the amendment he would be bound to conclude that in many respects they represent a travesty of the truth. I shall establish why I make that allegation.
First, the amendment claims that the Government have been attacking the standard of living of retirement pensioners. It is widely known, and has been publicised by the Prime Minister and others, that over the years 1978–82 pensions have been kept ahead of the increase in RPI. The figures will be familiar to the right hon. Gentleman. The amendment implies also that the Government have neglected the interests of the unemployed. It must be stated and restated that the Government have embarked on a huge programme of training and retraining and special employment measures, the like of which have not been seen in recent years, and which are likley to cost the Exchequer about £2 billion. No one can say that that is neglecting the interests of the unemployed.
One aspect of the Opposition amendment is correct—its reference to defence spending. Because of the long lead times in many defence decisions and because successive Governments have believed in supporting NATO and our contribution to it, I am sure that if the right hon. Member for Stepney and Poplar had remained in Government he would have honoured Britain's commitment to NATO. He probably would not have clone it as well as the present Government because we believe in giving a higher priority than did the last Labour Government to defence spending, but he would have done the responsible thing for the nation.
The present Government have a good record on defence spending. I believe that there has been a 23 per cent. increase in defence spending during the Government's term in office. That is a responsible aspect of our policy when the threat from the Soviet Union and the Warsaw Pact is increasing so dramatically both in terms of weaponry and money spent.
I hesitate to challenge the authority of the right hon. Member for Heywood and Royton (Mr. Barnett) on public expenditure control, particularly as he has laid out all his tricks in his memoirs. Today we listened to a gamekeeper turned poacher. The right hon. Gentleman listed all sorts of desirable ways that he would spend money if he were in office. I doubt whether he would adopt that policy if he were in office. I think that he did quite well as Chief Secretary to the Treasury some years ago.
The right hon. Gentleman spoke more seriously about the true meaning of control of public expenditure. Real control of public expenditure must mean, if it means anything, deciding on the total amount of public spending that the Government think desirable, the priorities within that, and the ability to achieve broadly the correct outturn in the light of those intentions.
We all recognise that that is bound to be difficult, partly because only 40 per cent. of total public spending is directly cash limited. It is more significant that another 40 per cent. is demand driven. The Government have no direct control over that, other than through major policy

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changes, which are always difficult in sensitive areas, particularly in the short term. The remaining 20 per cent. is current spending controlled by local authorities and only remotely controlled by central Government. It is controlled as a back seat driver might seek to control the person at the wheel of a car. It is wholly inadequate as a control mechanism, but, none the less, it is necessary. Governments have to strive to exercise control through the rate support grant.
Not enough has been made by Government Back Benchers of the shortcomings in the Opposition's arguments as expressed by the right hon. Members for Stepney and Poplar and Heywood and Royton. The Government are to be congratulated because they have public spending broadly under control, within the terms of my definition, even allowing for only 40 per cent. of total spending being directly cash limited.
The Government deserve congratulation for the example that they have set in controlling their own numbers in the Civil Service. I am glad to see my hon. Friend the Minister of State, Treasury on the Front Bench because that is his responsibility. It is an achievement to have brought down Civil Service numbers by 11 per cent. since 1979 without, apparently, affecting the efficiency or the effectiveness of the public administration. I understand that the aim is to cut Civil Service manpower by 14 per cent. by the end of the financial year 1983–84.
I welcome the Government's determination to spend more money on defence because that is a Conservative priority. A 3·9 per cent. a year cost increase in the period 1978–79 to 1982–83 is a good earnest of our intentions. I welcome the fact that spending on law and order has increased by 6·3 per cent. a year in cost terms since we came to power and that our spending on the National Health Service, which is so important to our constituents, is up by 3·2 per cent. a year in cost terms. Such spending has been directed in the right quarters. We are now employing about 20,000 more nurses and about 1,000 more doctors in the National Health Service. That is all to the good.
The pattern of spending reflects the Government's priorities, as does our protection of state pensioners against the rise in the cost of living. We have had some gratifying success in controlling and reducing the rate of inflation and that has helped to buy more goods and services for the money allocated under any heading.
I have complimented Ministers and now I seek their comments on some disappointments. We need to face one or two disappointments—notably the failure to control current spending by spendthrift local authorities. As a London Member, I think particularly of the GLC with its absurd right to precepts on the London boroughs. I hope that the next Conservative Government will be committed to abolishing the GLC and the metropolitan authorities. That aspect of local government spending is not controlled sufficiently.
The same applies to the failure to control nationalised industries' current spending, especially when public sector pay settlements are higher than the nation can afford. We are glad to see the water workers back at work, but that is only the latest example of a settlement which, on any reckoning, is too high. Others in the public sector, or even the private sector, will lose jobs as a result of that
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excessive settlement. I welcome the fact that the settlement for local authority manual workers, who are more numerous, is more responsible.
It is also disappointing that local authorities and the nationalised industries have not used their full allocations for capital spending. As a general principle capital spending and investment for the future is still too low, not only in the private sector but in the public sector. The shortfall totals about £1·3 billion for local government and about £600 million for the nationalised industries. I wish that that were not so.
The problem can be dealt with in various ways. The Government should give higher priority to making further progress with public procurement to help revive the private sector. A good example is set, as always, by the Ministry of Defence which knows all about public procurement. Its example should be emulated in construction, as my right hon. Friend for Daventry (Mr. Prentice) said, and in vital national infrastructure—for example, the water and sewerage systems, and in rail electrification and new rolling stock.
Recently in a meeting with some people on the management side of British Rail I was struck by the fact that there is a great need for new rolling stock, especially for the short haul commuter services serving Greater London and my constituency. It should be a high priority for the Government to arrange the cash limits for British Rail and the support for it so as to make it possible for the new rolling stock to be brought into service. Many of the coaches and much of the equipment in which my constituents and I have to travel is 30 or 40 years old and very cramped.
Support for public sector infrastructure is a major aspect of policy in our competitor countries such as France, West Germany, Japan and the United States. In Japan the longest railway tunnel in the world has been recently completed, linking Honshu with the northern island of Hokkaido. If the Japanese can do that, we can look sympathetically at the idea of a Channel tunnel.
In all of those schemes, particularly on construction, the great thing is that the import content is not too high, so it is possible to use that form of public spending to the benefit of the private sector without laying ourselves open to the charge that there is an enormous marginal propensity to import. In the infrastructure of construction, that need not be so. It can be made compatible with our general bias, which is sound, which is to buy British wherever and whenever possible.
With regard to the longer term, one or two other theoretical problems underlie many of the difficulties about public spending, and need to be faced by the House, if not solved. The first is that the Government, from what I can tell, seem to be aiming at a lower public sector borrowing requirement as a matter of policy and as a consequence of the medium term financial strategy, leading eventually to a balanced budget. That is the logical outcome of the path upon which the Government are embarked.
However, is that the right thing to do in a recession? Is that the right thing to do in what is, after all, the deepest recession for about 40 or 50 years? Is there a case for what is called a cyclically adjusted PSBR that separates the impact of unemployment from the rest of the calculation? It is just possible that there is a case for such a change of view by the Treasury. I shall be interested to hear the views of my hon. Friend the Minister on that vexed and

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rather technical question. One of the difficulties is that such a change would have to be credible in the financial markets or it could have adverse consequences on the interest rate structure. It might be helpful to the House if the Treasury thinking on that matter were spelt out.
The second point about the longer term is that the Treasury still seems unwilling or unable to distinguish fully between capital and current spending in its control of public expenditure. I have been brought up on simple economies and the view that capital spending should, on the whole, be financed from borrowing and current spending on the whole from taxation and revenue. I do not understand why it is not possible to make that separation in public accounts in the way that business men do almost every day of the week in private accounts above and below the line. In the absence of such a distinction, there continues to be an unfortunate bias built into the system against capital investment for the future, because essential capital investment always has to compete against other current claims, which are always more pressing because they involve the employment of people, public sector trade unions and all the other sticky difficulties in the public sector. That also means that public sector investment becomes, to some extent, the hostage of the buoyancy of the economy and what the public can stand in the way of taxation at any one time.
It has been said in the debate that roughly 25 per cent. of the population is supported by the other 75 per cent. in terms of the transfer payments to social security. There are limits to what the majority—the 75 per cent.—will stand in terms of rapid or ambitious increases in transfer payments to social security. However, one must consider that, if public sector capital spending is all the time to be dependent upon those two factors—the willingness of the public to fork out in taxation and the buoyancy of the economy when the world is in a difficult recession—we might put the claims of public sector capital investment into an unnecessarily invidious position. According to what I have learnt from the White Paper, as a proportion of total public expenditure, public sector capital expenditure has fallen from 13·1 per cent. in 1978–79 to 10·4 per cent. in 1982–83.
My third point about the longer term is that our continued success in reducing the rate of inflation and our continued efforts to increase efficiency in the public sector are very much to be welcomed. That must be one of the main planks in our way forward as it will enable us, whatever the totals of public spending and whatever the balance between different programmes, to get better value for money from the public spending that we sanction.
However, if that procedure and if those mechanisms are to be bought at the price of higher unemployment and raiding capital budgets in the public sector to meet our current commitments, inevitably we shall take longer and find it more difficult to get out of the recession than would otherwise be the case. Therefore, I conclude that we need the tightest possible continuing control of public sector pay, which accounts for about 30 per cent. of total public spending and a higher percentage in many of the labour-intensive parts of the public sector, which are the very aspects that are likely to expand fastest in the future.
We also need greater efficiency and effectiveness and the strongest possible commitment to that throughout the public service, with the Rayner exercises and everything that follows on from them. Above all, there should be more use of public capital spending to help the private
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sector. The economy of this country will be healthy and the Chancellor's Budget next week will be a success only if both the public and private sectors of the economy are run as efficiently and effectively as possible. In broad terms, I commend the Government on the progress that they have made so far. I shall be very interested to hear what the Minister says about some of the specific queries that I have raised.
8.8 pm
Mr. Michael Meacher: We shall all be interested to hear what the Minister has to say about the cyclically adjusted Budget policy. It is impossible not to feel some sympathy for the hon. Member for Carshalton (Mr. Forman) as he desperately tries to keep a fingertip hold on what are so obviously sensible and needed policies and equally desperately tries to stay within the parameters of Government policy. I doubt whether he will manage to square that circle. I wish ham well, but I have my doubts.
One central criticism that must be made of the 'White Paper is that it provides no clear statement anywhere in the two volumes about the underlying Budget strategy. I should like to ask some fairly obvious and fundamental questions. Is a smaller role for Government planned for two or three years' time? Are there any plans to shift resources from one sector of the economy to another? This is a sensitive question, with this Government. How will the taxpayer be affected in two or three years' time? Those questions are not answered in the White Paper. The fact remains that neither the autumn statement nor this White Paper provides price forecasts for 1984–85 and 1985–86. Therefore, it is not possible reliably to estimate the implications of the expenditure projection in terms of cost. That is all the more serious when the Treasury disbands volume estimates and when the White Paper commentary gives so little idea of the intentions that underline the strategy.
When personal taxation has risen, as it has under the Tory Government, by about £9 billion above the level that they inherited in 1979, one is entitled to ask why the Government have failed to show what the expenditure plans imply for future tax rates. It must be unacceptable that public expenditure plans are presented without the other side of the coin—the associated plans for tax revenue.
It is well known that the Treasury Select Committee attempted to correct for the inadequacies of the Government's presentation by setting out the plans in terms of what they were expected to cost when they were published. It is clear from the Select Committee's report that public expenditure will have risen, in cost terms, in each year from 1978–79 to 1985–86. That is contrary to the impression that is given by chart 1.2 in the White Paper.
Opposition Members are in no way opposed to increases in public expenditure. Indeed, quite the reverse—as is made clear by our amendment. Two things anger us. The first is the Government's two-facedness. When it suited the Chancellor last September to frighten the hell out of the nation, especially wage earners, by giving the impression that public expenditure was rising and out of control, the Chancellor drew on the leaked Think Tank document to say that, unless public expenditure was subject to further massive cuts, it would rise inexorably and, by 1990, income tax would reach 55p in the pound. Now that it suits the Chancellor to demonstrate to his Back Benchers how bone dry he is, we

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are told that public expenditure is falling. The Chief Secretary fell over himself today to make that clear. It may be lies, damn lies, and Treasury statistics with this Government, but they cannot have it both ways as they have tried to do recently.
My right hon. Friend the Member for Stepney and Poplar (Mr. Shore) made an excellent speech. He made a stunning case about the consequences of persistent public expenditure cuts. Opposition Members strongly object to the fact that the real cost implication of those figures is a huge cut in essentials such as housing, in which there has been a massive cut of £3 billion in five years. That massive cut is balanced by an equally large expansion in defence, law and order and the effects of massive unemployment.
The expenditure on the appalling waste of unemployment, which will be £17 billion in the coming year, is now so huge that, if the cyclical element that contributes to the estimated public deficit was excluded, the Government would be running a huge Government surplus. They are. That vital point is at the heart of the vicious spiral to which the Tory Government's policy on public expenditure has brought the country. Running what is effectively a huge Government surplus in one of the deepest recessions that we have suffered this century is not only absurdly, even criminally, irresponsible; it is counter-productive.
Massively restrictive fiscal policies of that type inevitably contract the economy further. That pushes up unemployment, which in turn pushes up the cost of unemployment and supplementary benefit provision which, given that the Government insist on a rigid public sector borrowing requirement, means either an increase in taxation or more cuts in other forms of public expenditure. Under this Government we have had both. Either way, the vicious circle starts again.
That is not simply theory. As the Government draw towards the end of their parliamentary life, we are entitled to say that that process is clearly demonstrated by what has happened in the past four years. The Government came to power asserting that public expenditure was unduly high, was a restraint on growth and was holding back private sector expansion. I am glad to see that the hon. Member for Wolverhampton, South-West (Mr. Budgen) agrees. The record shows that the Tories were wrong on all three counts.
If one excludes purely transferred payments—we should, to arrive at the most accurate definition of public expenditure—it is clear that public expenditure was and is lower in the United Kingdom than in the great majority of OECD countries. Public expenditure is simply not unduly high as compared with our international competitors. Nor, on the same evidence, is it true that countries with a higher level of public expenditure have a lower rate of economic growth. By and large, they do not. Nor is there any evidence that present levels of public expenditure shut out private sector expansion. Of course, there are levels at which the reverse would be the case.
In the past four years, non-cyclical public expenditure has been cut sharply but private sector investment has crashed down about 25 to 30 per cent. in real terms. Therefore, far from crowding out, which was all the monetarist rage, the evidence probably supports the exact opposite, and there is in fact a net element of crowding in
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because so many private firms depend heavily on local authorities and nationalised industries for many of their orders.
Where, in the light of what I have said, and after four years, does the Government's obsession for cutting public expenditure stand? What is the rationale, in the light of recent experience, for cutting public expenditure further as a proportion of gross domestic product, about which the Chief Secretary to the Treasury preened himself ostentatiously as if it were a magical and desirable achievement of Government?
No doubt we will continue to argue about whether public expenditure has risen or fallen in real terms in the past four years, but there can be no doubt that, if one excludes the cyclically-oriented component in the huge rise in unemployment benefits, there have been massive cuts in public expenditure. But where are the benefits to show for all the misery that has been created? It has not produced private sector expansion, it has not increased private sector investment and it has not brought down interest rates. What it has done, and on a huge scale, is push up unemployment. So why the Tory fetish for cutting public expenditure even further now?
Mr. Forman: Is it possible that, had we not taken the action that we did, albeit inadequate as my hon. Friend the Member for Bath (Mr. Patten) said, taxation and borrowing would have had to be still higher?
Mr. Meacher: The hon. Gentleman has misunderstood the Opposition's case on public expenditure. It is not a burden on the economy that must be paid for and a drag in terms of taxation and the private sector. If there is an expansion of capital investment, most public expenditure results in expansion of the economy. It generates growth and increases tax revenue to the Exchequer. That is why the central part of our amendment is that we support the role of public expenditure as a generator of growth.
The irony of the Tory position on public expenditure is that it is the wrong way round. The Government's economic policies have sharply contracted the productive element of public expenditure—the hon. Member for Carshalton (Mr. Forman) referred to this—especially the public investment element, which has fallen successively for the past five years and which has been almost halved as a proportion of GDP. That is a staggering fall. At the same time the Government's policies have bloated the unproductive component of public expenditure—the provision of unemployment and supplementary benefits. The opposite is so obviously and commonsensically required that only those with partisan tunnel vision can fail to see and accept it.
However, we do not only advocate sensible economic policies. In their attitude to public expenditure and their political vindictiveness towards the welfare state, the Government show their class antagonisms at their most overt and nasty. That is why we reject the cruel and economically senseless philosophy behind the White Paper.
8.21 pm
Mr. Nick Budgen: The contribution of the hon. Member for Oldham, (Mr. Meacher) was most interesting and persuasive until he reached his peroration. When I hear about how civil servants have corrupted the policies of our nation, and

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what I may describe as the Benn Friday night theme about the men from Oxford and Westminster conspiring to prevent Labour Governments from doing that which they promised the people, I cannot agree with that section of the Labour party that the hon. Gentleman represents so often, so intelligently and so persuasively.
I hoped that this Administration would cut public expenditure, not because I believe that civil servants are traitors to our nation, or from vindictiveness, or from a class attitude towards those who serve in the public sector, often with considerable idealism. The spiv who makes a quick buck should not always be regarded as a saint because he is also an entrepreneur. We have a diverse society and our public servants should often be admired but, none the less, I had hoped that in 1979 we should see a Tory Administration cutting public expenditure. Between 1974 and 1979 I took part in several debates on public expenditure. It is in an interesting change to speak in a more or less empty Chamber, with the Whips scurrying round asking hon. Members to add an extra five minutes to their speeches. Although a few non-Government hon. Members are still interested in public expenditure, there is no mass of youngish men anxious to demonstrate that, should they be appointed parliamentary private secretary to the third line Minister at the Department of Industry, they would be the best cost cutters in the business and that they agree with the right hon. Member for Stepney and Poplar (Mr. Shore) that there is always plenty of room for cutting waste once they are returned to power. While in Opposition we were very keen to cut waste, but it is rather different now that we are in Government.
The Government have not cut public expenditure. It has been controlled, but there is much difference between controlling and cutting. That is to be regretted. On the criteria that we put forward between 1974 and 1979, we have introduced honest finance in the sense that the failure to cut public expenditure has been balanced by increases in taxation. We have tried, progressively, to reduce the public sector borrowing requirement because we still believe in the concept of crowding out and the necessity to allow interest rates to fall.
Mr. Jack Straw: Perhaps I may assist the hon. Gentleman with the extra five minutes that he promised the Whips.
Mr. Budgen: I did not promise it.
Mr. Straw: Although the hon. Gentleman is correct to say that the Government have not cut public spending as a proportion of the gross domestic product, they have significantly altered the balance of public spending. They have reduced the proportion of capital spending and cut the basic welfare programmes, including education and social services. The failure to cut public expenditure, of which the hon. Gentleman complains, has been due to other Government economic policies that have forced up unemployment and added about £.14 billion to the public spending requirement.
Mr. Budgen: The cuts that we have made in public expenditure did not cause the present deep recession. I am supported in that by Mr. Sam Brittan, who said in the Financial Times on 3 March:
"Nearly everything that has happened in the British economy in recent years can be explained by two events—the 1979–80 rise in sterling and the wage explosion of the same period."
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I have a fairly pessimistic view of the role of Government and Opposition. While we were crowding in with youthful vigour to similar debates between 1974 and 1979, we added up the cuts that we would make and demonstrated how it would be possible to reduce the standard rate of tax to 20p in the pound. We had full and useful debates, but it all came to nothing. Just before the general election, it was for political reasons regarded as necessary to underwrite Clegg. As my hon. Friend the Member for Carshalton (Mr. Forman) pointed out earlier, 30 per cent. of public expenditure goes on wages. There was a massive explosion in the payments made to civil servants and to the public sector generally. Lucky old them—I do not blame them for getting the money. I am merely saying that all that splendid energy and planning in which we indulged from 1974 to 1979 became utterly useless.
We were then left with a very much larger public sector than we expected, simply because of that one promise that was regarded as politically necessary in order to win the 1979 election. I regarded it as a great mistake at the time, and it turned out to be an even greater mistake. It also had considerable effects throughout the private sector, because the public sector is to some extent a guide to wages in the private sector. That promise before the last election not only upset all our public expenditure calculations, but had a significant effect in creating the unemployment that is now such a sadness to us all.
I should like to offer a few suggestions to try to prevent a small mistake before the next general election. There can be no doubt that the west midlands is an area of great political importance. In the higher reaches of the Government at present, south-east and country Members are well represented, but it is in the west midlands and up the spine of England that elections are decided.
It is said—I have not worked it out because I am not that much interested—by those who advise us that 11 marginal seats in the west midlands may well decide the next election. Current levels of unemployment in the area have not been endured since the 1930s. They were perhaps endured most of all in 1922, when by monetarist means the post-first world war inflation was rapidly corrected. We must therefore go back either to 1922 or 1930 to remember any comparable misery.
When we next go the country, the level of unemployment in the west midlands will perhaps be 17, 18 or 19 per cent. I notice the hon. Member for Walsall, North (Mr. Winnick) in the Chamber, and he will have a view about that, but even if my view is unduly pessimistic I believe that the level of unemployment will be wholly new, and will be a deep psychological shock, to the west midlands.
The Government may well be asked "What are you going to do?" and there may be a panic reaction. They may say "It is true that there is 15 per cent. unemployment in many areas of the north, which have the advantage of regional policy. We will extend regional policy to the west midlands".
The Secretary of State for Industry has said that there is no demand in the west midlands for the extension of regional grants to that area. However, the mood is changing rapidly. For example, for a variety of reasons Wolverhampton has always been the home of those who believe in less state activity and the abolition of regional grants and, since 1832, has on the whole been represented by free traders whether under the Liberal, Whig or Tory

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banners. The chamber of commerce in Wolverhampton is now reluctantly convinced, however, that regional grants should be extended to the west midlands. The hon. Member for Walsall, North nods. He has advocated that for some time, from a position of perfectly consistent Socialist philosophy, but it is unusual for groups dominated by Tories to favour it.
There are two directions in which the Government can go. They can either follow the Socialist route, as they have on a number of other policies, and extend the advantages of regional policy to the west midlands, or they can say that they intend at an early stage to reduce the extent and type of regional benefit to the rest of the country.
Mr. Straw: What would the hon. Gentleman do?
Mr. Budgen: I should prefer the benefits received by the remainder of the country to be reduced. Many of my right hon. and hon. Friends would say that that would be electoral suicide, that it should not be made public before the election and that, if it is to be done, it should not be done until after the election.
Mr. Straw: The fact that such a proposal would be electoral suicide for the Government seems to me to be its only advantage. If regional assistance elsewhere in the country were reduced, would not the south-east and the country areas of which the hon. Gentleman spoke in such pejorative terms benefit even more than they do, and would not the split between the north and the south, and between industrial and country areas, become even worse than it is at the moment?
Mr. Budgen: If the advantages of regional development were extended to the whole country—I have not yet heard that case argued, but that might ultimately happen—the northern development areas would lose the advantages that they are said to enjoy. But the more likely proposition is that the benefits of regional development grants and so on should be extended to the west midlands but not to other areas to the south of the west midlands.
There should be an announcement by the Government now, or at any rate before the election, that it is the Government's firm intention to reduce—I see that I have the support of my hon. Friend the Member for Aberdeenshire, West (Sir R. Fairgrieve)—
Mr. Chris Patten: He is not standing for re-election.
Mr. Budgen: It is true that a significant step was made in that direction in July 1979 when the proportion of the population enjoying these grants was reduced from 40 per cent. to 27 per cent. However, it must be reduced further; otherwise it is certain that the demand from the west midlands will be very strong in the period leading up to the general election.
I understand what happens when political pressure is exerted just before a general election or indeed a by-election. One of the more obvious examples of public expenditure designed to affect a particular election was the announcement of the Humber bridge project. That is a little bit of corruption—
Mr. Straw: Coincidence.
Mr. Budgen: —that we can all laugh about. Nevertheless, despite the fact that it was announced at the
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time of a by-election and useless though it may be and vastly more expensive than the original estimate, it is something that can finally be paid for.
An article appeared in The Economist of 19 February which, I suspect, may have derived from certain guidance from the Department of Industry. The article points out that regional grants in the past two decades have cost the country £20 billion. If promises are made to extend regional assistance to the west midlands they will have to be honoured not just for a couple of years or even five years as with the Humber bridge, but possibly over the next couple of decades. There was strength in the argument advanced in July 1979 that when regional assistance is offered industry demands some stability and one cannot turn the tap off immediately. If the tap is turned on for the west midlands, the expenditure will continue for a very long time.
I conclude with a word about the nature of regional assistance. As the excellent—and, I suspect, inspired—article in The Economist points out, regional assistance has generally been capital intensive and a subsidy to capital. That is not what our society needs at this time. The hon. Member for Blackburn (Mr. Straw) nods in agreement. I suspect that I would carry him with me in saying that one of the first preferences for all Members from areas hit by heavy unemployment would be the abolition of the national insurance surcharge because it is a tax on labour. We understand that capital and labour compete in our society, but why should capital be subsidised by regional grants so that it can compete with labour on advantageous terms? The Economist puts it very well. Why should great chemical factories on Teesside be subsidised? The average cost of the 400,000 extra jobs in assisted areas since the late 1960s has been £50,000 per job. That is a great deal of tax being raised perhaps through the national insurance surcharge to drive other people out of work.
Mr. Straw: The hon. Member raises an important issue, and one that is not sufficiently discussed, both in respect of the grants made to industry and of our taxation of companies, in which we favour capital at the expense of labour. Does he agree that if we are trying to redress the balance we should be looking not only at reductions in taxes on jobs such as the national insurance surcharge, but at job subsidies? The temporary employment subsidy was one such scheme but by no means the only one of those that can be cost effective at the margin in keeping people in real jobs.
Mr. Budgen: It is true that subsidies to labour have a temporary effect. One of the reasons why, as I was describing it, public expenditure is controlled but not cut is the massive expenditure by the Manpower Services Commission, the body that, on the whole, carries out these various systems of subsidy to which the hon. Gentleman refers.
I regret, and here I think that I carry the hon. Member for Oldham, West (Mr. Meacher) with me, that the public expenditure White Paper does not carry a clearer picture of the Government's preferences and political priorities for the future. This Chamber may yet again be crowded by those who take an interest in public expenditure. I hope, for instance, that those who believe that the world price of oil is likely to fall substantially are right, but the consequence of that in the short term is that we lose some

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£5 billion a year of revenue from oil. That shortfall will take a great deal of cutting of public expenditure to make up. There will be renewed interest in cutting public expenditure, whichever party wins the next general election. After the general election, when we come to discuss public expenditure this Chamber will be crowded.
I hope that in the crucial, and for all of us rather frightening, weeks before the general election no unwise promises are given. I hope in particular that we shall hear from the Government specific plans for reducing the incidence of regional subsidies to capital, so that the pressure from the west midlands can be resisted on a proper and intellectually consistent basis.
8.48 pm
Mr. R. B. Cant: I shall follow what the hon. Member for Wolverhampton, South-West (Mr. Budgen) said only in the sense that I wish to talk about another £20 billion industry—local government. Local government is so often the whipping boy in public expenditure. Central Government are never to blame; it is always local government. Undoubtedly, on revenue account, some local authorities, although not all, are acting quite irresponsibly. While the Chief Secretary is here, I point out to him, on the subject of revenue expenditure, that it is time something was done to try to formulate a more satisfactory basis for local government grants. In the 30 years that I have been in local government service I have always found it very strange that the control of local government finances, a vast subject, should be with the Department of the Environment.
In the past two or three years, I would say from my practical experience that revenue expenditure in particular has been a financial disaster on a massive scale. We have introduced a new method of deciding how local government finance should be determined, turning our backs on the old rate support grant with its multiple regression analysis and everything else. We have introduced grant-related expenditure, which, in my opinion, although some people find it slightly attractive, has led to a large number of problems which local government finance officers find almost insoluble. No sooner is the grant-related expenditure announced than the Treasury has its own targets. We have had a period in which elected representatives and officials have seen the formulae for revenue expenditure in local government changed on 12 different occasions.
I wish to deal not with the overspending on revenue but with the underspending on capital to illustrate the chaos that exists. Reference has been made to the relative decline in capital expenditure in the whole public sector. This is also the case in local government. It is never very difficult for local authorities to spend all the prescribed local government capital expenditure to which they are entitled. In fact, I should like to enter a plea. I am not being parochial. I speak as chairman of the Staffordshire education committee. At a time when the Government ask us to spend more on capital account, they have cut our prescribed capital expenditure quota by £4 million. May we, please; have that back?
The situation now becomes more ludicrous. On the one hand, the Secretary of State for the Environment is cutting prescribed capital expenditure. On the other, he is calling for more spending on capital account from this other esoteric source of capital receipts. The whole thing becomes absolute nonsense. It becomes even greater
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nonsense this week. The previous Secretary of State for the Environment—he is, bless him, a real gentleman and I have great admiration for him—was on the horns of an inevitable dilemma. He wanted us to spend more when local authorities did not necessarily want to use their capital receipts for this purpose. The right hon. Gentleman told them that he would cut their entitlement to their own capital receipts by 50 per cent. If they had £10 million of capital receipts, they could spend only £5 million and he would take £5 million from them to be redistributed among other authorities in the hope that the global sum of expenditure from capital receipts for the nation as a whole would increase.
The lawyers—I do not know whether they were from the Treasury or the Department of the Environment—then intervened. This effort to increase the amount of money spent from capital receipts is being frustrated because the lawyers now say that the regulation to be introduced in the House on Friday will apply to all capital receipts—not only capital receipts that accrued this year, but in every previous year. The actual total of capital expenditure from capital receipts as distinct from prescribed capital expenditure will actually go down remarkably.
That is not the end of the story. The current Secretary of State for the Environment has a new proposal, which he is to introduce on Friday. The right hon. Gentleman calls this the 50-50-50 formula. This states that only 50 per cent. can be spent this year, as his predecessor announced, but that authorities will be allowed to spend 50 per cent. of the balance of 50 per cent. next year and, the year after that, 50 per cent. of the remaining balance. That is remarkable. It is cloud-cuckoo-land. The situation has gone berserk. The Secretary of State may say that councils which face any difficulty because of these new rules can effectively ignore them.
The financial environment of local government needs to be carefully investigated. I hope that the Chief Secretary, or his successor in a Labour Government, and the Secretary of State for the Environment will get together to make some sense of local government expenditure.
8.55 pm
Mr. Richard Alexander: It has always been an objective of my right hon. and learned Friend the Chief Secretary and the Government to reduce public expenditure as a proportion of gross domestic product. In the White Paper and in his speech this afternoon, my right hon. and learned Friend has shown that we are on the way to achieving that objective. To achieve it at a time when social security benefits and unemployment benefit payments are high, and at a time when the special employment measures, which themselves are costly, are coming in, is something of which my right hon. and learned Friend can be justly proud. However, it is more than a matter of pride. It is a further indication of the successes of this Government and their policies as a whole. It is perhaps a small indication, a small straw in the wind, but there are a number of straws in the economic wind now which give us ground for more than cautious optimism about the economy as a whole.
The Government's view of what still needs to be done to create prosperity differs significantly from the view of the Labour party. We do not see the problems of unemployment, loss of competitiveness, and regenerating

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our inner cities in terms merely of spending other people's money—taxpayers' money. We said that at the time of the election, and we still say it.
We started by reducing the burden of bureaucracy, and in cold figures we are achieving it. However, I wonder whether Ministers who have the ultimate say about the size of their Departments devote as much time and enthusiasm to carrying out that aim as they might. I served on a Standing Committee on a middle-ranking Bill last year, and I counted around the Minister 16 advisers, clerks, bag carriers and handkerchief holders. I do not know exactly why they were there, but there were 16 of them, and I doubt whether they were necessary. I like to think that if I had been the Minister in charge of the Bill, I could have done it with one quarter of the staff.
We as a Government have tried to hold down wages in the area where we have a direct responsibility. We have had some successes and one or two spectacular failures. The nation views the failures with considerable dismay. After all, it is the nation who pays.
Will my right hon. and learned Friend accept that there is a time—perhaps it is now—to control the huge cost of inflation-proofed pensions, particularly among the higher reaches of state pensioners? We should tackle this question not only in fairness to other pensioners but in fairness to the person who has to pay at the end.
Redundancy payments are another cause of anxiety in public expenditure. Why should the redundancy payments be significantly greater when steel works or pits close than when a private firm closes? Why should the differential be so vast and why should the taxpayer continue to pay for it? I urge my right hon. Friend the Chief Secretary to equate what is spent in the public sector with the private sector.
I appreciate that we are discussing expenditure rather than taxation, but has my right hon. Friend considered the waste which arises from the level at which traders have to register to pay VAT? In addition, trading between traders still incurs VAT and there is an enormous waste from just passing pieces of paper around. Likewise, we are passing paper around in the stamp duty offices; employing people to consider whether small amounts of stamp duty are payable. There is great scope for reducing employment in that area.
My final plea to my right hon. Friend is that the Government should not merely reduce the burden of public expenditure but ensure that it is incurred wisely. I am saddened by the grudging acceptance of the legislation introduced by my right hon. Friend the Member for Chelmsford (Mr. St. John Stevas) for controlling expenditure in the public sector. Anyone who saw the television programme on Sunday night on the aircraft industry and British Airways in particular, and the roasting that the people in charge of British Airways received, along with their not terribly effective response, will know that there is scope at least in that industry—how many more are there?—for reduction in wasteful public expenditure and for obtaining more of what the consumer wants.
In those areas must lie the reduction of public expenditure and greater efficiency. In those endeavours I wish my right hon. and learned Friend well.
9.2 pm
Mr. Austin Mitchell: I shall not follow the piggy-bank economics of the hon. Member for Newark (Mr. Alexander) because the essence of his conclusion is that the more misery and the greater the depression the better things are. It might be that he and people like him are better off compared with the misery that is inflicted on the rest of the community, but the logic of what he is saying is remorseless economic decline.
In a sense, the Government's expenditure plans are symbolic of their achievements. The White Paper is a much better presentation of an increasingly inadequate policy. It is based on assumptions—I am not sure whether they are optimistic, super-optimistic or just election year assumptions—that are essentially incredible. The first is the cutting of the contingency reserve by £1 million without any justification at all. What will happen to the British Steel Corporation if there is a continuing industrial decline? It will become an increasing burden. Expenditure this year has been about £500 million and there is no reason why that should not increase again next year. What will happen to expenditure on British Leyland? The cut in the contingency reserve is an unlikely assumption.
Even more unlikely is the Government's assumption that inflation will go down to 5 per cent. The fall in the pound, which is now a fall of about 15 per cent.—it must be slightly more since last November—still has some way to go. As the election approaches, the fall in the pound will continue, as it has done today. The Prime Minister could check the fall by announcing that there would not be an election until next year. If she is coy and enigmatic about the date of the election, the fall in the pound will continue. It is still 25 per cent. over-valued in real terms against EC competitors. That decline means that the inflation assumptions in the White Paper are incredible.
I am in favour of devaluation—it must be as part of an expansionary strategy—but now we have the management of the economy by depression and deflation as practised by this Government. That means that productive capacity is cut, and bottlenecks are built up. In any expansion, unless it is the kind of expansion that a Labour Government can carry through, there will be accumulating inflation pressures. A 5 per cent. assumption on inflation means that the Government are assuming that there will be no expansion and no economic recovery because inflationary pressures are bound to be generated by such an expansion.
Another incredible assumption is an increase in the public sector wages and salaries bill by 3·5 per cent. In the light of recent settlements and the negotiations that are proceeding, that is a totally unrealistic assumption. Such optimistic assumptions have become the basis for what will probably be the first cuckoo of spring next week— a give-away Budget, concentrating on tax cuts for those in employment. Tax cuts are not now a means of stimulating recovery. Tax cuts, such as the relaxation of hire purchase controls, will wash over into imports and not benefit British domestic manufacture.
It is important at this stage in the cycle to stimulate public spending and growth, and to rebuild the economy through public spending and not by bringing in tax cuts in the way that has been trailed in advance by the Treasury. That means prolonged depression and economic decline, and the two-nation society of massive unemployment which we have developed will be extended into the

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indefinite future. That will happen on the basis of a cynical calculation that it is possible to buy votes from those in employment by offering them tax cuts at the expense and misery of a large proportion of our people. Public spending should be used to expand the economy by investment.
The Treasury and Civil Service Committee report emphasises strongly that the fall in investment, despite the Government's forecast of an increase, will be two percentage points below the ratio that prevailed in 1978–79. The Treasury Committee speaks strongly about the underspending on capital investment, especially in the nationalised industries. It puts a strong case for an increase in capital spending which the Government do not seem to be able to envisage. The Government are envisaging further piggy bank economics in a massive Government surplus. The Government must be in surplus, adjusting for unemployment, given the expense of unemployment, which the Institute for Fiscal Studies estimates at £14 billion—that is the tax loss and the benefits paid out.
A House of Lords Committee estimated that it costs £5,000 to maintain an unemployed person. If that figure is multiplied by the number of unemployed, the Government are in substantial surplus. So the effect of the policies is massively deflationary. The Government are doing less than any other advanced industrial country by counter-cyclical spending in an attempt to repair the ravages of the depression. The public sector borrowing requirement is lower than that of any other advanced industrial economy. That helps to perpetuate the depression and perpetuates the present decline.
So the White Paper is a prelude to a brief flash of optimism in the form of tax cuts next week but a reality of continued economic decline. Public and private investment are down, and will continue to decline. The pound is still overvalued. There is no real economic stimulus in that. We face a future of prolonged unemployment without any attempt to fight back.
That is a tragedy, because North sea oil offered us a brief opportunity to expand and face balance of payments problems that we have never before been able to face. That opportunity is being thrown away. The balance of payments consequences of North sea oil are being used to finance imports and destroy jobs in this country, and the tax revenue from North sea oil is being used to pay for the unemployment created as a result of those imports. That is the essence of the Government's strategy. It is mean, narrow-minded, piggy-bank economics.
The hon. Member for Wolverhampton, South-West (Mr. Budgen) is essentially right, because it means that we are placing an increasing burden of public expenditure on a shrinking productive base. If the Conservative party is returned after the next election, the logical outcome will be further cuts in public spending and benefits, and in the machinery and fabric of the welfare state. That is what the prolongation of such policies means, unless there is an attempt to go to the root of the problem, to expand the economy and to rebuild British industry, which is the only basis for healthy public spending.
9.10 pm
Mr. Robert Sheldon: My hon. Friend the Member for Grimsby (Mr. Mitchell) sees little hope in the White Paper and only further cuts in store. I agree with him and shall come to that later.
Several hon. Members, including my right hon. Friend the Member for Heywood and Royton (Mr. Barnett) and
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the right hon. Member for Daventry (Mr. Prentice), asked an important question. They want to know why, when crucial decisions are made on public expenditure arid the Cabinet and Government spend much of their time marshalling the arguments, we do not have anything approaching that level or intensity in a debate on the Floor of the House. However, such arguments do not find a ready mirror in this Chamber. That is a great pity, but I hope that I and many other hon. Members understand some of the reasons for it. Perhaps the arguments become crucial only when a choice is being made. Another factor may be that we have no method of horse trading on the Floor of the House. However, that is no reason for failing to examine some of the issues more fully than we do at present.
The previous Estimates Committee failed in that task and was replaced by the Expenditure Committee, which again and again failed to concern itself with the matters for which it had some responsibility. It is only with the subject Committees of today that we come a little closer to detailed examination. Of course I pay tribute to the work of the Treasury and Civil Service Committee. Nowadays no debate on public expenditure is complete without it, and in some ways a debate cannot begin its serious task without the type of analysis that is now made available to us.
My right hon. Friend the Member for Heywood and Royton asked what the level of public expenditure and the priorities should be. We shall achieve that discussion on the Floor of the House only if we commit the subject Committees to undertaking the necessary examination. Therefore, we want them to make the same type of examination as the Treasury Committee gives, but on the more particular aspects of the matter.
In time, I look forward to a Green Budget examination in the autumn of each year, so that we are able to compare expenditure with revenue in the only meaningful way. As the Chief Secretary said, the Budget is only the first part. I think that the hon. Member for Loughborough (Mr. Dorrell) said that when it came to the Budget he would be told that expenditure was for last week, and that if he raised the subject of taxation now he would be told that that was a question for next week. It is only when these things come together and we see a more important role for the Treasury Committee in helping us to understand these matters more fully, and to bring out the more important essentials for debate, that we will finally make the progress for which many of us have long hoped.
In the Government's first public expenditure White Paper they made their declaration in clear, simple and resolute terms. Cmnd. 7746 of November 1979 said:
"Public expenditure is at the heart of Britain's present economic difficulties."
It was not that we might observe our efficiency as a manufacturing nation, nor our management expertise or lack of it. It was not even that tired old scapegoat for all Tory troubles, the trade unions. The prime cause of economic problems was held to be public expenditure. We note full well the import of that. The Chief Secretary appears to be shaking his head. Not only did the White Paper say that, but it was its very first sentence.
At a stroke, it appeared that the Government had discovered the solution to our performance as a nation. The philosopher's stone has been uncovered and all that was needed was a reduction in public spending. That simple assessment rests upon the belief that public

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spending is extravagant and private spending is virtuous. When the nation spends it is bad, when an individual spends it is good. It is irrelevant to that simple theory that the nation might be spending on essential investment and the individual spending on less necessary purchases. It all rests on the view of our economy that Government income and expenditure are like household accounts—if one is in financial difficulties one cuts down on spending, and equilibrium is restored.
I am sorry to have to say to certain simple souls who may believe that theory that Government expenditure does not work in that way. Public expenditure may be the spending of the nation, but it is also the investment of the nation. It is directly or indirectly the employer of a part of the nation. It is the recipient of the taxes paid by the people it helped to put to work. It can get people to work and it can obtain taxes from those same people.
Those ideas were rather too complicated for the Government. They believed that public expenditure was at the heart of our difficulties and had to be cut. So sure were they that that would mean lower taxes that they implemented tax cuts immediately. They believed that revenue and expenditure were in different watertight compartments, as they are for the individual. But as they cut expenditure, more and more people lost their jobs, tax revenue fell, unemployment benefit had to be increased in toto and taxes had to be increased also. Far from revenue and expenditure being independent, they depend vitally one upon the other.
The economy slithered down and there was the shameful Budget of 1981 when tax thresholds were not increased and unemployment rose and continued to rise. Unemployment has created the most shameful increase in public expenditure. The more the Government tried to restrict the economy, the more their public expenditure rose. The total cost of unemployment has been estimated by the Institute for Fiscal Studies at about £14 billion a year, including benefits and lost taxes. That is the amount of money that is being squandered. It is worse than that. Squandering implies that we get nothing for the money that we spend. We get less than nothing. Not only do we lose that money; we have the added burden of our people idle on street corners or locked away in their homes, losing their spirit and self-respect. Since 1979 more than £40 billion has been lost to the Exchequer in that way.
Maynard Keynes, 50 years ago, suggested what could have been done with similar resources. What we have forgone can be copied from the prescription that he laid down—the money could have built 1 million homes, one third of all our roads, provided equipment which could have revolutionised our industry and made our cities the greatest works of man in the civilised world. That is not dissimilar from what we could have done if we had had the money and spent it wisely. We have forgone it all in a vain attempt to reduce the proportion of the public to the private sector. The irony is that the proportion is changing as parts of the private sector are destroyed.
During the finance debates of 1965 it was argued that the new corporation tax would mean not the survival of the fittest but the survival of the fattest. Fewer firms failed in those happier days than now. The latest startling figures show that more than 12,000 companies were liquidated last year. Many of them were good, valuable firms with an important contribution to make to the local area and the
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nation's life. Many such firms invested heavily and sensibly in a future which, for them, would never exist. Other firms, sitting on unused assets with their funds idling away in Government stocks, have grown fatter and survived the industrial devastation inflicted by the Government's theories.
So it is that in the west midlands—this was the point made by the hon. Member for Wolverhampton, South-West (Mr. Budgen—the GDP per head of population is lower than it is in Scotland, the north-east, the north-west and elsewhere in the country. Our industrial heartland has suffered greatly. The fattest parts of our economy have survived, not the fittest. Those are the consequences of the Government's actions. Hon. Gentlemen who sit for west midland constituencies should take note of them.
One of the achievements of the Victorians—so admired by the Prime Minister—is that they realised that the public sector could invest profitably and so they initiated their big schemes for the supply of gas, water and electricity. The Victorians realised that wealth could be created in different forms by different institutions. Wealth could be created by individuals, by individuals banding together in a company, and in local authorities, by building the Manchester ship canal, and by the Government acting on behalf of their citizens.
Enterprise can be fostered by a Lord Nuffield, an ICI, a local authority building the municipal Manchester airport, or the British Gas Corporation discovering and developing our gas and oil reserves. It is enterprise alone that needs to be encouraged. The particular form of enterprise must be determined by circumstances and not dogma. Roosevelt took over as President of the United States of America 50 years ago. He was this century's greatest President. No economist, no theorist, he understood one thing—a nonsense is a nonsense. One does not need to wait for a complete economic theory, still less does one become a retailer of other people's dogmas. With millions of one's fellow citizens out of work and with the Government in a position to create the jobs—they should create them. No Socialist Roosevelt, he responded to the circumstances as he found them. He acted, helped and relieved, but this Government pass by on the other side of the road. Franklin Delano Roosevelt realised that wealth could be created by the public as well as the private sector. He set about creating wealth through such works as the mighty Tennessee Valley Authority. Electricity, great irrigation schemes and public works all formed part of his early achievements.
Our response to the same challenge is to squeeze public expenditure so that, far from investing, our sewers are crumbling and our railways declining.
There was a time when one looked forward to each new railway timetable to see how many minutes had been cut from one's regular journey. Today, with the squeeze on investment in track and rolling stock, we study each timetable to see how each journey has lengthened. Such is the rundown of our capital equipment.
Surely investment must increase even under this Government, but the answer is no. Will it remain the same? The answer again is no. Paragraph 25 of the Treasury Committee report shows that the plans for investment in 1983–84 involve less than in 1982–83. That is an illustration of the decline under this Government.
Hon. Members have considered the proportion of public expenditure in relation to gross domestic product. Some hon. Members may think that there is an ideal and

913
fixed relationship between what we spend as a country—our public expenditure—and the size of our created wealth—our gross domestic product.
There was a time when a certain politician thought that 60 per cent. of our resources went in public expenditure and therefore there was a threat to our liberities. It was then discovered that because the figure had not previously appeared important there had been much double-counting. Eventually the figure was discovered to be a little over 40 per cent. It is interesting that the clamour for cuts was undiminished.
Such reaction throws into doubt the importance of the relationship between public expenditure and GDP. If there was concern at 60 per cent., 40 per cent. should have created less concern. That view was not, of course, expressed. Those who complained that 60 per cent. was too high complained that the new estimate of 40 per cent. was too high. They used it as an all-purpose statistic to attack public expenditure. It mattered not whether the figure was 60 per cent. or 40 per cent., or even 30 per cent. Public expenditure was always regarded as excessive, and that view is common today.
I find the argument of limited interest. The debate should not be about public expenditure versus private expenditure, but about good expenditure, which, at a time of deep depression, brings about useful investment and creates jobs. The Government came in pledged to reduced the share of the nation's resources controlled by the state. Such thinking led to the famous Think Tank report of last September. It assumed current spending plans and the possible growth under this Government of 0·5 per cent. to 0·75 per cent. a year. It said that on that basis public expenditure would rise to 47 per cent. of GDP by 1990, or 6 per cent. above that inherited by the Government.
Rather than concentrate on the major question of how to improve growth and the GDP part of the relationship, the Government concentrated on reducing public expenditure still further. The dedication to yet another piece of mongrel theory led to yet another piece of nonsense. A silly question was asked and a silly answer given. We are able to understand, because one of the few endearing aspects of the Government is that the dottier something becomes, the more leaks we receive. By comparing the leaks we get a fair picture of what transpires.
One of the best accounts was given in The Economist of 9 October last year, when it described the Government's public expenditure plans if the people were unwise enough to elect them for a further term. It said that the Think Tank report was circulated to Ministers and that
"The gist of its argument was that, on present spending plans and assuming low growth (½ per cent. to ¾ per cent. a year on gross domestic product) public spending would take 47 per cent. of GDP by 1990."
The question was how public expenditure was to be reduced. The most controversial suggestions were replacing the National Health Service with private health insurance—saving £4 billion a year—ending state financing of education except for a certain number of scholarships and ending the link between pension increases and inflation.
The saner members of the Cabinet prevented such thinking being discussed. However, they did not stop it entirely, because the Chief Secretary to the Treasury less
914
than two weeks later went further and started telling us about the need for further examination of public expenditure cuts. He said on 22 September 1982:
"It is therefore not surprising that Treasury Ministers had decided that it was necessary to take a fundamental look at what lay behind the present spending patterns, or that ministers were looking at various options."
Therefore, it is becoming crystal clear that what was happening could be seen from the headline of The Economist article:
"Thatcher's Think Tank takes aim at the welfare state."
We must ask why the Government took aim at the welfare state. Why not defence? Many Opposition speakers have shown how it has increased year by year. Why did they not discover the need for real jobs for the unemployed? Why did they not examine the case for unemployment benefit being retained at the level at which it was before they started reducing it to take account of a notional tax increase and did not subsequently restore that reduction? All those options were available. However, it seems that they were closed to the Government.
In the four years under this Government their major task, which was wealth creation, has been uniformly disastrous. Manufacturing output is down by 19½ per cent. Unemployment is about 3½ million, on a generous estimate. Company liquidations are taking place at a historic high level of more than 12,000 a year. Those are nearly all small or medium-size firms. Let me not hear anything about helping the small firms. No help can be given to a liquidated small firm. The lives of the people working in those firms and running them have been destroyed by the actions of the Government.
All that has been taking place against the background of North sea oil. What are the benefits of North sea oil? Where have they gone? The March 1982 Quarterly Bulletin of the Bank of England gives us the figures. It states that dependence on net imports of oil was eliminated between 1980 and 1981 and that we became a net oil exporter in 1981. The value to us in our balance of payments is over £10 billion a year. The tax revenue for 1983–84 is forecast by the Government at £7½ billion a year.
The horrifying question is: if we have had such benefits from North sea oil, what would have happened to our economy under the Government if North sea oil had not existed? It is clear that the oil financed the experiment in monetarism. Without the oil the events of the past four years could not have taken place. We would have had two separate crises—one at home and the other overseas. The balance of payments would have swung into deep and permanent deficit. Secondly, unemployment benefit and other benefits would not have been maintained. There would have been a re-run of 1931 with cuts in unemployment benefit, severe means testing and a cut in the pay of Government employees. As this Government are the ideological legatee of the 1931 Government, their actions would have imitated those of their predecessors as they faced the same problems.
It was North sea oil that gave the Government the opportunity to use that resource to such little benefit for our people. We have only to compare ourselves with France, Germany, Italy and Japan, to note our inferior performance in all aspects of our economy in the past four years and then to ask ourselves what difference an asset such as North sea oil would have made to their economic and industrial condition to realise that the rise in oil prices

915
has constrained their performance. An abundance of oil would have freed them as it should have freed us. Such an asset should have provided for the re-equipment of industry for when the oil starts to decline. It will eventually, although I believe that it will continue, even into the 1990s and beyond, to supply a major part of our needs.
When we examine public expenditure and the White Paper, we find that perhaps the most notable omission is the failure to realise that public expenditure has a role to play in a recession or deep depression such as we are now in. Public expenditure should be used to move the economy towards greater equilibrium. If the economy is weakened, public expenditure should be used counter-cyclically. That would have been regarded as sensible in Victorian times, in the 1930s and in all post-war years until now. Failure of imagination and addiction to dogma permeate the White Paper. We oppose it and we shall vote for the amendment.
9.36 pm
The Minister of State, Treasury (Mr. Barney Hayhoe): Those of us who have been present for the whole debate will know that it has been distinguished by the quality rather than quantity of those hon. Members who have taken part. The right hon. Member for Ashton-under-Lyne (Mr. Sheldon) referred at the beginning of his winding-up speech to the fact that there has been fairly widespread comment about the lack of interest in what, in parliamentary terms, ought to be one of the most significant debates of the year.
It was interesting to hear the right hon. Member for Heywood and Royton (Mr. Barnett) who tonight lifted the curtain about what happens when public expenditure is discussed in the Treasury a little more than he did in his book. Even accounting for that, I am still not sure that we have found the best way to deal with these issues. Last year, the equivalent of this debate followed the Budget, the long Budget debates and the Second Reading of the Finance Bill. That debate had something of the flavour of yesterday's warmed-up menu. Today we have preceded the Budget. Perhaps it should have been an appetiser.
Although I am under the most stringent requirements not to anticipate my right hon. and learned Friend's Budget statement of next week in any way, there is little doubt that people are looking forward to it. Perhaps that is the essential difference between Labour and Conservative Budgets—Labour Budgets are feared and Conservative Budgets are generally looked forward to. As I have already said, I must not anticipate my right hon. and learned Friend's Budget statement. What I have said should not be taken in any way as a prediction of what he may announce.
Mr. Robert Sheldon: The Minister has said, as a general proposition, that Conservative Budgets are looked forward to with pleasurable anticipation. Surely he cannot be wholly denying what he knows are the effects of next Tuesday's Budget.
Mr. Hayhoe: I am speaking of a general rule. When my constituents asked me to tell them in a sentence the difference between Tory and Labour policy, I used to say
916
"Think about Budgets." Labour Budgets are generally feared, whereas Conservative Budgets are nearly always welcomed. That rule is not always followed.
The right hon. Member for Stepney and Poplar (Mr. Shore) moved the Opposition's amendment at the beginning of the debate. I hope that it is not indelicate of me to refer to it—no one else has. The right hon. Member for Ashton-under-Lyne managed to get round to it in his last phrase, saying that it should be supported. However, none of his arguments supported the amendment—they did not even refer to it. Perhaps that is understandable, because it is a most extraordinary mixture of errors and omissions. First, the Government are criticised for increasing expenditure on defence. However, we heard no suggestion from the Opposition that the threat to our security has diminished, nor did they make serious suggestions to counter that threat effectively with fewer resources. At the same time we are told that public expenditure should be used to reduce unemployment. It is difficult to see how cutting defence expenditure would help unemployment in the defence industries. We make no apology for our record on defence, nor for our future defence plans.
The amendment is wrong to suggest that there will be further cuts in social and community services. Expenditure on health and personal social services next year will increase both in cash terms and at constant prices. Expenditure on education has increased in cash terms—[Interruption.] The fall of about 5 per cent. in real terms reflects the fall in school rolls, as it should. The Government have not cut the standard of living of the retirement pensioner. The pension has been fully price-protected in accordance with our pledge. As my right hon. and learned Friend the Chief Secretary said, between November 1978 and November 1982, the retirement pension increased by 68 per cent. while the retail price index increased by 61 per cent. That is an increase in pensioners' standards of living, and families have been helped by increases in child benefit and one-parent family benefit.
The right hon. Member for Stepney and Poplar asked about the 1983 pension uprating and the 5 per cent. abatement in unemployment benefit. He knows only too well that those matters will be dealt with by my right hon. and learned Friend in his Budget statement, so he must wait until next Tuesday to hear the Government's views on them. Much has been said about Britain's tragically high unemployment. I make no complaint about that, but I complain about those who offer instant solutions to our most serious problem. Jobs are created and sustained by customers. As increasing numbers of people at home and abroad buy British goods and services, so employment prospects will improve.
The Government and the public sector are important customers in their own right. However, we cannot have a policy of buying British regardless of price and quality. That would waste the taxpayers' money and would foster a non-competitive British industry that is increasingly linked to the home market. It would be contrary to our international obligations and would encourage our trading partners to retaliate, thus reducing opportunities for British exporters. However, we always wish the public sector to consider carefully the goods and services offered by British firms and to buy them when price and quality are right. Under the Treasury purchasing guidelines, Departments are reminded that value for money should not

917
be judged solely on the basis of the lowest initial cost. Factors such as design, reliability and the cost of maintenance may justify a higher initial cost, and actions to promote industrial viability, and hence the trading competitiveness of suppliers, may justify an increased initial cost or greater technological risk if, in the longer term, the purchaser expects to gain improved value for money.
That general policy was introduced in 1981. There are difficulties in collecting statistics, as many of those who have experience of such matters will recognise, but the best estimate that we can make is that during 1981 Government Departments purchased 96 per cent. of the goods and services that they required from British firms. Controversial decisions are, of course, made from time to time, but overall that record is good. If similar figures applied more widely throughout the whole economy, think how enormously employment prospects would be improved. If British industry could regain the share of the market at home and abroad that it had 10 or 12 years ago, more than one million extra jobs would be restored.
When people complain about unemployment, one of the questions I nearly always ask is "What make of car do you have?" When they reply "A foreign car"—(HON. MEMBERS: "They are free to choose."] Of course they are free to make that purchase, but I draw their attention to the fact that in that way they are subsidising and increasing jobs abroad. I want British industry to provide goods at the right quality and price so that the British people will buy them.
Mr. David Ennals: I declare my interest. I have a British car. What are the Government doing about the appalling fact that the private sector is obviously not buying British, as a result of which imports are pouring in virtually without restraint?
Mr. Hayhoe: The people of this country should have a free choice. I am merely saying that the Government are setting a good example, and I hope that it will be more widely followed.
Important matters were raised by my right hon. Friend the Member for Taunton (Mr. du Cann). I join in the tributes that have been paid to him and to the Committee that he chairs with such distinction. Whatever differences we may have about the level of public expenditure, we can surely all unite around my right hon. Friend's proposition about the need to use the resourcess available as effectively as possible. The Government have given great emphasis to that essential task. We have made good management in the Civil Service a policy in its own right. The search for better value for taxpayers' money is, and must be, never ending, and a whole range of measures are to hand to improve efficiency and effectiveness in all Departments. More are being devised and planned.
The most visible sign of progress is the slimming down of the Civil Service from 732,000 in post when the Governmant took office to about 652,000 now. As my hon. Friend the Member for Carshalton (Mr. Forman) said, that is a reduction of about 11 per cent. It is worth nearly £600 million on the present annual Civil Service pay bill. We remain firmly on course to achieve our target of 630,000—the smallest Civil Service since the war—by April next year.
Since the Government came to office, Civil Service pay bill savings amount to about £1·2 billion, and that has
918
freed resources for other highly desirable programmes and projects. As normal, good management pratice, Departments have been asked to review their manpower needs—
Mr. Joel Barnett: I note what the hon. Gentleman said about cost-effectiveness in the Civil Service. Why then is he insisting on cuts in Customs and Excise, Inland Revenue and the DHSS, even when it is shown that it would be cost effective to have more staff?
Mr. Hayhoe: One cannot judge a civil servant by striking a balance as to whether that individual makes a profit or a loss. On the right hon. Gentleman's criterion, one would presumably sack all civil servants who did not show a financial return on what they did. That is absurd. We are looking at the Civil Service in the round. Reducing the numbers is part of the control that we are exerting within that public sector, and that has been shown to be effective.
Our aim is not just a smaller Civil Service but better value for taxpayers' money. That is the purpose of our programme of special scrutinies and reviews, pioneered by Lord Rayner but carried through by civil servants themselves. Overall, potential savings from the scrutiny and review programmes so far stand at over £300 million. The review programme will be continued and sustained, and I am delighted that it is now being extended to the National Health Service. I believe that it will prove an effective tool for concentrating resources on patient care and I am sure that many opportunities for doing so will be identified.
The Government have also launched a major initiative to improve the financial management in all the large Departments. We are determined to ensure that managers at all levels have a clear view of their objectives, a well-defined responsibility for making the best use of their resources and the information, training and access to advice that are necessary for effectiveness. This means a push to greater decentralisation and delegation down the line, which will represent a highly significant change in the culture of the Civil Service. All the major Departments have now submitted their plans, which are being appraised, modified, expanded and improved, and the results will be published this summer in a White Paper.
As more and more civil servants become involved in this financial management initiative, the whole process of achieving better administration will gain an impetus of its own. Recruitment, training, promotion prospects and practice will all be affected as we seek the greater efficiency and effectiveness that will guarantee better value for money.
Mr. English rose—
Mr. Hayhoe: I will not give way now. I want to reply to some of the points that have been made. Reference has been made to Civil Service pay. It is important to comment on what was said in the report—
Mr. English: On a point of order, Mr. Speaker. Towards the end of the debate, the Chief Secretary promised me a reply on a fairly obvious point—the percentage of GNP or GDP spent by NATO countries in Europe.
Mr. Speaker: That is not a point of order for me.
Mr. Hayhoe: I can answer the hon. Gentleman. He asked whether we were spending more than most of our

919
NATO partners. The answer is that we are spending a larger percentage of GDP than our NATO partners in Europe and about the same as the United States. That is on public record. The hon. Gentleman does not need to waste the time of the House with a tutorial on that.
The Treasury and Civil Service Committee was concerned that the provision for a 3·5 per cent. increase in wages and salaries might turn out to be too low. My view is that the 3·5 per cent. provision for the Civil Service remains adequate, especially in view of the recent rapid fall in the rate of inflation. It is important to remember that this cash provision is not a pay norm.
Mr. Robert Sheldon: Will the Minister give way?
Mr. Hayhoe: No, not at the moment.
Mr. Sheldon rose—
Mr. Speaker: Order.
Mr. Hayhoe: It is the increase that we have allowed for in the total provision to meet expenditure under the relevant Votes. Final decisions about how any particular pay settlement is to be financed must be taken in the light of the circumstances of the time. However, experience in the last three years has been that there is sufficient flexibility in the system—through, for example, manpower reductions and savings in other types of administrative expenditure—to absorb pay increases somewhat above the percentage increase made year by year in the relevant provisions.
Mr. Robert Sheldon rose—
Mr. Hayhoe: The right hon. Gentleman knows very well—
Mr. Sheldon rose—
Mr. Speaker: Order. If the Minister does not wish to give way he is not obliged to do so.
Mr. Hayhoe: As the right hon. Gentleman knows full well, a number of points were raised about Civil Service pay. The House listened in silence to him and it ill behoves him to shout and barrack when I try to answer the points raised by those who were present.
We were asked about arrangements for Civil Service pay in the future.
Mr. Straw: Who asked?
Mr. Hayhoe: Negotiations so far—
Mr. Straw rose—
Mr. Speaker: Order. Hon. Members must understand that only one hon. Member may stand to address the House at any time. The Minister said that he is not giving way.
Mr. Hayhoe: The questions were raised by my hon. Friend the Member for Carshalton. I thought that the hon. Member for Blackburn (Mr. Straw) was here at the time.
Negotiations in relation to the Megaw report are now in hand and I hope that they will come to a successful conclusion. The Government have accepted the broad approach of the Megaw recommendations, and the possibility of a new agreed arrangement for determining Civil Service pay is very important.
Concern was expressed about capital expenditure. There is, of course, a link with employment. There has been a decline over time in the capital share of total
920
expenditure. There is also the more recent problem of underspending. The Government agree that expenditure should be channelled into worthwhile capital expenditure, but the projects must be genuinely needed and able to show an adequate return. They must also be appropriate to the public rather than the private sector.
Capital investment is not, as some hon. Members seem to suggest, automatically desirable. There is no point in making more money available when spending authorities are not using what they already have. The important thing is to ensure that the provision already made is fully and sensibly spent. The Government's plans have been adjusted to take account of that reality. It was not possible to achieve the level of investment planned for 1982–83. The present plans take as their starting point that which can be achieved and provide for a significant increase on that.
The Government share the concern expressed in all parts of the House and especially by the hon. Member for Colne Valley (Mr. Wainwright) about capital underspending. As the evidence to the Select Committee shows, there has been no underspending by central Government this year, so the problem does not arise in areas under direct Government control. The Government have taken action to avoid the shortfalls in capital expenditure by local authorities and nationalised industries. Local authorities have been told that they can spend without limit on house improvement grants and more funds will be allocated. Other measures have been taken to encourage increased spending by local authorities.
In opening the debate, my right hon. and learned Friend the Chief Secretary asked the Opposition three questions about their economic policies. He asked how Labour proposed to spend and borrow more without generating higher inflation or higher interest rates or both, but answer came there none. The reality is that they cannot. Spending and borrowing would spin out of control, inflation would rise and any attempt at wage restraint would fail irrevocably if they tried to put their policies into practice.
My right hon. and learned Friend also asked whether a reversal of present prudent policies would not cause a major collapse of sterling, higher inflation and higher interest rates. Even a hint of the official Opposition proposals being introduced would inevitably lead to massive capital flows across the exchanges. A dramatic fall in the exchange rate would damage the underlying strength of the economy and leave exchange markets shivering. The Opposition's reply is to say that their national economic assessment would solve the problem. That is utter wishful thinking. I have seen no signs in today's debate that the opposition parties are prepared to come to grips in the same way that we have with these difficult questions. They live in a fantasy world in which expenditure can endlessly be increased while borrowing and taxation are reduced. I ask the House to reject the Opposition amendment.
Question put, That the amendment be made:—
The House divided: Ayes 228, Noes 287.

Division No. 91]

[10 pm

AYES

Abse, Leo

Bagier, Gordon A.T.

Adams, Allen

Barnett, Guy (Greenwich)

Allaun, Frank

Barnett, Rt Hon Joel (H'wd)

Alton, David

Beith, A. J.

Anderson, Donald

Bennett, Andrew(St'kp't N)

Ashley, Rt Hon Jack

Bidwell, Sydney

Ashton, Joe

Booth, Rt Hon Albert

Atkinson, H.(H'gey,)

Boothroyd, Miss Betty

921

Bottomley, Rt Hon (M'b'ro)

Huckfield, Les

Bray, Dr Jeremy

Hughes, Mark (Durham)

Brown, Hugh D. (Provan)

Hughes, Robert (Aberdeen N)

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

Hughes, Roy (Newport)

Buchan, Norman

Hughes, Simon (Bermondsey)

Callaghan, Rt Hon J.

Janner, Hon Greville

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

Jay, Rt Hon Douglas

Campbell, Ian

Jenkins, Rt Hon Roy (Hillh'd)

Campbell-Savours, Dale

John, Brynmor

Canavan, Dennis

Johnson, James (Hull West)

Cant, R. B.

Johnson, Walter (Derby S)

Carmichael, Neil

Jones, Rt Hon Alec (Rh'dda)

Carter-Jones, Lewis

Jones, Barry (East Flint)

Clark, Dr David (S Shields)

Jones, Dan (Burnley)

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

Kaufman, Rt Hon Gerald

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

Kerr, Russell

Cohen, Stanley

Kinnock, Neil

Coleman, Donald

Lambie, David

Concannon, Rt Hon J. D.

Lamond, James

Conlan, Bernard

Leadbitter, Ted

Cowans, Harry

Leighton, Ronald

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

Lewis, Arthur (N'ham NW)

Crawshaw, Richard

Lewis, Ron (Carlisle)

Crowther, Stan

Litherland, Robert

Cryer, Bob

Lofthouse, Geoffrey

Cunliffe, Lawrence

Lyon, Alexander (York)

Dalyell, Tam

McDonald, Dr Oonagh

Davidson, Arthur

McElhone, Mrs Helen

Davies, Rt Hon Denzil (L'lli)

McGuire, Michael (Ince)

Davis, Clinton (Hackney C)

McKelvey, William

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

MacKenzie, Rt Hon Gregor

Deakins, Eric

Maclennan, Robert

Dean, Joseph (Leeds West)

McTaggart, Robert

Dewar, Donald

Marks, Kenneth

Dixon, Donald

Marshall, D(G'gow S'ton)

Dobson, Frank

Marshall, Jim (Leicester S)

Dormand, Jack

Martin, M(G'gow S'burn)

Douglas, Dick

Mason, Rt Hon Roy

Duffy, A. E. P.

Maxton, John

Dunnett, Jack

Maynard, Miss Joan

Dunwoody, Hon Mrs G.

Meacher, Michael

Eadie, Alex

Mikardo, Ian

Eastham, Ken

Millan, Rt Hon Bruce

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

Miller, Dr M. S. (E Kilbride)

Ellis, Tom (Wrexham)

Mitchell, Austin (Grimsby)

English, Michael

Mitchell, R. C. (Soton Itchen)

Ennals, Rt Hon David

Morris, Rt Hon A. (W'shawe)

Evans, Ioan (Aberdare)

Morris, Rt Hon C. (O'shaw)

Evans, John (Newton)

Morris, Rt Hon J. (Aberavon)

Ewing, Harry

Moyle, Rt Hon Roland

Faulds, Andrew

Mulley, Rt Hon Frederick

Field, Frank

Newens, Stanley

Flannery, Martin

Oakes, Rt Hon Gordon

Forrester, John

O'Halloran, Michael

Foster, Derek

O'Neill, Martin

Foulkes, George

Orme, Rt Hon Stanley

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

Owen, Rt Hon Dr David

Freeson, Rt Hon Reginald

Palmer, Arthur

Garrett, John (Norwich S)

Park, George

George, Bruce

Parker, John

Gilbert, Rt Hon Dr John

Pavitt, Laurie

Ginsburg, David

Pendry, Tom

Golding, John

Penhaligon, David

Gourlay, Harry

Powell, Raymond (Ogmore)

Graham, Ted

Prescott, John

Hamilton, James (Bothwell)

Race, Reg

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

Radice, Giles

Harrison, Rt Hon Walter

Rees, Rt Hon M (Leeds S)

Hattersley, Rt Hon Roy

Richardson, Jo

Haynes, Frank

Roberts, Albert (Normanton)

Healey, Rt Hon Denis

Roberts, Allan (Bootle)

Heffer, Eric S.

Roberts, Ernest (Hackney N)

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

Roberts, Gwilym (Cannock)

Home Robertson, John

Robertson, George

Homewood, William

Robinson, G. (Coventry NW)

Hooley, Frank

Rooker, J. W.

Horam, John

Roper, John

Howell, Rt Hon D.

Ross, Ernest (Dundee West)

Howells, Geraint

Ross, Stephen (Isle of Wight)

Hoyle, Douglas

Rowlands, Ted

922

Ryman, John

Tinn, James

Sever, John

Torney, Tom

Sheerman, Barry

Varley, Rt Hon Eric G.

Sheldon, Rt Hon R.

Wainwright, E.(Dearne V)

Shore, Rt Hon Peter

Wainwright, H.(Colne V)

Short, Mrs Renée

Walker, Rt Hon H.(D'caster)

Silkin, Rt Hon J. (Deptford)

Wardell, Gareth

Silkin, Rt Hon S. C. (Dulwich)

Watkins, David

Silverman, Julius

Weetch, Ken

Skinner, Dennis

Welsh, Michael

Smith, Rt Hon J. (N Lanark)

White, Frank R.

Snape, Peter

White, J. (G'gow Pollok)

Soley, Clive

Whitehead, Phillip

Spearing, Nigel

Whitlock, William

Spellar, John Francis (B'ham)

Willey, Rt Hon Frederick

Spriggs, Leslie

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

Stallard, A. W.

Williams, Rt Hon Mrs(Crosby)

Steel, Rt Hon David

Wilson, Gordon (Dundee E)

Stewart, Rt Hon D. (W Isles)

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

Stoddart, David

Wilson, William (C'try SE)

Stott, Roger

Winnick, David

Strang, Gavin

Woodall, Alec

Straw, Jack

Woolmer, Kenneth

Summerskill, Hon Dr Shirley

Young, David (Bolton E)

Taylor, Mrs Ann (Bolton W)

Thomas, Dafydd (Merioneth)

Tellers for the Ayes:

Thomas, Dr R.(Carmarthen)

Mr. Allen McKay and

Thorne, Stan (Preston South)

Mr. George Morton.

NOES

Aitken, Jonathan

Cormack, Patrick

Alexander, Richard

Costain, Sir Albert

Alison, Rt Hon Michael

Cranborne, Viscount

Amery, Rt Hon Julian

Critchley, Julian

Ancram, Michael

Crouch, David

Arnold, Tom

Dickens, Geoffrey

Atkins, Rt Hon H.(S'thorne)

Dorrell, Stephen

Atkins, Robert(Preston N)

Douglas-Hamilton, Lord J.

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

Dover, Denshore

Baker, Nicholas (N Dorset)

du Cann, Rt Hon Edward

Banks, Robert

Dunn, Robert (Dartford)

Beaumont-Dark, Anthony

Durant, Tony

Bendall, Vivian

Dykes, Hugh

Bennett, Sir Frederic (T'bay)

Eden, Rt Hon Sir John

Benyon, Thomas (A'don)

Edwards, Rt Hon N. (P'broke)

Benyon, W. (Buckingham)

Eggar, Tim

Berry, Hon Anthony

Elliott, Sir William

Best, Keith

Emery, Sir Peter

Bevan, David Gilroy

Eyre, Reginald

Biffen, Rt Hon John

Fairgrieve, Sir Russell

Biggs-Davison, Sir John

Faith, Mrs Sheila

Blackburn, John

Farr, John

Body, Richard

Fell, Sir Anthony

Bonsor, Sir Nicholas

Fenner, Mrs Peggy

Bottomley, Peter (W'wich W)

Finsberg, Geoffrey

Bowden, Andrew

Fisher, Sir Nigel

Boyson, Dr Rhodes

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

Brittan, Rt. Hon. Leon

Fletcher-Cooke, Sir Charles

Brooke, Hon Peter

Fookes, Miss Janet

Brotherton, Michael

Forman, Nigel

Brown, Michael(Brigg & Sc'n)

Fowler, Rt Hon Norman

Browne, John (Winchester)

Fraser, Rt Hon Sir Hugh

Bruce-Gardyne, John

Fraser, Peter (South Angus)

Bryan, Sir Paul

Fry, Peter

Buck, Antony

Gardiner, George (Reigate)

Budgen, Nick

Gardner, Sir Edward

Burden, Sir Frederick

Garel-Jones, Tristan

Butler, Hon Adam

Gilmour, Rt Hon Sir Ian

Carlisle, John (Luton West)

Goodhart, Sir Philip

Carlisle, Kenneth (Lincoln)

Goodhew, Sir Victor

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

Goodlad, Alastair

Chalker, Mrs. Lynda

Gorst, John

Channon, Rt. Hon. Paul

Gow, Ian

Chapman, Sydney

Gower, Sir Raymond

Clark, Sir W. (Croydon S)

Grant, Sir Anthony

Clarke, Kenneth (Rushcliffe)

Gray, Rt Hon Hamish

Clegg, Sir Walter

Greenway, Harry

Cockeram, Eric

Grieve, Percy

Colvin, Michael

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

Cope, John

Griffiths, Peter (Portsm'th N)

923

Grist, Ian

Macfarlane, Neil

Grylls, Michael

MacKay, John (Argyll)

Gummer, John Selwyn

Macmillan, Rt Hon M.

Hamilton, Hon A.

McNair-Wilson, M. (N'bury)

Hamilton, Michael (Salisbury)

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

Hampson, Dr Keith

McQuarrie, Albert

Hannam,John

Major, John

Haselhurst, Alan

Marland, Paul

Hastings, Stephen

Marlow, Antony

Havers, Rt Hon Sir Michael

Marshall, Michael (Arundel)

Hawksley, Warren

Marten, Rt Hon Neil

Hayhoe, Barney

Mates, Michael

Heddle, John

Mather, Carol

Henderson, Barry

Mawby, Ray

Heseltine, Rt Hon Michael

Mawhinney, Dr Brian

Hicks, Robert

Maxwell-Hyslop, Robin

Higgins, Rt Hon Terence L.

Mayhew, Patrick

Hill, James

Mellor, David

Hogg, Hon Douglas (Gr'th'm)

Meyer, Sir Anthony

Holland, Philip (Carlton)

Miller, Hal (B'grove)

Hooson, Tom

Mills, Iain (Meriden)

Hordern, Peter

Mills, Sir Peter (West Devon)

Howe, Rt Hon Sir Geoffrey

Miscampbell, Norman

Howell, Rt Hon D. (G'ldfd)

Mitchell, David (Basingstoke)

Hunt, David (Wirral)

Moate, Roger

Hunt, John (Ravensbourne)

Monro, Sir Hector

Irvine, Rt Hon Bryant Godman

Montgomery, Fergus

Irving, Charles (Cheltenham)

Moore, John

Jenkin, Rt Hon Patrick

Morgan, Geraint

Jessel, Toby

Morrison, Hon C. (Devizes)

Johnson Smith, Sir Geoffrey

Mudd, David

Jopling, Rt Hon Michael

Murphy, Christopher

Joseph, Rt Hon Sir Keith

Myles, David

Kaberry, Sir Donald

Neale, Gerrard

Kershaw, Sir Anthony

Needham, Richard

Kimball, Sir Marcus

Nelson, Anthony

Kitson, Sir Timothy

Neubert, Michael

Knight, Mrs Jill

Newton, Tony

Knox, David

Nott, Rt Hon Sir John

Lamont, Norman

Oppenheim, Rt Hon Mrs S.

Lang, Ian

Page, John (Harrow, West)

Langford-Holt, Sir John

Page, Richard (SW Herts)

Lawson, Rt Hon Nigel

Parkinson, Rt Hon Cecil

Le Marchant, Spencer

Parris, Matthew

Lester, Jim (Beeston)

Patten, Christopher (Bath)

Lewis, Sir Kenneth (Rutland)

Pattie, Geoffrey

Lloyd, Ian (Havant & W'loo)

Pawsey, James

Lloyd, Peter (Fareham)

Percival, Sir Ian

Loveridge, John

Peyton, Rt Hon John

Luce, Richard

Pink, R. Bonner

Lyell, Nicholas

Pollock, Alexander

McCrindle, Robert

Porter, Barry

924

Prentice, Rt Hon Reg

Stokes, John

Price, Sir David (Eastleigh)

Stradling Thomas, J.

Prior, Rt Hon James

Tapsell, Peter

Proctor, K. Harvey

Taylor, Teddy (S'end E)

Raison, Rt Hon Timothy

Tebbit, Rt Hon Norman

Rathbone, Tim

Temple-Morris, Peter

Rees, Peter (Dover and Deal)

Thomas, Rt Hon Peter

Rees-Davies, W. R.

Thompson, Donald

Renton, Tim

Thorne, Neil (Ilford South)

Rhodes James, Robert

Thornton, Malcolm

Ridley, Hon Nicholas

Townend, John (Bridlington)

Ridsdale, Sir Julian

Townsend, Cyril D, (B'heath)

Rifkind, Malcolm

Trippier, David

Rippon, Rt Hon Geoffrey

van Straubenzee, Sir W.

Roberts, Wyn (Conway)

Vaughan, Dr Gerard

Rossi, Hugh

Viggers, Peter

Rost, Peter

Waddington, David

Royle, Sir Anthony

Wakeham,John

Rumbold, Mrs A. C. R.

Waldegrave, Hon William

Sainsbury, Hon Timothy

Walker, B. (Perth)

St. John-Stevas, Rt Hon N.

Walker-Smith, Rt Hon Sir D.

Scott, Nicholas

Wall, Sir Patrick

Shaw, Giles (Pudsey)

Walters, Dennis

Shaw, Sir Michael (Scarb')

Ward, John

Shelton, William (Streatham)

Warren, Kenneth

Shepherd, Colin (Hereford)

Watson, John

Shepherd, Richard

Wells, Bowen

Shersby, Michael

Wells, John (Maidstone)

Silvester, Fred

Wheeler, John

Sims, Roger

Whitelaw, Rt Hon William

Skeet, T. H. H.

Whitney, Raymond

Smith, Sir Dudley

Wickenden, Keith

Smith, Tim (Beaconsfield)

Wiggin, Jerry

Speed, Keith

Wilkinson, John

Speller, Tony

Williams, D.(Montgomery)

Spence, John

Winterton, Nicholas

Spicer, Michael (S Worcs)

Wolfson, Mark

Sproat, Iain

Young, Sir George (Acton)

Squire, Robin

Younger, Rt Hon George

Stanbrook, Ivor

Stanley, John

Tellers for the Noes:

Steen, Anthony

Mr. Carol Mather and

Stevens, Martin

Mr. Robert Boscawen.

Stewart, Ian (Hitchin)

Question accordingly negatived.
Main Question put and agreed to.
Resolved,
That this House takes note of the White Paper on the Government's Expenditure Plans 1983–84 to 1985–86 (Cmnd. 8789).

PETITION

  Congleton Hospital
  10.10 pm
  Mr. Nicholas Winterton: I have the duty, responsibility and honour to present to this honourable House a petition on behalf of the people of Congleton and district, and also on behalf of the people of Biddulph and district, who object most strongly to the intention of the Macclesfield district health authority to close the maternity unit at the War Memorial hospital in Congleton. The petition is signed by approximately 11,000 people of the districts I have named.
  I wish the House to know that my hon. Friend the Member for Leek (Mr. Knox) fully supports his constituents who are involved in the petition in the stand which they are taking in opposition to the closure of this valuable maternity unit, which is serving one of the fastest growing areas in Cheshire.
  The Merseyside regional health authority said only three years ago that the area covered by the Macclesfield area health authority, as it was then, required 72 maternity beds. Currently we have a mere 52 maternity beds and with the closure of the unit that number will be further reduced to just 41. People in the area feel deeply about it—
  Mr. Speaker: Order. The hon. Gentleman must not make a long speech; he must present his petition.
  Mr. Winterton: I accede to your request, Mr. Speaker, and appreciate the limited scope of presenting a petition in the House.
  I speak on behalf of a large number of people who will be adversely affected by this closure and who wish the district health authority and the Secretary of State for Social Services to review the situation.
  The petition concludes:
  Wherefore your petitioners pray that the House do all in its power to influence the Secretary of State to ensure that the maternity unit at the Congleton War Memorial hospital is retained and that this unit is further developed to serve the expanding local community.
  And your Petitioners as in duty bound will ever pray &c.
  To lie upon the Table.

British Rail (Sleeper Service)
Motion made and Question proposed, That this House do now adjourn.—[Mr. Thompson.]
10.16 pm
Mr. Anthony Steen: We are fortunate to have a Minister to reply to this important debate who is known for his commitment to the cities and with a first-rate track record—if that is the right phrase to use.
The strength of feeling over the withdrawal of sleeper services from the north-west of Britain is well evidenced by the number of people in the public gallery and the number of hon. Members in the House, including my hon. Friend the Member for the Wirral (Mr. Hunt), who is in his usual place on the Front Bench and who has long been a supporter of the sleeper service.
I should also mention early-day motion 126 in my name and that of other hon. Members, including the hon. Member for Liverpool, Scotland Exchange (Mr. Parry) who, unfortunately, is in Strasbourg but would like to be associated with what I say tonight.
My purpose this evening is to expose a cover-up which is aimed at cutting out the overnight sleeper services linking the capital with the entire north-west of Britain. But for the activities of a night mole, with whom I have close contact, hon. Members representing the north-west would have been kept in the dark with no idea of what British Rail was up to. I pay tribute to that night mole for alerting us to the impending danger.
Having confronted the chairman of British Rail with the fact that I knew of his plans to take off the sleepers, it took him two months to get his general manager to meet an all-party group of hon. Members on 10 February. We were promised facts and figures to justify British Rail's decision. That was a month ago, and no facts or figures have been produced. In a random check during the four weeks ending 15 May 1982 it was found that 96 of the 140 first-class berths and 255 of the 358 second-class berths were occupied on the Manchester to Euston sleeper service. So much for British Rail's contention that only Members of Parliament use the sleepers.
British Rail's arguments are that the sleeper coaches currently in use on the north-west line are about to expire and that the traffic on the route does not justify new night-sleeper rolling stock, which cost £250,000 each. Let us suppose that British Rail is right in that the level of business does not justify new sleeper coaches at that price. Why should it not refurbish some of the old coaches from the north-west and the redundant coaches on the Edinburgh and Glasgow routes? The cost would then be between £90,000 and £130,000 a coach and they would look like new.
As British Rail is obliged to find a 7·5 per cent. return on its capital, each coach must earn between £8,000 and £10,000 per year. Is British Rail telling the House that it cannot expect to earn between £8,000 to £10,000 per coach, when the Manchester coach earned more than £2,000 in May? Admittedly the throughput in the northwest has declined over the past three years, but that is as much a result of the appalling rundown in the service by British Rail as of the general problems of the recession. The withdrawal of the service would have been more rapid if it had not been for the remarkable team of stewards who

927
have done their best to keep their side of the service running and have inspired me to raise the matter this evening.
The service will be profitable if the pricing, product and marketing are right. Will the Minister explain why, on a brand new poster at Birkenhead railway station, British Rail has advertised the new sleeper services which the House is told are coming off on 1 May? It does not make sense that British Rail should, on the one hand, take the service off and, on the other, display a new poster.
I do not believe that subsidies are needed for the night sleeper service, but would they be inappropriate bearing in mind that every European network is subsidised by the Government, who recognise that a good transport network is a prerequisite for a buoyant economy?
The north-west is already one of the most heavily subsidised parts of the country. Successive Governments have poured huge sums of public money into the region. The Department of the Environment is spending £150 million in Liverpool this year. British Rail is planning to spend £2 million on a facelift for Liverpool's Lime street station, in addition to £5·4 million to be spent under the urban programme for the same purpose. What is the point of building up the station if the train services are being run down?
It is not just the night trains that have been run down. There is now just one fast train every three hours between London and Liverpool, compared with one fast train every hour last year. The action is similar to that of Liverpool city council, which, rather than repair the 5,000 empty council flats and houses in its possession, insists on building new ones.
I challenge the Minister and British Rail to produce the loadings on all the north west sleeper services from April last year to Christmas—a nine-month period—to produce estimates for rebuilding existing rolling stock, and to project the loads for the next three years. The House should examine them. If the service does not make a profit, perhaps it could break even. If, by chance, the service made a loss in the first year, why should we need to spend £2 million of British Rail's money on a facelift of Lime Street station? What is the point of the Government spending £13 million on an international garden festival in Liverpool in 1984 if the 3 million visitors who are supposed to come from the Continent and who may flood into the city are unable to travel overnight to their destination?
Either British Rail wants a share of the action, or it will increasingly lose out as people take to the road or fly into Speke airport, where private enterprise is increasingly capturing the market. I trust that the Minister will realise the seriousness of the issue and the strength of feeling on both sides of the House and not give us a ministerial answer, which will do little more than buy more time for British Rail.
Several Hon. Members rose—
Mr. Deputy Speaker (Mr. Ernest Armstrong): Order. Hon. Members will want to hear the Minister's reply, which the hon. Gentleman would like to begin at 10.34 pm.
10.24 pm
Mr. Charles R. Morris: I should like to associate myself with the case advanced by the hon. Member for Liverpool, Wavertree (Mr. Steen), and I support the retention of the rail sleeper services. Those who belong to the north-west group of Labour Members of Parliament are concerned about the proposed withdrawal of the Manchester to London sleeper service. Unhappily, that service may have rather unfortunate connotations for the Chancellor of the Exchequer and other Conservative Ministers, who have been known to lose their trousers when using it. Nevertheless, it meets a real community need. Understandably, British Rail is faced with major financial problems, but there is a commitment to provide a service that the community wishes to use. British Rail says that the 7 am train from Manchester arrives in London at 9.30 am. That sounds reasonable, but one must consider the practical problems of getting to the station in Manchester and of attending meetings in London in time.
Mr. Andrew F. Bennett: Is not one of the most illogical factors that the first train from Manchester leaves at 7 o'clock, while the first train to Manchester does not leave until 8 o'clock. Those who want to appear in court in Manchester either have to go up the night before or fly up on the morning of their court cases. More and more people are doing that.
Mr. Morris: My hon. Friend is quite right. It is assumed that one lives near the station in Manchester or that the meeting is being held right next to the station in London. I hope that the Minister will use his good offices with British Rail to convey the intense feelings held on this issue both in Manchester and in the House.
10.27 pm
Mr. Fred Silvester: I also associate myself with the remarks made by my hon. Friend the Member for Liverpool, Wavertree (Mr. Steen). The case has been well put and I shall not elaborate it.
The need for the service varies according to how the service is marketed and its cost, but that utilisation is high, as has been demonstrated. There is a difficulty in assessing one service, and so one must look at the service as a whole when considering the development of a region, and in particular Manchester and Liverpool. If the sleeper service is taken out of that whole a gap will be left that cannot be filled. The options open to business men who often have to deal with the metropolis will be limited. In a highly centralised country, it is an essential part of the quid pro quo that British Rail should ensure that the necessary services for the regions are properly maintained.
10.24 pm
Mr. Albert Booth: At a time when the finest sleeper coaches in the world are being introduced on to the British Rail network, it is proposed that the sleeping car service from Barrow to London and vice versa should be withdrawn. The cost of replacing the old rolling stock on those lines is—we are told by British Rail management—to be regarded as new investment on which a 7 per cent. return must be earned. However, there is no possibility of doing that on provincial lines. If that logic is followed, all provincial lines will stop their services when they need to replace rolling stock. What possible justification can there be for the British taxpayer

929
being required to pay more than £800 million as a public service obligation to British Rail to maintain the post-Beeching network if services are to be withdrawn from that network?
Barrow has been offered, as an alternative, the opportunity of travelling to Preston to catch a sleeper to London—a journey that can be done in 2½ hours on the express train. We must put up with travelling without a sleeper from London to Barrow overnight.
The clear alternative is to offer work to British Rail Engineering Limited, which has a superb capacity to either build or refurbish coaches to the highest standards. I trust that the Minister will tell us that he will intervene to achieve that.
Mr. Steen: Is the right hon. Gentleman aware that on the Glasgow and Edinburgh routes the new sleepers costing £250,000 have been introduced? I am told by my tame mole that many of the sleepers are in first-rate order. They do not need £80,000 or £130,000 spent on them. They may need £50,000 spent on them, but on a 7 per cent. return basis there is no reason why they should not be introduced into the north-west on 1 May. Does the right hon. Gentleman know anything about that?
Mr. Booth: There are coaches available to British Rail that could run without the most expensive of refurbishment programmes. But they should not, in any case, be required to make a 7 per cent. return.
10.31 pm
Mr. Doug Hoyle: I thank the hon. Member for Liverpool, Wavertree (Mr. Steen) for giving us an opportunity to join in the debate. It is important that as many as possible do so to show the strength of feeling throughout the region. The move proposed by British Rail means cutting off a lifeline to the region. It is not unusual for Warrington new town to appear on television urging people to come to Warrington to see developments, but the means of doing so is to be cut off.
I travelled on a sleeper from Manchester on which the local radion station conducted a survey of business people. There were many different types. They all said that it saved them hotel accommodation and that they could have a full day on business in Manchester and return to London the following day.
Mr. Bob Cryer: I intervene only briefly because it is a north-western debate. Does my hon. Friend accept that the problem is being faced by other provincial cities such as Leeds? British Rail is proposing the withdrawal of the Kings Cross-Leeds service, which will affect the Yorkshire and Humberside regions in the same deleterious way that my hon. Friend outlines for his region.
Mr. Hoyle: I accept my hon. Friend's remarks. It is an attack upon the regions. It is a further blow, and it is silly to do it. It does not make financial sense. It is economic nonsense. I hope that the Minister will take the strength of feeling back to British Rail and ask it to think again before it takes a step that will take opportunities from the regions.
10.33 pm
The Under-Secretary of State for Transport (Mr. Reginald Eyre): I listened to my hon. Friend the Member for Liverpool, Wavertree (Mr. Steen) with interest and
930
sympathy, particularly as I am aware of his deep concern for the quality of life in cur great cities. I understand his concern that the withdrawal of the sleeper services between Liverpool and Manchester and London could injure the prospects for the economic recovery of the north-west.
I have noted well the strong interest in the debate, marked by the attendance of so many right hon and hon. Members from the north-west. They include my colleague the Under-Secretary of State for Transport—my hon. Friend the Member for Wallasey (Mrs. Chalker)—and my hon. Friends the Members for Richmond, Yorks (Sir T. Kitson), for Macclesfield (Mr. Winterton), for Wirral (Mr. Hunt) and for Manchester, Withington (Mr. Sill/ester).
I assure the right hon. Member for Manchester, Openshaw (Mr. Morris), my hon. Friend the Member for Withington, the right hon. Member for Barrow-in-Furness (Mr. Booth) and the hon. Member for Warrington (Mr. Hoyle) that I shall certainly draw the attention of British Rail to the points that they have all made so strongly.
I am pleased to be able to tell the House at the outset that the British Railways Board in reconsidering the financial case for retaining these sleeper services and I believe that it will be reaching a decision soon. I am sure it will have regard to the views that have been expressed this evening. I hope it will help the House if I explain some of the background to British Rail's proposals to revise the sleeper services between Euston and the north-west.
Mr. Steen: The Minister should know that hon. Members find the behaviour of British Rail inexcusable. British Rail does not tell Members that it is withdrawing sleepers. I have to learn the fact from the tame mole. I put it to the chairman of British Rail, who took four weeks to reply to the letter. He says that it is true and then takes a further two months to arrange a meeting between northwest Members and his general manager. The general manager promised to return to hon. Members with the facts. He has utterly failed to do so.
Mr. Eyre: I am sorry to hear what my hon. Friend says. I shall draw it to the attention of the British Railways Board.
First, I should explain that, with the exception of the service between Glasgow and Edinburgh and Inverness, all of British Rail's sleeper services form part of the intercity sector. It is common ground between this Government and the previous Labour Government that inter-urban travel should operate without subsidy. It follows that British Rail's inter-city services should pay their own way, and the board has accepted a remit to run them as a profitable business. This commercial remit means that the case for investment in any part of the business, including sleepers, has to be judged according to its financial return.
I should make it clear that decisions on the scheduling of services are a matter for British Rail management. I am sure that right hon. and hon. Members will appreciate that it would be quite wrong, and would serve only to undermine proper managerial responsibility, for the Government to seek to intervene in service scheduling. This must apply to inter-city services as to others. I hope that right hon. and hon. Members will bear both of these points in mind when considering British Rail's proposals for sleeper services.
Hon. Members will know that British Rail is in the process of introducing a new generation of sleeping cars.

931
The previous generation of vehicles was built between 1957 and 1964, with a working life of around 20 years. British Rail had to decide whether it would be worth while to invest in a new generation of sleeping cars to re-equip all the services which were operated by the older generation. It had to bear in mind both the cost of the new vehicles and the likely demand.
On the cost side, it was clear that the new vehicles would be expensive. The new sleeping cars would have to offer standards of comfort comparable to British Rail's latest day coaches and good hotels. They would have to be capable of retaining a high level of custom for another 20 years or more. The new vehicles are based on the mark 3 day coaches with which hon. Members will be familiar from travelling on the diesel high speed trains and on the electrified services out of Euston. They incorporate the latest sound-proofing techniques, airsprung suspension and smooth braking. They are air conditioned, with a separate temperature control in each compartment. Finally, they contain highly sophisticated fire prevention equipment, reflecting all the safety lessons learnt from the investigation of the Taunton sleeper-train fire in 1978, in which 12 people died. The new sleepers are the most technically sophisticated vehicles now in service on British Rail. It is not surprising that they are expensive to build and maintain.
Bearing in mind that there had to be a sound financial case for investing in new sleepers, British Rail had to decide how to deploy them in order to generate the best return. As with any other business decision, the deployment of these vehicles must have regard to demand.
One of the most important factors influencing the demand for sleeper services is the quality of the day services on the same route. The key question is: "Can I travel from home to destination and back reasonably comfortably in a day, and have adequate time for my business, meeting, or whatever it may be, at the far end?" If the answer is yes, people will usually prefer to do the trip in a day, rather than use a sleeper service.
I am glad to say that services have much improved since the last generation of sleeper cars were ordered. Twenty-five years ago, in 1958, in the age of steam, it took about four hours to travel by train between London and Liverpool. The earliest time by which a London business man could be in Liverpool, travelling by day train, was 11.31 am. He would then have only five and a half hours before having to catch the last train home. Today the fastest journey time is two and a half hours instead of four. The earliest day train from London arrives at 10.30 am and there are eight and a half hours before the last train back.
There have been similar improvements in day-time services between Manchester and London. In 1958, the London business man travelling by day train would not arrive in Manchester until 11.34 am, leaving just over six hours to spare before the last train home. Today, he could be in Manchester by 9.45 am, with over nine hours to spare. The Liverpool or Manchester business man travelling to London has benefited in a similar way.
It is hardly surprising that these major improvements in day-time services should have reduced the demand for sleeper services between Manchester and Liverpool and London. I understand from the railways board that, between 1969 and 1981, the number of journeys by sleeper between Liverpool and Euston fell 65 per cent. From
932
20,000 to 6,900 a year, and between Manchester and Euston by a similar percentage, from 21,000 to 7,900 a year. There are no comparable figures for 1982 because of last year's strikes. I should say in passing that most of the journeys are southbound. About twice as many people use sleepers travelling south as travelling north.
In contrast, on the services between London and Scotland, journey times have improved over the last 25 years, but not to the point where a day return trip is feasible—at least for most travellers. On these services the demand for sleepers has remained buoyant.
Over the intermediate distances to Preston and Barrow, the results have also been intermediate, as one might expect. Demand has been more buoyant than on the Liverpool and Manchester services, and less than on those to Glasgow and Edinburgh. But on these services the imbalance between southbound and northbound passengers has been very marked—about 4:1 in favour of southbound.
British Rail must be guided by commercial criteria in deciding on the deployment of the new sleeper cars. The new vehicles are already in operation on the main AngloScottish services. During the summer, the new sleepers will be introduced on the remaining Anglo-Scottish services and the west country services. These long distance sleeper services are the most heavily-trafficked, and the main revenue earners for British Rail. It is natural that they should receive priority in the deployment of the new sleeper cars.
However, I understand that the board is still considering the financial case for introducing the new vehicles on to the less heavily-trafficked services. I know that it is aware of the particular concern of right hon. and hon. Members about the future of the services between London and the north-west. The debate will emphasise that strongly to the board. It is clear that there is still a strong demand for a sleeper service from Barrow and Preston to London, although apparently not as strong in the other direction. The board's decision to retain a southbound sleeper service from Preston, using the new vehicles, and to introduce a linking day train service from Barrow will be welcomed. I note the point about refurbishment, and that will, of course, be considered.
As I said in my opening remarks, the future of the Manchester and Liverpool sleeper services is still under consideration. I should remind the House, once again, that it is for the railways board to take the final decision on whether to retain these services, and that this decision must have regard to the commercial remit laid upon Inter-City.
I cannot judge whether the figures that have been quoted by some right hon. and hon. Members this evening demonstrate a financial case for the services to which they referred. That is a matter for the board, and it would not be right for Ministers to attempt to usurp its commercial judgment. However, I am sure—I repeat this as clearly as possible, because I am conscious of the strength of feeling in the House—that the board will take careful note of the points that have been made by right hon. and hon. Members. I am sure, too, that the board will look carefully at the financial case for retaining the services. That could involve using the older vehicles for as long as it is economic to do so, and using new sleepers if that can be justified commercially. I am grateful to my hon. Friend for raising this matter.
Mr. Steen: Will my hon. Friend say something about the Holyhead service? Does he realise that we are not asking for new sleepers? We are asking that the old sleeper coaches be renovated.
Mr. Eyre: That matter has not been raised specifically in connection with the debate, but I note that my hon. Friend properly raised the matter of Holyhead. I am told that the point that he made about refurbishment and the use of older sleeping cars may be relevant to the case that he has in mind. I am grateful to my hon. Friend for raising
934
that point. I assure him that I shall ask the British Railways Board to consider that aspect of the matter as well very carefully.
Mr. Steen: I am sure that the House is grateful to the Minister for his honest and open approach to the matter. We hope that we shall not have to call him back here again.
Question put and agreed to.
Adjourned accordingly at fourteen minutes to Eleven o' clock.

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

Wages Councils
Lord Boyd-Carpenter: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government how many wages councils are still in existence; and whether they intend to close down any, and if so which.
Lord Lucas of Chilworth: My Lords, there are currently 26 wages councils. There are no plans at present to abolish particular councils. However, each one is kept under scrutiny and we are ready to abolish individual councils when the need for them ceases to exist.
Lord Boyd-Carpenter: My Lords, while thanking my noble friend for that somewhat cryptic reply, may I ask him whether he and the department are aware of the fact that the employment of young persons is made much more difficult by wages councils' orders? Will they have a look at the problem from the angle of the employment of youth with a view to making some helpful improvements to the system?
Lord Lucas of Chilworth: My Lords, indeed we are very well aware that the proposals of some wages councils, particularly some made recently, have had an inhibiting effect on recruitment, particularly of young people, and this is an unhappy situation.
Lord Molloy: My Lords, will the noble Minister, when he is making this examination, bear in mind that the wages councils succeeded the old Trade Halls in 1928? The reason for their establishment was to see that anyone who did not have the cover of a trade union was not exploited. Young people were being ruthlessly exploited.
Does the noble Lord not agree that wages councils do not deliberately break the law of our land and that their fundamental principle is to defend people against such exploitation? Will he please take that into account in any examination that is made which might result in their abolition?
Lord Lucas of Chilworth: Indeed my Lords, that was so at that time. But other and better wage negotiating procedures have been adopted, and as and when these come into full being throughout the remaining 26 councils the need for those councils will no longer exist.
Lord Rochester: My Lords, is the noble Lord aware that a body as influential and impartial as the Institute of Personnel Management, which has wide knowledge and practical experience in these matters, has, as I understand it, expressed grave reservations about the
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possibility of any drastic action in relation to the wages councils?
Lord Lucas of Chilworth: No, my Lords, I was not aware that that institute had expressed that view. Perhaps the contrary view should also obtain—that of the employers.
Lord Blyton: My Lords, will the Minister take care when abolishing the wages councils that it does not take us back to the days that we knew before they existed—the days of sweated labour and the exploitation of young people?
Lord Lucas of Chilworth: My Lords, I note what the noble Lord, Lord Blyton, says, but in my original Answer I said that Her Majesty's Government have no plans at present to abolish particular councils.
Lord Drumalbyn: My Lords, can my noble friend say how many wages councils, if any, have been abolished in the past 10 years?
Lord Lucas of Chilworth: Yes, my Lords. About 10 in the last 10 years.
Lord Boyd-Carpenter: My Lords, will my noble friend not be misled by the extreme conservatism of the noble Lord, Lord Molloy, and realise that things have changed since 1928?
Lord Lucas of Chilworth: Indeed, my Lords; I thank my noble friend for that intervention. To put it properly into perspective, I think that perhaps I should say that the remaining 26 councils in fact look after the wages interests of only 2¾ million people.
Lord Molloy: My Lords, will the noble Lord also bear in mind that the creation of wages councils was to stop ruthless exploitation of our fellow citizens by extreme Conservatives?
Lord Lucas of Chilworth: My Lords, that may have obtained at that time, but I hardly think that ruthless exploitation obtains today.

South Yorkshire County Council:Civil Defence
2.40 p.m.
The Earl of Kimberley: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether the South Yorkshire County Council is in breach of existing regulations by stopping the emergency planning officer drawing up nuclear war plans in January 1982.
The Parliamentary Under-Secretary of State, Home Office (Lord Elton): My Lords, the South Yorkshire County Council has passed a resolution which includes continued compliance with the Civil Defence (Planning) Regulations 1974.
The Earl of Kimberley: My Lords, I thank my noble friend for that Answer. Can he tell me when the new civil defence legislation will come into being? Will he also give an assurance that councils will comply with the new regulations, or that the Government will do all they can to make them comply with them?
Lord Elton: My Lords, the Government propose to introduce new civil defence regulations imposing additional duties on local authorities shortly. These include the training and exercising of staff and volunteers, and the provision of emergency control centres. They also strengthen planning requirements. We shall certainly do everything necessary to see that this law is observed.
Lord Bishopston: My Lords, when framing the new regulations, will the Minister take into account the recent observations of the British Medical Association and have some regard to whether they might be a factor in the reluctance of many authorities to go ahead with civil defence or other planning? Can the Minister reply to the BMA's observations in order to give some assurance on these matters?
Lord Elton: My Lords, I think that my duty is to reply to the noble Lord rather than to the BMA. I can say that the Government will take account of all relevant factors and all opinions given by qualified people—people qualified to give opinion on the circumstances on which they are consulted, and not on others.

South Africa and Sport
2.43 p.m.
The Marquess of Donegall: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will encourage the MCC and governing bodies of other sports to re-establish normal relations with their opposite numbers in South Africa.
The Minister of State, Department of the Environment (Lord Bellwin): No, my Lords, this would be contrary to the 1977 Commonwealth Statement on Apartheid in Sport.
The Marquess of Donegall: My Lords, I thank my noble friend for that reply. Arising out of it, may I ask him if he would foresee any modification in this policy in the event of the governing bodies concerned adopting a policy of full multiracialism in sport? Would he accept that sporting contests resumed on those terms would be of great benefit to all nations in South Africa, especially the coloured ones?
Lord Bellwin: My Lords, Government policy is in line with the Gleneagles agreement—the 1977 Commonwealth Statement. It was agreed upon by Commonwealth Prime Ministers, and indeed only they can amend or revoke it. As recently as 11th November last in another place the Prime Minister
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reaffirmed the Government's commitment to it. If those same Ministers should themselves modify that agreement, that would be another matter and the Government would watch such modification with much interest.
Lord St. John of Bletso: My Lords, is it not the case that the original motivation for boycotting South African sport was that sport was structured on racial gounds and that the Government policy prevented integration in sport? Is the noble Lord the Minister aware that sport in South Africa is now fully autonomous? I say that from the point of view that I have spent the last seven years in South Africa and have experienced considerable change in sporting policy. Finally, does it not appear that the implementation of the so-called Gleneagles agreement and the extensive blacklisting of sportswomen and sportsmen has now been taken to ridiculous extremes?
Lord Bellwin: My Lords, I hear what the noble Lord says and I am sure that the House welcomes any move in that direction. But I think it would also be proper for me to say that in so far as the noble Lord refers to the blacklist, of course the Government cannot and will not support any instrument that requires us to control the free movement of our sportsmen.
Lord Wakefield of Kendal: My Lords, is the Minister aware that in so far as rugby union football is concerned normal relations have always continued with South Africa, to the great advantage of all races in South Africa and in other parts of the world?
Lord Bellwin: My Lords, I hear what my noble friend says. I used to say that that phrase, which I learnt on arriving in your Lordships' House, usually meant that that was the end of that. In fact I hasten to assure my noble friend that so far as this Question is concerned, that is not the end of that. I hear what he says with much interest, as I am sure do many other Members of your Lordships' House.
Lord Gisborough: My Lords, would my noble friend agree that during the last 10 years there have been very considerable relaxations, not only in sport, of the restrictive laws of South Africa and that if we continue not to recognise that progress—indeed, just add further insults and demands—it will become increasingly difficult for the South African Government to persuade their electorate that any further relaxations are worth while carrying on with?
Lord Bellwin: My Lords, it is good to hear of relaxations of the type to which my noble friend refers. I think it is fair to say that there is evidence to suggest that this is taking place. It will be welcomed by everyone. If it eventually reaches the point where it is acceptable to the Commonwealth and other Prime Ministers, it will have the desired effect that I think all your Lordships would want it to have.
Lord Cledwyn of Penrhos: My Lords, is the noble Lord aware that we on this side of the House warmly support his statement, namely, that the Government adhere strongly to the terms of the Gleneagles agreement, and that we are obdurately opposed to the

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odious policy of apartheid and everything that it stands for, and especially the use of sport to promote it?
Lord Bellwin: My Lords, I am not sure that I score lots of points on my own side by taking that point of view, but I think it is equally proper to understand that there is real concern and a genuine feeling by many of your Lordships, not least many of my noble friends, that if there were indeed to be closer activity on a multiracial basis it would contribute a great deal towards improving the whole of the climate. That is a view very strongly held by many of my noble friends, with which I know many of your Lordships on the opposite side would agree. The point here, I think, is that the Government stand by the agreement. I think that we have to act in accord with those in the Commonwealth, and that is what we are doing.
Lord Avebury: My Lords, is the Minister aware that the questions that have been put to him this afternoon are ample evidence of the effectiveness of the racist South African régimes propaganda, based on minor cosmetic changes in the field of sport and that the last thing that the Commonwealth nations which adhere to the Gleneagles agreement should do is to relax the pressure at a time when more is needed to be done by the Western democracies to dismantle the very fabric of apartheid?
Lord Bellwin: My Lords, just as I said to my noble friends, I understand what the noble Lord is saying. He states a point of view which may or may not be right. I think that there are others who would say that the point of view which they espouse, namely, a greater integration and coming together, might also contribute towards the end objective which I know the noble Lord, Lord Avebury, wants to see.
Lord Beswick: My Lords, can I get the noble Lord to agree that the normal relations to which the noble Lord, Lord Wakefield, has referred do not seem to have been particularly successful as far as the recent results of the English team are concerned?
Lord Bellwin: My Lords, my noble friend Lord Wakefield would probably concur with that view.
Lord Hatch of Lusby: My Lords, is the noble Lord aware that over 30 years ago I was accustomed to playing both tennis and rugby union with coloured and African players in South Africa; that within a few years that was illegal; and that the only way in which that situation has been changed has been by the efforts of those of us, including those within the rugby union world, who have deliberately boycotted South Africa? Is he further aware that the cosmetic changes which have been made so far have never removed the basic principle of apartheid—that a person, whether in sport or in social life, is judged according to the accidental colour of his skin and not according to his prowess in the sport?
Lord Bellwin: My Lords, I think that we are now moving very wide of the Question.

Theatres: Arts Council Grants
2.51 p.m.
Baroness Trumpington: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what was the total grant made by the Arts Council to theatres in the last year for which figures are available; and how much of this went to theatres outside London.
The Parliamentary Under-Secretary of State, Department of Energy (The Earl of Avon): My Lords, the Arts Council estimate that their direct grants to theatres in Great Britain, including the national theatre companies, in 1982–83 will total just under £26·3 million, of which almost £16·1 million will be available to theatres outside London. In addition, grants of about £1·8 million will be given by regional arts associations, mainly from funds provided by the Arts Council.
Baroness Trumpington: My Lords, I thank my noble friend for that very encouraging Answer. Does he agree that the importance of the living theatre to this country is very great? Is he aware that, for example, the Arts Theatre in Cambridge can only be sure of making a profit when it does Gilbert and Sullivan or Agatha Christie? Does he not agree that this is not a very encouraging situation for new playwrights who should be encouraged? Therefore, one supports this amount of grant.
The Earl of Avon: My Lords, I am interested in the double which Cambridge has done of Gilbert and Sullivan and Agatha Christie. So far as the playwrights are concerned, of course the Arts Council does indeed support new playwrights when it can.
Lord Strabolgi: My Lords, is the noble Earl aware that the belated decision of the Royal Opera House of Covent Garden to perform in Manchester next September is to be warmly welcomed? Will he suggest to the Arts Council that they should do all that they can to encourage London-based companies to perform in other cities in the United Kingdom?
The Earl of Avon: My Lords, I echo the gratitude of the noble Lord, Lord Strabolgi, that the Royal Opera House Company is going to Manchester. Of course, a large part of the sums paid out are in fact for touring.
Lord Alport: My Lords, while those who are concerned with the provincial theatres are very grateful to the Arts Council for the support which has been given over many years, is my noble friend aware that, owing to the prohibitive cost of going to the theatre in London for many of those who live outside the capital, the provincial theatre is becoming increasingly the important centre for dramatic art for the whole of this country? Is he aware that those who are concerned with it would welcome very greatly any change in the taxation policy of Her Majesty's Government at the next Budget which would enable

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the removal of the unfair incidence of VAT on tickets and, therefore, enable the theatres to recoup what they really deserve to recoup from the attendance which they encourage at these theatres?
The Earl of Avon: My Lords, I support virtually everything that my noble friend says until he comes to the question of taxation, which is a matter for my right honourable friend in another place.
The Earl of Lauderdale: My Lords, can my noble friend say what proportion of the help which he has talked about goes to Scotland?
The Earl of Avon: My Lords, as this Question was originally put down by my noble friend Lady Elliot of Harwood I have the figure handy; in 1981–82 it was £2,105,289.
Lord Glenamara: My Lords, is the noble Earl aware that a great many people agree with the noble Baroness, Lady Trumpington, that far too much goes to one or two so-called national bodies in London which are patronised mainly by rich people living in London and the Home Counties and by companies purchasing blocks of seats, and far too little goes to the struggling provincial theatres? Is the noble Lord aware that the Arts Council, by this policy, is unwittingly contributing to the "two nations" which the Government's economic policy is creating? Will he look at this imbalance in the distribution of Arts Council funds?
The Earl of Avon: My Lords, I do not agree with the noble Lord. The Arts Council takes a great deal of trouble to make sure that its money is spent across the board, and when supporting even the large national companies in London we must bear in mind that the National Theatre Company itself has a widely drawn audience from all walks of life and helps a great deal to make the "one nation" policy to which we all look forward.
Lord Elwyn-Jones: My Lords, the noble Earl has been good enough to give the figure for support for theatres in Scotland. The House will be amazed to learn that I would like a similar figure for the Welsh National Opera Company and the Welsh National Theatre.
The Earl of Avon: My Lords, the figure for Scotland which I gave to my noble friend was for the year 1981–82. The figure for the same year for Wales was £1,512,722.
Lord Davies of Leek: My Lords, is the noble Earl aware that, while we welcome the Question on the theatre and also welcome the Answer, there is no doubt, as has already been pointed out, that provincial theatres must be kept alive? Secondly, from the philosphical point of view, the Church and the theatre have played a great part in the history of this country. All changes—social, political, moral and so on—throughout history have had the theatre and the Church behind them. To neglect the theatre would be wrong. Consequently, I welcome this increase in attention and I hope it will be given to the provincial areas.
The Earl of Avon: My Lords, I am grateful to the noble Lord for his remarks. I should perhaps draw your Lordship's attention to the quite considerable number of subsidised plays which are brought up from the provincial theatres to London. I have in mind the Nuffield Southampton Theatre which had a play called "Nuts", which was transferred to the Whitehall Theatre.

Social and Economic Policies
2.57 p.m.
Lord Wells-Pestell Lord Wells-Pestell rose to move, That this House deplores the consequences of the Governments's social and economic policies on an ever-increasing number of our citizens and calls upon Her Majesty's Government to initiate urgently steps to invigorate the economy and alleviate the hardships so widely suffered.
The noble Lord said: My Lords, this is the third or fourth time since May 1979 that I have initiated a debate on the effect of the Government's policies on the lives of ordinary people. I want to emphasise that this debate, so far as I am concerned, deals with the under-privileged, the less fortunate and what I term the ordinary people. It is perhaps appropriate that we should be considering this matter this afternoon because there is a possibility that in the not too distant future there will be a general election, and in my view it is of supreme importance that we concern ourselves with the lives of ordinary people and how Government policies affect them.
I shall try to be as agreeable as possible, but let me say that it will be extraordinarily difficult because I feel that certain things need to be said and have got to be said, and I propose to say them. I shall try not to do it with any sense of maliciousness because I realise that a simple comment can sometimes arouse people when it is never intended to do so. I and my friends—and I talk about my friends in the Labour Party; I do not know whether I can include my friends in the Liberal Party, but I would hope that I could do so—are of the opinion that this Government have been a disaster to the majority of people in this country and that the Prime Minister has shown a callous indifference and lack of understanding to the needs of ordinary people.
I find the task that I have set myself daunting because I am conscious—your Lordships may think that it is imagination—of the great divide that exists between our outlook on this side of the House and the outlook of noble Lords opposite. I am not saying that they are wrong, but I believe they are. Many, if not most, noble Lords opposite have very little in common with the people about whom I want to talk. One cannot be a Member of your Lordships' House, as I have been for some 18 or 19 years now, without having a deep regard (and I say this very sincerely) for many noble Lords opposite and for whom, if I may go so far as to say so, I have a very real affection.
But it does not alter the fact that in my view the philosophy of outlook of noble Lords opposite and the philosophy of our outlook on this side are really poles apart. I think it is necessary that one must have some close experience of deprived people—people who are living on the edge of poverty—before one can really

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begin to understand the nature of their everyday life. When I said this not so very long ago, the noble Lord, Lord Boyd-Carpenter, quite rightly, took me to task. He said, "But some of us have been Members of the House of Commons; we have had constituencies and there has been a poor element". Perhaps there are not many poor sections in the average Conservative-held constituency. In the vast majority of cases the members of committees doing all sorts of things—and I meet them in your Lordships' House—are not brought in touch with the actual people: they are committees.
Baroness Trumpington: Rubbish!
Lord Wells-Pestell: My Lords, the noble Baroness may say "Rubbish"; I heard her say so—I have good hearing, so do be careful. It may be rubbish, but I did say the "vast majority" of people. I, too, have sat on committees—any number of them—and committees do not always involve a home visit. I am saying that, by and large, a large number of Members on the other side of the House do not appreciate the level or, if you like, the depth at which some people live.
In May 1979 the Prime Minister promised to unite the nation, but I believe that statistics and experience have shown people that we are in fact, more divided in this country today than we have ever been. Let us make no mistake about it, we are two nations: one which has too much and the other which has too little. On the doorstep of No. 10 in 1979 the Prime Minister led us to believe that she was a disciple of St. Francis of Assisi with her plea that:
"Where there is discord, may we bring harmony; where there is doubt, may we bring faith; where there is despair, may we bring hope."
Deeds speak much louder than words and, having regard to the fact that there is a great deal more discord, a great deal more doubt and a great deal more despair, that rather suggests that the Prime Minister has ceased to be a disciple of St. Francis and, I am almost tempted to say, has become the devil's disciple.
Almost the first, if not the first, action of the present Government in May or June 1979 was to reduce taxation. What did they do? The Chancellor of the Exchequer gave away £4,500 million in such a way that the poorest 10 per cent. of taxpayers in this country received 2 per cent. of that £4.5 billion while the richest 7 per cent. received no less than 34 per cent. of the £4,500 million. Is this the way in which a nation, or those acting for the nation, should distribute money if they are to reduce taxation by giving some of it back?
Since that time the Government's treatment of social security benefits has been deplorable. I want to quote from a debate in your Lordships' House on Wednesday, 24th November 1982, which was initiated by the noble Lord, Lord Banks. At column 893, when talking about social security benefits, he said:
"Those cuts have cut £1.5 billion from the social security budget each year"—
not just one year, but each year. The noble Lord went on to draw your Lordships' attention to a report entitled Despite the Welfare State 1982—a report of a big DHSS-sponsored research project. It said this:
"It is impossible to resist a reiteration of the general conclusion from much of the work, that benefit rates, particularly of supple-
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mentary benefit and child benefit, are simply too low at present for some families to avoid real hardship and damaging consequences to the health and other life chances of their children."
The Government's answer to that was an answer which had been made some time before. I gave notice to the noble Lord, Lord Trefgarne—I was going to say "my noble friend", because he is—who in the same debate in a sentence gave roughly the Government's attitude:
"We are determined to maintain the living standards of those most in need, but within a strategy to improve the prosperity of our economy as a whole".
That was another way of saying that it does not matter what your income is, it does not matter what your position in society is, it does not matter what you have or what you do not have, you still have to contribute by way of taxation, or in some other way, to the income of the country.
It has been said time and time again by the Front Bench opposite that we cannot exclude any individual; that everybody has to be prepared to take his cut. We on this side say that that may be all right in principle, but it depends entirely on whether one is in a position to do so—whether one is already living either on the poverty line or below the poverty line, and whether in fact one can do it. Noble Lords will forgive me if I remind them that supplementary benefit is regarded as the Government's official poverty line, so people on supplementary benefit are being maintained on the poverty line. A short time ago, those people reached a record number of six and a half million, which is something like a 44 per cent. increase in the last four years.
A report published by Church Action on Poverty states that the number of poor children has increased by 90 per cent. under the present Government and that more than 9 million people are now probably living below the official poverty line. The disgraceful thing that we are going to witness in the next few weeks is a give-away Budget by a Chancellor who wants to prepare the minds of the people of this country for a general election. People have been, I was going to say almost starved, if I can use the word "starved" in inverted commas, of benefits which they have needed in order to build up some kind of surplus so that the Chancellor of the Exchequer can go to the people just before a general election and say, "Look what we have been able to do"—and, for a few, life will seem brighter. There is not a more dishonest action than that.
I want to say a word or two about the unemployed. It is difficult to know what the figures are. I think the official figure is 3,377,000, but there is every reason to believe that the figure is much nearer 4 million or more. If I am asked on what I base that, I base it on a number of things I have read which are far too numerous to quote to your Lordships. I am glad some noble Lords opposite find it amusing. I wish I did. The point is that a large number of unemployed, after they have had their unemployment benefit for 12 months, are cut off, and they do not bother to go to the labour exchange. We just do not know how many of the unemployed who are not receiving unemployment benefit today in point of fact no longer sign on. But what we do know is that is runs into something like six figures.

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I wonder whether any of us here can visualise what it is like to be unemployed: to no longer be the breadwinner, and to have to depend on a handout each week. Your children cannot have the things they need. If they are going to school and are playing cricket or football, you cannot afford to buy them the jerseys, and so they are distinguished from the other children. It is very difficult for those of us who have never been unemployed to understand the impact of unemployment—and it is not just on the husband. He probably gets out of it much more lightly than his wife. What we know from medical evidence is that a large number of unemployed men have suddenly gone down with heart trouble and various other forms of heart disease which the medical profession attribute to unemployment. Of course, what do we find? We find that there are all sorts of other problems stemming from it.
The cut in unemployment benefit was the wickedest action that any Government could take. It surprised me that when the matter came before your Lordships' House, as when the Social Security (No. 1) Bill came before us and the Social Security (No. 2) Bill came before us, and when the question of the 5 per cent. cut in unemployment benefit, the unkindest cut of all, came before us, there was only one noble Lord opposite, if my memory serves me correctly, who spoke against it and, I think I am right in saying, who voted against it. I am glad to see him in the Chamber, albeit that he is on the wrong side. What sort of people are we when we can support a measure of that kind?
I was looking at the annual report of the Supplementary Benefits Commission, which says:
"There is ample evidence that unemployed families with children are more seriously affected by poverty than others living at, or close to, supplementary benefit levels."
I wonder how many of us would like to keep a wife and two children on £59.20 a week—plus, I accept of course, an allowance for rent and rates? After rent and rates have been met, they have £59.20 a week for a husband, wife and two children. Dare I suggest that certain noble Lords in this House sometimes spend that on a dinner at night? Not in your Lordships' House, I agree; but in the big hotels, where you have to book a table—it does not matter where you go—they are not cheap, as I learned from the paper last week. You can spend £45. My Lords, it is immoral. If you do that sort of thing, then you ought not to be supporting cuts in social benefits.
I want finally to say something about the effects on the social services, which are unable to cope with the increasing demands for advice, help and assistance. I was going to read a statement made by the head of the Association of Directors of Social Services, but it is a long one and so I shall refrain other than to say that the report says:
"Spending cuts in Britain's social services have almost stopped, according to the latest annual survey of the Association of Directors of Social Services, which represents 104 directors in England and Wales. But dramatic increases in demand for help from the poor, unemployed, elderly and handicapped mean that spending needs to rise by between 4 and 6 per cent. a year to prevent reductions in standards of service."
The head of the ADSS goes on to say:
"Some of the standards of care that we are able to offer are well below those which a rich civilised society should tolerate."
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We all know—it is a statistical fact—that there has been a serious increase in child abuse and in homelessness. Local authorities have been given to understand that they have to face the shedding of 28,000 social workers in the financial year, with Government cutbacks dramatically reducing the services. What is going to happen to the elderly and the disabled? Many of these local authority social service cuts will affect the elderly and the disabled, and they are really the people who should not only be engaging our attention but expecting us to do something for them.
I do not deny that, as a country, we have been through a difficult patch. But let us be quite honest about this—and noble Lords know that what I am going to say is true. There are a large number of people in this country who have not been affected, or, if they have been affected, they have been affected in such a way that what they have lost they do not miss. But if you are one of the 9 million on the poverty line, one of the 6.5 million on supplementary benefit, and somebody reduces your income by even only 20p, 30p or 40p a week, you know all about it.
People today have every right to work, and if, for whatever reason, that is not possible, they have a right from you and from me, from people who are legislating on their behalf, to have a fair standard of living, even if it means that those of us in the community who are much better placed financially have ourselves to suffer a reduction in our own standard of living. I beg to move.
Moved, that this House deplores the consequences of the Government's social and economic policies on an ever-increasing number of our citizens and calls upon Her Majesty's Government to initiate urgently steps to invigorate the economy and alleviate the hardships so widely suffered. [Lord Wells-Pestell.]
3.20 p.m.
The Secretary of State for Trade (Lord Cockfield): My Lords, as we all know, the noble Lord, Lord Wells-Pestell, is a man of deep feelings who speaks with sincerity and conviction. Nobody would remotely accuse him of maliciousness, if I may refer to what he said at the beginning of his speech. But I would put the point to him that sincerity and conviction are not in themselves sufficient. One needs also to diagnose the situation correctly and prescribe the right remedy. That is where I part company with him. There is nothing easier than to point to the existence side by side of two phenomena, but it does not follow that one flows from the other. The reverse may be the case. Or there may be no connection between the two at all. Government policy does not create the maladies identified by the noble Lord. On the contrary, Government policy offers the only way of curing those ills.
Let me start with the Government's record in the social services. My noble friend Lord Trefgarne will be dealing with these matters in detail when he comes to wind up. In the meantime I will make a few simple points. On health, our expenditure this coming year will increase by 1½ per cent. in real terms. Since we came to office, health service provision has already increased by 7½ per cent.—again, in real terms. We

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have devoted more of the nation's resources to health than any previous Government. On the personal social services, expenditure has increased by 9 per cent. in real terms since we came to office. On education, we are spending more in our schools in real terms per head than at any time in our history.
On pensions, we promised that we would maintain the real value of pensions over the lifetime of this Parliament. That we have done. On training and special employment measures, this year we shall spend £1½ billion on special employment and training measures. Next year we shall spend £2 billion. Over the next three years we shall spend £4 billion to bring training arrangements up-to-date. Despite the great economic difficulties the country has had to face, we have made provision for the money needed to meet all of these commitments.
I will refer briefly to what the noble Lord said about taxation. He was talking about massive reductions in taxation. I only wish there had been. In fact, since 1979 the proportion of our national income which goes in taxation has increased, not diminished. I wish it were otherwise. In fact, we have taken more money in taxation, not less. I am not in any way trying to forecast what my right honourable friend the Chancellor of the Exchequer proposes to do next week, but if we take a longer-term view, this country would have been better off if the Government had taken less money in taxation, not more. We should have a more prosperous economy if the Government had taken less money in taxation, not more. Quite apart from that, the noble Lord starts from what in effect is a completely false premise. He speaks as though it were the Government's money which Chancellors of the Exchequer were giving away. It is nothing of the sort; it is the citizen's money which the Government are taking from the citizen, and there should be, and there must be, a limit on the extent to which the Government can plunge their hands in the citizens' pockets.
I return to the main theme of the noble Lord's speech. Compassion is of no avail unless you have the means to give effect to it. We have to earn our living. As a nation, we have to pay our way in the world.
"If any would not work, neither should he eat"
is no longer true of the individual. It has ceased to be true for a long time. But it is certainly true of the nation. In some of my earlier exchanges with the noble Lord, Lord Kaldor, who I am pleased to see is in his place, he pointed out—as indeed is the case—that there were many advanced countries where Government expenditure as a proportion of national income was as high as, or even higher than, it is in this country. That is true, but they are, for the most part, countries which are wealthier than we are. The more people have, the greater the margin there is to spend on the social services and the manifold services the nation provides. The tragedy of our nation is that over many years we have failed to produce in the abundance which other countries have achieved. We still harbour our ambitions, our sense of compassion, but we have lost the means fully to indulge them.
Since we came to office, there has been a single golden thread running through all our policies: we must lead the nation forward, not allow it to sink
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steadily into decline. No one who looks back now over the history of the 'sixties and 'seventies could doubt the reality of our economic misfortunes: increasing inflation, rising unemployment, sluggish output, deteriorating labour relations and the growth of militant trade unionism. It would have been hard enough to reverse these trends in times of prosperity, when material growth would have permitted change without undue hardship. But the blizzard struck shortly after we came to office; the worst recession since the 1930s, the worst in most people's lifetime. It was not just our recession but the world's recession. Not even in a sense was it our own fault.
It was a recession sparked off by a massive increase in oil prices, itself the result of the revolution in Iran. It was a recession fed by a failure of the industrial world as a whole to react promptly and appropriately to the new situation. In our own case the position was made worse by a long tradition of wage inflation. The sheer stupidity of the wage explosion of 1979–80 passes comprehension. The bitter harvest of that folly has been reaped in unemployment and deepening recession.
But slowly the lesson has been learned. Working people realise—even if their leaders do not—that excessive pay increases lead to loss of jobs. It gives me no satisfaction to remind your Lordships that I have been saying just that ever since we came to office. But by steadfast adherence to firm fiscal and monetary policies we have brought inflation down to its lowest level for 13 years, to 4.9 per cent. compared with 10.3 per cent. when we came to office. Inflation is the corruption of society, the enemy of economic progress. Now that we have the rate of inflation well down, we must not relax our efforts. We are now better than the OECD average; better than the average for the Economic Community. But the United States, Western Germany, and Japan are still doing better than we are. Therefore we cannot relax. There are uncertainties ahead. Some influences are favourable—the fall in the price of oil, and lower commodity prices. Others are unfavourable—higher import costs, due to the fall in the value of sterling. But we must not allow any temporary setback, should one occur, to deflect us from our path.
One needs a responsible monetary policy if inflation is to be curbed and reduced. One needs a responsible fiscal policy to avoid undue pressure on monetary policy and to hold down interest rates. One needs moderation in pay settlements to avoid excessive pressure falling on monetary and fiscal policy alike. All the three are linked together. They support one another; but, equally, weakness in one undermines the other. Therefore the art of successful economic management lies in getting all three factors moving in the right direction. If we can achieve that, we can get results without creating excessive pressures on any point of policy.
This—if I may make the point to my noble friend Lord Soames, who raised the matter in the debate on the Unstarred Question of the noble Lord, Lord Lever of Manchester—is the explanation of the apparent change (or perhaps "development" would be the better term) in American monetary policy. In fact what the Americans are doing is simply refining their

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techniques and recognising that changes in some of the relationships have occurred, in much the same way as we have recognised these changes in this country. There is no fundamental change in policy. It is simply a question of operating the policy more efficiently.
The main factors in the economy are now nearly all moving in the right direction: inflation down, interest rates down, pay settlements down, a big increase in productivity, and—helped by a lower exchange rate—improved international competitiveness. The exception is unemployment, which remains obstinately high. Movements in employment always lag behind movements in economic activity. We shall see a fall in unemployment only when we achieve a substantial rise in output. That is why we put so much emphasis on creating a sound basis on which that rise in output can occur. There are signs of it beginning. But to that point I shall return in a moment.
Just now I wish to comment on Britain's trade performance, partly because it is my own Ministerial responsibility—I am going to give the noble Lord, Lord Bruce of Donington, some good news in a moment; I hope that it does not upset him too much; I am going to comment on our trade performance—but primarily because of its importance in relation to output and employment. Last year the trade of the world as a whole fell by 2 per centage points in volume. Britain's exports, in real terms—that is, in volume—rose by 2 per cent. Now 2 per cent. may not sound very much, but against a background where the trade of the world as a whole was falling it is a considerable achievement, and it is one in which management and workers in the industries and the companies concerned can take justifiable pride. Nor—as it is so often claimed—is it "all oil". Last year our exports of manufactures also increased in real terms. We exported £2½ billion-worth of manufactured goods more than we imported.
There has been some comment about the poor January trade figures. I have always stressed that figures for individual months can be erratic and unrepresentative, and that too much weight should not be put on one month's figures looked at in isolation. That is why in speaking about last year's figures I took the year as a whole. In order to put January's results into perspective, if we take the three months ended in January, instead of the one month alone, we find that our exports showed an increase of 2 per cent. in real terms—in volume, that is—compared with the corresponding figures for the same period in the previous year. If one makes a comparison between the three months ended January and the immediately preceeding three months, one sees that the increase in volume is no less than 3½ per cent. I hope that looked at in that way it will dispose of the gloom associated with the January figures.
The prospects for 1983 are, by fairly universal consent, better than those for 1982. World trade is expected to increase, compared with the fall last year. The recovery of the United States economy will provide a powerful boost. There are, of course, great difficulties. The enormous debt burden carried by the developing world poses great problems. But so far, with active support from the IMF and other international agencies, the problems have been
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contained. With the lower exchange rate, increased competitiveness and better delivery, we should do significantly better in 1983 than we did in 1982. If we do, it will make a notable contribution to our recovery for the country as a whole.
It is vital, therefore, that we should spare no effort in fostering our export trade. Our exporters are well aware of this. We give them every support through the British Overseas Trade Board, through the commercial departments in our embassies abroad, through the Export Credits Guarantee Department and, where appropriate, by linking aid with trade.
I now wish to turn to the general prospects for recovery in 1983, looking at the economy as a whole. There was a false dawn in 1981. It was aborted by the steep rise in American interest rates in the autumn of that year. One is cautious, therefore, in forecasting recovery in 1983. But the break in oil prices is, I believe, of great significance. Just as the rise in oil prices ushered in the recession, the fall should usher in the recovery.
There are many other favourable signs, too. Expectations of a recovery in the United States have been revised sharply upwards. The leading indicators in January rose quite exceptionally. As a result, by the end of this year growth in the United States is expected to be running at a rate of about 5 per cent. per annum, and, taking the last quarter of 1983 as against the last quarter of 1982, that compares with earlier estimates of about half that figure. If one takes the year on year increase—that is, 1983 compared with 1982—one finds that in the United States the expectation is now an increase of about 2½ per cent. In this country total output has increased by some 1½ per cent. since the spring of 1981, with industrial output showing an increase of 2 per cent.
There are signs that output is beginning to pick up in some sectors—including some in manufacture. Housing starts and new construction work both show an increase. The long decline in profitability is slowly coming to an end. This is good news for both jobs and investment. The February CBI survey published last week shows improved manufacturing order books, improved export order books, greater business confidence and greater optimism about export prospects. My right honourable friend the Chancellor of the Exchequer will be dealing with the prospects for 1983 in some detail when he opens his Budget next week.
Inevitably the question is: what happens when the recession ends and recovery comes? The parties opposite, in greater or less degree, believe that we shall slip back into the old ways—excessive wage claims and inflation thus leading to a further round of falling output and unemployment. The remedies they propose are essentially the same—controls on pay, on prices, on imports, devaluation of the currency, exchange controls, and so on ad infinitum. The details, the mixture, differ from one party to another, from one faction in each party to another, but the essence of the proposals that emerge from the parties opposite are the same—more controls, more Government intervention. The noble Lord, Lord Wells-Pestell, talks about a divide. This is the ultimate divide between the parties, between us on this side and those who support us, and those who support the parties opposite.

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It is not unnatural that in times of difficulty even people of goodwill should turn to the state as a protective mother figure. But this is a delusion; this is fantasy. The state is not a ministering angel; it is neither God nor Devil. It simply consists of a few hundred or, if you like, a few thousand politicians and officials. Why should these people be the repository of all wisdom? Why should they have the capacity—let alone the ability—to take the millions of judgments, decisions and actions which day by day constitute the fabric of our society, the stuff of our economy?
We believe that these millions of decisions ought to be taken by the people themselves. We believe that the people doing the job are best equipped to take the decisions and that they will be better decisions if they are taken by the people who are responsible, the people who reap the benefit of success and pay the penalty of failure. They will be much better decisions than if they are taken by politicians, by officials, or by trade union leaders. All the experience of this country and of other countries underlines this time and time again. Where is the wealth of the world produced? Overwhelmingly it is produced by those countries—the United States, West Germany and the countries of Western Europe—where Government intervention is at a minimum. Where in the industrial world is wealth conspicuously not produced? It is in those countries like Russia and Eastern Europe where government intervention is maximised.
We see it in our own country. It is in the private sector, where decisions are devolved to millions of individuals, that the wealth of the country is made. It is not made overwhelmingly in the state-managed, state-controlled sector. One sees it in the trade unions when decisions taken by the members—where they are allowed to take decisions—are almost invariably better than the decisions taken by the leaders. We are seeing this very fact today. We want less centralisation, not more; we want less state intervention, less state interference, not more; we want less controls, not more; we want less dictatorship by union leaders, not more.
We believe that a great change has occurred in the attitudes of our people. Such changes do occur. We can see them in this country; we can see them in other countries. It is never easy to diagnose them when they are in course of happening. It is only afterwards that one can see them with certainty. But my own belief is that history will look back on these years through which we are living and say that, in all of our troubles and our difficulties, this was the time when the British people came to grips with reality; this was the time when they cast off the illusions of the past; this was the time when they decided that they should shoulder their own responsibilities. Once realism dawns, it is a more potent force than illusion. It is more enduring because it brings reward, not disaster.
My Lords, we in Government will provide the framework, the right framework, in which a free, responsible and successful economy can operate. The success of that economy—and its ability out of the wealth it generates to support its weaker and more unfortunate members—depends upon the efforts and the sense of responsibility of the millions of individuals who make up our society. We put our trust in the
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people. That is what divides us from the party opposite.
3.47 p.m.
Lord Diamond: My Lords, under our new code of practice it is my privilege to thank the noble Lord, Lord Wells-Pestell, for having chosen such a worthy Motion and given us the opportunity of debating it at a time when it is absolutely necessary and appropriate. I want to offer him the thanks of your Lordships' House for so doing. I also want to tell him that I agree with every word of the Motion and that, if it is to be carried to a Division, then we on these Benches shall certainly be supporting him. As he did, I shall try to be as moderate in my expressions as the circumstances justify; but with 3½ million unemployed and with the base of our creation of wealth deteriorating at the pace that it has deteriorated during the last three years under the present Government, it is my duty to lay before your Lordships such experience as I have to endeavour, as the noble Lord, Lord Cockfield, has said, to diagnose correctly and to propose the right remedy.
I can assure your Lordships that any harsh words that I may use are less than I feel. I recognise the sincerity of everyone opposite in their views; I recognise that completely, I must do so if I expect any one of them to recognise, as I hope will be the case, the sincerity of my own views on these very important issues affecting our country.
The gravamen of our charges against the Government is not that in the search for curbing deflation they have chosen to have regard to monetary targets. It is not that during their period of office unemployment has risen and output has fallen. It is not that they have completely failed to protect us from the effects of world recession. It is that they have adopted a narrow monetary policy to the exclusion of all else. It is that during their period of Government unemployment has risen more and output has fallen more than in any similar country. It is that the policies which they have adopted, far from alleviating the impact of world recession, have exacerbated it. It is, above all, that they have been arrogant in the adoption of their policies and obstinate in the pursuit of them.
Let me now try to justify those two charges. First of all, as to obstinacy. We all recognise that we are suffering from the effects of a world depression. Figures have been quoted so often. I do not wish to bore your Lordships by repeating them, for they were last given fully by some five or six Members of the House on the debate on the Queen's Speech. The figures which have been so often quoted show that we have suffered more than other countries. It is very difficult to quantify what part of that suffering is due to world recession, and what part of it is due to the policies which the Government—with all sincerity, believing at the start, no doubt, that these were the policies which were right for our country—adopted.
Some have attempted to do this division. The London Business School, which are normally regarded as good friends of the Government, have recently attempted this division and they attribute approximately one half of the worsening of our position to the world recession, and accordingly the other half to Government policies. This conclusion is consistent

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with two further reports: one from the International Monetary Fund and one from the OECD, both of whom have recently reported that the policies pursued in this country have been twice as severe as the policies followed in any other developed country. Those are two authoritative attempts to do this difficult task, apportioning half the difficulties from which this country has been suffering to world recession—which I have to deal with because the Government always say, "All our troubles and problems stem from world recession which we are unable to resist"—and half to the policies of the Government opposite. That must be a conclusion which we must be prepared to accept. Certainly I do so.
I am not suggesting for one moment that the Government expected these results. They did not expect this worsening in the position. They thought no doubt that their restrictive monetary policies would be likely to contain prices and inflation without any serious effect on employment and output. Indeed, the Chancellor said as much before the last general election. He said that he had no intention of provoking,
"a dramatic short-term recession".
But events have proved him disastrously wrong. It has long been evident that the primary effect of these policies has been more on output than on prices. It has certainly had some effect on prices but it has had the most massive effect on employment and on output.
Equally disastrous was the decision to leave exchange rates to market forces, as the noble Lord, Lord Cockfield, has frequently repeated from the Front Bench opposite. Moderating the exchange rate would, I recognise, have added to the growth of money supply, and that is why no doubt the Government jettisoned it. But, at what cost, my Lords? The combination of very severe monetary policies involving as they did record interest rates, together with a complete absence of any attempt to moderate movements in the exchange rate, meant that by 1981—two short years after the Government came to office—British goods were costing 40 per cent. more. They were 40 per cent. more expensive in relation to the goods of our competitors than they were in 1979. The result of that undoubtedly—it was without doubt the main contributing factor—was the loss of 1 million jobs in manufacturing industry alone.
Unemployment, as we know, has risen and is still rising. It will rise even further according to the Government's own forecast. The Government evidently would rather live with 3½ million people out of work than change their policies. The noble Lord, Lord Cockfield, repeated only today the determination of the Government to stick to their policies. Unemployment may rise, output may fall, but the policies which the Government adopted when they came to office must in their view be pursued relentlessly in spite of their unexpected results, and in spite of their condemning many thousands more to the living death of long-term unemployment. It is that attitude which I feel I am justified in calling obstinate.
I now turn to my second charge which is that of arrogance. When the Government came into office they inherited the accumulated wisdom of all Governments from the experience that they had gained in the management of the economy since the
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war. All this was rejected. Not for them the logic of counter-cyclical economic management. Those are long words which mean nothing more complicated than turning the heat up when the house is getting colder. Not for them that accepted policy; on the contrary, if the nation were found to be suffering from what I may call "world 'flu", then the remedy the Government had in mind was to remove blanket after blanket, to force the patient to stand up to the elements, and this, they said, would soon sort out the strong from the weak.
Indeed it did: one million additional workers failed to survive. This is what is called on the other side of the House "slimming the workforce". Also there was thrown to the winds the knowledge of the control of the exchange rate. No matter that it was accepted previously as part of the economic management because of the important role it played in maintaining the competitiveness of our manufacturers and exporters; no matter that a violently fluctuating pound would mean that commerce would be dominated by doubt and international investors deterred by uncertainty; no matter that that might lead to the loss of jobs which I have already described—only inflation and financial targets seemed to matter.
This new doctrine rejected the wisdom of devising policies which had regard to unemployment as well as inflation. All previous experience was ignored and, indeed, Keynes was kicked downstairs. It is that deliberate rejection of known experience and that risking of all on the unknown that I feel I am justified in calling arrogant. Equally arrogant is the habit that economic ministers have of describing any alternative approach which is different from their own as disastrous. The noble Lord, Lord Cockfield, came very near to saying that today, but it has been said in those terms on many occasions. They not only say it would be disastrous but they say that it would lead to uncontrollable inflation.
My Lords, there is an alternative. I should not be justified in making these strictures if I did not sincerely believe that there was, and has been, an alternative. There is an alternative propounded by my right honourable friend, the Leader of my party, which has been most carefully costed and most carefully tested against the Treasury model. It would provide a moderate stimulus and it has been described in detail many times. It would aim to reduce unemployment by one million in two years, at a cost in terms of net borrowing of three and half billion. But even with that additional net borrowing, the public sector borrowing requirement—what the nation needs to borrow—would still be low by international standards; that is, some 4 per cent. of gross domestic product. The proposals to which I refer include several measures to keep prices down.
The Government may say—and indeed the noble Lord opposite very nearly did say it—that anybody can make an assertion of this kind. As I will demonstrate, this is no empty assertion, my assertion of an adequate alternative. It is no empty assertion and I am not talking about anybody: nor, if I may quote for one moment, is it a case of "imperator nisi imperasset". It is a carefully compiled set of proposals put forward by the man who is generally known as the best Chancellor of the Exchequer we have had since

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the war. It is not a dash into the unknown. When he was Chancellor of the Exchequer, inflation was below 5 per cent., unemployment was one-sixth of the present figure; economic growth was six times as fast as it is at present; we had no oil surplus to back us and we were restricted in what we could do by very limited gold and dollar reserves. This was achieved by a moderate stimulation—what the motion rightly calls "invigoration"—of the economy, of a kind similar to the one which I have proposed.
Did that have a dreadful impact on our borrowing? Did it lead to inflation? I have given your Lordships the inflation figure and, as to borrowing, in our last year, far from borrowing, we repaid debt to the extent of half a billion pounds. So much for the allegation that any alternative would be bound to lead to massive inflation and an unbearable public sector borrowing requirement. There is clearly an alternative, based on experience and validated by achievement. In ignoring that experience and its consequences over four years, the Government have persisted in their blinkered prosecution of policies which do virtually nothing to promote employment and output, and they deserve full condemnation in the terms of this motion.
4.8 p.m.
Lord Bruce of Donington: My Lords, the House will be most indebted to my noble friend Lord Wells-Pestell for having introduced this Motion this afternoon. I am bound to say that I thought he moved it, if I may relieve his mind, in terms of excessive moderation, and the speech which fell from the lips of the noble Lord, Lord Diamond, fully reinforced the conclusions at which my noble friend arrived. We had a very interesting speech from the noble Lord, Lord Cockfield, as indeed we always do. The noble Lord is always very sure of himself; in fact, if one goes back through his speeches over the last five years one sees how little they vary in tone or in content, but they do express his ineffable confidence in his own implacable wisdom. I shall refer to the noble Lord's speech in greater detail as I proceed, but initially I should like to take him up on one point.
According to the noble Lord, all our troubles really stem from what he termed "the economic blizzard". He claims credit, his Government claim credit, for the reduction in the rate of inflation from a 10.3 per cent. increase on an annual basis when they took office to something like 4.5 per cent., or whatever it is now. He claims full credit for that, albeit each point of decline has been accompanied by an increase of 400,000 unemployed. And, of course, carrying the matter to its logical conclusion, if the noble Lord were prepared to have the registered unemployed at nearly 5 million, inflation could be zero. But the noble Lord claims credit for that.
All the rest that has happened to the economy—the decimation of industry, and the mass bankruptcies and closures all over the country, some of them of firms that have adhered firmly to the noble Lord's homilies—is an act of God, and the Government have nothing to do with it. All that is good has happened because of a far-seeing and all-wise Government: everything had that has happened—the various social evils to which my noble friend Lord Wells-Pestell
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referred, and the various other industrial factors to which I have referred—is nothing to do with the Government, according to the noble Lord, Lord Cockfield. Those matters are merely acts of God; they arise from what he terms the economic blizzard. The noble Lord, Lord Diamond, has exposed that myth very well indeed, and I would fain add to it a little.
There is, of course, no such thing as an economic blizzard. The economic affairs of the free world are the result of the activities and decisions made by the millions of people everywhere, in whom the noble Lord believes so firmly. This is what has happened. What has happened, in terms of the economies of the west, is precisely the result of the interplay of free enterprise forces and the actions of individuals, in whom the noble Lord has such touching faith.
But, of course, we in this country have done far worse than most, as indeed the figures show. Since May, 1979, including the production of oil (which is a bonus that very few other countries have had) our output has gone down by 5 per cent., while that of the USA has gone down by 0.1 per cent. In terms of industrial production, we have gone down by 11.9 per cent., while the USA has gone down by 7 per cent. As regards unemployment, our rate is 12.4 per cent.; next is Italy, with 9.1 per cent.; then come the Netherlands, with 8.9 per cent.; and then the USA, with 8.6 per cent. In terms of performance, we appear to be at the bottom of the league tables. We are not even in division four on our way up to the top of division one. It is high time, putting the matter in sporting terms, that we took a hard look at the management—and, indeed, at some of the active players operating under the management.
It is quite clear that the world recession itself has been powerfully aided by the policies pursued in the two countries, the United Kingdom and the United States, which have followed almost identical deflationary policies. These are the people who themselves started the world recession from which the noble Lord wishes to dissociate himself. There can be no mistake about that. Is it a coincidence that the performance of the countries which have followed these repressive, high interest rate and deflationary policies should have led the world into what the noble Lord has referred to as an economic blizzard? So let us lay that one to begin with.
It must, of course, be obvious to all noble Lords—and I trust that it is obvious to noble Lords in all parts of the House—that a situation in which there will be, more or less indefinitely into the future. 4 million or 5 million unemployed is a quite intolerable one from the point of view of a parliamentary democracy. I shall not expatiate upon the ills that arise from that—the stress on individual families, the extra strain on the social services, which is far in excess of any actual increases in money value which the Government have put into them, and, aside from all that, the extra needs that they have had to meet.
A free society, a free democracy, cannot exist and maintain its social cohesion under conditions where there are between 4 million and 5 million people out of work indefinitely with no prospects and with no future, and where the burdens of society are distributed so unfairly that, over the last four years, some 40 per cent. of the population, probably, have borne the

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total cost in this country of the depression itself. Surely, our attention has to be directed towards trying to solve this problem within a free democracy.
How can we obtain the conditions—and it will take some time—in which there is near full employment (which is unemployment down to about 3 per cent. of the population) and still keep our essential personal freedoms intact? This was the ideal that emerged, quite naturally, after the last great war. It was unthinkable that policies other than those involving full employment should be followed. Successive Governments followed such policies. Whether it was the first Labour Government under the then Mr. Attlee or whether it was one of the succeeding Governments, which were, alternately Conservative-led or Labour-led, the objective, and the freely appreciated and shared objective, was always the same—to try to achieve the highest possible standard of life with near full employment (which was put at some 3 per cent. unemployed) and, at the same time, to try to preserve the liberties for which the whole nation, and not merely the rich, fought in the course of the war itself.
We have had some experience of the complete reversal of those policies under the Government headed by Mrs. Thatcher, and it is inevitable that some thought has been given to alternative means. The terms of the Motion this afternoon call upon Her Majesty's Government,
"to initiate urgently steps to invigorate the economy and alleviate the hardships so widely suffered".
The Motion is in very moderate terms. It calls for steps to be taken to vitalise the economy.
There are many of us who would wish to see quick steps taken towards a wider sharing in this country of the world's goods; a wider participation of the population as a whole in the country's economic future, with the ultimate aim of seeing man's promotion of the interests of society as a whole determining what he can get out of it, rather than battling competitively against his fellows to get a living. But this is a philosophical point: that man should be able to identify himself with society and see his welfare as emanating from the community to which he contributes.
This point is expressed more in terms of political extremes. The Motion is nothing of the kind. Essentially it postulates a Keynesian solution to our present problems. Various programmes have been put forward, including those of the noble Lord, Lord Diamond, the Trades Union Congress and the Labour Party, All have several features in common. They postulate that there should be increased public expenditure over a wide field, including investment in the country's infrastructure—roads, sewers and all the rest—and that there should be substantial investment in the various social services, all as a means of providing more consuming power for the public at large in order to help to revive our own domestic industries, to postulate investment in various state industries and to encourage it in private industries so that the wheels of industry may begin to turn again. These are not extreme policies. They have been put forward and discussed at length in the press.
The immediate response of the Government to proposals of this kind is to say derisively, "They have
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all been tried and they have failed". That is not so. The policies have been tried in part. Those who associate Keynes with the failure of certain aspects of his policy which have been carried out over the past few years forget that Keynes always stipulated that if his policies—essentially they are the same policies as were followed by President Roosevelt in the United States in the New Deal, which lifted misery from millions—were to be successful, where private investment failed the state must step in and invest. The noble Lord perhaps forgets that Keynes made this an integral part of his policy.
This has been tried only on a very small scale indeed. Where it has been tried it has been the party opposite and the financial and industrial interests which support and subscribe to that party which have opposed this particular portion of the Keynes doctrine—that in order to prevent inflation arising from deficit financing and as part of the package the state must step in and invest. Investment in private manufacturing industry in this country over the past 20 years has been running at 30 per cent below that in France, 40 per cent. below that in Germany and 60 per cent. below that in Japan. Therein lie many of our difficulties.
That brings me to a proposition which we all have to face: that in free democracies, retaining maximum personal freedom, there are two massive uncertainties which have to be taken into account in any endeavour to achieve overall planning on Keynesian lines. No computer can predict these two massive uncertainties, no matter what Government model there may be, no matter what university model there may be.
The first massive uncertainty is whether capital will provide the necessary investment. As the noble Lord has said many times, this is a matter of confidence. How do you feed confidence into a computer to find out whether, for any given plan or any given feed-in, there is going to be, on the basis of free choice, adequate investment? The second massive uncertainty is whether labour will take advantage of its organised strength in order to make extortionate wage claims. We on these Benches admit that this is a massive uncertainty, just as much as we admit the first. There is, therefore, no certainty.
The Conservative Party faces this dilemma in characteristic fashion. They acknowledge that the first factor—private investment—they can do nothing about whatsoever, so they do not bother. They ignore the uncertainty of private investment in industry and all the consequences which may arise from its shortfall. They offer incentives and inducements and hope that this will be successful. They know perfectly well what Mr. Heath found out and stated in August 1972. The noble Lord will remember it well. Speaking to the Institute of Directors Mr. Heath said, "We have given you every tax incentive that you need, and still you won't invest".
So the Conservative Party and the noble Lord opposite take for granted that private investment in industry will continue to be a matter of personal caprice and personal confidence. And they are content to leave it at that. At the same time they are endeavouring to add to it further by taking over the profitable portions of state enterprises so that investment decisions in those fields shall in future be a

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matter of private whim and private confidence. And they are content to leave it at that.
Not so when it comes to the second uncertain factor: whether labour will take advantage of its organised strength to make extortionate wage claims. The Tory Party are dealing with this possibility. They dare not and do not want to deal with the capital uncertainty but they are prepared to deal with the labour uncertainty. The way they are dealing with it is by deliberately creating unemployment in order to weaken the power of the trade unions and to make them as unpopular as they are themselves. They are also seeking to impose their own wages policy by the deliberate creation of unemployment.
It is perhaps the occasional slip of the tongue that reveals the true intention of Ministers. In an exchange which took place in the other place earlier this month, Mrs. Thatcher referred to the vexed question of the steel industry. This is what the Daily Telegraph reported her as saying:
"Mrs. Thatcher said in the Commons last Thursday that Mr. MacGregor had done a superlative job at the head of the state-owned steel industry. He has reduced the workforce by nearly a half, to 85,000, during his period of office".
That is now reckoned by the Tory Party to be an achievement. Achievements are no longer to be measured by industrialists in terms of the employment they create. Their success is now to be measured by the employment that they destroy.
Lord Saint Oswald: My Lords, I do not think that these remarks should go unanswered, particularly from these Benches, when they are delivered by a noble Lord who might count as my friend. He cannot in fact say that he sincerely believes that the policy of this Government is to create unemployment. Unemployment may be one of the results of their policies but to say that it is the deliberate policy of this Government the noble Lord, Lord Bruce of Donington, knows to be untrue, and he should be reminded of the fact.
Lord Bruce of Donington: Well, my Lords, I was just quoting the Prime Minister. I will give a further quotation too. I will give a quotation from today's issue of The Times—a remark by Mr. Lamont:
"Mr. Lamont repeated the Government's view that the major sacrifices made by the steel industry in recent years had not been matched by other EEC countries. 'The Government is not prepared to see the sacrifices squandered by the failure of industries in other member states to restructure and cut capacity.' ".
Yes, my Lords, and what has Mr. MacGregor been doing since his appointment in order to make representations and to insist that the British steel industry should make only those cuts that are proportionate to the EEC? The Government deliberately neglected to make representations at the EEC to get a fair distribution of the restructuring of steel in Europe.
Lord Trefgarne: Order!
Lord Bruce of Donington: Order? Indeed, order. I did not interrupt the noble Lord, Lord Cockfield, during the course of his speech, in spite of the many provocative remarks that he made. I trust that he will
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allow me to make my own speech, but I will allow the noble Lord to speak.
Lord Cockfield: My Lords, I am most grateful to the noble Lord for his courtesy, which never fails him. He was claiming that we did not support the interests of Britain in the European Community. That statement simply is not true. We have fought very hard for Britain's interests inside the Community. I do not want to go back over the history of the steel industry but one of the problems that arose—and the noble Lord must be aware of it—was that over-capacity existed for a long time and we were much too slow in dealing with it. When we did deal with over-capacity it meant that we were getting ahead of the rest of Europe in bringing our industry back onto a proper economic basis. The only point of the comment that the noble Lord has quoted from a remark made by my honourable friend Mr. Lamont is to illustrate that, having taken those measures, we were actively defending the interests of this country in the European Community.
Lord Bruce of Donington: No, my Lords, quite the reverse is true. If the noble Lord thinks that he can get away with that one then he had better re-examine what he has said, because of course it is not true in the slightest. All that happened was that, willingly and voluntarily, we made the cuts before anybody else did. That is exactly what happened, and the noble Lord knows it.
If I may continue, the rational solution to our problems—and it is one that need not raise any party hackles at all and ought to be agreeable to noble Lords in all parts of the House and, indeed, to people of all parties in the United Kingdom—is, first, where necessary to make deliberate state investment in this country in manufacturing industry; deliberate investment to make up for the failure, whether due to lack of confidence or whatever it may be, by the private investor. This can be done either alone or in collaboration with private industry. The next step should be a characteristic of any national policy. It is that the Government of the day should seek cooperation with trade unions and with the people at large and endeavour to relate wages to output and productivity, conditional upon the social wage being restored.
When trade unions negotiate wage settlements on behalf of their members, they do not merely take into account the money wages that are received in respect of the jobs which they perform; they also take into account the social wage in terms of educational facilities provided for children, in terms of the health service, and in terms of the full range of other services which our working population enjoys. Part of any collaboration with the trade unions and the people at large must take into account the level of the social services provided by the state.
I am quite sure that, although these are the imponderables which a free society must solve, they can be solved with co-operation between those who provide capital and those who use capital. This can be done. It can only be done in a different social climate. It can only be done with a drastic change in the media's presentation of the total problem. But it can

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be done, and it can be done with goodwill. One thing is certain, and that is that the problem of providing full employment within a free society cannot be dealt with on the basis of the antagonism which exists now in this country—which has been divided by this Government on a scale that has not existed since the 1930s. There has to be a rapprochement between the two.
I am well aware that this will immediately give rise to cries that the whole thing is quite impossible. We shall undoubtedly have statements or forecasts. Indeed, we have had many from the Conservative Party and its leaders, who have forecast that if we try a solution on Keynesian lines, even though a solution on Keynesian lines has never been attempted under conditions where we are independent for our oil supplies, it will produce hyper-inflation. That is their forecast. They have made it many times. They have pooh-poohed the whole idea of any kind of new deal economics, let alone socialist economics as they see them.
What about these forecasters? When the Government make a forecast of disaster on the basis of other people's plans, surely that should be subject to the Government's capability for forecasting. If the Government are incapable of forecasting, then their judgment of any plans put forward by those of us on this side of the House is worthless. Let us see what the Government have forecast in the past, and then we can form some judgment as to the value of the Government's forecast now.
On 28th November 1980, with unemployment having increased by 711,000 to 2,163,000 the Prime Minister announced very buoyantly:
"We are reaching the trough of the recession.".
On 4th January 1981, with unemployment another 250,000 on top, and with industrial manufacturing production having declined by 15 per cent., the Prime Minister said as a prediction and a happy handout for the new year:
"1981 will be the year when results begin to show".
A year later, on 9th March 1982, with unemployment up a further 400,000 to a figure of 2,821,000, and with industrial production still 15 per cent. down, the Chancellor of the Exchequer said:
"The recovery that we foresaw and worked for is now taking place".
On 15th May the theme was referred to by the Chief Secretary to the Treasury, who said:
"The evidence of the start of a recovery is all about us and not even the most blinkered pessimist could fail to see it".
By that time manufacturing production had dropped by 16 per cent. In December unemployment reached 3,090,000 and has been recently forecast for 1983, by the Chancellor of the Exchequer himself, at 3,300,000.
That is what those forecasts are worth. Those forecasts were not made by individuals. They were forecasts made by people with all the administration of government behind them, and with all the facilities of government to make forecasts. Even their forecast of the money supply was way out. In 1980–81 it was forecast to be 9 per cent.—in fact, it was 19 per cent. In 1981–82 it was forecast to be 8 per cent. and turned out at 10 per cent. Well, what value have their forecast judgments now on the quite serious policies that have
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been put forward not only by the TUC and the Labour Party but also by the Liberal/Social Democrat Alliance? Is it not far better that they should pay serious regard to these matters rather than dismiss them with an arrogance which ill accords with their past performance?
We on these Benches believe that there is a way. We believe that the plans that have been put forward after very careful research, and which have been so arrogantly dismissed, do, however much they may perhaps have to be modified in part, constitute a way in which this country can progressively regain its production capacity, can increase its output and can increase its employment. We believe that they should be taken seriously and we believe that they should be done.
One thing that the country will not sustain and will not continue to support for long is a circumstance in which millions of our countrymen, including perhaps a million school-leavers, cannot see any future for themselves at all. I believe it was Galsworthy who said, in The Forsyte Saga:
"He that cannot plan for the future has no future".
For millions in our country at the moment there is no means of planning for the future. There is a blight on families. We believe that with co-operation, with careful thinking and, indeed, with a rethink, and with a new spirit of trying to make the nation work together instead of dividing it so arrogantly, it can be done. We hope that your Lordships will support this Motion.
Viscount Massereene and Ferrard: My Lords, before the noble Lord sits down may I remind him that when he was speaking about the 80,000-odd steel workers who have been made redundant he forgot to mention the redundancy payments, many of them rising as high as £20,000 per man? Many of the redundancies were voluntary. I know one or two steel workers who have bought extremely nice villas in Spain on the strength of that. I am not complaining, but it was unfair of the noble Lord not to mention that.
Lord Bruce of Donington: My Lords, I am obliged to the noble Viscount. It is true that there were voluntary redundancies and it is quite true that for a large number of people the real uncertainties, the evil and immediate anxieties of unemployment, are alleviated by redundancy payments. Of that there can be no doubt. I am talking about those millions of people who have not yet even entered into a two-year period after which redundancy payments become available, for whom there is no relief and for whom there is no hope. But I am very glad to accept the noble Viscount's correction on that point.
4.45 p.m.
Lord Pennock: My Lords, in making this first contribution to an economic debate I rise to my feet with some diffidence, and this diffidence is deepened by the heightened indignation and passion which has been engendered in the debate so far. I recall in a previous incarnation, as a spokesman for the CBI, being invited to present an economic analysis to the union-sponsored Members who dwell in another place. At the end of a short peroration I concluded by recognising that some of my opinions were unlikely to

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be acceptable, and I asked (I now recall somewhat ruefully) whether there were any questions. A right honourable Member from north of the Border stood up and said, "Before we get to the questions, do you mind if I make a comment?" I leaned forward eagerly, awaiting a constructive dialogue. He continued, "I have seen you a few times on the box, and I have always wanted to throw the ruddy ashtray at you. Having listened to you for the last 10 or 15 minutes, I have nae changed my mind."
Undaunted by this experience, I hope for the next 10 or 15 minutes to present to noble Lords three main issues which are more concerned with the economic invigoration side of the debate than with the alleviation of social hardship, for the simple reason that as a businessman I feel genuinely that I am more qualified to make a contribution to the debate on the former issue although I respect the sincerity—indeed, I am moved by it—of the indignation at the social hardship shown by Members across the Chamber.
My three main issues are as follows. First, that the causes of our present economic malaise result not so much from the specific action of any one national Government, or steps taken internally by any one country. The causes are international in their origin, and are certainly widespread and international in their impact, and it is reasonable to deduce that solutions will only follow from an upward direction in international trends. Secondly, I seek to indicate that there are now positive signs of some upward direction in these international trends, and as a businessman I hope to illustrate that if this is the case the United Kingdom is well poised to benefit from them.
Finally, the invigoration of our economy and the alleviation of the hardship which the noble Lord, Lord Wells-Pestell, so rightly and earnestly seeks will not come from the pressures and actions of Governments of any persuasion, but will come primarily from the introduction of a process of improvement—a word which, regrettably, has not yet entered into our debate—in our competitiveness in the world situation. In an economy where we export approximately one-third of all we produce and, excluding oil, import almost as much as we export, it is only by the combined comprehension, resolution and action of management and employees within the business sector itself that such competitiveness will be achieved.
So, first, I refer to the widespread and international nature of our current economic situation. Just 12 months ago, as chairman of an international company earning almost 70 per cent. of its profits outside the United Kingdom, I stated at an annual general meeting that the strength of our international company lay in the width of its base and the international nature of its operations. I went on to describe how the United Kingdom may be in recession but we benefited from the economic improvement in Australia; the United States' growth may be flattened but there still remains strength in the Middle East; and if Canada suffers from adverse United States influence there is recovery in Malaysia, Indonesia and the Pacific zone. I can only report a year later, in retrospect, that I was wrong in my contention, in my forecast and in my judgment, because 1982 has been the first year in the post-war world where in every one
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of those countries, with the possible exception of Malaysia, they have experienced economic stagnation—even negative growth—and a wide-based economic depression.
If we turn to the more recent reports of the OECD, we find that in 1982 there was an overall decline in growth of about 0.5 per cent., which would have been considerably more but for the Japanese plus performance of 2½ per cent. In Germany, previously the proud protagonist of the economic miracle, there was a fall of 1.25 per cent.; in the United States a fall of 1.75 per cent.; and in Canada a fall of no less than 5 per cent. Even, as I stated, in Japan, accustomed to an annual growth of 6 or 7 per cent., there was a fall to 2.5 per cent. In the United Kingdom, with positively a growth estimated variously between 0.5 per cent. and 1.5 per cent., we seem in the last year to have stood up to the world recession not too badly, if not too well.
If we turn to hardship and unemployment, the picture again is a universal one. If our unemployment exceeds 3 million, there is a faster rising rate of unemployment in Germany today which passed 2½ million last week. For the United States, as noble Lords know, the figure is 12 million, and for France, in spite of reinvigoration from its new Government, the figure is also in excess of 2 million. In answering the charges of the noble Lord, Lord Diamond, on how much of this is our own responsibility, I, too, would quote the judgment of the independent OECD authority with no axe to grind. It stated that the reason for our higher rate of unemployment was that we were first into the recession, and that this was because we paid ourselves, as I well know, more and more wages for less and less production in the second half of the 1970s and rendered ourselves uncompetitive in the process. My first overall contention, my Lords, is that this recession is a world-wide one and recovery will follow only from an upward turn in growth, and not merely from the actions of any one country.
There are fortunately some tangible signs, albeit of an indicative rather than a strong positive nature, which suggest that this upward turn is now beginning to take place. In the United States, whose influence in the free world economy, for better or for worse, still predominates, there was before Christmas a significant growth in housing starts and in the production and sale of automobiles, which has been followed since Christmas into consumer durables; and in January there was an increase in overall industrial production of 1 per cent., while employment fell for the first time since 1981.
One of the problems with many Governments in our democratic society is that they promise a great deal in order to win elections, spend the early months of their office fulfilling to a greater or lesser degree these electoral promises, and then spend the rest of their time in office seeking to balance the books in order to pay for them. The United States is no exception. If the budget deficit, which has risen from $50 billion to approaching $200 billion in just over one year, is not contained and reduced, this recovery may be based on false foundations; but if the deficit can be reduced and interest rates follow down, there are strong reasons to believe that the recovery can be maintained. In Germany also, after a year of Teutonic

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self-flagellation and discontent, there has been a surge of activity and optimism, so that between December and January industrial production rose by no less than 4 per cent.
Within the United Kingdom itself, as the noble Lord, Lord Cockfield, has already said, there are positive indicators, and now we seek hungrily for positive improvement in performance. In my own company United Kingdom business remains currently flat, but I am happy to report that in the last month order books have significantly strengthened. In 1982 our exports, as has been mentioned, albeit with reduced or vanished margins, held up remarkably well, and accordingly in business we are already benefiting from the lower exchange rates.
There are those of us who believe that the quadrupling of oil prices in 1972 caused world growth rates in the 1970s of perhaps half of those in the 1960s and that a further trebling of oil prices in 1979–80 has already had similar effects in the 1980s. It is reasonable to argue that, provided that the fall is not too violent, cheaper oil prices will widen margins and create more confidence and profit where at present it hardly exists, and from that profit will come further investment and growth. But violence upwards or downward in economic trends, like violence in civil affairs, promotes reaction, and if pressed too far becomes unmanageable. It is crucial, therefore, that the fall in oil prices is kept in proportion and under some form of international control.
The CBI's industrial survey has been referred to. It is a regular report of 2,000 carefully selected companies who are asked specific questions month by month. Often its report has been maligned for its refusal to swerve from the facts as it finds them, but always it has retained its integrity. I am happy to report that in the last month it has shown export and output positive upward trends which are the best since March a year ago. So the portents and the omens are good, if we can now look forward to the follow-through in performance.
If there is a world upturn, business believes that the United Kingdom is well poised to benefit, and we also believe that Government can take credit for creating this condition: price inflation around 5 per cent., but please note still not less than our German and United States competitors and still about double that of Japan; interest rates, which have fallen significantly but which in real terms, expressed as the difference between the bank rate that we pay and the rate of inflation, still have some long way to go; a PSBR which in contrast to the United States deficit is now well under control; and, most important of all, a recognition of economic reality which has been seen in the majority of wage settlements in the public and private sector of late and which we hope will be evinced in the public industrial sector shortly—in the next 24 hours.
I would not accept the contention of the noble Lord, Lord Diamond, that this is entirely based on a fear of unemployment. I genuinely believe from personal experience that great progress has been made in the last three years in acquainting employees and managers at every level with the economic realities which face us and by their learning through economic discernment, and not solely through fear, the ways and
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means whereby we solve these problems. I believe that in the final issue economic recovery now will not arise from further Government action, either in the palliative field or even in setting further parameters for improved economic performance. I believe that this result can come only from improved competitiveness. It is only from improved competitiveness that we shall get growth, and it is only from growth that the results which we all seek in a fall of unemployment can follow.
There have been three times in our post-war history—1952 to 1956, 1959 to 1962 and 1963 to 1966—when in this country we had a GDP growth of 3 per cent. and we had a wage inflation of approximately 3 per cent., and on each occasion this period lasted for three years. Each time, I am happy to report, a million new jobs were created.
When we turn to the familiar quoted factors affecting competitiveness and therefore growth, I find an examination of my own company's finances to be interesting. Interest rates last year ran at £9 million, when we paid an average interest rate of 10 per cent. to 11 per cent. If they fall, therefore, at a rate of 1 per cent. or 2 per cent. the effect on our costs, and therefore our competitiveness, is £1 million or £2 million. We pay £4.5 million in local rates, so that the oft-pleaded-for industrial derating of 15 per cent. would save us about £0.6 million. The national insurance surcharge currently cost us £3 million, so the halving of that would result in a saving of half that figure.
But when we move to wages and salaries we come into another league. Our wage and salary bill is £240 million and our comparatively moderate wage settlement last year cost us no less than £18 million. A halving of that figure this year would save £9 million, which is twice all the other possible savings put together, and therefore twice the contribution to competitiveness which we are seeking.
Similarly, in the area of productivity there have been notable increases and improvements, but rarely at a rate which exceeds the improvements of our competitors. Here again, I believe that the result is not in the hands of government but is now in the hands of management being able to put forward the realities of economic competitiveness, and employees—as I know they are doing—beginning to comprehend them.
And so, my Lords, may I conclude as I began? Our problems are worldwide in their origins, in their impact and, I believe, in their solution. There are signs of worldwide improvement from which we are well poised to benefit. But the single most crucial factor in the improvement of performance lies in an improvement in our competitiveness. The most important factors affecting our competitiveness are moderate wage settlements and improved productivity, and perhaps I may safely add that there are clear signs that we are now beginning to achieve them.
5.2 p.m.
Baroness Ewart-Biggs: I should like to thank my noble friend Lord Wells-Pestell very much indeed for putting a Motion before the House which gives rise to such very wide-ranging discussions. I, for one, will not be examining the Government's economic policy but will be examining another aspect of the Motion—

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namely, how a certain section of the community is faring as a consequence of these policies.
So, without in any way wishing to bore your Lordships with a lecture about women's rights, I should like to point out some of the problems that the working mother is going through at present. I hope that that news will not bring on the departure of all of your Lordships, because it may well be a subject which is not discussed very often in your Lordships' House. I should like to point out that some of the policies at present used seem to be very seriously discriminating against her and deliberately trying to keep her out of the labour force in which she feels she has a rightful place.
First, it must be recognised that the participation of the wife and mother in the labour force has increased immeasurably in recent years. We have now reached the point where 26 per cent. of the entire labour force are married women, whereas only 14 per cent. of the working population are single women. This, of course, means that married women outnumber the unmarried women by nearly two to one. This shows a very great change in recent years.
We all know that recently there has been a lot of talk about the family—a lot of talk about what the role of the wife and mother should be in that family. She has been reminded of certain Victorian values and told in very categorical terms that her place has always been, and should continue to be, in the home. And in support of this injunction many Government policies are designed to reinforce the financial disincentive for her to go out and work.
Putting the actual rights and wrongs of this to one side, my contention is that this plea to working mothers to return to the sink has come too late, and the statistics which I have just given seem really to prove that. There seems little point in telling the married woman that there is no place for her in the labour market when it is quite evident that steadily and surely over recent years she has become an integral part of that labour force. Efforts to oust her from that position which she has, after all, fought for so hard and steadily over recent years, could only lead to great embitterment on her part and great detriment to the family as a whole. After all, it would seem entirely appropriate that married women should make a wider contribution to the running of society while, at the same time, in true and better partnership with her husband, bringing up her children and running the home.
It should be recognised that, through a variety of changes in social trends and living patterns, we have now reached the point where three very distinct categories of working mother have evolved. First, there is the mother in a two-parent family who goes out to work to supplement the family income—income which in many cases has been seriously eroded by the present economic policies. It is a fact, proved by a recently published report on the family, that without the earnings of these mothers there would be four times as many children living in poverty today. It is, indeed, thought that there are more than two million young who live in families struggling on incomes around or below the official
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breadline. If we need an example of the return to Victorian standards, then I fear that this would be a very real illustration.
The second category of working mother is the single parent mother who is the sole breadwinner for the family. The number of families now headed by a lone mother is approaching the million mark, and they represent the lowest-income families in the country.
Finally, the third type of working mother is the woman who, having benefited from fairer education opportunities for girls, has achieved a profession which she has pursued, either concurrently with her marriage or intermittently while having her children. There is no doubt that girls are really running more in parallel with boys as far as education opportunities go. I was reading in my paper the other day that last year there were actually more girls than boys sitting for A-levels. The year before there were just over 47,000 men admitted to university against just under 32,000 girls—meaning that 32,000 qualified young women with a conviction that they have earned a place in the labour market are pouring out from our universities (their only disadvantage being that a majority among them will have graduated with arts rather than science degrees and, therefore, will be more vulnerable to the recession in the employment field). There surely can be no doubt that we are now faced with the situation where there is an ever-increasing number of mothers who both have the financial need to work and feel that they have an equal claim to job opportunities.
Let me outline briefly some of the difficulties which confront these working mothers and how Government policies, instead of being designed to turn them out of the labour market, could actually accommodate them there to the benefit both of themselves and their surrounding families. First and foremost, it is of the greatest importance for the Government to take the lead in trying to change those firmly held attitudes about where the place of women should be. There is still the firmly held concept of the stereotype family where the man goes out to work and the woman stays in doing work at home. When these roles are either reversed or intermingled there are great howls of protest from many, many voices. Surely it should be accepted that this old family structure hardly exists any more, and efforts to restore it are simply trying to turn the clock back.
Indeed, other European countries are well ahead of us in their efforts to change attitudes and laws to move some of the weight of child-rearing from mothers to fathers. Some are moving towards the concept of parental leave being extended equally to fathers and mothers, but here in Britain it seems clear that any such proposals are still light years away from the thinking of the present British Government. So that is a question of attitudes.
But, from the point of view of Government policies mainly affecting working mothers, all the categories of women which I have enumerated suffer from the following. They suffer from shortage of child-care facilities, from discrimination in job opportunities, from discrimination in tax and maintenance policies, and from constituting three-quarters of the lowest paid in the country. Indeed, it would be true to say that in contrast to the expanding job opportunities of the

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1960s and the 1970s and the protection provided for women by Labour's Equal Pay, Sex Discrimination and Employment Protection Acts, present policies have made the lives of women more and more difficult. Again, it cannot be denied that the shape of their working lives and their employment opportunities are very much dictated by the fact that they still bear the major responsibility for the home, the care of the children and infirm and elderly dependants, all of which are becoming more onerous for them.
This, indeed, drives 70 per cent. of mothers to take part-time work in low grade, low paid, relatively insecure jobs in catering, cleaning, clerical, health and welfare employment—indeed, the jobs which men, with their more traditional attitudes to jobs, would not take. Working mothers are, therefore, often the very first to lose their jobs as, with their broken career patterns, they are the most vulnerable to redundancy on a "last in, first out" basis. Indeed, since May 1979 female unemployment has, according to official statistics, increased by over half a million to 900,000. But even that disastrous figure understates the problem which is generally felt. The true figure is thought to be more like two million, because the Government's new method of counting, introduced to disguise the real level of unemployment, does not include the non-claimant unemployed, most of whom are married women. The new work availability test, which demands details of child-caring arrangements from people seeking jobs, will make it more difficult for mothers to claim unemployment benefit and to register on the unemployment lists.
Furthermore, the Employment Act 1980 attacked women's rights to paid maternity leave and to protection from dismissal because of pregnancy. The abolition of the Fair Wages Resolution, the weakening of wages council machinery, and the encouragement of cuts in real wages, will all lead to further pressure on the low paid woman.
Finally, perhaps I may put forward just one or two ideas as to methods of helping the working mother keep her hard-won place within the employment market and of replacing those at present devised to exclude her from that market. First, all working mothers share the same need for child-care facilities. Through cuts in local government expenditure, many child-care centres have indeed been closed. We would, of course, all like to see the budget for child-care centres increased again. But there is another way in which this situation could be improved. We could take advantage of the fall in school rolls which means that some of our school buildings are very much emptier now, and, in any case, schools are used less than any other public building. In this way, surely creches could be set up in unused parts of these schools. This could be organised under the management of parents and teachers, and would serve to employ some mothers and liberate others. I have always felt that the school is very central to the life of a community—as perhaps was the village church in bygone days—and that, therefore, it should attract more community activity, of which, to my mind, this is a very strong example.
Secondly, as I said, a very large proportion of mothers are forced, because of their household
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responsibilities, to take on part-time work. Yet the Government's job-splitting scheme does not apply to married women who are not registered for benefit. Indeed, does this not seem a monstrous injustice when it is so glaringly obvious that it is the working mother who would benefit easily the most from any such job-sharing or job-splitting scheme? Again, in relation to this, why have the Government not given any support to the EEC directive on part-time workers?
Lastly, there can be no doubt that parts of our tax and social security system discriminate against the working mother. If she is of a two-parent family, she suffers from the principle under which, for tax purposes, her income is considered to be her husband's, and there can be no doubt in this instance that she would benefit very much from the phased abolition of the married man's allowance and the introduction of a system of mandatory, independent taxation. Equally, there can be no doubt that the single parent working mother suffers from the system whereby she loses her supplementary benefit should she earn more than £12 a week. This would seem in direct conflict with the fact that, of all mothers, the single parent mother is most in need of both the therapeutic and economic effects of employment. Not only does she suffer the most from loneliness and anxiety, but her children are among the most deprived in the country. So, surely, in order to remove the disincentive to earn provided by supplementary benefit and in order to stabilise these family incomes a little, it should be recognised that all one-parent families have a special financial need and they should receive one-parent family benefits which are non-contributory, non-means tested and in line with those received by widowed mothers.
Therefore, those are just a few examples of how the working mother should be helped; a few ways of strengthening the principle that she does have a right to participate more widely in the life of the community, and not merely from behind the sink. It is all very well talking about Victorian values, but let us remember all the injustices which they contained. It is, indeed, a strange paradox that working women's opportunities are being so severely undermined at the time of the first ever Government to be led by a woman and, what is more, someone who is a working married woman herself. For it must be recognised that at no point does the Government's present record display any sympathy for the Prime Minister's peers and contemporaries who also happen to be working family women.
5.17 p.m.
Lord Harris of High Cross: My Lords, I join with others in congratulating the noble Lord, Lord Wells-Pestell, on his ingenious Motion which—and I think there would be general agreement on this—he introduced so appealingly. It is a Motion that is naturally drawn in order to maximise support by rolling up every conceivable economic and social discontent into a single catch-all effort, with some success so far in bringing the Social Democrats back, at any rate on this occasion, into the Labour lobby.
My brief contribution will reflect more on the central confusions which I think underlie the social policies of both the main parties. I largely agree with the broad approach on economic strategy of the noble

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Lord, Lord Cockfield, and even more enthusiastically do I agree with his eloquent declaration of the eventual intention to reduce personal taxation. If it comes to a vote, I would find it easier to support the first part of this Motion, the indictment, than the second half, the remedy, which does not amount to anything much more than going back to the bottle of Keynesian inflation, albeit with a small dose in the first place.
I certainly would not dispute that there is much to deplore in the effects of the Government's economic and social policies. In my view, a major tragedy is their uneven impact within the public sector itself. Every example of inadequate resources for deprived minorities can be matched by 10 cases of inefficient or frivolous squandering of public money in education, in health and, of course, in local government. Even more to be deplored is that the necessary squeeze on inflationary excess has borne disproportionately on private industry. There we have seen, as the noble Lord, Lord Pennock, hinted, hard-pressed managements making often heroic efforts to adapt to long-neglected reality, despite the appalling burden of high taxes and costs imposed from a relatively protected public sector.
Even where the Government have contained or cut spending they have not usually done so by improving management or reducing extravagance. The way of all bureaucracies is to preserve their own high-level jobs at the expense of the service delivered to the public. That would also be the temptation of private bureaucracies in large firms. The difference is that the only source of income for private enterprise is from satisfied customers, whereas the public bureaux can go on living well off the rising rates and taxes unrelated to their own performance.
We have had a depressing catalogue of grievances from the Opposition Benches, and we shall no doubt have more. It often seems like a rather dismal dirge unrelieved by any acknowledgement of the dramatic improvements in standards of living even over the last generation. And yet every case of genuine hardship raises a question both for the proponents of this Motion and for the Government. What must be wrong with a system of universal welfare that fails to satisfy so many when it is spending so much?
Among spendthrift politicians—which is a rather large party—I never tire of pointing out that the Government, in all their baffling manifestations, are now disposing of 54 per cent. of the national income, and more than half of that total goes on welfare. So I present your Lordships once again, I fear, with the basic economic truth that enough can never be spent on free services because demand will always rise to outstrip the available supply.
However, from the Cross-Benches I want to offer some comfort, if they need it, to hard-pressed Ministers. The failure of universal welfare to win Universal acclaim is no new phenomenon. Indeed, during the last Labour Government, when the noble Lord, Lord Wells-Pestell, was a conscientious Minister at the Department of Health and Social Security, he and his colleagues were constantly besieged by insatiable demands for more spending from what has recently been called the predatory poverty lobby. My
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informant in all this is Labour's Chief Secretary at the time, Mr. Joel Barnett, who shares with the noble Lord, Lord Bruce of Donington, the unusual distinction for a socialist of being a successful accountant, and therefore of being able to add up. Mr. Barnett's revealing memoir, Inside the Treasury, shows that the novel feature of socialism really amounts to a rejection of old fashioned arithmetic. He explains early in the book:
"The days had long passed when I naîvely thought it would be easy to persuade my colleagues that 2 plus 2 really did make 4."
Problems with arithmetic are not confined to members of the Labour Party. But what I find difficult from the Opposition Benches is when what I believe sometimes amounts to a mathematical myopia gets elevated into a claim of moral superiority, with much boasting of compassion, which I have always regarded as a fine, noble virtue in the individual but as a politcal fraud in many cases where it is directed rather at the acquisition of votes. Against all those slings and arrows I offer a last inoculation from Mr. Joel Barnett's book. He wrote:
"… the question of priorities did not trouble my Cabinet colleagues … I suppose what really offended me was the implication that I was heartless, constantly saying 'No' to the most deserving cases, and that my critics were the only ones who cared."
I know exactly how Mr. Barnett must have felt.
I think it was Pascal who said that the first requirement for moral conduct is to make the effort to think clearly. In that spirit I want to offer the following proposition. It is nothing more than the pressure on politicians to overspend which has been the root cause in so many countries of inflation and all its attendant economic, social and moral evils. Many families and old people would not now be reduced to dependence on social security if their savings and private insurance had not been shrunk by inflation to one-twentieth of their pre-war value. If that view has any truth, it is plainly unjust that the party most given to currency depreciation on the Opposition Benches should now devalue language by blaming the Government for all of the pains inevitably associated with bringing down rising prices. I must say that I think it is a bit of a cruel jest in this Motion to talk of invigorating the economy and alleviating hardships by methods which objective observers increasingly see as turning back from uncomfortable reality to relapse into the deceptive soft option of rising inflation.
On another occasion I hope that we might try to narrow the philosophic divide of which we have heard between the Labour diehards, who, I fear, are too complacent about the continual growth of government, and those of us who would prefer to enlarge voluntary action and to foster personal responsibility. But since all the speakers, whatever our differences, are well this side of the Iron Curtain, I would in conclusion ask your Lordships to ponder the question at which the noble Lord, Lord Cockfield, hinted. Why has the West, despite all its present disorders, elevated the human condition so far above that endured in Russia?
On the broadest view I would urge that the poor, the weak and the handicapped have benefited along with everyone else in this century more from the multiplication of capitalist production than from the marginal efforts of politicians to shuffle around part of the proceeds. Accordingly, I oppose this Motion for

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giving too little attention to the imperative of incentive and efficiency for future economic and social progress.
5.28 p.m.
Lord Beaumont of Whitley: My Lords, I should like to thank the noble Lord, Lord Wells-Pestell, for initiating this debate about poverty. I have a slight criticism of the way in which the debate has been framed. It is in fact some time, with the exception of one debate initiated by my noble friend Lord Banks, since we discussed what boils down to the fate of the poor. It is high time that we did it again. The noble Lord, Lord Wells-Pestell, in his introductory speech to this Motion concentrated very much on this side of the whole debate, but it is unfortunate that we are discussing at the same time all the efforts which are apparently needed to put the economy right in order to do this. That may seem a bit of a paradox, but I hope to defend my paradox in a moment or two.
We have been discussing what to do about the economy roughly once a quarter in your Lordships' House for the last three years. I am not in any way opposed to this. It is a good thing, because the more we discuss it the more a consensus will emerge as to what we ought to do, and maybe the likelier it is that we shall realise that none of the ideas we are at present peddling does much more than touch the fringe of the problem, and that we need something entirely different in kind.
Noble Lords can see how easy it is to get led on to that particular problem. If you start confusing the two problems—of poverty and the creation of riches—you will always muddle the issue, and I have sympathy with much of what the noble Lord, Lord Harris, said in this context. But I at least will be true to what I want to say and will show myself to be what I think he would consider to be the worst of the sentimental wets. At least I shall not muddle up the question of how we cope with dealing with the poor in our society with how our industry and prosperity should be restored.
The moment I say that, I am clear that a number of people—and not only on the Conservative and Cross-Benches—will say that the answer to poverty is, of course, riches, so we must therefore decide how society will get richer, and then poverty will disappear. We are afraid that if we start discussing poverty without discussing riches and wealth creation, people will leap in and say, "Just like the Left, discussing how to spend money they have not got".
Of course people will say that, and they always will, but they will be talking nonsense. The poor, we have it on good authority, are always with us, and it is true that if growing richer could have cured poverty, poverty would have vanished 80 years ago or 800 years ago. It is not society growing richer that cures poverty; it is the incorporation in society of what Professor Dahrendorf called, in a correctly repellent phrase, the underclass.
Poverty is comparative. This again is often sneered at by opponents of the Left in politics. They say, "You are always trying to have the best of both worlds. You are increasing riches. Look how much better off people are than they were 50 or 60 years ago. Look how much better off they are than 200 years ago". What really matters to human beings is not necessarily having enough food, firewood and clothes. It is not really how
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much money they have. It is whether they are incorporated in the society of their fellow human beings—whether they are part of society and can live life on equal terms with those fellow human beings.
When Professor Dahrendorf talked about the creation in our society of an underclass. I think he was talking about the creation of a stratum of our society which can—maybe not elegantly, but rightly—be compared with the underblanket on a bed. The underblanket, as noble Lords will know, is thin, threadbare and stained. It may be perfectly clean, but it is an old blanket which has been darned, is stained, is thin and is never willingly (or should I say consciously?) looked at by the person who makes the bed. And, if there are still households represented in this House where the man of the house does not share the chores and does not make the bed, he never sees it at all. I sometimes think one can make a comparison with the Government in this case. The Government, although led by a woman, is a rather masculine affair. I think it goes out to work and does not look at what is happening; it does not make its own bed, does not look at the underblanket and does not see the problem.
We like to forget about the underclass, but we must not do so. We must incorporate them in our society. They must truly be our neighbours, and we can make them that in a society which is rich or poor, and that is why I believe we should discuss these problems apart from the problem of making money. We must find answers about redistribution which will work even if we do not get richer; which will work even if we as a society get poorer. Of course, if we do not get richer, but get poorer, they will be far less attractive answers, but they will be necessary answers all the same if we are to look after the poor in our society; if we are to look after the underclass. To do that we must tackle the problems of poverty head on.
Fifteen years ago I initiated a debate in this House to call attention to the serious extent of poverty which still remained in Britain. It is seldom since then that that unmentionable seven-letter word has been in the title of a debate in your Lordships' House, and it has been avoided even today. Reading that debate again today, apart from two very good speeches—by the noble Lord, Lord Wells-Pestell, and Lord Mitchison—the impression I get is how easy we all thought it was then. In fact, we failed to do anything about it when we thought it was easy, and it sure is going to be a lot harder now.
Then, it seemed as if we only needed a modicum of goodwill. Today it will take a massive effort. But I think there are signs that we are waking up to the need for that effort. There are, of course, many who have never dozed. I see that in 1968, in my opening speech, I quoted Professors Townsend, Titmus and Abel-Smith. Some of that generation unfortunately are no longer with us, and it is sad that so few of them joined us in your Lordships' House. I do not know whether, like Tawney, they refused, or whether the sometimes tragically frivolous attitude of Sir Harold Wilson towards this House was to blame. Nevertheless, they were great pioneers. Today there is a new generation coming up, of whom Frank Field is probably the best known example, with his cohorts at the Child Poverty Action Group, headed by Ruth Lister.

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On 5th July last year a new body was launched in this country called Church Action on Poverty, which I was delighted to hear being quoted by the noble Lord, Lord Wells-Pestell, in his opening speech. There are those who might think that Church Action on Poverty was a bit late in the day, but it has made up for its lateness by possessing a bite which, frankly, surprised me when I attended its first open conference at Swanwick in November. My generation in the ministry, both lay and ordained, threw up gadflies, but I suspect there is a new generation which more resemble bulldogs, or at least, and rather more appropriately, Jack Russell terriers.
Church Action on Poverty represents many Churches and Christian bodies. Roman Catholic, Church of England, Methodist, Baptist, United Reformed, Salvation Army and Quakers—all are represented. Its strength, I believe, lies in the fact that it is not, unlike other Church bodies, prepared to dodge political action. But, equally, it realises that the first task is not so much to arouse the politicians as to arouse the average Christian.
I should be misleading your Lordships if I led you to believe that a small group of determined people working, for the most part, in the inner cities presages a crusade from woody Wimbledon or even Hampstead Heath sweeping down upon Westminister, for the sad fact remains that the majority of the middle classes, smoothing down their comfortable duvets, prefer to ignore the fact of poverty and that there are 10 million people in this country living in poverty.
That figure of 10 million is virtually irrefutable. Frank Field, in the document which has already been quoted, refers to 9 million, but looking at his figures I think it is clear that he underestimates the numbers. There were 7.2 million people living on supplementary benefit last August, and there are at least that number now. There were 2.1 million people living below the supplementary benefit poverty line, but not claiming. That last figure was for 1979, but if, on the basis of only half the increase which we know has occurred, it is brought up to date with the other figures which I am quoting, it takes the total over 10 million; so that is 10 million people at supplementary benefit level or below. I hope that there is no one in this House who will tell me that that level is not an extreme poverty level. Short-term supplementary benefit is £8.50 less than the long-term benefit, and many are living on that.
How can 10 million people be so submerged that leafy Surrey is hardly aware of their existence? It is of course partly because we do not want to know; it is too uncomfortable a fact. It is partly due to the mechanisation of the dole queue. The only dole queue that most people have seen has been on the Tory election posters. It is partly because there is an underlying prosperity that means that in absolute terms even the poor are not as poor as they were. This is sometimes taken to mean that somehow it is not real poverty that we are dealing with. Of course, it is not poverty as it is known in parts of India and Africa—and thank God for that! Nonetheless, it is real poverty. It is a poverty which means—and I repeat—exclusion from society; not being able to afford to give your children Christmas presents; not
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being able to afford to feed and clothe your children adequately.
Another of the caches that hide poverty from us lies in that word "and". It is said, "Of course Mrs. Smith can afford to feed her children properly. Mrs. Jones does on the same income. It is just that Mrs. Smith is an inadequate manager". But at the same time we look at Mrs. Jones, and we say, "Of course she can afford to clothe her children. Look at Mrs. Smith's children; they are always well turned out. It is just that Mrs. Jones is a bad manager".
But different mothers have different strategies, and if the money just will not stretch, food goes short in one family and clothes go short in another. On the face of it there is always someone to whom one can point, and say, "They can cope in any given department". But the fact is—and I have not seen this denied by anyone who claims to have looked at the position—that the long-term situation of the poor in the welfare state means that there is not enough money at supplementary benefit level to cope. There is not enough to feed, clothe, house, warm, and keep in a decent way of life the children of the long-term unemployed.
Church Action on Poverty has chosen three short-term targets. The first is to raise child benefit to a more realistic figure. The current figure is £5·25, and it now costs about £8 a week to keep a child. I doubt whether any Government would raise the benefit overnight, but it must be done, and we can make a start on it in the forthcoming Budget. The second target is to increase benefits for the long-term unemployed, so that at the very least they are paid at the long-term rate of supplementary benefit. The third target is to press for a fairer system of housing finance and subsidy. Those are not excessive claims. Indeed, they are minima. The present Government do not believe in state intervention where it is not necessary. Perhaps that is good. But I think that there is a corollary here. If the Government are to cut intervention where it is unnecessary, they must interfere where it is necessary.
Quite clearly, there are one or two first priorities. One of them is the preservation of people in this country from real poverty. Another such priority is defence, which the Government do take seriously. I do not agree with their methods, but I acknowledge their seriousness as a Government. However, I do not think that the Government take at all seriously the preservation of people in this country from real poverty—the poverty that prevents adults from leading a full life and children from fulfilling their potential. The Government must take it seriously if they themselves are to be taken seriously. Whatever else they achieve, if they fail in this, they will have failed completely. There is no reason why they should fail. It needs only a moderate reordering of their priorities. Let them start now.
I ask the Government to make certain that, whether their industrial strategy succeeds or fails, they will turn their attention to the poor, so as to ensure that, whatever happens, it is not the poor who suffer, or that at least they suffer no more than do others. No longer must we have an underclass. It is a very unpleasant term, and it is a very unpleasant thing. Now above all we need—if I may use a Conservative phrase—not an underclass, but one nation.
5.45 p.m.
Baroness Gaitskell: My Lords, first, I must congratulate my noble friend Lord Wells-Pestell on the dignified way in which he moved his Motion, pressing the need to grapple with the growing number of unemployed. I should like to send copies of the speech of the noble Lord, Lord Cockfield, to every long-term unemployed man in this country and, if possible, I should like to see the replies that the noble Lord might receive.
We have not been specifically informed of the numbers of unemployed, but New Society carried out a survey which revealed that one in 16 households suffered from unemployment; that the real decline began during the first year of the Thatcher Government; and that unemployment in this country was worse than in most other major countries. But the survey also revealed—and I think that some of your Lordships will be more pleased with this—that only one quarter of the people consulted believed that Mrs. Thatcher was to blame, and nearly half of the total number of people in the sample thought that no one in particular was to blame.
All of that shows a considerable lack of knowledge about unemployment. Too many people still believe that unemployment is an act of God. Today people are becoming worried, and the press is alerted. Ironically, it is one of the Tory "wets", Sir Ian Gilmour, who has written a book in which he is Mrs. Thatcher's fiercest critic, and he is critical of the Tory philosophy, too. The book is perhaps too full of easy satire, the condemnation too widespread. In his book Sir Ian Gilmour presents a savage critique of the Prime Minister and her policies.
Most of the unemployed want jobs. There is some feeling in the country that the unemployed do not want to work. From politicians we receive responses of rhetoric, rather than of action. Time and again we slip back to the argument that unemployment is an act of God; that we can do nothing about it; because all countries suffer from it, like an infectious disease, we, too, have caught it.
Ironically, Sir Ian Gilmour is one of the Prime Minister's fiercest critics in the book that he has written, which is critical not only of our education. He tears up all of Mrs. Thatcher's arguments, and does not refrain from the most cruel satire. This is a revelation. He states that British economics, from defence to social security, is shrouded in an economic fog, which penetrates the brain. I do not quite know what that means, but perhaps some noble Lord might work it out. I have never read such a savage attack on a Prime Minister who was so revered when she took up office. It is all the more remarkable that the attack should come from one of the so-called "wet" members of her party. There has been much insensitivity and helplessness from many of our politicians. Most of the unemployed not only need jobs but want jobs; yet as I have said before, the response from political parties has been with rhetoric rather than with action and unemployment has been treated as an act of God.
5.50 p.m.
Baroness Lane-Fox: My Lords, the Motion in the name of the noble Lord, Lord Wells-Pestell, leaves very little doubt that the noble Lord regards the
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present scene as one shrouded in gloom, doom and despondency. He castigates the Government for failing to initiate the right steps to alleviate hardship. With all respect, I am very surprised that someone as accurate as the noble Lord should claim in his speech that none of us on this side of the House has had first-hand knowledge of the present-day conditions of ordinary people living in the community; that we only work in committees and do not know people as people. I am quite sure that I am not alone to prove that statement to be quite inaccurate. Alas! hardships, as we know, are ever present and always asking to be relieved. Surely nobody could deny that a vital factor to ease hardship and worry in many households is to preserve the value of money.
Let me take, for example, thrifty pensioners who managed to save money during their working lives in the past. They found that galloping inflation was eroding their often hard-earned and very precious nest eggs. For those people, the fact that the rate of inflation has fallen so dramatically to 4·9 per cent.—the lowest for 13 years—means that at last they know that someone is defending what remains of their savings. It seems very hard to realise now that the rate of inflation was 27 per cent. under the last Government in 1975. In the sad years from (I believe) 1973 to 1980 we could look abroad to other OECD countries to see that they had an average annual rate of inflation of 10.4 per cent. while ours galloped on at 16 per cent. at that time, bedevilled by the first oil shock and by the last Labour Government's attempts to spend their way out of recession. Retail prices rose at an average rate of 8·8 per cent. compared with 6·1 per cent. in those other OECD countries.
The turnaround that has happened here, and retirement pensions being at their highest ever level in real terms, are surely all important factors to stem worry and hardship in the sort of household I have mentioned. My reason for dwelling on this is to point out that to have halted inflation in this way is relieving a truly harassing hardship. It was because I found the tone of the Motion so depressing that I looked around at some of the moves that had been made in the Government's determined attempts to restore the economy, especially for the inner cities. Clearly the policy is to be to achieve an ever-closer partnership between the public and private sectors.
I have decided that one of the most important talents in life is to be able to adapt and to be flexible. In a few years one's existence can change enormously, and similarly conditions can change equally quickly. This has certainly happened, as we know, in the inner cities. When he was Secretary of State for the Environment, Mr. Heseltine showed great resource in making the move to reinvigorate the decaying economies of our inner cities and to attract the attention of today's wealth-creators and investors. In fact, he sought the partnership of private and public financing, with private financing providing the most. Public expenditure is used there as a magnet for other cash; and this is typical of the Government's determined but subtle attempts to restore the economy.
Certainly a healthier economy means more demand for jobs and for business premises. Very recently the present Secretary of State for the Environment has announced three new measures of this kind. He

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revealed the first batch of successful applicants under the urban development grant scheme and the first successes under the new derelict land grant scheme. He announced the addition of eight local authorities to the list of inner city programme authorities and the designation of three more authorities under the Inner Urban Areas Act. As I understand it, the urban development grant works as a signal to attract such private development as is in the interests of an inner city. It is used as a level to get major private investment into an inner city proposition.
How far this has succeeded can be measured by the Secretary of State's approval last month of 41 schemes with a total value of £50 million, all of which schemes are situated in inner city areas. The interesting point is that for every £1 put in by the public sector, £4 is placed there by private companies and private investors. The scheme will help with jobs, and clearly much more activity on these lines is under way.
As I said, I took a look at these schemes to see how closely they matched the Motion before us. The answer is that I can see that they do not recognise this constructive programme. Schemes operate in all the areas of local authorities designated under the Inner Urban Areas Act plus a few more. Local authorities are closely linked to the scheme and pay 25 per cent. of the public sector costs while central Government meet the rest. The derelict land, Category "A", scheme recently had 46 projects approved, and here the ratio of leverage through these schemes taken together is £1 of public money to £6 of private money. Just lately the Inner Urban Areas Act has been extended to include half a dozen more local authority areas. It is inspiring news. I went through the schemes and enterprise zones. The Government have pushed out this boat, filled it with private investors and are sailing ahead to improve the physical environment and to help clean up the debilitating and oppressing inner city landscapes.
It must be right to go for private capital, for this is cash which does not come out of the taxpayers' pocket. Private expenditure acts here as a healthy blood transfusion, while public sector money is blood sucked from the veins of the public purse. The same does not apply to the National Health Service in which expenditure has reached record proportions. Yesterday I asked a parliamentary Question in this House about the management inquiry team. Because of this, I fear that some of your Lordships jumped to the conclusion that I am against the National Health Service. As I am one who is ever thankful for its excellent attentions, I thought that I must correct this view. Yet I believe that a very large and very expensive service needs to have the closest care and attention in order to sustain its excellence.
I should like to make my position quite clear on that because, on reading Hansard this morning, it seemed that, for instance, the noble Baroness, Lady Gaitskell (who, I notice, is not in her place at the moment) did not quite understand what I was trying to say. With expenditure increased dramatically to a record £15·5 billion it is reassuring to know of the management team's programme. What is encouraging, too, is the increasing voluntary service involvement in the social services, another area where public and private sectors
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are working increasingly together. In the field of disablement, as some of your Lordships know, I have always worked with the Disablement Income Group. We still fight those battles in which we have been unsuccessful with successive Governments; for instance, for the extra-expenses allowance for severely disabled people based on extent of disability and not on the cause; for the married women's invalid care allowance, and against the married women's household duties test. Perhaps the most important of all the longed-for improvements is the partial incapacity to earn allowance. Without this the threat of losing invalidity benefit if one earns more than £20 a week is a real disincentive to work. I can assure your Lordships of that.
But we believe that all these cases should have high priority as soon as resources are available. Nevertheless, it is exciting that technological advance is used now towards solving problems of daily living for disabled people. Five new communications centres to help speech-impaired people, for instance, have been announced by the Minister for the disabled, Mr. Rossi. This means that Britain leads the world in that work. In addition, there are numbers of other such projects, the lists of which have been placed in the Library. From 14th to 18th March there is to be an exhibition in the Palace of Westminster which is backed by the BMA and the United Nations World Communications Year; it is to be in the Upper Waiting Hall, and other advances will be on show there.
In May drivers of special vehicles, including powered chairs, have the chance to attend a show of a wide range of vehicles, of hoists, et cetera, and to be able to take driving tests if they so wish. I am wondering whether your Lordships will send me to take such a test! These are some of the many schemes that include full-handicapped mobile people. Under this Government there has been a great increase in the number of district nurses, midwives and community nurses. When I say a "great increase" I mean at any rate it is a greater increase in proportion to hospital staff. But there also is this invaluable back-up support that is provided by the crossroad scheme, the family care schemes and other similar organisations.
The Manpower Services Commission community programme gives very many openings for unemployed people to get jobs on projects which are of benefit to the community. It is necessary that the sponsors have management skills and financial resources. To meet those expenses we have to be able to cover the extra contribution towards the MSC grant. I know something about this because we are considering just such a plan for a project with which I am connected. The whole scheme is a real attempt to give jobs on projects which need to be done.
One of today's worst tragedies, obviously, both here and overseas, is unemployment. Remembering the 1930s, I am bound to say that today's situation—thank the Lord!—is very different from the pittance of dole and/or pay that then was possibly the best on the horizon. Now, I suppose, redundancy payments and possible job schemes, possible rates of benefit, are at least something. Nevertheless, everyone must yearn for this problem to be eased.

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In this technological age, as I have said before, to be flexible and adaptable is more than ever important. While we all know the sadness and disappointments that must abound through shortage of jobs, it is by being helped to be resilient, adaptable and flexible that one is most likely to be able to bounce back. I speak here with personal experience and having gone through just such a stage of life myself.
To return for one moment to the tone and wording of the Motion, I assume that this is a plea for raising public expenditure, spending more taxpayers' money and risking a swift return to the higher rates of inflation with another threat to every nest egg and successful enterprise. There is no need to look further than across the river to the GLC and its enormous increase in rates—a rise in the rates precept of 14 per cent.—to see a taste of how labour policies can clobber a community.
Most of us are born with a genuine wish to help our fellow men, especially those of us who are in trouble. I, for one, have been on the receiving end and am always grateful. However, some of us realise that there is no hidden gold mine to pay for our endowments. Once we forget this, we quickly increase the trouble. As I perceive it, the Government's plan is to get a healthier economy through private and public expenditure working in partnership. This is the best route towards achieving what is called for in the noble Lord's Motion. Because this line differs so much from the view expressed, I must oppose the Motion.
6.5 p.m.
Lord Briginshaw: My Lords, the first thing that I want to do is to thank my noble friend Lord Wells-Pestell for initiating a debate on the Motion in such a robust and moving fashion. The economic committee of the TUC met Sir Geoffrey Howe, the Chancellor of the Exchequer, in London on 28th February, to place before him a £50 billion package of proposals and to urge jobs aid as contained in their economic review. The TUC general secretary, Mr. Len Murray, was reported to have said afterwards:
"There is no hope of the Government doing anything that will ease unemployment or create more jobs".
I think that the noble Lord, Lord Cockfield, in his contribution to our debate this evening, underlined the correctness of the reaction of the general secretary of the Trades Union Congress.
I want to commend to your Lordships some positive ideas and proposals which the Trades Union Congress has recently enunciated in their economic review for 1983, under the title The Battle for Jobs. I shall return to that title later on. I want to bring in the voice of over 10 million of our fellow citizens, and I shall develop that, too. It might seem a little discourteous if I left matters there and merely invited your Lordships to read the details set out in the booklet which the TUC have issued, price £3. I hope, however, to underline a timely indication which I think my noble friend Lord Gormley conveyed in his maiden speech in this Chamber recently. It was a polite warning to the Government, the media and some establishment figures that the sweeping and divisive mayhem of attacks on the trade union movement and its members in Britain was dangerous and, if continued to its apparently logical conclusion, would eventually lead
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to an unwanted civil conflict in the United Kingdom. There are undoubtedly some Government Ministers whose aims, in my view, are pursued in consciously provocative fashion.
If I am correct in my interpretation of what the noble Lord, Lord Gormley, was saying, in an almost affable presentation—as those noble Lords who were present will recall—I would join him in drawing attention to certain factors and people in our country who should know better. Not that there should never be any criticism of trade unions, but that certain "top people" are going over the top. There are a number of interpretations of how you go over the top. There is one in football in which one can break someone's leg. There are also professional fouls. But, I shall not dwell on these descriptions. However, the outcome could be disastrous for our country. I think that the noble Lord, Lord Bruce, was correct in pressing your Lordships for some details of value in this regard.
First, may I remind your Lordships, in polite fashion if you like, that the Conservative Party has no monopoly of patriotism or title to our national flag, the Union Jack, and that when we discuss British trade unionists we are concerned with those of our fellow countrymen and women whose record of fundamental patriotism over all the years, and particularly through two world wars, is equal to any. Secondly, I should like to define in this context how one sees patriotism, and in particular to declare my own view when referring to real patriotism. It must surely be desiring the greatest good for the greatest number, without reference to race or creed. So therefore let us throw out the simple, vulgar, jingoistic flag-waving as having any claim whatsoever to serious consideration in this connection.
It may be that I am among the dying breed of British nationalists. It is for these reasons that I have dwelt a little, though today I am inviting your Lordships to lift your sights above, the opportunist attacks on the working people and their defensive organisations. For this to be done, one must concede immediately that these organisations—made up, as they are, of our fellow countrymen and women—have all the strengths and weaknesses of mankind, so that among the millions of members of the largest democratic organisation in the United Kingdom (the trade unions and their members) the members do not always present themselves as the absolute acme of perfection. We are thinking of 10 million people who are our fellow countrymen and women.
Having said that, I would now draw your Lordships' attention to The Battle for Jobs which I see as the current "Battle for Britain". It is a supreme test of patriotism and it commits your Lordships and all our fellow countrymen and women of good will to rise to a platform above the narrow political party struggle and to break with the policies of negation and national division to which your Lordships have referred, which are being perpetuated by the Government of the day, certainly in my view. Above all, we have to direct our eves over the horizon.
When I mention civil conflict, I am addressing myself to the basic intelligence of the Members of this House. In this spirit, and in justification, I draw your Lordships' attention to some of the detail in the summarised presentation of the TUC review to which

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I referred in my opening remarks; and being so far down the batting list I am going to hurry this as much as I can. I have sought to extract a summary from each chapter of the review in the presentation without detracting from my main point, that is, the positive nature of the trade union efforts in their basic, patriotic, national interest. The objective approach is my main contention, and this is a side that we do not see sufficiently.
Under this Government there has been, they say—and I agree—an unprecedented economic collapse, and social inequalities have been widened. This is quite contrary to what was promised, as unemployment has grown and recovery, according to Ministers, has always been imminent but never quite arrives. The Government justify their performance by saying that the present hardship is a necessary price to pay for previous mistakes and that 1979 was the year in which decades of poor relative performance were turned into absolute decline. The Government's policies have been presented in a number of different guises, but the underlying philosophy has been consistent hostility to trade unionism, to social provision, and a willingness to exploit divisions throughout our society. Even the Government now admit that their policies are not going to produce a recovery; but the longer these are continued the more long-term damage will be done, so making the task of recovery more difficult.
It is not too late to repair the damage, but only a radical and far-reaching programme will do the job. The Government's new financial strategy has meant that output has stagnated, investment has fallen and bankruptcies have increased. Manufacturing trade is in deficit for the first time for a century. I think that is a point to emphasise: I repeat that manufacturing trade is in deficit for the first time for a century. The manufacturing and construction industries have been worst hit. Unemployment is expected to go on rising to 3·5 million on the old-count basis this year. Long-term unemployment is a major feature of the unemployment crisis, and over one million workers have been out of work for more than a year. These factors—and I am putting them in the smallest compass—are from the review itself and are the positive features that I wish to emphasise.
Unemployment has hit at all the workers, young people, women and ethnic minorities. In the worst-hit regions there are over 40 workers for every vacancy. The real job shortage is over four million and a registered unemployment total of three million costs the Government £15 billion a year. These factors that the TUC have presented publicly are not unknown factors, but it is most important that I present to your Lordships for your consideration and information the positive side of the work of the Trades Union Congress and its organisation as one of those important democratic bodies inside our country.
The foregoing shows that lower wages will not mean more jobs, because the workers' purchasing power will also be cut. Many of the unemployed had low pay in their last job. Britain's total labour costs are lower than most other countries, and I think that is important. The share of the national income taken by income from employment has not grown. New technology has
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not caused the present recession. Immigration and women going out to work have nothing to do with the level of unemployment. The unemployed are not better off being out of work: they just are not better off. Another year of this strategy—and this connects us with the current situation of the coming prospects of the Budget—and another year of the repetition of these factors and of worsened prospects is impossible.
The TUC's alternative budget strategy includes increased Government expenditure quite boldly, for reasons which I will explain, a lower exchange rate, reduced VAT and managed trade. The Budget package—this is the budget package the TUC has presented to Mr. Howe—will lead to economic expansion of 4 per cent. and give a major boost to employment. Co-ordinated expansion would not lead to runaway inflation, because of the balancing of the factors. But to tackle the underlying weaknesses of the economy, the first year's Budget needs to be followed up by a medium-term growth strategy, in order to reduce unemployment below 1 million. The starting point for a five-year plan must be the commitment to full employment and social progress, as shown in the period of post-war reconstruction. If I may remind your Lordships, my noble friend Lord Bruce dealt with this in considerable detail, and my noble friend Lord Wells-Pestell drew out some factors in support of the innovation of the social wage.
Planning must involve new institutions designed to tackle the structural weaknesses in the British economy. But it will work only if there is the maximum involvement of trade unionists at all levels in decision-making. This provides an essential political input. I am sure that your Lordships will assess the possible success of the political input in creating a sense of involvement.
The priority goal is to reduce unemployment to below 1 million over five years. This means economic growth of 4 per cent. sustained over that period. A major public investment programme is at the heart of the proposals which the TUC has in mind, but investment is needed throughout the economy. Investing for reconstruction on this scale will create jobs in all sectors. Only public spending can meet the basic needs of the worst-off. Only conscious public spending will provide a national network, such as transport or telecommunications. The planning system must be reformed and opened to public debate. It must concentrate on allocating real resources to meet real needs.
Public spending helps the rest of the economy by supplying a better infrastructure—this is one of the key factors in everything to which your Lordships are giving attention—a better labour force, and buying goods and services from it. The public sector can be used to restore economic growth. The public sector is not too big, but too small. De-industrialisation—a long run development—has accelerated rapidly in the last three years and it is of concern to all of us. An efficient and competitive industrial sector is crucial, if the return to full employment is to be sustained, with all that goes with it. A planned approach to industry involving those affected by the decisions is the key to industrial success. A new investment strategy based on the National Investment Bank and the NEB, and harnessing the pensions funds, is a top priority. I agree

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with the main thinking of the TUC in commending these factors to your Lordships.
Industrial policy must be flexible enough to have a strong input from regional and local interests. Public corporations can be used to create real jobs in the public and private sectors, and clear mechanisms are needed to manage the movement away from excessive defence expenditure. Powerful research, training and education strategies are needed to underpin industrial recovery. Given the high levels of imports, there is a clear case for the planning of trade, based on a managed exchange rate and import controls. Already, your Lordships will see that what attracted me to present this policy is the balanced, positive nature of the thinking of the General Council of the TUC.
The policies of the United Kingdom and United States Governments are a major cause of the problems, according to the TUC. The world economy is in crisis, and they say that the problems are getting worse. Expansion in one country can run into difficulties if the rest of the world stays in recession. But co-ordinated expansion would help the world economy as a whole, and each country would gain proportionately more than through isolated action. Positive policies are needed to secure development in the third world. I am sure that your Lordships will already have listened many times this week to what has been said about interesting ourselves in the well-being of the third world, in both their interests and our interests.
Inequality is a long-standing problem, but the massive rise in unemployment under the present Government has played a direct role in making inequality worse. Government cutbacks have resulted in a significant and sustained reduction in living standards for a major part of the working population. The TUC say—and I agree with them; it can be tested—that, in contrast to the unemployed and low-paid, the rich have been getting richer. This has already been mentioned in the debate today and I shall not press the point, except to say that disparities in incomes are reinforced by the extreme inequalities in the ownership of personal wealth.
The TUC's five-year programme for the economy is matched by a comprehensive package of measures to promote equality in terms of job creation, pay, the quality of working life and reductions in working time. It is all in one piece, as we go along. Priority must also be given to people who are unable to support themselves out of employment income, and this requires a renewed emphasis on improving the social wage. These factors may appear negative in the minds of noble Lords, but they test the positive nature of the proposals. The TUC recovery package is divided into two parts.Action Now is a one-year action plan that could be started now. The five-year expansion plan is the follow-up—a wide-ranging strategy designed to promote jobs, growth, democracy and more equality in Britain.
Taking the £10 billion budget package out of the £50 billion which the TUC presented to Sir Geoffery Howe for his consideration, it breaks down very quickly: the reconstruction of Britain programme—housing, education, hospitals, energy, roads, cities, water, sewers and telecommunications,
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£3,200 million; manpower, education and training measures, £1,800 million; aid to the regions, £850 million; local authorities, £250 million; state pensions increase—part of the political input to which I referred—£700 million; social benefits increase—and this, too, is part of the political input—£750 million, National Health Service extra spending, £175 million and a cut in VAT from 15 per cent. to 12½ per cent., £2,300 million.
Selective import controls on motors, machine tools, textiles, tyres and furniture are essential, if we are to be serious. The results have been tested—and this is what particularly attracted me to commending these factors to your Lordships. The TUC have tested the results of the package by the economic model used by the Treasury. It is not a secret; noble Lords on the other side know this. After one year, these are some of the results over and above the effect of current policies: unemployment down by 574,000; national output up 3.3 per cent. This is the way you will pay for it: prices up 0.9 per cent., and living standards up 3.2 per cent. The other part of the £50 billion package can be set out in full detail, but I shall not weary your Lordships by going through it.
The above factors are the broad guiding principles of an expansion plan. I have noted, during my part divorce from the TUC over a period of years as a result of retirement, that the TUC are not laying down a minutely detailed blueprint. A programme based on these principles will nevertheless lay the basis for a successful and growing economy. Furthermore, after five years unemployment will be below 1 million. It will also create a new, democratic way of planning how our industries and economy develop, instead of abandoning them to market forces. It will radically improve income and job opportunities for women, and it will tackle income inequalities and low pay. It covers the field to which your Lordships have given careful consideration this evening.
My conclusion, having studied all that the TUC have said and having taken the decision to commend their review to your Lordships this evening, is that the money we need for the infrastructure, which is the basis of everything else and which can move this country in a new direction, must come from the state. I end as I began, by commending to your Lordships the TUC review.
6.32 p.m.
Viscount Chandos: My Lords, to those of other noble Lords I should like to add my particular thanks to the noble Lord, Lord Wells-Pestell, for introducing the debate on this Motion. Since I last spoke in your Lordships' House about the Government's economic policies the noble Lord has been kind enough to come to my defence against the formidable attack of the noble Lord, Lord Boyd-Carpenter. Therefore, I regret all the more having arrived too late to hear the speech of the noble Lord, but I shall read it, and the speeches of the other noble Lords whose contributions I missed, with great interest. I hope that my own short speech does not suffer too much from my having missed some of the debate. I should also like to apologise to your Lordships for my very croaky delivery, due to a heavy cold. I shall inflict such a painful noise on your Lordships' House for only a very short time. I might

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ask the noble Lord for some of his water if my voice gives out during what I can assure your Lordships will be a rather shorter speech than it would otherwise have been.
The attack from which the noble Lord, Lord Wells-Pestell, defended me last year was based on the suggestion that the Social Democratic Party had no positive policy towards economic recovery. On this occasion, therefore, although the wording of the noble Lord's Motion is extremely tempting, I shall try to resist that temptation and will restrict the time I spend upon criticising the lamentable record of the current Government. The speech of my noble friend Lord Diamond has, I am sure, already demonstrated both the extent and the effectiveness of my party's policies. So I should like to concentrate on just one subject: the control of inflation in times of more rapidly increasing economic activity. I approach such an academic subject with some trepidation in the presence of an economist so distinguished as the noble Lord, Lord Harris of High Cross, but it seems to me to be the crux of the question raised by today's Motion.
First, I should like to try to summarise the case against the present Government and their social and economic policies. The level of inflation is now several per cent. lower than the rate inherited by the Government in 1979. There can be no denying, moreover, that in 1979 inflation was already moving on an upward trend, even before the first catastrophic Budget of the Chancellor. Equally, it is impossible to deny that from the middle of this year onwards there will also be a rising trend in the rate of inflation, so it would not seem to be an unfair comparison to look at the rate prevailing at the time of the General Election in 1979 and that expected to apply at the time of, say, a hypothetical general election in the autumn of this year. Such a comparison will show perhaps a three or four per cent. per annum difference in the level of inflation with, in both cases, a rising trend.
For this modest improvement in the level of inflation, ignoring for a moment the far higher rates that occurred in the interim, in some part due to the Government's own economic incompetence, a staggering cost has been incurred. As the noble Baroness, Lady Gaitskell, has already told your Lordships, many of the electorate, according to the opinion polls, do not attach all the blame for the rise in unemployment, the fall in real incomes and the devastation of manufacturing industry to this Government's policies. An election, however, like an execution, concentrates a man's mind wonderfully; so, if not now, then certainly in the months to come, I believe it will be generally seen that a very substantial part of these economic failures have been caused or exacerbated by the Government and not by extraneous factors, and that these can scarcely be justified by the modest economic success of the inflation rate which I have already mentioned. There have been gains in productivity, but only at massive financial and human cost, and the same gains could have been achieved, and will be achieved in the future, through the policies which we advocate, with nothing like the cost and sacrifice.
The prospects for economic growth of any significant level, certainly enough to restrain the
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apparently relentless rise of unemployment, are non-existent under the current Government's policies. I had thought that the Government themselves had realised this and no longer had the nerve to predict recovery. It was therefore a surprise, but in a way a familiar surprise, to read early in the new year, once more, a forecast by the Chancellor of the Exchequer, reported in The Times, that economic recovery was around the corner. I seem to remember that one of the most famous recurring letters on the correspondence page of that newspaper refers to the writer having heard the first cuckoo in spring. The Chancellor's forecast nearly prompted me to write a letter suggesting that I had just heard the first cuckoo in spring, but I thought, after all, that a cuckoo stands some chance of heralding the onset of better weather, while this Chancellor has no prospect of heralding any significant improvement in our economic climate.
I have promised your Lordships that I will not spend much time upon attacking the Government. Instead I will suggest what an Alliance Government could do to improve the position and why our policies could achieve a significant increase in the level of economic activity and a reduction in the level of unemployment without provoking a serious increase in the level of inflation. As my noble friend has already shown, increases in capital expenditure will have a cost effective impact on the level of unemployment, as will specific shorter-term measures to increase employment in the fields of environmental improvement, the training of young people, the labour intensive social services and subsidies for the hiring by the private sector of the long-term unemployed. These, in my view, could be introduced without having any significant effect on the rate of inflation, while other policies of the Alliance's alternative budget are designed to mitigate the rising trend of inflation which is expected from the late summer onwards.
The Government suggest, however, that only if their own rules continue will inflation remain under control. As I said earlier, there are already clear indications that the rate will begin to rise again in the summer. If this Government were to be returned and to use the same methods to hold down the level of inflation as they have used over the past four years, the consequences for employment and economic activity would continue to be disastrous.
Despite the hundreds of thousands of unemployed who have been sacrificed in battle, the dragon of inflation has not been slain. It will not be slain unless and until the fundamental and structural problems of our economy—such as the restrictive practices on every side of industry and commerce, the rigidities in the housing market, the immobility of the labour force, and so on—are tackled. To that end the SDP's proposals on industrial democracy, profit sharing and union reform in particular will go far further in tackling the long-term problem than anything that this Government have attempted. But for these measures to be introduced with a reasonable level of consultation will take time, and it is for that reason that we have not ruled out the introduction of some type of incomes policy. We do not envisage an incomes policy as being essential in all circumstances, and certainly not as a long-term solution—but it should be held as an option to ensure that, if a certain level of reflation

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does put up the pressure on the rate of inflation—and in my view our proposals will do that only to a very limited extent—we can avoid the uncontrollable upward spiral that has been seen in the past.
I repeat to your Lordships that we do not envisage our fight against inflation being led indefinitely by the imposition of an incomes policy. In the medium and long term, inflation will only be restrained at a low level, without unnecessarily and severely depressing the level of economic activity and employment, through an increase in productivity created by a new approach to industrial partnership combined with the selective and discriminating application of Government intervention over market forces.
The Government and their supporters are inclined to support not so much a mixed economy as a market economy—as pure and free in their eyes as possible. They do this because they claim that only the markets can allocate resources efficiently, and that every layer or level of interference in that process is by definition damaging to the efficiency of our economy. I believe in a mixed economy because I question not only the fairness of the allocation of resources achieved through unfettered market forces but also even the efficiency. It is customary for noble Lords on the Benches opposite to question the understanding of any noble Lord on this side of the House of the markets and the way in which they operate. I have spent all of my perhaps short working life closely involved in a variety of different markets. While there are certainly noble Lords with greater experience of the market place than mine, I suspect that there are a reasonable number, even on the Benches opposite, who have less. I hope that your Lordships will not find that claim immodest.
From my experience of markets, with all their imperfections and the fallibility of all the people who comprise the market, I have never seen how any market could be the supreme arbiter of resource allocation. The markets will be a valuable and essential guide to the allocation of resources, but Governments are abdicating their responsibilities if they leave the ultimate decision to the market alone without at least a continuing and critical monitoring of the market's influences. Indeed, it could be argued that to allow market forces to overwhelm Parliament's power to intervene and act erodes the democratic basis of our society. For these reasons, I believe that a stronger economy with reasonable economic growth and prospects for employment, combined with an acceptable rate of inflation, will now and in the future require a balanced partnership between the markets and Parliament which is deserving of the description "mixed economy".
The SDP are proposing policies which will make both Parliament (through electoral reform) and the market economy (through industrial and union reform) more responsive to the wishes of individuals, which is an essential precondition for economic growth combined with price stability. In parallel with the policies designed to create economic growth without a surge in inflation there are as my noble ally Lord Beaumont of Whitley, has said, desperately needed measures for the alleviation of poverty which must be introduced and which have been proposed by the SDP. I will not detail them here, nor rehearse the shaming evidence of their need, but rather will make
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just one point about the Government's ability to pay for the increased expenditure required.
My noble friend Lord Diamond has already told your Lordships that the PSBR implied by the Alliance's budget proposals will, at 4 per cent. of GDP, still be modest by the standards of international comparison. I should like to reiterate, drawing again on my experience as a banker operating in both the domestic and international capital markets, that a substantially larger borrowing requirement than that planned by this Government could be financed with no ill effect on the rate of inflation. The PSBR is a meaningless figure as defined or, should I say, fudged by the present Government, and by previous Governments for that matter. The pursuit of a PSBR target will be as damaging as was the Government's single-minded obsession with monetary targets.
I am in no way embarrassed by the jibe of the noble Lord, Lord Harris of High Cross, that our new party is on this occasion supporting a Motion proposed by a distinguished Member of the party from which so many of our members, both inside and outside Parliament, have come. The noble Lord, Lord Wells-Pestell, has proposed a Motion whose words and spirit I wholly support. I hope that the noble Lord will forgive me if I merely add that I believe the policies proposed by the SDP and our Liberal allies will achieve invigoration of the economy and the alleviation of hardship, where those of the Labour Party will not.
6.47 p.m.
Viscount Massereene and Ferrard: My Lords, it always used to be the custom in your Lordships' House—and I have been in this House a very long time—that Back-Benchers were not supposed to read speeches, but in the past few years that custom has rather gone by the board. However, I should just like to make that observation.
If I understood the noble Viscount, Lord Chandos, correctly, one of his points of blame for our present position—which I personally do not consider to be nearly so bad as people make out—was the restrictive practices of commercialism. Perhaps I am wrong about that, but I believe he spoke about restrictive practices in business. It is a freely known fact that the restrictive practices practised by the trade unions are responsible for about 1 million of our unemployed.
I was also astounded to hear the noble Lord, Lord Briginshaw, speak about the great democratic tradition of the trade unions. I have heard some amazing things said in this House but I have never heard more amazing speeches than those which I have heard in this House today. To speak about the democratic principles of trade unions is really going over the top. When they elect their own executives, there is no democracy at all, and they are above the law to a great extent. Although we have clipped their wings slightly, they can freely break contracts freely embarked upon by employers and employees. I could go on, but I do not wish to do so.
I should like instead to refer for a moment to the speech of the noble Lord, Lord Wells-Pestell. He said, so far as I remember, that we had now sunk to two nations—although that, of course, is nonsense. He also said that too many people have too little and too many

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have too much. That is hardly worth answering. The other thing that he said which rather interested me was that he thought that the number of people unemployed was about 4 million. He was not referring to the registered number of unemployed but to the corrected truth. I disagree. I believe the actual number of registered unemployed people is about 3,200,000, but that varies with school-leavers by 100,000 or 200,000 either way. But those are not the true unemployed. We all know about moonlighters. I know several of them. There are plenty of men here—not in the Chamber, although there may be, but in the country—who, we all know, are enjoying all the benefits or, at any rate, the dole and who are doing work on the side.
I asked a question in this House, I believe three times and it is such a bore having to repeat it! A few years ago an inspector went to Southend employment exchange and found over 100 men who had been drawing the dole for over a year. If he had found the same condition throughout the labour exchanges in this country at that time, which was about six or seven years ago, there would have been hardly any unemployment in the country at all. Therefore, these figures for registered unemployed are not the true figures. I know several women who are now on the dole who have rich husbands. They had jobs but they have no right to be drawing the dole. There have always been 400,000 or 500,000 people who are unemployable but I reckon that the true figure of unemployment is certainly not much more than 2 million. I agree of course, that that is a very serious figure.
However, I should like to ask the noble Lords opposite how many of them have ever paid wages out of their own pockets. Very few, I imagine, from the speeches they have made. Unfortunately, I have to pay wages out of my own pocket, but luckily, owing to the tremendous rise in wages, I do not now have to pay so many as I once did. But I deplore that because one cause of our recession, leaving out oil—I have said this before, as have, I believe, other noble Lords—is that between about 1970 and 1979, eight or ten years, wages rose by 400 per cent. while productivity increased by only 9½ per cent. That is one of the chief causes of our recession.
I feel very much for the unemployed who do want to find jobs. If the noble Lord who introduced this Motion, in speaking of hardship, is referring to mental hardship I agree with him, although I should have preferred the word "frustration". It is very frustrating for men, especially married men, if they cannot find employment. That is a very serious matter. But we must be thankful that, as regards physical hardship, with the welfare state that no longer exists. It may exist if a man drinks all his benefit and his family has to go without something, but it does not exist in general. I have no objection to being taxed so that everyone has reasonable housing, warmth, good food, their children educated free, and a good health service. I have no objection to being taxed for that, but I do object to being taxed to provide for scroungers.
What is the cause of unemloyment today? We have had many reasons put forward but one reason that we have not heard is automation. Although I have always
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been chiefly concerned with agriculture, but only in a small way now, I once had a factory which I started after the war. I have often said this before. I ordered machinery and I put in automatic machines. Of course, some of the labour force had to go. The result, however, was that we did produce more wealth.
If anyone has learned anything about economics, as I presume one or two of your Lordships have—I have learned a little but I am more on the practical side—he will know that one of the first things one learns is that the object of production, from the point of view of economics, is to produce wealth, not necessarily jobs. That sounds hard, but the theory is that if one produces that wealth it is then divided out, through taxation, so that everyone can have housing, good food, and so on. However, if one believes that the object of production is merely to employ people, production will go right down.
One thing that the Government have done, and I am pleased that they have, is to get rid of a lot of over-manning. That has streamlined much of our industry and has been a great help. For instance, our export trade for 1982 was extremely good. In the past two years, 1981–82, our balance of payments has broken all records. I think in 1981 the surplus was £6,000 million; in 1982 it was £4,636 million. It is not all due to the oil, and the Government must be congratulated on that.
As regards curing unemployment, I do not believe that any Government that follows the present Government, will ever be able to cure unemployment. One can, of course, for a short time spend, spend and spend, as, apparently, Peter Shore, would like to do, by employing people in artificial jobs—digging holes in the ground and filling them up again, if you like. But one would soon have the International Monetary Fund intervening.
There are one or two things that we can do, particularly as regards youth employment. The Government are to be congratulated on the various schemes that they have for youth employment because that is extremely important. As we all know, it is very bad for young people to leave school and not be able to find a job. It is right that the Government are reflating for that purpose. They may perhaps be able to reflate a little more to cure some adult unemployment. But they cannot overdo it, as I said, because then we should have the International Monetary Fund after us.
Another thing that we could do regarding imports and especially regarding Japan—but it has to be done in a rather gentle way—is that where a country like Japan sells to us far, far more than they buy from us, we ought to put a bit of pressure there and we ought to have import duties on certain Japanese goods. There may be other countries where we should do that, too, but we have to do it extremely gently and cleverly. It has been tried before here in a big way by former Governments—by a Labour Government, actually—but, of course, it proved rather disastrous in the end.
I do not really see that we can do much more than we are doing already. We have to hope that the recession recedes—and there are signs throughout the world that it is receding. But to blame this Government, as several noble Lords opposite have, for the

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amount of unemployment and the recession generally is quite absurd.
I think I have said enough. I have been 13 minutes. That is not as long as a lot of the noble Lords opposite, but I think that 13 minutes is quite fair enough, so I shall sit down.
7.1 p.m.
Lord Stewart of Fulham: My Lords, I hope that the noble Viscount will allow me to say how much I always enjoy his speeches. I think that we all do. He brings into this House a breath from the wide and varied world outside as he tells us of his wide and varied acquaintance. We have just learned of his acquaintance with moonlighting unemployed and with unemployed women with very wealthy husbands. In an earlier intervention today he told us about the unemployed using their redundancy pay to buy villas in Spain. The last time we had a debate of this sort they were having holidays in Corfu. If only we can go on at this rate, the standard of life of the unemployed, and therefore. Presumably, a fortiori, of the rest of the population, ought to top all expectations.
The Motion speaks of the injury done to various sections of the population by Government policies. It is significant that they have managed to hit those parts of the population who will suffer most. There are, first of all, those on whom they have inflicted the dreadful frustration and indignity of unemployment. One wonders who deserves one's sympathy most: the man in his middle fifties who loses his job and faces the fact that he will probably never get another, or the school-leaver who wonders whether he will ever get a job in his whole life. That is the trouble with unemployment: it is not merely the suffering now; it is the injury it does to the future—devastated industries and young people getting no experience of work. All those things are losses far greater than the immediate loss of wealth arising from 3½ million people out of work.
The noble Lord, Lord Cockfield, rejected any of the various proposals made for Government action to deal with unemployment by saying that they would involve something in the nature of an incomes policy, something about foreign trade, exchanges and so on, and that all that would be the end of freedom. When he said that, I am hound to say that I shared the view later expressed by my noble friend Lady Gaitskell: I could hear him expounding those views to an audience of unemployed. If the noble Lord would go down to one of the parts of the country (they are not hard to find) where unemployment is extensive, he could then explain to those people that they were not serfs, to have their wages determined by an incomes policy, because the Government's wisdom in allowing for the play of market forces had ensured that they should not have any wages at all; that they were not going to be troubled by Governments who tried to regulate the exchanges or to regulate foreign trade, because, again, everything would be left to the working of those market forces that had produced the results with which they were so familiar. I cannot help feeling that before he had gone very far in his speech many of them would have decided to go off on their holidays to Corfu or to their villas in Spain, and leave him preaching to empty air.
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But it is not only the unemployed who have been hit. There are the sick. I notice that there have been eulogies of the National Health Service from the Benches opposite. I think it will now be the fifth time that the Government have raised prescription charges—and they have not been in office four years yet. The raising of prescription charges, at least with that degree of persistence, is peculiarly contrary to the whole nature of the health service, because it creates the situation that the worse off a person is in health the more he will have to pay. There will, of course, be the usual ambulance wagons—the elderly, and possibly those subject to chronic illnesses. Concessions will be made to them. But we know perfectly well that the object of the increase in prescription charges is to raise money for the Government and to enable them to make tax concessions that on the whole will benefit people decidedly better off than those who are troubled by the prescription charges, because that has been the tendency of Government policy all along.
Then we come to the old. We are told that the Government will keep up the value of their pensions; but it used to be the policy of this country that the pension should be maintained not only at its actual real value but in proportion to the wealth of the rest of the community. It is that which the Government have definitely decided to abandon, although if, of course, the wealth of the whole community is going to go on moving, as it has under this Government, in the wrong direction, that possibly is not so much to be deplored.
Another person they have hit is the less well off taxpayer. The noble Lord, Lord Cockfield, deplored the fact that the total volume of taxation had gone up; but, of course, the Government began by making substantial reductions in taxation to the wealthiest—those who needed it least. Having done that, they then increased the total volume of taxation, which meant that the burden was all the heavier on the less well off taxpayer. That is particularly true if one takes into account not only direct but indirect taxation. One may add that that was flatly contrary to the Government's promise. One thing that they promised over and over again was that they would reduce taxation.
I never think it is sense for Governments to prophesy that kind of thing, because if the country grows more prosperous it can and ought to spend more on its social services. Just as our private expenditure will go up if the country gets richer, so ought our public expenditure to go up, unless the people who especially need public expenditure—the old, the sick, those in need of education and so on—are to be made continually worse off. I never pay much attention to promises to reduce taxation, but the Government of course insisted that that was what they were going to do; but it is what they most emphatically have not done.
There is the other form of getting revenue from the public—the rates. The Government have told us that they want people to be free; but, of course, they have practically destroyed the freedom of local authorities with regard to the amount of money that they can raise in rates and, increasingly, what they can spend it on. The effect of this has been—and complaints have not come only from Labour local authorities by a long chalk—that local authorities have been constantly

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cramped in the money that they can spend on necessary social services.
If we look at education, health and so on, I think we shall find that the economies have usually fallen on the most vulnerable groups—on those children who are in need of special education, on children in need of nursery education, the health service, home helps and generally in a way that makes the public services meaner and less satisfactory than they were before. There have been all those injuries all along the line, and the Government's reply always is that the only remedy is—using the words of the Motion—"to invigorate the economy", and that means the loss of our freedom and disasters of all kinds.
The case for invigorating the economy in one way or another has been put very persuasively by several speakers on these Benches. Although he is, alas! no longer of my own party, I thought that the most powerful and persuasive presentation was made by the noble Lord, Lord Diamond. It simply will not be possible for the Government to brush that aside by saying that Milton Friedman or someone of that kind said that it would not work. There is a dreadful doctrinaire approach about the Government's constant recurrence to the fact that we cannot increase public expenditure. Yet every now and again they do so. There was a statement from the noble Lord, Lord Bellwin, not so long ago involving the pouring out of public money for very useful and sensible purposes. He said that that was all right and that it was not inflationary because it was going to be done concurrently with expenditure of private money. It does not make sense.
If one sets to work on a useful necessary project like the modernising of our roads or railways, whether that is inflationary or not is not determined by whether it is done by public expenditure or by private expenditure; its value is determined by its usefulness and by the efficiency with which it is carried out. The Government always feel that they can never engage in any activity unless they can show that there is a private profit in it for somebody. That greatly limits their power to do anything to help the economy.
Finally, we see also the growth of what is called "the new Conservative philosophy", which is all about the values of private enterprise, private this, private that and so on. The interesting point about all these proposals is that they are all going to result in a shift in the distribution of wealth in the interests of the wealthier section of the community. Education vouchers are urged on the ground that they will give greater freedom of choice to parents. They will probably do that for parents who have substantially above the average income already; they will improve the position of those already well up the ladder and leave less to be scrambled for by the rest. The same is true about the sale of council houses. The same will be true about the various tinkerings with the health service which are proposed in the name of freedom of choice and Conservative philosophy.
So in this debate the noble Lord, Lord Wells-Pestell, has very rightly drawn our attention to the injuries done to the population by the Government's policy and to the need for a reconsideration of ways of
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invigorating the economy. It also helps us to notice the alternative: a continuance of Tory philosophy, first, in its persistence in refusing to invigorate the economy and going on and on with 3 million or 4 million unemployed; and secondly, in trying to elaborate on that situation by thrusting a deeper and deeper wedge between the richer and the poorer sections of society—a divisive and bitter policy of no use to this country.
7.13 p.m.
Baroness Seear: My Lords, I must first apologise to your Lordships' House that I had to leave the debate earlier this evening because I was attending a Committee of your Lordships' House. It is particularly unfortunate from my point of view because I missed the speech of my noble ally, Lord Diamond, which I am sure would have been extremely beneficial for me to hear, not least in order that I can be sure that I agree and do not in any way contradict anything that he said.
It is very easy to become acclimatised to other people's sufferings. We must be grateful to the noble Lord, Lord Wells-Pestell, for initiating this debate this evening and for reminding us—if we needed reminding—of the problems and the horrors of long-term unemployment, with an unemployment figure somewhere not much short of 4 million if we do the calculations correctly. The noble Lord has also reminded us of the plight—many other noble Lords have mentioned this and so I do not intend to dwell on it, not because I do not think it is important, but because I do not think, especially at this time of night, that repetition helps very much—of a married man in his forties (and that is what it has come to) with children, who loses his job at all levels and knows perfectly well that he is not likely to get another. That is something which should be thought about and it should be realised how hideous it is. The noble Lord has also reminded us of the plight of the school leaver who is unable to get work and who sinks into a kind of apathy from which it will be very difficult to arouse him if opportunities come later. All this is horrible, and I agree with what the noble Lord, Lord Wells-Pestell, said.
I also agree with the noble Lord's criticism of the Government in that there has been surely excessive concentration on one approach to the problems of unemployment and consequent poverty in this country. There has been the almost obsessional concentration on the problems of monetary supply—not that the Government have always succeeded (far from it) in controlling the monetary supply. There is also, I was about to say, the simple-minded belief, but it is really the almost obsessional belief, that if you pursue this one doctrine, then at the end of the day all will become well. Surely it must be true that to so complex a problem there are no simple solutions. There is no single way in which to approach it. There has to be a multi-pronged approach with appreciation of the complexities and difficulties of the problems that confront us.
Having said that I agree with the noble Lord, Lord Wells-Pestell, and other Labour speakers up to this point, I must say that I am deeply disturbed at the tone of the debate and at the attitude that seems to be coming from the Labour Benches, that these problems

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are all the fault of a wrong-headed Government and that if they were in power the situation could so easily be put right. I know that noble Lords will say that it is easy for us from these Benches to criticise what has been done by both the Conservative and the Labour parties because we have not had the opportunity to make mistakes. I fully agree that if we had had the opportunity we, too, would have made a good share of mistakes. But so far as I have attended this debate I have heard not a whisper from the Labour Benches that in all the years they were in power they took the steps to see that the economic problems of this country were tackled—and if they had been tackled our plight today would have been far, far less serious.
What did they do for the restructuring of industry, to get away from the supporting of industries which patently did not have a future and move into the high technology industries—the industries where new markets were opening up? What did they do to get rid of this appalling concentration of unskilled people in our labour force?—the highest among all our industrial competitors. We know perfectly well that it is among the unskilled that there is the great concentration of the long-term unemployed. We know, too, that when recovery comes it will be the unskilled who will not be able to share in that recovery because they do not have the knowledge and the trained abilities which will be called for to meet those opportunities when they come. Above all, what did they do to change the attitude among their supporters—and we have heard it reflected again and again this evening in your Lordships' House—that private profit is wicked and has to be discouraged? What did they do about the condemnation and denigration of the wealth-creating activities without which you cannot get the investment on which the future development of the economy depends? And without that development there is nothing that can be done for the social services, which we all want so very much. They had it in their power when they were in government to do so much to change those attitudes, and what have they done? Listening tonight, I believe that they themselves still believe in the doctrines which, to the disaster of this country, they for so long have preached.
However, having said that, it is my deep belief that the position is serious and will not be changed by a change of Government. Of course, we would want to see a great many things done differently from the way they are being done at the present time. But what we need now is to get on with a broad base of agreement across the country for the changes that need to be made. I do not want to take part in the kind of party one-upmanship—no, indeed I do not—that has been going on.
It is far more important that we should look to the future and the things that can be done, because the Government have at last given us a chance. The one thing they have done—and this is of prime importance—is that they have got down inflation. Everybody in this House must realise that, unless we keep inflation down, the future of employment in this country is dim in the extreme, and that it is necessary to start by getting inflation down and to continue to hold it down. But it is also necessary to build, and to start building now, on the basis that is being created by
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the reduction in inflation. Surely this is where the Government can show that they recognise the need for change and take advantage quickly of the opportunity that the fall in inflation has given us.
There is to be a Budget next week. Of course, it is too late for anybody to influence now what will go into the Budget—that is obvious. But at least let us hope that in that Budget we shall see the kind of changes which really will make it possible for industry to get ahead again now that the inflation position enables us to do so. Surely we can get rid of the national insurance surcharge, which is so seriously handicapping industry; surely it is possible to move towards getting interest rates still lower, which would make a very great difference to a great deal of industry in this country and stop a great many companies going out of business over the next six or nine months if interest rates continue at the present level. Above all, we must take action to ensure that, as recovery begins—and there are good signs in the world economy that there are the slow beginnings of economic recovery—we do not move back to the position in which we get pay increases which once again will simply lead to inflation.
The noble Lord, Lord Cockfield, seemed to be totally confident that as recovery takes place, everybody will have learned their lesson about the dangers of wage inflation and that there will not be the big wage claims and the inflationary consequences of those claims which we have experienced again and again in the past. He believes that the good sense of ordinary people up and down the country will ensure that this does not happen. I do not believe it. I recognise that there have been changes. I recognise that pay claims in the private sector have been very reasonable in many cases. But, in the face of difficulties of an unprecedented nature and of a realisation that the choice is between the shutting down of the organisation and the control of pay, what is there in the past or in the present to lead us to believe that, when that restraint no longer continues, we shall not return to the experience we have had again and again? If we do, all the long pain and travail of getting inflation down will have been to no effect and it will, as night follows day, mean that we shall be back with unemployment and back with all the consequences of unemployment that we have so often experienced in the past.
I do not deny the problems and the difficulties of getting a national incomes policy of some kind to work. I believe that we have to start particularly at the level of the company, though not exclusively. But there are advantages of which we can be seized. The negotiation of pay has moved to a very considerable extent from the national to the company level, and this gives an opportunity for the kind of understanding of what pay settlements mean in terms of the well-being of the organisation that was never there when pay settlements were at national level.
The suggestion is being put forward in some quarters—and I believe it is one that it is well worth while following up and developing—of the negotiation of development contracts at the level of the plant, by which I mean a far greater extension of the range of questions that have settled at company level, including questions of investment, of the extension of markets

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and of pay in relation to the opportunities that that investment and those new markets give, and also of what such developments mean in terms of security of employment.
If we get to a position in which all those factors are taken into account, with the cards put on the table as to when pay negotiations are entered into—not imposed from the top but springing from negotiations at the level of the organisation—I believe that we can have a hope of getting some sensible control over the level of pay within a framework of a general national policy. I do not believe that anything except developments of that kind will stop a return to the inflationary wage pressures that we have known in the past.
This means that the success of the organisation must be of far more direct benefit to the ordinary employee. It means an extension on a much larger scale of profit-sharing and share ownership schemes. The Government have given some encouragement to this in the past. Is it too much to hope that there will be a really substantial extension of encouragement for schemes of this kind—so that people can really see directly the consequences of sensible settlements in terms of the benefits to themselves in pay—not only in wages but in the money that comes as a result of the success of the organisation? I do not believe that there is any other way ahead, and it is that danger which the noble Lord, Lord Cockfield, ducked when he was talking this evening.
I also believe that there is room for much greater development on the lines of co-operative development. We have the Co-operative Development Agency. Is it really not possible for us to expand that so that, once again, the opportunities for ordinary people to benefit from the success of the organisation which they themselves are helping to run will bring a sense of realism and the relationship between investment, pay and employment to ordinary people up and down the country? Unless this is done, the pain that we have gone through over recent years may all have been in vain.
Baroness Gaitskell: My Lords, before the noble Baroness sits down, as she has made this great indictment against the Labour Party, may I ask her why she did it at this point, suggesting that bringing down inflation one point will enable the economy to recover completely? To ordinary people like myself it does not mean a thing. Nothing that she has said this afternoon in her speech means anything. If she knew all these things, we might have heard something about them before today.
Baroness Seear: My Lords, inflation has come down more than 1 per cent. If the noble Baroness does not recognise that when inflation comes down it is advantageous I personally do, especially when prices do not rise as fast as they have.
7.29 p.m.
Baroness Faithfull: My Lords, I should like to pay tribute to the speech that we have just heard. Whether or not we agreed with it all, it was a splendid speech and I for one am grateful to have heard it. In introducing this debate today, for which we are all very
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grateful, the noble Lord, Lord Wells-Pestell, said that Members on these Benches did not understand ordinary people and knew little about the vulnerable. I really must dispute that statement of the noble Lord. At the risk of appearing personal, perhaps I may say that for nearly a year I worked in the worst slums in Paris, running nursery schools and living there. I worked for five years living in the worst area of Birmingham in the back-to-back houses, and worked with both the unemployed and all others who lived in the district.
Furthermore, again at the expense of being personal, I worked my way in the evenings in order to pay for my university education during the day. Therefore, I should like the noble Lord, Lord Wells-Pestell, to know that there are those of us on these Benches who know the ordinary people and those who are vulnerable. I am sure I am right in saying that the noble Lord, Lord Pennock, must know all kinds of people as a result of the works he has done, not to speak of the noble Lord, Lord Trefgarne, who, when flying, must have come across people of all sorts and conditions. May I, therefore, nail this myth, and say that we on these Benches do understand ordinary people.
Lord Wells-Pestell: My Lords, I am grateful to the noble Baroness for giving way. Let me make it clear that I do not think she is typical of the Members on her side of the House. I wonder how many Members on her side of the House—take any big city—have spent days going into homes in Limehouse, Pennyfields, Isle of Dogs, Shadwell, St. Georges, and places like that, where one had to visit people every day and see the conditions under which they lived. I do not think that the noble Baroness is typical, and I suspect that very few Members on her side of the House have been so identified with the poor as many of us in the field of social work.
Baroness Faithfull: My Lords, I must again refute this. There are many people who employ labour, like the noble Baroness, Lady Elliot, who knows all about farms and the people on farms, and the noble Viscount here has employed people. I am sure that the noble Lord, Lord Pennock, knows about people. Visiting them in Limehouse does not necessarily give you the ticket for knowing ordinary people. However, I leave this point, but I should like to nail that flag down once and for all.
I am quite frightened because there are so many economists who have spoken so well in this debate, and although I read economics at university I am certainly not going to stray into that field because such very good speeches have been made, some of which one agreed with and many of which one did not. I wish to speak on social policies, which are part of the Motion for today's debate. I wish to concentrate on the greatest investment that a country can make, and that is in their children.
Before doing so I would, with diffidence, like to make two points in the arena of both statutory and voluntary social services. I wish to pay tribute to the good work being carried out by social workers in the fields of child care and related social services. They are committed to their task; they are skilled; and they are professional in outlook. Sadly, good work seems not to

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be good news in the media, and only tragic mistakes are highlighted. Of course, they should be known, but they should be set against much sound work carried on unobtrusively and with integrity. Secondly, as social workers and as citizens, social workers must of course be concerned with the structure of society.
However, I regret that in the day-to-day work in the health service, in education and in social services, often the professional side of our work is marred by party politics, whichever party is in power. I would hope that in the future we would concentrate more on the professionalism of our work and on the skill of our work rather than on the party politics involved. As a children's officer from 1958 to 1970 I found that the children's committee that I served was considered to be a committee which did not further the political aspirations of councillors. Consequently, no party politics entered into that committee, and I would suggest that extraordinarily good work was done.
The noble Lord, Lord Wells-Pestell, would have us believe from his speech that the social policies of Her Majesty's Government at the moment are deteriorating and that the personal social services are not being properly administered. The noble Lord talked about the creation of nations. I come back to the greatest investment we can make, and that is in our children. I would draw your Lordships' attention to the evidence given to the Social Services Committee by both the Department of Health and Social Security and by the directors of social services.
In this connection I would point out to the noble Lord, Lord Wells-Pestell, a cutting from the Guardian dated 15th January 1983, which said:
"Spending cuts in Britain's social services have stopped".
It is perfectly true that there were for a while cuts which were necessary, and that there had to be a realignment of the services. It was a painful and difficult time. I believe that that realignment of the services has now settled down, and that we are on a much better course than perhaps we were before.
May I refer to some of the policies which have been developed by Her Majesty's Government. First, may I support the noble Baroness, Lady Lane-Fox, over the growing partnership with industry and between the statutory and voluntary sectors. In 1981 to 1982 Barnardo's received revenue grants from the Department of Health and Social Security of £77,000. In 1982 to 1983 the figure was £209,000. In 1981 capital grants were made of £658,000, and in 1983 £93,000, and I know that there is more to come. I support this partnership between the voluntary and the statutory sectors. It is an enriching policy both for those working in the field of social work and for those who are vulnerable.
During the last four years there has been a growth in the fostering and boarding out of children. Many of us believe that this is good practice, and that a child who has a substitute home is far better off than a child permanently brought up in residential care. I must also pay tribute to those who work in residential care, because they have moved with the times and they have recognised, as the noble Lord, Lord Beaumont of Whitley, said, that we want to weave the children and adults into the society in which they live. Hence, the residential care workers are now running children's
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homes but they are being a resource for those in the community as well as those in the homes. Some of the children go by week, or by day, or just by term, and in this way they are offering a service to the community which has never occurred before.
I have to point out from the point of view of social policy that the 1978 Act recommended intermediate treatment—an extraordinary term—which meant helping children who were delinquent to adapt to a different way of life, at the same time living at home and in the community, instead of being removed from home. It is only in the last four or five years—perhaps five; the last year of the last Government and subsequently—that this policy has been developed. It is an excellent policy. It is effective where children and young persons are concerned, and it is economic.
With those few examples—including perhaps adoption and the fostering of handicapped children and many other new ways of helping and caring for children—I submit that there has been a forward-looking policy. I would like to think that, as a tribute to my colleague social workers, the growth, innovation and improved practices in child care would have come about whichever Government were in power. But I am bound to tell the noble Lord, Lord Wells-Pestell, that while much remains to be done, in the four years through which we have just been, against all the difficulties and very great problems, it is my view that in the greatest investment we have, our children, great strides have been made, and I am sure that the social work world will continue to make them.
7.42 p.m.
Lord Hatch of Lusby: My Lords, one of the greatest difficulties with which we have been living in the last four years—to which the noble Baroness, Lady Faithfull, referred—has been the impact of the policy of this Government. When they were elected four years ago they were clearly an ideological and forthright Government, and I publicly welcomed that fact at the time. Now that they have had four years in which to prove themselves the verdict on their record over those four years must be that they were elected on a false prospectus, and I wish briefly to point out why.
The present Government were elected on four main policy issues. The first was to cut taxes. They did that immediately—23 per cent. off the top incomes. At the same time they raised VAT to 15 per cent., that being a tax on the commodities which the majority of the people use. As the noble Lord, Lord Cockfield, admitted, taxation is today higher than it was at the time of the last general election—and that should be known by the country. Secondly, the Government were elected to reduce public expenditure. According to a Select Committee of the other House—chaired, incidentally, by a Member of the party opposite—public expenditure has gone up by 6·2 per cent. in the last four years, and if their public expenditure plans are carried out it will go up by another 2 per cent. in the intervening period up to 1986. At the time of the election, public expenditure was 40½ per cent. of the gross national product. Now it is 44½ per cent. Again, these are matters which the electorate have a right to know because it was on that prospectus that the party opposite were elected. Taxation and public expenditure have both gone up.

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Thirdly, they ware elected to increase production. What has happened to production? Manufacturing production is 20 per cent. lower than at the time of the 1979 election; its lowest point since 1963. Fourthly, the Government were elected to cure unemployment. Do noble Lords remember the posters? "Labour does not work", they said, with, I believe, conscripted members of Conservative Central Office forming a queue behind the leader at the front. Remember the words of the Prime Minister during the election? "There is nothing inevitable about rising unemployment", she said. If there is nothing inevitable about it, what has happened to it in the last four years? Surely the party which was elected to cut unemployment—and which made a great play throughout the country about the Labour Party bringing unemployment, while the Conservatives would cure it—must accept responsibility for what it told the electorate in 1979.
There is also a meanness in it all—a meanness which, as the noble Lord, Lord Trefgarne, knows, I have tried to bring out at Question Time on numerous occasions. Not only has the number of unemployed been doubled since the election, but over the past nine months they have been paying double tax. I would like the Minister to tell us when this double taxation of the unemployed will cease. The unemployed were told when the 5 per cent. decrease was imposed that it was until they came into taxation. They came into taxation last July, since when they have been paying double taxation.
Let me give a comparison to show the way in which the unemployed are treated. If you omit child benefit from both figures, average male earnings in Britain today are about £160 a week. What do the unemployed get? Unemployment benefit for a family with two children is £41.5 a week. That is the contrast between those who are in employment and those who are not. I should like to examine in some detail what I thought was the election speech—or perhaps I should call it the election apologia—of the noble lord, Lord Cockfield, but I do not have time tonight to do that.
We know that any Government must pay increasing sums in financing the social services, simply because there are more people with more needs; more old people and greater demands on the social services. We know that, but the noble Lord did not mention the pensioners, so let us look at what has happened to them. The pensioners have been changed over from receiving what was an earnings-related pension to an inflation-related pension. It does not seem to be recognised by sufficient people—at least those in the political life of the country—that the pension paid to the old-age pensioner is a right. It is not a handout or charity. Most pensioners were paying into the pension fund for most of their lives. But even if they were not, they were contributing to the growth of the wealth of the country, and they have a right in their old age to draw from the accumulated wealth of Britain to which they have contributed.
Nor did the Minister mention housing. The figures show that the number of houses finished last year was the lowest since 1947. Thus, we have discrimination against the unemployed and against the pensioners, and a rundown of our housing provision for the people of the country. Noble Lords may fairly expect me to
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suggest some remedies, but I shall not do so tonight because I have done that so often from this Bench, though my suggestions have obviously had no impact on the Government. I would simply mention that that half of the world's market to which I have referred so often still remains closed, and it does not seem that the Government have seen that by opening it they could take some action to bring this country out of the depression, instead of continually bleating about being part of a world depression over which they have no influence.
Furthermore, this afternoon while the debate was proceeding it was announced from the EEC that the prospect for growth next year in the Community is put at 0.4 per cent. It has been brought down from the previous figure of over 1 per cent. I wonder whether the Government yet know sufficient about this to say whether they will be able to come up to that figure; whether their prospect is to achieve 0.4 per cent. growth, or whether they have plans to exceed that average.
The noble Lord, Lord Wells-Pestell, who opened the debate, and to whom we are all indebted, spoke of the danger of the creation of two nations. I fear—I desperately fear—that if the Conservative Party is elected to a second term of government, we shall see three, not two, nations emerge in this country. Indeed, I believe that they are already emerging. First, there is the nation of the super-millionaires; and in today's papers we have seen that the electricity industry chiefs are to have a pay increase of 12½ per cent. We have seen thrown around astronomical figures relating to people such as Mr. MacGregor. That group of people is really out of the ken of even the wealthy of this country. Secondly, there are those in reasonably well paid employment, but they are living under constant fear of losing that employment.
Finally, at the bottom and forming by far the majority, are the unemployed, the low-paid, and—may I remind noble Lords on the other side of the House—those erstwhile middle-class friends of theirs who have now gone bankrupt. There has been a record number of bankruptcies in every single quarter since the Government took office. That has been happening among the Government's friends, among the middle-class. When a middle-class executive becomes unemployed, the shock and the effect on his health an on his family is just as bad as it is in other cases; but among these people unemployment is occurring in increaseng numbers every quarter.
Down at the bottom we have the mass of the poor and the people who are rapidly becoming poor. The situation is endangering race relations in inner cities, because proportionately many more blacks than whites are unemployed. There is the social disruption which comes from unemployment. There is, too, the increasing sickness, which will be a growing burden on the health services; and, as I have already pointed out, there is the increasingly poor housing provision for the third section of the British nation. That is truly returning to the Victorian values at the time of Dickens. The speech of the noble Lord who spoke for the Government at the beginning of the debate reminded me very forcefully of the way in which Jeremy Bentham described jurisprudence. He described it as the art of being methodically ignorant

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of what everybody knows, and to me that seems to be a very apt description of the Government's apologia for their period in office of almost four years.
7.54 p.m.
Lord Banks: My Lords, I should like to join with other speakers in thanking the noble Lord, Lord Wells-Pestell, for introducing the Motion this afternoon. Clearly it is concerned with a subject on which he feels very strongly, and during the course of our debate a good deal of strong feeling has been expressed in all parts of the House on this question. We have had an interesting debate. At the outset the noble Lord, Lord Cockfield, in his peroration, attacked demand management and incomes policy rather as though they represented totalitarian tyranny. I think that that was a rather extravagant view, and I reject it. My noble friend Lord Diamond summed up the main theme that we have been discussing today in the economic side of the debate when he said that it was a question of whether or not to turn up the gas when the house is cold; and I think that much of our discussion has been about which way to turn the tap, and how far to turn it.
The noble Lord, Lord Cockfield, said that in this country we had suffered from the world-wide recession. We on these Benches would accept that; it is so. But, as my noble friend Lord Diamond said, we believe that the impact of the world-wide recession on our economy has been greatly accentuated by Government policies. We believe that over the years during which the present Government have been in power the high interest rates, the over-valued pound, the deflatinary policies associated with the medium economic strategy, have accentuated the impact of the world recession and have made conditions here worse than they would otherwise have been.
While it is true that the rate of inflation has been reduced, nevertheless, as many noble Lords have said, it has been achieved at a very considerable cost. As my noble friend Lady Seear said, we of course welcome the fact that the rate of inflation has been reduced, but we deplore the cost that has been found necessary in order to achieve it. Production is 13 per cent. down over the period of office of the Government, profits are down 60 per cent. There has been a considerable loss of competitiveness, though to some extent that has been retrieved by the recent fall in the value of the pound. As the noble Lord, Lord Hatch of Lusby, said a minute or two ago, manufacturing output has been reduced by nearly 20 per cent. There has been a lack of investment, especially in public services. In 1982 central and local government investment was running at less than one third of the 1970 level; and that is a very considerable reduction.
Then of course there are the 3 million unemployed, to whom, naturally and rightly, reference after reference has been made this afternoon. Unemployment—and here I pick up a phrase used a few moments ago by the noble Lord, Lord Hatch, and earlier by other noble Lords—has consequently had the effect of creating two nations within the country: those with work, and those without work. The noble Lord, Lord Wells-Pestell, has reminded us how difficult it is for those of us who have not experienced
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unemloyment, or who are not now experiencing it, to put ourselves in the position of those who have or who are.
It is in that situation that we have found that taxation, far from decreasing, has been increased, as the noble Lord, Lord Cockfield, himself said in justification of Government policies against another charge; and the noble Lord, Lord Stewart of Fulham, emphasised that fact. A married couple with two children, earning three-quarters of average earnings, have had a real increase in taxation since 1978–79 of 17 per cent. The same size of family on average earnings have had an increase in taxation of 14½ per cent. A family on twice average earnings has had an increase of 9½ per cent. Your Lordships will see how the higher one goes, the lower is the increase in taxation. All of those groups have had an increase in taxation—but not the next one that I shall mention. A married couple with two children, earning five times average earnings, has had a cut—I repeat, a cut—in taxation of 6½ per cent.
Social security benefits—and I think that this is undeniable—are in the main lower than they would have been but for the Government cuts. About £2,000 million has been deducted from the annual budget for social security by the cuts which the Government have introduced, with the result that almost every group of claimants is worse off than it was three years ago, in spite of the 2 per cent. over-estimate of inflation which the Government made in fixing the rate of benefits for last November. Nine million pensioners are worse off because of the break of the link with earnings; invalidity pensioners for the same reason, because of the 5 per cent. abatement, are worse off. The unemployed are worse off than they would have been because of the 5 per cent. abatement. There have been cuts in children's additions for the unemployed and the sick, and no increase in child benefit to compensate; and child benefit itself is below its 1979 level.
The numbers on supplementary benefit, now something like 6–1 million, a record level, show an increase of 1¾ million since 1979—the biggest rise since the welfare state began. And there are 1¾ million children living in families where the breadwinner claims supplementary benefit. Then, there is the question of the personal social services—and the noble Baroness, Lady Ewart-Biggs, referred to this and in particular to the position of married women. There is the position of the elderly and the need for an increase in domiciliary services because of the increase in the number of very elderly people. There is no doubt that that provision is not keeping pace with the need at the present time.
Finally, there is a decline in the relative position of families with children. The percentage increase in the proportion of income paid in tax and national insurance between 1978–79 and 1982–83 has been, for the single person, 4·5 per cent.; for the married couple with two children, 11·3 per cent. That is continuing a trend which was going on before.
The position of families with children has been deteriorating relatively to the rest of the community. I think it is clear from what I have said that, whatever we may think about Government economic policies, they are pressing very harshly on some. Owing to

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wages outstripping inflation, there is a tendency for living standards for many people to rise at the present time; but not for the unemployed, not for the poorest. And I think that there is a danger of our developing what my noble friend Lord Beaumont described as an under-class. He borrowed that phrase earlier on in our debate from Professor Dahrendorf. What he said was echoed in what the noble Lord, Lord Hatch of Lusby, was saying and echoed also in an article in the Guardian this morning by Peter Jenkins, who said:
"If things go on as they are, the problem will arise of how to govern a society which banishes a substantial minority of its citizens into a sub-society of the useless and the poor, inhabiting the derelict areas of the old cities and the centres of industrial decline, poorly housed and inadequately looked after, without economic prospect, social future or political hope".
I think that what he said there is something that we ought to ponder very seriously.
My noble friend Lord Diamond explained at the beginning of our debate what the alternative would be that his party and my party together would seek to put forward. He made clear it would involve a stimulation of the economy—a controlled, collective stimulation. This would be linked with an incomes policy to which my noble friend Lady Seear was referring when she spoke; and we would have, within that incomes policy, a substantial element of profit sharing and industrial partnership. And if there is to be tax cutting, then it would be in the sphere of VAT and national insurance surcharge that we would seek to see that take place. Within the package there would be certain measures designed to deal with this problem of poverty—an increase in child benefit, the removal of the 5 per cent. abatement and the payment of the long-term supplementary benefit to the unemployed.
These would be some of the things in that package, as my noble friend Lord Beaumont made clear in his speech. We would regard those as just the first steps that have got to be taken because in the long term we want to see a complete reform of the tax and social security system, indeed the merging of those two; and, through that merged system, to secure that measure of redistribution which the facts that I outlined earlier demand.
We agree with the terms of the Motion before the House, hut we differ from the official Opposition over some of the ways in which we would seek to tackle the present situation. We agree with them that there is a need for a stimulation of the economy, and a need to turn up the tap. We fear that they would turn the tap too far, and we think that if they were to turn the tap too far and they do not have an incomes policy, it would land us back (as my noble friend Lady Seear said) in inflation, the inflation we want to avoid. We do not want—and I believe they would—more nationalisation. We would not seek import controls which is no policy for a country so dependent upon world trade; and we would not want withdrawal from the EEC, which we believe would put a barrier between ourselves and our largest market, to our disadvantage. To conclude, while we do not agree with all the solutions put forward by the Labour Opposition and while we have our own carefully worked out alternative, we fully support the terms of this Motion which has been proposed from the Labour Benches today.
8.8 p.m.
Baroness Jeger: My Lords, I think we would all agree that the noble Lord, Lord Wells-Pestell, has put the whole House in his debt today. He speaks not only with compassion and sympathy, but with a practical knowledge of the subjects which we have been talking about today. I am sure that, whatever opinions noble Lords hold about these problems, they will agree that it has been a very useful exercise and that we are grateful to my noble friend for giving us this opportunity. The terms of the Motion are drawn so widely that I was reminded of what Ernie Bevin used to say in another place, "Coo! We've 'ad a bit of a tour dorizon". We certainly have—from the economic situation of the world to the individual problems of many of the disadvantaged in our society. It would be intruding on your Lordships' sleeping time if I were to go into detail on every point that has been raised.
There are one or two themes that I should like to draw together. It seemed to me that from various sides of the House there has been an emphasis on the accidental circumstances in which we find ourselves. The noble Lord, Lord Cockfield, very eloquently referred to the world situation and to the problems of which we have to be a part. But what we were trying to say from this side of the House—and I thought my noble friend Lord Wells-Pestell made it clear—is that, while we accept the problems that come to us from international sources, we must not use them as an alibi for every mistake we make in our economic and social policies. We must establish our priorities within the room for manoeuvre which we certainly have in our free democracy and in an economy, may I say, blessed with the bonanza of North Sea oil and with rich reserves of human and material talent, including—and I was glad that my noble friend Lady Ewart-Biggs referred to this particularly—the under-use of the resources of women's contributions to society.
Our problem seems to me to be more one of redistribution, as the noble Lord, Lord Beaumont, said, and of the need for us to decide—as any housewife has to decide within the money in her purse—what should be done with our resources. Our criticism of the Government to a large extent tonight is that we do not feel that they are making the best use of what there is so far as many of the under-privileged people in our country are concerned. We all agree that the Government, contrary to their election promises, have taken more from the people in the way of taxation, and it may seem strange for someone from this side to be complaining about that. But our query is: From whom have they taken it? We feel that the proportions of taxation have been totally wrong.
I must also comment on something else that the noble Lord, Lord Cockfield, said: he said that the state does not consist of a few hundred politicians. Of course, it does not. The state consists of the whole community. Decisions, he said, would be better if made by the people most concerned. So I wonder what this Government are doing to local government and the decision-making powers of people who they apparently regard as not part of the state. He also said, "We want less controls". That is what Rachman said to the sanitary inspector. That is what Victorian factory owners used to say to the factory inspector: "We want less controls". In this very complicated

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situation in our country, with a large population, with all kinds of environmental pressures and technological developments, we have to live closer together and we cannot get a decent environment unless we are prepared as individuals to say sometimes that there are controls which are needed. Therefore, the whole community and the whole environment can be improved for the rest of our people.
I must refer to the question of the tax revenue, again briefly, because I do not understand much about it and my noble friend has spoken so eloquently—and he can count! I have some figures from the OECD which said that in 1978–79 the tax revenue in this country was 34 per cent. of our gross national product. By 1981 it had gone up to 39·8 per cent. That is bad enough in itself because it is contrary to the Conservative promises; but we have to add that VAT has more than doubled, and that a married couple now begin paying tax on a gross income nearly £5 a week lower in real terms than they would have done in 1979. This is our criticism, not against public expenditure as such or the raising of taxation, which every Government have to do, but against the way that the burden has been shared. We have to add to this that national insurance has increased by 40 per cent. National insurance is a form of direct taxation, and when we are talking about the tax burdens on our people we should surely add the national insurance increases to them. The Tory manifesto, on page 8—I give the page for ease of reference—says:
"The State takes too much of the nation's income; its share must be steadily reduced".
That is a broken promise which I hope Darlington will notice. There has been a 4·5 per cent. increase in public spending since 1979, although we were told it was going to be reduced—a reduction which we did not support—and we have to ask: Where has the increased public expenditure gone?
I am informed that £5,000 million of it has gone in keeping the unemployed idle instead of investing in necessary work. I was very glad to hear that the sewers had collapsed in Oxford and in Cambridge, because nobody cared when they collapsed in Manchester and Liverpool. I hope that now there are holes in the roads and broken sewers in Oxford and Cambridge a number of noble Lords will be so inconvenienced that they will think it better to pay people to repair the sewers rather than give them money to stay at home doing nothing.
In the Chancellor's autumn statement he confirmed that the total taxation as a proportion of national income rose to 40 per cent. in 1982. So we now have the situation—and the noble Lord, Lord Banks, who knows so much about these matters made the point—that a single person with three-quarters of average earnings has had his tax increased by 7·5 per cent.; but as for the richer person, the bigger his income the less is the proportion of tax increase. This is our criticism: the way in which this burden has been so unfairly shared.
I must emphasise that the Government have had choices, even though under all the restrictions of outside influences. What have they done? I shall not run through the whole list, otherwise noble Lords may think that we are all at Darlington. The Government
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abolished the earnings-related benefit for the unemployed, which was a serious blow. They kept unemployment benefit 5 per cent. below the payments needed to keep pace with inflation, and that has been going on for three years. They brought benefits into tax. They have invented this grotesque statutory sick pay system which means that a worker for the first eight weeks of illness is supposed to collect his sick pay from his employer, and nobody has made clear to any of the workers with whom I have discussed this matter what happens if someone has a rotten employer and is sick for eight weeks. The man is supposed to go to court. He is supposed to take his employer to court to claim the eight weeks' sick pay which in previous times he received through his national insurance contributions. We are not talking about fancy money; we are talking about the insurance money for which this man has paid his contributions.
This is nothing to do with a world recession. This has nothing to do with unemployment in Timbuktu, or even with the price of oil. It is just a part of the Government's theology: the harder one can make it for people to get their rightful benefits, the better. In this connection, I must say that I have seen several letters from employers who do not like it, either. They do not like the interference with their cash flow and they do not like the paperwork. Several firms are advertising to help other firms to get the system right because it is so complicated.
I also very much regret that the link with earnings was broken in assessing pensions. We have promised to restore that. At present-day prices a married couple on their old-age pension would be getting about £2.25 a week more if the link with earnings had been kept. I know that the Government insist that they are at least keeping the value of pensions because they have linked it to the retail price index. But any of us who have studied this question at all know that there is a serious imbalance between pensioner household expenditure and the retail price index. The retail price index includes many items that old people never buy. Most of them have not benefited from the reduction in mortgage rates. They do not spend a lot of money on petrol, or fur coats. or many of the elements in the retail price index. Many of them do not feel that their old-age pension is keeping pace with expenditure because the things that they spend their money on—their rent, heating and food—are not properly reflected in that index.
I want to be fair to everybody. I could not help but look again at the Conservative Manifesto. I was very interested in a paragraph at the beginning which was signed by the present Prime Minister, in which she says:
"For me, the heart of politics is not political theory, it is people and how they want to live their lives".
That is a very fine statement. I can tell the Prime Minister how they want to live their lives. First of all, they want a home in which to live their lives; and the housing programme of this Government has been a disaster, as my noble friend Lord Hatch pointed out. Their housing programme has been the lowest since 1947. They want enough money to live on if they are out of work or ill, and several speakers have shown that the benefits have not been keeping pace with rising costs; otherwise we should not have a record

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number of people on supplementary benefit. Supplementary benefit was supposed to be the safety net and not the automatic topping-up which it has become for thousands of our people.
I calculate, subject to correction, that child benefit would need to be raised by at least 60p a week to stand still at 1979 values. Also, I must say to the noble Baroness opposite, whom I much admire for so many reasons, that when she was talking about investing in our children, I wish that she would try to use a little of her charm and persuasion on her noble friends to do something about raising child benefit, because an increase in child benefit would be the best investment in our children—
Baroness Faithfull: My Lords, may I just make a comment? It is true that child benefit was not raised as much as we all wanted last year, but it was raised last year.
Baroness Jeger: My Lords, I will just repeat what my noble friend behind me has commented: "Not enough". Having decided that the Prime Minister wants people to live their lives as they want to live them, with enough money, with a home and a job and with care for their children, I think that the Government opposite have fallen far short of what was promised.
But I do not want to end on a grumbling note—I cannot think why, but I will not do so—because I believe that what we are all seeking is some way of working things out together. What we certainly cannot do is to return to the sort of Victorian stratified society of "Upstairs, Downstairs"—of class, privilege and all the terrible problems which existed in those days. We all know about Forster's Education Act and that Shaftesbury did much good work, and of course we know that the Prime Minister did not mean that she wants young boys to go up chimneys or women to go down the pits; but there is really rather an abrasive undertone to some of her statements on this matter.
Poverty—and let us all try to do something about it—is comparative. It is no good comparing people today with the unemployed in Victorian times and telling them that they are a lot better off than they would have been in the 1880s. It is no good thinking that children, because they do not have to go without shoes or are not actually starving, do not feel poor. Poverty is how people feel, and a child feels poor if in its classroom at school it has to live differently from other children. The same goes for adults, and there is a human pride about this which I am sure we should all recognise and not run down. Now we have everybody surrounded with an atmosphere saturated with advertising, with people demanding higher standards and feeling poor if they are not able to share comparably in the good things of life with those around them.
We ought to be able to work these things out together. We have a natural sense of social responsibility in this country and we are very lucky that that is so. But we have to keep the social wage high enough for people to feel no sense of deprivation; we have to stop telling a man with one leg to stand on his own two feet. We must somehow stop going further along this divisive path of two nations. We are a decent
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people and a socially responsible people, and we must all concentrate on trying to get rid of those things which disfigure our society. Many of the things that have been mentioned in our debate today are unnecessary and are not the fault of external affairs: they are the fault of a philosophy which I do not think all of us in this House can support.
I mentioned housing, but I forgot to say one thing which I should like to add. Much has been said on the theme of people being independent and not depending on the State. I looked up some figures and found that the average subsidy for home-owners with a mortgage is £417 per household per year. The average subsidy for public sector tenants is 184 per year. So people may well ask, "Who is subsidising whom?" I mentioned that only to show how we have got to progress as an integrated society and that the jealousies and the bullyings which seem to come from some quarters are not helpful because they do not take us forward into a better, a more egalitarian and a more friendly society.
8.27 p.m.
The Parliamentary Under-Secretary of State, Department of Health and Social Security (Lord Trefgarne): My Lords, during the course of this debate many noble Lords on the Benches opposite have spoken with eloquence and compassion on the plight of the poor, the unemployed and the most vulnerable groups in our society. As a Minister directly responsible for the conduct of policy in the Department of Health and Social Security, I share that feeling of compassion. I, too, consider our current unemployment figures tragically high and I, too, wish to see greater provision made for the sick and the elderly. However, I cannot share—indeed I wholeheartedly reject—the old and tired conviction that excessive and unwarranted public spending is a route appropriate to the desired objective. Indeed, the short-term boost to output and employment which can be obtained by this process would only be dissipated into higher inflation and the loss of jobs. Ultimately, the quality and the quantity of social provision that our society can make depends on what we, a trading nation, can earn in competition with our industrial neighbours in the rest of the world. In other words, the growth in domestic resources depends on how much more we can profitably sell in markets at home and overseas.
Some noble Lords are once again advocating reflation as the key to higher levels of output and employment. Once again, short-term expediency dominates their thinking on economic policy. Have they already forgotten where such policy led in the past? Between 1970 and 1980 real output grew by only one-twentieth of the growth in money GDP. Have they forgotten that in the post-war period resorting to the printing press to finance public expenditure drove average inflation ever upwards with each successive Government: 3¼ per cent.; 4¾ per cent.; 9½ per cent.; 15½ per cent. Your Lordships will not have forgotten that the total lack of fiscal prudence displayed by the last Labour Government drove this country cap in hand to the IMF.
But these policies did not provide a lasting solution to unemployment. Instead it too, crept insidiously

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upwards,: one third of a million, half a million, three-quarters of a million, one and a quarter million. It is hardly surprising that in the 46 months this Government has been in office it has not as yet been possible to repair the damage done by 30 years of excessive wage increases, rising prices and the rising unemployment which followed in its train.
Even as our policies are beginning to establish the conditions for a sustained improvement in output and employment, we have heard again the cry for a return to the bad old ways. Noble Lords opposite do themselves as disservice, if I may say so, and practise a cruel deception on those who are currently unemployed, when they claim that they can reduce unemployment below 1 million over one Parliament. The means by which they can achieve this is the national economic assesment, which we have seen. Let me offer your Lordships an independent assessment of these policies—the London Business School's asessment, of which the noble Lord, Lord Diamond, spoke with approbation. They said:
"if unions and financial markets act to support these policies, then unemployment falls by about one-third million and inflation reaches only 11 to 12 per cent. If not, then unemployment rises slightly as inflation accelerates to around 17 per cent."
Undoubtedly, on past experience, the latter result is far more likely than the former.
The noble Lord, Lord Diamond, supported by his noble friend Lord Chandos, claimed, unwisely I think, that he and his colleagues in the SDP offered some credible alternative. I fear not. The SDP document Budget for Jobs and Industry is claimed to be, as the noble Lord said, "moderately expansionary", and designed to,
"create up to a half-million new jobs in its first year".
On closer examination, however, we find that not only does the Alliance's latest document lack consistency with earlier pronouncements, but it blurs the difficult decisions.
Earlier pronouncements by the Alliance on incomes policy receive no mention. They were just touched on by the noble Viscount today. Monetary and exchange rate policies are only vague aspirations. The full-year cost of its proposals—perhaps, £6 billion or £7 billion—are now nearly twice what was previously claimed to be sufficient to achieve a similar reduction in unemployment.
The weaknesses of the Opposition's proposals are that it is wrongly assumed that our economic problems stem from a shortage of demand; but the real difficulty lies with supply. Consider the period since the second quarter of 1981. Real domestic demand has increased by around 3½ per cent., but real output by nearer 1 per cent. This poor performance is the result of our lack of competitiveness occasioned by earlier excessive wage increases—and by the weakness of overseas demand, for which higher spending and borrowing at home can hardly be expected to compensate—
Lord Beswick: My Lords, would the noble Lord allow me to intervene? If we were as uncompetitive as that in 1981, how does the noble Lord account for that remarkable export record which his noble friend was talking about at the beginning of the debate?
Lord Trefgarne: My Lords, that is what makes it so remarkable that we have been able to achieve that performance, in spite of the difficulties that I have described. We need a framework which provides room for growth in real demand, while establishing conditions which allow inflation to fall. That framework is provided by the medium-term financial strategy, and by the detailed measures that we are taking to improve incentives and make markets work more effectively.
It has been claimed—and the noble Lord, Lord Wells-Pestell, referred to this—that the "true" level of unemployment is much greater than the official figures, and that the Government are somehow fiddling the statistics. Various figures have been quoted, claiming that unemployment is over 4 million and, according to some, even over 5 million. But I wonder who really is fiddling the statistics. Those claims are considerable exaggerations, relying heavily on an assumed 1 million fall in the labour force between 1979 and 1982. They include, too, those benefiting from special employment measures, who are most certainly not unemployed. This latter, so-called "adjustment" to the official statistics is clearly inappropriate; while the former simply is not corroborated by the most recent statistics. Between 1979 and 1982 there was, indeed, a small reduction in the labour force, due to lower "activity rates", but this was insufficient to offset increases in population. In consequence, the labour force actually grew by about a quarter of a million.
The real issue, however, is what policies are likely to improve our national prospects. We must wait until next week for the statement on the economic outlook, which accompanies the Budget statement. But I can assure your Lordships of one thing. The unswerving objectives of this Government, since first we came to office, have been to achieve a sustained improvement in the economy through lower inflation and the promotion of initiative and enterprise, and that will continue to be so. Our medium-term objectives are to keep United Kingdom monetary and financial conditions sound, and to maintain lower inflation. Low inflation and improved employment prospects go together. They are not alternatives, as some still insist. The essential preconditions for sustainable improvements in employment prospects are a balanced approach to fiscal and monetary policies, along with lower pay settlements.
But we fully recognise that we are in a period of transition. That is why we have substantially increased spending, to alleviate the impact of unemployment on especially vulnerable groups. As my noble friend said in his opening remarks, we plan to spend £1½ billion on special employment and training measures in 1982–83, and £2 billion in 1983–84. But, in the last analysis, an improvement in our employment prospects depends on sustaining higher levels of economic activity. This can be achieved only by the sustained application of policies to create lower inflation and lower interest rates, both now and in the longer term.
Looking at our economic prospects this year, we must, of course, await the Chancellor's Budget forecast. But following the disappointments in 1982—particularly in world output and trade—we can

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reasonably expect a modest improvement in both output and demand. Manufacturing output levels last year were, undoubtedly, disappointing, but output in the consumer goods industries has recently been holding up well. This reflects higher levels of consumer expenditure, which in turn, in part, reflect the substantial progress made on inflation during last year. Inflation and interest rates are now substantially lower than they were a year ago, and this, coupled with the expected higher world output and a lower effective exchange rate, should encourage a further modest recovery in 1983. Furthermore, these factors, coupled with improved productivity and competitiveness, are providing a sounder base for expansion in the medium term.
May I now turn to just a few of the points that have been raised during the course of the debate tonight? I would not wish to detain your Lordships unduly at this late hour. The noble Lord, Lord Wells-Pestell, referred to the report of the Association of Directors of Social Services. He suggested that, even though social services departments were not, in general, reporting cuts, standards of care were below what a civilised state should tolerate. But Ministers have consistently urged local authorities to concentrate the resources available to them on the primary services, notably the personal social services for vulnerable groups. Over the past four years, since 1978–79, total local authority spending on the personal social services has increased by 9 per cent. in real terms.
The noble Lord, Lord Beaumont of Whitley, referred to the question of long-term supplementary benefit for the long-term unemployed. Since November, 1981, the long-term scale rate has indeed been payable to unemployed men aged 60 and over who have been unemployed for 12 months. This is considerably more than was done by the previous Government. The Government are, of course, aware of the arguments for extending the long-term scale rate to unemployed people more generally. Any extension of eligibility must, however, compete with other claims on the additional resources which would be needed, and no commitment, I fear, could be given at the present time.
The noble Lord, Lord Harris of High Cross, referred to efficiency in the provision of public services. I take that stricture to heart, but this is a field in which the Government have indeed made some progress, particularly, for example, in the National Health Service; and I answered a Question from my noble friend Lady Lane-Fox about that the other day. My noble friend Lady Lane-Fox herself raised the question of help to inner cities. Again, my noble friend Lord Bellwin answered a Question from another of my noble friends, Lord Gainford, on 8th February, and any noble Lord who is particularly interested in that matter might address himself to that Answer.
The noble Lord, Lord Stewart of Fulham, referred to the increase in prescription charges from 1st April 1983. What I think was not apparent from what the noble Lord said was just how wide are the existing exemptions from these charges. Some 70 per cent. of prescriptions are dispensed free of charge. Exemptions include the elderly, those on low incomes and, of course, children. Over and above that there are the facilities for season tickets. The Government believe
310
that, where the user can afford it, then he or she should bear a reasonable amount of the cost.
The noble Baroness, Lady Jeger, referred in her closing remarks to the preferred option, as she saw it, of the link with earnings rather than the link with prices with regard to pensions. The noble Baroness indicated that that would allow pensioners another £2·25 in their weekly pension. That may be so, but I would remind your Lordships that that increased pension would have to be paid for. I cannot off the top of my head calculate what that would cost in total terms, but it would be a very substantial amount indeed which would have to come from those presently in work and from their employers. The noble Baroness also said that she would have preferred the pensioners' price index to be used rather than the retail price index. Over recent years, pensioners would have been less well off had we used the pensioners' price index instead, so from their point of view I am not sure that that would have been a wise procedure.
I said at the outset that I, too, deplore the present level of unemployment which is of course a tragedy for those concerned, but in the context of the rising inflation which we inherited and the subsequent decline in world trade we could have averted this only by reverting to the failed policies of past years. For example, we might conceivably have achieved some very short-term relief by even more massive support and subsidy of the public sector and of declining industries, but the long-term result of such folly would have been a swift return to the old spiral of inflation and unemployment rising hand in hand. Instead, we chose the path of sound financial and fiscal management which is now just beginning to bear fruit.
In the meantime, we have been concerned to ensure that the most vulnerable groups in our society are protected. As my noble friend said, we have honoured our pledge to maintain the real value of pensions. Supplementary benefit, which provides the basic income for our very poorest, has been raised fully in line with prices in the four years up to November 1982. The Christmas bonus, which the Labour Government did not pay in 1975 and 1976, has been paid every year since we came into office and has now been enshrined in statute. Help with heating costs has been extended and increased and we are now spending £325 million in this area—vastly more than our predecessors did. Disabled people, too, have been helped. For instance, the mobility allowance has been increased by no less than 83 per cent. and has been made non-taxable. The attendance allowance has been fully protected against prices. In total, social security expenditure on the long-term sick and disabled has increased by 5 per cent. in real terms and now amounts to no less than £3·4 billion.
Turning to the National Health Service, we have increased expenditure from £7¾billion in 1978–79 to a planned level of £15½ billion in 1983–84. Spending is now at a record level, having increased 16 per cent. faster than inflation. The growth in services for the National Health Service as a whole is about 7½ per cent. for the same years.
The Motion before your Lordships is proposed by noble Lords whose record, by contrast, is one of ignominious failure. Now they come before your Lordships offering another dose of the same useless

311
medicine and presuming to criticise this Government for turning away from the old, disastrous policies to a new era of sound finance, lower inflation and increasing prosperity. We can justly claim that after the worst world recession in half a century the sky is beginning to lighten and that the future is bright. Inflation is down, interest rates are down, productivity is up and there are even some straws in the wind on unemployment. If your Lordships will forgive another metaphor, we are passing through the last reef into the lagoon beyond. What folly it would be to let go of the tiller now. I ask your Lordships to reject this ill-conceived Motion.
8.45 p.m.
Lord Wells-Pestell: My Lords, I am glad that it has been possible on this very serious issue to have what I think might be described as an agreeable debate. In saying that, none of us has lost sight of the fact, whether or not we are in favour of the Motion, that it is a matter which needs to be aired from time to time. I have no desire to exercise my right to address your Lordships at any great length, but there are three or four small points I should like to clear up.
The first I direct to the noble Lord, Lord Cockfield. The noble Lord perhaps misunderstood me when at the very beginning I complained bitterly about the way in which the £4½ billion was distributed to taxpayers. I believe the noble Lord said that it was not the Government who did this—that it was the citizens' money. The point I wanted to make was that, whether or not it was the citizens' money—and obviously it was the citizens' money—the Government decided how that money was to be spent. In that sense I hold the Government responsible. The point which I tried to make, although probably I did not make it very clearly, was that I believed it should have been incumbent upon the Government at that particular time to direct their refund or their reduction in tax in a different way, so that poorer people would obtain greater benefit.
Secondly, the noble Baroness, Lady Lane-Fox, referred to the fact that the Government have brought down the rate of inflation. That is perfectly true. However, the thought I want to leave with her is that when we went out of office in 1979 the rate of inflation was 10.3 per cent., but withing two years that figure had gone up to about 20 per cent. Since then it has come down very substantially, but the point I want to make is that although when we left office the rate of inflation was 10.3 per cent., unemployment in this country was far less than half what it is now. If I had to choose between a reasonably high inflation rate of 10.3 per cent. and only half the unemployment which we have now, and our present situation, I should opt for the higher inflation rate.
The noble Baroness, Lady Faithfull, questioned something I had said by mentioning that she had a copy of a cutting from the Guardian. What the noble Baroness ought to have done was to have continued reading it. She ended by saying that the spending cuts in Britain's social services "have stopped." If the noble Baroness had read the cutting a little more carefully she would have seen that it says, "have almost stopped". That is not quite the same thing. And had
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the noble Baroness continued—we must have the same cutting—she would have read:
"Some of the standards of care that we are able to offer are well below those which a rich, civilised society should tolerate. Many of our old, mentally ill and handicapped people live in local authority accommodation which is sub-standard or inadequately staffed. Many parts of the country have such scarce domiciliary services that people are admitted to institutions or hospitals or stay in these places purely on the ground of economics".
My final comment is directed to the noble Lord, Lord Trefgarne. I do not believe that I said (though I shall check it tomorrow in Hansard) that the Government had fiddled the unemployment figures. I said that the real figure, I believe, is 4 million. I did not use the word "fiddled". Although I can check that point tomorrow, I am not terribly worried about it.
I want to thank all Members of the House who have taken part in this excellent debate. We finish where we started: with profound disagreement on both sides and with no ground gained—or lost, for that matter. I thank your Lordships for the agreeable debate that we have had, and beg to move the Motion standing in my name.
8.50 p.m.
On Question, Whether the said Motion shall be agreed to?
Their Lordships divided: Contents, 51; Not-Contents, 82.

DIVISION NO. 1

CONTENTS

Airedale, L.

Kilmarnock, L.

Bacon, B.

Kirkhill, L.

Banks, L.

Llewelyn-Davies of Hastoe, B.

Beaumont of Whitley, L.

Longford, E.

Beswick, L.

Lovell-Davis, L.

Birk, B.

McGregor of Durris, L.

Bishopston, L.

Milford, L.

Blease, L.

Milner of Leeds, L.

Boston of Faversham, L.

Ogmore, L.

Briginshaw, L.

Oram, L.

Bruce of Donington, L.

Peart, L.

Chandos, V.

Pitt of Hampstead, L.

Chitnis, L.

Ponsonby of Shulbrede, L. [Teller.]

Cledwyn of Penrhos, L.

Collison, L.

Seear, B.

David, B. [Teller.]

Simon, V.

Diamond, L.

Stewart of Alvechurch, B.

Evans of Claughton, L.

Stewart of Fulham, L.

Ewart-Biggs, B.

Stone, L.

Fisher of Rednal, B.

Strabolgi, L.

Gaitskell, B.

Tordoff, L.

Hatch of Lusby, L.

Underhill, L.

Houghton of Sowerby, L.

Wade, L.

Jeger, B.

Wallace of Coslany, L.

John-Mackie, L.

Wells-Pestell, L.

Kilbracken, L.

Winstanley, L.

NOT-CONTENTS

Abinger, L.

Coleraine, L.

Airey of Abingdon, B.

Cork and Orrery, E.

Auckland, L.

Croft, L.

Avon, E.

Cullen of Ashbourne, L.

Belhaven and Stenton, L.

Davidson, V.

Bellwin, L.

De La Warr, E.

Belstead, L.

Denham, L. [Teller.]

Boardman, L.

Dilhorne, V.

Brougham and Vaux, L.

Drumalbyn, L.

Campbell of Alloway, L.

Elliot of Harwood, B.

Carthcart, E.

Elton, L.

Cockfield, L.

Energlyn, L.

313

Faithfull, B.

Marshall of Leeds, L.

Ferrers, E.

Massereene and Ferrard, V.

Fortescue, E.

Merrivale, L.

Gainford, L.

Mersey, V.

Gisborough, L.

Mottistone, L.

Glanusk, L.

Newall, L.

Glenarthur, L.

Orkney, E.

Gridley, L.

Pender, L.

Hailsham of Saint Marlyebone, L.

Pennock, L.

Plan of Writtle, B.

Harris of High Cross, L.

Rankeillour, L.

Henley, L.

Renton, L.

Hives, L.

Rochdale, V.

Home of the Hirsel, L.

St. Aldwyn, E.

Hylton-Foster, B.

St. John of Bletso, L.

Ingrow, L.

Sandford, L.

Kilmany, L.

Sandys, L.

Kinloss, Ly.

Skelmersdale, L.

Kintore, E.

Stamp, L.

Lane-Fox, B.

Stodart of Leaston, L.

Lindsey and Abingdon, E.

Strathcarron, L.

Long, V.

Swinton, E. [Teller.]

Loudoun, C.

Trefgarne, L.

Lucas of Chilworth, L.

Vaux of Harrowden, L.

Lyell, L.

Vivian, L.

Mackay of Clashfern, L.

Wakefield of Kendal, L.

Mansfield, E.

Windlesham, L.

Margadale, L.

Wynford, L.

Marley, L.

Young, B.

Marsh, L.

Resolved in the negative, and Motion disagreed to accordingly.

Parkeston Quay Bill [H.L.]
The Queen's Consent signified; Bill reported from the Unopposed Bill Committee with amendments.
British Railways (Liverpool Street Station) Bill
Reported from the Unopposed Bill Committee with amendments.

Pilotage Bill [H.L.]
Reported from the Joint Committee with amendments, and re-committed to a Committee of the Whole House.
House adjourned at two minutes before nine o'clock.

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