Sitting of 13 November 1984

Preamble
The House met at half—past Two o'clock
PRAYERS
[MR. SPEAKER in the Chair]
PRIVATE BUSINESS
  LOCHABER WATER POWER ORDER CONFIRMATION BILL
  Considered; to be read the Third time.

  CLOSURE OF DEBATE (STANDING ORDER No. 31)
  Return ordered,
  respecting applications of Standing Order No. 31 (Closure of debate) during Session 1983–84, (1) in the House and in Committee of the whole House, under the following heads:—

  1

  2

  3

  4

  5

  6

  Date when Closure claimed, and by whom

  Question before House or Committee when claimed

  Whether in House or Committee

  Whether assent given to Motion or withheld by the Chair

  Assent withheld because, in the opinion of the Chair, a decision would shortly be arrived at without that Motion

  Result of Motion and, if a Division, Numbers for and against

  —[The Chairman of Ways and Means.]

  DELEGATED LEGISLATION
  Return ordered,
  of the number of Instruments considered in Session 1983–84 by the Joint Committee and the Select Committee on Statutory Instruments respectively pursuant to their orders of reference, showing in each case the numbers of Instruments subject to the different forms of parliamentary procedure and of those within the Committees' orders of reference for which no parliamentary procedure is prescribed by statute, and the numbers drawn to the special attention of the House or of both Houses distinguishing the ground in the Committees' orders of reference upon which such attention was invited; and of the numbers of Instruments considered by a Standing Committee on Statutory Instruments, &c. and by the House respectively, in Session 1983–84, showing the number where the question on the proceedings relating thereto was put forthwith under Standing Order No. 79(5).—[The Chairman of Ways and Means.]

  PRIVATE BILLS AND PRIVATE BUSINESS
  Return ordered,
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  of the number of Private Bills, Hybrid Bills and Bills for confirming Provisional Orders introduced into this House and brought from the House of Lords, and of Acts passed in Session 1983–84:
  Of all Private Bills, Hybrid Bills and Bills for confirming Provisional Orders which in Session 1983–84 were reported on by Committees on Opposed Bills or by Committees nominated partly by the House and partly by the Committee of Selection, together with the names of the selected Members who served on each Committee; the first and also the last day of the sitting of each Committee; the number of days on which each Committee sat; the number of days on which each selected Member served; the number of days occupied by each Bill in Committee; the Bills of which the Preambles were reported to have been proved.; the Bills of which the Preambles were reported to have been not proved; and, in the case of Bills for confirming Provisional Orders, whether the Provisional Order ought or ought not to be confirmed;
  Of all Private Bills and Bills for confirming Provisional Orders which in Session 1983–84 were referred by the Committee of Selection to the Committee on Unopposed Bills, together with

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  the names of the Members who served on the Committee; the number of days on which the Committee sat; and the number of days on which each Member attended;
  And of the number of Private Bills, Hybrid Bills and Bills for confirming Provisional Orders withdrawn or not proceeded with by the parties, those Bills being specified which were referred to Committees and dropped during the sittings of the Committee.—[The Chairman of Ways and Means.]

  PUBLIC BILLS
  Return ordered,
  of the number of Public Bills, distinguishing Government from other Bills, introduced into this House, or brought from the House of Lords, during Session 1983–84 showing:

  (1)the number which received the Royal Assent, and

  (2)the number which did not receive the Royal Assent, indicating those which were introduced into but not passed by this House, those passed by this House but not by the House of Lords, those passed by the House of Lords but not by this House, those passed by both Houses but amendments not agreed to; and distinguishing the stages at which such Bills were dropped, postponed or rejected in either House of Parliament, or the stages which such Bills had reached by the time of Prorogation.—[The Chairman of Ways and Means.]

  SELECT COMMITTEES
  Return ordered,
  of Select Committees, except Business Committees, in Session 1983–84, with the Sub-Committees appointed by them; the number of the meetings of each and the number of meetings each Member attended; and the number of Members who served on Select Committees; together with the total cost (estimated where necessary) in respect of each Select Committee and Sub-Committee for the financial year 1983–84 of:—the attendance of witnesses; overseas visits; visits within the United Kingdom; specialist advisers' remuneration and expenses respectively, and other work commissioned; entertainment; the preparation for publication of the Minutes of Evidence; and printing and publishing; with so much of the same information as is relevant to the Chairmen's Panel and the Court of Referees.—[The Chairman of Ways and Means.]

  SITTINGS OF THE HOUSE
  Return ordered,
  of the days on which the House sat in Session 1983–84 stating for each day the day of the month and day of the week, the hour of the meeting, and the hour of the adjournment; and the total number of hours occupied in the sittings of the House, and the average time; and showing the number of hours on which the House sat each day, and the number of hours after the time appointed for the interruption of business.—[The Chairman of Ways and Means.]

  STANDING COMMITTEES
  Return ordered,
  for Session 1983–84, of (1) the total number and the names of all Members (including and distinguishing Chairmen) who have been appointed to serve on one or more of the Standing Committees showing, with regard to each of such Members, the number of sittings to which he was summoned and at which he was present; (2) the number of Bills, Estimates, Matters and other items referred to Standing Committees pursuant to Standing Order No. 79 (Standing Committees on Statutory Instruments, &c.) or Standing Order No. 80 (Standing Committees on European Community documents) considered by all and by each of the Standing Committees, the number of sittings of each Committee and the titles of all Bills, Estimates, Matters and other items as above considered by a Committee, distinguishing where a Bill was a Government Bill or was brought from the House of Lords, and showing in the case of each Bill, Estimate, Matter and other item, the particular Committee by whom it was considered, the number of sittings at which it was considered and the number of Members present at each of those sittings.—[The Chairman of Ways and Means.]

  SPECIAL PROCEDURE ORDERS
  Return ordered,
  of the number of Special Procedure Orders presented in Session 1983–84; the number withdrawn; the number against which Petitions or copies of Petitions were deposited; the number of Petitions of General Objection and for Amendment respectively considered by the Chairmen; the number of such Petitions certified by the Chairmen as proper to be received, and the number certified by them as being Petitions of General Objection and for Amendment respectively ; the number referred to a Joint Committee of both Houses; the number reported with Amendments by a Joint Committee, and the number in relation to which a Joint Committee reported that the Order be not approved; and the number of Bills introduced for the confirmation of Special Procedure Orders:
  Of Special Procedure Orders which, in Session 1983–84, were referred to a Joint Committee, together with the names of the Commons Members who served on each Committee; the number of days on which each Committee sat; and the number of days on which each such Member attended.—[The Chairman of Ways and Means.]

Oral Answers to Questions
  DEFENCE

    Trident Missiles
    Mr. Leighasked the Secretary of State for Defence what has been the effect of the dollar-sterling parity change on the estimated cost of Trident in the last 12 months.
    Mr. Heathcoat-Amoryasked the Secretary of State for Defence what is the latest estimate of the cost of the Trident programme.
    The Secretary of State for Defence (Mr. Michael Heseltine): The Trident estimate is currently being reviewed as part of the annual recosting of the defence programme. On completion, I will announce a revised estimate to Parliament and the exchange rate applicable to it.
    Mr. Leigh: Is my right hon. Friend aware that some Conservative Members, although fully committed to the maintenance of Britain's independent nuclear deterrent, are worried about the fact that because, according to some reports, £700 million has been added since last March to the cost of Trident due to the fall in the value of the pound, there is a need for a candid reassessment soon as to whether we can afford the Trident D5 system without damaging our conventional forces?
    Mr. Heseltine: I know of my hon. Friend's interest in this matter. I had noticed his name on the Order Paper in connection with this issue. The open government document which was published at the time of the initial decision shows that the alternatives and the arguments were fully set out. In the Government's view, nothing has changed to alter the basis of our judgment.
    Mr. Heathcoat-Amory: I thank my right hon. Friend for his reply. Does he agree that changing technology as well as changing costs make it important to review the Trident system constantly with a view to getting value for money? Will my right hon. Friend assure the House that other nuclear weapons systems are kept under examination to ascertain whether they would offer an adequate deterrent at a lower cost?
    Mr. Heseltine: I am grateful to my hon. Friend for asking that question. If we felt that there was an alternative because of changing technology, we would have to consider it, as would any Government. It is a sign of the Government's willingness to consider their position that we moved from the Trident C4 to the Trident D5 system. It would be misleading to pretend that we have knowledge of some of the new technological development that calls for a review of the sort that has been suggested.
    Mr. Douglas: Will the Secretary of State admit that since the open government document was published we have found that a higher proportion of expenditure will be incurred in the United States and that, therefore, the analysis of the dollar-sterling rate is of the utmost importance? When will the right hon. Gentleman come clean with the House and admit that an increase of 1 cent costs the country £25 million more and that the difference in the cost of this project is now about £700 million?
    Mr. Heseltine: The hon. Gentleman knows that, in common with others who have held this job, I have responsibility to update the defence programme on a regular annual basis. That updating is carried out along the lines of conventions which were established under the previous Government, and we have stuck to them. If anything, I have tended, if possible, to bring forward the updating announcements of the Trident system. In view of the interest of the Public Accounts Committee and the Select Committee on Defence, I am trying to ascertain whether I can bring forward the updating of the latest review, which we are in the last stage of completing.
    Mr. D. E. Thomas: Does the Secretary of State's total figure of public expenditure on Trident include the extra low frequency communications that are required? What is the specific cost of that part of the budget?
    Mr. Heseltine: I think that the hon. Gentleman will accept that the cost includes the whole capital cost of introducing the Trident system, but I shall look specifically at the individual component part to which he has drawn my attention.
    Mr. Boyes: Is the Secretary of State aware that the Opposition are committed to the defence of Britain, too, but find that Trident does not help in the slightest in that process? Is the right hon. Gentleman further aware that we find it impossible to explain to our constituents that, while the dollar-sterling parity rate has pushed up the price of the Trident submarine, council tenants will have to suffer because cuts are being made in repairs grants so that we can pay for that ludicrous weapon?
    Mr. Heseltine: I am sure that it is more for the hon. Gentleman than for me to explain to his constituents why he thought Polaris was necessary. It has to be modernised with the Chevaline process. However, he thinks that Britain can now abandon the policies that have kept the peace for so long.
    Sir Peter Blaker: Surely any alternative system would have to depend equally on American technology. Does my right hon. Friend know of an alternative system which is capable of penetrating the likely enemy defences by the mid-1990s and which comes anywhere near being less expensive than Trident?
    Mr. Heseltine: My right hon. Friend is correct. We looked carefully at the alternative systems, and we could
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    not find a system that gives Britain the absolute insurance which we believe to be necessary to maintain our independent nuclear deterrent. That is why we chose the Trident system and why we are determined to introduce it into service. However, I remind the House that at the time of the open government document a considerable analysis of alternatives to the Trident system was carried out, and in some cases the analysis showed that alternatives would be less effective and more expensive.
    Mr. Denzil Davies: Why is the Secretary of State so afraid to answer the question? Why does he not tell the House that, since we debated the Defence Estimates in the summer, the cost of Trident has gone up by £750 million? That is about five new frigates sunk on the foreign exchanges. Why does the right hon. Gentleman go through the charade of pretending that he can estimate the cost of Trident? Why does he not admit that he has no idea what the final cost will be?
    Mr. Heseltine: It is intriguing that the right hon. Gentleman suggests that we do not know what the cost is and then presses me to reveal it earlier than we normally would. However, he will be fully aware that any estimates that we make will be trying to anticipate the exchange rates for the rest of the decade. The change may have taken place on the scale that he mentioned, which I shall not yet confirm or deny because we have not finally concluded the review, but the mere fact that he could say that there has been such an incredible change as a result of exchange rates must cause him some moments of doubt as to whether the exchange rates will not move the other way.

    Shipbreaking (Asbestos Removal)
    Mr. Foulkesasked the Secretary of State for Defence if he will in future seek guarantees from the purchasers of naval vessels for purposes of shipbreaking, on the removal of asbestos from the vessels, before any sale is agreed.
    The Parliamentary Under-Secretary of State for Defence Procurement (Mr. John Lee): It has long been our practice to emphasise to purchasers of surplus naval vessels offered for scrap the statutory requirement to conform with the regulations in force at the time on the handling of asbestos. Firms tendering for the work are required to certify that they will so comply.
    Mr. Foulkes: In view of all the problems that the Health and Safety Executive has had with asbestos in the breaking up of the Ark Royal and the Bulwark at Cairnryan, and in view of the huge asbestos dump that has been discovered at Faslane, of all places, is it not grossly irresponsible of the Secretary of State to sell off those ships without getting a clear guarantee about the disposal of asbestos? Will the Minister consider the matter again? Will he also tell the people of Scotland what will happen to the dump at Faslane?
    Mr. Lee: I know of the hon. Gentleman's sincerity and genuineness in that area. We have dealt with several letters from him in that regard. However, I ask him to preserve some balance. The shipbreaking industry employs about 500 people. We work as closely as possible with the Health and Safety Executive. We recently recast our tendering documents to draw the attention of purchasers of the hulks to the existence of asbestos. We are as concerned as everyone to ensure that that work is handled

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    carefully and satisfactorily. Where individual shipbreakers contravene the law they are prosecuted, as is the case at present.
    The asbestos at Faslane was originally tipped well before regulations came into force and before the general concern about asbestos. We are carefully examining the whole site. It is fenced off, and no work is taking place at present.

    Soviet SS Missiles
    Mr. Chapmanasked the Secretary of State for Defence what is his estimate of the total number of SS missile warheads targeted on western Europe; and how this figure compares with one year and five years ago.
    The Minister of State for the Armed Forces (Mr. John Stanley): The number of warheads on SS20 missiles facing west is 729. No new bases facing western Europe have been completed in the past year, but further bases are currently under construction in both the eastern and western USSR which, when operational, could significantly increase the number of SS20s. The number of SS20s has trebled since 1979.
    Mr. Chapman: Do not those figures show conclusively that the Soviet Government have not negotiated seriously between 1979 and 1983 when, if they had reduced the number of their SS warheads, the West would not have needed to deploy cruise and Pershing? Has not the Soviet Union escalated the arms race and increased tension in Europe? Are not the figures a timely reminder to people in Europe that the British Government must pursue multilateral disarmament in the years ahead?
    Mr. Stanley: My hon. Friend is right. Regrettably, the INF negotiations in Geneva have not made progress, and responsibility for the lack of progress lies firmly on the Soviet side. My hon. Friend is also right to point out that the INF escalation has been on the Soviet side. The SS20 deployment started two years before NATO even decided on its own INF deployment and six years before any cruise or Pershing II deployment.
    Mr. James Lamond: Did the figures given by the Minister come from the same rather unreliable source which recently categorically stated that MiG fighters were being unloaded in Nicaragua?
    Mr. Stanley: Those figures have been published before, and we believe that they are absolutely reliable
    Mr. Cyril D. Townsend: Can my right hon. Friend confirm press reports that SS20s have been sited in Latvia, Lithuania or Estonia? Will he also confirm that it is still the West's plan to withdraw existing cruise missiles and not to position any more such missiles in this country if the Soviet Union is prepared to withdraw its SS20s?
    Mr. Stanley: I am sure that my hon. Friend will understand that I cannot comment on the detailed locations of SS20 sites. However, I assure him that the INF offer which the NATO countries have made remains on the table. The zero option remains on the table, together with the modification of an agreement with the Soviet Union on the basis of equal numbers at a lesser figure than those now deployed. Those offers remain firmly on the table, and it is our earnest hope that the Soviet Union will negotiate on that basis.
    Mr. Strang: Is the Minister aware that these deployments are to be deplored? Does he accept that the Soviet Union is doing exactly what it said it would do and that the deployment of these weapons is a direct consequence of the breakdown of the INF talks, which was caused by the decision of the West to press ahead with the deployment of cruise and, in particular, Pershing II?
    Mr. Stanley: The hon. Gentleman could not have listened to the chronology that I gave. Deployment of the SS20 missiles began six years before the start of cruise and Pershing II deployment.

    Nimrod Aircraft
    Mr. Favellasked the Secretary of State for Defence what representations he has received relating to the servicing of Nimrod aircraft.
    The Minister of State for Defence Procurement (Mr. Adam Butler): Various representations on this subject have been received, including those from my hon. Friend.
    Mr. Favell: Can my right hon. Friend tell us whether the major servicing of Nimrod aircraft is about to be put out to competitive tender? Does he know that the very survival of the Nimrod production and design team at Woodford depends on its being awarded that contract? Is my right hon. Friend aware of the value of that team to Britain's defence effort, both now and in the future, and will he beware of being penny wise and pound foolish?
    Mr. Butler: I am aware of the concern at BA Woodford, and I can confirm that the deep servicing of Nimrod will be put out to competition. The matter is being considered very carefully. We need to identify whether companies are likely to be able to undertake the work and obtain the necessary security clearance. Therefore, it is taking us some time to reach the point at which contracts will be put out.
    Mr. Dalyell: Have there been any representations on the malfunction of the Nimrod's AD470 high frequency Marconi transceiver equipment and its communications with Ascencion Island and with Cheltenham? The right hon. Gentleman will know why I ask
    Mr. Butler: I have not received representations on that subject.

    Trident Missiles
    Mr. Kirkwoodasked the Secretary of State for Defence whether he will reconsider Her Majesty's Government's decision to purchase the Trident II weapons system.
    Mr. Heseltine: No, Sir.
    Mr. Kirkwood: Does the Secretary of State agree that the acquisition of the independent Trident II system not only upsets the conventional-nuclear balance and ties us to the United States for both procurement and maitenance, but, even more importantly, flies in the face of recent moves within Europe and the Western European Union towards a more concerted European policy for defence and strategic purposes?
    Mr. Heseltine: I do not think that I would agree. Under all post-war Governments Britain has always taken the

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    view that it should maintain its own last-resort nuclear deterrent. That remains the position of the present Government.
    Mr. Bill Walker: Was not the decision on Trident II taken in the knowledge that, over the next 30 years, the revenue implications of the alternative systems for providing a credible deterrent were horrendous?
    Mr. Heseltine: That most important point was covered in the open government document of 1980, which showed that one of the alternatives—the cruise missile—would have been 30 per cent. more expensive to buy and twice as expensive to operate.
    Mr. Soames: Now that there is real hope of progress in East-West talks, particularly under the new umbrella concept, would it not be fatal to destabilise the present and future nuclear balance in Europe, pending multilateral disarmament? Accordingly, will my right hon. Friend press ahead with the programme?
    Mr. Heseltine: The Government are totally committed to multinational talks about arms and, I hope, agreements. Now that it seems that talks might start again, the House should remember that we were told that if we proceeded with the deployment of cruise missiles such a constructive dialogue would never take place. However, the Government took the view that a constructive dialogue would become much more likely, and it looks as though we may have been right.
    Mr. Denzil Davies: What effect, if any, will the sale of the warships division of British Shipbuilders have on the building of Trident at Barrow? Have not the merchant bankers who are advising the Government said that any prospectus must contain a guarantee to any purchaser that the Government will continue with the Trident programme?
    Mr. Heseltine: Our contractual agreements with the builders of the Trident submarine will be exactly what one would expect of an arm's-length relationship between a contractor and the Government.

    NATO (Military Committee)
    Mr. Barronasked the Secretary of State for Defence what were his latest discussions with the military committee of the North Atlantic Treaty Organisation.
    Mr. Stanley: My right hon. Friend does not have direct discussions with NATO's military committee. However, he and his Alliance ministerial colleagues were last briefed by the chairman of the military committee during a ministerial session of NATO's defence planning committee in May this year
    Mr. Barron: Has the Secretary of State had any involvement with our chief of staff and ambassador to NATO? Agreement has been reached in principle on the new policy of follow-on force attack, which is a policy of offensive attack and a rethinking of the treatment of the East in time of warfare. Many hon. Members believe that the policy of follow-on force attack should be debated in the House before it is agreed by the Secretary of State, because it has major implications for the likelihood of warfare in the world.
    Mr. Stanley: The hon. Gentleman misrepresents the NATO concept of follow-on force attack. We support the
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    concept, which is consistent with the long-standing NATO concern about the threat represented by Soviet and Warsaw pact second echelon forces. It would be wrong for us in our defensive posture not to take account of the threat represented by those forces.
    Mr. Wilkinson: If NATO were to forgo the possibility of interdicting the battlefield, would it not leave itself vulnerable to the huge masses of men and material that could be brought forward on the interior lines of communications enjoyed by the Warsaw pact? Is not that possibility essential for the defence of the West?
    Mr. Stanley: My hon. Friend has hit the nail on the head.
    Mr. Denzil Davies: Is it not a fact that at the next NATO meeting in December the airland battle, follow-on force attack, deep strike, or whatever phrase is used to describe it, will be confirmed? Does the Minister agree that many people are worried if that is the case, as it will mean that NATO will appear to be an aggressive rather than a defensive organisation? Would it not also mean that there could be rearmament in Europe and that nuclear weapons would be used even earlier under NATO strategy than is envisaged now?
    Mr. Stanley: The right hon. Gentleman is wrong in every respect. There is no change in NATO's defensive posture. The concept of follow-on force attack is purely defensive. It is concerned with how we would deal with the significant threat of the follow-on force of the Warsaw pact after it had committed an act of aggression against NATO countries.

    RAF Trainer
    Mr. Chopeasked the Secretary of State for Defence when he expects to announce a decision on the replacement of the Royal Air Force trainer.
    Mr. Gerald Howarthasked the Secretary of State for Defence when he expects to announce his decision on the new Royal Air Force basic trainer to replace the jet Provost.
    Mr. Butler: It is hoped to announce a decision around the turn of the year.
    Mr. Chope: What criteria will the Government use when deciding what trainer should replace the existing one?
    Mr. Butler: As my hon. Friend would expect, the usual criteria will apply, and they will include the operational performance of the aeroplane. It must meet the needs of the Royal Air Force. However, we shall take into account the issue of jobs in the United Kingdom, examine sales prospects and international relations and many other considerations.
    Mr. Howarth: I am grateful to my right hon. Friend for that answer. I am sure he is aware that there is an acrimonious battle going on between some of the contenders, especially about the United Kingdom content. Therefore, the sooner a decision can be made, the better. My right hon. Friend will know that hon. Members are being inundated with requests. Will he assure the House that, when weighing up all the factors, the preference of the Royal Air Force will be given top priority, following its extensive evaluation process?
    Mr. Butler: In regard to the second part of my hon. Friend's question, I cannot add to what I said in my second answer. I am glad to say that all four contenders have a high level of United Kingdom manufacturing content.
    Mr. Maginnis: Is the Minister aware that should Shorts' Tucano be selected that would produce more new jobs than would any of the other contestants? Is he also aware that it is a long time since the Ministry of Defence has supported Shorts by giving it an order for aircraft? As it has recently gained a most prestigious order from the United States Air Force, is it not time that the Ministry of Defence considered placing an order as well?
    Mr. Butler: As the hon. Gentleman knows, I am very sensitive to Shorts' position, but I shall remain completely objective in regard to this selection. The number of jobs involved in any order will be conditioned by the initial order from the RAF and by the prospect of overseas sales.
    Mr. Ashdown: Does the Minister agree that the only aircraft that is designed fully to meet the RAF's requirements is the AAC/Westland submission? Is he aware that choosing that aircraft could produce significant reciprocal Far Eastern orders for British industry? Does he agree that it is important that the RAF should have aircraft adequate to meet its requirements?
    Mr. Butler: This exchange is typical of the lobbying that has taken place, is taking place and will continue to take place for some months.

    Western European Union
    Sir Anthony Meyerasked the Secretary of State for Defence what plans he has for strengthening the military role of the Western European Union in the defence of Europe.
    Mr. Heseltine: We expect the reactivated Western European Union to give a valuable political impetus to improved European security co-operation. However, NATO remains the cornerstone of our security, and, as the modified Brussels treaty makes clear, WEU will not duplicate the military functions of NATO.
    Sir Anthony Meyer: In view of the renewed French interest in WEU, is it not now the ideal framework within which to secure a better balance within NATO and to strengthen the role of European industry to provide weapons for the Alliance?
    Mr. Heseltine: The provision of weapons systems is generally recognised to be a desirable objective for coordination, but it is more properly sought through the Independent European Programme Group, to which the Government are giving a great deal of attention. We certainly think that the recent discussions in Rome at the Western European Union were helpful and showed that there was a willingness and anxiety on the part of the Ministers participating to continue the momentum which that meeting began.
    Mr. Hardy: Does the Minister agree that there is justification for a little hesitation about this matter, as most of the Europeans with an overwhelming interest in the reactivation of WEU are primarily concerned with the central area of NATO? For them there may be far less interest or significance in the southern and, more
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    important for Britain, northern areas of NATO. Does the Secretary of State recognise the risk of a genuine strategic disadvantage for Britain?
    Mr. Heseltine: There is a great deal in what the hon. Gentleman says. That is why I made it clear in my initial answer that NATO remains the cornerstone of our defence-security policies.
    Mr. Hill: I am sure that my right hon. Friend, like me, welcomed the reactivation of WEU and the French initiative. Does he agree that it is absolutely essential that we do not lose sight of complete co-operation with the United States' Government and the Pentagon in this matter? Does he think that the United States' Government have welcomed the reactivation of WEU?
    Mr. Heseltine: My hon. Friend will recognise that his questions could easily trespass on the territory of my right hon. and learned Friend the Foreign Secretary. However, I believe that the initiatives are broadly welcomed by the United States' Government. The essence of what we are seeking to do regarding industrial co-operation is to ensure that European industry is equipped with the same degree of resource and rationalisation to enable it to compete more effectively with and to keep abreast of advancing United States' technology.
    Mr. Johnston: Regarding technical co-operation, does the Secretary of State think that the new French enthusiasm for WEU shows that France may be considering resuming her membership of NATO, and would he welcome that?
    Mr. Heseltine: The House will realise that if I hesitate to speak on behalf of my right hon. and learned Friend the Foreign Secretary, I shall hesitate even more profoundly to speak for France. France must decide what her motives are, and we must respond to initiatives. It seemed to us that there was an opportunity for profitable co-operation.
    Mr. Stokes: Will my right hon. Friend consider following the example of his colleagues, the other European Defence Ministers, and contemplate addressing the WEU Assembly, so that we can hear directly from him and be proud to have a British Minister present?
    Mr. Heseltine: I am most grateful for that kind thought, but it would seem appropriate for me to respond to invitations rather than to initiate them.
    Mr. Denzil Davies: Is the Secretary of State aware that many hon. Members are worried that the reactivation of WEU could lead eventually to the creation of another military bloc? No one wants that. Does he agree that if it is necessary, as it is, to have a greater European voice in the defence of the West, it should come through NATO and not through the creation of another body?
    Mr. Heseltine: The Government do not want to see the creation of another European bloc. That is why my initial answer was clearly designed to stress that NATO remains the cornerstone of our security. There is no profit for any of us, including WEU members, in fragmenting the defence efforts of Europe and our partnership with the North American people.

    USA (Discussions)
    Mr. Tony Lloydasked the Secretary of State for Defence if he has any plans to hold discussions with representatives of the United States of America Government.
    Mr. Heseltine: I have no plans to do so in advance of the NATO ministerial meeting in Brussels in December.
    Mr. Lloyd: Does the Secretary of State realise how unsatisfactory his right hon. Friend's answer was to the question of my right hon. Friend the Member for Llanelli (Mr. Davies) about the follow-on force attack? Would it not be appropriate for the Secretary of State to inform his American counterparts of the growing anxiety in this country and western Europe about the dangers, through follow-on force attack, of an early use of nuclear weapons? Will he advise the House whether there will be a debate on this important issue before 4 December, when the final decision will be made?
    Mr. Heseltine: I found the answer of my right hon. Friend the Minister of State for the Armed Forces wholly convincing. If the Opposition are suggesting that in the event of warfare we should not be allowed to attack the airfields in the Soviet Union or their tanks before they mass and attack us, it shows a degree of naivety towards defence policy which exceeds even that which inflicted such a severe defeat on the Labour party at the general election.
    Sir Nicholas Bonsor: When my right hon. Friend meets the United States Government, will he stress the comparative weakness of the northern flank of the NATO Alliance and ask them to commit a greater element of naval support to that area in the event of an attack?
    Mr. Heseltine: I am pleased to say that even in the past few days I have been able to have detailed discussions with my Norwegian and Danish colleagues who, of course, are aware of the concern of the whole Alliance to ensure that our defence spreads across the territory of NATO rather than any one specific part of it. Therefore, although we keep under constant review areas in which we think there may be a relative, though not an absolute weakness, they may be assured that we continue to do all that we can to maintain the credibility of our deterrence in all areas.
    Mr. Denzil Davies: Will the right hon. Gentleman confirm that, as he has already told the House, follow-on force attack is not part of NATO's strategy, but that in December NATO will be asked to approve that strategy, which is at present basically a US army strategy, as NATO strategy? If such a decision is taken, will the right hon. Gentleman make a statement to the House, as it is an important shift in NATO strategy?
    Mr. Heseltine: The right hon. Gentleman is far from keeping abreast of developments. On 9 November the NATO Alliance, through the Defence Planning Committee in permanent session, adopted the follow-on force attack policy, but the idea that there is something new in the concept that an alliance, if ever it found itself in hostile circumstances, should be allowed to strike deep in enemy territory is the most extraordinary abdication of defence capabilities.

    Nuclear Weapons (Transportation)
    Mr. Jannerasked the Secretary of State for Defence whether he will institute an inquiry into arrangements for the safe transport of nuclear weapons by road.
    Mr. Stanley: Like other aspects of nuclear safety, the arrangements for the safe transport of nuclear weapons remain constantly under review.
    Mr. Janner: Is part of that review the exercise now known as Broken Arrow, one phase of which was recently carried out on Salisbury plain? If so, what is the involvement of police arid fire authorities in such exercises, given that they would have to cope with the emergency caused by a disaster such as that which could have occurred when Chevaline nuclear warheads were carried through the city of Leicester in the rush hour?
    Mr. Stanley: We cannot breach the long-established policy followed by successive Governments for security reasons of not confirming or denying the presence of nuclear weapons in any particular location. As I have assured the hon. and learned Gentleman in parliamentary answers, however, nuclear safety, including the safe transport of nuclear weapons, is constantly under review and very close attention is paid to it
    Sir John Farr: When answering questions about the transport of nuclear materials and weapons around the city of Leicester, will my right hon. Friend bear in mind that Labour Members, including the hon. and learned Mernber for Leicester, West (Mr. Janner), would have us abandon entirely our own nuclear deterrent?
    Mr. Stanley: I am grateful to my hon. Friend. We are very much aware that the Labour party has embarked on a policy of one-sided strategic nuclear disarmament, which we have no intention of following.

    Tornado Aircraft
    Mr. Lathamasked the Secretary of State for Defence whether he will make a statement on progress regarding the introduction into operational deployment with the Royal Air Force of the air defence variant of the Tornado.
    Mr. Stanley: The first two Tornado F2s, the air defence variant, were delivered to RAF Coningsby last week and are being used for ground training and familiarisation. As planned, flying training for the operational conversion unit will start next year and the aircraft will enter squadron service in 1986.
    Mr. Latham: In view of recent critical comments in the United States about Tornado, will my right hon. Friend stress its importance to the Western defence effort and the importance of the existing strike version?
    Mr. Stanley: I am aware of the press reports to which my hon. Friend refers. I assure him that the RAE is extremely well satisfied with the capability and survivability of the Tornado. As for performance, it is significant that Tornado GR1s won two of the three major trophies in the recent Strategic Air Command bombing competiton staged by the United States air force.
    Mr. Robert Atkins: Why do we allow Turkey to be an ally within NATO when the Government are not prepared to sell Tornado to that country?
    Mr. Stanley: I do not think that my hon. Friend is entirely correct, but if my right hon. Friend the Minister of State for Defence Procurement can add further to the information about the sale, I am sure that he will do so.

    RAF Upper Heyford
    Mr. Baldryasked the Secretary of State for Defence when he anticipates that the noise level testings approximate to RAF Upper Heyford will be completed; and if he will make a statement
    Mr. Lee: We expect to have computer predictions of noise levels in the vicinity of RAF Upper Heyford available by the end of the year. Validating measurements in the area will then be taken to confirm these. If they show that noise levels are above a qualifying level, my Department will introduce its standard noise insulation grant scheme.
    Mr. Baldry: While those living near to Upper Heyford fully appreciate that one of the first duties of the Government must be the defence of the realm, is my hon. Friend aware that they are increasingly frustrated at the delay in knowing whether, and which, homes near to Upper Heyford will be eligible for a noise insulation grant? Will my hon. Friend and his Department make every endeavour to speed up these tests so that those who think they might be eligible for noise insulation grants can be informed as quickly as possible?
    Mr. Lee: I understand my hon. Friend's concern. The RAF Institute of Community Medicine will be visiting the area early in 1985 to validate measurements. We are in regular correspondence with the Cherwell district council. Noise insulation grant schemes are already operating at Brawdy, Honington, Yeovilton and Leuchars, and three helicopter sites in Northern Ireland, and are under consideration at Cottesmore, Kinloss, Lossiemouth, Stornoway and, of course, Upper Heyford.

    Chemical Weapons
    Mr. Greenwayasked the Secretary of State for Defence what measures he is taking to meet the threat from the chemical weapons manufactured and held by the Soviet Union; and if he will make a statement.
    Mr. Stanley: We are continually improving our defensive equipment and clothing against chemical attack.
    The Government are also doing their utmost to secure progress in achieving a comprehensive, verifiable and world-wide ban on the development, production, stockpiling and use of chemical weapons, together with the destruction of existing storks, at the conference on disarmament in Geneva. We tabled important new proposals on verification in February and July this year.
    Mr. Greenway: Will my right hon. Friend remind advocates on the Opposition Benches and in CND who are in favour of unilateral nuclear disarmament by us that our unilateral abandonment of chemical weapons in the 1950s did not evoke a similar response from the Soviet Union? Is it not an irony that we now have to depend on the nuclear deterrent against the massive armoury of chemical weapons held by the Soviet Union?
    Mr. Stanley: My hon. Friend is right. The massive Soviet procurement of chemical weapons is the most clear and eloquent illustration of the naivety of one-sided nuclear disarmament.
    Mr. Robert C. Brown: Will the Minister continue to resist the blandishments of those on his Back Benches on the issue of chemical weapons? Will he assure the House that he will continue to see that Her Majesty's armed forces receive the best possible equipment to withstand any possible chemical attack?
    Mr. Stanley: We are devoting many resources to improving our defensive equipment. There is no change in our policy, and we are working as constructively and earnestly as we can to achieve a world-wide ban on chemical weapons, which would be an enormous advance for mankind.

    Trident Missiles
    Mr. Canavanasked the Secretary of State for Defence what recent communications he has had about the proposal to base the Trident weapon in Scotland.
    Mr. Heseltine: I have received a few letters from organisations and private individuals.
    Mr. Canavan: Is the Secretary of State aware that, apart from a dwindling number of militant Tories, nobody in Scotland wants this terrorist weapon? In view of yesterday's announcement about increased prescription charges and cuts in overseas aid when people are starving to death in the Third world, why are the Government proposing to spend over £10,000 million on a weapon of death, instead of spending that amount of money on the preservation of human life?
    Mr. Heseltine: The Government are to modernise the Polaris system by the introduction of Trident for the same reasons as the previous Government modernised Polaris with Chevaline. If the hon. Gentleman believes that there is overwhelming evidence of opinion in Scotland, he will, perhaps, take into account the evidence of the letters that I have received about Scottish opinion on this matter—one from the president of Strathclyde university students association, one from Streatham CND and three from members of the public, two of whom live in England.

    Strategic Forces
    Mr. Home Robertsonasked the Secretary of State for Defence if he will report on the progress of his review of strategic forces.
    Mr. Heseltine: I take it that the hon. Gentleman is inquiring about our strategic nuclear forces; and I can assure him that no review of our policy is under way.
    Mr. Home Robertson: Are there any strategic circumstances under which Trident nuclear missiles in Britain could be used without the consent and approval of the United States Government?
    Mr. Heseltine: There is no question of any consent being necessary.

  PRIME MINISTER

    Engagements
    Ql. Mr. Fatchettasked the Prime Minister if she will list her official engagements for 13 November.
    The Prime Minister (Mrs. Margaret Thatcher): This morning I had meetings with ministerial colleagues and others. In addition to my duties in the House I shall be having further meetings later today. This evening I shall preside at a dinner in honour of President Koivisto of Finland
    Mr. Fatchett: I am grateful to the Prime Minister for that answer.
    In her speech at the Guildhall last night the Prime Minister confessed that the rate of economic growth in the economy was not sufficient to cut the level of unemployment. Earlier in the day the Chancellor, in his autumn statement, offered no hope of any real cut in the level of unemployment. Are we to conclude from those statements that the Government have absolved themselves from responsibility for unemployment and for the plight of the unemployed?
    The Prime Minister: No. If the hon. Gentleman looks in detail at what I said last night he will see that I pointed out that growth in Britain this year has been of the order of 2·5 per cent. It would have been 3·5 per cent. but for the coal strike. The 2·5 per cent. has been enough to create a considerable number of new jobs. But, because of the demographic curve that we have to face, it is not enough substantially to reduce, as we wish, the level of unemployment.
    Mr. St. John-Stevas: Will my right hon. Friend take time in her busy day to have words with the Chancellor of the Exchequer, who is sitting not far away from her, and ask him whether he will have second thoughts about the proposed abolition of the £1 note? If she saves us from the imposition of the most unpopular coin in our history, she will have the support of virtually the entire country.
    The Prime Minister: I cannot offer my right hon. Friend very much hope. The £1 note will have lasted for two years longer than might otherwise have been the case. During that time the £1 coin has become much more widespread in its use and much more accepted. As my
    right hon. Friend is aware, the £1 note lasts for only about nine to 10 months. A re-issue would cost some £3 million and we could find better use for that money.
    Mr. Kinnock: The Government have cut overseas aid by £160 million in the past four years. Can the right hon. Lady tell us whether that cuts programme has now stopped, whether it is to continue, or whether, in the name of humanity, she will reverse that cuts policy, and reverse it now?
    The Prime Minister: I cannot give the right hon. Gentleman any more information than is contained in this year's Autumn Statement, which he will notice is in precisely the same form as the previous statement in 1983. In other words, the budget for the Foreign and Commonwealth Office, including the Overseas Development Administration, was given as a global sum. He will see that the two Departments have precisely the same budget as was anticipated in the White Paper. It has not been increased; it has not been decreased. The total
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    amount for the Foreign and Commonwealth Office was £1,800 million in 1984–85 and it will be £1,870 million in 1985–86.
    Mr. Kinnock: The hunger has not decreased at all. Is the Prime Minister not aware that this country feels that it has a moral responsibility and wants to discharge it? She is still dodging, just as the Chancellor of the Exchequer dodged yesterday and as the Minister for Overseas Development dodged last week. She is the Prime Minister. Cannot she tell us straight exactly what that budget is to be spent on? Are there any cuts, or is she just too ashamed to say?
    The Prime Minister: No, Sir. The global budget is done at this time of the year, and within that total budget separate provision is made by the Foreign Secretary. The right hon. Gentleman will recall that last year aid was up on the previous year. In 1983–84 the total Foreign Office budget was £1,683 million. I do not have the precise aid figures, but the figure for the total Foreign Office budget has increased from £1,683 million to £1,870 million this year. I should make it quite clear that that aid budget has allowed us to respond to Ethiopia. There is no question but that we shall be able to respond in the future with humanitarian aid in the same way as we have just responded to Ethiopia.
    Mr. Kinnock: That is a shameful answer from the Prime Minister and I do not think that the public or those engaged in trying to help the hungry will forgive her for it. Will she now reverse the cuts programme and discharge the responsibilities of a rich country to the poor of this earth?
    The Prime Minister: The right hon. Gentleman is trying to detract from this country's excellent record of humanitarian aid. As he knows, this country led the world in providing aid to Ethiopia. He does not like that lead and is trying to detract from it. The budget for the Foreign Office will be quite sufficient to permit humanitarian aid of that kind in future.
    Mr. Robert Atkinsasked the Prime Minister if she will list her official engagements for 13 November.
    The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.
    Mr. Atkins: Is my right hon. Friend aware that the great majority of people in ray constituency, in the rest of Lancashire, and probably in the country for that matter, support the retention of corporal punishment in our schools? Is she further aware that the old adage "Spare the rod and spoil the child" is as true now as it ever was? Will she do all in her power to ensure that that element of discipline is retained in our schools?
    The Prime Minister: I assure my hon. Friend that we do not intend to abolish corporal punishment in schools. As he knows, we have to respect the judgment of the European Court of Human Rights, which made it perfectly clear that where the convictions of parents were otherwise, those convictions must be respected. We shall introduce legislation to honour that judgment.
    Mr. Steel: Why should we trust in the Prime Minister's belief that her present policies will lead to a fall in unemployment when only last December she told us of her belief that the £1 note would be retained?
    The Prime Minister: If the right hon. Gentleman reads exactly what I said, he will find that the £1 note will be retained for about two years longer than it would otherwise have been. Indeed, if he reads the very long letter that I wrote, he will find that—as I said in the House—
    "there is no question of withdrawing the note for the time being. But equally, that may eventually be the right thing to do."
    I do not think it right to spend another £3 million on a special extra print of £1 notes to last only nine or 10 months when that money could be spent on several other things.
    Mr. Lester: I listened carefully to my right hon. Friend's answer about the Foreign Office budget. Will she take time today to inquire about what machinery would exist to deal with an adverse rate of exchange which affected that budget, as there is a commitment in the Gracious Speech to a substantial overseas aid programme and it is widely supported in all parts of the House?
    The Prime Minister: The Foreign Office budget, including that for aid, is substantial. Most aid expenditure is in sterling and does not therefore suffer from exchange rate movements. We determine our aid in sterling and it is denominated in sterling in those countries to which we give it. The only exception is aid given under the Lomd convention, when European currency is used. Payments to the World Bank are also denominated in sterling.
    Mr. Pikeasked the Prime Minister if she will list her official engagements for Tuesday 13 November.
    The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.
    Mr. Pike: Only 35 per cent. of electricity was generated from coal in August and the CEGB has considerable additional costs. Can the Prime Minister say what those additional costs are? Can she give an assurance that they will not be passed on to the consumer, recognising that the dispute was provoked by the NCB, which did not use recognised procedures before proposing to close Cortonwood? Does she accept that the Government have taken no positive steps to help resolve this long dispute?
    The Prime Minister: The hon. Gentleman is aware that the Government neither wanted nor sought the dispute and did everything possible to avoid it. Generous pay offers, generous investment, generous voluntary redundancy, a guarantee of future employment and very generous subsidies of taxpayers' money were involved. We are talking of far more generous terms for the coal industry than many people who have to find the taxes for the coal industry receive.
    If the CEGB is to go back to the amounts of electricity once generated from coal, it must be sure of security of supply. Failure to achieve security of supply loses customers more than anything else.
    Mr. Terlezki: The NUM has taken millions of pounds to America — perhaps it would have been more appropriate for the money to be taken to Cuba or the Soviet Union. Would it not be better if that money were used to help the families of striking miners or for Ethiopia, about which the Opposition shed crocodile tears?
    The Prime Minister: I can see my hon. Friend's point. I would take more notice of some right hon. and hon. Members of the Opposition if they did not support a strike to take an unlimited quantity from the taxpayer to support the coal industry.
    Mr. Parryasked the Prime Minister if she will list her official engagements for Tuesday 13 November.
    The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.
    Mr. Parry: Is the Prime Minister aware that further increases in gas, water and electricity prices will cause more hardship to pensioners and people on low incomes? Is she also aware that any further increase in prescription charges will deter people from seeking proper medical treatment, thereby causing more pain and suffering? Will the Prime Minister make it clear that she will totally oppose any cuts in overseas spending in the poorest countries, where millions are dying of starvation? If the so-called iron lady does not, she should be renamed the cruel lady.
    The Prime Minister: I have nothing further to add about the aid programme. Electricity charges have gone up by 2 per cent. in the last two years. Under the Labour Government they went up by 2 per cent. every six weeks. I remind the hon. Gentleman that 70 per cent. of prescriptions are free and that the prescription charge covers only about one third of the cost of the average prescription.
    Mr. Butterfill: Will my right hon. Friend comment on reports in The Standard tonight about the GLC granting employment contracts to temporary and part-time employees knowing that the posts will disappear, resulting in the payment of £90,000 in compensation — [HON. MEMBERS: "Reading."] Should people be granted compensation when they were appointed on a temporary basis only last July?
    The Prime Minister: The actions speak for themselves and are yet another reason for the abolition of the GLC.
    Mr. Pavitt: Does the the Prime Minister recall that during last year's less tragic Conservative party conference millions of television viewers heard her express concern about terminal cancer patients and the cost of prescriptions? How can she justify the rise in prescription charges last April to £1·60 each, or £26 a year for the long-term sick?
    Will the right hon. Lady do something about the young woman with breast cancer who has to undergo chemotherapy? If the prescription charge rises to £2 she will have to pay that sum every three weeks, or about £30 a year for a season ticket, for the remainder of her life. Cannot the right hon. Lady do something about that rather than simply express concern?
    The Prime Minister: The hon. Gentleman is aware of the answer to his question. There is no special arrangement for terminal cancer patients. An obvious reason is that it is difficult to tell the patient that the illness is terminal, and that in some cases it is difficult to know that it is terminal. If such patients come within the exempted group for other reasons, their prescriptions will be free of charge.

House of Commons Stationery (Use)
3.31 pm
Mr. James Couchman: On a point of order, Mr. Speaker. I wish to raise a point about the actions of a senior Opposition spokesman, the hon. Member for Oldham, West (Mr. Meacher), who circulated, on House of Commons stationery, health authority members whom he perceived to be Labour party supporters. I put a note in the hon. Gentleman's pigeonhole earlier this afternoon but regret to note that he is not in the House. The circular was sent on 13 August and was addressed to all Labour members of health authorities. I believe that it was sent in postage-paid envelopes—
Mr. Speaker: Order. What is the point of order for me?
Mr. Couchman: I believe that sending out such circulars on House of Commons stationery, in postage-paid envelopes, was an abuse of the rules relating to the use of stationery to which we are all subject.
Mr. Speaker: The hon. Gentleman gave me notice of his point of order. It is the practice of the House for questions relating to the appropriate use of House of Commons stationery to be considered by the Services Committee, which drew up the rules that govern that matter. I shall ensure that the attention of the appropriate Sub-Committee is drawn to the hon. Gentleman's remarks, and no doubt that Sub-Committee will look into the matter.

Questions to Ministers
3.33 pm
Mr. Stuart Bell: On a point of order, Mr. Speaker. During the last Session of Parliament you were kind enough to rule that questions to the Prime Minister should be directed towards her responsibilities. Today there have been two questions to the Prime Minister on matters outside her responsibilities. Would it be in order for you to repeat your edict?
Mr. Speaker: I shall gladly do so. Supplementary questions should always be related to the question on the Order Paper. There are 115 questions on the Order Paper today — the highest number ever — asking the Prime Minister to list her engagements. Some of the supplementary questions today were addressed to me rather than to the Prime Minister's engagements.
Mr. Rob Hayward: Further to that point of order, Mr. Speaker. It has been your stated intention since I have been a Member of Parliament to protect Back Benchers, especially during Prime Minister's Question Time. Are you aware that when my right hon. Friend was first elected as Leader of the Opposition she took 15 weeks to use 1,000 words to ask questions of the then Prime Minister? The current Leader of the Opposition has taken not 15 weeks, not 10 weeks, not eight weeks, but four weeks to use 1,000 words in questioning my right hon. Friend. Were it not for that verbosity factor of 375 per cent., two more Back Benchers could ask questions during each Prime Minister's Question Time.
Mr. Speaker: I am afraid that I have not carried out such detailed research. A dispensation has always been given to Front Bench spokesmen. I do my utmost to ensure that Back Benchers have an equal share of the time. When we begin a new Session, I start with a clean sheet for Prime Minister's questions. I hope that everyone will have his opportunity.
Mr. Douglas Hogg: Further to that point of order, Mr. Speaker. Are you aware that during defence questions the right hon. Member for Llanelli (Mr. Davies) rose on no fewer than four occasions and spoke at great length? Would it not be a good idea to suggest that the right hon. Gentleman does not model himself on the verbosity of his leader?
Mr. Speaker: I think that it was five times. The choice rests entirely with the right hon. Member for Llanelli (Mr. Davies), but I must remind the occupants of both Front Benches that every time a Front Bench spokesman rises a Back Bencher will fail to catch my eye.

Statutory Instruments, &c.
Mr. Speaker: With the leave of the House, I shall put together the six motions on statutory instruments.
Ordered,
That the Dairy Produce Quotas (Amendment) Regulations 1984 (S.I., 1984, No. 1538) be referred to a Standing Committee on Statutory Instruments, &c.
That the Industrial and Commercial Ratepayers (Consultation) Regulations 1984 (S.I., 1984, No. 1355) be referred to a Standing Committee on Statutory Instruments, &c.
That the National Health Service Functions (Directions to Authorities and Administration Arrangements) Amendment Regulations 1984 (S.I., 1984, No. 1577) be referred to a Standing Committee on Statutory Instruments, &c.

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That the Bread and Flour Regulations 1984 (S.I., 1984, No. 1304) be referred to a Standing Committee on Statutory Instruments, &c.
That the Bread and Flour (Scotland) Regulations 1984 (S.I., 1984, No. 1518) be referred to a Standing Committee on Statutory Instruments, &c.
That the Rating of Caravan Sites (Scotland) Order 1984 be referred to a Standing Committee on Statutory Instruments, &c.— [Mr. Lang.]

Orders of the Day

  Debate on the Address
  [SIXTH DAY]
  Order read for resuming adjourned debate on Question [6 November]
  That an humble Address be presented to Her Majesty, as follows:
  Most Gracious Sovereign,
  We, Your Majesty's most dutiful and loyal subjects, the Commons of the United Kingdom of Great Britain and Northern Ireland in Parliament assembled, beg leave to offer our humble thanks to Your Majesty for the Gracious Speech which Your Majesty has addressed to both Houses of Parliament—[Sir Paul Bryan.]

The Economy
Mr. Speaker: I have selected the amendment in the name of the Leader of the Opposition and his right hon. and hon. Friends. In addition, under the powers given to me by Standing Order No. 35, I have selected the amendment in the name of the right hon. Member for Plymouth, Devonport (Dr. Owen) and his right hon. and hon. Friends for a second Division at the end of the debate.
3.36 pm
Mr. Roy Hattersley: I beg to move, at the end of the Question, to add:
But humbly regret that the Gracious Speech reaffirms policies which have already done severe damage to the British economy and will, in the future, further hold back the prospects of economic recovery
At the end of the exchanges which yesterday followed the autumn statement on the economy the hon. Member for Suffolk, South (Mr. Yeo) complained about what he called a slur which I had cast on the Government's reputation. The assertion to which he took such histrionic exception was my conclusion that unemployment was now not so much a consequence of Government policy but an integral part of it, planned, intended and essential to the present economic strategy.
If we assume, as we must, that the passion of the hon. Member for Suffolk, South was genuine, it was the product of one of two possible errors. The first possibility is that he does not know the meaning of "slur". The second is that he fails to comprehend the workings and the intentions of the medium-term financial strategy, which is the centrepiece of the Government's economic policy. Anyone who adopts that policy or supports it is, at the very least, accepting a high level of unemployment as a price that is worth paying for the achievement of other economic objectives.
I ask the Chancellor of the Exchequer a question which I asked him three weeks ago and which he singularly failed to answer on that occasion. Does he or does he not accept on behalf of the Government any responsibility for the present level of unemployment? It is not me alone who believes that the Government are guilty in this particular. I quote from yesterday's edition of The Guardian in which these words appeared:
"there does seem to be some slight difficulty in constantly lamenting the high level of unemployment while at the same time pursuing policies which drive it even higher."

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That is the judgment of the right hon. Member for Chesham and Amersham (Sir I. Gilmour) and not the opinion of a radical leader writer. I note that the Chancellor laughs at the very mention of the right hon. Gentleman's name, but he was happy to serve in a Cabinet with the right hon. Gentleman when things were going rather better for him.
The Opposition's first charge against the Government is that the concept of their economic strategy is that high levels of unemployment are inherent within the policy which they pursue. Our second charge is that that policy ignores the real economy and concentrates instead on artificial and arbitrary financial targets which in the end become an object in themselves. Hence the fact that yesterday the Chancellor had the effrontery to claim some kind of victory because he had almost met the public expenditure targets which last year he had set for himself. He claimed that victory while the real world, outside the theoretical model which he has created, is depressed and moving into slump, in no small part because of the deflation that he has created by pursuing his public expenditure and money supply targets.
Let me once more quote from the right hon. Member for Chesham and Amersham. It is a quotation which was mentioned in part yesterday by my right hon. and learned Friend the Member for Monklands, East (Mr. Smith). It describes the present economic condition so perfectly that the full paragraph deserves an airing. The right hon. Member for Chesham and Amersham said:
"there are nearly two million fewer people in employment than there were in 1979. Manufacturing production is still 12½ per cent. below its peak level in 1979. Though now rising, manufacturing investment is still 30 per cent. below 1979. Our non-oil trade has declined from a surplus of £500 millions in 1981 to a deficit of £7½ billion in 1983, and will probably be in deficit by over £10 billion this year."
That is a resume by the right hon. Member for Chesham and Amersham of the economic success which the Chancellor describes, and it ends with a reference to the deficit of £7½ billion.
It was upon that basis that yesterday the Chancellor commented upon the balance of payments prospects. He said:
"We expect it to be in surplus by about £2½ billion next year."
He added:
"If a Labour Government had achieved anything like that, they would not have been able to believe their good fortune." —[Official Report, 12 November 1984; Vol. 67, c. 420.]
"Good fortune" are exactly the right words to describe the position. Without North sea oil, a bonus which no other Government have enjoyed, our balance of payments would be in deep and chronic deficit, and yet the Chancellor brags of his balance of payments record which is wholly and completely dependent upon that gratuitous advantage.
I never cease to be amazed by the Chancellor's self-destructive willingness to say things on one day which are exposed as errors and distortions on the next. That typifies his comment upon his alleged balance of payments success. It typifies almost all he did yesterday. The BBC last night spoke of his "creative accounting". Today, the Financial Times, with magisterial understatement, observes that:
"Mr. Lawson's November utterances are hardly a reliable guide."
Mr. Tim Yeo (Suffolk, South): Does the right hon. Gentleman regard his general election utterances as a
540
reliable guide to the rate of inflation? It is of course one of the largest influences on the level of unemployment. Under his government and that of his colleagues. the rate of inflation was high and increasing; under the present Government the rate of inflation is low and decreasing; notwithstanding the right hon. Gentleman's predictions.
Mr. Hattersley: I suspected that one of the weaker-minded Back Benchers would return to the inflation prediction that I made during the general election. The Chancellor and I made seven economic predictions during the last general election. I was wrong about one and right about six; with the Chancellor the position is exactly the opposite.
The Chancellor of the Exchequer (Mr.NigelLawson): Give us them.
Mr. Hattersley: Let me give the right hon. Gentleman the obvious one—his promise that unemployment was about to fall. There is one problem with the Chancellor's unemployment forecasts — he makes them only at election time. When he makes them, they invariably turn out to be wrong.
It is highly undesirable for this country as a whole to possess a Chancellor of the Exchequer who is written about, as was the present Chancellor in this morning's newspapers, in terms of the managing and manipulation of statistics and the inability or unwillingness to tell the House of Commons the truth about his programmes. When the Government's economic policy is defended as it has been this week by the partnership of the Chancellor and the Secretary of State for Employment, the problems of believing the Chancellor are even greater. The Secretary of State for Employment always addresses us as though he were the head boy at morning assembly — and then, after Tom Brown, we get Flashman. That attitude is revealed, as it was yesterday, in the Chancellor's comments about North sea oil. Next year, North sea oil revenues will amount to £11 billion, yet, despite that massive amount, they will total less than the cost to the Exchequer of the 3 million unemployed. The money will be wasted on financing unemployment rather than spent on increasing jobs.
There are two central serious arguments about the alternative ways of using North sea oil that should be explored by the House. The Opposition believe that the abandonment of exchange control combined with the effect of the Government-induced recession have encouraged far too much of the North sea income to be exported and invested in other countries' economies, jobs and industries and, therefore, invested in our unemployment. We believe also that the oil income should have been specifically used for the reinvigoration of the industry against the time when the oil revenues began to diminish —a reduction that almost certainly begins next year. Those are serious questions, yet the Chancellor's response on this subject to a question from the hon. Member for East Lindsey (Mr. Tapsell) is recorded in Hansard. The Chancellor said:
"He need not worry too much about North sea oil … for it will certainly see out his active life."
Mr. Lawson: Tell the full story.
Mr. Hattersley: A full stop followed the sentence that I read. The Chancellor stated:
"He need not worry too much about North sea oil … for it will certainly see out his active life."—[Official Report, 12 November 1984; Vol. 67, c. 425.]
Mr. Lawson: Read on.
Mr. Hattersley: The Chancellor will not divert me from reminding him that, although that may be true in the case of the hon. Member for East Lindsey—although, after yesterday, we all certainly hope that it will not be —North sea oil will not last for the lives of this year's school leavers, 150,000 of whom are still unemployed.
Mr. Peter Tapsell: I point out to the right hon. Gentleman that if I reach the same age as my father and grandfather I shall be here for another 30 years.
Mr. Hattersley: I probably greet that news with more pleasure than the Chancellor of the Exchequer. I suspect that the Chancellor really meant yesterday that North sea oil revenues will easily see out the life of this Government. His real concern is that his policies should be cushioned by that unusual boon and unique benefit.
Yet even with £11 billion of North sea oil revenue the Government both anticipate and plan for a permanent reservoir of 3 million unemployed. They use that pool of unemployment as a sort of incomes policy to hold down the total wage bill. They hope to use it as part of their attempt to emasculate the trade unions. That, on the evidence of the Chancellor's performance on "Weekend World" three weeks ago, is a major object of present Government policy.
Yesterday I pressed the Chancellor on unemployment prospects. I asked him whether the Financial Times was right to say that the Government Actuary hypothesised an increase of 400,000 in unemployment this year. In fact, the Financial Times was wrong. The new assumption for this year is that unemployment is 150,000 higher than was originally estimated in last year's autumn statement. But the real significance of the Government Actuary's work lies in his next statement, his assumption for 1985–86. The Government Actuary assumes that unemployment will remain just as high in 1985–86 as this year. There is to be no fall, reduction or improvement, just a steady grind on of unemployment at—even on the Government's phoney figures—3 million or more.
It is no good the Chancellor saying that the Government Actuary does no more than make assumptions.[Interruption.] "Conventional assumptions", says the Chancellor. The Chancellor is wholly dependent on those conventional assumptions being right. If they are not right, the entire public expenditure forecast on which the Government hypothesise their tax cuts is wrong. Those assumptions have to be right for anything that the Chancellor said yesterday to work out in practice next March or the March after
The truth is — I think that the Chancellor would improve his reputation if he honestly admitted it—that the Government do not anticipate any reduction in unemployment in the foreseeable future. If I do the Chancellor or his colleagues less than justice by saying that, he can confound me at once by telling me when the fall in unemployment is anticipated. After all, he used to say that a reduction in unemployment would follow certainly, inevitably and automatically from a reduction in inflation and public borrowing. So I ask the right hon. Gentleman: How long do we have to wait? Did he and his colleagues make it clear five years ago when they first embarked on that policy that at the end of five years or more, far from the automatic and inevitable solution
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coming about, unemployment would be 2 million or more higher and there would be no reasonable prospect of its being reduced? Of course, they did not.
The country has not been told the hard truth that, despite all the fancy talk about controlling monetary growth and of the relationship between interest rates and the public sector borrowing requirement, the Government have held down inflation by collapsing the economy. Yet, as the hon. Member for East Lindsey reminded us, Japan and America thrive on budget deficits. As Conservative Members recall — or should recall — even this Government began a small, temporary but genuine recovery in 1982 by relaxing credit control, increasing the PSBR and, above all, extending public capital spending.
Yesterday the hon. Member for Croydon, South (Sir W. Clark) insisted that unemployment is most likely to be reduced
"If that money is left in the hands of the taxpayers—[Official Report, 12 November 1984; Vol. 67, c. 421.]
I congratulate the hon. Gentleman on venturing far enough out of the backwoods to accept the need for a boost in demand. He joins those other notable progressive revolutionaries and Socialist theorists, the Confederation of British Industry and the Daily Mail, in demanding that more activity is injected into the economy as a direct result of Government policy. I ask the hon. Gentleman to take a further step and join the CBI and the Daily Mail in accepting that the best way to increase employment and reduce the unemployment about which the Government claim to be so concerned is for whatever funds that are available to be spent in the public sector, and particularly in capital programmes.
Sir William Clark: The logic of the right hon. Gentleman's argument is that he believes that, if the Government spend, spend, spend on public projects, unemployment will disappear. Will he explain why that did not happen in France under President Mitterrand and why the previous Labour Government did not spend, spend, spend to bring down unemployment?
Mr. Hattersley: That is not the logic of my argument; that is the illogic of the hon. Gentleman's conclusion. The Opposition have not suggested that we can spend, spend, spend indefinitely, down to zero unemployment. We have suggested that other countries have demonstrated that by prudent investment in capital works unemployment will certainly be reduced.
I do not expect or ask the hon. Gentleman to take my word for that. I simply ask him to read some of the published texts. This is the subject in which he is supposed to be interested and on which he is an alleged authority. Let him read the work of the Institute of Fiscal Studies. If he disregards the institute because it is objective, unprejudiced and unbiased, let him read the work of the London Business School, once the Valhalla of monetarism.
Both those institutions agree that £1 billion spent on public works will create six times more jobs than £1 billion used to reduce taxation. That is the result of their detailed studies of the British economy. I do not know any reputable economist who argues with that, though I know some disreputable politicians who say that they would rather give the money away in tax cuts than reduce unemployment. However, I do not know one authority that

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disregards or contradicts the formula produced by the London Business School and the Institute of Fiscal Studies.
Mr. Lawson: I do not agree with it.
Mr. Hattersley: Perhaps not, but I was talking about reputable economists.
I insist that the use of any surplus for job creation by investment in the public sector is exactly how any funds that the Government have available ought to be employed. By doing it that way, rather than simply increasing private consumption, the Government would reduce whatever dangers there might be of a deterioration in the balance of payments as a result of the deflation—a danger which largely results from the damage done by the Government to manufacturing industry over the past five years.
I am aware that when the upturn comes, under one Government or another, the Government will have left manufacturing industry in the worst position to meet an upturn that it has been in for the past 50 years.
I repeat that whatever surplus might be created ought to be used directly to generate jobs. Yet the Chancellor is determined to use any surplus that he can contrive to cut direct taxation. As he knows the alternatives and is determined to choose tax cuts, how can he claim, here or anywhere else, that his prime object, or even his serious intention, is to reduce unemployment?
I understand, in part, the political reasons why the Chancellor is determined to make some cuts in taxation. After all, he and his party were twice elected on the false prospectus that that would be done, and done quickly. Today annual taxation is £22·5 billion higher than it was in 1979. If the Chancellor achieves his objective of cutting income tax by £1·5 billion, he will have to reduce the overall tax burden by only another £21 billion to get it back to the level that he inherited from the Labour Government
It is not surprising that the Prime Minister confines her comments on the subject to income tax alone; nor is it surprising that she always defines the tax bill according to her immediate convenience. When the national insurance surcharge is reduced, it is a tax cut. When the national insurance contribution is increased, national insurance has nothing whatsoever to do with tax. We know, and every reputable economist confirms, that national insurance contributions are in effect a tax and that including them in the overall bill means that an extra £22·5 billion is taken out of the economy every year by the Government.
Mr. Alistair Burt: If the right hon. Gentleman is so certain that national insurance is a tax, and a damaging tax, why was a surcharge imposed while his colleagues were in government, and why did he take no steps to remove it?
Mr. Hattersley: Not because it was not a tax. No Labour Minister would have made the feeble pretence that it was not a tax. The hon. Gentleman is entitled to argue that the surcharge was damaging to industry and undesirable. but that is not the point at issue. The surcharge was a tax when we imposed it and it is a tax when the Conservative Government abolish it; and so is every form of national insurance contribution.
Mr. Jerry Hayes: The right hon. Gentleman is confining his arguments to the volume of taxation. He does not refer to the rate of taxation, which is being reduced considerably. He ought to consider what
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happened in the 1984 Budget, when the largest number of people since 1948 were released from liability to tax; and he should also reconsider his own record.
Mr. Hattersley: If the hon. Gentleman wishes me to comment on the distribution of taxes, I will say that, over the past five years, the richer the taxpayer, the bigger the volume of tax relief he has enjoyed. I am sure that my hon. Friends would be delighted for me to expand on that significant observation on the distribution of tax relief.
Last week the Prime Minister made selective claims about reducing income tax. She used to be the high priestess of monetarism and the personification of the cliché "There is no other way". Last week, after her temporary desertion of the Chancellor — and he only damages his reputation further by denying it—there was speculation about a U-turn.
Mr. Lawson: The right hon. Gentleman should have heard my right hon. Friend last night.
Mr. Hattersley: The Chancellor says that I should have heard the Prime Minister last night. Is he telling me that he did not want a bigger cut in the housing programme and that the Prime Minister did not fail to support him in that?
Mr. Lawson: I was concerned, as I always have been and as previous Chancellors have been, with achieving a particular total of public expenditure, and that total was achieved.
Mr. Hattersley: In other words, "I was right". There has been much speculation—since the event which the Chancellor has by implication confirmed — that the Prime Minister is undergoing a change of heart, that there is to be a U-turn and that she is about to distance herself from monetarism. The situation was likened by the right hon. Member for Chesham and Amersham in The Guardian yesterday to the Narvik debate, with the right hon. Lady playing the part not of Churchill but of Chamberlain.
I can reassure the Chancellor, however, that all the whispers about dumping him are premature. For the time being, the Prime Minister will continue to posture as a conviction politician, and the poor and the unemployed will pay the price of her convictions. However, the conscience of the country is beginning to stir at the thought of high, prolonged and intentional unemployment. Some Conservative Back Benchers have caught the mood already — for instance, the hon. Member for Staffordshire, Moorlands (Mr. Knox), who spoke on the first day of the debate on the Queen's Speech, and many others who have spoken in a similar vein during the past four days. Eventually, for electoral purposes, the Prime Minister will catch the same mood. Eventually she will lower her voice and say that unemployment is a scourge that, given a chance, she will eradicate. She has had the chance and has refused wholly to take it. She will riot be forgiven
4.5 pm
The Chancellor of the Exchequer (Mr.Nigelawson): Yesterday, I was able to outline in my autumn statement an outlook which is in many ways encouraging. We have the prospect of stable public expenditure in line with our long-term plans, inflation edging still lower, still lower interest rates, strongly rising investment and scope for reducing further the burden of taxation and leading to

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[Mr. Nigel Lawson]
sustained economic growth and a rising level of employment for our people. I want to make it quite clear that the Government are doing and will be doing all that they can to create the conditions for a reduction in unemployment.
The prospect to which I have referred has been made possible because, among other things, we have stuck firmly to the promises that we made at the time of the general election. The planned total public expenditure of £132 billion in 1985–86 — which I was seeking and which my right hon. and learned Friend the Chief Secretary sought during the public expenditure round —is in line not just with last year's White Paper but with the figures set out in the White paper published before the 1983 general election. Indeed, when my right hon. Friend the Prime Minister declared that we stood on the plans published for all to read in the public expenditure White Paper, that is precisely what we did. The public expenditure figures for 1985–86 printed in the autumn statement yesterday are the very public expenditure totals on which we fought and won the general election.
In our first Parliament, we had the crucial priority of bringing down the unsustainable level of Government borrowing which we had inherited from the Labour Government of which the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) was a rather stout pillar. That excessive borrowing not only fuelled inflation but drove up interest rates and represented a burden of deferred taxation which, sooner or later, would have to be paid. We achieved our objective of bringing down the borrowing requirement. We repaid all the foreign debt which we inherited from the Labour Government and reduced the annual level of Government borrowing to a more reasonable proportion of our gross domestic product.
In this Parliament, our fiscal priority can shift to the reduction and reform of taxation. That process began in the 1984 Budget when I laid out a structure of company taxation to endure for the rest of this Parliament and beyond. In that Budget we also began the process of tax reduction. The process had been initiated in the 1983 Budget by my right hon. and learned Friend the present Foreign Secretary. Personal allowances were raised substantially in excess of the rate of inflation, and that took many hundreds of thousands of people out of the income tax system entirely and reduced the poverty trap and the "why work?" syndrome.
The main target for our first round of cuts was the final elimination of the national insurance surcharge. It has frequently been described as Labour's tax on jobs. We remember that it was strongly advocated by the Liberal party when it was a member of the Lib-Lab pact.
Mr. Richard Wainwright: Is the right hon. Gentleman unable to conceive that in the utterly different circumstances of full employment a beneficial tax can turn to a curse when unemployment reigns?
Mr. Lawson: Circumstances are always completely different in the hon. Gentleman's eyes. I must remind him that there was not full employment then.
The final abolition of the pernicious surcharge took effect only on 1 October this year. Thus, jobs have been free of tax for precisely 44 days—scarcely enough time to assess the benefits of abolition. The tax changes that I
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announced in this year's Budget have their full effect in 1985–86. Thus, there is already built into the system a tax cut of some £1·75 billion next year. The fiscal adjustment that I described yesterday, with the necessary qualifications, gives the prospect of scope for net tax cuts in the next Budget of a further £1·5 billion.
The right hon. Member for Sparkbrook seemed to accuse me of being interested in statistical manipulation and inaccurate forecasts. His problem is that he always looks on the dismal side of the economy, in regard not merely to unemployment—which worries us all—but to all other aspects, even when things are going well. For example, I looked back at his reaction to last year's autumn statement, when he strove to cast doubt on my forecast for investment. I have the relevant copy of Hansard with me in case he would like me to read from it. He declared that all of the commentators agreed that I was far too optimistic. I was forecasting that investment would rise by 4 per cent. in the current year. With the bulk of the year now behind us, it is clear that investment is likely to be up, not by 4 per cent., but by 7½ per cent. I apologise to the House for my undue pessimism last year.
In regard to the manipulation of statistics, the right hon. Gentleman is something of a rascal as he is always striving to make comparisons between the record of the Government in which he served and that of the present Government by taking the growth of output during the Labour Government's years from the first quarter of 1974, which was unusually low as a result of the adverse effects of the three-day week, to the second quarter of 1979, when it was artificially high reflecting the recovery from the winter of discontent. Any reputable economist, to the use the right hon. Gentleman's phrase, knows full well that a correct comparison is between the calendar years 1973 and 1979, which avoids the strike complications and takes the period between the two peaks of the business cycle. We shall do that and take the equivalent six-year period from 1979 to the forecast in the autumn statement for 1985.
During the six years from 1973 to 1979, under the Labour Government, gross domestic product rose by 8 per cent. The forecast that was published yesterday shows a level of output in 1985 of nearly 8 per cent. higher than the 1979 level. In other words, taking broadly equivalent six-year periods, the growth of output is virtually the same. However, the right hon. Gentleman made it clear that we should take no notice of North sea oil in our calculations. Excluding North sea oil, growth in output between 1979 and 1985 goes down to 5½ per cent. If we exclude North sea oil from the Labour years 1973–79, GDP rose by only 3½ per cent.
I agree that the world has changed. There has been a world recession, as some hon. Members are aware. However, between 1973 and 1979, when British output rose by 8 per cent., output in France rose by 20 per cent. and output in Germany rose by 15 per cent. In other words, their output was growing at least twice as fast as ours. The comparison with other European countries is much better for 1979–85. On the basis of the latest OECD forecast for France and Germany and the autumn statement, output will have risen at roughly the same rate in the United Kingdom as in France and Germany. If anything, it has grown faster in Britain. Europe has experienced difficulties in the past few years, yet the United Kingdom's growth performance in relative terms has improved beyond all recognition.

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The right hon. Gentleman is also worried about employment. Although I am glad to say that employment is rising strongly, it has fallen in the past five years. That must be seen against the background of performance in the years 1973–79. The only reason why employment did not fall sharply during that period was that productivity grew appallingly slowly. Excluding North sea output, it grew by only 2 per cent. in six years. By 1979, hidden unemployment and overmanning was massive. As many Opposition Members would now agree, that represented hidden unemployment which was bound to emerge sooner or later. Productivity growth since 1979 has had to make up the ground that was lost during the 1970s. Since 1979, manufacturing productivity growth in the United Kingdom has been faster than in either France or Germany. Recapturing the lost productivity has been a painful experience, but it has been absolutely necessary if a basis is to be laid for improved efficiency and jobs in the future.
Inflation has also improved dramatically. During the period 1973–79, inflation averaged almost 16 per cent. compared with an OECD average of 10 per cent. During the past five years, inflation has averaged less than 10 per cent. and has now stabilised below 5 per cent.—roughly in line with the OECD average.
Mr. Hattersley: If we are contending statistical veracity, the House will want to be reminded that the Chancellor has compared two six-year periods. The Labour period that he has chosen began before the Labour Government were elected, let alone had had any effect on the economy. The Conservative period that he has chosen ends up not with fact but with forecasts. The first lesson of statistics is not to compare fact with forecast unless one is trying to cook the books.
Mr. Lawson: As I reminded the right hon. Gentleman by quoting my investment forecasts — I could have quoted others — my record on forecasting has been modest. In the event, reality has been better.
The right hon. Gentleman argues that our only recovery was in the wake of measures to stimulate demand in anticipation of the general election. He is completely wrong. Growth has averaged 2¾ per cent. per annum since the trough of the recession in 1981. It would have been 3½per cent. this year, had it not been for the coal strike. That growth has been due in large measure to lower inflation and lower interest rates, not to a short-lived fiscal stimulus which would all too soon have been dissipated in higher inflation. The right hon. Gentleman wants just that sort of fiscal stimulus. Once again, he has offered the House a remedy that he acknowledges is incredible and discredited —a dose of reflation. It is true that, before the election, he was a professional reflationist. He believed that public spending was the cure for all ills. Accused by my right hon. Friend the Prime Minister of wishing to solve all problems by pouring public money over them, he said, "I plead guilty to that charge."
One month after the election the right hon. Gentleman made a sincere and praiseworthy effort to go straight. He admitted:
"Labour's economic policy — the promise to put Britain back to work—was a net vote loser. Nobody believed that Labour's theories could be put into practice. Labour's vague hopes of achieving growth through Government spending were barely understood and rarely believed."
The right hon. Gentleman continued:
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people—not being stupid—realised that the whole strategy lacked two essential ingredients: a coherent plan for investment and a scheme to combat inflation."
Alas, the right hon. Gentleman could not go straight for long. He is a reflationary recidivist — a habitual offender. He was back at it again today, offering the old reflationary package.
Does the right hon. Gentleman imagine that the House will accept what the British people—not being stupid—have already firmly rejected? He is not content with insulting the House by offering us a policy in which he does not believe, at least for part of the time. He went on to denounce the approach in which he now believes.. He now denies that excessive wages price people out of work —I voiced that proposition in an earlier debate—and that wage moderation could price more of our jobless back into work. Yet he believes in an incomes policy. What is the point of an incomes policy if it is not to price people into work? The right hon. Gentleman accuses us of using high unemployment to curb wage inflation. As usual, he is totally wrong. We do not want high unemployment to curb wages, but we want to curb wages to reduce unemployment.
Mr. Hattersley: I have waited for some time for an opportunity to explain to the Chancellor two distinctions which sooner or later he must understand. I support the view that while a Labour Government reflate the econorny and create expansion, there must be an agreement with the trade unions that ensures that that expansion and reflation are used to create new jobs. The distinction between that agreement at a time of reflation and expansion, and the pretence, at a time of slump, that anything can be achieved by lower wages is total and absolute. It is astonishing that the Chancellor cannot tell the difference.
Mr. Lawson: It is astonishing that the right hon. Gentleman is unaware that this is a time not of slump but of economic recovery with high unemployment. That view is echoed by the CBI, which he cited in his remarks as a great authority. The right hon. Gentleman has his work cut out for him in convincing some of his hon. Friends of the virtues of his incomes policy. I should like to know when it becomes the official policy of a united Labour party.
The right hon. Gentleman knows that wage moderation can generate more jobs. Indeed, it is the right way to generate jobs. The recent CBI survey conducted by Gallup provided telling confirmation of that. It showed that the one factor that a sizeable proportion of all firms believed would lead them to take on more employees was moderation in pay.
The House will have noticed that the right hon. Gentleman was unusually reticent about one important development: the miners' strike. He must know that it was wholly unnecessary, pursued by evil means, in pursuit of impossible demands and for political ends. No Government of any political party could concede to the demands of Mr. Arthur Scargill. The right hon. Gentleman knows that the strike has wrought untold damage on the industry, riven communities asunder, destroyed jobs in the industry's suppliers and, through its effects on interest rates, damaged employment prospects throughout the economy. Yet throughout, the dispute has been backed and, therefore, unnecessarily prolonged by the Labour party. [Interruption.] I am referring to resisting the strike. The country can judge where its priorities lie.

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The right hon. Gentleman spoke eloquently about the compassion that he and his party feel for the poor and the unemployed. I am certain that those feelings are sincere, although I regret that he is unlikely to acknowledge that all Conservative Members fully share the same feelings. I am certain that his compassion is genuine, although he offers the unemployed a remedy in which he does not believe, although he now denounces the one approach which he formerly proclaimed as vital, and although he feels compelled to back a strike which has grievously aggravated the problem. But I am also certain that the poor and the unemployed will not thank him or his party for a compassion which stops short of reasoned analysis and credible policies.
It is impossible to expect any consistency from the right hon. Gentleman. He publicly proclaimed:
"whatever policy the London Party stands on at the next election, I will support it."
The man of principle!
Today, the right hon. Gentleman proposed the very policies which were tried when his party was in government and found wanting. They were tested, and failed. They gave us high public spending and borrowing, high taxation, high inflation, high rates of interest and rising unemployment. Our policies, however, have been shown to lead to growth, as we said they would. We said that we would bring inflation down, and we have. We said that lower inflation would lead to growth, and it has. We said that with growth would come new jobs, and they have.
None of that would have been possible without first bringing down inflation. Nevertheless, we have always recognised that low inflation is not enough. We also need policies to reawaken the spirit of enterprise, to spread ownership and to fashion new attitudes about the creation of wealth. Much of our effort has concentrated on the small business sector of the economy, and for good reason. Britain is short, relatively speaking, of small companies compared with the United States and our major European competitors. The number of new businesses is a fair barometer of the vigour of enterprise in an economy. Today we suffer from a lack of new businesses which should have been created a decade ago. By now they would have been sizeable enterprises, which would continue to expand and create jobs. Their absence is a key feature of today's unemployment picture.
The recent CBI Gallup survey confirms that view. The results reveal a particularly optimistic attitude among small companies about the prospects for new employment. Those companies, above all, see themselves as needing to take on new employees in the year ahead.
Mr. Eric S. Heifer: In view of the fact that the Government are basically responsible for the wholesale destruction of large enterprise, is it not clear that the only chance of their making progress is through small businesses? The Government are not doing particularly well in that direction either.
Mr. Lawson: I am glad that the hon. Gentleman, who often has more sensible contributions to make than the Labour Front Bench, which he once adorned, agrees with me about the importance of small businesses.
The Government's economic policies are designed to facilitate the creation of wealth and jobs. We have not
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hesitated to provide encouragement through the tax system where the circumstances demanded it. The business expansion scheme was introduced by my predecessor. It greatly extended and improved the earlier business start-up scheme, which was inaugurated in 1981. We have been monitoring the results of the business expansion scheme. Final figures are not yet available, but the picture that is emerging for the first year of the extended business expansion scheme—1983–84—is most encouraging.
The House will be glad to know that we estimate that at least £75 million, and probably more, was raised by small businesses under the scheme in 1983–84. More than 10,000 investors have put their money into more than 400 small companies. Inevitably, the sums raised have varied enormously. About 30 per cent. of companies each raised £50,000 or less. About 60 per cent. raised between £50,000 and £250,000. A few raised more than £1 million each. Particularly encouraging is the fact that well over half the total amount invested—at least £41 million—went to young, or very young, start-up companies. The rest went to more mature, but still relatively small, companies.
The purpose of the scheme is to encourage new and expanded activity in the small firms sector, which is so vital as a source of new jobs and prospects. The full results of the survey will be published fairly shortly. One of the most important features of the scheme is that the investor, even if he invests his money through a trust, becomes the direct owner of shares in the company in which his money is invested. That gives him a direct interest in the way in which the company is managed. It means that the company can benefit from an informed and active body of shareholders who can assist the management in the effort to expand and to create more jobs.
Throughout the Conservative Government's period of office the importance of direct ownership has been a constant theme. We have enabled an extra 1·75 million people to become owners of their own homes, so that the proportion of home ownership is now more than 60 per cent. The expansion of home ownership has aroused a much broader interest in the whole concept of owning, and the privatisation programme has helped to satisfy that new demand. Whenever we have moved a company from state control to the private sector, we have provided the employees with shares on special terms. The response has been enormous. The great majority of employees have accepted the offers and become shareholders in their own companies. Owning shares has given the workers a new sense of identity of interest with their companies and a new incentive, and companies that have moved back into the private sector have invariably performed better as a result.
Mr. Mark Fisher: Jaguar?
Mr. Lawson: Yes—Jaguar, too.
The result has been that the work force is now able to participate directly in the success of the company. The interest in sharing in the ownership of major companies goes far beyond the companies' employees. It is interesting to note, for example, that British Telecom has already handled 1 million or more telephone calls requesting information about or expressing interest in the sale.
Even outside the privatisation programme the Government have been willing to use the tax system to stimulate acquisition of shares. That, too, has been

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remarkably successful. When we came to office there were fewer than 30 profit-sharing schemes in the whole of British industry. Today, there are 788—more than 25 times as many — and there are many more in the pipeline. Since 1979, more than half a million employees have benefited from approved schemes.
The result of all those changes has been to create in business managements and work forces a whole new set of attitudes far removed from the "them and us" confrontation that has bedevilled this country for far too long. Employees know that the success of their business is linked with their own efforts and that their efforts determine their rewards. That spirit has lain crushed for many years beneath Government economic planning, penal taxation and incomes policies of the type still advocated by the right hon. Member for Sparkbrook and the minority that he leads. Today that spirit is reawakened. Better motivation means higher profits, faster expansion and more jobs. It is, of course, a long-term policy.
Mr. Hattersley: How long?
Mr. Lawson: There is no short-cut. The Government's economic strategy is to create an enterprise economy that will produce prosperity and jobs for our people. The recovery is strong, the strategy is on course, and the policy will succeed.
4.33 pm
Mr. James Callaghan: Like others, I wish to speak about the gloomy prospect of higher unemployment and fewer jobs. Mass unemployment is a cancer, the long-term effects of which cannot be neasured. One thing, however, we know: the lost years for young men and women cannot be replaced or overtaken. Therefore, I do not share the satisfaction of the Chancellor and the Prime Minister that the economy is in good shape. Indeed, it was perhaps a measure of the Chancellor's own uncertainty that he spent so long abusing the Labour Government. Listening to the right hon. Gentleman, one would scarcely believe that the Conservative party has been responsible for our affairs for nearly 10 of the past more than 14 years. If responsibility is to be allocated, by far the greater part must fall to the extended period of office of the right hon. Gentleman and his predecessors.
The Chancellor's selection of statistics is so brazen that one watches with admiration to see to what dizzy height he will jump next. The figures that he selects and the way in which he puts them are not an insult to the House because we all see through him and we all like him and admire his agility in these matters, but they do nothing for the intellectual level of the debate that he is leading. I do not intend to bandy figures. I shall come to my conclusion straight away so that the argument can be put to rest.
In my view, the Conservative Government have done better than the Labour Government on inflation and productivity but the Labour Government did better than the Conservative Government on employment and growth. That seems to me to be about as fair an assessment as one can make. But that is not what the Chancellor came to power for. He came to power to reverse the long-term secular decline of Britain's economy and he has failed to do that. That is the measure not of the condemnation of the right hon. Gentleman—that can follow at any time —but of the problem that the country still faces. So long as the right hon. Gentleman goes on trying to shuffle
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off responsibility for what was not done by the Labour Government 10 years ago he will fail to face the fact that the economy is still going backwards compared with our competitors. If we carry on as we are and North sea oil begins to fade we shall sink into a shabby genteel penury in the next 20 years. That is the measure of the task facing the Chancellor and he should address himself to it today rather than harking back to some misplaced balance sheet and comparing the present situation with what happened between 1974 and 1979.
I give one illustration of what I mean. The Prime Minister said last week—I believe that the Chancellor has said the same in the past—that private investment in manufacturing industries is improving and is now 15 per cent. higher than it was a year ago. That is welcome so far as it goes, but it does not go very far. I am delighted that private investment in manufacturing industry is 15 per cent. higher than it was a year ago, although none of us can say how much of that is due to the fact that there is to be a change in the capital allowance system, which must certainly be helping to accelerate some of the new investment. Rather than trying to delude the House with that statistic, however, the Prime Minister should look further back. I make the comparison with the Labour Government merely to show the continuing decline, which is a national problem.
New investment in manufacturing is not 15 per cent. higher than it was when I was in office. It is not even the same. It is 26 per cent. lower than it was in 1979. To put it another way, for every £100 spent on new, up-to-date plant and machinery in 1979 only £75 is being spent now,. I believe that that failure is beginning to be reflected in our capacity to export manufactured goods of the type and quality required if we are to maintain our place among the foremost industrial nations. I believe that it was partly for that reason that, as we all know only too well, in 1983 we made a loss on our trade with other countries, if not for the first time in our history, certainly for the first time since the end of the war. That is something on which the House must concentrate, because this is where our future lies. At the moment, we are depending on North sea oil to keep us afloat, but our manufacturing industry is moving backwards by comparison with others, and also absolutely.
Another factor, which is too lightly dismissed, illustrates our economic difficulties. Again, I must put it personally. When I left the office of Prime Minister, a traveller going to the United States could get $2·5 for his pound, while today he gets $1·26. We are told that this helps exports, but, although it helps the export of some of the traditional goods for which we have been famous, it does not help our imports because it increases their prices.
My major point is that the Government, after nearly six years, still have to convince us not whether they are better or worse than the Labour Government, but that they are able to reverse the long-term secular decline that, if it continues, will mean that in 20 years' time this country will be ranked among the developing countries instead of among the advanced industrial countries.
Mr. Hugh Dykes: Does the right hon. Gentleman agree that the ominous realisation is affecting more and more observers of the total scene that, in reality, this country needs billions of pounds to be invested in productive new assets, both in the public and private sectors, and this is still not taking place?
Mr. Callaghan: I agree. The hon. Gentleman has anticipated the point that I would have made, although perhaps not as elegantly as he has. What worries me about this—and it must concern us all—is that the country is now, and increasingly unless we break out of the vicious circle, trying to maintain first-class social services on the back of a second-class economy, and we shall fail to do it. We shall have a gradual and slow decline.
We need a sustained improvement in competitiveness. I see no reason to depart from the general line that I pursued when I had responsibility for these matters, and I say nothing now that is different from what I said then. As the hon. Member for Colne Valley (Mr. Wainwright), the spokesman for the Liberal party, said, when today we have a much larger, under-used volume of resources of manpower skills and under-used machinery than at any time since the 1930s, we should do more to help ourselves. That is the point that the hon. Member for Harrow, East (Mr. Dykes) was also making. Higher productivity must come about and will lower labour costs per unit, but so will higher production in many cases. The Government need to change their policies to achieve this domestically, so that we can get higher production through the measures that have been set out already, and they should use their influence internationally to achieve the same ends.
The world has not yet recognised that the debt of the developing countries is the result of a broader global disequilibrium. Several million jobs in the modern industrial western world are dependent on exports to the Third world. As many as one in six of the jobs in the United States are so dependent. Import reductions by these countries, which are taking place under the influence of the International Monetary Fund, to try to put their economies straight and offset their deficits create unemployment in our countries. We must follow policies in trade and aid that will enable debtor countries to increase their foreign exchange earnings. Last year, interest payments on old loans from the developing countries to the western world were $50 billion to $60 billion in total, with the result that there was a net transfer from the developing countries to the western industrialised countries of some $20 billion across the exchanges from the poorest to the richest countries.
We must—this is where the Government should use their influence internationally —recommit the world's economic system to growth to permit a net flow of resources to developing countries and not from them. In that way, we shall both help them to overcome their dreadful poverty and help ourselves with more jobs. I do not disguise the fact that the problem is immense, and every Government have so far failed to solve it.
We are now faced with the technological revolution that has come upon us fast. A few days ago I was in Japan. With typical thoroughness, the Japanese have set up an institute of strategic research, whose purpose is to investigate, and report on, the economic and social consequences to their society of the technological changes, and what will be involved in the new, high-density communication prospects and the processing of new materials and other methods. I suggest that the Government should begin to do the same and take a broad strategic look at this problem, not just in isolation but in conjunction with other European countries. I see no prospect at the moment of any large-scale reduction in unemployment. Indeed, I fear the reverse.
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I come now to the mishandling of the miners' strike. The Chancellor referred to this, and said that the Opposition should have made more reference to it. It drags on week after week, with both sides intent on a complete victory by a knockout, irrespective of the damage and suffering that they inflict. There have been negotiations in the course of which the National Coal Board has given some ground, notably to the NUM at Edinburgh, while in the settlement with the National Association of Colliery Overmen, Deputies and Shotfirers, the board shifted its position favourably towards the miners. However, we are now told by both sides that negotiations are at an end.
I was taught that the essence of negotiation was to carry one's case to the point at which one could go no further, to recognise when one has got all that could be wrung out of one's opponents, and to leave oneself a way out so that at the end one could settle honourably and live to fight another day. I do not think that either side in the present dispute gets high marks on those tests. However, the miners are a special breed of men. Danger, loyalty and dogged determination are their lifeblood. Consider what happens when there is a pit disaster. Those of us who watched the rescue work at Aberfan will never forget the way in which the men flocked to undertake the most , dangerous and difficult tasks to rescue the children and others who were buried. During the last war they volunteered for the services in such numbers that Ernest Bevin had to hold them back.
I understand Mr. Scargill's pride in the miners, even when it leads him, wrongly, to fail to condemn acts of violence and intimidation, but whatever recent events may have done to influence public opinion, the country is fortunate to possess a breed of men, and their wives, with this stubborn determination and loyalty. We have needed them in the past and we shall need them in the future. They must never feel alienated or deserted, and I shall support their struggle to maintain the life of their villages and their pride in their communities.
Two steps are now necessary, one by the Government and the other by the miners' leaders. First, I beg the Prime Minister, the Home Secretary and other Ministers to change their tone and to acknowledge the value of the men who are on strike as much as they acknowledge the value of the men who are at work. Both are equally deserving of an appreciation of the kind of men they are. If the Conservative party can never understand that, it will never solve these industrial problems.
There is a value in all miners, whatever view they have taken. It is the same stubbornness and loyalty that demands that some of them stay at work while others will not go back. Whether they are at work or on strike, I value them all. The minority possess the same qualities as those who are on strike, and we should not separate one group from the other.
However, the Government should acknowledge, clearly and precisely, in a way that they have not done yet, that the offer of large redundancy payments is not enough to revive the communities where a pit closure could bring disaster. There should be cast-iron guarantees about the programme for replacing old pits with new pits in some of the areas that will be worst affected, when new pits have been talked about but are still largely in the air. For example, it is not yet believed finally in south Wales that the new pit that has been talked about for so long will be brought into action. There must be cast-iron guarantees.

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I have read the 1974 "Plan for Coal" two or three times recently because so many references have been made to it. It is couched in such general terms that it is not possible to pin everything upon the precise interpretation of every word in it. There must be a revised "Plan for Coal" which gives coal a large place in our future energy programme, as the Government say they wish. But the Government should go even further. They should sponsor exceptional and imaginative measures to offer new jobs and new hope to pit areas faced with closures so that the communities can see a clear way ahead.
The second step is for the miners' leaders to take. They must not permit the miners' exceptional loyalty and dogged resistance to be dissipated and drained away by a ragged break in their ranks. If the leadership comes to the conclusion that no more can be gained than has been already won, they have the responsibility to say that to their members and then to put it to the test of their members' opinions. If the decision goes in favour of acceptance, they will all march back together, united, with their heads held high, in an orderly and disciplined manner. That is the way for our miners and for our Government to behave. It would then be the responsibility of everyone in the House to hold the Government and the National Coal Board to their pledges to ensure a future for all those wonderful and worthy communities.
I fear that on the economic side the Government have much more to do before they can say that they have changed Britain's attitude and that we are making our way forward rather than backward. I fear also that in trying to understand the psychology of many groups of our people the Government still have much to learn.
4.51 pm
Mr. Francis Pym: This afternoon we have had a characteristically robust performance from my right hon. Friend the Chancellor and an equally characteristic performance from the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley). However, the rerun of yesterday has not added a great deal to the knowledge that the House already has.
I do not intend to follow the right hon. Member for Cardiff, South and Penarth (Mr. Callaghan) in his comments on the miners' strike, but I shall seek to follow him in the longer view of events which he took at the beginning of his speech.
I want to put my remarks into the broad context of the Gracious Speech, which is the subject of this debate. As the House knows, that speech is never written as a good read. It is just a programme for a Session. There are some good measures in this one and some highly controversial measures, but it is only concerned with this Session. Yet this is the second Session of this Parliament and therefore a highly significant one in the Government's unfolding strategy over the five years.
The Gracious Speech tells us little about that strategy. The only sentence that relates to it that I can find says:
"my Government will continue their policies of exposing state-owned businesses to competition and, where appropriate, returning them to the private sector."
The process of privatisation is a continuing theme of the Government, which I fully support. But I cannot detect anything else in the speech that I would put in the strategic category. There is, of course, firm control of Government spending, but that is a sine qua non anyway.
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The speeches of my right hon. Friends from the Front Bench—all admirable speeches—also told us little of the broad strategy, although that of my right hon. Friend the Chancellor was an exception. The other speeches from the Treasury Bench have dealt essentially with short-term issues, with reference in some cases to the medium term. This afternoon I want to urge upon the Government the necessity for thinking more positively and constructively about the long term. I want them to look further ahead with more imagination. I want to press them to anticipate future trends and developments more carefully and to prepare people for the changes that will come anyway. I want the Government to adjust their policies, including their economic policy, to take account of changing conditions and new opportunities, and to to stick too rigidly to their original decisions.
Let me give some recent examples of where I observe a failure to look ahead.
My party was committed to the abolition of rates and their replacement with a fairer system. About two years ago that commitment was abandoned when it was discovered that there were no alternatives that were not worse or impossible. What happened? No preparations were made for the consequences of that conclusion. No alternative plans were looked for. We got an ad hoc measure — rate capping. Yet we all know that the present system of local government finance was and is haywire. What should have happened was the immediate start of a process leading to a major reform of local government finance. That did not happen until last month. That suggests that the Government had not thought the matter through and had reacted much too late.
Debates in the House last Session revealed profound anxiety about the state of local government and the scale of Government interference. The Government seemed impervious to all those voices and tried to hold the line that all was well. It was not and it is not. Now, belatedly, my right hon. Friend the Secretary of State for the Environment has concluded that:
"we need a clear and dispassionate study not only of the abuses but of the underlying changes which those abuses reflect."—[Official Report, 6 November 1984; Vol. 67, c. 134.]
It would have been better to think all that through before embarking on highly controversial legislation.
Those are examples from the recent past. A current example is the welfare state and its future development. I want to say at once that I welcome the extra funding that my right hon. Friend the Chancellor was able to announce yesterday. For some time three things have been obvious about the welfare state. First, there have been enormous changes between the Beveridge period 40 years ago and the 1970s and 1980s. Those changes could not possibly have been foreseen and, as a result of them, the context in which the welfare state operates today is different from the circumstances in which it was created.
Secondly, the ever-growing demands on the welfare state will continue to increase, probably at an accelerating rate. Chancellors of the Exchequer will always have an anxiety here.
Thirdly, the Health Service, which is a vital part of the fabric of our society, is not as efficient or as cost-effective as we would like it to be. In that situation it would have been wise to undertake a review on at least as big a scale as the original Beveridge commission. My right hon. Friend the Secretary of State for Social Services has set several reviews in hand. He announced them during the

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past year and they are nearing completion, but I doubt whether they are far-reaching or fundamental enough to be able to recommend the adjustments that may well be necessary.
In particular, we must look in a radical way at how the social services are provided. We are most unlikely to generate anything like enough economic growth to fund the scale of social services that people would like to have. There will be a continuing squeeze on resources in relation to demand. The task is to provide the best social services that we can afford in the most efficient way. Therefore, we should at least examine the feasibility of privatising some of the social services with the Government providing people in need with the resources to buy their own services. I do not say that that will necessarily provide the best answer in all cases, but I am urging a new, radical and imaginative approach that will deal effectively with the needs and problems of the future, and thus maintain the best possible welfare state. Such a review could follow on the six minor reviews that my right hon. Friend the Secretary of State for Social Services has set up. It might well take a couple of years, but that does not matter because the work should be done.
By far the most important issue both now and in the future for our people is employment. Indeed, it has been for some years. At last the Government are beginning to acknowledge the nature and depth of the problem. I applaud all the action that they have taken, especially for the young, and the new measures announced yesterday, but the Government have not yet measured up to the scale of the changes taking place, so they have not responded to them. They adhere with notable rigidity to the economic policies prepared in the 1970s—the policies that were going to create "real jobs". Indeed, my right hon. Friend the Chancellor confirmed that in his speech today. But it cannot be denied that those policies have not yielded the results claimed for them. Despite the encouragement that my right hon. Friend the Chancellor drew from the various favourable developments, they show no sign of producing those results yet. That is because those policies are being applied in circumstances that have completely changed.
As a result of the world recession and the other events, we have rising unemployment. From the outset—from the autumn of 1979, or wherever one cares to pitch it—the Government have consistently misjudged unemployment. I believe that under present policies it will continue to rise. I am sorry to have to say that to my right hon. Friend the Chancellor, who is a much greater economic expert than I am, but that is my view. However, I cannot find any business man who does not think that unemployment will continue to rise in present circumstances. The Government are reluctant to accept that and therefore, of course, their policies cannot deal with it. They expressed deep concern in the Gracious Speech but the Government's actions and response are not commensurate with that concern.
Mr. Hayes: Is not my right hon. Friend deeply depressed by the fact that in the next three years or so 550,000 jobs will have to be created to keep employment as it presently is? Does he not agree that the most responsible thing to do with the resources set aside for tax cuts would be to invest them in improving the infrastructure?
Mr. Pym: I am in much agreement with my hon. Friend but I do not want to depart from what I wanted to say to the House. My right hon. Friend the Lord Privy Seal laughs, but in the interests of the House—
The Lord Privy Seal and Leader of the House of Commons (Mr. John Biffen): A direct answer to that question would be revealing for us all.
Mr. Pym: I believe that if there is money to spare when the outturn comes at the time of the Budget, it would be right to use it for the benefit of the unemployed in a job-creating role.
We need a strategy that encompasses not only the present high levels of unemployment but future developments and needs. That strategy should begin from a much better analysis than we have at present of likely future trends and, in particular, the development of the technological revolution. We know that new technology industries will create some new jobs, but they will be skilled jobs. I draw hon. Members' attention to the statement made last week by my right hon. Friend the Secretary of State for Employment. He said:
"I am keenly aware that, even at the present level of unemployment, it is an appalling fact that we still face serious skill shortages."—[Official Report, 30 October 1984; Vol. 65, c. 1244.]
That points to a lack of forethought and a lack of strategy in the years gone by. On that basis, I do not see how it can be thought possible that the new technological industries can provide the new jobs. It is a feature of ministerial speeches that they express the view that just as the industrial revolution generated a mass of new jobs, so the technological revolution will do the same. But I do not believe that that is so, and on the basis of that statement it seems unlikely to be able to do so.
The technological revolution will also make many unskilled workers redundant. That is at the heart of the challenge that we face on unemployment. A strategy for employment must include all aspects of the problem. There is the educational element, which in itself has two aspects. First, there is industrial training, where new efforts are now being made. Indeed, my right hon. Friend the Secretary of State for Employment spoke about that yesterday. I completely endorse all that. It may be late in the day to begin, but new efforts are being made and every drive must be made to encourage such training and to increase it as quickly as possible. Secondly, the education of our children should include an element that will enable them to appreciate and enjoy greater leisure than their fathers or grandfathers knew. Unless the education system takes that into account, people will not be able to take full advantage of the marvellous opportunities offered by technology.
The strategy must also face up to the regional problems. National statistics disguise the extreme unevenness of unemployment, ranging from single percentage figures to 30 or 40 per cent. Yesterday my hon. Friend the Member for Horsham (Mr. Hordern) made a very effective speech about Liverpool. The geographical pattern spells a major problem. National averages are not much guide. What are we going to do with the cities that were created during the industrial revolution and that are no longer wanted? Do we take work to the people in them, or help the people to go to the work? Many attempts have been made at the former, with a high failure rate, but few attempts have been made at the latter, although that policy was a feature of the

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recovery in the 1930s. I believe that we want both and that we want a new policy to cope with the situation. Yesterday, my hon. Friend the Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) made an important intervention about encouraging activity in the inner cities.
We must also do much more work on job sharing, and find out more about people's wishes and views about dividing their working time. We must find out how they feel about the balance between time off and reduced income. It would also be helpful to know more about what is happening in other countries. The strategy must also take account of the public expenditure implications. Earlier retirement is likely to be a feature, although it is obviously very expensive. We have already spoken about more education and training. I should add that private industry is not doing enough. It is not putting enough resources into that and is not contributing in the way that it should be doing. There are also the demands for more social services, to which I have referred.
I acknowledge that that strategy will cost something, and make no secret of it. But it is worth it, because we must find a balance in the strategy between counter-inflation, measures to deal with unemployment and growth. The strategy that I have described is, as my right hon. Friend the Chancellor of the Exchequer would say, a "credible policy". I also believe that such a strategy would be much closer to what most people want. But all of it highlights the vital need for growth. Without it, our difficulties will be compounded, with social and political consequences. Thank goodness there is growth, but we should like it to be much more extensive.
The Government are right to stress the importance of a flexible and competitive economy, but by itself that is not enough. The Government have given a lot of new help to new businesses and technology, which I strongly support, but they should not be involved only with new or small businesses. Our future depends far more on the extension and development of existing businesses. It is no longer enough just to try to create the most favourable climate for them, although that remains a vital and fundamental function of Government. The world is now much more complex. The Governments of other countries are closely involved with their industries and often support them, creating distortions in the market that cannot just be wished away. Therefore, I want to see a more effective partnership between Government, management and the unions—an unfashionable view, but fashion is a poor guide here. I remind the House that my right hon. Friend the Prime Minister has spoken of establishing a new relationship with the unions after the miners' strike is over, and she is right.
I see the Government's role as strategic and supportive; positive rather than passive. Such a strategy would incorporate practical policies to reduce unemployment. That must surely include policies to remove the obstacles to employment. It will be a slow process, but it is important.
Such a strategy should have a European dimension, too. Theoretically, that should come first. Unemployment is a European problem. Indeed, it is a world problem. No vigorous attempt seems to be made to deal with it on a European basis. The same applies to new technology. Our performance compares unfavourably with that of our competitors. The United States and Japan are outstripping us easily. The only way to compete with them effectively is on a European scale. We should make a real attempt
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—a far more enthusiastic attempt — to tackle on a Community basis some of the great challenges that we all face in Europe.
That leads me to the Foreign Office budget and the aid programme. The Chancellor said yesterday that it has not changed, that it is still £1,870 million. Of course, with respect to the Chancellor, it has changed because of factors such as exchange rates and inflation in other countries which cannot be quantified. The amount involved seems to be between £30 million and £100 million. That is the size of the effective cut. In my view it is a great mistake. With the world in its present unstable state the cut is unwise. It is a wrong assessment of public expenditure priorities.
The Chancellor said today that his interest was in the total figure, but it is more than that. The breakdown of that figure and the priorities are important. The Foreign Office has made its contribution to containing public expenditure over the past five years, but now that has gone too far. At the same time as reducing numbers there has been a big shift of emphasis from the political to the trade side. It was, indeed, necessary to build up the trade side, but the result is that the diplomatic service proper has been thinned down too much. In current circumstances I should like it strengthened. That is not expensive.
The same applies to the aid programme. With the present deprivations and political worries in the Third world this is a time to increase our investment in those countries. That is what aid really is. Many of the countries are Commonwealth countries which matter to us.
The recent appalling tragedy of Mrs. Ghandi's murder emphasises that. Effectively, she was the leader of the Third world and a key figure in maintaining calm and stability despite all the problems and tensions. She has no obvious successor in that role. We can expect the strains and tensions to increase. At least, it would be unwise to make any other assumption. Our reaction and response should be commensurate with that.
The Government's decision in that area of expenditure is short sighted. Some of my hon. Friends do not like even the concept of overseas aid, but I believe them to be profoundly misguided. Britain has a major and unique role in the world. Britain has an influence for stability and peace that must be used to the full.
We should increase the activities of the British Council and the BBC overseas service. Not only are they excellent ambassadors for Britain, but they are excellent ambassadors for greater understanding and harmony. They are national assets, unique to Britain, which for strategic reasons should be enhanced.
Again, I note a Government decision that neglects the long term. I urge them to think much harder about that in this and all areas of policy. If they do, the present probability of a Conservative Government continuing in office beyond the next election will become a certainty. What is more, they will deserve to continue.
5.14 pm
Mr. Roy Jenkins: I hope that the Chancellor of the Exchequer will not leave the Chamber yet, because I have some specific things to say to him.
The right hon. Member for Cambridgeshire, South-East (Mr. Pym) made a wide-ranging and far-seeing speech to which I listened with much interest. I agreed with much of it—in particular his concluding remarks, not about the return of a Conservative Government, but about the

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Foreign Office, our representation abroad and overseas aid. I am sorry that the Chancellor could not stay to listen to two sentences about his right hon. Friend the Member for Cambridgeshire, South-East.
The Chancellor made an effective debating speech this afternoon. If tu quoque between him and the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) could solve our economic problems, Britain would be the most prosperous nation in the world.
I cannot recollect the reputation of a Chancellor declining as sharply as that of the present Chancellor in the past eight months. In some ways, he deserves sympathy, because his reputation has declined at least as fast as the pound against the dollar, but without the compensation of a little recent rallying which the pound has shown. One wonders why that has happened. The Chancellor has many of the qualities necessary for his difficult office. He certainly has nerve and at least as great an understanding of the technicalities of his difficult job as many, if not most, of his predecessors. However, that is all vitiated by a fatal combination of complacency and insensitivity, epitomised in a passage of his speech on 30 October, when he said:
"Our policies are already bearing fruit."
So they should, after five and a half years. It would have been a barren tree if no fruit were forthcoming after that time. What sort of fruit are the policies bearing? The Chancellor continued:
"We are now in the fourth year of a steady economic recovery, and I see no sign of it faltering—[Official Report, 30 October 1984; Vol. 65, c. 1180.]
I shivered for the future when I took in that misplaced self-congratulation. That description of the past and prophecy for the future would be pushing things even if our production were surging ahead, if the unemployed were being sucked back into jobs and if we had one of the strongest economies in the world. In view of recent facts and future prospects, those words are almost the equivalent of Mr. Ian MacGregor congratulating himself on his handling of public relations.
There has been some mild recovery since the deep trough of 1980–81, but, taken as a whole, the first five and a half years of this Government's policy have been barren. About 2 million fewer people are at work than in 1979. Manufacturing production is one eighth down. Manufacturing investment is still substantially lower than when the right hon. Member for Cardiff, South and Penarth (Mr. Callaghan) left office—and it was not all that magnificent then, by international standards. Above all, our balance of payments on everything except oil has gone into massive deficit in the last three years. Even in 1981, despite the damaging effect of an unnecessary and unjustifiably high sterling exchange rate, we had a surplus of £500 million on our manufacturing trade. What will the deficit on manufactured trade be this year? It looks like being between £10 billion and £11 billion.
The rational basic object of economic policy, as the hon. Member for East Lindsey (Mr. Tapsell) pointed out yesterday, should be to achieve results—primarily an increase in national wealth—and not to strike attitudes.
Judged by results, the Chancellor's attempt to portray the past four years as a golden economic age looks not only wrong, but ludicrous. It casts doubt not on his veracity— which he may regard as expendable — but on his
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sense. The Chancellor's "set fair" view of the future is even more disturbing. What are the salient facts about the prospect that confronts us and the remainder of the world? There is the certainty of a slowdown in the rapid rate of American economic growth that has taken place until recently. Indeed, it has begun already. In annual terms, the growth rate was 10 per cent. in the first quarter of the year, 7·5 per cent. in the second and 2·7 per cent. in the third. In addition, there is likely to be a fairly determined postelection attempt to reduce the federal deficit. I accept that that is probably necessary. Super-Keynesianism by the back door, without acknowledgement in Washington, has produced a bonanza in the United States during the past few years. The size of the deficit, and its non-inflationary, non-cyclical character, makes it very different from our deficit or the deficits of the main industrialised countries, and would certainly shock Keynes.
Let us be in no doubt that the correction of the deficit will be unpleasant for Britain, for Europe and for the world. Last year, half of the growth in world trade came from the United States. The slowing down or halting of United States growth will have a far more depressing effect on Britain and Europe than can be counterbalanced by the possibility of lower interest rates. There is a real danger that without positive corrective action in Britain and Europe, the incipient recovery will force the European countries back into the recession before recovery has really begun and before it has affected unemployment totals.
Such a likely economic scenario will have still more devastating effects upon the developing world, whose countries are already suffering from a combination of very low commodity prices and a burden of debt that, on average, pre-empts about one third of their export earnings. If those earnings fell any further, the debt would become unsustainable and we could still have a major financial collapse that would lash back upon the trade and economic performances of the industrialised world.
We in Britain have our own peculiar problem of how, when the oil supply runs down, we can earn our living and achieve a tolerable balance of payments. I am not saying that the oil will run out during the lifetime of most hon. Members, but it will certainly run down, so we cannot continue to produce a massive surplus to counterbalance a massive deficit.
Dominating everything is that massive and slowly growing lump of intractable unemployment. The Chancellor's policy is to ignore that. Yet unemployment has grown by about 15,000 a month during the past year—almost 200,000 in a year. That has occurred during the steady and sustained recovery about which the Chancellor has been so lyrical. It has occurred while the world's strongest economy across the Atlantic has forged ahead at a rate that it cannot possibly sustain. When that rate is reversed, the rate of increase in our unemployment is likely to accelerate.
The hard fact is that with present policies, there is virtually no chance of unemployment falling below 3 million during this Parliament. Indeed, there is a considerable chance that if the American slowdown is not balanced by deliberate expansion in Europe, unemployment will go beyond 4 million. The outlook is far from being set fair. The outlook for unemployment is depressing. Even on the most favourable assumptions, there are additional hazards that could make the outlook not only depressing, but catastrophic. The Chancellor's complacency in those circumstances is a national menace.

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What should be done to correct the position? I do not think that we can simply hope to muddle through the international debt crisis. Of course, there is a 70 per cent. chance that we might do that, but is a 30 per cent. risk acceptable? That depends not only on the statistical probabilities, but upon the consequences if things go wrong. If we were contemplating a picnic and were told that there was a 30 per cent. chance that it might rain, we might be prepared to take a risk because of the 70 per cent. chance that the weather might be fine. Even if it rained, that would not be catastrophic. But if we were about to board an aeroplane and were told that there was a 30 per cent. chance that the aeroplane would crash before reaching its destination, most of us would rapidly leave the boarding area. When assessing whether risks are acceptable, it is important to look not only at the probabilities, but at the consequences if things go wrong.
Mr. Peter Hordern: The right hon. Gentleman's analogy of the aircraft and the 30 per cent. chance of crashing was one that he used when the Social Democratic party was first launched. I do not know how he rates that now.
The right hon. Gentleman is asking the European Community — he mentioned this when speaking at a function last week—to expand to take up the growth that the Americans will no longer be able to provide. How does he envisage that happening when both France and West Germany are markedly reluctant to expand their economies?
Mr. Jenkins: I did not use the analogy of the aeroplane during the launch of the Social Democratic party. I used a quite different analogy which turned out to be a singularly happy choice as the SDP's angle of ascent exceeded my expectations. I shall mention expansion in Europe, but when the hon. Gentleman intervened I was dealing with international debt. I am sure that he wants me to deliver my speech in a logical rather than illogical order.
While there is a probability that we could muddle through the international debt crisis, there is a danger that things could go wrong and that there would be a financial catastrophe. The effects of that upon world investment, confidence and trade would be so great that we cannot afford to hope that things will come out right on the night. We should mount an advance international rescue operation, not unlike that mounted by the Americans for the Continental Illinois bank.
The responsibility for the present position lies partly with the banks that lent the money, partly with the Governments of the developed countries — ourselves, America and others — who encouraged the banks because it was the only way to deal with the position after the second oil price increase, and partly with the Governments of the developing countries who borrowed the money but did not always spend it wisely. There is a spread of responsibility. Therefore, some of the costs of mounting a rescue operation should be similarly spread.
The Governments of the lending countries should set up a consortium to buy risky debts — they could be identified by the bankers themselves—at a substantial discount. That would be the penalty that the banks would have to pay. The debts could then be rescheduled at a significantly lower rate of interest—for example, 6 per cent.—which the borrowing countries would be obliged to pay. It would be a costly operation, especially for the
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United States, but it would be nothing like as costly as the burden that would fall on the United States and other countries if they had to mount massive rescue operations to prevent banks from becoming bankrupt. The benefits that would accrue from removing that threat or menace would be immense.
Mr. Allan Rogers: Will the right hon. Gentleman give way?
Mr. Jenkins: I think that I should continue.
The direct and central need—this brings me to the issue raised by the hon. Member for Horsham (Mr. Hordern) — is to co-ordinate European expansion to offset the American slowdown. The hon. Gentleman anticipated correctly what I would say. If this does not occur, world growth rates will decline and all the problems of both the poor and the rich countries will be exacerbated.
I stress the need for co-ordinated action. If one country makes a dash for expansion on its own, it is likely to get into balance of payments and exchange rate problems and hence inflation problems. That was to a considerable extent the experience of France in 1981–82.
The Community's trade is now sufficiently integrated within the Ten to make expansion reasonably safe and sustainable if it is co-ordinated. Could an agreement on co-ordinated expansion be achieved? I do not know for certain, but I know that it will not be achieved unless we try to achieve it, and Britain is certainly in a position to take a lead. Britain has the lowest percentage public sector borrowing requirement of any Community country—in those terms it has almost the lowest requirement of any country in the world — but it has the highest unemployment rate of any major country in the Community. Given the depression of the early 1980s, it may be that Britain has the highest growth potential, if it can be released, of any Community country. However, we shall not achieve expansion and we shall not encourage others to move with us in the absence of any agreement.
The House will recall that a conservative expansion plan was agreed at the Bonn western economic summit in 1978. That was aborted by the world oil price increase which came along immediately afterwards. That, at any rate, will not come again. If a plan for expansion were to be agreed, it would not be appropriate to seek agreement with the United States, which has been out of phase with us with its extremely rapid expansion during the past few years. I think that a plan can be agreed with the other European countries, but it will not be achieved so long as we adhere to the inappropriate aim of a further reduction in public sector borrowing.
Our public sector borrowing is low by international standards. Furthermore, the total weight of public debt in Britain is low by historic standards. It is barely half what it was 20 years ago, at the beginning of the 1960s, in a non-inflationary period.
I am not against some stringency in public finance. I am not against stringency, when necessary, in public sector borrowing. It is almost boringly well known that I was the only Chancellor since the war to have a negative public sector borrowing requirement, but that was in different circumstances. If the Chancellor were in his place, I would tell him that he and the Government have no chance of reducing unemployment significantly below 3 million so long as the Government adhere to their obsession with the public sector borrowing requirement,

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which the Chancellor is not very successful in controlling in any event. In the right hon. Gentleman's absence, I give that message to the Leader of the House.
I believe that many Conservative Members are deeply uneasy about unemployment and its consequences. They know that as long as they support such a policy they, or their party, will be responsible for having spent the proceeds of the oil spate upon unemployment benefit and little else.
I am surprised that every Cabinet public expenditure engagement is now fought out almost entirely in public. We are told that the Chancellor has won or has lost. It might almost be more appropriate to introduce television cameras into Cabinet meetings. That would be more appropriate than leaving it to civil servants to leak documents. To what does the Chancellor attribute this extraordinary publicity? Does he think that it is primarily the amiability of his character or the loyalty of his colleagues? In any event, it has achieved remarkable proportions.
Even if the Prime Minister is distancing herself slightly from the Chancellor of the Exchequer, he should not try to distance himself from public expenditure decisions on overseas aid. The Foreign Secretary is no longer the Chancellor of the Exchequer. The right hon. Gentleman is in that position, not the right hon. and learned Member for Surrey, East (Sir G. Howe). Any cut in real terms in the meagre total of our overseas aid would be unacceptable lunacy when we are trying to deal in Ethiopia with an eruption which arose from a much more widespread, longer-term and underlying problem, which is the relentless advance of the desert across sub-Saharan Africa, the destruction of the topsoil and the increasing inability of a growing population to feed itself. In those circumstances, the medium-term need for water is as necessary as the short-term need for grain. To respond to a crisis and then to implement a policy of aid reduction would be to make the repetition of the disaster more likely. That would be typical of the tactical skill and strategic sterility of the Chancellor.
5.38 pm
Sir William Clark: The right hon. Member for Glasgow, Hillhead (Mr. Jenkins) devoted much of his speech to the international debt. Many of my right hon. and hon. Friends, and probably many on the Opposition Benches, agree that it is a world problem. One of the difficulties of the world debt is the tremendous interest burden. There has to be rescheduling from time to time, and so the debt increases without the country concerned receiving any cash. I agree with the right hon. Gentleman that some concerted effort should be made to sell whatever debts have been left by a bank. The best way would be to channel the debts through the IMF or the World Bank. The World Bank, for example, could then reschedule the interest.
If, for example, an American bank has a debt of 100 units at 12 per cent. with a particular country and it sells the debt for 50 units to the World Bank—the original bank has probably already discounted the value of the security—the World Bank will have the responsibility and authority to charge a lower rate of interest. The IMF will then be able to have some control over the economies
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of the borrowing countries. One of the difficulties with overseas debts is, in some instances, the profligacy of the borrowing countries. That must cease.
The right hon. Member for Hillhead spoke about the topsoil structure of the starving countries. We must remember that in many instances their problems have been brought on by their Governments. Many of them have spent their economic resources on building up arms, not helping the population. I do not want to spend too much time on the overseas debt.
I am sorry that the right hon. Member for Cardiff, South and Penarth (Mr. Callaghan) is no longer in the Chamber. He rather blamed Governments for their policies of the past 10 or 15 years. It will be in your recollection, Mr. Deputy Speaker, that Conservative Administrations have never borrowed from the IMF, but Labour Administrations have. I mention that merely for the record. When the Conservative Government took over, there was $22 billion of overseas debt. Today, there is $11 billion. The Government have repaid half the debt.
My right hon. Friend should keep on the course that we have followed over the past four or five years. Many people, including some of my hon. Friends, would like more expenditure. That has been tried in many countries. We have tried it here in the past. We have tried to spend our way out of recession, and what has happened has been disastrous. One has only to look across the channel at the French economy. When President Mitterrand came to power two or three years ago, he did the same, and spent and spent. That eventually caught up with him.
One of the matters that has come out of the Gracious Speech very forcefully was the anxiety felt in all parts of the House about the scourge of unemployment. It is unfair and unreasonable of Opposition Members to say that the Conservative party has no compassion for the unemployed. It is not the prerogative of the Labour party, the Liberal party or the SDP to have compassion for the unemployed. If one considers the history of unemployment, the House will be aware that from the early 1950s the unemployment trend has been upwards.
Mr. Peter Shore: Nonsense.
Sir William Clark: The right hon. Gentleman can refute that when he replies to the debate, if he does.
This country may have suffered from poor management or the intransigence of trade unions and so on more than any other Western industrialised country. We have been industrially overmanned. That is why unemployment has increased and why, with the world recession, private enterprise particularly had to shed labour to stay in business. We keep talking about unemployment and what we can do to help it. The Government spend over £2 billion of taxpayers' money on the youth training scheme and other schemes. We all applaud that, but it is a deeper problem and throwing money at it will not solve it.
We should consider the position of the potential employer. I declare an interest because I am in business with various companies. We ask why an employer does not take on another man. We should study our employment legislation. Wages councils, for example, inhibit the taking on of an extra employee. Unfair dismissal procedures, the employment protection legislation and the Manpower Services Commission are supposed to be looking after employment, but I believe that they are interfering with the engaging of an individual.

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The United States and Japan have been mentioned. Over the past 10 years 15 million new jobs have been created in America. Why is that? The Americans do not have any wages councils, employment protection, or unfair dismissal procedures. They allow the employer and the employee to make their own arrangements. I should have thought that we would want to do that. Over the years successive Governments have tried to regulate employment, and that just does not work. The proof of the pudding is in the number of unemployed that we have.
My second point relates to the cost of the welfare state. I support my right hon. Friend the Member for Cambridgeshire, South-East (Mr. Pym), who drew attention to the different circumstances at the time of the Beveridge report and today. The total budget for social services today approaches £40 billion. I accept that that includes unemployment pay and so on, but the magnitude of the figure and percentage of our GDP is very different from what Beveridge thought about. I agree with my right hon. Friend that we should have another Beveridge report.
I know that my right hon. Friend the Secretary of State for Social Services has set up various investigations, but I do not believe that they will be sufficiently comprehensive. I hope that I am proved wrong. We cannot nibble at this subject. There are many matters involved in the welfare state, and we hear about them daily. There are the people who go down to the south coast to live on holiday and who receive an allowance. There is something wrong with that. Foreign students come over here and take money, and then there is legal aid for foreigners. I know that such things probably do not add up to much, but they are symptomatic of the slackness within our welfare services. A proper investigation would be extremely helpful.
We seem somehow to have our priorities wrong when we deal with welfare benefits. I have never understood why a voluntary one-parent family receives better treatment than a married couple in similar domestic circumstances. Something should be done about that. It would do some of our leading clergymen good to pay a little more attention to the morality of the nation than to its politics.
The third point that I wish to make is about pensions. I must declare an interest because I am a consultant for the Life Insurance Association and Commercial Union Assurance Company. I wish to take the matter in its long term. Our occupational pensions are an adjunct to our welfare services. If we did not have occupational pension schemes, the social security and supplementary benefit burden on the taxpayer could be tremendous. The fact that people can obtain from their employer when they retire a pension to which they have contributed during their working life keeps them away from the supplementary benefit board, and consequently nothing should be done to harm occupational pensions.
There have been rumours about the "lump sum" part of pensions. The House will recollect that in many cases one can have a reduced pension by taking a lump sum which is roughly one and a half times one's earnings when one retires. That system has been in operation since 1909. It was enjoyed at first only by civil servants. It has grown ever since, and was considered by the Wilson committee when it was studying the City. The committee found that the lump sum was an anomaly but that it had been going on for so long that it would be extremely difficult to get rid of it.
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There are other rumours that my right hon. Friend the Chancellor might take it upon himself to tax the income of pension funds. At the moment pensions funds enjoy a tax-free status. That means that those people who have been paying into pension funds over the years expect, when they reach the age of 60 or 65, to receive a certain sum each year based upon a formula of the number of years that they have worked, and so on. The actuary has worked out the pension on the basis of the pension fund remaining tax-free. If tax is charged, the expectations of all those who are working towards the date when they receive their pension will necessarily be reduced. It would be folly to upset the balance, because occupational pensions relieve the burden on the taxpayer.
I wholly share the Government's philosophy that people should own their own houses. We have had wonderful success in the sale of council houses because of discounts and mortgage interest relief. I hope that there is no talk of taking that relief away. I should have thought that pensions were in the same category as those measures. They are a form of saving, and we should not do anything to damage them.
The Chancellor's statement was generally well received. Although there have been some snide remarks and a few sneers, I congratulate my right hon. Friend on reaching a target of £132 billion. We can argue about the breakdown of that figure, but it was an extremely successful operation to keep to that target. I remind those hon. Members who say that our public sector borrowing requirement and overspending levels are low that next year it will cost the British taxpayer £16.5 billion to pay just the interest on the national debt. I accept the fact that that will be only 2 per cent. of our GDP, as the right hon. Member for Hillhead said, but that amount is in addition to the £132 billion. I should have thought that a cost of more than £45 million a day is one that we would not want to increase.
The abolition of unemployment must have the highest priority, and I know that the Government have taken that aim on board. Despite what some people have said, the Government are giving high priority to that aspect. We should be cautious about wage claims. It is extremely worrying that those involved in, for example, the car industry, which is just about on its feet, are to go on strike. Strikes mean only that jobs will be lost. Over the years, we have seen our car industry go downhill, simply because some trade unions have priced their men out of work.
I welcome the tax cuts. The right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) has been. involved in an altercation about those cuts. I believe that the £1·5 billion tax cuts that are promised should go into the pockets of the taxpayer. I do not like talking logically with the right hon. Member for Sparkbrook, because he gets mixed up with illogicalities. When there is a £1·5 billion reduction in taxation, why complain that taxation is high? However, when the Government say that they will reduce taxation, the Opposition say that they must not. Does the Labour party, if, God forbid, it ever regained office, intend to increase taxes so that we will hake more money to spend in the public sector and create more jobs? I am sure that that would be a recipe for disaster.
Many claims will be made about the suggested £1·5 billion tax cuts. I am sure that the Chancellor's postbag will contain suggestions not only from Members of Parliament but from people all over on how to spend that £1·5 billion. We should concentrate on taking as many

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people as possible in the lower income range out of the income tax bracket. In view of increasing privatisation—British Telecom, British Airways and the rest—my right hon. Friend the Chancellor should ascertain whether some of that £.1·5 billion can be used to help people to invest in that privatisation.
I believe that our economic base is firm and that we should not change course. We have a firm base, and we should build on it.
5.55 pm
Mr. Eric S. Heffer: The hon. Member for Croydon, South (Sir W. Clark) was right to say that we must look at the welfare state. Everyone who is serious about the future of the welfare state knows that certain things must be done. The hon. Gentleman suggested that the welfare state should be dismantled, that the wages councils should be abolished and that there should be certain arrangements for the system dealing with unfair dismissal.
Sir William Clark: I did not say that.
Mr. Heffer: I believe that the hon. Gentleman was clearly hinting in that direction. His speech added up to an expression of a Right-wing reactionary view which we often hear from Conservative Members—all the benefits that working people in particular have gained over the years should be taken from them as a way of dealing with our severe economic crisis.
Sir William Clark rose—
Mr. Heffer: I shall not give way too quickly or too early.
Sir William Clark: The hon. Gentleman should not misrepresent me.
Mr. Heffer: I do not think that I have misrepresented the hon. Gentleman. That is the only conclusion to which anyone could come after listening to the hon. Gentleman's speech.
One thing is clear: the economic crisis in this country exists in just about every western European country, the United States and Canada. The economic crisis is basically a product of a type of economic system. The problems in Britain are worsened because of the Government's policies. The Government have deliberately used unemployment as a weapon to deal with that crisis at the expense of the mass of ordinary people. For many years, hon. Members on both sides of the House were dedicated to Keynesian economics, but Keynesian economics are no longer sufficient to deal with the depth of the crisis.
I agree with my right hon. Friend the Member for Cardiff, South and Penarth (Mr. Callaghan) that we cannot have an expanding welfare state with a declining economy. I think that everyone recognises that that is an impossibility. If we try to have both, we end up with constant confrontation and, as has happened in some other countries, with such a severe economic and political crisis that the democratic structure is destroyed and one form or other of dictatorship is brought in. That is the reality of where we stand. We need new radical economic policies that move from either the Government's policies of confrontation or the old Keynesian economic policies. We have to move towards a Socialist solution to the economic problems of the day.
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The Government have decided that the way to deal with the economic problems is through confrontational policies against the trade unions and by putting the burden of the crisis on to the shoulders of ordinary working people. They are not arguing for a redistribution of wealth.
Mr. Yeo: Will the hon. Gentleman give way?
Mr. Heffer: I know that I shall upset Tory Members, but I hope that they will stay in their places. That will then mean more time for everybody else to speak.
I should like to refer to what I think is the important issue overshadowing the debate in the House and the country at present. Clearly, I am referring to the miners' dispute, which is serious. I have never seen, in 20 years in the House of Commons, so much hatred displayed by hon. Members in the Tory party against any trade union leaders as I have seen recently in relation to the leadership of and the trade unionists in the National Union of Mineworkers.
Let me make it clear. In defending the mineworkers' leaders, I have disagreed not once but many times with Arthur Scargill, and I have no doubt that I shall disagree with him again. I am renowned for disagreeing with many people, so Arthur Scargill is not beyond the pale when it comes to arguing with people. For example, I do not agree with Arthur Scargill's view on worker control. I believe that we need forms of management by workers in big industry. Arthur does not believe in it. He accepts something that many hon. Members should take into their bosoms. He actually agrees with proportional representation. I think that he is wrong. I told him so. Arthur also does not support Solidarity in Poland or the development of free and independent trade unions in the Eastern European states in same way as I do. Therefore, I disagree with Arthur Scargill in many areas.
However, I support Scargill, the leaders of the NUM and the workers who are on strike. I particularly support the leaders because they are courageous fighters for their union, their members and working-class people who are suffering under the Government's policies. They deserve the unqualified support of each and every one in the trade union and Labour movement. They have received that support, despite what the press has tried to make out, from the Labour party. Since March the national executive committee of the Labour party has given its support to the mineworkers and urged the constituency Labour parties to raise money for the miners. That has been done on a tremendous scale, to such an extent that I heard some of the mineworkers' leaders saying that the Labour party had raised more funds for the miners in their struggle than any other body.
Last night the Prime Minister used the Lord Mayor's banquet at the Guildhall as an occasion to attack the NUM leaders. Undoubtedly it was an appropriate place for her to be. There they were, sitting there, well fed and having a nice evening. No doubt the occasion was lavish. Yet the working class is suffering poverty and misery in some areas of the country and miners are at the soup kitchens, being kept going only through the support of fellow workers who collect their pennies so that the miners can have a meal.
The Prime Minister implied that the miners' pickets were similar to the IRA. She knows that that is not true. However, if people constantly tell a lie over the years—we saw the Goebbels machine in Germany—in the end

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people believe that lie. That is what is happening today, with what the Government are trying to do in relation to the miners. I found to my cost that the lies and innuendoes in the press are difficult to combat.
It does not seem to cross the Prime Minister's mind that the Government's policies are responsible for the atmosphere of violence in this country. My right hon. Friend the Member for Cardiff, South and Penarth (Mr. Callaghan) made an important speech. Pointing to the Government Benches, he said that it is time that the Government changed their basic attitudes towards the miners and understood that they were decent, loyal, honest people. That applies to those who are on strike, not just to those who are working. They must be understood. But the Prime Minister does not even begin to understand them. She does not try to understand them.
Many Tory Members went to public schools such as Eton and Harrow and then joined a Guards regiment. They are very proud of being in it. They are proud that they can be part and parcel of a great regiment, fighting together for what they believe. They say "Unity is strength." Miners and the trade unionists are their own Guards regiment. They have the same loyalty to their organisations as Tory Members had when they were gallant officers in a Guards regiment. One must understand and realise that. One must reach an accommodation in the end. The Government have not done so.
My right hon. Friend said that the National Coal Board had made certain concessions. I do not deny it. But it is not generally known that the NUM has also made concessions. It has issued statements to the press saying what it has done, but not one word has been printed. I wonder why. I wonder why the NCB's statements were printed, but not those of the NUM.
We must change the atmosphere of violence. The Prime Minister has heightened the fight against the miners and the trade unions by saying that she regards trade unionists as the enemies within. She talks about trade unionists as being subversive and being ruthless leaders. It is the Government's policy of unemployment, anti-trade union legislation, extra and new powers for the police and unqualified acceptance of judges' decisions that is causing workers and trade unionists, employed and unemployed, to feel frustrated and to feel fear. It is causing an atmosphere in this country that we have never known, certainly not since I was a young lad. That worries me. I do not know where this country is going, but I warn the Government that if they continue with their confrontational policies against workers and trade unions, only disaster can lie ahead.
Some Conservative Members know that the Government's policies are wrong. They must stand up and tell Ministers, "Change course before it is too late." They cannot remain silent. When a Labour Government were in power and Back Benchers thought that their policies were moving in the wrong direction they said so. I should like to see some courage and determination from Conservative Members. They make wishy-washy, wet speeches about the economy, but they ought also to concern themselves with civil liberties and the future of our country.
I do not agree with SDP policies and, after my hon. Friend the Member for Bolsover (Mr. Skinner) was thrown out of the Chamber yesterday, it is difficult for me to have to admit that the Leader of the SDP, the right hon. Member for Plymouth, Devonport (Dr. Owen) made some good
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points in a radio interview this morning, along the lines of what I have been saying. Conservative Members ought to realise that the Government are increasingly in a minority position over the miners' dispute and the general drift of affairs in this country.
I have been involved with many strikes. People have to know when to strike and when to go back. They have to know how far they can go and how much they can achieve. They must not allow their forces to be so dispersed that the future of the organisation is put in jeopardy.
I once had to tell thousands of workers who had been on strike for six months over the dismissal of myself and five other senior shop stewards, "Go back, brothers. We will not win this one. March back onto that site as a group and elect your new stewards immediately." That was difficult for me, but I knew it had to be done.
I do not believe that the miners are in that situation, but we must remember that they must be supported by the Labour movement so that they can come out of the dispute with an honourable settlement, in the interests of themselves and their families and in the interests of the people of this country.
I ask Conservative Members not to be too keen on jumping into confrontation. Let us all seek a proper solution that will benefit the miners and their families, help the fight against unemployment and ensure that the trade union movement maintains its unity and strength in the face of future moves by this anti-trade union Government.
6.13 pm
Mr. Michael Marshall: If I do not take up the theme of the hon. Member for Liverpool, Walton (Mr. Heffer), it is not because I think that he has not raised important issues or because I do not respect many of his views. However, when he said that the NUM had made concessions, he did not mention the condition on which the union continues to insist—the maintenance of all pits, however uneconomic. I suggest that when the hon. Gentleman was a trade union leader he would never have imposed such a condition. That claim by the NUM differentiates the present dispute from any other industrial dispute that is likely to take place in this country.
However, I agree with the hon. Member for Walton that the review of the welfare state is important. I am glad that the issue was referred to by my hon. Friend the Member for Croydon, South (Sir W. Clark) and by my right hon. Friend the Member for Cambridgeshire, South-East (Mr. Pym), who also referred to new technology. I wish to concentrate on those matters and I shall, therefore, leave aside the mining dispute for today.
I remind the House that this Government is the first for 20 years to face the prospect of a second full term of office. I especially welcome the fact that my right hon. Friend the Member for Cambridgeshire, South-East took a positive and constructive approach and drew attention to the medium and longer term.
The fact that I have a pamphlet coming out tomorrow which attempts to show that 3 million jobs could be produced by the end of the century will not prevent me from advancing some of those ideas today, because I should like to attract the interest and support of hon. Members on both sides of the House.
The pamphlet sets out actions that could be taken by the Government and by industry. I shall concentrate on the

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role of the Government, and I am glad to see my hon. Friend the Minister who is responsible for the Civil Service on the Front Bench, because I have some points to put to him. The ideas that I am putting forward are not only my own. My co-authors are a computer consultant and an industrial journalist, so our work over the past two years has been fairly widely tested.
In putting forward arguments about the wholesale embrace of new technology, I take head on the frequently-expressed worry that new technology will lead to net job losses. I do not believe that that will be the case, but there is a difficulty in quantifying where the continuing change in moving from old to new technology will occur. Our objective of 3 million new jobs by the end of the century is realistic and is spelt out in more detail in the pamphlet.
We have to accept what my right hon. Friend the Member for Cambridgeshire, South-East called certain inevitabilities. He was right to draw attention to the fact that shorter working lives, shorter working weeks, earlier retirement and a society in which people live longer will present challenges, but also opportunities. The United States and Japan have come to terms with the needs of the service industries, and this country could do much more in that regard.
For example, let us consider the role of the Government as an employer. They have shown little imaginative thinking in getting away from the nine-to-five mentality. Surely it is ridiculous that the majority of people who wish to get help and assistance from the DHSS, the Inland Revenue or electricity or gas offices have to find time during their working day to visit the offices where such help can be provided.
With the adoption of new technology, it should be possible to move to staggered working hours—which may involve debates on flexi-time, job splitting, part-time working and so on—and the Government ought to be able to take a lead and reassure those who might be worried about the introduction of new technology and more flexible working. New technology, leading to the provision of services out of hours and at weekends, would not only help the public and improve the relationship between the public and the instruments of government and the nationalised industries, but provide better job opportunities, because there is evidence that people are prepared to view sympathetically the opportunities that a more flexible working pattern would allow.
My next suggestion is directed towards the Department of Trade and Industry and particularly to the information technology interest in the Department. The question of cable television is still most important. It is worrying that much of the earlier enthusiasm has died away. There have been problems, but I believe that they could have been overcome. The question of establishing interactive television, which is the key element in building on many of the social service and service industry aspects of this development, is still important. I hope that the Government will rethink the question of pay-per-view, because that is the only way in which the process can be accelerated within the private sector. In the public sector, the use of interactive television should be considered as a cost-effective way of providing an additional service.
Secondly, there is the question of copyright. I believe that within two years we must extend to computer software and all forms of electronic publishing the copyright
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protection already enjoyed by videos. If we do not, pirates may decimate a substantial proportion of that important industry, which offers important export opportunities and provides the background for British software skills.
Thirdly, the creation of small businesses is important. The time has come for a more imaginative look to be taken at the planning laws. The idea of working from one's own home should be fostered in the most direct way. I am thinking about planning laws which inhibit people from working at home at a time when the microcomputer society provides opportunities for many home-based, one-man businesses or partnerships. In such an area, the way ahead could be shown by Department of the Environment circulars. There may not even be any need for legislation.
There is also the wider question of industrial and commercial estates where the laws frequently forbid people from living in industrial premises. In the case of non-polluting businesses in residential and industrial areas, some flexibility would be of help.
There are enormous opportunities for helping pensioners and the disabled. The Department of Health and Social Security has done some work on the question of bulk purchasing, but a certain amount of money could usefully be spent on research in this field. More could be spent on considering the kind of equipment which could provide manufacturing jobs and export opportunities. It is time for further consideration of these matters. For instance, I think of the use of robotics in providing artificial limbs not just for those who are usually considered to be severely disabled but for those who, as they get older, could use such appliances in their own homes.
There have been developments in recent years in the provision of sheltered accommodation. We could assist the process by doing nothing — by not chopping and changing in terms of the impost of taxes and other legislative burdens on such developments within the private sector. The public sector also has an opportunity to develop purpose-built facilities in sheltered accommodation, including such equipment as I have mentioned, and using robotics and modern information technology to provide services for those who live in such accommodation and to create further industrial activity.
Turning my attention to what the Chancellor can do in such matters, I should like to reinforce his enthusiasm for the shift from direct to indirect taxation. We should be willing to face the more unpopular aspects of this shift when we consider the opportunities which the Chancellor will take to collect revenue through indirect taxation. But if my right hon. Friend were to accept that it is possible to exempt some areas from indirect taxation, he could make changes which would be positively helpful. I think, for example, of not applying value added tax to repairs and extensions to sheltered accommodation, because in that case VAT is a disincentive.
Governments rarely show a propensity to rethink policy once it has been announced, but my right hon. Friend should be flexible and when he pursues his shift from direct to indirect taxation he should be responsive to the benefits which that shift could bring with it.
One step which my right hon. Friend could take would be to raise the VAT threshold. The last uprating did no more than keep the figure below the recent increase in inflation. A VAT limitation of £30,000 would be helpful to small businesses in some of the areas which I have mentioned.

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The Chancellor should look urgently at the question of the tax allowances which could be provided for the average user of a number of services. I am particularly interested in bringing the black economy back into the world of legitimate trading. My proposal on VAT would assist with that process. It is nonsense that enthusiastic —or unenthusiastic—amateurs such as myself should be left to tackle do-it-yourself jobs when we could revive and legitimise the work of craftsmen. There is a market for their skills, yet in many parts of the country it is difficult to find such help, particularly for the elderly. The figures show that there are substantial numbers of people who have sufficient means to seek such assistance and who are made increasingly anxious by their failure to get such work done through the welfare state.
I accept the fact that my proposals would involve a certain amount of rethinking and a certain ability to look ahead. My right hon. Friends will know the terrible sinking feeling which one suffers when the process of legislation, stretching into the months ahead, seems to block any opportunities for new thinking. However, because for the first time in 20 years we have a Government with a prospect of completing two full terms —this is an uncertain world, and I choose my words cautiously—we should be thinking now about new ideas and about the medium and the longer term. We have a reforming Chancellor, and a Prime Minister with an enthusiasm for harnessing science and technology. They should encourage their ministerial colleagues to move in these and other ways towards the reform of the welfare state and the wholesale embrace of the new technology.
6.27 pm
Mr. Robert Litherland: Nothing that I have read in the Queen's Speech and nothing that I have heard in the autumn statement, in yesterday's debate on industry and employment, in the Chancellor's speech today or in this debate will be of any consolation to my constituents. The Government's past, present and future economic policies have nothing to offer the major inner city areas such as Manchester except continued decay. The city and its neighbouring areas have felt the full impact of the long and bitter economic depression, and our manufacturing and industrial base has been laid to waste, never to be revived.
We have passed through depressions before, but this one is different. This is not a question of the peaks and troughs of the trade cycle. Workers used to be laid off because of temporary overcapacity in the production of goods, and the machinery and the factories lay idle until there was an upturn in the economy and labour was required again. Then the word would go along the grapevine that the firm was taking on labour again and that if one went down to the factory gates there would be the chance of a job. That happened in the 1930s. Factories that were closed because of over-production had laid men off. There were gangs of men at street corners with nothing better to do than kick an old football around. However, the factories remained. They were still at the end of the street. The skills remained in the hands of the workers and the machines were still in the factories. Then the whisper would go around, "They are taking men on." Engineers would go to the factory gates and be offered jobs.
Those days have gone for ever. When a firm closes now, it closes for good. There are no more whispers on the grapevine that jobs are available and that firms are
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offering people their old jobs. Livelihoods are also lost for ever. The labour and the skills are no longer required. It is not that they are no longer needed. They could be put to good use, providing much-needed facilities and a higher standard of living for all. The powers-that-be, however, decree otherwise. The worker is humbled by the might of high finance and the money manipulators—that is where the real power lies. With a Government such as this who champion the few who control the system, what earthly chance is there for the unemployed, especially in my constituency?
There is no chance for workers while we have a Government who, without conscience, introduce monetarist policies and laws to crush organised labour and to shackle trade unions. Is it any wonder that millions are on the dole and that there are many others who live in daily fear for their jobs? In Manchester, unemployment has increased to record levels. Although there are no seasonal factors which make more adults and school leavers unemployed during September and October, the increase in unemployment has been higher than expected. Nothing that the Chancellor said yesterday or today will help to reduce unemployment.
Figures for the travel-to-work areas around Manchester are farcical as they do not show the true picture of high unemployment in the inner city. There is 51 per cent. unemployment at one office in Moss Side. The city planning department has shown that 34 per cent. of men in part of my constituency are out of work. What prospects do such loyal workers who have given their lives to their firms have? As they say, they are bleak. They know that the firms at which they spent a lifetime are shut permanently. Firms that once had international reputations have been demolished or stand like giant tombstones, symbols of a once industrious past. They include household names such as Richard Johnson and Nephew. From its title, it was clearly a family concern. It existed for more than 200 years. It provided jobs in the area and produced some of the finest wire in the world. It was bought out by a South African consortium and was closed within 18 months with the assistance of Government grants in a so-called rationalisation programme. Workers were put on a three-day week and one day, when they returned to work, the factory gates were locked in their faces. That firm is one of many in a catalogue of closures and disasters for workers in my constituency.
Lawrence Scott was an engineering firm of many years' standing. It is now a heap of rubble. That is where the workers wanted to work but could not force their way through the huge picket line of police. The police even assisted by allowing helicopters to lift machinery out of the factory over the heads of the workers, over the roofs of the houses and over the schoolchildren playing in the playground. That was the role of the police in those days —to stop workers going to work.
The closure of such firms is felt by the small businesses that used to supply them, by shops, pubs and clubs. It is also felt by the community. But none feels it more than the workers who have no hope. I shall relate an incident that might seem humorous. After the closure of Richard Johnson and Nephew, a man walked the street in blue overalls because he did not accept that the firm at which he had worked since he had been a boy of 14 would never reopen. He is now in his fifties and has no hope because the firm is closed for ever.

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if I could select just one industry to which the Government should apply their initiative to provide jobs and to boost the economy, it would be the construction industry. We have all heard about the further horrific cuts that were contemplated for that industry. We also heard about the threatened resignations of Ministers if the original sum suggested by the Treasury was agreed. In spite of the Secretary of State for the Environment's so-called triumph, more cuts have been made and yet more are contemplated in public sector building.
What is the public's reaction? I have received correspondence from the Group of Eight which consists of representatives of the construction industry — builders, civil engineers, material producers, designers and unions. It believes that the construction industry could make a valuable contribution to our economic revival. It wrote:
"The point that the Construction Industry should not be used as an economic regulator has been made to Government many times. It can only be assumed, from the lack of notice taken of this point, that Members of Parliament and Civil Servants either do not understand or choose to disregard it. It is perhaps understandable that a major force, such as the Construction Industry, should be used as a counter in political bargaining but the consequences of such an action should be seen for the folly they are."
The group believes that, if money is spent on housing, highways and renewing sewers, there could be a spin-off in terms of jobs. It says that liquidations in the building industry continue. It also says that repair and maintenance are reaching critical levels, that existing building stock is deteriorating and that infrastructure such as sewers, highways and waterways are not being renewed as necessary.
Housing is needed. We have thousands of construction workers on the dole and millions of stockpiled housing bricks. It is sacrilege that millions of people should be waiting for decent housing. Th men who have left the construction industry during the past decade have probably been lost for ever. The Government should realise that all the palliatives in the shape of training courses and all the false talk about creating real jobs mean little to my constituents. They know from bitter experience that the Government's economic policies have brought only misery. People want work, and they want it now. They want their dignity back. Above all, they want a future—especially the young. Any Government who steal the future of so many young people stand condemned. They should cut the cackle, cut the pretence and give us action, not words.
6.39 pm
Mr. Terence Higgins: By tradition, the Leader of the House replies to the debate on the Queen's Speech. I shall begin by making some points about procedure before I turn to the broader issues which we have been discussing.
The debate is about the Queen's Speech. Although you, Mr. Speaker, suggested that we should talk about economic affairs, the debate is not on the Chancellor's autumn statement, although, inevitably hon. Members tended to refer to it both yesterday and today. It is extremely important to distinguish the debate on the Queen's Speech from that on the Chancellor's autumn statement.
I hope that we shall debate the autumn statement in the near future. If that debate is to be of high quality, and if
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we are to be properly informed, it is important for the Treasury and Civil Service Select Committee to have an opportunity to take evidence and present a report to the House. Hon. Members can then be fully informed about some of the detail which is not apparent from a 24-hour examination of the statement.
Last year's report of the Select Committee concluded:
"We hope that in future the House will be permitted to receive its Committee's report before the debate takes place, which in normal circumstances would certainly be before the Christmas adjournment."
Our programme. for economic debates has become less than satisfactory, especially when, as on this occasion, the Queen's Speech and the autumn statement come together. The House must use the usual channels, and decide what the right approach to that programme should be and how to spread the major debates on the Budget, autumn statement and public expenditure White Paper so that we have opportunities at reasonable intervals and without too long gaps or too much crowding in any one period to debate major items affecting the economy and how the economy is being managed. I am worried by the large number of leaks to the press about public expenditure and possible changes in taxation. That seems to reinforce the case made in the Armstrong report for a green budget in the autumn. Hon. Members could then express their views on matters before final decisions were taken.
I wish not to make a speech about broad macroeconomic principles, but to take up some points already raised. I hope that the hon. Member for Manchester, Central (Mr. Litherland), who spoke with such conviction and compassion about the plight of the unemployed, will excuse me if I do not pursue that subject. I hope, however, to be able to speak about it on another occasion.
I shall concentrate on three matters. We must consider the question of priorities. Many hon. Members have spoken about priorities. My first point relates to the section of the Queen's Speech that states:
"Following the agreement at Fontainebleau on the fairer sharing of the Community's budget burden and on the overall control of Community spending, my Government look forward to the further development of the European Community. They will continue to press for improvements in the Common Agricultural Policy".
The Select Committee took evidence on that. The Economic Secretary to the Treasury and his officials were helpful in putting forward the Government's position during the negotiations. We have not yet reached a satisfactory agreement following Fontainebleau. I am a fundamental believer in the importance of the Common Market and the great benefits that can stem from it, but if we think that it is going in the wrong direction we should tell the Government in the hope of bringing them and the Common Market back on the right lines.
We have the best opportunity since we joined the Common Market of bringing under control excessive spending on the common agricultural policy. We have run up against the 1 per cent. VAT own resources limit, which puts us in a strong bargaining position. The Common Market has spent more money than it has, and it is running out of cash. Under the negotiations which are continuing, the Government propose, subject to limitations, to increase the funds available, not by increasing the own resources limit, which the House has not had an opportunity to debate, but through an intergovernmental agreement. That would provide additional money over and

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above the amount which is covered by the limit which the treaty imposed and which the House by implication accepted. That is a worrying development.
In considering the Chancellor's statement, we must ask whether we wish to spend more money on support for agriculture, especially support for French farmers, rather than on other areas of public expenditure where there have been cuts. I am not convinced that adequate consideration has been given to that increase as against the cuts which have taken place. Therefore, I ask the House to pay attention to that matter, and the Government to take action on it.
We are told that the intergovernmental agreement will be subject to a guarantee of agreement on budgetary discipline. It is a question not merely of mechanics, though they are important, but of the allocation of resources. We are told that Common Market expenditure on agriculture is not to increase as fast as expenditure generally. I have yet to hear a convincing argument that we should spend more on agricultural support in the Common Market. The Common Market has accumulated vast surpluses of agricultural products. That is extremely wasteful. It is difficult to see how the guarantee of budgetary discipline will work when the system of agricultural support is open-ended. We must consider the proposals carefully. It is extremely important that the House should have an opportunity to express views on them before a final decision is taken.
I turn to the related question of the aid programme, which has been a matter of controversy during the past 24 hours and, indeed, for longer than that. I am worried that we are accumulating huge surpluses at considerable expense. I tried to get figures for the cost of storage. The annual cost for cereal items is about £35 a tonne—that is probably a minimum figure. It is doubtful what will happen to those surpluses. They may be sold to the Russians at a greatly reduced price. We must consider whether it would reduce public expenditure if, instead of storing those surpluses indefinitely, we shipped them overseas. We may save money that way, even allowing for the cost of transport. A charitable organisation quoted the price of transport at £40 a tonne in a 10,000-tonne cargo ship. That is not the cheapest way to transport goods. If the surpluses were transported in a cleaned-out super tanker, it would be cheaper. On an annual basis, the cost of shipping surpluses would be less than the cost of storage.
I am worried that there is not sufficient co-ordination between the Foreign Office, with its aid programme, and the Ministry of Agriculture. There is scope for savings in public expenditure while meeting the understandable anxiety expressed throughout the country about aid to developing countries.
Watching the television, it is easy for all of us to feel an upsurge of emotion. It is much more difficult to fight the battle for a more rational long-term policy on aid and agricultural surpluses. The problems of the Third world will not go away. It is often argued that shipments of grain will put local producers out of business, but there is no way in which people in many of those countries will ever be able to pay for grain on a commercial basis. The overall picture is very worrying. It requires careful analysis and co-ordination among Government Departments which, alas, does not seem to be happening at the moment.
The ambiguity of the Government's position on aid in the past few days has been unfortunate. It is very odd and
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most worrying to be told that it all depends on the decisions of the Foreign Secretary and what other cuts he decides to make. As we all know, the Foreign Office has a very small budget. Unlike the Ministry of Defence or the Department of Health and Social Security, it cannot lose huge sums and barely notice. As soon as the Foreign Office is caught by the cuts, it is in a very difficult position. If it is to maintain its basic tasks of diplomatic representation and so on, it has to cut some other item. It may be the overseas aid programme or the BBC overseas service, on which the House has expressed clear views in the past.
I believe that there is a clear case for the Treasury and the Government in general to distinguish the main functions of the Foreign Office from overseas aid and other items. I strongly support the Chancellor's efforts to cut public expenditure, but unless such a distinction is made those efforts may lead to some very foolish decisions. I hope that progress can be made in co-ordination between Departments and the assessment of priorities.
On a quite different subject, the Government seem to be making greater efforts and assessing the priorities correctly. I refer to drug abuse, drug trafficking, and so on. I am glad to see that in this case the Government are not making cuts but spending money to tackle a problem which is a very great danger to this country. One has only to visit the United States to be aware of the constant fear of many parents that their children may become addicted to drugs even at school at the age of 10, 11 or 12. So far, we have managed to avoid that, but we must not underestimate the real danger to our society.
I therefore welcome the references to these matters in the Queen's Speech and the reasonable co-ordination that there seems to be between the many Departments involved, including Customs and Excise, the Home Office, the Foreign Office and the DHSS. There is now considerable activity in all those areas. I am glad that the Chancellor has confirmed as permanent the 60 additional staff checking the illegal import of drugs and has indeed provided for a further 100. That is a great advance. I had four years' experience in charge of Customs of Excise and I know that it does a magnificent job, but it needs the additional resources. At the Foreign Office, too, more is being done. There is now a Customs officer posted in Pakistan and the Foreign Office is spending £1 million over a period of years trying to persuade people in Pakistan not to produce the raw material that forms the basis of narcotic drugs. The Home Office, too, has taken action. The Home Secretary has said that in future he will not parole people sentenced to more than five years for drug offences and that he proposes to introduce a sentence of life imprisonment. That is absolutely right for people convicted of drug trafficking. More resources are also being made available in the DHSS.
All those developments are good and show that the Government are moving in the right direction in their increased preoccupation with the problem. Nevertheless, I do not believe that the scale of the operation is yet right. The value of recent Customs hauls is far in excess of the amount being spent to try to prevent the import of narcotic drugs. Since the beginning of this year catches have included cannabis with a street value of £20 million, cocaine with a street value of £3 million and heroin with a street value of £11 million. Those sums, which would go into the cash flow of the people involved in the traffic:, are vastly greater than the £1 million being spent to deter

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people from growing the raw material and the other sums allocated to prevent drug abuse. A single haul may be worth £3 million. It is fine to have a further 160 Customs officers doing a magnificent job, but the cost of that is far below the value of a single haul seized at the east coast port near the constituency of my right hon. Friend the Member for Cambridgeshire, South-East (Mr. Pym). The Government are moving in the right direction, but I am not convinced that co-ordination and the assessment of public expenditure priorities are yet quite right.
In all three areas—the development of the common agricultural policy and financial discipline in the EEC, overseas aid, and the prevention of the import and abuse of narcotic drugs — more co-ordination and, in many cases, more finance are required. On the broader issue, I hope that once the Select Committee has reported we shall be able to discuss macro-economic policy, as we traditionally do. In this debate, however, I believe that it is right to bring those three issues to the attention of the House, to encourage the Government when they are going in the right direction, and to point out the error of their ways when they are going down the wrong path.
6.57 pm
Mr. Richard Wainwright: Liberal Members fully share the view of the right hon. Member for Worthing (Mr. Higgins) that the Chancellor's response on the vital question of overseas aid has not been good enough. I hope that the Leader of the House will be more responsive when he winds up the debate. In a series of written answers Secretaries of State have told the House how they intend to allocate the bulk of the sums allotted to their Departments in the autumn statement, but the Government have not told us their intentions about overseas aid. It is important that this issue should be taken up.
For a number of years I have also fully shared the view of the right hon. Member for Worthing that the form of the autumn statement is inadequate and that the House should request a green budget providing a more comprehensive picture of the state of the economy and Treasury thinking in advance of the Budget. All the matters that need not remain secret until Budget day could then be properly aired and discussed throughout the country, led by debates in this House.
I end this catalogue of agreement with the right hon. Member for Worthing by sharing his hope that, in considering the timing of the customary debate on the autumn statement, the Leader of the House will give the Select Committee on the Treasury and Civil Service the opportunity to assist the House by preparing with its usual promptitude a report on that very Complex and difficult document.
The complacency of the Chancellor's autumn statement, to which many Members on both sides have referred, has been widely attributed to a supposed desire to soothe and reassure investors before the flotation of British Telecom and to do nothing which might upset that enormous operation. There may be something in that, but I believe that two other important factors contribute to the pronounced smugness of the autumn statement.
First, this complacency reflects the fact that the Chancellor knows that he has nothing to fear from the Labour segment of the Opposition, and that was made
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crystal clear this afternoon. He knows that he can get away with it, as the Conservative party did at the 1983 general election, very largely because of the lack of firm and convincing opposition from the Labour party. That smugness is also due to the fact that the tasks that the Chancellor chooses to set himself are substantially irrelevant to the plight of our economy. He is playing a game with targets that may give him satisfaction but do not belong to the real world. He fixes his eyes, at present with great satisfaction, on the state of the money supply and the prospects for the public sector borrowing requirement. Both of these are, from time to time, important indicators for a Chancellor of the Exchequer, but, as the supreme targets of economic policy, they are wholly unsuitable. In our view, the Chancellor should have as his targets the three main aspects of the economy, which are the growth of GDP in money terms, the rates of interest, and the sterling exchange rate. For a Chancellor to repeat continually the idea that he does not need to have a policy or targets for the sterling exchange rate is the depth of unreality. We need targets that, among other things, have a direct and manifest relation to the rate of unemployment.
As to policies aimed directly and specifically at relieving the unemployment problem, but with other benefits as well, I draw the attention of the House to some conclusions in the recent report of the EEC Commission to the Council of Ministers. It is an annual report, published only a fortnight ago, and traditionally it reports on the economic situation throughout the Community and suggests economic policy guidelines for member countries. As one would expect from its source, the report is prepared by people who are keenly aware of the dangers of reviving inflation, and who are in no sense madcap expansionists airing some dogma of their own. They believe, and make it clear, that the time has come for some expansion and selective reflation in the major economies of the Community.
For instance, referring to the growth rate — and incidentally without reference to the particular complications of the coal strike, which is affecting our growth rate —it says:
"when combined with measures to increase the trend of growth of potential output, an actual growth rate of 3½ per cent. to 4 per cent. might conceivably become possible for a period … With a more favourable pattern for economic growth, it should be possible to achieve a substantial annual growth of employment … Programmes of public investment should be strengthened, especially in countries whose public finances have been adequately consolidated and where the construction sector is underutilised."
That last point is clearly addressed to the United Kingdom, among other countries.
At the moment, a large number of important industries —industries that we cannot forgo—are in great danger of serious contraction because they have such slender order books. It is nonsense that industries that require teams of skilled workers accustomed to doing complicated work as teams and industries that require a high degree of technical management should be left in the doldrums, contemplating widespread redundancies because of an unnecessary shortage of orders from the public sector.
There is a danger that the House may share the Chancellor's complacency about housing, because so great were the fears that he might get away with an appallingly large cut in housing finance that there has been comparative relief at the announcement that the cut is to be just £65 million for next year. However, that in itself

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is a shocking reduction in a crucial sphere of public investment. The National Home Improvement Council reports that 4·3 million dwellings in England are in a poor condition and need repairs costing on average £2,500 per house. That is 21·7 per cent. of the housing stock in England; and there are many more examples and further figures for Scotland and Wales. I quote that simply as an example of a crying need in the economy that can be met at a low import cost by skilled people who are available but who are in danger of being left idle.
What perpetually seems to pervade Government statements is the idea that in some way public investment should be sharply differentiated from investment in the private sector. I do not see why that should be so, because the overwhelming consequence of an increase in public investment is orders to the private sector. There are few parts of the public sector that construct their own capital works or attend to their major projects in-house. The overwhelming amount of public investment directly means orders for the private sector. Therefore, I do not see why there should be doctrinaire stigma attached to public investment, especially by the Chancellor, who seems to rejoice in private sector investment flourishing and public sector investment declining.
The aspect of the autumn statement that we criticise most is the repeated hammer blows at public sector spending. Implicit in the words of the statement is that in education, the housing stock and many other spheres of local government, there will be reduced capital expenditure. In paragraph 1.43 the statement says:
"The rapid growth of private investment is likely to be offset in part by lower public investment".
That is poor stewardship, as well as an unnecessary addition to the risks of even higher unemployment.
The assumed rate of unemployment for 1985–86 in the Government's publication must mean that, in addition to the high cost of unemployment benefit and of PAYE forgone, we are losing as a community at least £20 billion worth of goods and services that could have been produced by the unemployed. For the Government, with apparent equanimity, to instruct the Government Actuary that he must account for at least 3 million unemployed for the financial year 1985–86 is a dreadful admission of failure.
I despair most at the Government's unwillingness to accept any real responsibility for the unemployment position. It is against that background that my right hon. Friends and I, and our friends in the SDP, will vote for our amendment tonight.
7.9 pm
Mr. William Cash: The economy will be judged not by what we say about it but by its performance. The words "output" and "productivity" do not merely mean producing things, nor just a return on capital or labour. They contain elements of all those but require the added yardstick of efficiency and effectiveness. In addition, innovation, competition, marketing, advertising, production engineering, quality control and design, the practical application of new technology, including information technology, are all part of the general package of effective output and productivity. But human motivation and the enthusiastic interest of those at every level in British industry surely remains at the centre of gravity of wealth creation, even in the age of robotics.
Output and productivity of the highest quality of goods and services which people want and need and buy so that
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profits can be made to finance new investment, pay justifiable wages and create more growth, combined with the remarkable and successful policy of the Government in containing inflation, must be a first priority in the economy today, accompanied by the incentive to achieve it.
Money to pay for reasonable public expenditure and wages and to help those in need cannot be conjured out of thin air, nor can companies, including those which have been privatised, survive and prosper unless we are competitive and successful in world markets with a firm domestic base. That means that we must sell more and better products and services than our rivals abroad, including the United States and Japan. That is a matter of great importance in my constituency of Stafford which includes important exporting companies such as the General Electric Company, British Reinforced Concrete, Universal Grinding and Evode.
What we lack in the availability of those natural resources which we have to import we must make up for in the quality of what we produce and in keeping to delivery dates, in reliability and design. We no longer dominate the routes and rules of international trade as we did in the days of empire. Pure free trade was then more of a possibility because we exercised control in so many parts of the globe. Today there is much more of a tightrope for British industry. We live by what we sell, but mere output or productivity, unrelated to quality and to what is needed or in high demand, will not enable us to pay our way in the world.
That brings me to the connection between incentives and motivation and the efficient production which must lie at the heart of our economy. We have a responsibility to future generations to develop our longer-term economic strategy on a basis which maximises the advantages of North sea oil but does not wholly rely upon it.
The skills, labour and inventiveness of British workers and management in businesses large and small are no less capable of being stimulated and revived today than ever before, but they need personal motivation and tax reductions throughout the work force from top to bottom, from the shop floor to the board room, so that there is an enthusiastic, real and personal interest in producing and selling high quality goods here and abroad. Therefore, I greatly welcome the Chancellor's determination to stay on course and to keep inflation down while allowing room for further tax reductions so long as they go across the board.
We often look across the world to Japan. We blame our management and exporters and the world recession but Japan too imports a vast amount of its manufacturing materials. Japan's level of advanced technology and use of the microchip put us to shame. The microchip, with which labour has to compete in the present day, can be a potent source of new, small and larger businesses unless we allow the Japanese to dominate the market entirely. We must encourage mobility in our work force with incentives to train and to acquire skills in that sphere.
Education for schoolchildren and for school leavers and retraining schemes in the new technologies are being provided by the Government. The problem is that too often the opportunities are not taken up, or we find that dreadful sense of pointlessness which characterises so many young people these days and which they seem to acquire at school.
Greater emphasis must be placed on communicating the practical value of those opportunities and schemes. We

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need to be less on the defensive and to acknowledge that we live in difficult times with a significant change, as in the 1840s, in the nature of our economy and employment. Over and over again in past centuries we have as a nation faced up to that challenge and won through. I have complete confidence that we shall do so again, providing that we give those to whom the challenge is ever present the incentives and encouragement which they need to make the challenge a reality, and, in so doing, reduce not only taxation but the deadweight of over-regulation. I say "over-regulation" because some regulation is necessary, but our tax laws must be comprehensively reviewed to put emphasis on the making of profits rather than losses so that we can produce financial advisers rather than tax avoidance experts.
I am glad to note that the Chancellor has tax reform in hand. We can and must look across the Atlantic and learn some lessons from the United States in that area. The sheer volume and complexity of our statute book, compounded by subordinate and EEC legislation, is in itself a disincentive to enterprise and the creation of small businesses.
We need a radical review of our legislation to make it more responsive to people and simpler to understand and to apply. There is simply too much of it, and we underestimate the impact that it has on our economy and on the cost that is involved for public expenditure and for public administration. What people do not understand they may be inclined to disregard. That has dangerous implications for the rule of law. The black economy is not a healthy development; it is enterprise driven underground. Nor do I subscribe to Truck Act perks such as substitution for real pay with freedom to choose what to do with it.
The sum total of our economy is the efforts of the people. If productive effort is rewarded by lower taxation and the creation of new businesses, with lower interest rates, buttressed for the time being by North sea oil as we move from the older to the newer industries and services and invest in training and skills relevant to future employment, we could emerge by the end of the decade with lower unemployment.
With lower inflation and lower and simpler taxation, the pay packet will be larger and there will be a constant reminder of the relationship between pay and effective productivity and output. Of course, there is a real connection between wages and inflation, but lower taxation throughout every level of industry is the key incentive to containing wages reasonably and to increasing profitability and competitiveness. Lower taxation means higher real wages for more people in more businesses.
We need to relate wealth creation to what people do and think at work. The Third world indebtedness and the world recession make that problem more acute and the need for a practical response at home becomes more important. We need to encourage in our schools and elsewhere a new attitude of mind towards work. We can and must restore the confidence of those in the economy who produce the wealth, and we must provide every incentive to make that happen.
7.19 pm
Mr. Tony Lloyd: Perhaps I have one thing in common with the hon. Member for Stafford (Mr. Cash). I, too, have a GEC plant in my constituency.
Conservative Members' speeches have given the debate an air of unreality. Earlier, I listened to the Chancellor of the Exchequer's almost disgusting complacency about the state of the British economy. He seemed to be saying that, instead of our being in the midst of the most profound economic crisis to have occurred in the lifetime of almost every hon. Member, we were on the verge of the dawn of a new British economy. If the right hon. Gentleman is right, he is talking about an economy that exists only in very selective parts of the country or just in his own mind. If he came to the north-west or to the Manchester area, about which my hon. Friend the Member for Manchester, Central (Mr. Litherland) has spoken, he would find, for example, that one in three of my male constituents are out of work. Half of those men, or some 17 per cent. of the total, have been out of work for more than a year. In Moss Side, one out of every two adult males is out of work. They do not believe that this economy is on the mend and they show no sign of believing that there is a bright future for them.
The hon. Member for Stafford spoke about the disillusionment of youth, but if a generation of children is brought up with literally nothing to look forward to—not even the end of the day, because they go home to poverty and to a future without prospects—it is not surprising that they should show the signs of apathy and disenchantment that he saw in our schools. That is the reality for many children in our inner-city areas and it is not confined to the north of England.
But the tragedy for areas such as the north is that they have become increasingly marginalised within the economy. We are now treated as economic residuals. When Conservative Members say that Opposition Members have no monopoly on compassion for the unemployed, their words have a hollow ring. Whatever their views may be about the intellectual undesirability of unemployment, we at least recognise it as something that concerns people and as something that therefore conditions the policies that we are determined to put into practice. This Government's policies do not recognise in any way that unemployment is a problem. It is something to be regretted and that can be calculated by looking at the number who are out of work.
In my area we do not even mind so much about new jobs. Often we would like simply to hang on to the jobs that we have. My constituency once housed the biggest industrial estate in the world, Trafford Park. Even now, under this job-creating Government, 19 jobs a day are being lost from that estate. Indeed, many more jobs have gone during the past four or five years.
Since coming to power, this Government have been caught up in the economics of prejudice and lack of choice. They have pretended that there was only one way of governing an economy and that was a way that did not allow for any social choice. We were told in 1979 that inflation was the major problem and that it could be solved by public expenditure cuts. We were also told that tax cuts would revitalise the British economy. By cutting public expenditure and squeezing the economy into abysmal

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poverty of opportunity, the Government crushed inflation but at the same time discovered that there was no room for those tax cuts.
Perhaps I should congratulate the Government on their learning facility, because we now hear that they can no longer justify talk of tax cuts as an automatic solution, albeit they are still part of the Chancellor's package on a much more modest scale. Instead, we hear exhortations about wage cuts for those who already bear the brunt of the economy.
At GEC in my constituency 200 people are on strike, many of them because they are paid about £80 a week. That is a disgrace, given the work that they do. Their wages do not bear comparison with those in similar industries in the area and they have not had any pay increase for two years. If the idea of wage cuts worked, that factory and factories throughout the north, where labour rates are lower than in the south, would be bristling with economic activity, but as my hon. Friends the Members for Liverpool, Walton (Mr. Heffer) and for Manchester, Central have said, that is not happening because wage cuts avoid the real question. It is interesting to note that the managing director of GEC, Lord Weinstock, had an income of more than £500,000 last year. Although his work force had no increase, he received an increase in excess of 15 per cent.
I would be the first to agree about the need for a new Beveridge report, but we also need to look at the real problem of the maldistribution of income and wealth in our society, in which the disgustingly rich exhort those on poverty wages to take even bigger cuts. That is the reality behind the Chancellor's exhortations to cut wages.
The Government do not recognise the real problems, or their total failure to provide demand within the economy. Even the Manchester chamber of commerce has come out with a report suggesting that about 44 per cent. of the firms sampled had a capacity utilisation of less than 90 per cent. Clearly, nearly half of the firms are waiting for the Government to put some demand back into the economy, as that would then produce jobs as well as goods and services for consumption by ordinary people.
Instead, the Secretary of State for Employment yesterday said that the level of demand was extremely enouraging. He said:
"The problem is the capacity of British industry to compete with overseas suppliers and to win back demand."—[Official Report,12 November 1984; Vol. 67 c. 400.]
Ironically, I might agree with him, because as the Government have destroyed many firms during the past few years and as there have been record bankruptcy levels, there will be real problems about supplying demand when demand increases. The would-be suppliers have been destroyed through the Government's deliberate actions.
The Government do not recognise the problems caused by the export of capital. In the first six months of this year, those great patriots in the City exported more than £7 billion. Not one penny of that will go directly towards creating jobs in the United Kingdom or towards producing plant, machinery or factories. Conservative Members talk about the need for investment, research and training. As I believe my right hon. Friend the Member for Cardiff, South and Penarth (Mr. Callaghan) said, manufacturing investment is about 26 per cent. below what it was when the Conservative party took power. Yet if we were to believe this Government and their glowing prospectus, the confidence of industrial investors should be sky-high.
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However, that simply is not so. Often, investment in manufacturing industry is only made to enable it to tick over. We are seeing disinvestment and reinvestment overseas. That is disastrous for this country's manufacturing base.
There is an appalling level of investment in research and development, and the situation has been made worse by yesterday's announcement by the Minister for Information Technology. He has said that there is to be a cut in support for research and development projects. Indeed, he said:
"no further application will be accepted for:
research and development projects from individual firms on standard support for innovation terms
development and investment projects under the microelectronics industry support scheme and the fibre-optics and opto-electronics scheme and
application, development and installation projects for flexible manufacturing systems and robots."
That research and development is needed. Ironically, because the scheme was successful the Minister has said that applications
"will be processed within the limited funds still available."—[Official Report,12 November 1984; Vol. 67 c. 87.]
Thus a cost constraint is being imposed on those valuable schemes at a time when we should be guaranteeing more money for them.
There are skill shortages even in the Manchester area. Over half the firms sampled said that there was a shortage of skilled and other labour. That is happening even in depressed areas. In areas of demand the shortage is much worse.
Since 1980 under this Government the north-west, which once relied upon the engineering industry, has lost nearly 20,000 engineering jobs. A report by the four county councils in the area refers to a mass exodus of jobs from the area. They prophesy that between now and 1987 over 100,000 people will be forced to leave the region, not because of a desire to get on their bikes, but simply because they will be driven out of the area in which they were born by the policies, lack of compassion, lack of understanding and lack of integrity of this Government when representing the interests of those who want a job. I am talking of those who have given a lifetime of work and wish to continue to work and of young people who see no future under this Government.
7.32 pm
Mr. Julian Critchley: I enjoyed the robust speech of the hon. Member for Liverpool, Walton (Mr. Heffer), although I fear that he will find my speech to be both wet and windy. However, it will be made with all the authority, not of a former officer in the Guards but of a lance-corporal in the King's Shropshire light infantry.
At least all of us who have spoken this afternoon will have escaped the slings and arrows of the scene writers upstairs, all of whom have been scribbling in another place. Not for the first time have the heavyweights on the two Front Benches been upstaged by the Earl of Stockton, the last of the great men. I did not hear his maiden speech, but, from what I hear of it, it should be required reading, for my Front Bench at least.
If nothing is done to reverse the inexorable rise in unemployment, the United Kingdom will be heading either for apathy or for social disruption. Let me place that at its lowest for the benefit of some at least of my hon. Friends. Unemployment is a fertile ground for the

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advancement of revolutionary Socialism. Unemployment is not simply a social or economic matter, but a political one of the utmost importance.
I have no wish to re-examine the Government's economic policy since 1979. I have no wish to go over all that awful dead ground, save to say that we have heard much less about monetarism than we used to hear. Monetarism was, of course, a policy which seemed insane when it was not hypocritical, and hypocritical when it was not insane.
I do not wish to minimise the difficulties ahead, but far too often the Government have given the impression—I use those words carefully—that they do not sufficiently care about the unemployed or about the plight of the less prosperous regions of the country. That impression has been strengthened in recent weeks by the Chancellor's washing of hands—for instance, on "Weekend World" a fortnight ago.
The Chancellor should look again towards the American example. He may still believe that the only role for Government is the removal of controls and allowing markets to work better, yet he knows that the Americans have done far better than us. This, he believes, is due to the greater flexibility of United States labour markets and greater mobility. There may be some truth in that. American workers are more mobile, possibly because one part of America looks much like another, but there is more to it than that. In America the money supply was squeezed between 1980 and 1981 and 1 million jobs were lost. Constraints were subsequently relaxed and unemployment began to fall swiftly without a return to inflation. Would that we had done half as well.
The Chancellor's assertion in the July debate that the Government's economic policy had been "vindicated by events" was the most remarkable statement since Hitler was accused of having missed the bus. The Chancellor rattled out a series of figures, but by sleight of hand he was careful to start from the second quarter of 1981 and not the second quarter of 1979. He left out the sad and sinister story of the radical decline in Britain's share of world trade. The balance of visible trade, excluding oil, has deteriorated by nearly £11 billion since 1981. The Times this morning describes the Chancellor as a "conjuror". From now on, let us have more hats and fewer rabbits.
What should be done? There is no easy way. A foot flat on the accelerator would bring about a financial and trade crisis and ensure a return to inflation. However, to do nothing more than is proposed would be to risk — I quote Lord Macaulay—
"The wreck of laws, the confusion of ranks"
and the
"dissolution of the social order."
I have two modest suggestions to make. We must have a modest further increase in Government spending. A restructuring of the national insurance contributions is needed so that they bear less heavily upon the lower paid, the elimination of national insurance contributions on new jobs, and a 1 per cent. overall cut. The cost of that would be £600 million over two years. Secondly, there should be additional Government spending on capital projects of about £900 million.
Speaking at the CBI conference, Mr. Roland Long, of International Harvester, said:
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"The sad decline in manufacturing and rise in unemployment has been — linked and together they constitute the price which has to be paid for the Government's success in the reduction and control in inflation."
Yet some of those close to the Prime Minister still hanker after zero inflation. God preserve us from them. Mr. Long continued:
"and there will be no substantial fall in the number of the unemployed without the restoration and regeneration of manufacturing industry."
Amen to that.
Does the Prime Minister, after her many successes, wish to go down in history as the leader of the Conservative party who breathed new life into the old jibe that the Tories are the party of unemployment? I should not like to think so.
7.37 pm
Mr. Allan Rogers: I do not know whether I need say anything after the speech by the hon. Member for Aldershot (Mr. Critchley). The case that needs to be put against the Chancellor and this sterile Government has been ably made.
I listened with interest to the speeches by right hon. and hon. Members on the Government Benches. We agree on some issues at least. I agree in particular about the need for drug control. More money should be spent on that important fundamental problem. It is one of our gravest dangers. I recently visited Athens and discovered that the Greeks face the same problem. It is becoming out of control in western Europe and more resources should be devoted to it.
The Chancellor's statement yesterday is fundamental to today's debate. It demonstrates that the Government have no solutions to offer. In the limited time available, I want to discuss certain parts of the Chancellor's statement and the prospects for the future of the economy.
Like my hon. Friends the Members for Manchester, Central (Mr. Litherland) and for Stretford (Mr. Lloyd), I wish to emphasise that when all the esoteric arguments in the Chamber have come to an end, the issue of unemployment is about the people in our constituencies. For those hon. Members who represent the fringe and marginal areas of Britain, unemployment is a severe problem.
I held a surgery last Saturday morning at the Lewis Merthyr club, Porth. The club is famous in south Wales, because it was the liaison centre of the sit-down strike of miners from the Lewis Merthyr colliery. They tried to save their jobs by locking themselves underground. A man of about 55 or 56 came to see me at my surgery. He was an ordinary chap, with nothing pretentious or special about him. He had served his country for five or six years in the Army, had then taken a job and raised a family. While talking to me he began to cry, which I found embarrassing. I am sure that most hon. Members would be embarrassed if a man cried. His anguish was caused by the fact that his 25-year-old son had never worked and had no prospect of working. The domestic tensions in the family had become too much for him. He was an ex-soldier who had fought, and perhaps faced death, for his country, yet he found it difficult to deal with unemployment in his family, and he cried. I had to tell him that I could do nothing for him, and the tears were not far from my eyes.
The same problem is faced by almost 40 per cent. of my constituents. I can weep for them, but I cannot offer any solutions. If the Labour party were in power I would

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want it to take action. I only hope that the Government can bring themselves to do something for the son of that 55-year-old man, who could only cry. The man showed me a bundle of envelopes that had contained answers to job applications by his son. There has been a spirit among some honourable, or perhaps less honourable, Conservative Members that if a fellow was on the dole, he was lazy. I remember one Conservative Member saying, "There is no problem. Get on your bike and get a job somewhere else."
My hon. Friend the Member for Stretford suggested that his constituency might lose 100,000 people. Where will they go? South Wales exported people in the 1920s and 1930s to Slough, Reading, Coventry and the other new areas. But those new areas are now facing 20 or 30 per cent. unemployment. Where will our gipsies go now? Where will my gipsies from the Rhondda go? They have nowhere to go.
People talk of the miners' strike, the problems in the mining industry, Scargill, the boot boys, and so on. I do not approve of the mindless violence on the picket lines. Some people react with tears while others react in another way. There is frustration and anger among the people, and the Government must address themselves to that problem. They are frustrated and angry because they have nowhere to go—they have no hole to run to, there is nowhere that they can hide. The miners will be out of work. There were once 53 pits in the Rhondda, but only one remains. The level of unemployment among males in my constituency is horrendous. If they are given jobs, they will work. They worked hard enough during the 1914–18 war and the last war, when they sweated to produce energy. They are prepared to work now if the jobs are available.
Never before have I known people to strike for nine months and subject themselves and their families to enormous hardship for nothing. They are certainly not striking for money. I know a chap of 54 or 55—Ron Windos from Tonypandy. I asked him last week why he did not take his redundancy money. I asked him how much he would receive. He said, "With my service in the pit, I would get about £27,000 or £28,000." I said, "Why not take it?" He said, "That would be giving my job away." That is how the miners see the strike. They are striking not for additional pay or bonuses, but because they are concerned about jobs.
If the miners could get out of the pits and work elsewhere, they would so so. My hon. Friend the Member for Ogmore (Mr. Powell) comes from my valley. We do not know of one miner who wants to go underground. Any of them who could find a decent job out of the pits would do so. There is nowhere for them to go, and that is the shame of the Government. Are they a Government for people or for profit? The Chancellor this afternoon spoke about interest rates, juggling with money and finance. He used City jargon. He did not once mention people. It is no wonder that the people of Britain are becoming angry.
It used to be said that the Tory party was happy only if there were two people chasing one job. I was brought up on that dictum. The hon. Member for Aldershot said that he hoped that the Tory party would not again be regarded as the party of unemployment. I hope for that also. I want the Government to succeed for the sake of those whom I represent.
There has been a commonality of interest on issues such as the control of drugs, because that affects everyone and
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his children — my children, the Queen's children, anyone's children. When unemployment becomes the concern of the middle and upper middle classes, they might address themselves to that problem. I know that I am doing a disservice to many Conservative Members who are now attacking the Government because they view unemployment in the same light as I do—a scourge. I only hope that the Government will change their mind.
The Government's record in Wales is appalling. Since 1979 unemployment has risen from 80,000 to 180,000 —from 7 per cent. to 17 per cent. The number of jobs, has decreased from 1,030,000 to 912,000 and in the manufacturing sector from 308,000 to 212,000. The number of employees in Welsh manufacturing industry fell by about one third between June 1979 and June 1984. More than 114,000 redundancies have been confirmed.
If the Conservative Government are not concerned with people, they might be concerned about liquidations, and over the past five years there have been about 52,000. Unfortunately, it is not possible to give separate breakdowns for England and Wales. That is an abysmal, shameful and shabby record. It is one from which no Government could derive pride. This is a Government of corrupt farmers selling off the seedcorn of the nation. I am distressed that the Government are eroding and destroying the tax base of Britain and that we shall be reduced to a level from which we shall never be able to recover.
I am not especially concerned about revolutionary Socialism arising from the wasteland that the Government are creating; I am concerned about the Fascists who rise out of unemployment. History demonstrates that out of unemployment rise jackbooted Fascist thugs. Recent history in Germany and Italy bears that out. I am concerned about Fascists, not revolutionary Socialists.
7.51 pm
Mr. Stephen Dorrell: The speech of the hon. Member for Rhondda (Mr. Rogers) was one of great eloquence and passion. His passion has been aroused by genuine concern about the plight of his constituents, many of whom suffer from unemployment. I, too, shall concentrate my remarks on unemployment. The hon. Gentleman and I share a concern for unemployment that is shared also by many of those who have spoken in the debate on the Gracious Speech.
There is no doubt in the minds of the majority of hon. Members, or in those of the majority of our constituents, that the key issue on which the Government's record and our record as hon. Members in this Session will be judged, is the way in which we shall have tackled the problems of unemployment.
We have heard much about the problems of youth unemployment during the debate on the Gracious Speech. We have heard about school leavers who spend a year in the youth training scheme, feel that they are qualified to take a job—qualified for life—and find on leaving the scheme that there is no job for them. We have heard from the hon. Member for Rhondda about the 50-year-old who finds himself out of work, cannot find new work and discovers that, under the benefit system, he will be more or less destitute after one year of unemployment. He learns that the state will offer him no visible means of support after 12 months. My constituents often tell me that the benefit system is too generous. I tell them that if a person has been out of work for 12 months and has more than £3,000 in savings, he will be given no support by the state.

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That comes as a surprise to many. Many of those who are aged 50 or more have no realistic prospect of work and there lies a concentration of the problem.
The hon. Member for Rhondda spoke about the concentration of unemployment in the regions, and he was right to do so. It is fitting that he should do so on the day when the Earl of Stockton made his maiden speech in another place. Unemployment in the regions was the issue that he made very much his own during the 1930s and many of his speeches of that period bear re-reading. All these issues come together in their most potent form when we consider the impact of unemployment on the coloured population. Some hon. Members may have seen a "Newsnight" programme that was shown a fortnight ago. It is staggering that 93 per cent. of coloured school leavers in Bradford this year have yet to find a job.
Mr. Terry Davis: What colour?
Mr. Dorrell: That is a reasonable question. I am talking about the Asian and West Indian communities, and especially the Asian community in Bradford. Hon. Members have addressed themselves to the issue during the debate and it is right that they have done so.
This session is critical if the Government are to be remembered as the Administration who did something about unemployment. If we allow the Session to pass and we arrive at this time next year without having taken real action to tackle unemployment, all the other measures in the Gracious Speech will have been long forgotten and, instead, the Session will be remembered as the opportunity that the Government failed to take to reduce the problem of high and dangerous rates of unemployment.
What sort of action can the Government take to tackle the problem? I can do no better than refer to the document that my right hon. Friend the Prime Minister has taken to referring to recently, the 1944 White Paper on employment policy.
Mr. Terry Davis: Has the hon. Gentleman read it?
Mr. Dorrell: I have indeed. My right hon. Friend the Prime Minister has referred to the passage in the White Paper that states that jobs are not created solely by Government action. Jobs are created by vigorous private sector entrepreneurs and there is no argument about that on Conservative Benches. But that is not the only statement in the White Paper. Its importance lies in the contents of the first paragraph, which explain that post-war Governments will regard themselves as committed to the maintenance of full employment. The historic importance of the document can be attributed to the fact that it sets out three preconditions for succeeding in maintaining full employment. Two of the preconditions will cause no stirring on the Treasury Bench. The White Paper observed that full employment would not come if we did not pursue policies consistent with sound money and efficient labour markets. There is no argument on the Conservative Benches about that.
If the White Paper is set in its historical context, its remarkable feature is not its emphasis on the importance of sound money and efficient labour markets. The Governments of the 1930s were not conspicuous for their disregard of those priorities. It is remarkable for drawing
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attention to a third element which was regarded as an essential precondition to full employment, the commitment which was placed on Government to manage demand to maintain a level of full employment.
It seems that "reflation" has become a dirty word and I shall not quibble about that and whether it is the word that should be used. If demand is managed, that must mean that the Government accept an obligation in some circumstances to reduce demand if there is a danger of overheating—perhaps that is not the primary concern at present—and in other circumstances to increase demand to maintain the principal objective in the first paragraph of the 1944 White Paper, the maintenance of full employment.
Many have argued that conditions are now so different from those of 40 years ago that the strictures of the 1944 White Paper have become irrelevant. Those who advance that argument say that we need to find different remedies. Have the proponents of that argument thought through what they are saying? I cannot see any important difference which renders irrelevant the cures which were advocated in the White Paper. Some of my hon. Friends say that new technology destroys jobs and that its introduction means that it is impossible for us to use traditional techniques to create full employment. It is true that new technology, like the generations of machines that went before it, is justified because it saves labour.
No manufacturer ever put in a new generation of machinery if it did not hold out the prospect of producing goods more efficiently than before. That does not set the new technologies apart from the previous generation of technologies. Going back to the industrial revolution, the only thing that could set them apart would be if there were evidence that the new technologies increased productivity and therefore reduced job opportunities faster than the generations of machines that went before.
My right hon. Friend the Chancellor of the Exchequer yesterday published evidence which showed that productivity is improving not faster than in previous years but more slowly. If those machines are the threat to employment that they are sometimes held out to be, is it not passing strange that as they are introduced the rate at which we increase our productivity is below rather than above its historical trend? Furthermore, one does not have to look at theoretical arguments about productivity rates; there is clear evidence in the experience of the past two years, here and abroad, that adequate growth creates jobs.
The experience of the United States has been mentioned, but we do not even need to look that far afield; we can look at our experience with our modest growth rates, because even in Britain, the relatively modest growth rates that we have enjoyed since 1981 have created jobs.
Our slow rate of job creation in recent years has not been the result of the new machinery, the new technology that is supposed to put us in such a different world. It has been the result, in my view, of the slow rate of growth and not the result of any change of conditions that invalidates the prescriptions of the 1944 employment White Paper.
If it is not the new technology which renders the cures of the 1944 White Paper irrelevant, we move on to the argument which is even more improbable that the problem today is not one of lack of demand and, therefore, is not a problem of demand management.
If it is not a problem of lack of demand, that would be news to some of my constituents, many of whom are

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employed in traditional manufacturing industries where output is 5 per cent. down on May 1979. It is said by some that that is not evidence of inadequate demand. If it is not that, what is it? Some say that it is evidence that wages are too high. Those people would do well to read the speeches of the Earl of Stockton in the 1930s, because right through the 1930s Neville Chamberlain said that wages were too high. Right through the 1930s, the experience surely was that action substantially to reduce wages led into precisely the deflationary cycle out of which so many of the speeches of that time were designed to push us. We all recognise that if wage increases get out of control and the result is inflation, that is damaging to economic progress and job creation, but that is different from saying that the solution to today's problem is wage cuts.
The question, surely, that my right hon. Friend the Chancellor and other Ministers must answer is not whether wage cuts would in some circumstances produce extra jobs, because we can argue for a long time about that. The more immediate question is whether additional demand introduced now in techniques espoused by the 1944 White Paper would produce extra output or extra inflation. That is the simple question that Ministers must answer.
Like many of my hon. Friends, my answer to the question is clear. I believe that my right hon. Friend can continue—as I argued in the Budget debate earlier this year and in debates before that—the process which his predecessor started before the last general election, not of radical expansion but of drip-feeding the economy into higher growth rates. As he decides whether he can do that, I ask him to consider the fact that as Chancellor he has the opportunity, whether by tax cuts Reagan-style or by spending increases Labour party-style—in his terms it is relatively immaterial whichever way he does it — to channel demand, but not into the odd sectors where there is evidence of bottlenecks. No one can surely argue that there is a bottleneck in the construction industry, and if there is none what then is the restriction on channelling some additional demand into that industry in the same way as my right hon. and learned Friend the Foreign Secretary did just before the last election?
As my right hon. Friend is considering his answer to those questions, I hope that he will be prepared at some time during the course of the next few months, as he develops his Budget strategy, to put away the textbooks and technical papers and ask himself, as a reasonable man, whether it is reasonable to argue that an economy with 3·25 million unemployed people and a low and stable rate of inflation is so hidebound by capacity restraints that it must retreat next year from the dizzy heights of an underlying 3·5 per cent. growth rate in the current year—disregarding the effect of the miners' strike—to the safe and familiar ground of a 2·5 per cent. underlying growth rate next year.
My right hon. Friend the Chancellor might like to heed the advice of Mr. Jack Kemp, a possible Republican candidate for the Presidential nomination in 1988, who is reported in yesterday's Daily Telegraph. Mr. Kemp is not famous in the United States as a Liberal, but when asked what he thought the new Reagan Administration would do about the economy he said:
"The mandate Reagan got was for Reaganomics—growth, not cutting the deficit. Cutting the deficit is what Mondale ran on."
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That is, perhaps, an interesting comment on the scene that my right hon. Friend would like to consider.
My hon. Friend the Member for Aldershot (Mr. Critchley) averted to the fact that today has seen the maiden speech in another place of my noble Friend the Earl of Stockton. I should like to conclude by reminding the House of a speech about unemployment that he made in the 1930s. He referred to Disraeli who said in a famous phrase that the keys of India lay not in Kandahar or Herat, but in London. So it is with unemployment. The keys of unemployment lie not in Durham or south Wales but in Downing street and Threadneedle street.
8.7 pm
Mr. Bryan Gould: I am glad to have the opportunity of following the hon. Member for Loughborough (Mr. Dorrell) because among other reasons, he has the curious distinction—if that is the correct way to put it—of being a former pupil of mine. At least in his thoughtful speech, with which I substantially agreed, he spared us what we have become far too accustomed to in recent years, and that is the experience of hearing Ministers at the Dispatch Box trying to justify and explain what has happened and what has gone wrong by the selective use of statistics.
In view of the complexity of our economy and the great panoply of statistics, it is by no means impossible for the diligent researcher, winnowing through all the available material, to come up from time to time with statistics that support almost any view. By the careful selection of base dates and the use of percentages rather than absolutes, comparing like with unlike and so on, Ministers no doubt feel that for the purposes of any debate they can produce figures and arguments which satisfy the needs of the moment. I doubt whether anyone in the House of Commons is convinced by that type of argument. We heard an excellent example of it this afternoon from the Chancellor.
First, it is easy enough to set aside those little sweepings of statistics on the margins, and to invite Ministers to confront the central importance of the maze of statistics — those about our output, trade and investment, and most of all those about unemployment. That has been done so often that even Ministers must know the truth and importance of those terrible figures.
Another way of rebutting that statistical sleight of hand is open to any member of our society who looks around him in Britain today, particularly if he is able, by virtue of foreign travel, to compare the way in which other societies are confronting similar problems. Inevitably he will conclude that Britain is poorer, scruffier and shabbier. It has failed to arrest its economic decline and has started to run out of faith, hope and confidence in itself. It has a society that is turning in on itself, demanding sacrifices from those least able to make them. It has a lower level of public services and it does things worse than other countries. After looking around the world, I find that it is a society that is almost a byword for failure.
That is the reality that lies behind the Government's false claims, the Prime Minister's vainglorious posturings and the Chancellor's complacency. It is a reality that Conservative Members know as well as Labour Members. That is why we are increasingly hearing a chorus of demands from Conservatives for a change in policy.
The "ship of state" is a familiar metaphor, but our ship of state, under its present command, is like an aging

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passenger liner whose paint is peeling and whose engines are belching smoke and on which we are heading for the rocks. On the bridge is the Prime Minister, the captain. She appears to be unaware of us. She is enjoying wearing the uniform. She is told by her mate, the Chancellor, not to worry about the impending disaster—the fact that we are heading inland instead of out to the open sea. He says, "Don't take any notice of the course that has been plotted or of the facts and figures that show that our speed and direction are leading to us running aground. We are, believe it or not, heading for the open sea, and the last thing we must do is change course, repair the engine or provide some more fuel."
The Chancellor says, "If we happen to run aground, there is an easy remedy. We have been using that remedy for five years now, and no one so far has been worried too much, at least on our side. The remedy is that, as we get into shallow waters and the disaster is impending, we merely jettison a few skilled crew and a few essential bits of equipment. We shall float off the sandbank—don't worry too much about it. The last thing you must do is listen to the creaks and groans from the shuddering ship, the cries of pain and the sounds of conflict from those on board." That is the reality of the Government's economic policy.
There is a growing realisation not just among Conservative Members but throughout the country—not least in industry—that the Chancellor is finally running out of options and excuses. I believe that the Chancellor senses that also, and that is why he is scraping the bottom of the barrel. He knows that his somewhat quixotic interpretation of success stories around the world, not just in America but in many diverse countries such as Australia, Sweden, Japan and Austria, will not convince many people. The Chancellor, however, persists in the unlikely argument that their success is due to real wages. He seems unaware of the fact that if he succeeded in convincing people that that is the course that we should follow, he would announce the final denial of hope and confession of failure.
The Chancellor's problem is that he continually says that any attempt to grapple with unemployment will be self-defeating. In his own terms, that is true, because he postulates a completely unchanged monetary polciy. As long as the Chancellor's monetary targets remain sacrosanct, there is no escape from increasing unemployment. What is true of the remedies that the Opposition would pursue is true also of the remedy to which the Chancellor points. No solution will be found by cutting real wages if the Chancellor does not insist on adhering to the other aspects of his policy.
Let us assume that the Chancellor could persuade people that cuts in real wages were necessary. I concede immediately that the right hon. Gentleman is right to say that we must improve our international cost competitiveness, which has declined substantially under this Government, despite ministerial rhetoric about the constant need to improve. Incidentally, it always strikes me as odd that Ministers continually disclaim responsibility for the shocking decline in our manufacturing trade performance, because they say that it is the inevitable consequence of North sea oil; yet, at the same time, they
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argue that we must improve productivity and competitiveness, force down wage costs and so on. What would be the point of achieving those difficult changes if no improvement in our trade performance were possible?
Such failures and lapses of reason underlie much of the Chancellor's current policy. If the Chancellor were to try to resolve his difficulties by forcing down real wages, almost certainly he would not succeed. If 3 million-plus unemployed are not sufficient to force down wages, one shudders to think how many more jobless we need and how much more social bitterness we have to endure before wage rates fall. Even if the Chancellor could, by some miracle, force down wage rates, how many people would believe that he could do it sufficiently quickly and effectively to close the gap on our competitors, whose unit wage costs are falling because of expansion, not contraction? The Chancellor concedes that their wage unit costs are falling. It defies all credibility to believe that we could force down our wage costs by contraction and compulsion to a degree sufficient to match the effort made by our competitors and catch the train that is leaving the station.
Let us go further and assume that, despite all those difficulties, the Chancellor is able to cut real wages. The Chancellor says that, if only real wages had been 1 per cent. or 2 per cent. lower, many hundreds of thousands of jobs would have been created. From where would those jobs have come? There would have been no increase in effective domestic demand, no stimulus to output or additional resources to finance more jobs. Nothing would have happened in the domestic economy that would conceivably have provided the resources to provide a single extra job, simply on account of cuts in real wages.
The Chancellor might argue that the improvement in our cost competitiveness would create new export markets and that that is where the increase in output would come. The Chancellor must know that, with an unchanged monetary policy, any improvement in competitiveness to improve our balance of payments would be immediately counteracted by a rise in the exchange rate and negated by an appreciating rate for the pound. Any temporary benefit to investment, output and employment would be quickly stifled. That would be entirely in accordance with the Chancellor's stated policies. There would be no solution to the problem. Not a single extra job would be provided from domestic demand. There would be no solution from increased demand from abroad for our goods.
Where will the Chancellor find the increased resources to create the additional jobs? He certainly cannot look to a further fall in the savings ratio, because that is already at its lowest point since 1971. Even if the savings ratio fell further, the Chancellor would find that, by his policies, he had achieved no solution. He would still have had to fund the PSBR and pull in funds from abroad by raising interest rates, and that would mean dearer money and a higher exchange rate. So again the Chancellor would square the circle and box himself into a contractionary policy.
The Chancellor's predicament is increasingly recognised. That means that the days of the Chancellor and his policies could be numbered. It is significant that he lost his battle in the Cabinet a week ago and that he was able to sustain his position only by virtue of what all the commentators called creative accounting and relying on windfalls. It is significant that he did not, so one is led to believe, enjoy the full support of his own Prime Minister. The example of the American economy is simply too

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overwhelming to be ignored, not just in economic but in political terms. Within a year, when we shall be halfway through this Parliament, literally dozens and scores, if not hundreds, of Conservative Members will start to say to themselves, "Can we win the next election? Can we hold our seats without a change in policy?", particularly when they have the glowing example of a Right-wing American President sweeping to a virtually unprecedented victory on the strength of policies which, so far, have been anathema to the Conservative Government.
The one glimmer of hope on the horizon that I see is that those pressures could induce the Prime Minister to consider a change in policy. For her, the fact that the Chancellor is so closely associated with the present policy could be a bonus because she could announce the change by replacing the Chancellor with someone more amenable and less committed to the existing disaster.
The tragedy for the Chancellor—perhaps I should not express any sympathy for him personally—is that we are constantly told that he is an intelligent man. If he is as intelligent as his admirers lead us to believe, he must know that his options have been closed and that he has nothing further to offer. He also has the experience of having engineered successfully a recovery on a previous occasion. He did it in 1982–83 as a pre-election manoeuvre. He did so in very clever ways — by overfunding so that the money supply looked to be unchanged and then funnelling back to the private sector through the sale of commercial bills the money that he had apparently taken out of the money supply. Therefore, he knows how to engineer a recovery. He knows that his present policies cannot work. I believe that that is why his recent performance has been so bad. If he really is as intelligent as we are told and knows that his policies have failed, that would explain why he has so little to offer. That is why he can only continue to mouth the same old unconvincing platitudes.
If the consequences of the long, sad and disastrous experiment in monetarist policies is that the Chancellor of the Exchequer is to be sacrificed, I shall feel sorry for him, but it would be a tiny price to pay for restoring hope to the vast majority of the British people.
8.23 pm
Mr. Tim Yeo: I am glad to follow the hon. Member for Dagenham (Mr. Gould), who made an eloquent contribution to the debate. However, like so many contributions from the Opposition Benches, it was long on criticism and short on solutions. Without wishing to follow the hon. Gentleman too far down the route of seafaring metaphors, I should like to say that it was not clear from what he said whether he would rather the Government succumbed to the temptations of the Scylla of everlastingly higher public spending than to the Charybdis of giving in to the trade unions on every issue.
Not for the first time since I have been in the House, some of the most constructive contributions to the debate on the economy have come from Government Back Benchers. Like my hon. Friend the Member for Aldershot (Mr. Critchley), who made a stylish contribution, I agree that the most urgent economic issue of the day is unemployment. I am sure that that view is shared on both sides of the House. Many hon. Members have stressed their personal experience in coming to that conclusion. I
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also believe that if we fail to solve that economic problem quickly, unemployment will become the most urgent social problem of the day.
I should like to refer to the speech by the hon. Member for Liverpool, Walton (Mr. Heffer). I am sorry that he is not present, but I shall say what I tried to intervene to say while he was making his speech, but he did not give way. I admit that I cannot even match the military distinction of my hon. Friend the Member for Aldershot, who is a former lance-corporal. My only connection with the services is that I was a humble cadet pilot in my university air squadron. In a way I am relieved that the hon. Member for Walton is not present, because I would have to tell him that it was the Cambridge university air squadron.
The hon. Gentleman attacked the Government for confronting the workers. I should like to ask the hon. Gentleman who is confronting members of the NUM who wish to go to work. Are they not being confronted by their leader, Arthur Scargill? I do not want to be too unkind to the hon. Gentleman, as we in the Conservative party have much to thank him for, because he contributed more than anyone else to the growth in the Government's popularity by his chairmanship of the Labour party conference.
Contrary to what the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) said, I understand clearly the aims of the Government's medium term financial strategy. It is part of an overall policy designed to achieve a low and stable rate of inflation. That is an essential precondition for the creation of new jobs. Yesterday I rebutted the outrageous slur that the Government do not care about unemployment. They are certainly not using high unemployment as an instrument of policy, still less as an objective of their economic policy.
However, apart from inflation, there are two other essential preconditions for new jobs. The first is the proper control of public expenditure and the public sector borrowing requirement; the second is the achievement of a steady rate of economic expansion. The figure of 3·5 per cent. next year is modest, not excessive. I suppose that we can regard it as satisfactory, but only just. This year, we must not overlook the contribution of the miners' strike in cutting the rate of growth in 1984. That reduction in the growth rate has been a means of destroying other workers' jobs. I hope that the leader of the NUM is aware of the damage that he is causing to fellow workers.
I approach the subject of unemployment as an optimist. Like some hon. Members, I do not accept that technology means no return to full employment. Some 150 years ago, two thirds of the British work force worked on the land. Today less than 5 per cent. is on the land. If the pundits in the 1830s had foreseen that decimation of jobs in agriculture, undoubtedly they would have predicted vast unemployment. Yet during that space of 150 years, when there have been huge advances in technology, the work force and employment have increased manyfold. Therefore, as my hon. Friend the Member for Loughborough (Mr. Dorrell) said, technology can be the creator, not the destroyer, of jobs.
For that reason, and also because of the forthcoming demographic changes that mean that after the next 30 years the number of people of working age relative to the number of people of retirement age will go down sharply, I do not support fashionable schemes for encouraging early retirement and lowering the retirement age. In the first place, such schemes are not terribly effective because their

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proponents acknowledge that for every two people who are forced to take early retirement, the best that one can hope for is one new job for someone coming off the unemployment register. Secondly, such schemes are expensive in terms of extra pension costs, and the resources needed for them would be better used elsewhere.
It is generally agreed that there are three causes of unemployment. The extent to which one believes that any one of them is dominant depends on one's political viewpoint. The first is the cost of labour; the second is macro-economic policy, particularly the level of public expenditure as it relates to the amount of demand in the economy; and the third comprises the non-financial obstacles to employment, some of which were referred to yesterday by my right hon. Friend the Secretary of State for Employment. I wish to concentrate on the first two causes, because the Government can act on both those fronts without abandoning their responsible fiscal and monetary policy.
My right hon. Friend the Chancellor of the Exchequer has often stressed the cost of labour as a principal cause of unemployment. In our debate on unemployment two weeks ago, he said that a 3 per cent. real increase in wages could have cost 500,000 jobs, and his analysis is supported by academic research at the London School of Economics into the inelasticity of employment relative to real wages.
The Government could reduce the cost of labour by cutting employers' national insurance contributions. It is becoming fashionable to advocate tinkering with the contributions, but I believe that it should be a priority for the available cash — we were told yesterday that it would be £1·5 billion, but let us hope that by the time of next year's Budget it proves to be more than that—to be used to cut employers' national insurance contributions. That is far more urgent than tax cuts, which are not in great demand now that we have got rid of the confiscatory rates that we inherited from the Labour Government. Tax cuts for individuals are not such a high priority, because they do not directly affect job creation.
Employers' national insurance contributions are 10·45 per cent. of wages up to £13,000 a year, and the contributions total £11·68 billion per annum. A 3 per cent. cut would cost about £3·3 billion, of which £1·2 billion is already borne by the public sector. The net impact on the public sector borrowing requirement would be only just over £2 billion — not much more than what the Chancellor hopes to have available next year.
If we assume no increase in public sector employment, the consequence of such a cut in the employers' national insurance contributions could be the creation of 300,000 private sector jobs. The cost of unemployment, in terms of benefits and lost revenue, is more than £5,000 a year for each unemployed person. Therefore, the creation of 300,000 more jobs could produce an eventual saving of £1·6 billion. Therefore, the net final cost to the PSBR would be little more than £500 million.
Of course, there would be a time lag of perhaps two or three years before the full effects were felt, but some impact should emerge in the first 12 months and, if the policy proved acceptable, the trick could be repeated in 1986 and 1987 and, with one final heave, the whole of the employers' national insurance contribution could be phased out before the end of this Parliament.
Mr. Gould: Why is the hon. Gentleman prepared to concentrate help on the employers' national insurance contribution? Why should it not be concentrated on the employees' contribution? That would have the great advantage of producing a substantial increase in take-home pay at no inflationary cost, which is one of the major factors in the American recovery.
Mr. Yeo: I accept the hon. Gentleman's analysis of what would happen if cuts were concentrated on employees' contributions. Our priorities reflect our differing views of the most effective agent of job creation. I believe that reducing the costs of employers will create jobs more quickly. The hon. Gentleman presumably believes that putting more money into the hands of the workers will produce the same result by increasing demand. There is room to split the cuts according to our individual viewpoints.
The abolition of employers' national insurance contributions would have the incidental advantage of allowing us to do away with the national insurance system —the contributory principle was abandoned many years ago — and employees' contributions could be merged into income tax without any change in take-home pay. Getting rid of the national insurance system would produce an administrative saving of £100 million a year.
As regards the second cause of unemployment, I do not advocate huge increases in public expenditure, but there will be continuing dismay at the restraints on expenditure on house building and home improvements. Those are particularly labour-intensive activities which have low import penetration and a far greater job-creating potential than many other public sector capital projects.
The Department of the Environment's spending on housing has been trimmed in the autumn statement to £2·3 billion, which, even after making the necessary adjustments for capital receipts from the sale of council houses, is quite a lot lower in real terms than the 1979 figure. I hope that the Government will soon reverse that decline. If resources are needed from elsewhere to finance a return to higher spending on housing, we need look no further than the suggestions made in yesterday's excellent speech by my hon. Friend the Member for Horsham (Mr. Hordern), who referred to the regional grants of £600 million, spending on agriculture, and so on. I cite those examples for illustrative purposes.
I support the Chancellor of the Exchequer's efforts to switch from taxes on income to taxes on spending. That is the right way to go, but I must point out that charities are the one category that is exempt from income tax but not from spending taxes. It is odd that a Government who are so committed to a partnership with the voluntary sector should continue to penalise charities by switching taxes without giving those charities any concession.
However, that switch is only one aspect of tax reform. Another equally urgent aspect is the need to integrate income tax and the social security system. Tinkering with either component in isolation will merely produce more anomalies and complications. I hope to see a commitment to that vital reform in next year's Queen's Speech, by which time the results of the social security reviews put in hand this year will be known.
I make a plea for one other small tax concession that would be completely self-financing. I suggest that individuals who wish to employ people in a personal capacity and take someone from the unemployment

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register should be allowed to set the employment costs against their income tax. By definition, that would be a self-financing concession, and I believe that it would be a small but helpful move towards new job creation.
The Queen's Speech makes no mention of an important contribution to tackling unemployment that would carry no public sector cost. It involves the mobility of labour, which has been an important but often overlooked factor in the American success in job creation.
The new jobs in America are being created not in the old industrial heartlands; they are down in the sun belt. There has been a huge movement of the working population and that process has been facilitated by the availability of accommodation. We have been hampered for decades by the immobility of our labour force, which has been an obstacle to job creation. I believe that that immobility will continue.
Mr. Michael McGuire: Is the hon. Gentleman aware that the move from the industrial areas in the United States came about as a result of anti-trade union laws? The jobs have been created in what are known as the right-to-work states. The laws were a way of getting at the unions and making them weaker. Perhaps that is why that example appeals to the Tories.
Mr. Yeo: If it is true, which I doubt, that anti-trade union laws have created millions of new jobs in America—and Opposition Members have frequently cited the American experience as a good example for the Government — perhaps our Government have been derelict in their duty by not bringing in tougher anti-union laws.
We lack suitable accommodation for employees who seek jobs in different parts of the country. The council house system—
Mr. Eddie Loyden: There is a vast difference between the economic and geographical situation in the United States and that in Britain. In America one can travel thousands of miles in order to obtain employment, but in our tight little island people who have been advised to move away to other regions often find the same situation prevailing there as at home. The hon. Gentleman's parallel between the United States and Britain is erroneous with regard to the movement of labour.
Mr. Yeo: The parallel has been cited more frequently by the Opposition than by the Government. It is the Opposition who hold out the American example as a useful one. I think that the parallel about the movement of labour is fair. Indeed, with a smaller country, it should be easier to move from one region to another.
If there were a proper private rented accommodation sector, there would be places for people to move to in their search for jobs. It is not true, as the hon. Member for Liverpool, Garston (Mr. Loyden) suggests, that conditions are the same wherever one goes. I am surprised to hear an Opposition Member make that suggestion. One of the Opposition's criticisms—and it has some validity—is that conditions in the north are very different from those in my constituency and in many parts of the south-east, where jobs are available but there is no accommodation. The Government could repeal the Rent Acts at no cost to the private purse, and we could then start to recreate the supply of accommodation. Many property owners, who at
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present are afraid to offer accommodation for rent, would be willing to let parts of their houses or flats. We would release to the economy a quantity of new resources not at present usefully employed. Greater mobility between regions is an essential precondition to reducing unemployment. I ask my right hon. Friends the Chancellor and the Secretary of State for Employment to urge my right hon. Friend the Secretary of State for the Environment to introduce the necessary legislation in the coming Session.
I have summarised the measures that I believe would reduce the level of unemployment. I commend them to the House and, in particular, to my right hon. Friend the Chancellor, especially as they would in total leave next year's public expenditure at £132 billion.
8.43 pm
Mr. Richard Caborn: Neither the Queen's Speech nor the Chancellor's autumn statement holds out anything for my constituency, which at pre sent is suffering an overall unemployment level of over 25 per cent. and where in large areas it exceeds 50 per cent.
It is evident from the speech of the hon. Member for Suffolk, South (Mr. Yeo) that he has no comprehension of the problems and the hardship faced in the northern inner cities. The solutions which he has just pronounced show that he has little or no understanding of the problems. In the Sheffield, Central constituency about 10,300 people are unemployed, and the deprivation has to be seen to be believed. The only actions that the Government are taking are compounding the problem. The unemployment figures that I have given are the official figures. They do not include all the unemployed. Many people, especially married women, are now being denied the opportunity to take part in community programmes, and old people are being deprived of an extra pound in connection with the heating allowance. The Government are continuing to attack people in the most deprived regions.
Hon. Members may remember that Sheffield was once famous for its steel industry. Two years ago, the Government decided to embark upon the denationalisation of that industry by means of the development of the Phoenix schemes — part private and part public. We were told that that was the way forward, the new formula for privatisation and the panacea for the ills of the industry. The Government brought in Mr. MacGregor—the man who has committed 100,000 steel workers to the dole queue in the past five years.
I draw attention to the role of Mr. MacGregor in the Phoenix schemes, and particularly Phoenix III. On Saturday, an exclusive report in the Morning Telegraph said that Sheffield Forgemasters—which is Phoenix III—was on the brink of disaster. According to the report, Mr. Scholey, the chief executive of the British Steel Corporation, had made an announcement to the Steel Industry Management Association. He had not told the workers at the factories concerned or indeed the management there. He announced to the association that the BSC would have to pick up the tab for paying the wages. That article exposed the situation, and on Saturday an article in the Financial Times entitled
"Forgemasters set to receive a major cash injection"
stated:
"A major cash injection at Sheffield Forgemasters, the engineering and special steels company formed jointly by the British Steel Corporation and Johnson & Firth Brown almost two years ago, is expected to be announced within two weeks."

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That is the success story. Two years ago the employers — not the trade union side but the employers — were pleading not to be forced into a shotgun marriage between the private and the public sector. They believed that that was the wrong way to approach a major sector of the industry. Nevertheless, Big Mac came in. The industrialists — not the trade unions, though they had their point of view—said that the way in which he was insisting on the merger and on developing that part of the steel industry was doomed to failure. Mr. MacGregor persisted. Two years later, when he has gone on to be the butcher of our mining industry, 100,000 jobs have been lost in the steel industry. That situation should be compared with that of the steel-producing countries of the EEC. Mr. MacGregor forced a privatisation against all the advice. Two years later the banks have to go in with a rescue operation and the BSC announces that it will have to pick up the tab.
This sector of the British steel industry supplies the nuclear industry and aerospace, and provides the open die forgings which are an extremely important part of our industrial base. If we are to develop the high-technology industries and if we are to move into new markets in aerospace, this is the type and quality of steel that will be needed. The destruction wrought on the industry by Mr. MacGregor could set it back by two to three years.
The Morning Telegraph is not famous for supporting the trade union movement but it states:
"Hindsight is often patronising and arrogant, but there are many who often feared that Sheffield Forgemasters had been formed and was being operated on too tight a shoestring, given the huge problems of rationalisation and recession that it has faced from day one."
That has always been a problem of the steel industry, especially the private sector. The steel industry has also had to bear some of the highest energy costs in the EEC because of Government policy. It has also had to make substantial interest payments. In 1980, Aurora paid £6·7 million in interest, Hadfields paid £3·3 million and Johnson Firth Brown paid £9·7 million. That money could have produced a hell of a lot of jobs. If the money had been invested, especially in research and development, we should still have a fairly competitive edge.
I should now like to discuss Phoenix II. About two years ago Hadfields was the centre of attention. The Tories were crying out against pickets outside the gates saying, "Carry on working, lads: we will be right behind you." Hadfields is not only ,shut—there is hardly a brick of it left. That is the result bf the help of the Tory Government who condemned people who were fighting for their jobs in the steel industry. The Government dare not announce the carve-up of Phoenix II because of the problems with Phoenix III and financial difficulties which arise not out of market share, management or the labour force but out of the financial structure that the Government forced through. Although the Government dare not announce Phoenix II, they have sold Hadfields down. Working miners should compare the promises that the Prime Minister gave at the Tory party conference and again last night with the promises that she gave to workers who crossed picket lines at Hadfields when they were asked to stand and defend their jobs. The Government's record on defending those who scab against their fellow workers in defence of their industry is appalling.
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In the past four years Sheffield has lost about 25,000 jobs in the steel industry. The local authority's employment department has attempted, through innovation and consultation, to develop the local economy. It has developed about 20 co-operatives and created 1,000 new jobs. But what have we got from the Government who are crying crocodile tears about unemployment? They have condemned such initiatives that are now to be suppressed by rate-capping. The metropolitan counties, which have also tried to develop such schemes, are to be abolished. Successive hon. Members have talked about putting money into the economy — it is difficult to establish whether the Government are acting in concert with their Back Benchers. We have tried and trusted mechanisms which understand local needs, but when they try to generate local economies the Government, through legislation, by destroying the metropolitan counties and by rate-capping, destroy their initiatives.
It is time that the Government took basic manufacturing industries on board. Nobody denies that new technology must be accepted by trade unions and others, but industries such as the steel industry and basic manufacturing should not be written off as the Government are trying to write off many. Their performance in regard to the steel industry under the leadership of Mr. MacGregor has been appalling.
8.53 pm
Mr. Alistair Burt: Although I lack the advantage of being a member of the General Synod of the Church of England or a spiritual Member of another place, I should like to say something about the north-south debate in relation to the current state of the economy and its development as envisaged by the Queen's Speech.
Conventional wisdom is directed to increasing the divide between north and south. There is more than a grain of truth behind some recent expressions of concern. I was unable to hear the speech of the hon. Member for Manchester, Central (Mr. Litherland), but the hon. Member for Stretford (Mr. Lloyd) made some telling points. I should like to remind him and others, however, that there is another side to the coin. It is not correct to allow people to believe that sitting at the northern tip of a prosperous south is an economic desert. I do not wish to deny that there are problems in the north of England, but it is after investment like everyone else and if we continue to beat our chests and to tell people all over the world how dreadful it is, who on earth will want to invest capital there and provide jobs for us? It is important to give the other side of the story.
The north-west has seen some of its traditional manufacturing industry decline, but it has done its best not to stand still. Any new industrial survey of the area would show our successful aerospace industry, new technology industries, important work being done in regard to the offshore oil and gas industries and heavy investment in the nuclear power industry. We have the new freeport at Liverpool docks and the finest airport outside London—Manchester international airport, which should also be a freeport. They are success stories for the north-west and they join the best of our older industries which continue to change with the times and are working hard and successfully.
The hon. Member for Stretford referred to a recent economic survey produced by the Manchester chamber of commerce and industry. In that connection I am reminded

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of the old joke in which the optimist looks at a bottle and says, "It is half full," and the pessimist says, "It is half empty." There are two sides to the survey. Welcome improvements in deliveries and orders are shown in the report, as are booming home and export markets. There are better figures for manufacturing production. Some 56 per cent. of firms now work at or above 90 per cent. capacity compared with only 43 per cent. in June. General business confidence in the region has also shown a change for the better.
For the first time, the survey recorded a significant difficulty in recruiting skilled workers. The shortage of skills is noticeable throughout the country. It is surely at that that the Government are directing some of their youth and adult training measures. I refer right hon. and hon. Members who are worried about the expansion of public sector borrowing to the comments of my right hon. Friend the Member for Cambridgeshire, South-East (Mr. Pym) who said where public expenditure could be used to good purpose. It is not enough for Conservative Members to say that all public expenditure is bad and for Opposition Members to say that all public expenditure is good. We should be able to distinguish between good and bad investment. Investment by the Government in the training of young people to meet skill shortages is good and we should not he afraid to say so.
I recently toured the youth training service in my constituency. I can only praise the work of the local authority and the sponsors who have produced more than a 60 per cent. success rate from the first 12 months' work. It is wrong to characterise the north of England as entirely derelict. If people there are doing their best to survive in difficult times, how much better they could do if they received a little more help from their friends in government. Although I appreciate the success of the north-west, it is impossible to disguise the appallingly low base from which that success is springing. Inevitable industrial changes in trade and technology have affected the traditional industries of the north-west, and given a boost to higher unemployment.
There is a perceived trend in the Government's economic policy, which is deeply worrying to people in the north. They wonder whether, while they fulfil their side of the bargain, the Government are fulfilling theirs. I refer to the continuing change between the manufacturing and service industries. The shift from manufacturing to service industries has not been kind to the north-west. Those setting up in the new service industries are not settling in as quickly as we would wish. It is proper that the economy changes with time and that market forces direct the Government to support what is best for the country as a whole, but it is not proper for Governments to consider that manufacturing industry has reached its timely end and must wither and die with their blessing. Although the manufacturing sector provides only 30 per cent. of jobs, it contributes nearly 70 per cent. of foreign currency earnings.
Some sectors of manufacturing industry can outstrip anything offered in terms of world competition, but they cannot defeat manufacturing industry subsidised by foreign Governments. The Government must make it clear to those in manufacturing industry that strong support is there not merely in word but in deed. I see nothing in the Queen's Speech to reassure me of that.
Britain cannot afford an economy entirely of services or entirely of manufacturing industries. There must, of
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necessity, be a balance between the two. The Government should be capable of discernment and of supporting the best of manufacturing industry without committing themselves necessarily to an industry which could never be competitive in any environment. The Government can do two things in particular.
First, in a review of areas of high unemployment and difficulty, the Government should examine industries in decline and those which are doing well. They should then consider what assistance they can give to allow those industries to do even better, because that is where jobs will be created. Perhaps the Government could think about collective reductions in national insurance in regional areas of high unemployment.
Secondly, the Government could take a wider view of their supportive role in industry. For example, for many years our heavy manufacturing industry has been at a disadvantage regarding energy costs. We know that the French have done well because of the nuclear element in their fuel supply. Surely we can produce a better deal for our intensive energy users. In France, energy policy is directed to producing the cheapest energy for the benefit of French industry. Our energy prices should not he directed towards providing the Treasury with a back door way to cover up its inadequacies.
The Government are right to look at some of their successes, notably the real reduction in inflation, as a stepping stone to future recovery, but they must beware of the language in which they couch the description of the recovery. To be told that we are in the fourth year of recovery with unemployment at 3·5 million, is a definition of an economic boom unknown to me. It is all very well to talk about it, but, as unemployment climbs in a constituency such as mine, optimism must be tempered with realism if the Government are to retain credibility.
Unemployment in the Bury-Bolton travel-to-work area is touching 17 per cent., which is the seventh worst in the north-west of England. To my sorrow and concern, I see my home town of Bury comparing itself with industrial wastelands with which it never before had anything in common. That is the basis of the anger in the debate between north and south and of the obvious anxiety expressed by the hon. Members for Stretford and for Manchester, Central. Unemployment is abysmal, and it is time the Government recognised the pain that hon. Members must endure in their constituencies when they deal with the problem. Whether the Government deny it or not, it is time they realised that many people are saying that some of the unemployment problem is their fault.
My constituents understand the kernel of good sense at the heart of the Government's message and know, because they are sensible, that a number of factors contributing to unemployment cannot be laid at the Government's door. However, they will look hard at those who continue to propound the wearing of the hair shirt of unemployment because somehow it is good for them. The Government must explain how wage cuts can be the next answer, when those industries in which there is competition for jobs are the unskilled low-wage industries. In industries where labour is not plentiful, the inevitable market forces work in the opposite direction. My constituents will be anxious to see what lessons the Government learn from the United States' experience. They will be anxious that the right lessons, not the wrong ones, are learnt.
My constituents will continue to try to understand the benefits of industrial policies based on sound money, but

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in their heart of hearts they will want to see the Government wide open to every option available to reduce unemployment. Many of them were rehearsed in a thoughtful debate recently, and a number were spelt out in more detail in a recent book, "Jobs Ahead", written by my hon. Friend the Member for Beckenham (Sir P. Goodhart), which is based on the work of the One Nation group.
My constituents will not demand to see the Chancellor perform miracles in the desert, but they expect him to be out there with his stick tapping at the rocks with a shrewd idea where the water might spring from. Above all, they echo the sentiment expressed so well yesterday by my hon. Friend the Member for Devizes (Mr. Morrison)—they share the desire for taxation to be reduced as a result of efficiency but they are not at all sure that cuts in direct personal taxation should be a priority to the exclusion of all else. The clamour for reductions in taxation is declining as the number of unemployed rises and those fortunate enough to be paying tax look over their shoulders, fearing the day when for them, too, taxes will no longer be a problem. If the Chancellor can find £1·5 billion to be sensibly used before the next Budget, he would do well to consider all the options open to him to direct that money to the nation's most pressing problem. It is no longer sufficient for him to say that there is no alternative. There are plenty of alternatives.
My constituency and the north-west in general are composed of brave, hard-working people who have not stood still as times have changed. The industrial relations records of Bury, Tottington and Ramsbottom are second to none. People there have played their part and accepted the need to change their old industries. They are living up to their side of the bargain and they are looking for a sign that the Government have confidence in them. A wider perception of the Government's interventionist role and investment by the Government in the kind of industry and infrastructure that will truly boost the recover of the northwest will show my constituents that their sacrifices have not been in vain. Above all, they look for a display of open-mindedness by those in charge of Government economic policy and a willingness to seek all the options available to defeat unemployment, a fresh look at the PSBR and an understanding that, as times and conditions change, so, too, can economic policies and aims. All those things would be welcome and would reassure my constituents and others in the north-west that their problems are not just recognised but on their way to being solved.
In essence, it comes down to this. The Government must never lose sight of the fact that economic policy is only a means to an end, not an end in itself. If the Conservative party and the Conservative Government do not exist to improve the condition of the people in a variety of ways, through their handling of the economy and their all-round policy, they are out to achieve nothing at all. Conservative Governments — and this one is no exception — have a fine record of social reform, of following a variety of economic theories and of showing a pragmatic grasp of the aspirations of the people which has enabled them to retain the trust of the people. In the cause of material and spiritual advancement, economic theory is a fine servant of Governments, but it is a dreadful master.
9.7 pm
Mr. Austin Mitchell: It is interesting to note the cool reception of both the Queen's Speech and the autumn statement by those who have hitherto acquiesced in every folly of the Government's economic policy. In so far as there was any economic message in the Queen's Speech, it received a very cool reception from Conservative Back Benchers who are at last beginning to realise that something is disastrously wrong. It also received a cool reception from that sycophantic body, the CBI, and the leaders of British industry, whose main economic preoccupation so far has been to clamour for more of the rod for their own backs and more of the machinery for the destruction of their own industries. Bought off with knighthoods and tax cuts, they acquiesced in all the Government's previous follies. Both those groups are now beginning to turn against what the Government are doing.
The worms are truly beginning to turn — a generic description from which I exclude the hon. Member for Bury, North (Mr. Burt), although he was certainly turning quite dramatically. The worms are turning because they see that the Chancellor is trapped. The Government's whole economic strategy has led them into a trap from which it is virtually impossible to escape—the trap of trying to talk up, by sheer pressure of exhortation, an economic revival which obstinately refuses to flicker into life while at the same time implementing policies directly harmful to any possible revival and to the productive manufacturing sector of the economy. The pound is still substantially overvalued against the currencies of our principal competitors, especially West Germany but also Japan. Our export prices as against those of West Germany are 45 per cent. higher than they were in the last quarter of 1976. It is almost impossible for British industry to overleap that competitive barrier in any circumstances.
Competitiveness is eroded still further as a direct result of Government policies, and the increase in the cost of power and fuel has become another burden on British industry — a burden amplified by labour costs. The Government have made a fetish of labour costs, but have not told us that, even under their policies, unit labour costs have increased by about 7 to 8 per cent. as against the last quarter of 1982. In the same period, in the United States, thanks to the expansion that has gone on there, unit labour costs have come down about 6 per cent. Unit labour costs have fallen in West Germany. In this country they have gone up, and that is a competitive gap that puts the Government in a trap. Either they allow the pound to come down, to erode that competitive gap, or they continue the long-term comparative decline that has gone on for so long.
The Government are also imposing the burden of high interest rates. Unusually, interest rates failed to come down, in their annual ritual, in time for the Tory party conference to allow the Government to give a little good news to their supporters. They could not praise themselves then because interest rates had not come down from the insane levels to which they were misguidedly increased in July. It is no good the Government claiming that the recent news on interest rates is good, because the real level of interest rates is still at an unprecedented level, and interest rates are a crippling burden on investment, industry and the whole economy. That burden will make it difficult for expansion to be resumed.

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The Chancellor is trapped in the same cupboard in which too many Chancellors have been trapped—I do not mention their names because a number of them have been Labour Chancellors. Perhaps it is not a cupboard but a coalhole, because the Chancellor will almost certainly blame the miners for his problems, but the fact that he is trapped is inescapable. The tragedy is that the country is trapped at a far lower level of economic health and vigour than at any previous time, because of the enormous harm and destruction that have been inflicted on the economy by policies that have been directly harmful to its core—manufacturing industry. Manufacturing industry provides so much of our ability to survive, and it used to provide many of the jobs.
The harm that has been done makes it difficult for us to survive in the position to which the Chancellor has reduced us. He has taken us into his trap with a real level of unemployment of about 4 million. We are a net manufacturing importer, instead of the workshop of the world and the exporter that we used to be. He has taken us there as the balance of payments benefit of North sea oil has been frittered away into the predictable deficit position.
We are in that trap despite the examples of how to deal with economic difficulties that have been proffered to us by all too many countries overseas, which are either ignored by the Chancellor or described as manifestations of original sin. I give as instances Sweden, where a 16 per cent. devaluation has led to a substantial rate of growth and a fall in unemployment, Australia, where a 10 per cent. devaluation has produced both those results, and, more importantly, the United States, which is often quoted.
After two years of trying to implement similar fiscal policies to those of our Government, President Reagan reversed those policies. President Reagan is the only Keynesian economist left in the world who does not have grey hair because he has been following the policy of Keynesian expansion by deficit financing that many of us would wish to be followed here. The result has been the generation of 6 million real jobs which are paying real money to people to participate in the economic advance of their country by policies which the Chancellor tells us are impossible and directly harmful in Britain.
It is clear from that failure to learn from examples overseas that the Government's economic policy is now a busted flush. It is exhausted. Unless the policies are reversed — the Chancellor is not the most adept and flexible person at learning lessons and is not the most willing person to admit when he is wrong — all that faces the country and the Government is a prolonged downhill slide while other countries advance, prosper and grow.
The Government have given us the exact reverse of the policies that are necessary to deal with an economy in comparative decline, turning to absolute decline, as it was, as world trade faltered. They have given us confrontation where we needed corporatism; cuts where we needed Keynes; an export of capital on an enormous scale when we needed investment in the productive strength of Britain; high interest rates when we needed cheap money; over-valuation when we needed a competitive pound; and free market economics when we needed management, planning and growth. The only way out of that trap is to reverse the policies; otherwise, there will be a long three-year slide downhill for the Government.
9.15 pm
Mr. Peter Shore: We have come a long way verbally since, with customary glitter and glamour, the Queen's Speech was first read from the Throne in the other place a week ago. The debate that has followed has been wide-ranging. I would not wish for a moment to understate the importance of the debates on health and social security, local government and transport, nor on disarmament and foreign affairs, but it is only right to say that the main focus of the debate has been the state of the economy, both domestic and international, and, above all, the levels of unemployment in the United Kingdom.
We have had during the day a number of notable contributions to our debate. We heard the wise words of my right hon. Friend the Member for Cardiff, South and Penarth (Mr. Callaghan) on how to settle the long-standing mining dispute, or at least what attitudes of mind to bring to that solution—sentiments rightly echoed by my hon. Friend the Member for Liverpool, Walton (Mr. Heifer). It will be well worthwhile for Ministers to study those words in Hansard tomorrow.
We have also had a timely reminder of the crucial importance of the international debt problem and what we all owe to the American economic expansion from the right hon. Member for Glasgow, Hillhead (Mr. Jenkins). We too easily fail to recognise just how much of the expansion in world output, including British output, which has taken place this year, we all owe to the American expansion. The right hon. Gentleman was right to say that that hectic pace of expansion cannot be sustained, that it would be wrong if it were sustained, and that, therefore, unless we in Britain and other countries of similar weight in the EEC are prepared to rake up the baton of expansion, the world economy is likely once again to fall into a no-growth position, at any rate in 1985–86.
There is no prospect of Third world countries being able to carry the weight of the international debt which weighs so heavily on so many of them unless the markets of the western world are expanded. Otherwise, those countries simply cannot earn the exports and the revenues from exports which they need to service the ever-growing mountain of debt. The right hon. Member for Cambridgeshire, South-East (Mr. Pym) made a striking contribution. He spoke for most Opposition Members and for many Conservative Members when he deplored the clipping and paring of overseas aid moneys and of other external services at a time when not only Ethiopia hut much of sub-Saharan Africa face an historic catastrophe. He also hit a responsive chord when he rightly said in relation to Ministers' frequently expressed concern about unemployment that their action was not commensurate with their concern. The hon. Member for Aldershot (Mr. Critchley) made the same point succinctly, when he said that the Government give the impression that they do not sufficiently care.
On Thursday evening we tabled our amendment regretting that
"the Gracious Speech reaffirms policies which have already done severe damage to the British economy and will, in the future, further hold back the prospects of economic recovery."
Nothing that I have heard today from the Chancellor and certainly nothing that I have read in the autumn statement has given me any reason to change my mind about the relevance and accuracy of our amendment.

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What those damaging policies are is now all too familiar to hon. Members. They are policies to deflate the economy, and thus to run it at a far lower rate of growth of output and a far higher rate of unemployment than would otherwise be necessary. These policy aims have been achieved first by the imposition of money supply targets which have necessitated high interest rates. Secondly, those high interest rates have in turn encouraged a high exchange rate, thus making exports—except to the United States—more expensive and imports cheaper than they would otherwise be. Thirdly, deflation has been promoted by the continued cuts in public expenditure, cuts that have damaged the quality of community services and radically reduced capital investment in the infrastructure of our community. Fourthly, deflation has been pursued by a massive increase over the five years as a whole in total taxation — direct and indirect combined — with the greatest increases falling upon those with the smallest incomes, and the only reliefs being enjoyed by the very rich.
No country in the Western world had deflated more fiercely or, to use the technical term, tightened its fiscal stance more seriously, than Britain. Not surprisingly, Britain has suffered both the highest increases in unemployment and the lowest increases in output as a consequence. Those deflationary policies are restated in stark terms in the Gracious Speech in the following words:
"My Government will continue to pursue policies founded on sound money and lower public borrowing and aimed at securing a further reduction in inflation."
When those policies were first embarked upon, in 1979, it was the Government's contention that once inflation had been reduced, the economy would spontaneously resume growth and job creation. Prosperity and real jobs were, and according to the Government have always been, "just around the corner."
In November 1980, when unemployment stood at 1,600,000, the Prime Minister told us:
"We are reaching the trough of the recession and it will start to turn up towards the end of next year."
In the following year, in June 1981, the Prime Minister told the House:
"There are now clear signs that the worst of the recession is over."—[Official Report, 24 June 1981; Vol. 7, c. 332.]
Unemployment then stood at 2·5 million. In the Government's third year of office, in March 1982, the Prime Minister assured us, and an audience in Harrogate, that
"after three years of battling, we are beginning to see the regeneration of our economy".
Unemployment then stood at 2,900,000. In their fourth year of office, in May 1983, the Chancellor of the Exchequer was telling us:
"There is every prospect that by next year we will see the start of the fall in the level of unemployment."
Unemployment then stood at 3,100,000. Now, in the Government's fifth year of office, in September 1984, unemployment has reached 3,284,000, which is the highest figure ever reached in our history. It is higher even than in the very depths of the world recession in the early 1930s.
We are dealing not with one or two years but with five years of continued failure; of policies stubbornly and stupidly adhered to long after the damage and folly has been demonstrated to all. How fitting it is, therefore, that the Chancellor should end his speech today with the
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resounding affirmation that his was a "long-term" policy. How fitting it is that the Leader of the House, in a BBC interview about the Queen's Speech last week should conclude his remarks with the assertion
"patience is a great virtue in politics"
and
"in the long run we are all dead."
Against that background of unchanged deflationary policies, proudly reaffirmed in the Queen's Speech, and the scandalous level of unemployment, we must judge the sincerity of what the Government have to say about the plight of the jobless.
The Queen's Speech states:
"my Government remains deeply concerned about unemployment".
The right hon. Member for Cambridgeshire, South-East will agree that concern is nothing if it does not lead to, or express itself in, action. The truth is that the actions required to increase jobs in Britain are directly contrary to the Government's main economic policies.
The Prime Minister, as evidence of her good intentions, has recently taken to quoting selectively from the 1944 White Paper on employment policy in Britain by the late Lord Keynes. At her conference in Brighton she had the impertinence to claim that the 1944 White Paper policies were basically the same as hers. When she opened the debate on the Queen's Speech a week ago the right hon. Lady tried again and quoted from the first and central paragraph of that White Paper to which she had previously not referred. She quoted from that paragraph in reply to a question by the right hon. Member for Plymouth, Devonport (Dr. Owen) who asked her whether she accepted
"the primary aim of maintaining a high and stable level of employment."
In her reply the Prime Minister said:
"The first paragraph of that White Paper says that the Government should 'accept as one of their primary aims … the maintenance of a high and stable level of employment after the war'."
The Prime Minister went on to say:
"As I said at my own party conference, I accept most parts of this Paper—pretty nearly all of it except those aspects which over time have changed.
We would all like to return to a low level of unemployment." —[Official Report, 6 November 1984; Vol. 67, c. 24.]
The Prime Minister failed to quote the whole of the first paragraph of that White Paper. It does not say:
"The Government accept as one of their primary aims the maintenance of a high and stable level of employment after the war."
It reads:
"The Government accept as one of their primary aims and responsibilities the maintenance of a high and stable level of employment after the war."
The right hon. Lady has sent me a note telling me that she cannot be here because she is entertaining the President of Finland. I regret that she is not here, because it is important that she should be aware of what she omitted to say and of my comments.
It is unbelievable that the Prime Minister should inadvertently delete that crucial word "responsibilities" when purporting to quote from the White Paper, because responsibility is the heart of the matter. It is at the heart of the White Paper. No Government before 1944 had accepted that responsibility. The dictionary definition of "responsibility" according to Chambers is
"a trust or charge for which one is responsible."
The same problem afflicted the Secretary of State for Employment when he tried to intervene in the speech by

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my hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott) yesterday. In the debate on unemployment the Secretary of State said:
"I was asked by the right hon. Member for Plymouth, Devonport (Dr. Owen) whether we had noted the first sentence in the 1944 White Paper. We have noted it, and I assure the House that we certainly want to see the highest possible employment level in this country".— [Official Report, 30 October 1984; Vol. 65. c. 1246.]
But to note is, once again, not to accept responsibility. We should ask the Leader of the House, who is to reply to the debate, the Chancellor and the Prime Minister, when she returns to the House on Thursday, whether the Government accept not only the aim but the crucial responsibility for the maintenance of a high level of employment, which was central to the 1944 White Paper and crucial to the whole economic policy of successive Governments from 1944 to 1979.
Let us consider what the Chancellor has said about responsibility for employment. Three weeks ago he was interviewed on television by Brian Walden. He was asked, as Mr. Walden put it, about carrying the can. The Chancellor replied:
"We have always made this clear what the Government can do to create jobs is very, very little indeed. It is largely a matter of how the economy works, which…in a free society depends on a whole myriad of decisions taken by the millions of workers, employers and managers up and down the country, that's what will determine how the jobs are. There is a little bit the Government can do to help them. What we can do we will do. But to fall into the error of thinking that the Government can determine the level of employment, that is totally false."
That is something that not only the Chancellor but the Prime Minister and the whole of the Treasury Bench believe. It is a convenient belief because, undoubtedly, a high level of unemployment assists the Government in keeping down inflation, in weakening the power of trade unions, in reducing pay claims and in redistributing income and wealth in favour of the well-to-do. Above all, that convenient doctrine exonerates the Government from blame and relieves them of their proper responsibility. But to describe these policies as stemming from the 1944 White Paper is a falsehood and a deception of the grossest sort.
There is a great hole in the middle of the Queen's Speech. The clamant problem of 1984 is the return of mass unemployment to our land. It has brought with it great suffering to individuals and communities, it has sharpened and increased industrial conflicts, it has actively destabilised our democratic system and it is alienating a whole generation of youngsters upon whom the brunt of the burden of unemployment has fallen. Yet the Queen's Speech has nothing to say that has the least relevance to their predicament. The autumn statement is, basically, a no-change document. As the document itself concedes, the present record level of unemployment will be sustained in 1985–86—the same appalling level as it has reached in 1984.
Since the productive potential of the economy is certainly not less than 2·5 per cent. per annum—that is the national increase in productivity per man at work—and as the predicted underlying growth rate in the autumn statement is 2·5 per cent., unemployment levels are bound to remain the same. If we are to bring down unemployment, and if the Government accept responsibility for a high and stable level of employment, we need a period of years during which the rate of growth is deliberately set at well above the productive potential, so
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that the unemployed total can be reduced. That is what has happened in the United States—a level of growth well above productive potential, well above the national increase in the labour force, and successful in bringing down the unemployment rate from well above 10 per cent. to just over 7 per cent. in less than two years.
There is plenty of room to discuss the pace and the pathway for the reduction of unemployment in the United Kingdom. However, that discussion will begin only when we have a Government who have the will and the wish to reduce unemployment and accept that they have a responsibility for maintaining a high and stable level of employment, and that will not be until we have got rid of the present occupants of the Treasury Bench.
9.35 pm
The Lord Privy Seal and Leader of the House of Commons (Mr. John Biffen): It is a week ago that the debate on the Gracious Speech and the Loyal Address was initiated with contributions of wit and perception by my hon. Friends the Members for Boothferry (Sir P. Bryan) and for Wiltshire, North (Mr. Needham). Since then the debate has been continued over a wide range of topics and today it has been set upon its concluding stages with a debate upon the economy that was initiated by my right hon. Friend the Chancellor of the Exchequer.
I have had the advantage of listening to the most formidable troika of contributions from the right hon. Members for Cardiff, South and Penarth (Mr. Callaghan) and for Glasgow, Hillhead (Mr. Jenkins) and my right hon. Friend the Member for Cambridgeshire, South-East (Mr. Pym). I pay heartfelt thanks to them all for their collective efforts to prevent our occasion being entirely upstaged by the Earl of Stockton in another place. His performance must but be watched with envy and concern by the National Coal Board.
The contribution of my right hon. Friend the Member for Cambridgeshire, South-East so excited me that I made a momentary intervention, which I hope he will not think in bad taste. I must tell my right hon. Friend that a year ago it was my privilege, in undertaking the same task that I now perform, to offer a message of personal congratulation, though from the Treasury Bench, on his speech on that occasion. That message was genuine. I hope that it will not lead to complications for him, at any rate, if I repeat my good wishes and congratulations. His speech elevated the level of debate in the Chamber and it will be remembered long after this day.
That said, I must say to my right hon. Friend the Member for Cambridgeshire, South-East that I felt as though he had taken me by the elbow and propelled me to one of those better eating houses in the area of St. James. As I sat down I was passed the menu, and with the delicateness of those circumstances I found that it was rich in suggestion but devoid of prices.
Mr. Patrick Cormack: Why did my right hon. Friend not go a la carte?
Mr. Biffen: I do not do that when I am a guest of my right hon. Friend. Confronted by a menu which was the pinnacle of social discretion, I had this fascinating vacuity where in grubbier minds details should have been evident. When it came to the wine, I needed no memory. The bouquet rushed to meet me; it was vintage 1970–74. I say to my right hon. Friend—
Mr. Rogers: When will the right hon. Gentleman address himself to unemployment?
Mr. Biffen: This is a friendly discourse. It is a good-natured reflection between friends, a characteristic that is unknown on the Opposition Benches. I say to my right hon. Friend that perhaps our next assignment will be at a Wimpy bar. However, I am certain that the areas he outlined for policy debate are the most legitimate of all and that they will persist throughout the Session.
The three main elements that I shall touch upon in the substance of my speech concern procedure, which is customary for the Leader of the House in replying to this debate. It will include also certain aspects of the Queen's Speech and the legislative tone of it, which is the heart of the debate and, finally, the general economic background against which we shall be transacting our business and which comprised the majority of the speech of the right hon. Member for Bethnal Green and Stepney (Mr. Shore).
I shall take account of procedural points raised by my right hon. Friend the Member for Worthing (Mr. Higgins), and will be in touch with him in due course.
The point on which I should like to detain the House for a moment is that about Opposition time. During the debate on the Queen's Speech it has become clear that there is continuing unease among Liberal and SDP Members over the present Standing Order governing the allocation of Opposition days.
That Standing Order, approved by the House in 1982, lays down that the use of the 19 Opposition days provided for should be at the disposal of the Official Opposition. Hitherto, there had been informal consultation between the Official Opposition and the other Opposition parties through the usual channels about the use of Supply days but the House declined to formalise these practices as in an amendment proposed by the hon. Member for Berwick-upon-Tweed (Mr. Beith). The events of the past few days have made it clear that these informal arrangements give rise to dissatisfaction on the Liberal-SDP Bench.
I am anxious to see whether progress can be made on this matter. I must, however, stress that the procedures of the House are determined by a majority of the House itself. It cannot be otherwise, and whatever new arrangements might require, an amendment of Standing Orders can only be put into effect by the consent of the House. In the first instance, there is merit in seeing whether the existing conventions over Opposition days can be reconsidered in the light of recent complaints. I hope, therefore, that an attempt might be made through the usual channels. I believe that such an attempt will be made in good faith.
If, however, no progress could be made that way, then I realise at once that there would be the need to involve the Procedure Committee again to consider this matter.
The House will realise that the Procedure Committee has already decided to undertake a major review of public Bill procedure. This work was set in hand at the request of the House. The Committee has decided that its energies should be first directed to this work.
However, the Procedure Committee may well feel that it can accommodate the feelings that have been expressed in this debate. The right hon. Member for Tweeddale, Ettrick and Lauderdale (Mr. Steel) has argued that I should
"ask the Select Committee to put the issue at the top of its agenda
for this Session".—[Official Report, 7 November 1984; Vol. 67, c. 120.]
I am sure that the House could not properly consider this matter without a report from the Select Committee.
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Meanwhile the right hon. Gentleman knows that the Select Committee is instructed by the House, and any approaches on my part should take account of that.
At this point, I should mention that I have been in touch with my hon. Friend the Member for Honiton, (Sir P. Emery) the Chairman of the Select Committee on Procedure. I know that he cannot be in his place today: parliamentary duties require him to be abroad. I have, however, been able to discuss the issue tentatively with him over the telephone. I shall be discussing the matter with him again when he has returned to this country next week.
Should circumstances so necessitate, I believe that the House should have the option of empowering the Committee to set up a Sub-Committee for the particular purpose of studying the allocation of Opposition days.
That said, I am sure that the whole House would agree with me that if at all possible this is a problem to be resolved through the usual channels. To my mind, that would be the more expeditious way of proceeding, but if that fails, then it is on this kind of problem that the House would rightly wish to look to the Procedure Committee for advice.
Mr. David Steel rose—
Mr. Biffen: I apologise to the House for having detained it, and I hope that the right hon. Gentleman will not press me. What I have just said is testimony of my good faith on this topic, and of the importance that I realise is attached to it on that Bench. I hope that it will be accepted as such.
The legislative load outlined in the Queen's Speech is broadly similar to last Session's load. Clearly, every Session leaves an imprint, and I have no doubt that the connoisseurs of multilateral political warfare will find that the legislation proposing the abolition of the GLC and the metropolitan counties will reward them for all their interest. I have been reminded of that not merely by the Opposition.
Important though that legislation is, I remind the House of three other proposals contained in the Queen's Speech which deserve to be put in the balance and recorded in this debate. First, by any judgment, the Representation of the People Act is a major measure. It will significantly extend the franchise by providing for postal voting for holidaymakers and by extending the franchise to certain British citizens resident abroad. I am delighted that the legislation gives a handsome response to the recommendations of the Home Affairs departmental Select Committee for 1982–83. As Parliament is rooted in popular representation, I believe that there will be strong support for this measure, implying as it does a commitment to the ballot box.
Secondly, the Pensions Bill will be designed to improve the occupational pension rights of those who leave schemes before pensionable age. This is an increasing problem with greater labour mobility. This legislation is an advantageous social measure, and I am certain that the whole House will extend good will to my right hon. Friend the Secretary of State for Social Services in securing the passage of this measure.
The third item that I choose to demonstrate the utility of the Queen's Speech is the legislation that will be necessary for Hong Kong. That legislation is of great

619
significance—I doubt that that point will be challenged in any quarter of the House—not only because of what it portends for Hong Kong but because of what it means for us. The legislation deals with an area of growing political and economic importance and of great consideration to our overseas interests. The manner in which and the dignity with which we are adjusting our status in Hong Kong betokens greater possibilities for enhancing our future influence in not only that area but the wider Asian area that it serves. Since so much of our foreign policy in a post-imperial age derives from influence rather than the normal exercise of power, the legislation is in every sense a testimony to the negotiating skills of my right hon. and learned Friend the Secretary of State for Foreign and Commonwealth Affairs.
If I hear murmurs of discontent from the Opposition —I do not include the alliance Benches, but refer to the Labour Benches—I make this point: it is difficult for many hon. Members to believe that this country finds itself as well beyond its boundaries as within. Perhaps a country of this maritime tradition finds itself never so well far beyond its boundaries as within. That is a message to be taken to heart.
Mr. Shore: It is a great pity that the right hon. Gentleman is left to quarrel with himself and to imagine that he is engaging the Opposition in some great controversy. He is not. The only matter causing restlessness among the Opposition is his failure so far to address himself to the major issues of the economy, including our high and growing unemployment.
Mr. Biffen: I thank the right hon. Gentleman for his reassurance. I shall not disappoint him on the question of debate on the economy. I realise that it is much easier for the right hon. Gentleman to stand at the Dispatch Box to agree with me than it is for him to agree with most of those behind him.
The three Bills, serving as they do social issues, issues of parliamentary democracy and a wider national interest, are characteristic of this wise Queen's Speech. But, of course, in response to the invitation of the right hon. Member for Bethnal Green and Stepney, I say at once that I refer to the economic background against which the politics of this Session will be conducted.
In the debate, we have heard frequent mention of unemployment. That is natural enough, with the jobless levels that we have experienced in recent years and that still persist. I shall, therefore, naturally comment upon that part of the debate. However, I shall make an initial reference to inflation. I appreciate that the right hon. Member for Glasgow, Govan (Mr. Millan), who is the erstwhile shadow spokesman for Scotland, seemed to be worried that I would not discuss the issue of unemployment. I say this to the right hon. Gentleman. Any consideration of the Queen's Speech must have reference to the points that I have already made, and any reference to the economy must also have reference to the level of inflation. If Opposition Members have become unbalanced in their consideration of the matter, they cannot see it in that wider perspective.
Therefore, I make an initial reference to inflation. The success of my right hon. Friend the Chancellor of the Exchequer in securing an inflation rate of 4·7 per cent. is central to the Government's economic strategy. It represents a valuable step forward in securing a sense of
620
realism in economic affairs, pay claims and settlements and generally in industrial relations. Indeed, it is the relative stability that comes with lower inflation that has enabled us to live with such high unemployment without a greater disruption of our social structure.
Meanwhile, my right hon. Friend is determined to build upon the success of lower inflation. He does so with the prospects of increasing national output, a prudent balance between spending and taxation and a promising outlook for British overseas trade.
Mr. Jack Straw: Did the right hon. Gentleman write this?
Mr. Biffen: Every word that I say is well considered and well measured. It may be trite—that I do not deny—but it is the obvious nature of it that Opposition Members cannot accept—(Interruption.] Even so, there remains the issue of unemployment.
Mr. Rogers: This speech is like the Chancellor's tie —awful.
Mr. Speaker: Order. The hon. Gentleman's speech was heard in silence. I ask him to give the Leader of the House a fair hearing.
Mr. Biffen: Even so, there remains the issue of unemployment. The fact that it is also a major problem with our trading partners and rivals offers no consolation. The social and economic challenge remains daunting. However, the problem is trivialised by the rhetoric so freely used from Opposition Benches. I invite the House to share with me both an analysis and a prescription for the present employment situation. First I refer to the analysis—of how the unemployment toll has climbed upwards of 3 million. Some have suggested that unemployment has been the instrument of Government policy. [HON. MEMBERS: "Hear, hear."] The very cheers from Opposition Benches that greet that remark show at what level Opposition Members are prepard to discuss such serious subjects.
There has been a crude slander that the Government created the present levels of workless to weaken trade unions. That argument is fantasy. Indeed, the reality, and not the fantasy, is that there are two major factors in our present unemployment situation. First, there is the demographic factor.
Mr. Straw: Ah.
Mr. Biffen: Is it denied that there is a demographic factor in unemployment?
Mr. Straw: Of course there are demographic factors in unemployment—though the right hon. Gentleman and his colleagues always denied that when the Labour Government were in power.
Will the right hon. Gentleman explain why, while our inflation record is no better in relative terms than the records of our partners, our unemployment record is the worst of all the industrial nations? What is the answer to that?
Mr. Biffen: If the hon. Gentleman bad had the pleasure of listening to my right hon. Friend the Chancellor of the Exchequer making his autumn statement, he would know that my right hon. Friend rebutted that proposition in respect of our partners in the European Community. However, I am glad that we have elicited—not without difficulty — an acknowledgement of demographic

621
factors. At least we have taken the debate a stage beyond the abuse that unemployment is a deliberate action of the Government and is designed to be a central part of their economic policy to harass working people.
The demographic factor of current relevance is the fact that the national work force has expanded by 400,000 since 1979, as those leaving schools and further education exceed those who are aging into retirement.
Firstly, there has been a massive transformation in the relationship between the work force and output. In 1983, the national output was almost identical to the figure for 1979, yet that identical output was being secured by a work force reduced by 1·7 million. Of course oil is a factor, but there has also been a productivity revolution, and the right hon. Member for Cardiff, South and Penarth was generous enough to refer to that.
These are real considerations which help to explain a significant part of our current levels of unemployment. They also suggest that the new patterns of activity are more likely to come about if we abandon high-cost methods of production and follow the guides of competitive price and profit. That is the mainspring of the Government's policy.
Meanwhile, the Government have never denied the importance of public action and public funds in policies for employment. That has been particularly true in the ambitious training schemes we how have for young people. These are estimated to cost about £1,100 million in the current year.
Secondly, we have sought to change our fiscal structure to encourage the expansion of wealth-creating small businesses. We have also tried to shift the burden of corporate taxation so that it weighs less heavily on employment. The abolition of the national insurance surcharge was welcome and wise. It will do more to encourage, rather than penalise, employment.
Finally, we acknowledge that employment in Britain can best be secured within an open trading system and—no less important—with the political and economic alliances of the West. Indeed, it could hardly be otherwise for a nation exporting over 30 per cent. of its gross domestic product.
Yet we frequently hear cries from the Opposition Benches demanding protectionism and neutralism. Those cries can only harm our security, our trade and our employment. Therefore, I say to Labour Members that we will debate the issue of unemployment and the personal tragedies that it implies. But we will debate it by analysis and on policy, and not by generalised and extreme rhetoric.
The return of this country to greater employment will not be by some mechanical process. It cannot be gauged by some interlocking relationship with public spending or movements in inflation. As much as anything, it will be the product of social attitudes and business confidence.
It is a reality and not an abdication to assert that in these matters the authority of the Government is conditional and not absolute. That said, I have no doubt that the policies that I have outlined are well founded and will play their role in bringing about the return to work. In the debate on employment, as in so much else, the future belongs to us, and that is what this parliamentary Session will show.
Question put, That the amendment be made:—
The House divided: Ayes 205, Noes 364.
622

Division No. 4]

[10 pm

AYES

Adams, Allen (Paisley N)

Godman, Dr Norman

Alton, David

Golding, John

Anderson, Donald

Gould, Bryan

Archer, Rt Hon Peter

Gourlay, Harry

Ashdown, Paddy

Hamilton, W. W. (Central Fife)

Ashley, Rt Hon Jack

Hancock, Mr. Michael

Ashton, Joe

Hardy, Peter

Atkinson, N. (Tottenham)

Harman, Ms Harriet

Bagier, Gordon A. T.

Harrison, Rt Hon Walter

Banks, Tony (Newham NW)

Hart, Rt Hon Dame Judith

Barnett, Guy

Hattersley, Rt Hon Roy

Barron, Kevin

Haynes, Frank

Beckett, Mrs Margaret

Heffer, Eric S.

Beith, A. J.

Hogg, N. (C'nauld & Kilsyth)

Bell, Stuart

Home Robertson, John

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

Howell, Rt Hon D. (S'heath)

Bermingham, Gerald

Howells, Geraint

Bidwell, Sydney

Hughes, Dr. Mark (Durham)

Blair, Anthony

Hughes, Robert (Aberdeen N)

Boothroyd, Miss Betty

Hughes, Roy (Newport East)

Boyes, Roland

Hughes, Sean (Knowsley S)

Bray, Dr Jeremy

Hughes, Simon (Southwark)

Brown, Gordon (D'f'mline E)

Janner, Hon Greville

Brown, Hugh D. (Provan)

Jenkins, Rt Hon Roy (Hillh'd)

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

John, Brynmor

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

Johnston, Russell

Brown, Ron (E'burgh, Leith)

Kaufman, Rt Hon Gerald

Bruce, Malcolm

Kennedy, Charles

Buchan, Norman

Kilroy-Silk, Robert

Caborn, Richard

Kinnock, Rt Hon Neil

Callaghan, Rt Hon J.

Kirkwood, Archy

Callaghan, Jim (Heyw'd & M)

Lamond, James

Campbell, Ian

Leadbitter, Ted

Canavan, Dennis

Leighton, Ronald

Carlile, Alexander (Montg'y)

Lewis, Ron (Carlisle)

Clarke, Thomas

Lewis, Terence (Worsley)

Clay, Robert

Litherland, Robert

Clwyd, Mrs Ann

Lloyd, Tony (Stretford)

Cocks, Rt Hon M. (Bristol S.)

Lofthouse, Geoffrey

Cohen, Harry

Loyden, Edward

Coleman, Donald

McCartney, Hugh

Concannon, Rt Hon J. D.

McDonald, Dr Oonagh

Conlan, Bernard

McGuire, Michael

Cook, Frank (Stockton North)

McKay, Allen (Penistone)

Cook, Robin F. (Livingston)

McKelvey, William

Corbett, Robin

Maclennan, Robert

Corbyn, Jeremy

McTaggart, Robert

Cowans, Harry

McWilliam, John

Cox, Thomas (Tooting)

Madden, Max

Craigen, J. M.

Marek, Dr John

Crowther, Stan

Martin, Michael

Cunliffe, Lawrence

Mason, Rt Hon Roy

Cunningham, Dr John

Maxton, John

Davies, Ronald (Caerphilly)

Maynard, Miss Joan

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

Meacher, Michael

Deakins, Eric

Meadowcroft, Michael

Dewar, Donald

Michie, William

Dixon, Donald

Mikardo, Ian

Dobson, Frank

Millan, Rt Hon Bruce

Dormand, Jack

Morris, Rt Hon A. (W'shawe)

Douglas, Dick

Morris, Rt Hon J. (Aberavon)

Dubs, Alfred

Nellist, David

Dunwoody, Hon Mrs G.

Oakes, Rt Hon Gordon

Eadie, Alex

O'Brien, William

Eastham, Ken

O'Neill, Martin

Edwards, Bob (W'h'mpfn SE)

Orme, Rt Hon Stanley

Ellis, Raymond

Owen, Rt Hon Dr David

Evans, John (St. Helens N)

Park, George

Ewing, Harry

Parry, Robert

Faulds, Andrew

Patchett, Terry

Fisher, Mark

Pavitt, Laurie

Foot, Rt Hon Michael

Pendry, Tom

Foster, Derek

Penhaligon, David

Foulkes, George

Pike, Peter

Fraser, J. (Norwood)

Powell, Raymond (Ogmore)

Freeson, Rt Hon Reginald

Prescott, John

Garrett, W. E.

Radice, Giles

Gilbert, Rt Hon Dr John

Randall, Stuart

623

Redmond, M.

Stewart, Rt Hon D. (W Isles)

Rees, Rt Hon M. (Leeds S)

Stott, Roger

Richardson, Ms Jo

Strang, Gavin

Roberts, Ernest (Hackney N)

Straw, Jack

Robertson, George

Thomas, Dr R. (Carmarthen)

Robinson, G. (Coventry NW)

Thompson, J. (Wansbeck)

Rogers, Allan

Thome, Stan (Preston)

Rooker, J. W.

Tinn, James

Ross, Ernest (Dundee W)

Torney, Tom

Ross, Stephen (Isle of Wight)

Wainwright, R.

Rowlands, Ted

Wallace, James

Ryman, John

Warden, Gareth (Gower)

Sedgemore, Brian

Wareing, Robert

Sheerman, Barry

Weetch, Ken

Sheldon, Rt Hon R.

Welsh, Michael

Shore, Rt Hon Peter

White, James

Short, Ms Clare (Ladywood)

Wigley, Dafydd

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

Williams, Rt Hon A.

Silkin, Rt Hon J.

Wilson, Gordon

Skinner, Dennis

Winnick, David

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

Wrigglesworth, Ian

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

Young, David (Bolton SE)

Snape, Peter

Soley, Clive

Tellers for the Ayes:

Spearing, Nigel

Mr. James Hamilton and

Steel, Rt Hon David

Mr. Austin Mitchell.

NOES

Adley, Robert

Butterfill, John

Aitken, Jonathan

Carlisle, John (N Luton)

Alexander, Richard

Carlisle, Kenneth (Lincoln)

Alison, Rt Hon Michael

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

Amery, Rt Hon Julian

Carttiss, Michael

Amess, David

Cash, William

Ancram, Michael

Chalker, Mrs Lynda

Arnold, Tom

Chapman, Sydney

Ashby, David

Chope, Christopher

Aspinwall, Jack

Churchill, W. S.

Atkins, Rt Hon Sir H.

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

Atkins, Robert (South Ribble)

Clark, Dr Michael (Rochford)

Atkinson, David (B'm'th E)

Clark, Sir W. (Croydon S)

Baker, Rt Hon K. (Mole Vall'y)

Clarke, Rt Hon K. (Rushcliffe)

Baker, Nicholas (N Dorset)

Clegg, Sir Walter

Baldry, Tony

Cockeram, Eric

Batiste, Spencer

Colvin, Michael

Beaumont-Dark, Anthony

Con way, Derek

Beggs, Roy

Coombs, Simon

Bellingham, Henry

Cope, John

Bendall, Vivian

Cormack, Patrick

Bennett, Sir Frederic (T'bay)

Couchman, James

Benyon, William

Cranborne, Viscount

Best, Keith

Crouch, David

Bevan, David Gilroy

Currie, Mrs Edwina

Biffen, Rt Hon John

Dickens, Geoffrey

Biggs-Davison, Sir John

Dicks, Terry

Blackburn, John

Dorrell, Stephen

Blaker, Rt Hon Sir Peter

Douglas-Hamilton, Lord J.

Body, Richard

Dover, Den

Bonsor, Sir Nicholas

du Cann, Rt Hon Edward

Bottomley, Peter

Dunn, Robert

Bottomley, Mrs Virginia

Durant, Tony

Bowden, A. (Brighton K'to'n)

Dykes, Hugh

Bowden, Gerald (Dulwich)

Edwards, Rt Hon N. (P'broke)

Boyson, Dr Rhodes

Eggar, Tim

Braine, Sir Bernard

Evennett, David

Brandon-Bravo, Martin

Eyre, Sir Reginald

Bright, Graham

Fairbairn, Nicholas

Brinton, Tim

Fallon, Michael

Brittan, Rt Hon Leon

Farr, Sir John

Brooke, Hon Peter

Favell, Anthony

Brown, M. (Brigg & Cl'thpes)

Fenner, Mrs Peggy

Browne, John

Finsberg, Sir Geoffrey

Bruinvels, Peter

Fletcher, Alexander

Bryan, Sir Paul

Fookes, Miss Janet

Buchanan-Smith, Rt Hon A.

Forman, Nigel

Budgen, Nick

Forsyth, Michael (Stirling)

Bulmer, Esmond

Forsythe, Clifford (S Antrim)

Burl, Alistair

Forth, Eric

Butcher, John

Fowler, Rt Hon Norman

Butler, Hon Adam

Fox, Marcus

624

Franks, Cecil

Lang, Ian

Fraser, Peter (Angus East)

Latham, Michael

Freeman, Roger

Lawler, Geoffrey

Fry, Peter

Lawrence, Ivan

Gale, Roger

Lawson, Rt Hon Nigel

Galley, Roy

Leigh, Edward (Gainsbor'gh)

Gardiner, George (Reigate)

Lennox-Boyd, Hon Mark

Gardner, Sir Edward (Fylde)

Lester, Jim

Garel-Jones, Tristan

Lewis, Sir Kenneth (Stamf'd)

Glyn, Dr Alan

Lightbown, David

Goodlad, Alastair

Lilley, Peter

Gorst, John

Lloyd, Ian (Havant)

Gow, Ian

Lloyd, Peter, (Fareham)

Gower, Sir Raymond

Lord, Michael

Grant, Sir Anthony

Luce, Richard

Greenway, Harry

Lyell, Nicholas

Gregory, Conal

McCurley, Mrs Anna

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

McCusker, Harold

Griffiths, Peter (Portsm'th N)

Macfarlane, Neil

Grist, Ian

MacKay, Andrew (Berkshire)

Ground, Patrick

MacKay, John (Argyll & Bute)

Grylls, Michael

Maclean, David John

Gummer, John Selwyn

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

Hamilton, Hon A. (Epsom)

Madel, David

Hamilton, Neil (Tatton)

Maginnis, Ken

Hampson, Dr Keith

Major, John

Hanley, Jeremy

Malins, Humfrey

Hannam,John

Malone, Gerald

Hargreaves, Kenneth

Maples, John

Harris, David

Marlow, Antony

Harvey, Robert

Marshall, Michael (Arundel)

Haselhurst, Alan

Mates, Michael

Havers, Rt Hon Sir Michael

Mather, Carol

Hawkins, C. (High Peak)

Maude, Hon Francis

Hawkins, Sir Paul (SW N'folk)

Mawhinney, Dr Brian

Hawksley, Warren

Maxwell-Hyslop, Robin

Hayes, J.

Mayhew, Sir Patrick

Hayhoe, Barney

Mellor, David

Hayward, Robert

Merchant, Piers

Heathcoat-Amory, David

Meyer, Sir Anthony

Heddle, John

Mills, Iain (Meriden)

Henderson, Barry

Mills, Sir Peter (West Devon)

Heseltine, Rt Hon Michael

Miscampbell, Norman

Hickmet, Richard

Mitchell, David (NW Hants)

Hicks, Robert

Moate, Roger

Higgins, Rt Hon Terence L.

Molyneaux, Rt Hon James

Hill, James

Monro, Sir Hector

Hind, Kenneth

Montgomery, Fergus

Hirst, Michael

Moore, John

Hogg, Hon Douglas (Gr'th'm)

Morrison, Hon C. (Devizes)

Holland, Sir Philip (Gedling)

Morrison, Hon P. (Chester)

Holt, Richard

Moynihan, Hon C.

Hooson, Tom

Mudd, David

Hordern, Peter

Murphy, Christopher

Howard, Michael

Neale, Gerrard

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

Needham, Richard

Howarth, Gerald (Cannock)

Nelson, Anthony

Howe, Rt Hon Sir Geoffrey

Neubert, Michael

Howell, Rt Hon D. (G'ldford)

Newton, Tony

Howell, Ralph (N Norfolk)

Nicholls, Patrick

Hubbard-Miles, Peter

Nicholson, J.

Hunt, David (Wirral)

Norris, Steven

Hunt, John (Ravensbourne)

Onslow, Cranley

Hunter, Andrew

Oppenheim, Phillip

Hurd, Rt Hon Douglas

Oppenheim, Rt Hon Mrs S.

Jackson, Robert

Ottaway, Richard

Jenkin, Rt Hon Patrick

Page, Richard (Herts SW)

Jessel, Toby

Parkinson, Rt Hon Cecil

Jones, Gwilym (Cardiff N)

Parris, Matthew

Jones, Robert (W Herts)

Patten, John (Oxford)

Joseph, Rt Hon Sir Keith

Pattie, Geoffrey

Kellett-Bowman, Mrs Elaine

Pawsey, James

Key, Robert

Peacock, Mrs Elizabeth

King, Roger (B'ham N'field)

Pollock, Alexander

King, Rt Hon Tom

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

Knight, Gregory (Derby N)

Powell, William (Corby)

Knight, Mrs Jill (Edgbaston)

Powley, John

Knowles, Michael

Prentice, Rt Hon Reg

Knox, David

Price, Sir David

Lamont, Norman

Prior, Rt Hon James

625

Pym, Rt Hon Francis

Stradling Thomas, J.

Raffan, Keith

Sumberg, David

Raison, Rt Hon Timothy

Tapsell, Peter

Rathbone, Tim

Taylor, John (Solihull)

Rees, Rt Hon Peter (Dover)

Taylor, Teddy (S'end E)

Renton, Tim

Temple-Morris, Peter

Rhodes James, Robert

Terlezki, Stefan

Rhys Williams, Sir Brandon

Thatcher, Rt Hon Mrs M.

Ridley, Rt Hon Nicholas

Thomas, Rt Hon Peter

Rippon, Rt Hon Geoffrey

Thorne, Neil (Ilford S)

Roberts, Wyn (Conwy)

Thornton, Malcolm

Robinson, Mark (N'port W)

Thurnham, Peter

Roe, Mrs Marion

Townend, John (Bridlington)

Ross, Wm. (Londonderry)

Townsend, Cyril D. (B'heath)

Rossi, Sir Hugh

Tracey, Richard

Rost, Peter

Trippier, David

Rowe, Andrew

Trotter, Neville

Rumbold, Mrs Angela

Twinn, Dr Ian

Ryder, Richard

van Straubenzee, Sir W.

Sackville, Hon Thomas

Vaughan, Sir Gerard

Sainsbury, Hon Timothy

Waddington, David

St. John-Stevas, Rt Hon N.

Waldegrave, Hon William

Sayeed, Jonathan

Walden, George

Scott, Nicholas

Walker, Cecil (Belfast N)

Shaw, Giles (Pudsey)

Walker, Bill (T'side N)

Shaw, Sir Michael (Scarb')

Walker, Rt Hon P. (W'cester)

Shelton, William (Streatham)

Waller, Gary

Shepherd, Colin (Hereford)

Walters, Dennis

Shepherd, Richard (Aldridge)

Ward, John

Shersby, Michael

Wardle, C. (Bexhill)

Silvester, Fred

Warren, Kenneth

Sims, Roger

Watson, John

Skeet, T. H. H.

Watts, John

Smith, Sir Dudley (Warwick)

Wells, Bowen (Hertford)

Smith, Tim (Beaconsfield)

Wells, Sir John (Maidstone)

Soames, Hon Nicholas

Wheeler, John

Speed, Keith

Whitney, Raymond

Speller, Tony

Wiggin, Jerry

Spence, John

Wilkinson, John

Spencer, Derek

Winterton, Mrs Ann

Spicer, Jim (W Dorset)

Winterton, Nicholas

Spicer, Michael (S Worcs)

Wolfson, Mark

Squire, Robin

Wood, Timothy

Stanley, John

Woodcock, Michael

Steen, Anthony

Yeo, Tim

Stern, Michael

Young, Sir George (Acton)

Stevens, Lewis (Nuneaton)

Younger, Rt Hon George

Stevens, Martin (Fulham)

Stewart, Allan (Eastwood)

Tellers for the Noes:

Stewart, Andrew (Sherwood)

Mr. Robert Boscawen and

Stewart, Ian (N Hertf'dshire)

Mr. Donald Thompson.

Stokes, John

Question accordingly negatived.
Amendment proposed, pursuant to Standing Order No. 35, at the end of the Question to add:
But humbly regret that the Gracious Speech offers no policies for reducing the level of unemployment.—[Mr. Beith.]
Question put forthwith pursuant to Standing Order No. 35 (Calling of amendments at end of a debate), That the amendment be made:—
The House divided: Ayes 200, Noes, 364.

Division No. 5]

[10.15 pm

AYES

Adams, Allen (Paisley N)

Beith, A. J.

Alton, David

Bell, Stuart

Anderson, Donald

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

Archer, Rt Hon Peter

Bermingham, Gerald

Ashdown, Paddy

Bidwell, Sydney

Ashley, Rt Hon Jack

Blair, Anthony

Ashton, Joe

Boothroyd, Miss Betty

Atkinson, N. (Tottenham)

Boyes, Roland

Bagier, Gordon A. T.

Bray, Dr Jeremy

Banks, Tony (Newham NW)

Brown, Gordon (D'f'mline E)

Barnett, Guy

Brown, Hugh D. (Provan)

Barron, Kevin

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

Beckett, Mrs Margaret

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

626

Brown, Ron (E'burgh, Leith)

Kilroy-Silk, Robert

Buchan, Norman

Kinnock, Rt Hon Neil

Caborn, Richard

Kirkwood, Archy

Callaghan, Rt Hon J.

Lamond, James

Callaghan, Jim (Heyw'd & M)

Leadbitter, Ted

Campbell, Ian

Leighton, Ronald

Canavan, Dennis

Lewis, Ron (Carlisle)

Carlile, Alexander (Montg'y)

Lewis, Terence (Worsley)

Clarke, Thomas

Litherland, Robert

Clay, Robert

Lloyd, Tony (Stretford)

Clwyd, Mrs Ann

Lofthouse, Geoffrey

Cocks, Rt Hon M. (Bristol S.)

Loyden, Edward

Cohen, Harry

McCartney, Hugh

Coleman, Donald

McDonald, Dr Oonagh

Concannon, Rt Hon J. D.

McGuire, Michael

Conlan, Bernard

McKay, Allen (Penistone)

Cook, Frank (Stockton North)

McKelvey, William

Cook, Robin F. (Livingston)

Maclennan, Robert

Corbett, Robin

McTaggart, Robert

Corbyn, Jeremy

McWilliam, John

Cowans, Harry

Madden, Max

Cox, Thomas (Tooting)

Marek, Dr John

Craigen, J. M.

Martin, Michael

Crowther, Stan

Mason, Rt Hon Roy

Cunliffe, Lawrence

Maxton, John

Cunningham, Dr John

Maynard, Miss Joan

Davies, Ronald (Caerphilly)

Meacher, Michael

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

Michie, William

Deakins, Eric

Mikardo, Ian

Dewar, Donald

Millan, Rt Hon Bruce

Dixon, Donald

Mitchell, Austin (G't Grimsby)

Dobson, Frank

Morris, Rt Hon A. (W'shawe)

Dormand, Jack

Morris, Rt Hon J. (Aberavon)

Douglas, Dick

Nellist, David

Dubs, Alfred

Oakes, Rt Hon Gordon

Dunwoody, Hon Mrs G.

O'Brien, William

Eadie, Alex

O'Neill, Martin

Eastham, Ken

Orme, Rt Hon Stanley

Edwards, Bob (W'h'mpt'n SE)

Owen, Rt Hon Dr David

Ellis, Raymond

Park, George

Evans, John (St. Helens N)

Parry, Robert

Ewing, Harry

Patchett, Terry

Faulds, Andrew

Pavitt, Laurie

Fisher, Mark

Pendry, Tom

Foot, Rt Hon Michael

Penhaligon, David

Foster, Derek

Pike, Peter

Foulkes, George

Powell, Raymond (Ogmore)

Fraser, J. (Norwood)

Prescott, John

Freeson, Rt Hon Reginald

Radice, Giles

Garrett, W. E.

Randall, Stuart

Gilbert, Rt Hon Dr John

Rees, Rt Hon M. (Leeds S)

Godman, Dr Norman

Richardson, Ms Jo

Golding, John

Roberts, Ernest (Hackney N)

Gould, Bryan

Robertson, George

Gourlay, Harry

Robinson, G. (Coventry NW)

Hamilton, James (M'well N)

Rogers, Allan

Hamilton, W. W. (Central Fife)

Rooker, J. W.

Hancock, Mr. Michael

Ross, Ernest (Dundee W)

Hardy, Peter

Ross, Stephen (Isle of Wight)

Harman, Ms Harriet

Rowlands, Ted

Harrison, Rt Hon Walter

Ryman, John

Hart, Rt Hon Dame Judith

Sedgemore, Brian

Hattersley, Rt Hon Roy

Sheerman, Barry

Haynes, Frank

Sheldon, Rt Hon R.

Heffer, Eric S.

Shore, Rt Hon Peter

Hogg, N. (C'nauld & Kilsyth)

Short, Ms Clare (Ladywood)

Home Robertson, John

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

Howell, Rt Hon D. (S'heath)

Silkin, Rt Hon J.

Howells, Geraint

Skinner, Dennis

Hughes, Dr. Mark (Durham)

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

Hughes, Robert (Aberdeen N)

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

Hughes, Roy (Newport East)

Snape, Peter

Hughes, Sean (Knowsley S)

Soley, Clive

Hughes, Simon (Southwark)

Spearing, Nigel

Janner, Hon Greville

Steel, Rt Hon David

Jenkins, Rt Hon Roy (Hillh'd)

Stott, Roger

John, Brynmor

Strang, Gavin

Johnston, Russell

Straw, Jack

Kaufman, Rt Hon Gerald

Thomas, Dr R. (Carmarthen)

Kennedy, Charles

Thompson, J. (Wansbeck)

627

Thorne, Stan (Preston)

White, James

Tinn, James

Wigley, Dafydd

Torney, Tom

Williams, Rt Hon A.

Wainwright, R.

Winnick, David

Wallace, James

Young, David (Bolton SE)

Warded, Gareth (Gower)

Wareing, Robert

Tellers for the Ayes:

Weetch, Ken

Mr. Ian Wrigglesworth and

Welsh, Michael

Mr. Michael Meadowcroft.

NOES

Adley, Robert

Conway, Derek

Aitken, Jonathan

Coombs, Simon

Alexander, Richard

Cope, John

Alison, Rt Hon Michael

Couchman, James

Amery, Rt Hon Julian

Cranborne, Viscount

Amess, David

Crouch, David

Ancram, Michael

Currie, Mrs Edwina

Arnold, Tom

Dickens, Geoffrey

Ashby, David

Dicks, Terry

Aspinwall, Jack

Dorrell, Stephen

Atkins, Rt Hon Sir H.

Douglas-Hamilton, Lord J.

Atkins, Robert (South Ribble)

Dover, Den

Atkinson, David (B'm'th E)

du Cann, Rt Hon Edward

Baker, Rt Hon K. (Mole Vall'y)

Dunn, Robert

Baker, Nicholas (N Dorset)

Durant, Tony

Baldry, Tony

Dykes, Hugh

Batiste, Spencer

Edwards, Rt Hon N. (P'broke)

Beaumont-Dark, Anthony

Eggar, Tim

Beggs, Roy

Evennett, David

Bellingham, Henry

Eyre, Sir Reginald

Bendall, Vivian

Fairbairn, Nicholas

Bennett, Sir Frederic (T'bay)

Fallon, Michael

Benyon, William

Farr, Sir John

Best, Keith

Favell, Anthony

Bevan, David Gilroy

Fenner, Mrs Peggy

Biffen, Rt Hon John

Finsberg, Sir Geoffrey

Biggs-Davison, Sir John

Fletcher, Alexander

Blackburn, John

Fookes, Miss Janet

Blaker, Rt Hon Sir Peter

Forman, Nigel

Body, Richard

Forsyth, Michael (Stirling)

Bonsor, Sir Nicholas

Forsythe, Clifford (S Antrim)

Bottomley, Peter

Forth, Eric

Bottomley, Mrs Virginia

Fowler, Rt Hon Norman

Bowden, A. (Brighton K'to'n)

Fox, Marcus

Bowden, Gerald (Dulwich)

Franks, Cecil

Boyson, Dr Rhodes

Fraser, Peter (Angus East)

Braine, Sir Bernard

Freeman, Roger

Brandon-Bravo, Martin

Fry, Peter

Bright, Graham

Gale, Roger

Brinton, Tim

Galley, Roy

Brittan, Rt Hon Leon

Gardiner, George (Reigate)

Brooke, Hon Peter

Gardner, Sir Edward (Fylde)

Brown, M. (Brigg & Cl'thpes)

Garel-Jones, Tristan

Browne, John

Glyn, Dr Alan

Bruinvels, Peter

Goodlad, Alastair

Bryan, Sir Paul

Gorst, John

Buchanan-Smith, Rt Hon A.

Gow, Ian

Budgen, Nick

Gower, Sir Raymond

Bulmer, Esmond

Grant, Sir Anthony

Burt, Alistair

Greenway, Harry

Butcher, John

Gregory, Conal

Butler, Hon Adam

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

Butterfill, John

Griffiths, Peter (Portsm'th N)

Carlisle, John (N Luton)

Grist, Ian

Carlisle, Kenneth (Lincoln)

Ground, Patrick

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

Grylls, Michael

Carttiss, Michael

Gummer, John Selwyn

Cash, William

Hamilton, Hon A. (Epsom)

Chalker, Mrs Lynda

Hamilton, Neil (Tatton)

Chapman, Sydney

Hampson, Dr Keith

Chope, Christopher

Hanley, Jeremy

Churchill, W. S.

Hannam, John

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

Hargreaves, Kenneth

Clark, Dr Michael (Rochford)

Harris, David

Clark, Sir W. (Croydon S)

Harvey, Robert

Clarke, Rt Hon K. (Rushcliffe)

Haselhurst, Alan

Clegg, Sir Walter

Havers, Rt Hon Sir Michael

Cockeram, Eric

Hawkins, C. (High Peak)

Colvin, Michael

Hawkins, Sir Paul (SW N'folk)

628

Hawksley, Warren

Maxwell-Hyslop, Robin

Hayes, J.

Mayhew, Sir Patrick

Hayhoe, Barney

Mellor, David

Hayward, Robert

Merchant, Piers

Heathcoat-Amory, David

Meyer, Sir Anthony

Heddle, John

Mills, Iain (Meriden)

Henderson, Barry

Mills, Sir Peter (West Devon)

Heseltine, Rt Hon Michael

Miscampbell, Norman

Hickmet, Richard

Mitchell, David (NW Hants)

Hicks, Robert

Moate, Roger

Higgins, Rt Hon Terence L.

Molyneaux, Rt Hon James

Hill, James

Monro, Sir Hector

Hind, Kenneth

Montgomery, Fergus

Hirst, Michael

Moore, John

Hogg, Hon Douglas (Gr'th'm)

Morrison, Hon C. (Devizes)

Holland, Sir Philip (Gedling)

Morrison, Hon P. (Chester)

Holt, Richard

Moynihan, Hon C.

Hooson, Tom

Mudd, David

Hordern, Peter

Murphy, Christopher

Howard, Michael

Neale, Gerrard

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

Needham, Richard

Howarth, Gerald (Cannock)

Nelson, Anthony

Howe, Rt Hon Sir Geoffrey

Neubert, Michael

Howell, Rt Hon D. (G'ldford)

Newton, Tony

Howell, Ralph (N Norfolk)

Nicholls, Patrick

Hubbard-Miles, Peter

Nicholson, J.

Hunt, David (Wirral)

Norris, Steven

Hunt, John (Ravensbourne)

Onslow, Cranley

Hunter, Andrew

Oppenheim, Phillip

Hurd, Rt Hon Douglas

Oppenheim, Rt Hon Mrs S.

Jackson, Robert

Ottaway, Richard

Jenkin, Rt Hon Patrick

Page, Richard (Herts SW)

Jessel, Toby

Parkinson, Rt Hon Cecil

Jones, Gwilym (Cardiff N)

Parris, Matthew

Jones, Robert (W Herts)

Patten, John (Oxford)

Joseph, Rt Hon Sir Keith

Pattie, Geoffrey

Kellett-Bowman, Mrs Elaine

Pawsey, James

Key, Robert

Peacock, Mrs Elizabeth

King, Roger (B'ham N'field)

Pollock, Alexander

King, Rt Hon Tom

Powell, William (Corby)

Knight, Gregory (Derby N)

Powley, John

Knight, Mrs Jill (Edgbaston)

Prentice, Rt Hon Reg

Knowles, Michael

Price, Sir David

Knox, David

Prior, Rt Hon James

Lamont, Norman

Pym, Rt Hon Francis

Latham, Michael

Raffan, Keith

Lawler, Geoffrey

Raison, Rt Hon Timothy

Lawrence, Ivan

Rathbone, Tim

Lawson, Rt Hon Nigel

Rees, Rt Hon Peter (Dover)

Leigh, Edward (Gainsbor'gh)

Renton, Tim

Lennox-Boyd, Hon Mark

Rhodes James, Robert

Lester, Jim

Rhys Williams, Sir Brandon

Lewis, Sir Kenneth (Stamf'd)

Ridley, Rt Hon Nicholas

Lightbown, David

Rifkind, Malcolm

Lilley, Peter

Rippon, Rt Hon Geoffrey

Lloyd, Ian (Havant)

Roberts, Wyn (Conwy)

Lloyd, Peter, (Fareham)

Robinson, Mark (N'port W)

Lord, Michael

Roe, Mrs Marion

Luce, Richard

Ross, Wm. (Londonderry)

Lyell, Nicholas

Rossi, Sir Hugh

McCurley, Mrs Anna

Rost, Peter

McCusker, Harold

Rowe, Andrew

Macfarlane, Neil

Rumbold, Mrs Angela

MacKay, Andrew (Berkshire)

Ryder, Richard

MacKay, John (Argyll & Bute)

Sackville, Hon Thomas

Maclean, David John

Sainsbury, Hon Timothy

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

St. John-Stevas, Rt Hon N.

McQuarrie, Albert

Sayeed, Jonathan

Madel, David

Scott, Nicholas

Maginnis, Ken

Shaw, Giles (Pudsey)

Major, John

Shaw, Sir Michael (Scarb')

Malins, Humfrey

Shelton, William (Streatham)

Malone, Gerald

Shepherd, Colin (Hereford)

Maples, John

Shepherd, Richard (Aldridge)

Marlow, Antony

Shersby, Michael

Marshall, Michael (Arundel)

Silvester, Fred

Mates, Michael

Sims, Roger

Mather, Carol

Skeet, T. H. H.

Maude, Hon Francis

Smith, Sir Dudley (Warwick)

Mawhinney, Dr Brian

Smith, Tim (Beaconsfield)

629

Soames, Hon Nicholas

Twinn, Dr Ian

Speed, Keith

van Straubenzee, Sir W.

Speller, Tony

Vaughan, Sir Gerard

Spence, John

Waddington, David

Spencer, Derek

Waldegrave, Hon William

Spicer, Jim (W Dorset)

Walden, George

Spicer, Michael (S Worcs)

Walker, Cecil (Belfast N)

Squire, Robin

Walker, Bill (T'side N)

Stanley, John

Walker, Rt Hon P. (W'cester)

Steen, Anthony

Waller, Gary

Stern, Michael

Walters, Dennis

Stevens, Lewis (Nuneaton)

Ward, John

Stevens, Martin (Fulham)

Wardle, C. (Bexhill)

Stewart, Allan (Eastwood)

Warren, Kenneth

Stewart, Andrew (Sherwood)

Watson, John

Stewart, Ian (N Hertf'dshire)

Watts, John

Stokes, John

Wells, Bowen (Hertford)

Stradling Thomas, J.

Wells, Sir John (Maidstone)

Sumberg, David

Wheeler, John

Tapsell, Peter

Whitney, Raymond

Taylor, John (Solihull)

Wiggin, Jerry

Taylor, Teddy (S'end E)

Wilkinson, John

Temple-Morris, Peter

Winterton, Mrs Ann

Terlezki, Stefan

Winterton, Nicholas

Thatcher, Rt Hon Mrs M.

Wolfson, Mark

Thomas, Rt Hon Peter

Wood, Timothy

Thompson, Donald (Calder V)

Woodcock, Michael

Thorne, Neil (Ilford S)

Yeo, Tim

Thornton, Malcolm

Young, Sir George (Acton)

Thurnham, Peter

Younger, Rt Hon George

Townend, John (Bridlington)

Townsend, Cyril D. (B'heath)

Tellers for the Noes:

Tracey, Richard

Mr. Robert Boscawen and

Trippier, David

Mr. Ian Lang

Trotter, Neville

Question accordingly negatived.
Main Question put:—
The House divided: Ayes 352, Noes 202.

Division No.6]

[10.30 pm

AYES

Adley, Robert

Bright, Graham

Aitken, Jonathan

Brinton, Tim

Alexander, Richard

Brittan, Rt Hon Leon

Alison, Rt Hon Michael

Brooke, Hon Peter

Amery, Rt Hon Julian

Brown, M. (Brigg & Cl'thpes)

Amess, David

Browne, John

Ancram, Michael

Bruinvels, Peter

Arnold, Tom

Bryan, Sir Paul

Ashby, David

Buchanan-Smith, Rt Hon A.

Aspinwall, Jack

Budgen, Nick

Atkins, Rt Hon Sir H.

Bulmer, Esmond

Atkins, Robert (South Ribble)

Burt, Alistair

Atkinson, David (B'm'th E)

Butcher, John

Baker, Rt Hon K. (Mole Vall'y)

Butler, Hon Adam

Baker, Nicholas (N Dorset)

Butterfill, John

Baldry, Tony

Carlisle, John (N Luton)

Batiste, Spencer

Carlisle, Kenneth (Lincoln)

Beaumont-Dark, Anthony

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

Bellingham, Henry

Carttiss, Michael

Bendall, Vivian

Cash, William

Bennett, Sir Frederic (T'bay)

Chalker, Mrs Lynda

Benyon, William

Chapman, Sydney

Best, Keith

Chope, Christopher

Bevan, David Gilroy

Churchill, W. S.

Biffen, Rt Hon John

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

Biggs-Davison, Sir John

Clark, Dr Michael (Rochford)

Blackburn, John

Clark, Sir W. (Croydon S)

Blaker, Rt Hon Sir Peter

Clarke, Rt Hon K. (Rushcliffe)

Body, Richard

Clegg, Sir Walter

Bonsor, Sir Nicholas

Cockeram, Eric

Bottomley, Peter

Colvin, Michael

Bottomley, Mrs Virginia

Conway, Derek

Bowden, A. (Brighton K'to'n)

Coombs, Simon

Bowden, Gerald (Dulwich)

Cope, John

Boyson, Dr Rhodes

Cormack, Patrick

Braine, Sir Bernard

Couchman, James

Brandon-Bravo, Martin

Cranborne, Viscount

630

Crouch, David

Howard, Michael

Currie, Mrs Edwina

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

Dickens, Geoffrey

Howarth, Gerald (Cannock)

Dicks, Terry

Howe, Rt Hon Sir Geoffrey

Dorrell, Stephen

Howell, Rt Hon D. (G'ldford)

Douglas-Hamilton, Lord J.

Howell, Ralph (N Norfolk)

Dover, Den

Hubbard-Miles, Peter

du Cann, Rt Hon Edward

Hunt, David (Wirral)

Dunn, Robert

Hunt, John (Ravensbourne)

Durant, Tony

Hunter, Andrew

Dykes, Hugh

Jackson, Robert

Edwards, Rt Hon N. (P'broke)

Jenkin, Rt Hon Patrick

Eggar, Tim

Jessel, Toby

Evennett, David

Jones, Gwilym (Cardiff N)

Eyre, Sir Reginald

Jones, Robert (W Herts)

Fairbairn, Nicholas

Joseph, Rt Hon Sir Keith

Fallon, Michael

Kellett-Bowman, Mrs Elaine

Farr, Sir John

Key, Robert

Favell, Anthony

King, Roger (B'ham N'field)

Fenner, Mrs Peggy

King, Rt Hon Tom

Finsberg, Sir Geoffrey

Knight, Gregory (Derby N)

Fletcher, Alexander

Knight, Mrs Jill (Edgbaston)

Fookes, Miss Janet

Knowles, Michael

Forman, Nigel

Knox, David

Forsyth, Michael (Stirling)

Lamont, Norman

Forth, Eric

Lang, Ian

Fowler, Rt Hon Norman

Latham, Michael

Franks, Cecil

Lawler, Geoffrey

Fraser, Peter (Angus East)

Lawrence, Ivan

Freeman, Roger

Lawson, Rt Hon Nigel

Fry, Peter

Leigh, Edward (Gainsbor'gh)

Gale, Roger

Lennox-Boyd, Hon Mark

Galley, Roy

Lester, Jim

Gardiner, George (Reigate)

Lewis, Sir Kenneth (Stamf'd)

Gardner, Sir Edward (Fylde)

Lightbown, David

Glyn, Dr Alan

Lilley, Peter

Goodlad, Alastair

Lloyd, Ian (Havant)

Gorst, John

Lloyd, Peter, (Fareham)

Gow, Ian

Lord, Michael

Gower, Sir Raymond

Luce, Richard

Grant, Sir Anthony

Lyell, Nicholas

Greenway, Harry

McCurley, Mrs Anna

Gregory, Conal

Macfarlane, Neil

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

MacKay, Andrew (Berkshire)

Griffiths, Peter (Portsm'th N)

MacKay, John (Argyll & Bute)

Grist, Ian

Maclean, David John

Ground, Patrick

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

Grylls, Michael

McQuarrie, Albert

Gummer, John Selwyn

Madel, David

Hamilton, Hon A. (Epsom)

Major, John

Hamilton, Neil (Tatton)

Malins, Humfrey

Hampson, Dr Keith

Malone, Gerald

Hanley, Jeremy

Maples, John

Hannam, John

Marlow, Antony

Hargreaves, Kenneth

Marshall, Michael (Arundel)

Harris, David

Mates, Michael

Harvey, Robert

Mather, Carol

Haselhurst, Alan

Maude, Hon Francis

Havers, Rt Hon Sir Michael

Mawhinney, Dr Brian

Hawkins, C. (High Peak)

Maxwell-Hyslop, Robin

Hawkins, Sir Paul (SW N'folk)

Mayhew, Sir Patrick

Hawksley, Warren

Mellor, David

Hayes, J.

Merchant, Piers

Hayhoe, Barney

Meyer, Sir Anthony

Hayward, Robert

Mills, Iain (Meriden)

Heathcoat-Amory, David

Mills, Sir Peter (West Devon)

Heddle, John

Miscampbell, Norman

Henderson, Barry

Mitchell, David (NW Hants)

Heseltine, Rt Hon Michael

Moate, Roger

Hickmet, Richard

Monro, Sir Hector

Hicks, Robert

Montgomery, Fergus

Higgins, Rt Hon Terence L.

Moore, John

Hill, James

Morrison, Hon C. (Devizes)

Hind, Kenneth

Morrison, Hon P. (Chester)

Hirst, Michael

Moynihan, Hon C.

Hogg, Hon Douglas (Gr'th'm)

Mudd, David

Holland, Sir Philip (Gedling)

Murphy, Christopher

Holt, Richard

Neale, Gerrard

Hooson, Tom

Needham, Richard

Hordern, Peter

Nelson, Anthony

631

Neubert, Michael

Squire, Robin

Newton, Tony

Stanley, John

Nicholls, Patrick

Steen, Anthony

Norris, Steven

Stern, Michael

Onslow, Cranley

Stevens, Lewis (Nuneaton)

Oppenheim, Phillip

Stevens, Martin (Fulham)

Oppenheim, Rt Hon Mrs S.

Stewart, Allan (Eastwood)

Ottaway, Richard

Stewart, Andrew (Sherwood)

Page, Richard (Herts SW)

Stewart, Ian (N Hertf'dshire)

Parkinson, Rt Hon Cecil

Stokes, John

Parris, Matthew

Stradling Thomas, J.

Patten, John (Oxford)

Sumberg, David

Pattie, Geoffrey

Tapsell, Peter

Pawsey, James

Taylor, John (Solihull)

Peacock, Mrs Elizabeth

Taylor, Teddy (S'end E)

Pollock, Alexander

Temple-Morris, Peter

Powell, William (Corby)

Terlezki, Stefan

Powley, John

Thatcher, Rt Hon Mrs M.

Prentice, Rt Hon Reg

Thomas, Rt Hon Peter

Price, Sir David

Thompson, Donald (Calder V)

Prior, Rt Hon James

Thorne, Neil (Ilford S)

Raffan, Keith

Thornton, Malcolm

Raison, Rt Hon Timothy

Thurnham, Peter

Rathbone, Tim

Townend, John (Bridlington)

Rees, Rt Hon Peter (Dover)

Townsend, Cyril D. (B'heath)

Renton, Tim

Tracey, Richard

Rhodes James, Robert

Trippier, David

Rhys Williams, Sir Brandon

Trotter, Neville

Ridley, Rt Hon Nicholas

Twinn, Dr Ian

Rifkind, Malcolm

van Straubenzee, Sir W.

Rippon, Rt Hon Geoffrey

Vaughan, Sir Gerard

Roberts, Wyn (Conwy)

Waddington, David

Robinson, Mark (N'port W)

Waldegrave, Hon William

Roe, Mrs Marion

Walden, George

Rossi, Sir Hugh

Walker, Bill (T'side N)

Rost, Peter

Walker, Rt Hon P. (W'cester)

Rowe, Andrew

Waller, Gary

Rumbold, Mrs Angela

Walters, Dennis

Ryder, Richard

Ward, John

Sackville, Hon Thomas

Wardle, C. (Bexhill)

Sainsbury, Hon Timothy

Warren, Kenneth

St. John-Stevas, Rt Hon N.

Watson, John

Sayeed, Jonathan

Watts, John

Scott, Nicholas

Wells, Bowen (Hertford)

Shaw, Giles (Pudsey)

Wells, Sir John (Maidstone)

Shaw, Sir Michael (Scarb')

Wheeler, John

Shepherd, Colin (Hereford)

Whitney, Raymond

Shepherd, Richard (Aldridge)

Wiggin, Jerry

Shersby, Michael

Wilkinson, John

Silvester, Fred

Winterton, Mrs Ann

Sims, Roger

Winterton, Nicholas

Skeet, T. H. H.

Wolfson, Mark

Smith, Sir Dudley (Warwick)

Wood, Timothy

Smith, Tim (Beaconsfield)

Woodcock, Michael

Soames, Hon Nicholas

Yeo, Tim

Speed, Keith

Young, Sir George (Acton)

Speller, Tony

Younger, Rt Hon George

Spence, John

Spencer, Derek

Tellers for the Ayes:

Spicer, Jim (W Dorset)

Mr. Robert Boscawen and

Spicer, Michael (S Worcs)

Mr. Tristan Garel-Jones.

NOES

Adams, Allen (Paisley N)

Bidwell, Sydney

Alton, David

Blair, Anthony

Anderson, Donald

Boothroyd, Miss Betty

Archer, Rt Hon Peter

Boyes, Roland

Ashdown, Paddy

Bray, Dr Jeremy

Ashley, Rt Hon Jack

Brown, Gordon (D'f'mline E)

Ashton, Joe

Brown, Hugh D. (Provan)

Atkinson, N. (Tottenham)

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

Bagier, Gordon A. T.

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

Banks, Tony (Newham NW)

Brown, Ron (E'burgh, Leith)

Barnett, Guy

Buchan, Norman

Barron, Kevin

Caborn, Richard

Beckett, Mrs Margaret

Callaghan, Rt Hon J.

Beith, A. J.

Callaghan, Jim (Heyw'd & M)

Bell, Stuart

Campbell, Ian

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

Canavan, Dennis

Bermingham, Gerald

Carlile, Alexander (Montg'y)

632

Clarke, Thomas

Loyden, Edward

Clay, Robert

McCartney, Hugh

Clwyd, Mrs Ann

McDonald, Dr Oonagh

Cocks, Rt Hon M. (Bristol S.)

McGuire, Michael

Cohen, Harry

McKay, Allen (Penistone)

Coleman, Donald

McKelvey, William

Concannon, Rt Hon J. D.

Maclennan, Robert

Conlan, Bernard

McTaggart, Robert

Cook, Frank (Stockton North)

McWilliam, John

Cook, Robin F. (Livingston)

Madden, Max

Corbyn, Jeremy

Marek, Dr John

Cowans, Harry

Martin, Michael

Cox, Thomas (Tooting)

Mason, Rt Hon Roy

Craigen, J. M.

Maxton, John

Crowther, Stan

Maynard, Miss Joan

Cunliffe, Lawrence

Meacher, Michael

Cunningham, Dr John

Meadowcroft, Michael

Davies, Ronald (Caerphilly)

Michie, William

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

Mikardo, Ian

Deakins, Eric

Millan, Rt Hon Bruce

Dewar, Donald

Mitchell, Austin (G't Grimsby)

Dixon, Donald

Morris, Rt Hon A. (W'shawe)

Dobson, Frank

Morris, Rt Hon J. (Aberavon)

Dormand, Jack

Nellist, David

Douglas, Dick

Oakes, Rt Hon Gordon

Dubs, Alfred

O'Brien, William

Dunwoody, Hon Mrs G.

O'Neill, Martin

Eadie, Alex

Orme, Rt Hon Stanley

Eastham, Ken

Owen, Rt Hon Dr David

Ellis, Raymond

Park, George

Evans, John (St. Helens N)

Parry, Robert

Ewing, Harry

Patchett, Terry

Faulds, Andrew

Pavitt, Laurie

Fisher, Mark

Pendry, Tom

Foot, Rt Hon Michael

Penhaligon, David

Foster, Derek

Pike, Peter

Foulkes, George

Powell, Raymond (Ogmore)

Fraser, J. (Norwood)

Prescott, John

Freeson, Rt Hon Reginald

Radice, Giles

Garrett, W. E.

Randall, Stuart

Gilbert, Rt Hon Dr John

Redmond, M.

Godman, Dr Norman

Rees, Rt Hon M. (Leeds S)

Golding, John

Richardson, Ms Jo

Gould, Bryan

Roberts, Ernest (Hackney N)

Gourlay, Harry

Robertson, George

Hamilton, James (M'well N)

Robinson, G. (Coventry NW)

Hamilton, W. W. (Central Fife)

Rogers, Allan

Hancock, Mr. Michael

Rooker, J. W.

Hardy, Peter

Ross, Ernest (Dundee W)

Harman, Ms Harriet

Ross, Stephen (Isle of Wight)

Harrison, Rt Hon Walter

Rowlands, Ted

Hart, Rt Hon Dame Judith

Ryman, John

Hattersley, Rt Hon Roy

Sedgemore, Brian

Haynes, Frank

Sheerman, Barry

Heffer, Eric S.

Sheldon, Rt Hon R.

Hogg, N. (C'nauld & Kilsyth)

Shore, Rt Hon Peter

Home Robertson, John

Short, Ms Clare (Ladywood)

Howell, Rt Hon D. (S'heath)

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

Howells, Geraint

Silkin, Rt Hon J.

Hughes, Dr. Mark (Durham)

Skinner, Dennis

Hughes, Robert (Aberdeen N)

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

Hughes, Roy (Newport East)

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

Hughes, Simon (Southward)

Snape, Peter

Janner, Hon Greville

Soley, Clive

Jenkins, Rt Hon Roy (Hillh'd)

Spearing, Nigel

John, Brynmor

Steel, Rt Hon David

Johnston, Russell

Stewart, Rt Hon D. (W Isles)

Kaufman, Rt Hon Gerald

Stott, Roger

Kennedy, Charles

Strang, Gavin

Kilroy-Silk, Robert

Straw, Jack

Kinnock, Rt Hon Neil

Thomas, Dr R. (Carmarthen)

Kirkwood, Archy

Thompson, J. (Wansbeck)

Lamond, James

Thorne, Stan (Preston)

Leadbitter, Ted

Tinn, James

Leighton, Ronald

Torney, Tom

Lewis, Ron (Carlisle)

Wainwright, R.

Lewis, Terence (Worsley)

Wallace, James

Litherland, Robert

Wardell, Gareth (Gower)

Lloyd, Tony (Stretford)

Wareing, Robert

Lofthouse, Geoffrey

Weetch, Ken

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Welsh, Michael

Wrigglesworth, Ian

White, James

Young, David (Bolton SE)

Wigley, Dafydd

Williams, Rt Hon A.

Tellers for the Noes:

Wilson, Gordon

Mr. Robin Corbett and

Winnick, David

Mr. Sean Hughes.

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

Transport (Supplementary Grants)
10.43 pm
The Minister of State, Department of Transport (Mrs. Lynda Chalker): I beg to move,
That the Local Government (Supplementary Grants for Transport Purposes Specified Descriptions) Order 1984, dated 18th October 1984, a copy of which was laid before this House on 22nd October, in the last Session of Parliament, be approved.
This is a joint order by my right hon. Friend the Secretary of State for Transport and my right hon. Friend the Secretary of State for Wales. It is made under section 51 of the Local Government, Planning and Land Act 1980. I shall concentrate my remarks tonight mainly on the points concerning England. The changes proposed for Wales are minimal, but my hon. Friend the Minister of State is here to deal with any questions on the Welsh aspects of the order.
The order will bring into effect the proposals announced by my right hon. Friend last month to confine transport supplementary grant to capital expenditure on roads. First, a few remarks about TSG. It has been in existence for 10 years. The aim of the system devised then was to encourage county councils and the Greater London council to pursue suitable transport policies for their areas and to compensate them for costs that were high in relation to their populations.
TSG was intended also to enable central Government to provide support for large, local capital transport schemes without the drawbacks of the system of specified grants which it replaced. In other words, it helped to smooth out the uneven expenditure patterns that most road building has. TSG also enabled support to be given to public transport at a time when no adequate means existed to bring expenditure on public transport subsidies within the rate support grant system.
However, in recent years the TSG system has not been able to reconcile the need to constrain local authority expenditure with some authorities' policies for extravagant public transport subsidies. Nor has this form of TSG met the vital need for a sustained level of investment in major roads.
In 1983–84, in the expenditure which the Secretary of State accepted for TSG, excluding London, 28 per cent. was for capital investment, but less than 10 per cent. of the grant was spent in this way. The tendency for councils to use TSG to support current spending rather than capital investment has been increasing. In 1980–81 councils used about 63 per cent. of TSG to support current spending. In 1984–85 they budget to use 71·6 per cent. while 25 councils propose to use 100 per cent. of their grant to support current spending and use none of it on capital investment.
The planned level of road construction has often not been achieved. For example, local capital spending on roads fell short of the Government's plans by almost £32 million in 1981–82 and by £11 million in 1982–83. This fall in spending has had most noticeable effects on the larger schemes needed to further the main objectives for local roads set out in the White Paper "Policy for Roads in England: 1983". Cmnd. 9059, the primary route network, bypasses and urban roads. The extra support from the taxpayer nationally represented by TSG should be used to benefit the population at large who produce the money and not only those who live in a single local authority's area.
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Although the system was intended to favour authorities with high expenditure needs in relation to their resources, it has been criticised for producing an unfair distribution between different parts of the country. For example. in 1984–85 London and the metropolitan county councils received 62 per cent. of the grant available, when they account for only 38 per cent. of the country's population. The present system has also been criticised for being unpredictable in its outcome from year to year.
The possibilities of a change to the system have been around for a couple of years. TSG was increasingly difficult to reconcile with the developing system of expenditure targets and rate support grant penalties. The establishment of London Regional Transport earlier this year meant that it would not be possible to make a sensible settlement for London under the present system. It became apparent that the changes would be needed for 1985–86.
We consider that the first priority for TSG is to focus grants more closely on roads-capital expenditure, so we encourage investment in road building; to give a greater incentive than under the threshold system which has been extremely complicated, and to give some guarantee of continued support for schemes as well as to achieve a fairer distribution of the money available; and to give priority to our objectives for local roads as set out in the White Paper. We also have to try to stop the leakage of grant given for capital expenditure going into current expenditure as I described.
My right hon. Friend outlined his ideas formally to the local authority associations in May this year. In July we wrote consulting them on a capital-only TSG limited to expenditure on highways and traffic regulation. The proposed grant will be paid at a flat rate of about 50 per cent. We propose to consider to what extent the roads and routes affected would be of more than local importance. We propose also to take into account whether people living or working in an authority's area would be relieved of the effects of heavy through traffic. We also said that we would specify the schemes in the programme. Provided progress is satisfactorily maintained we shall continue to support them in future years.
Current expenditure on roads and public transport will continue to be supported through the RSG block grant. It already is to a large extent. We shall devise new formalae for grant-related expenditure s for public transport revenue support and for road maintenance with the local authority associations.
We have been concerned that the shift from TSG to RSG should produce a grant distribution which will, as far as possible, reflect councils' spending needs for public transport and road maintenance. The proposals will not result in changes in the resources available to local authorities nor any reduction in the total amount of exchequer grant available to them.
Investment in facilities for local public transport such as bus stations, bus depots and rail electrification schemes will no longer under this order be eligible for TSG but we will pay specific grants under section 56 of the Transport Act 1968, towards large worthwhile projects to provide new facilities. Some hon. Members may recall that we have used section 56 to support the Tyne and Wear metro. That is the type of scheme for which it should be used.
My right hon. Friend and I have discussed these proposals with elected representatives, and officials have discussed the financial implications at a number of meetings with the associations. Having considered the

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outcome of the consultation, my right hon. Friend decided to seek the approval of Parliament to the necessary legislative changes.
The purpose of the order is to restrict payment of supplementary grant for transport in England to capital expenditure on highways and the regulation of traffic. In Wales, TSG will no longer be payable on parking. Financial support for parking will be provided from the RSG.
The Local Government, Planning and Land Act 1980 provides for different TSG systems in England and Wales. In 1981 the threshold system for Wales was ended and the eligibility for grant was restricted to capital expenditure on public transport, highways, the regulation of traffic, the provision of freight handling facilities and parking. This has been granted only for projects of high value. The order merely removes parking from eligibility. Thus, it makes no fundamental change to the arrangements already operating for Wales.
The legislative changes sought in the order will enable my right hon. Friend to operate the TSG system in the way that I have outlined. Article 4 confines TSG to expenditure in England in connection with highways and the regulation of traffic. Article 6 provides for the consequential amendments of section 6 of the Local Government Act 1974. It describes highways and the regulation of traffic as the transport matters qualifying for grant in England and changes the method of apportioning the grant from the threshold system.
The acceptance of expenditure for TSG has always been a matter for the Secretary of State's discretion. It is customary for him to say in circulars how he intends to use it in relation to authorities' transport programmes. The consultation paper and the circular issued on 22 October explained the criterion of more than local significance and how consideration would be given to such areas as the primary route network, urban roads and bypasses. These aspects can be dealt with under the discretion already available to my right hon. Friend. They do not, therefore, form part of the order.
The present TSG system has proved inadequate in a number of ways. It has not been able to prevent the use of the grant for extravagant public transport subsidies. It has not met the overriding need for investment in major road schemes. It has produced settlements which have been increasingly criticised as unfair and unpredictable.
The Government's proposals for changing the system which I have outlined will put an end to these inadequacies. They will enable Government support provided through TSG to be concentrated on roads which are of more than local significance. Day-to-day current expenditure on local roads or for general public transport subsidies are essentially local matters. Local authorities can best decide their own priorities for spending on these within the Government's targets for their overall expenditure and from the resources available to them, through the rates and RSG. Overall, local authorities will not be worse off as a result of these changes. Approval of this order will enable us to prepare a TSG settlement for 1985–86 on the new basis, which will enhance investment in new roads by local authorities. I commend the order to the House.
10.55 pm
Mrs. Gwyneth Dunwoody: We should be clear about the background to the order. It is not only an important order but a mean little order. It was spawned in spite and nurtured in complete ignorance of the wishes and interests of the truly elected members of the local authorities, and it has been brought before the House with indecent haste. The motion to approve the order should have been moved by the Secretary of State, because its effects will be felt well beyond any of the extraordinarily unimaginative phrases that have been used by the Minister of State to give the impression that the measure was demanded by all and welcomed throughout the country.
Let us be clear about what is happening in this order. By changing from the transport supplementary grant to the rate support grant system, the Government have in effect said, "In future, we shall be singularly uninterested in the views of anyone in any particular locality about his transport system. We believe that we should have control from the centre exercised so that local authorities find it extremely difficult to set priorities that are acceptable to their electorate." Let us understand that in future parking, rail freight and public transport revenue support will go into the rate support grant system. The percentage of spending to be paid centrally will fall from 55 per cent. in 1984–85 to 50 per cent. from April next year.
How do the Government justify that spurious argument? They say that there are two reasons for the change. They say that local authorities have been underspending their allocation for capital road projects, and that they intend to change that. Their claim is based on an estimate for 1982–83 that only £330 million of the allocated £469 million was spent. Those figures were later discovered to be inaccurate. In fact, the council spent £442 million, which is only a 6 per cent. underspend. Central Government have already allowed trunk road underspending of 5 per cent. to be carried over. That 1 per cent. extra is so important that we have to carry through a major change.
The Select Committee on Transport expressed its surprise at the Government's inaccuracy. The Committee called for more encouragement to use capital money, but said:
"we would not wish to endorse such a change until we were satisfied that adequate provision could be made through Rate Support Grant for the support of current transport expenditures".
We are told by the Minister of State that the order is intended to curb extravagant public transport schemes. In future, large worthwhile projects — presumably those decided upon by the Secretary of State — will be supported and others will not. We are told that the Secretary of State consulted the local authorities, although the speed with which this statutory instrument has been brought forward makes one wonder how much consultation has taken place. On top of that, the Secretary of State has obviously ignored the views of the local authorities themselves because they understand only too well that in future they will find it virtually impossible to provide from the rate support grant system for the absolutely necessary items of expenditure outside road spending.
Let us return to spending on roads. Apart from the fact that the Government's fears of low expenditure on road capital are entirely false, one will not encourage road capital if the percentage support is cut even further to 50

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per cent. instead of 55 per cent. this year. There has been a 70 per cent. cut since the Government took power. The Government have already undermined all sections of transport through TSG cuts. The TSG for England was £499·1 million at today's prices in 1979–80, but this year it is £400 million. For Wales the capital-only scheme first appeared in 1982–83. Then TSG on roads capital alone was £30 million. In the next two financial years it rose to £31 million. That is a 5·5 per cent. cut in the allocation for roads capital, despite implementing a new system.
However, the real damage of this nasty little change can be seen only too clearly when one considers the effect that it will have on public transport, particularly British Rail. The passenger transport executives of the metropolitan counties have expressed strong concern that moving their grant into RSG can cause only direct cuts. Manchester passenger transport executive says that British Rail cuts will cause 25 per cent. reductions in train services. West midlands has predicted serious consequences.
While the PTEs are directly affected, British Rail is hit because section 20 of the Transport Act 1968 gives local authorities a duty to subsidise non-profitable services of British Rail. Without TSG, virtually all the rail lines within the metropolitan counties, excluding the inter-city services, will close if the cash cannot be found from elsewhere. British Rail stands to lose £80 million, or 10 per cent. of all its subsidies.
However, the Government say that they intend to reconsider any capital projects, even if they are allowed and accepted, that have not been scheduled for commencement before 1 April 1985. Therefore, many plans for capital road building are under threat from the measures, and all to try to solve a capital road building problem.
The extent of the chaos of the Government's thinking on transport is demonstrated only too clearly by a little incident that we witnessed today. The Prime Minister, standing at the Dispatch Box earlier on, was exceedingly scathing about a headline in a certain evening newspaper — which will get no extra publicity from me. The headline is:
"90,000 golden handshake for Left-wingers sacked by LT"—
that is, London Transport. The Prime Minister said that she found that totally unacceptable. But what do we find when we study the article closely? It says:
"News of the pay-off with taxpayers' money will raise a storm of protest."
Notice that it is not local authority money, but taxpayers' money. What is the reason for that? It is made clear by the reporter. He states that the Left-wingers concerned
"were removed from office by Transport Secretary Nicholas Ridley almost before the ink was dry on the White Paper creating the new London Regional Transport Authority and separating it from GLC control."
The Secretary of State is responsible for that bizarre golden handshake. His deep contempt for locally elected people is such that he will not allow them to appoint to their own London Transport executive those who represent their views. The right hon. Gentleman is prepared to carry it so such lengths that he would rather that they went away with large golden handshakes than that they be allowed to play a part in deciding the future of London's transport system.
Mr. Roger King: Did not the bandits at county hall appoint members of the Labour
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party to the London Transport executive only weeks before it was due to be abolished? Was not that an affront to common sense?
Mrs. Dunwoody: The hon. Gentleman does not seem to understand that, even with this Government, measures must be brought before the House before major changes can be introduced. The Secretary of State may ignore the views of the London electorate, but the Labour party is aware of its responsibility to the electorate at every level.
Let us be clear what this is all about. We are not talking about a more efficient system or saving money for the taxpayer. Roads are virtually the only part of the Department of Transport's work that has not been but by the Government since 1979. Motorway spending is up by £400 million—37·8 per cent. faster than prices. Even local authority road-related spending has risen 7 per cent. in real terms or £387 million in cash terms. Yet the Government's justification for this tatty little measure and for taking away local authorities' rights to spend money on revenue support is based on the claim of underspending, on roads by local authorities.
At the same time, central funding for local bus, underground and ferry services has fallen by 37 per cent., which is the equivalent of £143 million being taken away from those services since April 1984. The Minister of State ought not to present us with wholly spurious arguments. She does not believe them and we do not believe them. We shall vote against the order to show the electorate the mean and petty attitude of the Government towards local transport.
11.7 pm
Mr. Peter Fry: As one who has advocated for several years the change that we are discussing, I naturally welcome the order.
I should have thought that Opposition Members who represent Welsh constituencies would reflect on the excellent road building programme that has been started in many parts of Wales since the changes introduced by the Welsh Office. I have been to the Principality to see the excellent schemes underway there, particularly in Cardiff where there is a scheme to help with the new port facility and industrial development in the city. Much money that would otherwise not have been available has been spent in Wales.
Mr. Dafydd Wigley: Will the hon. Gentleman accept that the new schemes in Wales have been implemented at the expense of schemes that have been in the plans for years? Areas have been blighted because of uncertainty about whether schemes would go ahead and many towns and villages that needed bypasses have lost them. It has been an absolute mess and it needs to be sorted out.
Mr. Fry: The hon. Member is merely saying that more money should be spent on roads in Wales. I agree, but expenditure is a matter of priorities and we all wish that we had more money for our own constituencies.
Contrary to the impression given by the hon. Member for Crewe and Nantwich (Mrs. Dunwoody), whom I welcome to her new responsibilities, the Select Committee on Transport made it clear that it was sympathetic to the proposed changes. I am a member of the Select Committee, and I think that the hon. Lady's quotations from our report were selective and gave a wrong flavour to the report.

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Surely the Opposition cannot accept that local authorities should be allowed to put in bids for TSG based on fictitious figures. They often put in amounts for road building and maintenance without having any intention of spending the money for that purpose. They wished to divert it to other purposes. Before hon. Members descend upon me with rods, they should recall that when there was a Labour Secretary of State for Transport, he complained bitterly about the activities of some Labour-controlled authorities, such as South Yorkshire, which pursued policies which were at variance with the bids that they put in. It is unacceptable for bids to be put in on a spurious basis, and it therefore makes sense that the suggested change should take place.
However, I wish to make two reservations. When the Select Committee made its report upon road maintenance, we were somewhat concerned about the amount of money being spent, particularly on urban local roads. It seemed to us that there was a danger that insufficient moneys would be forthcoming for the renewal and repair of those roads which in many towns were falling into a serious state. I want therefore to utter a word of caution. Enough money must be put into the rate support grant to ensure that there is no danger of continued deterioration.
Secondly, I feel that this measure may be the first of a number of measures which may affect local transport during this Parliament. My views on the matter are well known. My hon. Friend the Minister of State and my right hon. Friend the Secretary of State must be aware of the charge that is likely to be made that the changes that they are trying to effect—the sum total of changes this year—are likely to mean that many local authorities will be forced to make difficult decisions, particularly about the level of revenue support. If the Government are determined that there shall be no deterioration in public transport, the support that will be offered to local authorities, once all the legislation has been passed, must be spelt out more clearly.
It is because I believe that the present measure cannot be considered purely on its own that I have those reservations. When we discuss legislation on buses, Opposition Members may be surprised by the way in which I shall vote; but we are not doing so now. We should give the Government the benefit of the doubt, and support the measure. If, later on, it appears that the measure has been used simply to make it more difficult for local authorities to support public transport, I may find myself casting my vote differently when we vote on some larger measure. I have not been afraid to do so in the past and I shall not be afraid to do so again.
I hope that the House will approve the order, but I also hope that my right hon. and hon. Friends have taken note of my words of caution.
11.12 pm
Mr. Stephen Ross: I apologise for not having been present when the Minister of State began her speech. I must say that I have grave doubts about the order. While on the whole I accept that it makes sense, when one changes the rate support grant to a block system, to do away with transport supplementary grant, the uncertainty about what is to happen will mean that local authorities will feel worried about what is in store for them.
The hon. Member for Crewe and Nantwich (Mrs. Dunwoody) drew our attention to the problem of the
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passenger transport executives. They do not know what the situation will be in the west midlands or the north-east or on Merseyside. Will enough money be forthcoming to enable them to support British Rail under Section 20 of the 1968 Transport Act? We do not know. The measure has been introduced far too early. It should have been introduced after some definite statement from the Secretary of State for the Environment.
The Minister of State visited my constituency earlier this year. She must already know that doing away with transport supplementary grant will place us in considerable difficulty.
One of the criteria laid down in the order is whether expenditure is on a primary route network. We have no such network, as the Minister well knows. The second is whether the road is a major urban road of more than local significance. It could be argued that all capital highway expenditure on the island is of local significance only. The third is whether the expenditure is for a bypass which would relieve local communities of the effects of heavy lorries. I openly admit that that is not as great a problem in my constituency as elsewhere. We are therefore worried whether, after abolition of TSG, we shall be treated as fairly as when it was in operation.
During the past few years our transport policy plan has met with a fair response from the Government. We have had a good allocation, but can the Minister say in all sincerity that having done away with TSG she can guarantee that, under the block grant system, we shall do so well? I gravely doubt whether she can. Therefore, with reluctance, I cannot support the order. I say that although I supported the change in the grant system introduced by the former Secretary of State for the Environment. It was right to change the block grant system and it is only sensible to do away with TSG now and to put it in the block grant. However, the change is premature and the Government should have given us some guarantee before introducing the order. We and passenger transport executives have great difficulties accepting that we shall be as well served by the new system as by the old one.
11.16 pm
Sir Paul Hawkins: I greatly welcome the change because I lost a bypass around my home town. It badly needs that bypass but lost it because the county council spent the money on other things. This order is a move in the right direction for my constituency and other parts of Norfolk, if not for the Isle of Wight. Many other hon. Members lost grant to build bypasses and to carry out major improvements on major roads between the midlands and the north and the East Anglian ports. We badly need more trunk and county council roads and I am convinced that many schemes have been lost because county councils have used transport supplementary grant intended for bypasses around small market towns that are almost shattered by huge vehicles for other purposes. For that reason, I wholly support the order.
11.17 pm
Dr. John Marek: I agreed with much of what the hon. Member for Wellingborough (Mr. Fry) said, except towards the end of his speech when he said that he would support the order. I shall certainly not do that. Transport supplementary grant has been hijacked and bids for capital have not been spent on capital. Policies that have been bid for should be carried out. However, keeping

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capital spending on its own and shoving revenue spending in with the rest of the block grant would be all right if we had a real democracy. Unfortunately, we do not. Local government has no chance of acting independently. It is constrained by holdback and the rest. It is shackled hand and foot by the Government. If that were not so I should have every confidence in revenue spending being left in with block grant as councils could then make their own choices about priorities. Under present conditions we shall have little revenue spending.
In regard to the railways, local authorities are likely not to take a strategic view of rail implications. The chances are that revenue spending under section 20 of the Transport Act 1968 will decline. The same will be true for passenger transport executives. My hon. Friend the Member for Crewe and Nantwich (Mrs. Dunwoody) made that point. It is likely that the type of integrated transport system which we have in the metropolitan councils will disappear because of the limitations and restrictions placed on local authorities.
British Rail will be worried about the order. According to my figures, section 20 grants amount to about 5 per cent. of its revenue income. That will decrease. It will have more difficulty in meeting the objectives which the Secretary of State set last year.
I am worried about the implications of the order for the maintenance of roads. If a council is pressed for cash, it will not resurface roads, but postpone the work for a year. Hon. Members must understand that that is what will happen. If restrictions on a local authority are not lifted, it will postpone the work for a further year. That will increase the dangerous state of the roads, and make it difficult for us to move goods. Most of our goods are moved by road. It will make life difficult for motorists and especially for motor cyclists.
What assurances can the Minister give the House about maintenance programmes for roads? Even if she can assure us, I shall vote against the order because it is wrong for the railways, because strategic decisions will not be taken in district areas and because there will not be an integrated transport policy in metropolitan areas. Can the Minister assure the House that road maintenance programmes will be maintained?
11.22 pm
Mr. Matthew Parris: I also welcome the hon. Lady the Member for Crewe and Nantwich (Mrs. Dunwoody) to her new responsibilities. She launched into her first speech with the bland understatement now characteristic of her style. I look forward to a continuation of that moderation which is her hallmark.
If the Secretary of State for Social Services had come to the House this evening with a proposal that a social services supplementary grant should be set up and the Government should earmark moneys for social services and restrict local authorities to spending those funds, Opposition Members would, quite rightly, have said that it represented an infringement of local democracy and that the ideal for local government spending was to give local government an overall sum to spend as it determined.
There is an argument for abolishing transport supplementary grant altogether, but my hon. Friend the Minister has not gone as far as that. She simply seeks to restrict the area controlled by the Government to capital spending. Has the case for maintaining Government
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purchase over capital spending been well made? I believe that it has. In too many areas transport spending has been twisted into social policy, and funds allocated for transport purposes have been used to redistribute wealth.
I am not against the redistribution of wealth—both parties spend most of their time redistributing wealth in one way or another—but I do not believe that taking money away from people and giving them free or cheap bus tickets in return is a sensible way of redistributing wealth. For that reason, I do not believe that moneys allocated for transport purposes are being properly used when they are used simply to subsidise public transport.
I was specially encouraged by my hon. Friend the Minister's comments about section 56 grant. Not all capital spending on transport will be spending on public works. All kinds of useful investments can be made in our public transport system—in roads, in railways and in buses—which do not involve public works. We should remember that there is capital investment in public transport just as much as in roads and that in both cases it is not the same as subsidising fares.
For all those reasons, I believe that the proposed changes are sensible and I shall certainly support them.
11.26 pm
Mr. Peter Pike: Many local authorities are worried about passenger revenue support in view of the problems involved in the present system of grant-related expenditure assessment. For instance, there is the anomaly that the grant for museums and art galleries is based on the square footage of the area's central shopping facility. The transfer to the grant system of revenue support for public transport, a bigger and more important aspect of local government, therefore worries many authorities a great deal. A large number of authorities run systems beyond their own areas, providing services for neighbouring authorities which do not have undertakings of their own, while others rely on the National Bus Company and other undertakings.
I believe that the proposed system is ill thought out and has been too hastily introduced. If it has to go through, local authorities and others responsible for running public transport will need to be assured that the same level of revenue support will be available so that services can be maintained, especially in rural areas and other areas of difficulty. If the level of support is not maintained, the public transport system will be endangered throughout the country.
11.27 pm
Mr. Edward Leigh: I am surprised at the Opposition's strong resistance to these proposals. I thought that there was a consensus in the House on the need for more capital spending on roads—for environmental reasons, especially spending on bypasses for heavy lorries, for reasons of investment for industry and, above all, for employment reasons. The hon. Member for Crewe and Nantwich (Mrs. Dunwoody) disagreed with the figures produced by my hon. Friend the Minister, but I think that both sides agree that local authorities have underspent in terms of capital spending.
Areas such as my constituency in rural Lincolnshire have suffered from the emphasis that larger authorities, especially in south Yorkshire, have placed on what my hon. Friend the Member for Derbyshire, West (Mr. Parris) described as using transport policy as a means of social

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policy and thus misusing the transport supplementary grant. When I was a member of the GLC, the Conservative administration were thinking in terms of using the grant for the Jubilee line, capital investment in the east end, and so on, but the grant has been misused by the current GLC administration.
My area has suffered from the lack of capital investment. Although Lincolnshire has more miles of road per head of population than any other county, we still have severe environmental problems in the Trentside villages and with the A46. The village of Dunholme has waited 40 years for a bypass. As my hon. Friend the Minister said, although London has 38 per cent. of the population, it gets 62 per cent. of the grant. Rural areas such as the one that I represent will welcome this order, and for that reason I shall vote for it tonight.
11.30 pm
Mr. Ted Leadbitter: The problem with a measure such as this is that it comes in the context of proposals affecting local government. In rapid succession, there have been increasing penalties and restrictions on local government expenditure. The Government have had many objections to local government expenditure proposals in the past few months. There have been problems in the negotiations on the formula for grant related expenditure, and penalties have been applied there. The Government have become increasingly persistent in interfering with local government, which is an elected part of our constitution, and which has the right to a say in the determination of its own affairs.
For Wales, there is a modification of the transport-related grant. For England, there is a wholesale transfer from transport-related grant to rate support grant, leaving, for the determination next year and each succeeding year, only the highways and the regulation of transport operations in the local authority areas.
The amount of money involved nationally is relatively small, but at local level it is of increasing importance. There is not sufficient evidence—although I have read some of the Select Committee reports, and have gone into the matter carefully—to suggest that local authorities are misusing their bids for transport supplementary grant. There may be some cases of this, but there is no perfection, either here or in any part of local government. We have to deal with our responsibilities by making shrewd judgments. A local authority should be allowed some flexibility of judgment in the overall finances available to it.
In this order, the Government are being rather petulant. A local authority may decide, after making a bid, and succeeding in getting it, that there is a need in that period for some other priority — a practice that has been acceptable hitherto. Why the sudden discovery that it is wrong? Here is another instance of promises made in the 1979 and 1983 election manifestos of non-intervention going out of the window. The Government have become the biggest interferers that I have known since I entered political life. They are here making a dishonest prospectus for the country.
The issue of transport in London has to be related to the future of the GLC. All that the Government wanted to do from the outset was to get rid of the GLC. They knew that if they did that alone, they would be charged with political
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nepotism and so they decided to include the metropolitan counties in their abolition plans. They are interfering with the PTAs, and are forcing through this order.
It is not fair to either side of the House to have an order such as this, which is incomprehensible on first reading. The short explanatory note does not deal with the whole problem that we are facing. We shall have a vote tonight, yet hon. Members cannot honestly say that we have had an in-depth debate on matters of great importance to local authorities.
With approximately 20 Bills to come before the House this Session we are becoming so legislatively constipated that' we shall not make much sense of the real affairs of Britain. I hope that the Government will understand that some people are saying that enough is enough and that, when elected, local authorities have a right to determine their own affairs without forever going cap in hand to a Secretary of State, and this Secretary of State in particular, because his only hallmark is his persistence to outdo his own Prime Minister.
11.35 pm
Mr. Robin Maxwell-Hyslop: In the short time available to me, I want to say that if the Department of Transport intends to take out of the hands of local authorities decisions about priorities, for heaven's sake let us make sensible decisions in each individual case rather than laying down grandiose rules.
My hon. Friend the Minister of State, whose attention I hope to attract for just two minutes, will know that for some time I have taken the view that, instead of building a trunk road from Fairmile to Exeter, that bypasses nothing, the same amount of money in the same constituency could be spent on bypassing Crediton. No danger points are removed by spending a huge amount of money on a trunk road diversion which does nothing except go through good land and ruin a number of businesses. On my hon. Friend's criteria the same money would be much better spent — if my hon. Friend is taking away the power to make decisions on those criteria from local authorities—on bypassing a town which, for a mile and a quarter, is utterly ruined by through traffic.
I know that it is difficult for the Minister to sort through her papers before she replies, but if she is taking away from local authorities the choice of priorities, she really must listen to her colleagues if decisions are to be made by Government instead. That is my message to her which I hope that she has time to hear.
11.37 pm
Mr. Tony Banks: It is a great pity that the Secretary of State cannot find the time to stay with us for an hour and a half. Perhaps he has nipped off to plug himself into his life support machine for a while.
Conservative Members seem to think that the order will somehow be good for transport in Britain. It has nothing to do with the efficient ordering of the transport system in Britain. We saw that in the London Regional Transport Bill. It is all to do with the further centralisation of Government powers and with assisting the roads lobby.
The Labour party's criticisms of the order can be put simply and straightforwardly. First, it undermines the original intention and purpose of the transport supplementary grant system. Secondly, it has been rushed through in undue haste.

647
The Minister said that the Secretary of State consulted local authorities. Yes, indeed he did. But the local authorities were not consulted until July. What was their reaction? Of course, we all know the answer. They were very much opposed.
Thirdly, there is the financial impact on the local authorities. Before the Secretary of State left to go elsewhere, he accused my hon. Friend the Member for Crewe and Nantwich (Mrs. Dunwoody) of not doing her homework. The Minister might like to comment when she replies on some figures that I have. The allocation of transport supplementary grant under the new system looks as though it will take about £45 million away from the shire counties, which is a 30 per cent. reduction. There will be £29 million taken away from the metropolitan counties and £23·7 million taken away from the GLC—a 50 per cent. reduction overall. It is impossible to see how that is geared to assisting those authorities to meet their transport needs. Of course, the Minister is really saying —and will no doubt claim further—that overall the councils will not be worse off, because the aggregate Exchequer grant is determined independently of the total of TSG. Although the TSG will be reduced, the amount of RSG block grant will be correspondingly greater But we know just how easy it is for the Secretary of State to manipulate the block grant system.
Dr. Marek: There is possibly one good point about the changes being made, and that is that as capital will remain under the TSG the Government could put money in, and then increase construction thus reducing unemployment. However, that is sadly probably not the Government's intention.
Mr. Douglas Hogg: Wait and see.
Mr. Banks: There is too much of a wait-and-see attitude towards capital allocations for local authorities. One difficulty about underspends on capital outlays, which has been mentioned by the hon. Member for Gainsborough and Horncastle (Mr. Leigh), lies in the one year basis of the programme. It is difficult for local authorities to know exactly what to do when dealing with a one-year programme that can be changed at will by Ministers. That is what is making local government so difficult to run. There is an increasing amount of intervention by central Government.
Perhaps the Minister will tell us how local authorities can be sure that they will get additional moneys through the block grant system. We should all be extremely grateful for that knowledge. We know how that block grant system has been, and is being, manipulated by Ministers. Indeed, it will continue to be manipulated by them. In effect, on the revenue side, the TSG system is being replaced by the block grant system. We do not believe that that will be good for transport, because the Government are manipulating the block grant system to suit their short and long-term political objectives.
Whilst on the subject of political objectives, I should add that I saw the story in The Standard tonight about the golden handshakes being given to the so-called Left-wingers sacked from the London Transport board. The article makes no mention of the fact that the Secretary of State then packed the London Regional Transport board with his own appointees who are no doubt totally non-political and not in any way interested in the right hon. Gentleman's policies.
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Perhaps the Minister will tell us the difference between the salaries of Mr. John Telford Beasley, who has just been appointed as the new managing director of buses, and his predecessor. I notice that he is to receive a £41,000 salary. I also notice that he has many transport connections. He was an international business man with an American pharmaceutical company based in the Mediterranean before he joined London Transport. I do not quite see how that is relevant to running London Transport.
I also notice that Mr. Telford Beasley is coming up to Waterloo by train. He says that he will take a bus from Waterloo to Victoria. What a breadth of experience of LT he will gain from that trip. He says:
"I don't see any point in having a limousine waiting for me every day at the station, when there is a very efficient bus service. I will use it every day, and I can get talking to the passengers and find out what they think of the service at first hand."
Mr. Telford Beasley will not have much chance of doing that while riding from Waterloo to Victoria—a distance that any other person would try to walk. No doubt we shall all be hearing a lot more of Mr. John Telford Beasley. How much bigger is his salary than his predecessor's? Is it true that he is a personal friend of Dr. Bright, the chairman of London Regional Transport and that that was why he was appointed? I believe that Dr. Bright was very knowledgeable about making Dad's Cookies before he was translated into the chairman of LRT. Where are all these people coming from? From where did they gain their knowledge and experience of the transport needs of London?
11.45 pm
Mr. Peter Snape: My hon. Friend the Member for Newham, North-West (Mr. Banks) was rather scathing about the appointment of the new manager for London Transport bus services, Mr. John Telford Beasley. My hon. Friend referred to him as an American business man with no experience of London Transport. My hon. Friend was being a little unfair, because the Tory party has a weakness for American business men and appoints them to its nationalised industries with no great record of success. I hope that the new appointment will be more successful than that other well-known and well-paid American business man that they appointed to run the mining industry.
The hon. Member for Norfolk, South-West (Sir P. Hawkins) expressed concern about the number of bypasses that have been cancelled because of the subsidy to public transport in Norfolk. He sat down before we had a chance to intervene, but I should be delighted to give way to the hon. Gentleman if he could tell me one bypass that has been cancelled in his county because of the concentration by the Norfolk county council on public transport, bearing in mind that Norfolk is one of the much—heralded trial areas for the proposed bus legislation.
Sir Paul Hawkins: Bypasses were not built in Downham Market where I live. Fakenham was mentioned in the list of places which could have had money spent on it by the Ministry of Transport. I never mentioned anything about expenditure on public transport. I said that the money which should have been spent on capital grants was spent elsewhere, not necessarily on public transport
Mr. Snape: That will not do. It is all very well for the hon. Gentleman to say that money could have been spent

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in a particular way, but did the county council pay for support for the Downham Market bypass — a place which I know, but not as well as the hon. Gentleman? Is there a reason why a much-needed bypass has not been built and why money is being spent on bus services? The hon. Gentleman fails to prove his case. If that is the reason for the way in which he casts his vote tonight, I hope that in future he will consider proposed legislation more carefully.
I hope that the Minister will concentrate on the point made by my hon. Friend the Member for Crewe and Nantwich (Mrs. Dunwoody). What on earth will happen to rail services protected by section 20 grants? The House deserves a reply. I hope that the hon. Lady will not accuse local authorities of scaremongering. I hope that she will accept that they are genuinely worried about their future. I hope that she will allay our anxieties.
I listened intently to the contributions by the hon. Member for Gainsborough and Horncastle (Mr. Leigh) during the passage of the London Regional Transport Bill. I tried to like him a little more in Committee, but I had some difficulty doing so. I do not wish to be personal, but I liked him slightly less after hearing his contribution tonight, because he appears to understand less and less about public transport the more he speaks about it.
The Secretary of State for Transport (Mr. Nicholas Ridley): That makes two of you.
Mr. Snape: I am delighted to welcome the Secretary of State to his place. What he says might be true, but I should not be so rude about him because he well knows the affection with which I hold his performance at the Dispatch Box. I notice that he sent his Minister of State to do the dirty work this evening. It will probably embarrass her if I say that she did the job better than he could have done it. Her role in the Department of Transport is to go round the country tapping her head significantly when asked about the Secretary of State's plans.
The hon. Member for Gainsborough talked about how essential expenditure on road works was. He talked about its value in terms of employment. He was right. Substantial employment is involved in road works. He obviously fails to understand what the Conservative party fails to understand — that there is a great deal of employment involved not only in the operation of public transport but in the production of public transport vehicles, such as the building of new buses.
I have to tell the hon. Lady, in her role of purveyor of excuses for the Secretary of State, that the bus industry is not exactly—to use a footballing phrase—over the moon about the Government's proposals—
Mrs. Chalker: That is a romantic phrase.
Mr. Snape: It is a bit late for romance for me. However, if the hon. Lady can tear herself away from the Adjournment debate, she never knows.
It is not good enough for the hon. Member for Gainsborough and Horncastle and others to ignore the fact that many private firms despair because of the Government's attitude towards the public transport industry. Does not the hon. Gentleman stop to consider that firms such as Leyland and Metro Cammell have
650
enormous concern about the employment prejudiced by the barmy proposals of the Government? The public transport industry is surely not only about building roads.
The key to the legislation before us is that the Government are determined to prevent local authorities from making decisions about how money should be spent. They believe that Whitehall knows best. I understand that sort of attitude from the Secretary of State—he had a deprived upbringing. He went to a school where pupils were told from an early age that they knew best. The hon. Lady was not exactly a product of the state system either. The right hon. Gentleman believes that he is entitled to make decisions that will apply throughout the country. It is not only Labour members of local authorities who express concern about the Government's direction on transport policy. A great many members of the Tory party disagree with the legislation. Not too many of them are behind the right hon. Gentleman, which I understand, as many of the young Turks of the Conservative party found themselves, to their amazement, in the House in 1983. At least they can honestly claim that ignorance is bliss. The right hon. Gentleman and the hon. Lady have no such excuse.
I wish to refer—
Mr. Robin Corbett: Where are the SDP members?
Mr. Snape: We must not expect the SDP members to be around at this time of night—it is far to late for them to be out and about. They have all caught the bus home, presuming that the buses still exist.
I refer to the newspaper report—
Mr. Christopher Chope: What is the beef?
Mr. Snape: Does the hon. Gentleman really want to provoke me into that sort of argument?
I refer to the report in The Standard today. My hon. Friend the Member for Crewe and Nantwich said that she would not name the newspaper. I do not understand that. I make no bones about my attitude towards it—it is the worst newspaper in this country. It dropped below its usual depths today. Under the headline "Thank you Comrades!" it attempts to mislead — perhaps this was done inadvertently—many Londoners. It refers to "Left-wing Labour politicians" having been sacked from the London 'Transport Board and says that London ratepayers will be faced with a heavy bill.
The Prime Minister referred to the report and a later edition of the same dreadful newspaper reported that "Maggie"—of course, I would not refer to the Prime Minister in that way, I merely quote from The Standard—considered that the payments to the three who have been sacked were another reason to scrap the GLC. We all know that the Conservative party and Conservative Members hang on every word that the Prime Minister says—well, some of them do so with more enthusiasm than others. The blame for £90,000 being paid out in what are described as "golden handshakes" rests with the right hon. Gentleman the Secretary of State for Transport.
Mr. Leigh: No—with Ken Livingstone.
Mr. Snape: That shows how much attention the hon. Gentleman was paying to the debate that took place when the London Regional Transport Bill, as it then was, was being considered in Committee. He should be aware that

651
the Bill as drafted originally provided that compensation for such sackings or redundancies, call them what we will, should be met by the Greater London council.
Mr. Ridley: The hon. Gentleman knows that he is wrong.
Mr. Snape: No, I am not wrong. If the right hon. Gentleman wishes to intervene, I shall gladly allow him to do so. Apparently he does not wish to intervene. The story about the sackings appears in The Standard in a slanted form because the right hon. Gentleman, with his customary incompetence—well, perhaps he was swayed by the persuasive powers of my hon. Friends and myself—accepted an Opposition amendment in Committee that made the Department of Transport responsible for agreeing the terms of compensation if any members of the then board were fired by the Secretary of State. That is what happened, and if the right hon. Gentleman wishes to disagree with my version of events, I shall gladly allow him to intervene.
Mr. Ridley: The hon. Gentleman is not talking about the order, but he should get other matters straight. The original draft of the then Bill provided that the GLC, among others, could be asked to pay compensatory payments. The Government responded to the hon. Gentleman's amendment by removing that provision. That left the possibility — it was always there — that LRT should pay. The hon. Gentleman is exuberant tonight, but he should get these matters straight.
Mr. Snape: I have never been one to rub it in, and I shall not rub anything into the right hon. Gentleman's intervention. I think that he has conceded my argument, despite his initial indignation. He has accepted, in effect, that it is entirely his fault—this is the effect of his arbitrary decision to remove three members from the board — that taxpayers, and eventually London ratepayers, will have to foot the bill. As I understand the legislation, LRT will have to compensate the Department of Transport.
Mr. Ridley: Wrong again.
Mr. Snape: It is reported in The Standard that ultimately LRT will have to pay the compensation from its own funds, and that the amount will be decided by the Secretary of State for Transport. The right hon. Gentleman's incompetence is there for all to see.
Mr. John Butterfill rose—
Mr. Snape: No, I shall not give way. If the hon. Gentleman turned up more regularly to transport debates I might consider allowing him to intervene. The right hon. Gentleman has condemned himself from his own mouth. He has arranged for the compensation to be paid, and if it is another reason to scrap the GLC, as "Maggie" says, it is an even better reason to scrap the right hon. Gentleman, who is obviously unaware of the effects of his legislation, including the amendment that he accepted.
Once more we are seeing an attempt to undermine the principles of local government democracy. We are told that these decisions are rightly to be taken by central Government. What sort of Conservative party do we have these days when it believes that the bowler hats in Whitehall know the best way to spend local government funds?
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I said earlier that I felt that some Conservative Members were motivated only by ignorance. The Government have no such excuse. They are motivated by malice. That is why we shall vote against the order.
12 midnight
Mrs. Chalker: With the leave of the House, I seek to reply to the debate.
The hon. Member for West Bromwich, East (Mr. Snape) is his highly amusing self. Not much of what he said had the least bit to do with the order, but we have come to expect that from him. He said that he was over the moon, or something. I should rather say that he was still in orbit and has not yet been rescued by the new transport satellite, the hon. Member for Crewe and Nantwich (Mrs. Dunwoody). I can only conclude that he had little to say about the order. I think that I know why, because I have, as is customary at this stage of the year, been around many of the roads annual consultative councils. I know that the shire and metropolitan county councils wish to get their bypasses and roads built. The TSG settlement will be roads capital only to assist them to do that, subject to the agreement of the House tonight and the agreement of another place.
I assure my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) that the settlement will be based on the transport policies and programmes submitted by the county councils this summer. They decide their priorities, what they put forward in their programme and when they are ready to proceed. Provided that the programme meets with the criteria that we have laid down, which go far wider than the primary road network, they will receive the settlement. I assure the hon. Member for Isle of Wight (Mr. Ross) that if they are suitable for roads capital only TSG, within sensible limits his bypasses will get it just as much as those of anyone else.
Mr. Snape: Will get what?
Mrs. Chalker: Transport supplementary grant. I realise that the hon. Gentleman does not understand the system and I was trying to help him.
The capital allocations will also provide for additional expenditure over and above that supported by grant. Despite the comments and questions of some hon. Members, I cannot anticipate the settlement that will be announced in December by my right hon. Friend the Secretary of State for the Environment, but provided that the order is given the support of the House tonight we shall be able to proceed to a much more sensible and less variable TSG than has been possible in previous years.
Mr. Tony Banks: Much smaller as well.
Mrs. Chalker: The hon. Gentleman is not right, but I shall come to him in a few moments if I have the time.
A couple of hon. Members have said that the change has been rushed through. Although formal consultation began at the beginning of July, local authority associations have been aware of the likely changes for some time. Capital only TSG has been around for some two years, and my right hon. Friend the Secretary of State for Transport had a good discussion at the national advisory council meeting with local authority representatives in May this year.

653
As I said a few moments ago, in that discussion the shire and metropolitan county councils said that they wished to get on with their road building, and they want a sensible scheme.
I am well aware that the metropolitan county councils do not wish to lose the excessive revenue support that they have been spending on public transport, but this TSG designed to promote the proper provision of local roads by county councils must be brought forward in this way now if we are to avoid what would otherwise be an unreal settlement in the future.
I accept that the mechanics of the TSG system have been difficult to understand. That is why when the hon. Member for Crewe and Nantwich commented about the change in the grant rate she ignored the difficulty of the threshold system based on population which has often made it difficult for hon. Members to understand why their bypasses in a sparsely populated county did not receive grant in the same way as they saw bypasses in more heavily populated areas receiving TSG. Those mechanics are simplified considerably by the proposal in the order. This is not a move to curb spending. We are removing the distortions that exist in current spending by using grant for the taxpayers' share of the costs of roads—those roads with more than local benefit. The amount of transport supplementary grant will differ from the previous amount, but the RSG block grant will be larger than it otherwise would have been to take account of road maintenance and other responsibilities.
The hon. Members for Wrexham (Dr. Marek) and for Hartlepool (Mr. Leadbitter) mentioned parking and other schemes. Since the system in Wales changed, only capital schemes in excess of £5 million have attracted grant. There is, therefore, effectively no change in Wales because of the order.
A number of hon. Members commented on the support for public transport. I have been surprised by the volume of support from the Opposition for the present system and their dire warnings about the new system. That only confirms my view that the current form of TSG is seen by Labour authorities as a means of financing excessive public transport subsidies. Unlike the Opposition, I do not believe that excessive subsidies mean healthy public transport or that they should be underwritten by the taxpayer. The discipline of financing public transport subsidies on an equal footing with other claims on the general resources available to councils will be beneficial to them. The councils may compare the value of the money provided by subsidies with the other means of keeping fares down, such as improvements in efficiency, competitive tendering to the private sector and the like. The Government are no longer prepared to support excessive subsidy for local public transport from central funds. The Government can no longer justify the payment of special central government grant to what are essentially local trading services.
I was asked about revenue for buses and rail services. In removing revenue support from TSG, we are not cutting the resources available to local authorities, as the Opposition have been suggesting. We shall maintain in real terms the provision for local authority current expenditure on transport at the planned 1984–85 level. This provides a sensible level of revenue support for bus
654
services, which we shall continue to support through block grant. We shall be introducing a new GRE formula to reflect the need of authorities to spend on bus subsidies.
We already have a separate GRE indicator for revenue subsidies for local rail services in the passenger transport executive areas. Councils will be able to decide whether to maintain that support for local services within the resources available to them. It is up to them to decide their priorities in the provision of local services. The TSG will not be paid for them, but they will be receiving block grant. [Interruption.] As is to be expected, the Opposition are making a lot of noise in this debate.
An examination of what has happened in recent years — shire counties had just 38 per cent. of the grant available with more than 61 per cent. of the population while London and the metropolitan counties had 62 per cent. of the grant—shows why there has been so much disquiet about TSG and why demand has arisen for a more equitable system. We shall ensure that road maintenance will not suffer. The provision will continue to be steadily increased in real terms, and RSG will reflect that in full, according to the GRE formula contained in RSG for it.
I was also asked about why the changes are coming forward now. They would have come forward even if the abolition of the metropolitan counties and the Greater London council had not been envisaged. They facilitate the payment of the transport supplementary grant to metropolitan districts and London boroughs, as set out in the consultation papers. The metropolitan districts and the London boroughs will get the TSG. They will also receive the block grant for the financing costs of the capital. With the support from RSG and TSG, they will be able to continue contracts inherited and carry out necessary programmes. If anything is different, the proposed changes mean a fairer deal for the metropolitan areas over the abolition period with regard to their road programmes.
I promised to return to the matter raised by the hon. Member for Isle of Wight. I understand it, having toured round the island on a delightful weekend in the summer, when I met him and discussed with his county councillors the problems that they face. He and his county council may rely on the assurance that we have given that we shall continue to support schemes to which we are already committed, for example the new Yar bridge. For the future, I can tell the hon. Gentleman that I am well aware of the special circumstances of several of the roads on the island. The terms of the order are sufficiently widely drawn to allow us to take the circumstances particular to the island into account when drawing up TSG for the future.
The local authorities will still continue to put their transport policies and programmes to the Department. They will decide the priority of their road spending. They will decide the way in which they wish to order their different schemes. That is certainly in no way a central decision about their programmes. They will also be able, as the new system develops, to consider schemes such as the regeneration of certain areas, which will have a national benefit. They can put forward many ideas, which I am sure we shall be able to accept in future.
It being one and a half hours after the commencement of proceedings on the motion, MR. DEPUTY SPEAKER put the Question, pursuant to Standing Order No. 3 (Exempted business).
The House divided: Ayes 253, Noes 169.

Division No. 7]

[12.12 am

AYES

Adley, Robert

Forsyth, Michael (Stirling)

Alexander, Richard

Forth, Eric

Amess, David

Fowler, Rt Hon Norman

Ancram, Michael

Franks, Cecil

Arnold, Tom

Fraser, Peter (Angus East)

Ashby, David

Freeman, Roger

Aspinwall, Jack

Fry, Peter

Atkins, Robert (South Ribble)

Gale, Roger

Atkinson, David (B'm'th E)

Galley, Roy

Baker, Nicholas (N Dorset)

Gardiner, George (Reigate)

Baldry, Tony

Gardner, Sir Edward (Fylde)

Batiste, Spencer

Garel-Jones, Tristan

Beaumont-Dark, Anthony

Goodlad, Alastair

Bellingham, Henry

Gorst, John

Best, Keith

Gow, Ian

Bevan, David Gilroy

Grant, Sir Anthony

Biffen, Rt Hon John

Greenway, Harry

Biggs-Davison, Sir John

Gregory, Conal

Bonsor, Sir Nicholas

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

Boscawen, Hon Robert

Griffiths, Peter (Portsm'th N)

Bottomley, Peter

Grist, Ian

Bottomley, Mrs Virginia

Ground, Patrick

Bowden, A. (Brighton K'to'n)

Gummer, John Selwyn

Bowden, Gerald (Dulwich)

Hamilton, Hon A. (Epsom)

Boyson, Dr Rhodes

Hamilton, Neil (Tatton)

Braine, Sir Bernard

Hampson, Dr Keith

Brandon-Bravo, Martin

Hanley, Jeremy

Bright, Graham

Hannam, John

Brinton, Tim

Hargreaves, Kenneth

Brittan, Rt Hon Leon

Harris, David

Brooke, Hon Peter

Harvey, Robert

Brown, M. (Brigg & Cl'thpes)

Haselhurst, Alan

Browne, John

Hawkins, C. (High Peak)

Bruinvels, Peter

Hawkins, Sir Paul (SW N'folk)

Bryan, Sir Paul

Hawksley, Warren

Budgen, Nick

Hayes, J.

Bulmer, Esmond

Hayhoe, Barney

Burt, Alistair

Heathcoat-Amory, David

Butcher, John

Henderson, Barry

Butterfill, John

Hickmet, Richard

Carlisle, John (N Luton)

Higgins, Rt Hon Terence L.

Carlisle, Kenneth (Lincoln)

Hirst, Michael

Carttiss, Michael

Hogg, Hon Douglas (Gr'th'm)

Cash, William

Holland, Sir Philip (Gedling)

Chalker, Mrs Lynda

Holt, Richard

Chapman, Sydney

Hooson, Tom

Chope, Christopher

Hordern, Peter

Churchill, W. S.

Howard, Michael

Clark, Dr Michael (Rochford)

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

Clark, Sir W. (Croydon S)

Howarth, Gerald (Cannock)

Clarke, Rt Hon K. (Rushcliffe)

Howell, Rt Hon D. (G'ldford)

Colvin, Michael

Howell, Ralph (N Norfolk)

Conway, Derek

Hubbard-Miles, Peter

Coombs, Simon

Hunt, David (Wirral)

Cope, John

Hunt, John (Ravensbourne)

Couchman, James

Hunter, Andrew

Crouch, David

Jackson, Robert

Currie, Mrs Edwina

Jessel, Toby

Dickens, Geoffrey

Jones, Gwilym (Cardiff N)

Dicks, Terry

Jones, Robert (W Herts)

Dorrell, Stephen

Key, Robert

Douglas-Hamilton, Lord J.

King, Roger (B'ham N'field)

Dover, Den

Knight, Gregory (Derby N)

du Cann, Rt Hon Edward

Knight, Mrs Jill (Edgbaston)

Dunn, Robert

Knowles, Michael

Durant, Tony

Knox, David

Dykes, Hugh

Lamont, Norman

Edwards, Rt Hon N. (P'broke)

Lang, Ian

Eggar, Tim

Latham, Michael

Evennett, David

Lawler, Geoffrey

Fairbairn, Nicholas

Lawrence, Ivan

Fallon, Michael

Leigh, Edward (Gainsbor'gh)

Farr, Sir John

Lester, Jim

Favell, Anthony

Lewis, Sir Kenneth (Stamf'd)

Fenner, Mrs Peggy

Lightbown, David

Fletcher, Alexander

Lilley, Peter

Fookes, Miss Janet

Lloyd, Ian (Havant)

Forman, Nigel

Lloyd, Peter, (Fareham)

656

Lord, Michael

Powell, William (Corby)

Lyell, Nicholas

Powley, John

McCurley, Mrs Anna

Prentice, Rt Hon Reg

McCusker, Harold

Price, Sir David

Macfarlane, Neil

Raffan, Keith

MacKay, Andrew (Berkshire)

Raison, Rt Hon Timothy

MacKay, John (Argyll & Bute)

Rathbone, Tim

Maclean, David John

Renton, Tim

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

Rhodes James, Robert

Madel, David

Rhys Williams, Sir Brandon

Major, John

Ridley, Rt Hon Nicholas

Malins, Humfrey

Rossi, Sir Hugh

Malone, Gerald

Sackville, Hon Thomas

Maples, John

Sainsbury, Hon Timothy

Marlow, Antony

St. John-Stevas, Rt Hon N.

Marshall, Michael (Arundel)

Scott, Nicholas

Mates, Michael

Shaw, Sir Michael (Scarb')

Mather, Carol

Shepherd, Colin (Hereford)

Maude, Hon Francis

Shersby, Michael

Mawhinney, Dr Brian

Silvester, Fred

Maxwell-Hyslop, Robin

Skeet, T. H. H.

Mayhew, Sir Patrick

Smith, Sir Dudley (Warwick)

Mellor, David

Speller, Tony

Merchant, Piers

Spicer, Jim (W Dorset)

Meyer, Sir Anthony

Squire, Robin

Mills, Iain (Meriden)

Stanbrook, Ivor

Miscampbell, Norman

Stevens, Lewis (Nuneaton)

Mitchell, David (NW Hants)

Stewart, Allan (Eastwood)

Moate, Roger

Stokes, John

Monro, Sir Hector

Stradling Thomas, J.

Montgomery, Fergus

Sumberg, David

Morrison, Hon C. (Devizes)

Taylor, John (Solihull)

Moynihan, Hon C.

Terlezki, Stefan

Murphy, Christopher

Thompson, Donald (Calder V)

Neale, Gerrard

Townend, John (Bridlington)

Needham, Richard

Trippier, David

Nelson, Anthony

van Straubenzee, Sir W.

Newton, Tony

Walker, Bill (T'side N)

Nicholls, Patrick

Ward, John

Nicholson, J.

Wardle, C. (Bexhill)

Norris, Steven

Warren, Kenneth

Onslow, Cranley

Watson, John

Oppenheim, Phillip

Wilkinson, John

Ottaway, Richard

Wolfson, Mark

Page, Richard (Herts SW)

Wood, Timothy

Parkinson, Rt Hon Cecil

Yeo, Tim

Parris, Matthew

Patten, John (Oxford)

Tellers for the Ayes:

Pawsey, James

Mr. Michael Neubert and

Peacock, Mrs Elizabeth

Mr. Mark Lennox-Boyd.

Pollock, Alexander

NOES

Adams, Allen (Paisley N)

Campbell, Ian

Anderson, Donald

Canavan, Dennis

Archer, Rt Hon Peter

Carlile, Alexander (Montg'y)

Ashdown, Paddy

Clarke, Thomas

Ashton, Joe

Clay, Robert

Atkinson, N. (Tottenham)

Clwyd, Mrs Ann

Bagier, Gordon A. T.

Cocks, Rt Hon M. (Bristol S.)

Banks, Tony (Newham NW)

Cohen, Harry

Barnett, Guy

Coleman, Donald

Barron, Kevin

Concannon, Rt Hon J. D.

Beckett, Mrs Margaret

Conlan, Bernard

Beith, A. J.

Cook, Frank (Stockton North)

Bell, Stuart

Cook, Robin F. (Livingston)

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

Corbett, Robin

Bermingham, Gerald

Corbyn, Jeremy

Bidwell, Sydney

Cowans, Harry

Blair, Anthony

Craigen, J. M.

Boothroyd, Miss Betty

Crowther, Stan

Boyes, Roland

Cunliffe, Lawrence

Bray, Dr Jeremy

Davies, Ronald (Caerphilly)

Brown, Gordon (D'f'mline E)

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

Brown, Hugh D. (Provan)

Deakins, Eric

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

Dewar, Donald

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

Dormand, Jack

Brown, Ron (E'burgh, Leith)

Dubs, Alfred

Caborn, Richard

Dunwoody, Hon Mrs G.

Callaghan, Jim (Heyw'd & M)

Eadie, Alex

657

Eastham, Ken

Oakes, Rt Hon Gordon

Ellis, Raymond

O'Brien, William

Evans, John (St. Helens N)

O'Neill, Martin

Ewing, Harry

Park, George

Faulds, Andrew

Parry, Robert

Fisher, Mark

Patchett, Terry

Foster, Derek

Pavitt, Laurie

Foulkes, George

Pendry, Tom

Fraser, J. (Norwood)

Penhaligon, David

Freeson, Rt Hon Reginald

Pike, Peter

Garrett, W. E.

Powell, Raymond (Ogmore)

Gilbert, Rt Hon Dr John

Prescott, John

Godman, Dr Norman

Radice, Giles

Golding, John

Randall, Stuart

Gould, Bryan

Redmond, M.

Hamilton, James (M'well N)

Rees, Rt Hon M. (Leeds S)

Hardy, Peter

Richardson, Ms Jo

Harrison, Rt Hon Walter

Roberts, Ernest (Hackney N)

Hart, Rt Hon Dame Judith

Robertson, George

Haynes, Frank

Robinson, G. (Coventry NW)

Hogg, N. (C'nauld & Kilsyth)

Rogers, Allan

Home Robertson, John

Rooker, J. W.

Howell, Rt Hon D. (S'heath)

Ross, Ernest (Dundee W)

Howells, Geraint

Ross, Stephen (Isle of Wight)

Hughes, Robert (Aberdeen N)

Rowlands, Ted

Hughes, Roy (Newport East)

Sedgemore, Brian

Hughes, Sean (Knowsley S)

Sheerman, Barry

John, Brynmor

Sheldon, Rt Hon R.

Kaufman, Rt Hon Gerald

Shore, Rt Hon Peter

Kilroy-Silk, Robert

Short, Ms Clare (Ladywood)

Kirkwood, Archy

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

Lamond, James

Silkin, Rt Hon J.

Leadbitter, Ted

Skinner, Dennis

Leighton, Ronald

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

Lewis, Ron (Carlisle)

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

Lewis, Terence (Worsley)

Snape, Peter

Litherland, Robert

Soley, Clive

Lloyd, Tony (Stretford)

Spearing, Nigel

Lofthouse, Geoffrey

Stott, Roger

Loyden, Edward

Strang, Gavin

McCartney, Hugh

Straw, Jack

McDonald, Dr Oonagh

Thompson, J. (Wansbeck)

McGuire, Michael

Thorne, Stan (Preston)

McKay, Allen (Penistone)

Tinn, James

McKelvey, William

Wallace, James

McTaggart, Robert

Wardell, Gareth (Gower)

McWilliam, John

Wareing, Robert

Madden, Max

Weetch, Ken

Marek, Dr John

Welsh, Michael

Martin, Michael

White, James

Maxton, John

Wigley, Dafydd

Maynard, Miss Joan

Williams, Rt Hon A.

Meadowcroft, Michael

Winnick, David

Michie, William

Wrigglesworth, Ian

Mikardo, Ian

Young, David (Bolton SE)

Millan, Rt Hon Bruce

Mitchell, Austin (G't Grimsby)

Tellers for the Noes:

Morris, Rt Hon A. (W'shawe)

Mr. Don Dixon and

Morris, Rt Hon J. (Aberavon)

Dr. Roger Thomas.

Nellist, David

Question accordingly agreed to.
Resolved,
That the Local Government (Supplementary Grants for Transport Purposes Specified Descriptions) Order 1984, dated 18th October 1984, a copy of which was laid before this House on 22nd October, in the last Session of Parliament, be approved.

Blind Persons (Benefits)
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Boscawen.]
12.24 am
Mr. Laurie Pavitt: At the outset of this important debate, may I say how pleased I am that the Minister for Social Security is to reply. I have known him for some years and know that he shares some of the concern that is felt in all parts of the House about the arrangements for the disabled. Tonight we are discussing those who are disabled by blindness. I have some sympathy for the hon. Gentleman, as I believe that his heart would like to make appointments that the Chancellor will not permit him to keep.
I must make some comparisons. Comparisons are always odious, but I should make it clear that, when they compare what happens to people with other forms of disability, the blind are not trying to make divisions between themselves, paraplegics, the mentally handicapped or those who are handicapped by deafness. There is unity and solidarity among the disabled. Although the blind would like their needs to be given special consideration, they do not want that to be at the expense of other sections of the community. Those other sections of the community have been fortunate in regard to mobility and attendance allowances, and the blind are most grateful for that.
I am pleased to see that my right hon. Friend the Member for Manchester, Wythenshawe (Mr. Morris) is present. Everyone knows that, although all Governments have been able to contribute, no Back Bencher has made a greater contribution than did my right hon. Friend by introducing and getting onto the statute book the Chronically Sick and Disabled Persons Act 1970, which started a series of measures providing care and attention. The House is most grateful to him.
I intend to conclude my speech earlier than usual, as the hon. Member for Bournemouth, West (Mr. Butterfill) is present. As this is an all-party concern, I hope that he might catch your eye, Mr. Deputy Speaker, before the Minister replies. Blind people miss out in two ways—first, because most benefits are not geared to help with extra costs. For example, invalidity benefit helps people who have lost their income because they cannot work. It is not designed to meet the extra price of being blind. Secondly, blind people do not qualify for important benefits which would help with extra costs. For example, they do not qualify in their own right for mobility or attendance allowances. Blindness does not qualify people for mobility allowance, which is based on physical ability to move and not on sensory difficulties which make it hard or unsafe to get about and which impose extra costs in assistance and fares. Indeed, many blind people are barred automatically from mobility allowance because they cannot claim it for the first time if they are over 65—and more than half of the 130,000 blind people in the United Kingdom are over 75 and most lost their sight as they grew older. Blindness does not therefore qualify people for attendance and other allowances. In that context, I hope that the Minister will cast his eye over the possibility of making some improvements.
Blind people do not find it easy to do their own decorating, to clean their own windows, to cut their own hedge, to make their own clothes, to mend a fuse or rewire

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a plug or to shop around for the best value. Blind people find that their clothes get extra wear and tear from bumping into things, rubbing against walls, catching on projections, scorching, cigarette burns and tears. Their crockery and glass is more readily broken and chipped. They often need to pay for a companion and to take taxis when they travel. If one is blind, one often needs tape recorders and tapes to keep telephone numbers, recipes and notes, and to keep up with the printed word. One cannot get by with a ballpoint pen and a pad of paper. One needs a typewriter or a braille typewriting machine. A blind person uses the telephone more and at more expensive times. One needs extra space to store bulky braille books. Braille takes eight times the space of print.
Blind people receive special help, and the Minister will take that into consideration. Forty thousand blind people get supplementary benefit and an extra £1·25 a week. That was fixed in 1962, and I hope that it will be revised. Thirty thousand blind workers receive extra tax relief that amounts to only £2 a week. But 60,000 blind people receive neither. There is, quite rightly, an allowance for those who cannot walk, but there is no allowance for those who cannot see.
Last session an early-day motion sought to persuade the Government to accept International Labour Organisation convention 159, which affects all disabled people, including blind people. It was approved by the ILO, but the Government have still to ratify it.
Blind people face problems at work. I mentioned their difficulty of remaining in the community. For the past 30 years the general principle has been not to put the disabled into institutions, but to make them a living part of the community. That means working. Blind people are at a disadvantage compared with other disabled people regarding sheltered work shops. Because blind people are provided for in an earlier Act than other disabled people, they cannot return to a sheltered work shop after leaving it
In a period of prosperity blind people leave sheltered work shops and find jobs in the community. When there is a recession, however, they find themselves out of work—at present more than two and a half times as many blind people are unemployed as non-disabled people—and are not permitted to return to sheltered work shops. An attempt should be made to provide such a facility for the blind to bring them into line with other disabled people.
We are a civilised society. A civilised society is judged by the way it treats the very young, the very old and those who are not fortunate enough to have all their faculties and to be able to face the physical and mental problems of our modern world. A civilised society should pay more attention to the fact that for about 25 years the blind have been missing out on provisions. Something should be done to bring provisions for them into line with others who unfortunately suffer from disablement.
Mr. John Butterfill rose—
Mr. Deputy Speaker (Mr. Paul Dean): I understand that the hon. Member for Bournemouth, West (Mr. Butterfill) has the agreement of the hon. Member for Brent, South (Mr. Pavitt) and the Minister for Social Security to intervene.
Mr. John Butterfill: I am greatful to the hon. Member for Brent, South (Mr. Pavitt) for his characteristic courtesy in allowing me to intervene
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in the debate. He made an eloquent case for the plight of the blind. I shall confine my contribution to some questions which may enable us to judge more clearly the present position of the blind.
My hon. Friend the Minister for Social Security was good enough to reply to a written question today in which I asked what the present day value was of the original blindness allowance set in 1948 at 15s, or 75p, a week. My hon. Friend replied that its value today would be £7.06. How does he reconcile that with Lord Glenarthur's reply on 21 March this year in another place that
"If the extra allowance of 1948 had been increased in line with the movement in the retail price index it would have been £8.21 in November 1983."—[Official Report, House of Lords, 21 March 1984; Vol. 449, c. 1359.]
I appreciate that the Government have made great strides in reducing inflation, but the disparity still seems rather odd. My hon. Friend may say that his answer allowed for the deduction of the housing cost component. If so, perhaps he will assist in restoring comparability as between the two answers.
The hon. Member for Brent, South gave a detailed catalogue of the extra costs incurred by the blind. I believe that the £1.25 currently paid barely meets the cost of maintaining a guide dog. The payment is thus in urgent need of review, especially as it has come nowhere near keeping pace with inflation. Although we applaud the increase in tax allowance given to the blind by the Government some time ago, does not my hon. Friend feel in retrospect that we might have done better to use that money to increase the allowances of the less well off rather than to help the small and relatively more affluent percentage of blind people in a position to pay tax?
I hope that my hon. Friend will also explain one or two anomalies relating to supplementary benefit. It seems that the non-householder addition will make single non-householders better off than single householders. The ordinary rate for single householders is £28.05 per week whereas single non-householders receive £31.15 per week when the supplementary benefit and the blindness addition are added together. Similarly, the long-term rate for single householders is £35.35 per week whereas for single non-householders it is £38.45. That appears to discriminate against the non-householder when it seems clear that the needs of the householder are likely to be greater.
In conclusion, I draw attention to my early-day motion 36 and hope that my hon. Friend the Minister has had the opportunity to study it.
12.38 am
The Minister for Social Security (Mr. Tony Newton): This debate is of considerable interest to many thousands of people outside the House, some hundreds of whom lobbied Members on the subject earlier today.
I congratulate the hon. Member for Brent, South (Mr. Pavitt) and my hon. Friend the Member for Bournemouth, West (Mr. Butterfill) on raising the subject and on the serious and responsible way in which they have put the case, which was very much in line with the impressive way in which the arguments were put to me this afternoon by representatives of the Royal National Institute for the Blind, the National League of the Blind and Disabled and the National Federation of the Blind of the United Kingdom in connection with their lobby. It was put to me fairly firmly this afternoon by one of the people who was in the delegation that what was wanted was not expressions of sympathy but action. I understand that.

661
I must make it clear that I cannot tell hon. Members tonight what they want to hear. However, I am sure that there is nothing between us in recognising the problems that blind people face, in our sympathy—I use the word advisedly—with their difficulties, and in our concern to secure that their needs are reflected in the formation of social security policy.
The existing major provisions in supplementary benefit and tax have already been referred to. My hon. Friend the Member for Bournemouth, West is right in his assumption about the difference between the figure that I gave him in a recent answer about the real value of supplementary benefit addition compared with 1948 and the answer given earlier in the year in another place. It is because, as in all our answers on supplementary benefit rates, of which the blindness addition is one, we use the same price index as that used for uprating supplementary benefit, that is the retail price index less the housing component of that index. The comparable figure to the answer in the other place, had the recent answer been on that basis, would have been of the order of £8·50.
I hope that I made it clear in the answer that I was answering on the basis that I did. That seems sensible, given that for supplementary benefit claimants housing benefit costs are met separately, and that is as true for blind claimants for supplementary benefit as it is for any other. Therefore, it is sensible to use this index convention in talking about supplementary benefit rates or additions. I should not want to mislead my hon. Friend.
There has been reference to the supplementary benefit blind addition and to the tax allowance, which, as my hon. Friend said, has been increased by the Government to £360. However, it may be sensible if I set out in a little more detail some of the other existing provisions, because they amount to somewhat more than is recognised, and it is important that the possible entitlement of blind people should be understood. We have been taking various steps to try to ensure that it is more widely understood.
In addition to the supplementary benefit blind addition of £1·25, as my hon. Friend recognised, single householders aged 18 or over and those aged 16 to 17 who have a dependent child are entitled to a further addition to that benefit to bring the scale rate up to the higher level of a householder. That will be worth, from 26 November, £5·60 additional to those in receipt of the ordinary rate of supplementary benefit and £7·15 extra a week for those on the long-term rate, which includes pensioners. My hon. Friend seems to have misunderstood the position as between householders and non-householders. He will have gathered from what I have just said that the benefit of non-householders is brought up to that for householders in these circumstances.
Equally, where householders are in receipt of both supplementary benefit and housing benefit, where there is a dependant in the household—this is another advantage of the present system for the blind — no assumed contribution towards housing cost is deducted from the claimants' housing or supplementary benefit entitlement. In the case of housing benefit entitlement, where the claimant is in receipt of housing benefit only, the needs allowance is increased by £4·95 a week where the claimant or his partner is blind, and by £7·30 a week if both are blind. That does not mean an equivalent amount of benefit, because that will depend on various other
662
circumstances, including the rent and rates paid, but it brings an additional advantage to blind people. The claimant's benefit is not reduced to take account of an assumed contribution towards housing costs from any non-dependent member of the household.
In the context of the debate, it is perhaps ironic that the provisions mean that, far from being ignored in the present system, blind people are, I think that I am right in saying, the only group of people who command special treatment of this kind as a result of a specific disability. In making that point, I am conscious that it can be turned round to say that the special case for the treatment of blindness in that way has already been recognised. Before hon. Members jump in to make too much of that point, let me say that for the most part those provisions are an inheritance from a time when blindness was virtually the only disability to be recognised. For a long time now—I recognise that the right hon. Member for Manchester, Wythenshawe (Mr. Morris) played an important part in this—the approach of successive Governments of both parties has been to seek to recognise and to try to meet the needs of disabled people as a whole.
The principal reason why the supplementary benefit addition has not been systematically uprated, despite the introduction of new benefits and a massive increase in social security spending on the long-term sick and disabled, is precisely because Governments have sought to concentrate resources on provisions that help disabled people across the board.
Mr. Alfred Morris: We cannot argue the case for legislation in an Adjournment debate, but the Minister is well aware that the RNIB, the National League of Blind and Disabled and the National Federation of the Blind are concerned to see the introduction of a blindness allowance. Will he be making representations to the Chancellor about the strength of the case for such an allowance? At the same time, can he say anything about the importance of the claim on behalf of people who are both deaf and blind for some help with their mobility? He knows that the Deaf-Blind Helpers League is concerned on that matter. I hope that he will be able to say a brief word about its case.
Mr. Newton: Indeed, I was about to make the point, in the context of what I have just said, about the development of benefits in recent years alongside the long-standing national insurance benefit, sickness benefit, invalidity benefit—sickness benefit partly replaced by statutory sick pay — for those who are incapable of work. We have seen from the right hon. Gentleman's work, and more recently from changes that we have made, the development on non-contributory invalidity benefits, now turning into the severe disablement allowance in which the position of the blind is particularly recognised by automatically passporting them over the 80 per cent. test. There is a range of non-contributory invalidity benefits from which many blind people have benefited. The introduction of attendance allowance has been another major development, and there has been the introduction of mobility allowance.
All those benefits are available to blind people on the same basis as to everybody else. Those are not idle words. I accept that there have been—this is directly relevant to the right hon. Gentleman's point — a number of

663
difficulties about mobility allowance, particularly involving blind and deaf-blind people, and to some extent mentally handicapped people as well, which remain in a state of some uncertainty because of a case which is now going on appeal to the House of Lords. The right hon. Gentleman will understand that, because the matter is subject to appeal, there is little that I can add tonight except to say that we shall review the need to look at the guidance, and, indeed, if necessary, the regulations in the light of the outcome of that case. Clearly I cannot say more than that tonight.
On our latest information, some 13,600 people with visual impairment are in receipt of attendance allowance. It must be bringing them considerable assistance.
Mr. Butterfill: Does my hon. Friend agree that it is probable that the vast majority of those are elderly blind people who might well receive attendance allowance in any case?
Mr. Newton: It is possible, although we cannot be sure, because we do not have sufficient analyses. However, I shall come to that point in a moment. As time is short, I simply want to emphasise that as a Government we have sought to build on the approach of developing benefits that spread across the range of disabled people and are directed primarily to the needs that arise from disability, rather than to classify people according to their disabilities.
To that end, we have commissioned the most substantial survey of disabled people and their needs to have been undertaken in this country for many years, with a view to giving us better information for future planning and policy making. It would, of course, be open to hon. Members to say that they wished to change the approach that has informed the development of disability benefits in recent years under Governments of both parties, but I hope that they will ask themselves a few questions before deciding that that is what they wish to do. For example, is such an approach really consistent with the more coherent system of benefits for disabled people which is, I think, our common aim, given that the effects of so many disabilities and disabling diseases vary so much from case to case? Is it established that the undoubted problems that blind people face can be so clearly distinguished from those caused by other disabilities that the case of a blindness allowance can be taken in isolation?
The hon. Member for Brent, South has always, to his great credit, taken a close interest in the problems of deaf people and he will be as well aware as I am of the case put
664
forward by them and on their behalf in respect of the extra costs of their special problems. Indeed, that case is being advanced at the moment. I do not think that the hon. Gentleman would wish any more than I do to arbitrate between the claims of the blind and the deaf, but I am sure that I will carry him with me in saying that the organisations representing the deaf feel that they too have a powerful case which should command our attention.
Given that three quarters of those who are blind are over 65 and that well over half are over 75—in other words, that blindness is predominantly a problem of old age—are hon. Members really sure that it would be right to single out blindness for unique provision alongside the many other disadvantages and disabilities of advancing years?
In asking those questions, I have deliberately refrained from referring to the question of cost, but clearly that too has to be faced. To extend the blindness allowance to all blind people at mobility allowance rates would cost about £125 million. Even more modest proposals, such as the maintenance of age restrictions for mobility allowance and their application to a blindness allowance, would probably leave us with a bill of about £40 million. Inescapably, those figures must be looked at alongside many other claims including an extension of invalid care allowance to married women, a reduction of the 80 per cent. disability test for the severe disablement allowance, the possible introduction of a partial incapacity benefit, and abolition of the mobility allowance age limit. They are all powerful claims. There are also demands for an improvement in services, such as the employment services to which the hon. Member for Brent, South referred, if resources are available.
I do not know, and I do not pretend to know, the answers to all the questions that I have put before the House. I have tried to approach the debate in a spirit of listening constructively to the arguments at a time when we are looking at much of our existing provision for social security and mounting a major survey of needs, including the information necessary for future planning.
I am sorry that I have been unable to say what hon. Members would like me to say, but they can be assured that in our work we shall be determined to ensure that we take account—as we should—of the case that has been made here tonight on behalf of blind people.
Question put and agreed to.
Adjourned accordingly at seven minutes to One o' clock.

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  Police National Computer
  Police National Computer
  Firearms Certificates (Rifles)
  Firearms Certificates (Rifles)
  Breathalyser Machine
  Breathalyser Machine
  Plastic Baton Rounds
  Plastic Baton Rounds
SCOTLAND
  Nuclear Winter
  Nuclear Winter
  Young Persons (Remand)
  Young Persons (Remand)
  Health Services
  Health Services
  NHS Expenditure
  NHS Expenditure
  Nuclear Bunker, Coupar Angus
  Nuclear Bunker, Coupar Angus
  Higher Education
  Higher Education
  Labour Statistics
  Labour Statistics
  Geriatrics and Geriatric Psychiatry
  Geriatrics and Geriatric Psychiatry
  Radiographers and Physiotherapists
  Radiographers and Physiotherapists
  Nurses
  Nurses
  Roads
  Roads
  Redundancies
  Redundancies
  Crofter Housing
  Crofter Housing
  Deer (Firearms) (Scotland) Order 1984
  Deer (Firearms) (Scotland) Order 1984
  Improvement Repair Grant
  Improvement Repair Grant
  Voluntary Bodies (Grants)
  Voluntary Bodies (Grants)
SOCIAL SERVICES
  Hospital Beds
  Hospital Beds
  Blind Persons
  Blind Persons
  District Health Authorities
  District Health Authorities
  Supplementary Benefit
  Supplementary Benefit
  Maternity Allowance
  Maternity Allowance
  Disability Benefit
  Disability Benefit
  Severely Handicapped Persons
  Severely Handicapped Persons
  Pensions
  Pensions
  Fluoridation
  Fluoridation
  Single Payments
  Single Payments
  Falkland Islands
  Falkland Islands
  Deaf Discrimination
  Deaf Discrimination
  Free Prescriptions
  Free Prescriptions
  Chemists (Reimbursement)
  Chemists (Reimbursement)
  Cot Deaths
  Cot Deaths
  Leeds Eastern District Health Authority
  Leeds Eastern District Health Authority
  Regional and District Health Authorities (Chairmen)
  Regional and District Health Authorities (Chairmen)
  Depo Provera
  Depo Provera
  Doctors
  Doctors
  Prescription Charges
  Prescription Charges
DEFENCE
  Nuclear Defence
  Nuclear Defence
  General Belgrano
  General Belgrano
  Animals (Research)
  Animals (Research)
  Trident Missile
  Trident Missile
  Strategic Forces
  Strategic Forces
  Round the World Race (Services Yacht)
  Round the World Race (Services Yacht)
  Nuclear Weapons
  Nuclear Weapons
  New Fighter Aircraft
  New Fighter Aircraft
  Regular Army Reserve
  Regular Army Reserve
  Royal Ordnance Factories
  Royal Ordnance Factories
  AQD Laboratories, Harefield
  AQD Laboratories, Harefield
  RAF Trainer
  RAF Trainer
  Departmental Costs
  Departmental Costs
  Trident Missiles
  Trident Missiles
  Cruise Missiles
  Cruise Missiles
  Greenham Common
  Greenham Common
  Recruitment
  Recruitment
  Nuclear Tests (Australia)
  Nuclear Tests (Australia)
  United States Export Administration Act
  United States Export Administration Act
  Falkland Islands
  Falkland Islands
  HMS Conqueror
  HMS Conqueror
  Coal Industry Dispute
  Coal Industry Dispute
  Ships' Logs
  Ships' Logs
  British Army of the Rhine
  British Army of the Rhine

Preamble
The House met at half-past two of the clock: The CHAIRMAN OF COMMITTEES on the Woolsack.
Prayers—Read by the Lord Bishop of Coventry.

The "General Belgrano"
Lord Hatch of Lusby: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government on what dates the change in the rules of engagement to enable the Argentine cruiser, the "General Belgrano", to be attacked outside the exclusion zone were communicated to the Argentine Government and the United Nations Security Council.
The Parliamentary Under-Secretary of State for the Armed Forces (Lord Trefgarne): My Lords, rules of engagement are classified guidelines issued to operational commanders and changes were not communicated to the Argentine Government or the United Nations Security Council. The change in rules of engagement on 2nd May 1982 which permitted the attack on the Argentine cruiser "General Belgrano" outside the total exclusion zone fell within the scope of the warning which was sent to the Argentine Government on 23rd April and which was communicated to the United Nations Security Council on 24th April.
Lord Hatch of Lusby: My Lords, is the noble Lord aware that the purpose of this and other questions is not about whether the "General Belgrano" should have been sunk but about the honesty among public figures to Parliament and to the public? Is it not the case that the Ministry of Defence was asked to disclose why there was this delay in communicating the change in the rules of engagement from 2nd May to 7th May to the Argentine Government and to the United Nations the following day, 8th May? Is it not also a fact that the information concerning this delay was already in the Library of another place but that it was not communicated to the Select Committee on Foreign Affairs of another place? Is it not further the case that both the then Secretary of State for Foreign Affairs and the Attorney General of that time expressed concern in writing about both the morality and the international legality of this change in the rules of engagement?
Lord Trefgarne: My Lords, as I said in the original Answer, changes to the rules of engagement do not fall to be notified either to the Argentine Government or to the United Nations. The noble Lord's questions do not therefore arise.
Lord Annan: My Lords, does the noble Lord agree that to have communicated changes in the rules of engagement would have been an act of military and naval folly and, if they had been communicated either
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to the Argentine Government or to the United States forces, this would have endangered our own task force? Would the noble Lord agree that this continual quest to cover the face of the Prime Minister with slime is becoming odious in the sight of most people who, having heard these arguments, realise now that there was nothing whatsoever wrong in the action which her Majesty's Government took regarding this cruiser?
Lord Trefgarne: My Lords, I am grateful to the noble Lord. I agree entirely with him.
Lord Paget of Northampton: My Lords, why do we go on with this nonsense? Since when has our Royal Navy required permission to sink the enemy? What the hell do we keep a Royal Navy for?
Lord Trefgarne: My Lords, I wish that the noble Lord's question would be heard by the noble Lord, Lord Hatch of Lusby, and by that honourable gentleman in another place.
Lord Hankey: My Lords—
Several noble Lords: Order! Grimond!
Lord Grimond: My Lords, before we leave this Question—apparently in some disorder—which I shall be very glad to do, may we take it from what the noble Lord the Minister has said today that one point, which I have been doubtful about in my own mind, has been cleared up: that the original exclusion zone was no guarantee to Argentina that if they remained outside it they would not be attacked? Indeed, it was not communicated to them. Are we to take it that it was simply an instruction to our own commanders that they should not attack Argentine ships outside the exclusion zone without the approval of their political masters?
Lord Trefgarne: My Lords, the establishment of the exclusion zones—first, the maritime exclusion zone and later the total exclusion zone—was related initially to ensuring that the Argentine forces were not resupplied and, later, to the arrangements for the repossession of the Falkland Islands. As to the noble Lord's question about Argentine vessels being attacked inside or outside the exclusion zones, I would invite him to study the words of the advice that we gave to the Security Council on these matters. I shall arrange for the noble Lord to receive a copy.
Lord Jenkins of Putney: My Lords, is it not the case that the Government did notify the Argentine Government of the fact that they had changed the rules of engagement on, I believe, 7th May? Since they did so notify the Government, why was it that the Government found it necessary to do so, and why did they do so so late in the day?
Lord Trefgarne: My Lords, rules of engagement are confidential matters not conveyed to the Argentinians, nor to anyone else.
Lord Hankey: My Lords, have the people who ask these questions not forgotten the fact that the

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Argentines gave us no notification that they were going to attack the Falklands without provocation and also invade South Georgia? What is the relationship between those actions and international law such as that to which the noble Lord, Lord Hatch, referred?
Lord Trefgarne: My Lords, that comparison had occurred to me and I am grateful to the noble Lord for reminding me of it.
Lord Campbell of Alloway: My Lords, is my noble friend aware of any orders to the commander of the "General Belgrano" which precluded that vessel from taking hostile action? If not, what on earth does an exclusion zone or a change in the rules of engagement have to do with the matter?
Lord Trefgarne: My Lords, my noble friend has again put his finger on the matter, if I may say so. The reason the "General Belgrano" was attacked was of course that she posed a threat to units of the British Task Force.
Viscount St. Davids: My Lords, does the noble Lord not agree that the Argentine itself had certain rights and that it had taken to itself the right to sink our craft at any point in the seas—certainly not restricted to the exclusion zone? Does he not agree that the "General Belgrano" intended to sink any British ship it could find—even outside that zone—and that the Argentines themselves have never claimed that we were wrong to sink their ship at any point in the sea? They believed it to be quite right. Why should we bother so much?
Lord Trefgarne: My Lords, the noble Viscount is quite correct. Indeed, it was an Argentinian Admiral who said just that on a television programme.
Lord Hatch of Lusby: My Lords, if the noble Lord is maintaining the Answer he gave to my original Question and thereby ducking my supplementary questions, how does he square his Answer with the evidence given by the present Minister of Defence to the Select Committee on Foreign Affairs in another place just last week, when the question of the rules of engagement was answered by the present Minister of Defence? In view of the now admitted fact that Parliament and the public have been misled—perhaps through ignorance—by the Prime Minister and other Ministers on the whole of this issue, is it not time that the Government followed the advice of many leading Members of their own party and published a White Paper giving both Parliament and the public a true account of the facts?
Lord Trefgarne: My Lords, I believe that the noble Lord is now flogging a dead horse. All the questions he has posed today and on previous occasions have been answered in your Lordships' House and in another place time and time again.
Lord Hatch of Lusby: My Lords, the Minister has not answered one of the questions I have asked—
Noble Lords: Order!
The Lord Bishop of Norwich: My Lords, is the noble Lord aware that he has answered this question so many times that even the popular as well as the what is called the rather respectable press has not got his name down in the newspapers as "Lord Trefgarno" for some reason? Is he aware also that all sides of the House and certainly these Benches—and I speak as a naval chaplain—feel that he should be allowed to return to his other naval duties in the MoD, which he conducts with great diligence and great acclaim?
Lord Trefgarne: My Lords, I am greatly obliged to the right reverend Prelate.
Lord Hatch of Lusby: My Lords, the noble Lord has refused to answer a single one of my questions, not one of which has ever before been asked in this House. May I ask him at least to extend to the House, if not to me, the courtesy of answering the specific questions which arise from the statements and documents made and written by his own Government, and not attempt to duck away from them, as he has done this afternoon?
Lord Trefgarne: My Lords, I invite the noble Lord to study the answers I have already given this afternoon and on previous occasions.

VAT on Building Work
2.48 p.m.
Lord Dean of Beswick: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what are their intentions regarding the EC proposals to place VAT on all building work.
The Parliamentary Under-Secretary of State, Department of Health and Social Security (Lord Glenarthur): My Lords, the EC Commission has been contending that some of the United Kingdom's zero rates, including those applying to new non-domestic construction and civil engineering work, are contrary to the provisions of the Sixth VAT Directive, which established community rules for the structure and coverage of VAT. Her Hajesty's Government do not accept the Commission's views. It will be for the Commission to decide whether to apply to the European Court of Justice for a judgment on the issue.
Lord Dean of Beswick: My Lords, I am grateful to the Minister for that Answer. I should like to make him aware of the fact that he and the Government will have the support of most noble Lords, I hope, in restricting any extension of the imposition of VAT on any sector of the building industry. Is the Minister aware that if VAT was imposed on new construction, it would have the effect of completely cutting across the Government's policy and intentions for regenerating and refurbishing our decaying inner-city areas, such as those in London, Manchester and Leeds? I hope the Government will dig in their toes because of the adverse effect such an imposition would have also on the unemployment situation which presently exists in the building industry.
Lord Glenarthur: My Lords, certainly we have asked for some clarification on the particular issue which the noble Lord raises about new housing. There has been no evidence in the past that the Commission is challenging the legality of zero rating for new housing but, as I have said, we have asked for clarification of that issue.
Lord Dean of Beswick: My Lords, I should like to press the Minister further. I am talking not only about new housing; I am also talking about development in a general sense. Will he turn his mind just for a moment—and, if possible, give us some figures on this—to what adverse effect the imposition of VAT would have on unemployment in the building sector? Would it mean that a further 30,000, 40,000 or 50,000 people would join the dole queue to suit the Commission of the EEC?
Lord Glenarthur: My Lords, I certainly cannot give those figures to the noble Lord. But, as I said, the Government do not accept the Commission's view and they see no reason to implement the changes because of it.
Lord Barnett: My Lords, does the noble Lord's answer mean that the Government have no intention of imposing VAT on construction work?
Lord Glenarthur: My Lords, the question relates to the particular issue of the EEC, which I think I have answered. The noble Lord is leading us down a different path.
Baroness Airey of Abingdon: My Lords, may I ask the Minister whether VAT is, or will be, applicable to building repairs to churches?
Lord Glenarthur: My Lords, with respect to my noble friend, that question goes slightly wider than the Question on the Order Paper.

Nuclear Weapons: Review of Effects
2.51 p.m.
Lord Renton: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government when they hope to publish the Home Office review of the casualty and damage effects of nuclear weapons.
The Minister of State, Home Office (Lord Elton): My Lords, we intend to publish this review early next year.
Lord Renton: My Lords, while I thank my noble friend for that reply, may I ask him whether he is aware of the serious conflicts of evidence and the consequent misunderstandings with regard to this vital matter? Will he therefore ensure that publication of the report is given the highest priority and the widest possible circulation when it is published?
Lord Elton: My Lords, the report will rest on very thorough research. It will be published as an official document available to the public and a copy will be placed in your Lordships' Library.
Lord Shinwell: My Lords, with great respect to the noble Lord, Lord Renton, may I ask the noble Lord the Minister how it is possible to estimate or determine the casualties that are likely to result from the use of nuclear weapons when the nuclear weapons have not been used? Do we not have to wait for what happens, and when it happens shall we not know what is going to happen? We shall be destroyed.
Lord Elton: My Lords, I understand that it is because it has not happened that it is so difficult to decide what will happen if it does happen.
Lord Mishcon: My Lords, will the noble Lord the Minister agree that the public of this country deserve a full, frank and simple account of what the Government feel, on scientific advice, to be the effects of nuclear war, in so far as one can carry that hypothesis through? Does the Minister feel that that may well encourage people to support, in so far as is practicable, a civil defence policy, whereas if the Government are not frank people will disbelieve?
Lord Elton: My Lords, it is the purpose of the report to reveal what we believe the effects of certain nuclear weapons would be if they were used. That will no doubt contribute to the understanding of the public of the need for civil defence, as the noble Lord rightly suggests.
Lord Gisborough: My Lords, when the report is published, can my noble friend also publish alongside it an estimate of the casualties of a non-nuclear attack, thinking back in terms of Coventry, Hamburg and places like that?
Lord Elton: My Lords, I do not think that that is our present intention, but I will draw the idea to my right honourable friend's attention.
Lord Gladwyn: My Lords, is it not evident, even before the publication of this report, that civil defence provision against what might be called a strictly limited nuclear war, which I think is very improbable, need not greatly exceed the provision of civil defence against conventional weapons, whereas any provision for defence against any serious nuclear attack will be absolutely money wasted, because such defence is quite impossible?
Lord Elton: My Lords, the first part of what the noble Lord said may be true. The second part is highly questionable, because, in the event of the use of any conceivable level of attack on this country, there would be some survivors. The prediction is that there could be a great many and it would be most unfortunate if no provision were made for them to survive.
Lord Jenkins of Putney: My Lords, is it not the case that the fortunate people in such an event would be not the survivors but those of us who were lucky enough to

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catch the full benefit of the blast? In those circumstances, will the noble Lord consider what his noble friend has suggested, which is that the Government survey should cover not merely the consequences of a nuclear attack but the possibility of an alternative attack, because it is only in the latter circumstance that any form of civil defence makes any sense whatsoever?
Lord Elton: My Lords, as to the first part of the noble Lord's question, I do not think any Government could responsibly suggest that it was their duty to commit the civilian population of this country to suicide. As to the second part of the noble Lord's question, I have already said that there is, of course, a duty to take defensive measures against conventional attack, and those are things with which the public and the Government are familiar.
Lord Renton: My Lords, with regard to the question—if I may say so, the shrewd question—raised by the noble Lord, Lord Shinwell, is my noble friend aware that there have been nuclear tests in various parts of the world and that a great deal of scientific evidence has been accumulated as a result of those tests which would give us some indication of what could be done to help people who were not damaged by a direct hit by a nuclear bomb, but were on the wide perimeters of such an attack?
Lord Elton: My Lords, the purpose of the report, as my noble friend rightly said, is to evaluate the likely physical effects of explosions of various sorts in this country and the extent to which those effects would extend over the population. It is not, of course, to predict what number of such weapons or what size would, in any event, be used.

Arab/Israel Dispute
2.57 p.m.
Lord Chelwood: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will make a statement, following the Foreign Secretary's recent visit to Israel, on the prospects for an European initiative, in conjunction with the United Nations, to prepare the way for international negotiations to seek a solution to the dangerous deadlock between Israel and the Arab countries about the future of the Palestinian people.
Lord Trefgarne: Following the visit of my right honourable and learned friend the Secretary of State for Foreign and Commonwealth Affairs to Israel, the Government remain convinced that a negotiated settlement of the Arab/Israel dispute must be based on the two principles of secure existence for Israel and self-determination for the Palestinians. This view is shared with our European Community partners. We stand ready to help in the search for such a settlement, but the primary responsibility to initiate progress must lie with the parties directly concerned.
Lord Chelwood: My Lords, I am very grateful for that reply, which I confess I find rather puzzling and even a little depressing. What are the reasons why the Government take the view that it is likely that the United States will take an initiative in the foreseeable future to try to narrow the gap between Israel and her Arab neighbours, bearing in mind that it would indeed have to be based on the two principles which my noble friend has enunciated for the umpteenth time; that is, the security of Israel and the self-determination of the Palestinian people? Why is it that Her Majesty's Government and our Community partners continue to take such an optimistic view of the possibility of an American initiative? Is this not rather a strange optimism and ought not the Community to be willing to take an initiative itself?
Lord Trefgarne: My Lords, I think it is a mistake to think that the United Kingdom, or even the European Community, has a magic wand which we can wave over this problem to produce a solution. The first thing we need to achieve is a concerted view among the parties themselves, or at least one side of the parties themselves, and that has yet to be attained.
Lord Cledwyn of Penrhos: My Lords, we welcome the visit of the Foreign Secretary to the Middle East and note that he has offered to consider playing a part in an expanded United Nations force in South Lebanon, but that—and I quote the right honourable gentleman's words—
"participation on the ground is not the only way of giving support."
Will the noble Lord say what sort of support the Foreign Secretary and the Government have in mind, if not the contribution of forces? Furthermore we regret—as he does, I feel sure—the postponement of the United Nations inspired military talks between the Lebanon and Israel. What is to happen next and can the Minister tell the House why these talks broke down?
Lord Trefgarne: My Lords, I am not entirely clear why the talks to which the noble Lord referred have broken down, but I understand that the Secretary-General of the UN is trying actively to get them going again. As for the United Kingdom's contribution to UNIFIL, as the noble Lord will be aware, we have long favoured an expansion of that force to help Israeli withdrawal. Indeed, it was our idea as far back as September 1983. We are already a major financial contributor and provide some logistical assistance. My right honourable and learned friend actually said, I think, that we would consider additional support. The area of logistics is one where we are particulary well-equipped to help.
Lord Shinwell: My Lords, is the noble Lord aware that a European initiative is desirable not only because it might effect consensus instead of the continued confrontation but for military, or peace, reasons? Why allow the intervention of the United Nations, which will never cease condemnation of the state of Israel, which has never accepted the proposition that Israel should be furnished with essential security and which has displayed bias and prejudice from the very beginning on the subject of the Middle East?
Lord Trefgarne: My Lords, I am sorry if the noble Lord takes that view. We favour the position of the Security Council in this matter rather than some of the declarations of the General Assembly, with which we have less sympathy.
Lord Bottomley: My Lords, does the Minister agree that, if there are to be successful peace initiatives in the Middle East, it is necessary for the Palestinians to recognise the state of Israel?
Lord Trefgarne: My Lords, that would certainly be an important step forward.
The Earl of Onslow: My Lords, is it not important that Europe plays a much greater part in this area, because, after all, it is Europe's dew pond—it is her back garden—between Israel and the Middle East? The American President received 31 per cent. of the Jewish vote at the last election, as opposed to the 72 per cent., or whatever it was, for Mr. Mondale. Therefore Europe is in a position to pressurise an American President who is now less beholden to the Zionist vote than ever before; and perhaps there is hope for some sort of progress under those circumstances for both Palestinian rights and peace in the Middle East.
Lord Trefgarne: My Lords, I agree that the United States is indispensable to the peace process in the Middle East. It has close links with both sides. We are glad that President Reagan reaffirmed at the United Nations General Assemby his proposals of 1st September 1982, which we believe are a realistic starting point for negotiations.
Viscount Buckmaster: My Lords, is the Minister aware that the Secretary of State's speech in Israel in which he urged the Israeli Government to call a halt to the construction of new settlements on the West Bank has been widely welcomed in the Arab world in the context of an eventual settlement of the Arab-Israel dispute?
Lord Trefgarne: My Lords, my right honourable friend certainly did, I think, speak in the way that the noble Lord says. We believe that the Israeli settlements are illegal and an obstacle to peace. A freeze, which has sometimes been suggested, would certainly increase confidence as regards Israeli intentions.

Dinner
The Earl of Swinton: My Lords, it may be for the convenience of the House if I announce that dinner will be available at the usual time of 7.30 p.m.

Education and Training Bill [H.L.]
Lord Perry of Walton: My Lords, I beg to introduce a Bill to provide for the establishment and functions of a National Development Council for continuing education and training. I beg to move that this Bill be read a first time.
Moved, That the Bill be now read a first time.—(Lord Perry of Walton)
On Question, Bill read a first time, and to be printed.

Wildlife and Countryside Act 1981 (Amendment) Bill [H.L.]
Lord Houghton of Sowerby: My Lords, I beg to introduce a Bill to extend the provisions of Section 11(1) of the Wildlife and Countryside Act 1981.I beg to move that this Bill be now read a first time.
Moved, That the Bill be now read a first time.—(Lord Houghton of Sowerby).
On Question, Bill read a first time, and to be printed.

European Communities Committee: Select Committee
The Chairman of Committees (Lord Aberdare): My Lords, I beg to move the first Motion standing in my name on the Order Paper.
Moved, That a Select Committee be appointed to consider Community proposals, whether in draft or otherwise, to obtain all necessary information about them, and to make reports on those which, in the opinion of the Committee, raise important questions of policy or principle, and on other questions to which the Committee consider that the special attention of the House should be drawn;
That, as proposed by the Committee of Selection, the Lords following be named of the Committee:

Attlee, E.

Bancroft, L.

Brookeborough, V.

Broxbourne, L.

Carnegy of Lour, B.

Gallacher, L.

Harris of Greenwich, L.

John-Mackie, L.

Kearton, L.

Llewelyn-Davies of Hastoe, B. (Chairman)

MacLehose of Beoch, L.

Nathan, L.

Nugent of Guildford, L.

O'Brien of Lothbury, L.

Oram, L.

Peyton of Yeovil, L.

Plowden, L.

Robson of Kiddington, B.

Rochdale, V.

Rochester, L.

Serota, B.

Sidmouth, V.

Templeman, L.

Thomas of Swynnerton, L.

Torrington, V.

That the Committee have power to appoint Sub-Committees and to refer to such Sub-Committee any of the matters within the terms of reference of the Committee; that the Committee have power to appoint the Chairmen of Sub-Committees, but that such Sub-Committees have power to appoint their own Chairman for the purpose of particular enquiries; that two be the quorum of such Sub-Committees;
That the Committee have power to co-opt any Lord for the purpose of serving on a Sub-Committee;
That the Committee and any Sub-Committees have power to adjourn from place to place;
That the Committee have power to appoint specialist advisers;
That the Committee have leave to report from time to time;
That the Reports of the Select Committee from time to time shall be printed, notwithstanding any adjournment of the House;
That the Minutes of Evidence taken before the Committee or any Sub-Committee from time to time shall, if the Committee think fit, be printed and delivered out;
That the Committee or any Sub-Committee appointed by them have leave to confer and to meet concurrently with any Committee of the Commons on European Legislation, &c. or any Sub-Committee of that Committee for the purpose of deliberating and of examining witnesses, and have leave to agree with the Commons in the appointment of a Chairman for any such meeting.—(Lord Aberdare.)
On Question, Motion agreed to; and it was ordered that a Message be sent to the Commons to acquaint them therewith.

Statutory Instruments (Joint Committee)
Lord Aberdare: My Lords, I beg to move the second Motion standing in my name on the Order Paper.
Moved, That a Select Committee of seven Lords be appointed to join with a Committee appointed by the Commons to consider—
(1) Every instrument which is laid before each House of Parliament and upon which proceedings may be or might have been taken in either House of Parliament, in pursuance of an Act of Parliament; being

(a) a statutory instrument, or a draft of a statutory instrument;

(b) a scheme, or an amendment of a scheme, or draft thereof, requiring approval by statutory instrument;

(c) any other instrument (whether or not in draft), where the proceedings in pursuance of an Act of Parliament are proceedings by way of an affirmative resolution; or

(d) an order subject to special parliamentary procedure;

but excluding any Order in Council or draft Order in Council made or proposed to be made under paragraph 1 of Schedule 1 to the Northern Ireland Act 1974.
(2) Every general statutory instrument not within the foregoing classes, and not required to be laid before or to be subject to proceedings in the Commons only, but not including Measures under the Church of England Assembly (Powers) Act 1919 and instruments made under such Measures;
with a view to determining whether the special attention of the House should be drawn to it on any of the following grounds—

(i) that it imposes a charge on the public revenues or
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contains provisions requiring payments to be made to the Exchequer or any government department or to any local or public authority in consideration of any licence or consent or of any services to be rendered, or prescribes the amount of any such charge or payments;

(ii) that it is made in pursuance of any enactment containing specific provisions excluding it from challenge in the courts, either at all times or after the expiration of a specific period;

(iii) that it purports to have retrospective effect where the parent statute confers no express authority so to provide;

(iv) that there appears to have been unjustifiable delay in the publication or in the laying of it before Parliament;

(v) that there appears to have been unjustifiable delay in sending a notification under the proviso to subsection (1) of section 4 of the Statutory Instruments Act 1946, where an Instrument has come into operation before it has been laid before Parliament;

(vi) that there appears to be a doubt whether it is intra vires or that it appears to make some unusual or unexpected use of the powers conferred by the statute under which it is made;

(vii) that for any special reasons its form or purport call for elucidation;

(viii) that its drafting appears to be defective; or

on any other ground which does not impinge on its merits or on the policy behind it. and to report their decision with the reasons thereof in any particular case.
That the Lords following, as proposed by the Committee of Selection, be named of the Committee:

Airedale, L.

Brooks of Tremorfa, L.

Cullen of Ashbourne, L.

Denington, B.

Dilhorne, V.

Henley, L.

Shaughnessy, L.

That two be the quorum of the Committee.
That the Committee have power to agree with the Committee appointed by the Commons in the appointment of a Chairman.
That the Committee have power to appoint one or more Sub-Committees severally to join with any Sub-Committee or Sub-Committees appointed by the Committee appointed by the Commons: and to refer to such Sub-Committee or Sub-Committees any of the matters referred to the Committee.
That it be an instruction to the Committee that they do not consider any instrument which is directed by Act of Parliament to be laid before and to be subject to proceedings in the Commons only; and that the Committee do not join with the Committee appointed by the Commons in considering any such instrument.
That it be a further instruction to the Committee that, before reporting that the special attention of the House be drawn to any instrument, the Committee do afford to any Government department concerned therewith an opportunity of furnishing orally or in writing to them or to any Sub-Committee or the

219
Committee such explanations as the department think fit.
That the Joint Committee have leave to report from time to time.
That the Committee do meet with the Committee appointed by the Commons this day at a quarter-past four o'clock.—(Lord Aberdare.)
On Question, Motion agreed to; and it was ordered that a Message be sent to the Commons to acquaint them therewith.

Address in Reply to Her Majesty's Most Gracious Speech
Debate resumed on the Motion moved on Tuesday last by the Earl Cathcart-—namely, That a humble Address be presented to Her Majesty as follows:
"Most Gracious Sovereign—We, Your Majesty's most dutiful and loyal subjects, the Lords Spiritual and Temporal in Parliament assembled, beg leave to thank Your Majesty for the most gracious Speech which Your Majesty has addressed to both Houses of Parliament."
3.4 p.m.
The Chancellor of the Duchy of Lancaster and Minister for the Arts (The Earl of Gowrie): My Lords, I should like to support my two noble friends Lord Cathcart and the Earl of Dundee on their Motion for a humble Address, and I congratulate them on the excellent speeches with which they opened these debates one week ago. Today we debate the economy. Like everyone else in this House, and, I imagine, very many people outside it, I am eagerly looking forward to the contribution of my noble friend Lord Stockton. I am sure that people of all political persuasions are looking forward to it.
After my childhood in the austerity years, I was a teenager and young adult during the golden Macmillan era. In spite of the unfair notoriety of a phrase associated with those years, it was a good time. The Western economies were growing hard after the war and its aftermath. The industries responsible for that growth were still labour intensive. Perhaps inflation was the distant rumble of thunder at the picnic but it still seemed a long way away. How sad that that world changed irredeemably just over 10 years ago, in 1973.
Then the young men and women of the swinging sixties—and even my hair was a great deal longer at that time—grew to maturity in the post-OPEC 1970s. Someone said of the "swinging London" period, "The English are Romans in the process of becoming Italians". Now we are having to learn the stoicism and purposefulness of early Rome all over again. Surely there can be no better person than my noble friend—I would timidly suggest perhaps the best read of any of our Prime Ministers throughout history—to teach us these classical virtues. I am sorry that before the House comes to listen to the sorcerer it must put up with an apprentice, but I promise not to speak for very long.
I want to put before the House a single and very simple proposition for consideration. The proposition is this, and I put it in the form of a question. If the
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number of registered unemployed people was now levelling off or starting to fall, would not most people who are critical of the Government's conduct of economic affairs feel quite differently? Is it not unemployment, above all, that is obscuring the Government's economic record—a record that is generally successful?
In talking about success I am using shorthand. That is because it is, of course, people outside government who clock up the goals—and sometimes the own goals—of economic success or failure. Put quite crudely, is it not the case that this economy is climbing quite rapidly out of the recessionary 1970s; that real rates of growth are now being achieved and, even more importantly, can be sustained; that new jobs are being created, year by year, and that the British economy is slowly and painfully learning that governments can no longer cushion it from competitive pressures, whether at home or abroad?
I submit that most people are not worried about the answer to those questions. What worries them is the scale of unemployment and its pervasiveness; and it is also my guess that they take the view that none of the political parties has a very clear idea as to where unemployment is heading or what to do about it.
In this debate, as in the real world outside, we must not dodge thinking of what we are to do about unemployment. I would also say to the House that we are in danger of ducking the supreme issue of unemployment if we do not first recognise the things that are going well in the economy at present—the things which the Government can legitimately (in view of our polictical conventions) claim as successes. Because if we do not do this, we are in danger of throttling our economic recovery with attempts to tackle unemployment that in the end can only put more people out of work—because we are truly on our way. This will be the fourth successive year of significant expansion and one of the longer lasting recoveries of the post-war period.
I want, if I may, to draw this particularly to the attention of the official Opposition because, to judge from the remarks at the opening of these debates from the noble Lord, Lord Cledwyn, the remarks that the Government should modify the policies particularly in relation to public expenditure plans, I fear that we may have a Bourbon and not a Cledwyn before us. The recovery that we are enjoying, the considerable number of new jobs (well over a quarter of a million in the year to June) that are coming on stream, would be put sharply at risk if public expenditure got out of control again; or if the Government were thus prevented from raising still further those tax thresholds which are in Britain such formidable obstacles to growth and to employment.
So let us start by looking at what is going well in Britain in these mid-1980s. As I said, our curious conventions allow the Government to claim these successes as their own. But the important thing is not the Government's claim. It is that we do not spoil what is going well. It is that we encourage what is going well. It is, above all, that we try to solve the problems of unemployment by looking rather more closely at employment. It is that we do not put the clock back and have to establish the conditions for success all over again.

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First, inflation. We have debated this so much in recent years that I do not propose to spend much time on it. This is quite a self-denying ordinance, because it is, after all, the area where the Government are most directly involved. As the late Lord Beveridge said—no wet he; not exactly famous for his aridity—
"The State is, or can be, master of money. But in a free society it is master of very little else."
During the last year or two of the previous Labour Government and the first year of ours, critics simply could not see how by controlling money and constraining public borrowing within stricter limits, we could control inflation at all. And then when they were proved wrong, of course the grounds of attack changed. "Easy to control inflation", we were told, "by bringing things to a standstill, by a crude and potentially unending deflation of demand." Your Lordships will remember the famous "round robin" to this effect from the 364 economists (some of them Members of your Lordships' House) early in 1981.
But I think it is fair to claim that they have been proved wholly wrong, because demand and GDP have been growing steadily and strongly: up 8¼ per cent. on the first half of 1983; and yet inflation has been falling. This year growth will be 2½ per cent.: less good than it would have been, because of the miners' strike. But once this saddest and most unnecessary of own goals is behind us, literally as well as metaphorically, 3½per cent. growth is a clear possibility again next year.
That is a healthy rate to set against our European competitors. Oddly enough, the figure is a little over the level achieved during the golden Macmillan years. Last year, for instance, we enjoyed the fastest rate of growth in the European Community for the fourth successive year. It will, incidentally, be interesting to see—especially interesting, I would have thought, for the Labour Party—whether socialist France's fierce cutbacks in public spending allow her to catch up. I rather suspect that they will. Here at home the Government's policies are therefore achieving sustained growth without resurgence of inflation. That has been the grail of successive Governments since the last war. We have attained it and we are determined to keep hold of it.
Next, new jobs. Having been forced to concede two of their arguments in respect of inflation, critics of the Government change tack yet again. "This is all very well", they argue, "your recovery is based on lower inflation, we grant you that one, but it is not producing any jobs. It is achieved at the expense of employment". In crude political terms, I think this card has been played effectively, though not perhaps so effectively as to deny the Government reasonably healthy surpluses in surveys of opinion. But I do want to say as clearly as I can that the argument is false. New jobs are coming on stream: nearly 300,000 people between last year's Budget and June of this year; jobs that did not exist before. Nor is it good enough to complain that much of this figure is attributable to the growing employment of part-timers and women. First, growth in these categories is surely good in itself; brave the critic nowadays who complains about the growth of female employment, as in a notable intervention a year or two ago the noble Lord, Lord Spens, had the courage to do.
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Second, these categories underscore another argument of the Government, the "price yourself into work" argument. I suspect that because most female workers see wage levels in terms of aggregate or household income, and most male employees do not, and because fewer female workers are members of powerful unions, wage demands are aligned more closely to their interests of remaining in, or coming into, employment. Many people may object to this fact of life in moral terms. Yet it remains that: a fact of life. So does the relationship between falling real wages in the United States in recent years and the greater success in job generation of the United States economy over the European Community economies.
Certainly few would object to another successful phenomenon, the expansion of self-employment. Throughout the 1960s and 1970s the self-employed made up a small and quite stable percentage of the workforce. Since this Government came to office they have been growing markedly from about 1¾ million to about 2¼ million. An estimated 70,000 of that increase came in the year to this June.
The CBI conference will no doubt be mined by the other side of the House during this debate (and perhaps even by critics on this side) for rods—though I think they might be nearer to wands—with which to beat the Government. But it must also be acknowledged that both the conference and their specially commissioned survey indicated that new jobs were coming on stream and more were on the way. They are coming, let it be said, from small, strike-free and often non-unionised firms. Please let no speakers in this debate subscribe to the rather extraordinary view of the Leader of the Opposition, Mr. Kinnock, that there is not much relation between pay levels and employment levels and therefore between job generation and bargaining power. I happen to be an individual in favour of higher economic wages where many of our industries are concerned. I always have been. I am in favour, for instance, of the excellent rates of pay to the mining industry. This wretched dispute has nothing to do with rates of pay which are the envy of most workers in industry.
British industrial wages, I would argue, were too low for too long. They allowed overmanning to continue far longer than it should have. But I am not in favour of higher wages without lower manning levels, higher output and productivity, and more automation. Regardless of what I, as an individual, happen to favour or not to favour, these industrial changes are happening in any case. They must continue to happen if we are to recover more lost markets and earn our living and do our jobs here on earth, rather than, if I may say with due deference to the Bishops Benches, in Heaven.
To sum up these positive elements in the British economy, I would submit that few disinterested observers would deny this Government's remarkable successes, and, certainly, the electorate has not denied them. Price increases are down, and all the indications are that they will stay down; yet profitability in industry has been increasing dramatically. The real rate of return on capital has been rising strongly for several years. This, in turn, has led to a rapid rise in investment—15 per cent. up in the first half of this year.

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Investment from overseas, too, even if you exclude North Sea oil investment, doubled last year as an increasing number of companies saw the attraction both of the changed economic climate and of Britain's unusually wide-ranging high technology resources and software skills. Significantly, too, strikes have been down: from over 29 million working days lost in 1979 to fewer than four million last year. This year, alas, will be distorted by the miners, but most of the country, like indeed most of the miners, want to keep working, and I believe we shall soon be back on course.
And then again the miners' strike itself, tragically and needlessly interrupting this progress, will, as it comes to an end, signal strongly to the world that this Government have no intention of being brought down by the political leadership of a powerful public sector monopoly union; a political leadership that is being seen by more and more of its own union members as being just that: political, more interested in revolutionary politics than in the welfare, prospects or pay of the industry concerned. That will be a powerful signal—overdue, but formidable in its effect on national and international confidence.
Then, again, productivity is up. We have improved our competitiveness by about a fifth during the last three and a half years. We must do even better, substantially better, if we are to be sincere in our concern for unemployment because in the end any substantial reduction in the numbers depends on recovering markets we have lost.
So it comes back to unemployment. As I said at the beginning, it is possible for this Government both to demonstrate the success of their policies and the need to continue with them, not least in the interests of new jobs. In 1979 these policies were considered eccentric, even wilful. They are now being pursued by all of our Community partners. Our problem and theirs—I recognise that the Government may have underestimated the scale of the problem—is that jobs are not appearing on the labour market, even at the impressive rate that obtains here in Britain, in sufficient numbers to balance the social and industrial pressures in the opposite direction. The world is not the same as it was in the 1930s, nor even the 1950s and the 1960s. There is the rise in commodity prices—and who would deny the developing world rises of income? There are demographic changes—the baby bulge of the 1960s to which, as I have said before, I have to confess that I contributed, coming onto the labour market before the baby bulge of the early 1920s comes off it.
There are structural changes and the first effects of new automation. Subsequent effects can, if we keep our heads, be rather more advantageous in job terms. There is the post-inflationary hangover: a very nasty morning after indeed as the unemployed start to pick up the bills for previous bouts of borrowing, often borrowing in the interests of putting off the evil day when changes in the requirements of the labour market must take place. There is the legacy of reduced competitiveness in the past and loss of jobs to those more highly disciplined capitalist economies in the Far East. We have fallen a long way behind. The next century will belong to the Pacific rather than the Atlantic if we are not careful. But let us indeed, like the seas themselves, flow into each other and share in the
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action. We are doing so now. Our overseas portfolio is healthy. We shall not be able to continue, however, if Labour is in a position to bring back exchange controls.
All these are real economic phenomena. They are not excuses for high levels of registered unemployment. Even the Shadow Chancellor, Mr. Hattersley, stepped out of the party political rugger scrum for a moment when he warned against,
"the impression which we have sometimes given that full employment will be easily achieved".
Mr. Hattersley appears to be recognising that rising employment coexists in the modern world with rising unemployment, that we live in an economy going through extensive and overdue structural alteration. The real issue, surely, is not to try to thwart changes which are coming in any case, but to mitigate their effects on individuals who are adversely affected by them.
So in general economic policy we must continue on the present path. Few people suggest that higher inflation will bring greater sustainable employment. Few people believe that higher levels of taxation will do that, either. Some believe that the Government should borrow more in order to spend more. Most of these critics acknowledge, however, that consumer demand, far from being depressed, is actually quite buoyant. The volume of retail sales is 4 per cent. higher than last year. Total spending is also up by 8 per cent. in money terms. So the most frequent appeal—we shall hear it many times this afternoon—is for what is known as selective spending; spending on infrastructure proposals, hospitals and school maintenance, waterways, rail, roads, sewers, energy conservation and the like.
I take this proposal with the greatest seriousness. It is put forward by people whom I listen to with the utmost respect, but I have to say I remain very sceptical indeed. For one thing, the argument implies that there is a capital project or infrastructure squeeze going on at present, and one of great severity. Little evidence has been presented that worthwhile projects are not going ahead due to lack of public sector funds. Take transport, for example. Looking to the future, the English trunk road building programme alone contains schemes worth more than £5 billion to be built between now and the mid-1990s. My own minuscule Office of Arts and Libraries has, in the new British Library, potentially the largest public building of the century. I would suggest that streamlining and accelerating planning decisions would be the best way to bring more construction jobs on stream—and more quickly.
And few proponents of selective reflation tell us how much additional money should be spent. My experience is that the figure is usually about £2 billion to £2·5 billion more than the Government are spending already. Well, that, or any other figure, has to be borrowed. A quotation from a recent and very interesting book goes this way:
"However justified the reasons for these increases in public expenditure, the fact remains that expenditure on this scale can only be financed by a combination of taxation and Government borrowing that can have adverse effects on the operation of market economies. High taxes can inhibit saving and investment and discourage the innovation, risk taking and entrepreneurial drive which underlie economic progress and increasing prosperity.

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"High levels of Government borrowing can lead to either high interest rates, which may crowd out productive private sector investment, or to increases in the money supply, which may fuel inflation".
That could have come from my right honourable friend the Prime Minister or my right honourable friend the Chancellor of the Exchequer. In fact, it came from the honourable Member for Plymouth.
Current borrowing levels, therefore, in our submission, already are having a rather greater deflationary effect in other areas than we should like. That is why we are so determined to maintain public spending at a constant level in real terms, but within that to maximise the efficiency and value of the money we are spending on reducing unemployment. There is, again, the old problem of the additional money drifting into higher wage claims. Only the Liberal Party is flying the income policy flag with great enthusiasm at present, and I do not really believe that the noble Lord, Lord Diamond, or Dr. Owen think you can tax firms, particularly dynamic and successful ones, for sharing profits with their workers; and that is the net effect of such policies.
Then, again, if job creation is our key objective, infrastructure spending is not necessarily the best buy; far from it. Most big projects involve relatively few men and much costly machinery in their construction. As I have directly experienced in Northern Ireland, their completion ends in lay-offs and disillusion. Their net Exchequer cost per job can easily be 10 or 20 times greater than the employment measures which we are pursuing already at a cost of £2 billion. My noble friend Lord Young updated and refined these when he was at the MSC, so I am not going to deal with the measures but will leave them to him. It is sufficient to say for the moment that they do have the effect of targeting efficiently on those groups who, through no fault of their own, are caught up in the grinding machinery of an economy that is changing gear. I am thinking, of course, of the young, particularly. I know that the noble Baroness, Lady Seear, has commended us for the greater emphasis we have laid on training, and I believe that my right honourable friend Mr. Prior and I can claim some credit for that shift of emphasis when we were at the Department of Employment.
To sum up, my message is that to tackle unemployment we must study employment. New jobs are coming on stream in this country. We have to determine—and it is not all that difficult—what are the special factors which are bringing them on stream. We have to determine the special constraints, the barriers, to job generation, which are still getting in the way. My noble friend will have something to say about these barriers when he winds up.
As we do this, we also have to maintain a relentless pressure on the economy not to lose the gains that have been made over inflation and increased competitiveness. Once your share of world markets has fallen, the climb-back is long and painful. But we are climbing back. We have to get across the message that borrowing money to help industry increases the cost of money, which hurts industry. Above all, by reducing personal taxation we have to deliver greater sums of take-home pay to the British people. We have to see that its value is protected. We must ensure, if we
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can, that the lower paid are eased more gently into the tax system.
In my view, the poverty trap is by far the greatest obstacle to a real improvement in these unemployment figures. But these things themselves—changing the thresholds, for example—need financing. They are a selective reflation, if you like, and it is to bring them about that spending has to be kept at a level which allows the Chancellor some room for manoeuvre each spring. If we continue to do these things, to play our part calmly but inexorably, Budget by Budget, I have little doubt that the British people will do the rest.
3.35 p.m.
Lord Barnett: My Lords, I join with the noble Earl in congratulating the mover and seconder of the Motion for a humble Address. I am sure that all who heard or read their speeches will have welcomed them. I also join with him in congratulating the noble Earl, Lord Stockton, and welcoming in advance the speech which I am sure everyone is waiting to hear. For my part, I am grateful to him for adding slightly to the audience we might otherwise have had.
If I may, at the outset I should like to congratulate the noble Earl, Lord Gowrie, on his promotion to the Cabinet. I am sure that all of us, in all quarters of this House, would welcome that well-deserved promotion. I wish I could congratulate him quite as much on the speech he has just delivered but I fear I cannot. The speech may have come through the voice of the noble Earl, but the real words came from the hands of the Treasury, or at least the latter part of the speech; and I must say that the words and figures of the Treasury—and, indeed, the words and figures of the Treasury in the Autumn Statement yesterday—have taken creative accountancy to even greater heights than I knew. Having done a little of it myself, I could have admired it were it not for the fact that it leaves us, regrettably and very sadly, with unemployment still going upwards.
As one would expect from the noble Earl, he made the best of a bad job; but anybody reading or hearing his speech will unfortunately come to the conclusion that he had little to offer to those who are now unemployed or who are likely to be made unemployed in the near future. As most Government spokesmen do, he blamed just about everybody else other than the Government for the fact that we have these regrettably high levels of unemployment.
I say to the noble Earl that nobody doubts his sincerity. The "in" word today is "compassion". Knowing him, nobody would doubt his compassion about the worry and anxiety over the levels of unemployment. In any event, it is foolish to impute lack of compassion to political opponents on economic policy or, indeed, on any other. But I am bound to say to the noble Earl and, indeed, to the Government that it is not easy to convert a happily embraced image of an Iron Lady to an image of one who cares deeply about unemployment, especially when the fact is that it is her policies which have created it. Sadly, that is what we now have. Indeed, I noted recently that we had the Chancellor of the Exchequer seeking to take on the role of a sort of minister for compassion—not a role for which I think even his best friend would have nominated him.

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The plain fact is that we do have appalling levels of unemployment, and what the noble Earl said today, everything the Chancellor said yesterday and everything the Prime Minister has been saying during these debates, must lead everyone to conclude, regrettably, that the tragically high levels of unemployment are going to continue to rise, because, as we heard from the noble Earl, there is going to be no change in policy.
This is the last day of our debate on the gracious Speech. I am bound to say to your Lordships that the Speech was irrelevant to that central social and economic problem that faces the nation; that is to say, the one that the noble Earl addressed—the problem of unemployment. If I may say so to the noble Earl, at least I am grateful that he has now stopped quoting me—he has been reading a little wider—in his criticism of those who criticise the Government's policy on public expenditure.
It is not unfair to summarise the Government's economic policy, and, indeed, what the noble Earl said today, in this way: first, that there is to be no change in Government policy; secondly, that high wages are a major factor in the levels of unemployment; and, thirdly, the old word "TINA"—there is no alternative. If I may, I propose to deal briefly with each of these to see how likely it is that what the Government are doing or are not doing will affect that central problem that faces us.
The Chancellor, like the noble Earl, constantly reiterates this policy that there should be no change—indeed, there cannot be any change—in the Government's economic policy. If inflation is held down, we are constantly told, everything else will come right. Unfortunately for that theory, we are now well into the sixth year of the policy, and we are still waiting for unemployment to come down; for what we have seen in practice has simply not borne out the theory.
Noble Lords do not have to accept my view that the monetarist experiment has not left us with a soundly-based economy, as the Prime Minister constantly claims it has. The Institute of Directors—not normally the most serious of the Government's critics—recently carried out a survey and they found that:
"only 24 per cent. of businessmen were more confident about United Kingdom economic prospects than they were six months ago".
Their director general, Sir John Hoskyns—a former head of the Prime Minister's own "Think Tank"—said:
"This significant fall in business confidence indicates the fragility of British economic recovery".
So that is the description: it is not soundly-based. "Fragility" is the description given by those most directly affected, and it puts into perspective Government talk of a soundly-based economy of which we are constantly hearing and of which we heard again from the Minister today. However, it is not surprising, because the facts make the point, that far from the economy being soundly-based, we are frittering away as a nation, under the Government's direction, the huge benefit of North Sea oil. Indeed, in his Statement yesterday the Chancellor was only able
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to balance his books by the newly-found £2 billion extra that he is getting from North Sea oil because of the fall in the exchange rate. All this is taking place while our industrial base is being alarmingly eroded.
As the facts show all too clearly, the situation is getting very little better. The national income is only 2·2 per cent. higher than it was in 1979, and even at that time, I should be the first to concede, it was not at a particularly high level. Indeed, it is even worse, because if one excludes oil, national output is still 3 per cent. below what it was in 1979. If investment is a vital element—as even the noble Earl would be bound to concede—the fact is that investment is 3·8 per cent. below the 1979 level. To crown this disastrous economic record, unemployment has risen by more than 2 million. Against that appalling performance we were told by the Chancellor in a recent TV interview that there was "very, very little indeed" that the Government could do to create jobs. In the light of that, I must say that there seems to be little for the new noble Lord, Lord Young, to do in his new job. Nevertheless, I genuinely and warmly welcome him and I hope that he has every success in his office. But the noble Lord must know that there is nothing that he can do that will stop the further loss of real jobs if the Chancellor's policies continue, as we have heard today they are going to continue. All, or most, independent outside economic forecasters, unlike the Chancellor yesterday, are telling us that unemployment will continue to rise. That is the plain fact. I fear that, unless there is a change of policy, the noble Lord's role will be a bit like that of the hapless Mr. Eaton, or Mr. Kirk, to Mr. Ian MacGregor. Of course I make it quite clear that I wish the noble Lord well, but I am bound to say to him that all political history and experience leads me to feel that good wishes are not going to be enough.
The Chancellor, the Prime Minister, and the noble Earl today, have been arguing again on the second point that I made; namely, that low wages lead to more jobs. I want to say right away that I accept as an obvious fact that there is a clear relationship between wage costs and jobs, though I prefer the definition "unit wage costs"; that is to say, high wages matched by high productivity create more, not less, jobs. But what the Chancellor implied and what the noble Earl today implied very clearly is that our wages are generally too high and that there is evidence in other countries, where they are accepting lower wage increases, that there they are creating more jobs. The United States is often quoted in aid. But two years ago they had very high unemployment in the United States. It is now down to 7 per cent. The difference between the United Kingdom and the United States is not simply a question of wage levels, as the noble Earl must know. The United States spent its way out of unemployment with the help of a huge budget deficit. If I may point out to the noble Earl, they did it without inflation taking off as well. They managed to do it. I have noted the noble Earl's reiterated statement that he cannot do so. Maybe he should make way. Maybe there are others who feel that they may be able to do something about it. But to say that we have to live with, effectively, nearly 4 million unemployed, and rising, and that there is no way out of it, no lessons to be learned from any other country, is, frankly, defeatism of the worst possible kind.

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As I say, personally I accept an obvious relationship between wages and jobs. But, it is also fair to say, as I have told your Lordships before, that there is ample evidence in the United Kingdom that many industries have not been spared massive increases in unemployment, despite very low wages. The textile industry in Lancashire is a particular example.
Nevertheless, I accept the clear correlation between high unit wage costs and jobs, and for my part I would certainly be willing to face the challenge that that represents. But the Chancellor really cannot complain. It is central to his policy to do nothing about it; indeed, the reverse. He favours, he is positively dedicated to, free collective bargaining, except, of course, for the already low paid in the public sector who have an incomes policy. They have an incomes policy imposed on them, but it is not called an incomes policy; it is called "cash limits". It is a policy that I do not apologise for introducing, but the difference is that I never intended it to be used as a substitute for an unfair and selective incomes policy, as it is being used today.
If the Chancellor believes that lower wages generally would help to reduce unemployment—and in that respect I am bound to say that he is supported by a recent survey by the Oxford Economic Forecasting Group—then it is (and I hope that your Lordships will accept this) the height of social and political irresponsibility to opt out of doing anything about it. I do not doubt the difficulties of trying to do something about it, and I certainly am not one of those—and I never have been—who advocate a statutory incomes policy. But with the tragic prospects of yet even higher unemployment, the nation deserves more than rigidly sticking to policies that have so clearly failed. There must be at least some prospects of an improvement in jobs if, instead of confrontation with the trade union movement, we had some greater attempt at conciliation with it.
But it is not only on the subject of unemployment that the Government have been unwilling to contemplate that it is just possible that they may have got it wrong. On economic policy generally, as I said, they constantly repeat the worn-out phrase of TINA, even when it is clearly shown, not just by the Opposition, that there are a number of alternatives that should, and, indeed, must, be considered.
We in the Opposition have consistently argued that there is a case in current circumstances for an increase on capital projects in the public expenditure field. Even the CBI—by no means the severest critics of this Government—have supported those proposals. I, of course, accept that there must be some limit as to how much we can spend as a nation. But having said that, we are nowhere near that limit when we are wasting so much public expenditure in keeping millions unemployed and when the public sector borrowing requirement is as low as it is today as a percentage of GDP both historically and by international comparisons. Even Sam Brittan, the strongest supporter of the Chancellor of this Government, in an article on 8th November, said:
"There is nothing inherently wrong with most kinds of deficit if they facilitate additional investment which will pay for their own servicing".
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Certainly investment in new capital projects that takes thousands of people out of the appallingly long dole queues must be servicing its own expenditure.
I am bound to say to the Minister that it would be outrageous to do what the Chancellor proposes—namely, to cut public expenditure to make room for direct income tax cuts. It would also make nonsense of any claim by Ministers to care about levels of unemployment. For it has long been recognised that an increase in public expenditure would create more jobs than would a cut in income tax. Again, your Lordships do not have to take my word for that. The Institute of Fiscal Studies, supported by the London Business School, has recently shown that for £1 billion of tax cuts approximately 30,000 jobs can be created, and that for £1 billion extra of public expenditure 185,000 jobs can be created. So capital expenditure in the public sector must surely be something which this Government—or, indeed, any government faced with this situation—must look at with a view to reversing these unemployment trends.
There are other proposals, and they are not just put forward from these Benches. The Conservative Party's own Back-Benchers have put forward proposals to the Government. I refer to the One Nation Group, which the noble Earl, Lord Gowrie, will know very well. It has put forward the proposal to abolish the employers' national insurance contribution for those under the age of 20; it has proposed a reduction in income tax on low wages, not just across the board, and a vast expansion of the existing job release scheme. These schemes would cost substantial sums.
If the noble Lord, Lord Young of Graffham, did not know before—and having been at Cabinet meetings a few times, especially in recent days, I am sure he does—he will know now that the Treasury will be opposed to his spending any more money. Perhaps I may be so bold as to give him a little advice from my experience on the other side of the Table, because the situation is too serious to take sides on this issue. He has a powerful case against the Treasury. They will argue with him that any schemes which he puts foward should be counted gross; in other words, that they should not take account of any savings in unemployment that he would obtain from his schemes. He should seek the support of his Cabinet colleagues and tell the Treasury that in current circumstances that argument which I used should not be used today. The situation is far too serious for that, and I hope that he will have the support of his noble friend Lord Gowrie when he puts forward the case against the Treasury's argument.
However, the measures to which I referred show that there are alternatives to what the Government are now doing. They are alternatives which the Government simply must consider. I am not saying, and never have said, that there is an easy option or that at a stroke we can create millions of real jobs. We cannot. The situation here, with what effectively is some 4 million unemployed and with no change in policy, meaning an inevitable rise to maybe 5 million, is too serious for lighthearted promises. But unemployment at these levels is doing too much damage to the very social fabric of our society in too many parts of Britain for us to stick rigidly to a policy that has so obviously failed. There must be change or

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we condemn too many decent men and women to the misery of permanent unemployment. Some of the suggestions that I have made would help. They do not offer miracle cures; they would offer hope when none now exists.
House adjourned and resumed by The LORD CHANCELLOR.
3.54 p.m.
Lord Diamond: My Lords, first, I want to offer my very sincere congratulations to the noble Earl, Lord Gowrie, on his achieving Cabinet responsibilities and status, not only on his own account but also on your Lordships' account. I regard it as very important indeed that your Lordships' House should be as well represented in the Cabinet as it is today. Indeed, I see three Cabinet Ministers sitting on the Government Front Bench.
Lord Gladwyn: My Lords, there are four altogether.
Lord Diamond: My Lords, I am well aware that there are four altogether, and it is particularly favourable and important for your Lordships that the Leader of the House should be one who has the ability to make the views of the House fully heard and fully understood in Cabinet, and we are also very grateful for that.
Next, I too am very much looking forward to the maiden speech of the noble Earl, Lord Stockton. On many occasions I have had the privilege of listening to his comments, obviously from the other side of another place, and I am sure that when he has made his maiden speech there will not be a single Member of your Lordships' House who, in relation to that speech, will not want to say, "We've never heard it so good".
I am very glad that the noble Earl, Lord Gowrie, was followed by a speech which really took most of the wind out of his sails, because one is left with the feeling that, whereas there is very little to support what the Government have been doing, the posture of a new Cabinet Minister is one of extreme carelessness about the way this country is going. The noble Earl picked out figures which are totally unknown to me—and I shall examine everything he said with the greatest possible care and I shall controvert one of them a little later in my remarks—in order to demonstrate how well the Government are doing. Of course, every economic Minister on that Bench since this present Government came to power has been doing the same thing; they have been saying that things are going very well, that we should just wait a little longer, that next year will be very good, and that growth will rise next year. It never has done; there has always been some special reason why not. The net result facing us is the sad and serious fact of the rise in the level of unemployment. No matter what their speeches said, the main purpose of economic policy, which is to enable people to earn a decent living for themselves and their families, has totally failed.
I do not recognise the picture of Great Britain which the noble Earl painted. I am aware of what used to be a great manufacturing and trading nation, which over the years has been able to earn a good living, which has
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been able to give a large population in these small islands an increasing standard of living, which has been able to assure an increasing fairness in our society and to provide a reasonably civilised background, now finding itself more divided than ever before, falling back from its position in world trade, its manufacturing base cut to dangerously low levels and unable to maintain the necessary modest annual increase in the living standards of its people. All those things, coupled with the fact that what was a slow—and nobody is suggesting that it should necessarily be fast—progress away from an unequal society, have been halted and even reversed.
As has been indicated, it is absolutely right to say that financially the nation is being kept afloat by what I can only call the misappropriation—yes, indeed, misappropriation—of the once-for-all oil revenues and by the continuation of this pernicious habit of selling the family silver to pay for the groceries, which the noble Earl has heard me argue several times before. I have already indicated that the one thing that hurts us above all is the growing number of millions of our fellow citizens who are being denied the right to work.
It is against that changing background, which largely occurred during the period of this present Government and which was largely, but not completely—and I have argued this as clearly as I can on two previous occasions so I shall not bore your Lordships with a repetition—attributable to the policies carried out, that we naturally turn to the gracious Speech for some solution. We turn hopefully. What do we find?—a proposal to destroy, to abolish, the GLC. Apart from the merit of that proposal itself, what possible relevance has that to our real economic difficulties? What do we find there to deal with the problem of the ever-deepening pit in which the unemployed find themselves trapped? For our decimated manufacturing industry? For the increased danger of our not being able to pay for the food and materials that we must import to maintain our people? We find nothing new. No new policies and no change in priorities.
I suppose that the true figure of the unemployed—that is to say the true figure of those offering themselves and denied the possibility of work—must now be well over 4 million, whereas the figure for inflation at the moment is something slightly above 4½ per cent. And yet top priority is still given by the Government, as confirmed in the Queen's Speech, to the level of inflation.
Of course we all want to see a further reduction in the level of inflation, but at what cost? It has already been substantially reduced by this Government, but largely at the cost of a huge increase in the number of people out of work. It is relevant to ask whether the continuation of those same policies of rigid monetary control, amounting to stark deflation, will achieve a reduction below 4½ per cent., except at the cost of more unemployed and more misery. We are told that the answer is sound money.
Sound money, said the gracious Speech, is the foundation of it all. This was repeated on Tuesday by the noble and learned Lord who sits on the Woolsack. What he said was received with murmurs of approval in your Lordships' House. I wonder how widespread is

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that view. I wonder what kind of reception the Lord Chancellor would get if he travelled North and spoke to any of the thousands of unemployed who are struggling to survive at subsistence levels, and he told them that the Government in their economic management were giving top priority to reducing inflation, and that they therefore need worry no longer about their bank balances being eroded? I do not think he would get a favourable reception. I do not think that the magic of the appeal of sound money is all that great when you possess neither sound nor unsound money.
Let me be clear on what I am proposing. I am not—and I must repeat not—arguing in favour of any increase in the rate of inflation. I am saying first that any further reduction in the rate must be sought by methods other than those entailing further increases in the number of unemployed or in the duration of unemployment. Secondly, I am saying that, as we are saddled with a Government that know of no other way of reducing inflation, as the gracious Speech makes clear, then at the present levels of each we should give undoubted priority to the reduction of unemployment, and that is really where the great divide comes between the two sides of the Chamber. The Government have chosen their main priority wrongly.
It may be argued that even with the accent in the wrong place, and even with no new proposals for mitigating unemployment contained in the gracious Speech, it can still be claimed that nothing new is required because existing policies are serving the nation well, as the noble Earl tried to argue, Alas that can no longer be correct. The first policy, that of inflexible monetary controls, is a depressant, whereas what industry needs, in the view of the Alliance, in the view of the Labour Party, in the view of many Tory Back-Benchers, and certainly in the view of all or nearly all Tory ex-Cabinet Ministers, and, by the way, in the view of industry itself, is a stimulant. We on these Benches have many times set out our carefully constructed proposals for a modest stimulation of the economy.
We are left with the second leg of the Government's policy, the encouragement of increased international competitiveness. That is put forward as the way to rebuild our industry and its exports. Well, in a sense, this, happily, is where we are on common ground. We too believe in improving competitiveness. The noble Earl quoted from a very good book by Dr. Owen which makes our position on that clear. Indeed, I have been hard put to it to find any political party which believes that the way to succeed in the market place is to offer your goods at a higher price than anybody else. Therefore, I am afraid that we cannot give the Government any prizes for originality in that field.
What matters is, is that policy succeeding? My answer is, no, it is not. That is the short answer. A slightly longer answer would be that there was a marked fall—and I am sorry to trouble your Lordships with these figures but, in view of what the noble Earl said, I must do so—in competitiveness in 1980, 1981 and 1982, and some improvement in 1983. It appears for the time being to have settled down at a level slightly better than the 1980 figure but considerably worse than in the years before 1979. Far from our
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international competitiveness having improved, we are now less competitive than we were in the years before this Government took office and made such play with this policy.
My information is drawn from a series of articles and statistics published by the Treasury, the Department of Trade and Industry, the International Monetary Fund and, incidentally, the Prime Minister herself. Speaking in the other place only a week ago in the debate on the Address on 6th November, the right honourable Lady said at col. 27:
"It is pay in relation to output that is the critical factor. Unit labour costs in Britain are still going up at a higher rate than in the United States and Japan."
And she could well have added West Germany and France: the figures support that too.
"I am afraid",
went on the right honourable Lady,
"that unless we get unit labour costs down it does not augur well for our industry. Pay in relation to output is the critical factor."
Well that is indeed very true. It is also true that it is a great pity that the Prime Minister then went on to explain the number of changes and indeed sacrifices that labour must accept to keep the pay element down, without saying a word about the responsibility of management and Government to improve the output element. Not a word was said about investment, which is the first essential for improving output in relation to a given labour cost; not a word about improved management techniques; not a word about greater participation and consultation with all concerned; not a word about achieving a greater sense of unity both inside and outside the factory gates.
I realise that this is not a time to go into much detail. Suffice it to say that it must be clear to anyone reading the gracious Speech that the Government have completely run out of ideas. Faced with the evidence of their major economic policies failing and with ever growing unemployment, they have nothing new to offer to prevent us trailing further and further behind in our capacity to compete abroad, they have nothing to heal the wounds in our society and, above all, they have for yet another year nothing to offer by way of hope to the hopeless millions failing to find work. I am driven to repeat on their behalf the age-old cry of suffering,
"How long, O Lord, how long?".
4.11 p.m.
The Earl of Stockton: My Lords, as I rise to make a maiden speech in your Lordships' House I ask for the forbearance and sympathy which is traditionally extended to someone in that position. I cannot help recording that it is just 60 years since I underwent the same ordeal in another place.
I cannot pretend to your Lordships that the first 16 years of my life in the House of Commons was very successful. It was certainly not very happy. I found myself more and more out of sympathy with the policies—social and economic, and later and much more dangerous into the realms of defence and foreign policy—being pursued by the Government I was elected to support. Naturally, I do not blame them. I became regarded with a certain distaste and even dislike by the leaders of my party. It is an awkward

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situation. However, I was, fortunately, able to deal with the matter fairly soon by becoming the leader of the party myself. Noble Lords on the Front Bench need have no fear as I am too old to repeat that.
I had 40 years on and off in the House of Commons, and 20 years in complete retirement, when I have spent my time either on my own business affairs or in writing and reading about the past. I have taken no part in politics at all. I do not remember making even two political speeches all that time. So now when I come back to Parliament at my advanced age I feel a sort of political Rip van Winkle. These extraordinary changes that I see quite overcome me. First, in the political sphere, during all my active life your Lordships' House played a honoured but not a very powerful role in our politics. Now, to my amazement, I find on the very first day of the debate on the gracious Speech that so great has grown your Lordships' power—partly due I hope to the measures which my colleagues and I took by the creation of Life Peers, which I feel have strengthened and widened the House of Lords, and partly due to the decadence of the House of Commons—that your Lordships' House has been even in conflict with and forcing its amendments upon the Government of the day.
My noble friend the Leader of the House made a speech which quite took my breath away; the terms of it were radical, jacobin—"I warn the Lords not to interfere with the elected representatives of the people". I do not know how he slept that night. Were his dreams haunted by the shades of Lord Lansdowne and Lord Curzon? Of course, the reason is that your Lordships, I admit perhaps in a small field to start with, have been regarded as doing something to protect the individual, the small local group, the small local authority, against the ever-growing and engrossing powers of a centralised Government and an ambitious bureaucracy.
Now I pass to the economic affairs. Here the situation is even more surprising. Very kind things were said by two noble Lords who have spoken about the Government Administrations over which I presided; but it was not really good management; I think it was good luck. But at any rate we set ourselves some very clear purposes in the years between 1951 and 1964 when I was either a member of or presided over a Conservative Administration. Like the juggler who used to delight us all as children, we had to try to keep four or five balic in the air without any dropping to the ground. The first and most vital purpose was the maintenance of the gold exchange system set up at Bretton Woods by which we maintained the value of sterling at two dollars and eighty cents, as fixed by Sir Stafford Cripps in the previous Government. That was maintained as part of the understanding by which the whole great sterling area operated, greatly to the profit of a large part of the world which had a fixed, clear and stable currency in which to deal and make forward bargains, and was much to the advantage of this country.
That was the first purpose. Your Lordships can judge how carefully we watched the gold incomings and outgoings of the Bank of England. The second purpose one might say was full employment. We somehow had that. In fact at one time we had what
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was called over-full employment. To use the jargon of the day, the economy had become overheated and we even had to put up the bank rate to try to stop it; not to spur it on, but to stop it. I think it went up to some appalling figure: it must have been about 6 per cent. The average rate was 4½ per cent. throughout those years.
We then had to have a balanced budget which was very important especially for the first purpose; the value of sterling. I understand that the difference between income and capital is now regarded as a very out-of-date conception, but we still had it then. The idea was that if enough money was raised by taxes and the other income of the Government to pay for the normal expenditure, capital expenditure could be financed without inflation so long as savings could be sufficient to cover it. Hence the importance of the savings movements which started during the war but carried on after the war. Splendid groups of volunteers went around selling savings certificates. I even invented a new form in the one budget I introduced. It was called the Premium Bond. Of course I got into a bit of trouble about that. The Archbishop of Canterbury said that I had debauched the people and was driving our countrymen to nothing but gambling. I thought that it was a slightly unrealistic figure: that of millions of homes with the husband out of work or drunk, the wife without money, the children starving—all because the head of the household had developed an extreme desire to lend money to the Government free of interest. I think that the Archbishop must have confused Premium Bonds with lotteries, which they have in church bazaars. But it does not matter. I belong and, of course, belonged to the Church and I have learned (much as is my deep affection for the Church and its representatives) that episcopal and archiepiscopal plunges into economics are very often rather eccentric, even capricious.
Then we had to have a favourable balance of trade. That seemed to be all right. And so it went on. Of course, politics being politics, the Socialist Party naturally called those years the "thirteen years of Tory misrule". But nobody seemed to mind very much. As one noble Lord has reminded me, there was some enthusiast—I cannot remember his name now—who invented some slogan about, "You've never had it so good!" or something like that. Anyway, it was all right.
And then, through nobody's fault—it was not really anybody's fault—this bolt from the blue came, struck, and nearly destroyed the industrialised and modern society of the world. That was the sudden rise in the price of oil. It was a staggering blow. The amazing thing is that we withstood it, not that we wavered under it.
It had four results, significant, and all bad. First of all, it raised the cost of all manufactured goods, capital goods or consumer goods, especially to those new and emerging countries who, of course, could not now afford to buy them. Then, by its reaction upon the industrialised countries, there was an effect upon the demand for what the new countries really live on—which is not a few doles from Parliament or a little charity. They depend upon the price of minerals and vegetables which they have to sell. That is what they live on. A little rise in the price and demand for copper and rubber will do more for West Africa than

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anything else. It is a paradox but it is true. The only way to make the poor countries richer is to make the rich countries richer still. Of course, it is so. It stopped all that, which before had been going on well.
Thirdly, it produced this vast sum of money in the hands of the OPEC powers; it was huge, in terms that one can hardly realise, hardly take in, it was like Aladdin's cave. Money without responsibility. This money floated around the capitals of the world, here, there, and then there, destroying all the exchange systems, doing infinite harm. And then, at the end, something perhaps even more dangerous was the attempt, at seeing this, to try to use some of this floating money and steer it into countries in need but who, unfortunately, could neither afford to borrow nor ever to pay back. So there are these enormous debts of the international banking system, through loans to the Argentine and to other countries, which hang like a great cloud over the whole system. That is what has happened.
Well, everybody did their best. The Government of the day, quite naturally, thought that perhaps a little inflation would get us out of it, on the so-called neo-Keynesian system. It seemed very reasonable, but it did not. And I will tell you why. It was because of what the noble Lord who has just spoken referred to from the Front Bench. It was because we increased wages, we increased costs, and we increased the total amount of money without increasing production or productivity: and so we had inflation. Then they tried, with great gallantry, a very difficult thing. They tried to do the opposite, to put on a squeeze, to have complete control over wages, prices and dividends. Of course, like all those manoeuvres, it worked for a bit; but, alas, as pressure grew up behind them stronger and stronger, ultimately the dam burst. So then came the falling of the pound and the general confusion. We tried to go to the IMF, where we borrowed a certain amount of money and got a great deal of rather pedantic advice. I do not know who are these people—self-appointed, I suppose—on these international bodies. They seem to lecture one a great deal. It is rather like the situation after a bad report at school—not much pocket money and a lot of pijaw.
That failed and the Government went out. Then the present Government came in. I think that most of your Lordships quite honestly will feel that, whatever else may be said in criticism—and there are criticisms, of course, to make—of the Government of the last four years, and now still the Government, they faced that terrible situation, in terms of war like the breaking of an army, with a courage, a determination and a persistence which must ever be admired by all reasonable men and women. I hold that view strongly. Of course, things were very unpleasant but they had to be done. The long boom always produces a certain amount of fat in the system, both in private and in public enterprises: too many people, overmanning on the factory floor and in the secretary's office; too many motor-cars, a bit too easy. We had to go through it. To private enterprise—and this was in the first year (do we not remember?) before the Government attacked the public sector—it came pretty hard, with interest rates of 18 per cent. Of course, all the smaller and newer firms collapsed, and those who survived were only
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those who could hope to borrow from the banks—and they still had losses—and who had long years of profits to show behind them. It was a great and terrible year for bankruptcy and loss.
Then the Prime Minister tried to slim the public sector, and of course it is very disagreeable. Last week I listened to some moving speeches and among the speakers were noble Lords objecting, quite rightly, to the results of the cuts in the medical, educational and other services. I see it every day as Chancellor of Oxford University. But it had to be done and it still has to be done. The question is: what do we do now? We have done this—we have got some control over the machine which was completely out of control. What do we do now? As to that, it is very difficult to answer.
As always, there are broadly two answers. There are people who are on the expansionist side—and I do not think it is really political: it is more what people feel like—who are natural expansionists. They would come along and say, like the neo-Keynesians, "Let's spend a bit more". The Labour Party spent, let us say, a great deal more. The Liberal Party said, "Well, not quite that; but let's spend some more". And the Government said, "No. Do not spend any more". It is the two methods: the neo-Keynesians and the monetarists, the new economists that have come into being—and nobody knows where they come from; they say that some come from America, and some from Tibet.
There are two points of view, and it goes right through. Many of your Lordships will remember that it operated in the nursery. How do you treat a cold? One nanny said, "Feed a cold"—she was a neo-Keynesian. Another nanny said, "Starve a cold"—she was a monetarist. It is natural. The noble Lord complained that the Government have produced in the gracious Speech a list of things which are completely irrelevant; of course they are—they are meant to be. I do not rate the Government's intelligence so low as to think that they believe they have any importance. They are just to keep us happy.
And look what they do. As somebody said, the first affects about 10 million people: the people and government of London. What was the next one? That was about the fees which solicitors are to charge. Then there is one which I hope really affects only a tiny percentage—and, I am certain, none of your Lordships. As I understand it, a condemned prisoner, if he feels that the judge has been too heavy on him, can appeal, but an aggrieved prosecutor cannot appeal, and so he is going to have his chance. It is not a great contribution to either the social or the economic development of the country. The next thing, I think, is something about the prosecutions not being by the police, but by the public prosecutor. There may be some improvement in that. Perhaps one may even cross a yellow line without being got at. But of course they are meant to be irrelevant because the policy is to go on next year as before.
But while all this is going on I think it is worth while to look outside Europe. First, however, we can look inside to this extent: that even France, with a president elected on a policy of reflation on a big scale, has had completely to turn round and follow the policies of Her Majesty's Government.

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Let us look somewhere else—at the country of my dear mother, the United States. Ah, that is a very different thing. I rejoice at what Reagan is doing. He has broken all the rules, and all the economists are furious. He has a completely unbalanced budget. What does he do? Of course, according to the rules you have all been following and noble Lords on the Front Bench have been following, he ought to have increased taxation. He did not do it—not all all; he has reduced it. He even gives you special grants off your payment of income tax if you can show that you have invested in industry. Then there is this huge deficit in the balance of payments, but they have not introduced any particular protectionist thoughts. When they want a thing and they like it, they buy it, like the Jaguar motorcar.
But what has happened? What has happened has been that unemployment has fallen from one in 10 to one in 17, whereas here it is one in eight and next year will be one in seven. Five million new jobs—the noble Lord spoke of this—have been created in the new industries, and at the same time inflation has been kept quite low. It is a miracle; the House should know how it has been done. I think I know how it has been done: it is because they have had the sense to make somebody else pay for it. By keeping the bank rate at 1 per cent. above everybody else they have attracted all the money from the old world to the new. It has been flowing in—not only the quick money, but also serious investment, because everybody believes in it. It is not only the quick money that moves about. If you ask any investment banker, the trustees of funds, and even, I expect, the trade union pension funds, you will see that they are all making long-term investments in the United States. In a word, Reagan (to reverse Keynes) has called in the resources of the old world in order to finance the expansion of the new.
But of course it is something more than that, too. It is because the United States, whose scientists, inventors and technologists have been the first to see the coming of the new industrial revolution, have been the first to exploit it. Curiously enough, we fear that if it is applied, it will create more unemployment, and perhaps it will temporarily. After all, wherever you substitute a capital-intensive plant for a labour-intensive plant it must produce temporary unemployment. But the experience in California, where the new revolution has been most used, is that it has created enough wealth to make a new demand for goods and services which has reduced unemployment and made their figure the lowest in the United States. So that may appear to be the way out. At any rate they have seen it; and, my Lords, if you will allow me just a few more minutes, I shall say what, in my view, we should be looking at, and we are not—not the Government, nor the trade unions, nor the managers—not enough.
There is a new industrial revolution, or a new phase in it. The first phase was based on coal and steel and the substitution of the hand-loom and the warp-loom of the cottage for that of the factory. There were great troubles and great hardships in introducing that phase: that is because people would have theories. Laissez-faire was just as bad as collectivism. Good men, good Christian men, like Mr. Cobden and Mr. Bright,
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closed their eyes to factories working appalling hours, employing children under 12—and not only hours in the factory, but underground, too. No, the Government could not interfere; it was against the doctrine of Laissez-faire. Once you get a doctrine, that is the end of you. Pragmatic politics are the only good ones. But anyway this is bound to happen.
The second phase came when I was a child, when the internal combustion engine was invented and the new fuel oil came into being. The motorcar and the aeroplane broke the monopoly of the railways, and the aeroplane completely destroyed that of the steamships.
And now the third phase has come, based upon the computer, silicon chips, automation, and all the incredible, skilful things which are being done by the scientists and technologists in America and a great deal in England, where there is more going on than we know. But I am sure we cannot say "Oh, well, just let it come, like the others". Then we should get into great trouble. We have got from now to think out what this means in human terms. We cannot just say, "It would be rather nice to have a bit of it", as the Government seemed to suggest. It is a complete revolution in thought.
If really capital-intensive plants are going to take the place of all labour-intensive ones, surely we shall reach the conclusion that the capital plant might as well work. After all, today, except in the metal industries, where out of necessity the plant works for 24 hours a day, the plant which is costing this enormous sum, with interest charges and sinking funds, and the rapid replacements that are made with modern techniques, probably costs 16 or 17 per cent. For how long does it work?—220 days a year, seven and a half hours a day? Why, if it worked all day and all night, that would save two-thirds of the interest. The answer surely should be that the machine should work and the man should have leisure. What we want is to have four six-hour shifts and the machine to work all day long and all night long. It is that kind of thing we have to face: a completely new concept.
I foresee that in 10 or 15 years' time we shall never use the word "unemployment". We shall refer to the proper use of leisure, and how to deploy it. We shall wish to ensure that this new leisure which man at last will be able to enjoy is properly used for his mind and education, for sport and other leisure purposes. All kinds of old beliefs on all sides will have to go by the board. Many old speeches will have to be torn up, and many old attitudes will have to be changed. We must approach the problem with an open mind. But if we are to achieve the intellectual revolution which is involved, we need also a kind of moral and spiritual revolution. Although at my age I cannot interfere or do anything about it, it breaks my heart to see what is happening in our country today. A terrible strike is being carried on by the best men in the world. They beat the Kaiser's army and they beat Hitler's army. They never gave in. The strike is pointless and endless. We cannot afford action of this kind.
Then there is the growing division, which the noble Lord who has just spoken mentioned, in our comparatively prosperous society between the South and the North and Midlands, which are ailing. This cannot

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be allowed to continue. There is a general sense of tension. The old English way might be to quarrel and have battles—my noble colleagues know that there were plenty of rows and battles in the past—but they were friendly. I can only describe as wicked the hatred that has been introduced and which is to be found among different types of people. That must go. Not merely an intellectual but a moral effort is required to get rid of it. I can only hope, because I am so old, to see the first gleams that precede the dawn, but I know that, if that effort is made, generations to come will see the bright sunlight of day. If some of the dreadful, wicked systems which have crept into our lives are replaced, if we abandon cynicism, criticism and hatred for each other, and if we take up the great theme which St. Paul gave to us—to rely more upon faith, hope and charity, but above all upon charity—then I foresee the young men and women from every home in England setting out with confidence on a new phase along the long road which we call Man's pilgrimage here on earth.
Noble Lords: Hear, hear!
4.44 p.m.
The Lord Bishop of Lincoln: My Lords, it is a tremendous and exacting privilege to follow the noble Earl and to pay tribute to him for the superb speech which he has just made. I have in my hand a copy of the maiden speech which he made 60 years ago. It is 60 years since his last maiden speech, but, of course, the noble Earl has had a few years between then and now in which to practise before the superb speech which he has made today. None of us will ever forget the magnificent survey of our country's economic, political and moral life which we have had the privilege to hear today.
I know that many other speakers will pay their own tribute to the noble Earl. However, I am particularly glad, despite what the noble Earl said about the bishops, that it should be a bishop who has the honour of this first response to what I like to call "this word of the Lord". I am glad to have this honour because, among many other of his many attributes, the noble Earl is a devoted member of the established Church. It was not the noble Earl who, as Prime Minister, put my name forward for the Royal Assent to my appointment as a bishop. Whether that puts me slightly out of the true apostolic succession, I cannot really say. I should also like to salute the noble Earl as a fellow guardsman—although, I have to say, in the slightly cautious way in which a Coldstreamer approaches a Grenadier.
I wonder whether the noble Earl, when choosing his title, was a little torn between Stockton and Bromley, his other Parliamentary seat. I am sure that the people of Bromley, in the favoured south-east, are in every way splendid people. However, I am very glad that the noble Earl chose Stockton because, as in the 1920s and 1930s, so now: that part of the kingdom is as hard hit as any by the recession. What the noble Earl said and wrote in those days showed him to have a heart of social compassion. That social compassion, combined with his vision as a statesman and his skill as a politician, have given him the place in our history and our hearts which he occupies today. Therefore, it is
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good to see him here and to listen to him here. I am proud to salute him and to follow him in this debate.
I must now turn to my eccentric speech. I suppose that all debates on the gracious Speech always have a backward and a forward look. Certainly I would want to look back and salute the Government for maintaining the low level of inflation over another year. I should like to single out a salute to the amount of money which the Government have put into the youth training scheme. I know that the youth training scheme had its teething troubles, but it has got over those now and the scheme is worthy of the support of all of us. I know that in my part of the kingdom, Lincolnshire, about 40 per cent. of the young people who are on YTS courses get jobs at the end of it.
I do not believe that people look back often enough to 1979, when the Government took office, so as to recall the very difficult economic and political inheritance which they had to take up and to which the noble Earl referred in his speech. As a result of the difficulties which have been faced by Governments of all parties, they have been unable to "make a go" of Britain. The new Government set out on the new tack of monetarism to free the market in order to make Britain efficient so that Britain might survive—but it is here that I see a dilemma which now presents itself very clearly five years later. When any human grouping, be it an institution, an industry or a nation, has no choice but to face and accept painful change, it seems to me to be of crucial importance for those seeking to manage its affairs to create, as much as may be possible, some kind of climate of confidence—some kind of context of trust in which those changes might be the more positively and creatively faced.
Monetarist policies, I fancy, are about freeing the market. One of the obstructions to this aim is monopoly of any kind, and one of the monopolies here applied, as the Government seem to see it, is the monopoly of the trade unions in the labour market. This means that building the needed climate of confidence in the nation becomes impossible, since the trade unions are at one and the same time one of the main parties with whom confidence needs to be built and one of the main obstructions, as the Government see it, to the Government's aims. I recognise the Government's claim that much of their trade union legislation is aimed at restoring trade union power to their rank and file, but if that is what eventually happens it will be in the long term—too long to right the balance of confrontation in the direction of confidence.
As the five years have crept on side by side with falling inflation, the numbers of unemployed people have crept up, as we have been hearing this afternoon, so that the nation has again become divided; millions of people divided off from being able to take any part in the nation's life. The fact that we are employing more people than ever before makes this division all the more insidious—and all the more so in that the burden falls very unequally on some sections of the community and some areas of the country.
I believe that because of these dangerous divisions the Government need—because the country needs it—to revive the aim of consensus in a quite new way. The idea of consensus has of late had a bad press. What we tend to think of as political consensus really

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belongs to a different world—to the 1950s, the 1960s and the very early 1970s. It belongs to the commitment then to the building of a welfare state and the maintenance of the new factor of full employment—all on the basis of the growth of those years.
It belongs to a world where, perhaps, the underlying issues were increasingly fudged. No one wants exactly that kind of consensus back. On the other hand, we could work for a consensus which seeks to get ahead of a future that will not wait. This, I believe, is what the noble Earl was so vividly and graphically putting before us.
It would be a consensus about many things, and it is something we could all agree on, I fancy. It would be a consensus about serious commitment to technical change and therefore about social policies to prevent undue hardship to those groups which will have to adjust as a result. It would be a commitment about exactly what measure of paid work is likely to emerge, and a consensus about how to pay the thousands whose skills may not equip them for much of it but who could and would do much other work—of a broadly social nature, perhaps, which cries out to be done if only it could be paid for by a living wage.
It would need to be a consensus about the working week, the working year and the working lifetime. It would need to be a consensus about education and training seen essentially as part of each other, and including the elements of education that make not just for technical efficiency but also for the social and moral discernment a mature society will need. It would be a consensus about what kind of work and working methods are likely to develop, and about what kind of human and political issues this will raise in terms of painful adjustment but also of great opportunity.
There are evidently many problems in the national life which certainly need confronting but I doubt if confrontation leads to the best solutions in the long term. I wonder if it be not true, on the whole, that large parliamentary majorities tend to be bad for politics and therefore bad for a country, let alone bad for any party which has one. I say this because it seems to me that a large majority can make politics a matter of force rather than of power. I see power as the energy which emerges when political skills have managed to carry most of the people along in some measure of overall acceptance. That engenders some sort of confidence and releases our human resources so that things get done. That really is power.
But when a party—any party—has a really large majority, it can sometimes exercise not power in that sense but force; not physical force, of course, but political force. It can sometimes force things through in the teeth of opposition, with a long-term divisive effect. This can be all the more damaging when parliamentary opposition is weak, since it can cause opposition to arise in non-parliamentary ways.
If we are to get into the future, where tremendous opportunities, as well as problems, lie ahead, we need to try to do it together. All this is not just an economic and political matter. It is a moral matter, because morality is about what is right—and what is right is
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what is for the true, common good of our people. That emerges and can be enjoyed when a nation pulls together and not apart; where there is enough confidence to give as well as to take. Sometimes when speaking about these matters in other place, I put it like this: where there is trust, there is thrust—and at the moment, we do not have enough of either.
4.55 p.m.
Lord Kaldor: My Lords, I, too, consider it a very great privilege to be among the first speakers to congratulate the noble Earl, Lord Stockton, on his brilliant maiden speech. The speech, both in its wisdom and in its wit, was one of the best I have ever heard. The noble Earl has been one of the leading statesmen of my lifetime; a statesman in the grand tradition of parliamentary democracy and of a Tory Party which strove to consolidate social progress through the maximum degree of consensus and tolerance for alternative points of view—as well as through respect for the views and the interests of minorities.
The Tory Party gave the British political system its peculiar flavour. Until recently, it was never a Right-wing party—any more than it would be possible to describe the noble Earl as a Right-wing politician. It was a party which moved with the times and which consolidated the reforms achieved by other parties. During the hey-day of the British political system, the two parties were never very far apart. After the war, we had a strongly reformist Labour Government—the Government of Mr Attlee—which many people recognise as being the greatest reformist government of this century. It was followed by Tory governments whose policies were so little distinguished from those of the Labour Party as to prompt someone to coin the well-known phrase, "Butskellism"—made up from the names of the Tory Chancellor, Mr Butler, and Mr Gaitskell, the Shadow Chancellor.
The noble Earl is in that grand tradition of the British Tory Party. The Governments led by the noble Earl will be long remembered for continuous full employment and for a remarkable period of industrial and social advance. The Government which came to power five years ago under Mrs Thatcher will not, I fear, be so remembered. It will be remembered as the Government which lost this country 2 million jobs. To appreciate the enormity of this figure, it is best to remember that during the worst economic depression in history, in the years from 1929 to 1932, employment fell by only 780,000, or 3·7 per cent. of the 19½ million employees in employment in 1929. As against that the figure of 2 million represents 8·7 per cent. of the 23 million employees in employment in 1979.
It is possible—and we have heard this often enough—that in 1984 employment will increase for the first time in five years, by about 250,000 as far as employees are concerned, or by 350,000 if one includes the self-employed. But that would still leave l¾| million fewer employees in employment than we had in 1979. Thus the Thatcher depression has, by every test, been twice as severe as the great depression after 1929.
Manufacturing production is still 13 per cent. below the level in the second quarter of 1979. Although it has

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recovered quite a lot from the bottom, it is still 13 per cent. lower. And despite all the talk about developing new industries, manufacturing investment is still 30 per cent. down in volume. Nor is there any qualitative improvement to set against the loss in production. The competitive position of British industry gets steadily worse.
We have become, for the first time in centuries, net importers of manufactures to the tune of £5½ billion last year and £7½ billion in the current year. Our share of world exports in manufactures, which, after the devaluation of 1967, stabilised around 9½ per cent. for 12 years, has been falling again and is now around only 7½ per cent. The only thing the Government have succeeded in doing, at a tremendous cost in terms of lost output and employment, is to bring down inflation. They brought it down from 10½ per cent., which it was for the 12 months prior to their taking office, to 5 per cent. But this is meagre compensation for the loss of industrial production and the miseries of well over 3 million unemployed.
The Chancellor of the Exchequer maintains that he can do very little to reduce unemployment by fiscal or monetary measures. The only way we can reduce unemployment, according to him, is to reduce real and not just money wages, and thereby cause people,
"to price themselves into jobs rather than out of them".—[Official Report, Commons, 30/10/84; col. 1182.]
That was the view expressed in a speech in the other place exactly a fornight ago. Maybe, in the meantime, he has radically changed his view. He is speaking again today, but we shall not know about that until tomorrow. This assertion assumes that real wages are under the control of trade unions, in the same way as money wages. They could raise them or lower them at will. But that is pure nonsense. Real wages cannot be settled in wage negotiations; they depend on prices, which are not under the control of the unions. Prices relative to wages depend on the productivity of labour and the size of the percentage mark-up for profits.
Evidently, the Chancellor does not understand the link between real wages and productivity. In his Mais Lecture, delivered last June, he claimed that in the past three years productivity in manufacturing industry rose at the rate of 6 per cent. a year. This was a poetic exaggeration. The true figure, as officially calculated, was 4·9 per cent. a year between 1980 and 1983, and even this latter is no guide to the trend, since between 1980 and 1981 productivity was falling and the subsequent rise incorporates a substantial element of catching up.
Taking the whole period of the present Administration, the annual growth of productivity in manufacturing since the second quarter of 1979, and up to and including the second quarter of 1984, was 2·5 per cent. exactly, which compares badly with the 3·3 per cent. growth rate of productivity achieved in the 20 years of full employment between 1953 and 1973—a period of which members of the present Administration are apt to speak so contemptuously
But whatever the figure, it is quite inevitable that, in consequence of the rise in productivity, prices should rise less than wages. This is because the movement of prices reflects labour costs per unit of output, and the latter is the resultant of the change in productivity as
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well as the change in wages per man hour. Thus, since 1980 wages in this country rose by 10 per cent. a year, whereas labour costs per unit of output rose by 5½ per cent. a year—not 10 per cent.—and the price of manufactured goods in the home market rose by 6 per cent. a year.
So when the Chancellor said, as he did in his recent speech in the other place, that on the basis of a careful investigation of the evidence reducing pay increases to the level of price increases will create 500,000 new jobs a year, and 1½ million in three years, he was talking through his hat. If the increase in wages were reduced to 5 per cent. a year, instead of 10 per cent., but productivity growth remained the same, the rate of increase in prices would be 1 per cent. a year and not 6 per cent. There is no way in which you can reduce wage increases to the level of price increases. There must always be a gap between them, so long as productivity is rising.
The gap between the rise in prices and wages would remain, unless productivity ceased to rise—and I am sure that that was not his intention—or unless the mark-up for profits was pushed up fast enough to absorb the whole of the productivity gain. In any case, the movement of real wages reveals nothing about the change in the effective demand for labour, which is what determines the change in employment so long as surplus labour and under-used capacity exists.
Mr. Lawson quoted extensively from the experience of the United States where, according to him, the large increase in employment that took place in that country was due not to Keynesian measures of demand expansion, but to the fact that, in contrast to Europe, real wages were falling slightly instead of rising rapidly. Moreover, according to the Chancellor, 13 million out of the 15 million new jobs created during the last decade occurred,
"during the first half of the period at a time when United States fiscal policy was becoming more, not less, restrictive".
On all this, the Chancellor got his facts wrong—and these are facts which can easily be ascertained by consulting the official representatives of our great ally, the United States. As I found out, they are only too ready to oblige by supplying one with the correct information. Indeed, it seems unbelievable that his official advisers in the Treasury should have failed to make sure that he got his facts right on these matters.
It is true that in America real wages have risen modestly—not fallen slightly, as Mr. Lawson said—between 1974 and 1984, by 8 per cent. in 10 years or by 0.8 per cent. a year. However, productivity per man hour increased equally modestly by 0.86 per cent. a year—that is to say, productivity changed at exactly the same rate as real earnings. It is clear that the low rate of growth of real wages in America was a reflection of the low rate of growth of productivity and of nothing else. It is another question why productivity growth was so low. Before 1973, it averaged 3 per cent. a year. The reasons for this are very puzzling to economists in the United States, but nobody suggests that this had anything to do with the trade unions or with budgetary deficits.
As regards the sources of job-creation in the United States, we again find that Mr. Lawson got his facts completely wrong. In the first place, the number of additional jobs in the decade 1974 to 1984 was 19

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million and not 15 million. Secondly, this increase largely occurred in two big spurts, and both were due to fiscal stimuli through large tax cuts. The first started under President Ford and continued under President Carter, extending over the years 1975 to 1979. The second occurred under President Reagan, when employment increased by 6 million (and not 2 million, as Mr. Lawson said in the other place) in the two years 1983 and 1984. In both cases the increase in jobs was the result of substantial fiscal stimuli, mainly through tax cuts on orthodox Keynesian lines. Thus, contrary to Mr. Lawson, the huge rise in employment in the United States—for 19 million, or 25 per cent. of the total amount of employment, in 10 years is indeed a very big figure—was the consequence of large doses of reflationary stimuli introduced by two Republican Presidents. This was ruled out completely by our Chancellor and by the present Government as being purely inflationary and completely unsound.
So much for Mr. Lawson's views and his knowledge of the facts of history. Fortunately, there are some signs that his chief, the Prime Minister, is learning from experience. At any rate she now quotes Keynes rather than Hayek or Friedman, and keeps a much thumbed copy of the famous 1944 White Paper on Employment Policy in her handbag. With some difficulty, she pulled it out of her handbag recently in the other place to quote a passage from it. The main theme of that White Paper was the exact opposite of Mr. Lawson's main assertions. Its main thesis followed the lines laid down by the noble Earl, Lord Stockton, in 1938 (or six years before the publication of the White Paper) when he wrote:
"In a society in which opportunities for employment occur according to the efficiency of a vast and complicated mechanism employing co-operative methods of production, society should accept the responsibility of so governing that mechanism as to provide the individual with the opportunity to work …Society has not the right to abandon the individual because, as a result of faulty organisation, the labour which he is still willing to expend cannot temporarily be utilised".
That quotation comes from the noble Earl's book, The Middle Way.
I must end my speech with a sincere apology. Owing to a long-standing commitment to attend a conference of central bankers and economists in Amsterdam which begins early tomorrow morning, I have to catch the last plane to Amsterdam tonight. I shall therefore not be able to follow the whole debate and stay for the summing-up.
5.14 p.m.
Viscount Caldecote: My Lords, it is a great privilege to be the first speaker on these Benches to follow the inspiring maiden speech of the noble Earl, Lord Stockton. He was a very distinguished statesman when I first joined your Lordships' House over 35 years ago, so it is with real pleasure, but with great humility, that I offer him my warmest congratulations on his magnificent, sparkling and forward-looking speech. I hope that he will in the future often give us the benefit of his long experience and unrivalled wisdom.
I was very glad that the noble Earl who opened the debate dealt so fully with the problems of job creation, because there was only a passing reference to those problems and the problems of unemployment in the
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gracious Speech. Like him, I intend to concentrate on unemployment. I think that we are all agreed that the principal objective of economic policy is to achieve prosperity. That includes opportunities for satisfying activity or paid jobs for everybody.
There is no greater admirer than myself of the Government for what they have achieved in controlling and bringing down inflation. I fully accept that low inflation is a necessary condition for prosperity. But low inflation is not synonymous with prosperity; it is not a sufficient condition for prosperity, and it certainly is not an objective or an end in itself. So we cannot be satisfied with the present figure of over 3 million unemployed. Worse still is the prediction of rising unemployment, the growing percentage of young people who are unemployed and the increasing numbers who will be unemployed for two years or more and who may never work again; for not yet have we reached a proper understanding of the use of leisure time, to which the noble Earl, Lord Stockton, looked forward.
Nor can we accept that the Government can do nothing in the meantime to stimulate employment—to create jobs—except to control inflation. Otherwise, they say, it is up to industry and business to create jobs. Of course industry, and manufacturing industry in particular, is the principal source of wealth creation, on which prosperity and jobs depend, and must play its part. For Britain that means that industry has to be competitive and so able to gain a greater share of world trade.
Let us for a moment examine the realities of the situation in this rapidly changing world. First, I believe that it is quite wrong to argue that because in the past technological advances, leading to greater productivity, have increased employment (as in the textile and motor-car industries) through creating bigger markets, this will happen again. The markets and the competition have changed a lot. The scale of productivity improvement is an order of magnitude greater than in the past, with automation, computers and robotics. I am sure that it is equally false to conclude that we should hold back technological advance and higher productivity to maintain employment. That is the fastest way to ruin and unemployment, through lack of competitiveness.
What are the prospects then for employment and more jobs? There are two main sources of jobs—the creation of products, as in manufacturing, including agriculture; and the provision of financial, communications, leisure and other services. In all those activities the customer in the broadest sense must be satisfied—by providing good value for money and by offering the right quality at competitive prices. Without that there will be no orders and no jobs, whether in manufacturing or in the service industries.
In vast areas of manufacturing to achieve the quality and competitive prices required we must have higher investment, which in almost every case produces greater output with fewer people, leading to more unemployment until the market expands, as other noble Lords have pointed out. Thus to increase our share of world trade involves lower employment, at least initially. Productivity in United Kingdom industry has greatly improved over the last five years.

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But, in spite of that, we are still 20 per cent. less competitive than we were 10 years ago, particularly as compared with our principal competitors; and, sadly, unit labour costs have been rising recently.
That means we need still more investment to reduce costs in manufacturing industry. In new small growing enterprises it is a very different story. In the USA in the past 10 years, as other noble Lords have already mentioned, more than 12 million new jobs have been created; two-thirds of those came from small, young companies, and it is estimated that half those new companies have been financed by individuals who have made their money through selling equity, share options and the like in larger companies who have employed them.
In Europe and the United Kingdom no new jobs have been created over that 10-year period. What are the reasons for that striking contrast? First of all there is a vast, dynamic market in the USA which we have not yet achieved in the European Community. That is one important factor. But perhaps even more important is the different culture and the different tax structures which have affected new company formation. For instance, in this country when somebody makes a lot of money by starting a new company and selling it to a bigger one, he all too often goes off, buys a farm and becomes a country gentleman. Whereas in the United States he would put his £100,000, or half a million, that he has made into some new industrial enterprise which quite soon would become a big new company, an employer of many people.
But of course there have been great and encouraging changes here in Britain in the last five years. There has been a new spirit of enterprise and risk taking, encouraged and stimulated by the lower taxes which were introduced by the present Government in 1979. What a tragedy that we did not have that régime of taxation 20 years ago instead of the ludicrous high rate of taxes which the party of the noble Lords opposite imposed in following their policy of equality of misery.
Now the City is awash with money. Individuals have some to spare too. Venture capital funds are springing up like mushrooms. New companies are forming every day. Management buy-outs are giving many people stakes in risk taking and initiatives with the incentives of big potential rewards. In 10 years' time those new small companies will create millions of jobs, just as they have in America, but not tomorrow or next year in the numbers we need. The fact is that in manufacturing, in our traditional industries, established companies can only survive and prosper through more labour saving investment. Some in newer industries could grow faster already but the skilled people they are needing are not there and people must be trained. That is very urgent but we shall not get quick results there, either.
Thus, though manufacturing industry remains the essential engine of wealth creation in this country and output will increase as the economy grows—and it is growing—overall the trend of employment in manufacturing is down, at least in the short term. Some do not feel too worried about that because they assert: let us control inflation and the growing economy will stimulate vast increases in labour
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intensive service industries. In some sectors, in leisure and entertainment for instance, that is probably true. In others, especially those trading internationally and facing competition as fierce as any competition in the manufacturing sector, they will need to reduce operating costs just as much as manufacturing companies, through technological advance and investment. In insurance, in banking, in communications, in shipping, the drive for greater productivity must go on but it will lead to lower employment in the short term. So far in the office world we are only just beginning to see the effects of the information technology revolution, and in general in the service industries.
Lastly, in Britain we are greatly dependent on international trade. Competition will grow and not diminish, especially from the newly developing countries, with their lower pay and the increasing use of modern technology. Thus on balance there are encouraging signs of growth leading to more jobs in the longer term, say in five years' time, through lower inflation, higher productivity, greater competitiveness, more enterprise and new company formation, and growth in leisure-based and other service industries.
However, in the shorter term, the outlook is less bright. Older industries must become more productive. They must shed labour to remain competitive, and indeed to stay in business at all. The service industries, too, will follow on that road, and small company formation takes time to grow jobs. Thus, it will take time to grow jobs in both the manufacturing and service industries. Therefore, I believe it is dangerously complacent to assume that low inflation and growth in the GDP will lead to the creation of sufficient jobs to reduce unemployment in the shorter term. Something more is needed if we are to avoid the misery, the frustration and the divisiveness of long-term unemployment doing irreparable damage to the structure of our society.
So much for diagnosis. Now for the treatment, recognising that much is already being done through MSC and other training schemes. First, I believe that the Government must now shift their emphasis from reducing inflation, as top priority, to job creation and reducing unemployment. That does not involve an inflationary rush for growth or throwing money at the problem. The indications are that the Chancellor is confident that he has money available to reduce taxes. It has even been suggested that he may increase indirect taxes to give more scope for direct tax reduction. I believe that the first priority must be, as other noble Lords have indicated, to get rid of the poverty trap to encourage employment at the lower end. Beyond that, any surplus must surely be used to finance investment in our decaying infrastructure rather than to reduce personal taxation.
I say that for three clear reasons. First, much of that investment in the infrastructure makes us more efficient. It reduces costs of essential services like transport. Secondly, it will create much needed jobs in the private sector and the effect will spread out both in orders and in confidence building. Thirdly, investment in housing, services and other parts of the infrastructure cannot be delayed. Like any investment it cannot be delayed indefinitely. Surely the best time to do it is now when there is ample capacity, for if we

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leave it until the economy is booming and then inject that demand into it, that really will be inflationary. I believe that that case for action on the infrastructure is unassailable. If the alternative of overall personal tax reduction is adopted, it will simply increase imports and job creation will be minimal.
It is equally important in the short term to sweep away the bureaucratic obstacles to the growth of small businesses. As a start, why do we not remove all planning restrictions to conducting business from home or from existing buildings, provided only that no environmental pollution occurs which is damaging to the neighbours? Why do we not for five years give exemption to owner managed businesses, employing fewer than five people, from the payment of national insurance, PAYE and all the other procedures involving form filling and paperwork, as well as from any obligation to make redundancy or similar payments? That would really stimulate employment in the small company sector.
Lastly, we need much swifter action in improving education and training to meet the needs of expanding industries. There are great shortages of skills in, for instance, information technology, in precision mechanical engineering and in manufacturing systems, which are holding back job creation. There is no time to wait for the effect of changes in schools, colleges and universities, important as they are. We need a crash programme of retraining using every device available, including distance learning techniques such as the Open University.
These are just three proposals which would stem from a decision to give absolute priority to job creation in the shorter term. No doubt many others will evolve. Of course, there are difficulties and risks in emergency action. Government and politicians are always anxious to tell industry to be enterprising and to accept risks—why not the Government, too? The noble Earl, Lord Gowrie, tried to make our flesh creep by quoting comments by the honourable Member for Plymouth—I am not quite sure who he is——
The Earl of Gowrie: My Lords, I meant Dr. Owen.
Viscount Caldecote: My Lords, the noble Lord made our flesh creep by those comments from Dr. Owen about what might happen if we go too far along the expansionist road. Of course, it is a very difficult judgment of balances between opposing economic factors. But the fact is that there is no shortage of tasks that need doing, no shortage of people to do them and no shortage of money to finance them. Surely, a Government who have achieved so much in reducing inflation and in encouraging enterprise cannot shirk the challenge of bringing those three together—the tasks, the people, and the money—and so give hope to millions of young people who are now facing a very bleak future.
5.30 p.m.
Lord Rochester: My Lords, it is always a pleasure to follow the noble Viscount, Lord Caldecote, whose views I always respect and often share, as I do this afternoon. May I also from these Benches join other noble Lords in offering warm congratulations to the
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noble Earl, Lord Stockton, on his moving speech. I have often benefited from the noble Earl's wise speeches and writings. That has been the case again this afternoon.
I welcome the reference in the gracious Speech to the Government's recognition of the need to provide better opportunities for employment and to help the unemployed obtain the training or work experience required to take those opportunities. However, I join the noble Lord, Lord Barnett, my noble friend Lord Diamond and, I think, if I may say so, the noble Viscount who has just sat down, in feeling some scepticism as to the effect of the Government's policies in this matter. I wish to touch on only one aspect of it.
Last Thusday, in our debate, the noble Lord, Lord Mishcon, rightly stressed the dangers stemming from the fact that almost half of the total number of unemployed are now aged under 25. It is significant, too, that the honourable Member for North Wiltshire in another place, in seconding the Motion for a humble Address to her Majesty last week, drew attention to the point that the number of people continuously out of work for more than three years has increased eightfold in the last five years. They already total nearly 60,000. That number looks like rising to more than 100,000 over the next few years.
On numerous occasions in your Lordships' House I have suggested that more places should be made available on the community programme for long-term unemployed people aged between 19 and 24. Many in this age group were too old to benefit from the youth training scheme when it was first introduced and they therefore have no skill to offer in now seeking a job. They will miss out altogether unless provision is made for them to receive training now. I would ask the noble Lord, Lord Young of Graffham, when he replies to the debate, for a specific assurance that the Government will have these unfortunate young people particularly in mind in their plans for the future.
There is one omission from the gracious Speech that I welcome. It is that the Government have no plans for further trade union legislation in this Session. Recent events seem to me to have demonstrated that there is already quite enough of it. It remains to be seen how effective laws enacted in the last five years on secondary industrial action, on closed shop ballots, on pre-strike ballots, and the rest, will prove in practice. In our discussions last summer on the Trade Union Bill, my noble friends and I opposed the introduction of pre-strike ballots not on grounds of principle, but because we feared that they might lead to even more unofficial action than there already is.
Only a few weeks ago, I nevertheless asked the Government whether, in the special case of the current coal dispute, they stood ready to introduce, if necessary, urgent legislation designed to give all those employed in the coal industry the opportunity, under suitable independent supervision, to vote in a secret national postal ballot on whether they wished the formula for settling the dispute produced by ACAS on 12th October last to be accepted. With every day that passes it becomes clearer that such legislation on the part of the Government is now unlikely to prove either necessary or desirable.

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In the conduct of the dispute, there have been faults, it seems to me, on all sides. I say that in all humility because I can recall clearly enough, from the time when I had to take some responsibility in such matters, how easy it is to make a wrong move. I nevertheless feel bound to observe that, in my experience, one of the most elementary mistakes that employers can make in industrial disputes is to lose the support of their first line supervisors. The National Coal Board has done just that and then capped it by contriving to lose the confidence of its senior managers.
But let me add at once that such blunders, however regrettable, are in my view secondary to the main issue in this dispute; namely, that the president of the National Union of Mineworkers—and if challenged I am prepared to quote my authority for saying this—sees the strike as a means of bringing down the elected Government of the day. There has been mass intimidatory picketing of a criminal kind. In negotiations all the concessions have been made by the Coal Board and none by the union. The NUM executive has refused to countenance a national ballot of its members even to test the support for a settlement on the basis of that reached between the board and NACODS. There may still be room for i's to be dotted or t's to be crossed, but I see no reason why the substance of the offer already made, and still available, to mineworkers should now be varied.
If the TUC is unwilling or unable to bring sufficient pressure to bear on the NUM to cause it to alter its present attitude, it looks as though there will be no end to the dispute until it is brought about by enough miners voting with their feet to return to work. All that I can do is to use such small influence as I may possess as a spokesman for the Alliance in these matters to urge more miners to go back to work and the executive of the NUM, when it meets next Thursday, to arrange a national ballot on whether the strike should now end.
So much for the dispute itself. I make no apology for mentioning it. It is surely one of the most crucial political and industrial issues of the day. But one day it will be over and the full extent of the damage will then be revealed. In anticipation of that day and even possibly as a means of bringing it forward, I think that it might help considerably if the Government were to hold out the hope, indeed, the promise, of much more money than the £5 million already allocated being made available to assist in creating new jobs and in making other provision for the devastated mining communities.
I live in Cheshire and can therefore observe, perhaps more closely than many of your Lordships, the wide gap that exists between the absence of job opportunities and the social deprivation that there is in the north and the relative affluence of the south. I am glad to be in support of the noble Earl, Lord Stockton, in saying that.
The Earl of Gowrie: My Lords, I, too, live on the fringes of Cheshire. I should have thought that one would describe Cheshire as one of the richest parts of the United Kingdom.
Lord Rochester: My Lords, I did not for a moment suggest that Cheshire was anything else. I simply
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observed that, living in Cheshire, I am perhaps in a better position, in proximity to the north and in particular in having had something to do with employment or unemployment and industrial problems in the north-west, to make the observation that I did.
If, in their social policies, the Government are not perceived to be acting in the interests of the nation as a whole, I fear that we shall pay a heavy economic price for their failure. In saying that, I readily acknowledge the point that the noble Lord, Lord Boyd-Carpenter, made in our debate last Thursday—that the provision of any such selective help, including the additional training facilities for the 20 to 24 year age group I was advocating earlier, will cost money. I trust the House will accept, however, that I have always been glad to join with those who urge the need to continue to control inflation and to improve productivity so that expenditure of this kind can be financed.
I fear that in mishandling the GCHQ affair, as I believe they did, the Government threw away a glorious opportunity to establish a no-strike agreement which might later have been of inestimable value in avoiding disruption in other essential services. I can only hope that once the coal dispute is over they will go out of their way to show not vindictiveness but magnanimity towards the trade union movement in general. There is, in my view, no speedy way in which unnemployment can be reduced and our industrial performance improved except through co-operation between the Government and representatives of management and employees; and on that point I agree wholeheartedly with what the right reverend Prelate the Bishop of Lincoln had to say earlier.
Lastly, I wish to draw attention to another omission from the gracious Speech, and this time to deplore it. I refer to the absence of any apparent recognition of the need to improve human relations or to bridge the gap between "us" and "them" in British industry. Speaking on the Second Reading of the Trade Union Bill last May, on behalf of my noble friends, I said that had the Bill afforded us the opportunity to develop our own step by step approach to increasing employee involvement, we should certainly have taken it. As it is, I have tabled an Unstarred Question asking the Government,
"What conclusions they have reached in monitoring the action reported to have been taken by companies in introducing, maintaining and developing employee involvement in accordance with section 1 of the Employment Act 1982."
I remind the House that that secion is based on an amendment which we on these Benches moved to the Bill because, among other reasons, we considered it would lead to an improvement in this country's international competitiveness. I hope there will be an early opportunity to debate this subject and to learn what effect this first, tiny step—tiny statutory step—in a desired direction is, in the Government's view, having in practice.
Hovering in the wings, so to speak, is European Community legislation in the form of the Vredling and Fifth Directives. It is a matter on which, in my view, we in this country cannot afford to stand still. To judge from one analysis of more than 200 recent statements made on the subject in the annual reports of

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companies (almost all of them large ones) it appears that the majority of firms do not have, or if they do, have failed to mention the existence of, any formal consultative machinery. In my view, that simply is not good enough. I remain of the opinion that, building on the practice of our best companies, it should next be made a statutory requirement that in both public and private sectors every organisation employing more that a certain number of people should have consultative bodies of some kind.
There is not time to pursue this matter further now. Suffice it to say that if a broad advance could actually be made on this front, I believe it might do more than any other single thing to improve this country's economic and industrial performance. I do not expect the noble Lord, Lord Young, when he comes to reply, to have much to say, without notice, on this subject. I hope, however, that he will acknowledge its importance and offer us at least a few words of encouragement, however general they may have to be.
5.47 p.m.
Lord Granville of Eye: My Lords, as there are many more speakers to come in this interesting debate, I am certainly going to be very brief. Like other noble Lords, I believe that the great speech we heard this afternoon from the noble Earl, Lord Stockton, will have a profound effect not only in your Lordships' House, but in the country as well. Those who remember his "Never had it so good" will agree that he has never lost the golden touch. We look forward very much to hearing him again in your Lordships' House.
The noble Earl, Lord Gowrie, who spoke for the Government, spent a good deal of time, as have other noble Lords, on unemployment and the demand abroad for our goods. If you go round the shops, in London or elsewhere, you see that they are full of goods, and there seems to be plenty of money about to buy them. The goods seem to be Italian, or French, or German, or from Taiwan or Hong Kong, but today very few seem to be British. I believe that our adverse balance of trade in our manufactures in the EEC is now a very formidable figure indeed. It has been said that without oil today we cannot keep ourselves, with our population, after the so-called baby boom and the high period of immigration.
The problem is that unfortunately we did not modernise many of our great industries after the war, while our competitors did. Certainly we never concentrated on co-operation with the shop floor as a vital priority, as many of our competitors, such as the Japanese, have done, But, as the noble Earl said, the microchip revolution may not create more immediate jobs, but they will come, and they will multiply. In the meantime, the Government emphasise the setting up of small businesses with all the Government help in their programme. However, we have to pay for our food and raw materials with our exports. It is not just a question of expecting that it will mean taking in each other's washing. As I see it, the real problem facing us today in a single sentence is this. We must be able to compete with our competitors if we are to create more employment and to get the orders. If not, unemployment will certainly rise.
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I remember that last year at a trade fair in Germany I asked a well known German buyer, "Are you buying British goods now if the price is right, the deliveries are satisfactory and if the quality is up to standard?" He surprised me by saying, "No". I said, "Well, why not? You are in the EEC now". He said, "There are three reasons why I can't buy British goods at this industrial fair. The first is the English disease; the second is that your deliveries are still, I am afraid, poor; and the third is that, alas, 'Made in Britain' used to be a good sign on any product but it is not so much so today". So, sadly, American and European investors and buyers are continuing to look elsewhere.
The paradox is that if one picks up the Daily Telegraph or the Financial Times one sees pages full of vacancies, but they are mostly for skilled labour. Listening to the noble Earl's speech, I feel that we must obviously, as a priority, train far more young people in engineering skills than we are doing at present.
There is another aspect of this problem to which I hesitate to refer. I attended an international seminar in Switzerland which was comprised of directors, economists, union officials, bankers and so on. They staggered me by saying two things in the various debates which we had, which were all broadcast and shown on the eidograph. They said, "Today you are a see-saw economy and government. When the Conservatives are in power they denationalise everything. When Labour come back to power they renationalise everything. This is really government by see-saw: it is swings and roundabouts". I think that there may be something in what they said.
In some ways—as the noble Earl said—our democracy today has to face a new climate. The function of the Opposition, whether it be Labour or Conservative, has changed in our parliamentary democracy. Now it seems all too often that, whatever the Government do, the tendency is for some to cry, "stinking fish", or to throw a spanner into the works, which is highlighted by the media who love to give it priority. I do not think that that helps the national effort to try to deal with the vital problem of unemployment.
In conclusion, I think that we need a new generation of union leaders to contribute to co-operation and technology. We need a new generation of managers as well to win the shop floor co-operation, as the Japanese do when they set up factories in this country. The alternative is a low standard of living in this island in the North Sea, trying to take in each other's washing. If this debate has highlighted that, then it has achieved something worthwhile.
5.55 p.m.
Lord Bauer: My Lords, the speakers before me have already paid eloquent tribute to the exceptional maiden speech of the noble Earl, Lord Stockton. It would be otiose for me to add to their tributes except to thank the noble Earl for the pleasure and instruction that I derived from his speech.
We should emphatically endorse the Government's commitment to controlling inflation. An unwarranted and disturbing complacency, not confined to politics, is abroad on this subject, accompanied by demands for a relaxation of financial discipline. The Financial

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Times of 1st October reported on circulars by stockbrokers advocating expansionist policies while complacently envisaging inflation above 5 per cent. With inflation at 5 per cent., £1 would be reduced in value to 3p in a lifespan of 70 years. A very prominent economist expressed alarm over inflation, primarily because it is so unjust. I quote:
"Its most striking consequence is injustice to those who in good faith have committed their savings to titles to money rather than to things".
He concluded:
"We must make it a prime object of deliberate State policy that the standard of value…should be kept stable".
Who wrote that? Friedman? Hayek? Walters? Genghis Khan? It was Keynes.
There are, of course, many people who are protected against inflation or who even profit from it. But this ensures that others are hit correspondingly harder. And prudent people with modest means often cannot protect themselves against its injustices and hardships. Protection against inescapable contingencies of life, such as ill health or old age, against which prudent people can normally provide for by private saving or insurance, is supplied by the state, albeit inadequately and at great cost. At the same time the risk against which many people cannot safeguard themselves—namely, erosion of the value of money—has been promoted by policies of successive Governments, thereby driving many people into dependence on taxpayers' support.
On a taxi ride from this building, an elderly driver in indifferent health told me that he had hoped to retire long ago, but he could not do so because his savings had largely vanished. He had invested some in the purchase of a flat to let; and rent control had practically destroyed its capital value. The rest was in a building society deposit which had lost most of its purchasing power. Is it not distasteful, perhaps even disgraceful, that prosperous stockbrokers should smugly belittle inflation, which erodes the savings of the less well off, the assets of charities catering for them, and makes more people dependent on state hand-outs?
Relaxation of financial discipline is canvassed on the ground that heavy unemployment is always evidence of insufficient demand. On this argument the 4 million people unemployed in February 1947, when coal stocks gave out and factories had to close, also reflected a recession calling for financial expansion.
Mrs. Thatcher's Government are accused of deflating demand. Yet since 1979 total monetary spending has greatly increased. Look at the outcome. Between the second quarter of 1979 and the second quarter of 1984 total spending rose by 63 per cent., retail prices by 62 per cent., total output by 2·8 per cent., and recorded unemployment much more than doubled.
The volume of retail sales was at an all-time high in September. All around us people often cannot get even unskilled labour. Everywhere businesses and consumers alike economise on labour as best they can and self-service establishments spring up right and left. It is customers who chase repair men, and not the other way round.
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In these conditions it is perverse to talk about "unremitting deflationary policies", as did an article in the Financial Times of 18th October. In such circumstances how can it make sense to urge expansionist financial policies? Their futility was emphasised by Mr. Callaghan in September 1977 in an oft-quoted speech.
The heavy and prolonged unemployment here and elsewhere in Europe is the result of necessary and long-overdue attempts to reduce inflation at a time when the movement of people between places and jobs is discouraged or even obstructed by a whole host of factors, mostly familiar though often unacknowledged. These include minimum wages, union restrictions, rent controls, so-called employment protection, expensive and mostly futile rescue operations, heavy taxation of low wage-earners, and the operation of the social security system. Financial expansion could not remedy any of these severe impediments to higher employment.
Nor is somewhat increased growth likely to bring much relief. In particular, greater growth by 1 or 2 per cent. will not much affect total unemployment. To expect such relief would be like hoping that an increase in population could reduce the huge farm surpluses under the CAP.
Lower interest rates may well be desirable on various grounds. But cheaper money combined with over-priced labour would further encourage capital intensive forms of production and consumption. Thus, while lower interest rates may well reduce unemployment in the short-term, they aggravate it over a longer period unless labour costs per unit of output come down. As we know from the noble Lord, Lord Wilson of Rievaulx, a week is a long time in politics. But in the present context, policies governed by this aphorism will bring early retribution.
Any impact of faster growth or even improved international competitiveness on unemployment, is counteracted by people's increasing awareness of how little they gain by working rather than by claiming various benefits. Such awareness is now encouraged by exhortations to claim benefits emanating from the DHSS and other organisations. It is also counteracted by the persistent pressure on both businesses and private people to economise in their use of high-cost labour.
Substantial and lasting reduction in unemployment requires confidence in the stability of money, opportunities and encouragement for people to price themselves into jobs; and promotion of more labour-intensive methods in both the production and consumption of goods and services at prices customers are able and willing to pay.
6.5 p.m.
The Lord Bishop of Southwell: My Lords, first, I should like to echo the congratulations and thanks which were offered from this Bench by my noble friend the right reverend Prelate the Bishop of Lincoln to the noble Earl, Lord Stockton, for what he said to us tonight. It was one of those rare parliamentary occasions which I think all of us will treasure all our lives. Secondly, I must apologise to the House for the fact that I cannot stay to the end of the debate. I hope

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in particular that the noble Earl, Lord Gowrie, and the noble Lord the Minister who is winding up the debate will accept my apologies. Thirdly, I should like to say how sorry I was that I had to nip out for a moment when the noble Lord, Lord Rochester, was speaking, because he was speaking about the miners' strike and it is about that that I wish to say one or two things tonight.
For two reasons, it is with considerable diffidence that I address your Lordships on this subject: first, because some of your Lordships will have heard all you want to hear from bishops on this subject; but, more importantly, because I have always believed that there is a time to speak and a time to be silent, and heretofore I have believed it important to be silent. At times I have been under pressure to speak because my diocese covers the county of Nottinghamshire, where the majority of pits are working. Other bishops have a different situation to cope with. My firm hope is that in speaking tonight I shall say nothing that will aggravate a very sad situation, for part of the trouble with this dispute is the use and meaning of words.
I begin by stressing the importance of coal for our economy. Coal is a precious commodity, vital to our wellbeing, and a fuel which will remain essential to our needs for many years to come. For this reason it is of the utmost importance that the viability of the industry is not destroyed. It could be destroyed by this dispute dragging on, or it could be destroyed by doing nothing about the present state of the industry and so allowing uneconomic pits to consume all the money which the industry needs for new developments. The great need at the present time is for a strategic plan for the proper use of all our fuel resources. A plan for coal must be part of an overall plan for energy. There is anxiety in the coal mining industry that it will be so reduced in size as to be unable to take its proper place in any overall plan, if ever one is made.
Nottinghamshire miners are sometimes accused of being selfish because the pits in Nottinghamshire are, on the whole, viable pits making a profit and the jobs of Nottinghamshire miners are therefore not so noticeably in danger. I think it is true that nearly all the Nottinghamshire pits make a profit except those few where the workings are under towns, such as Mansfield, and the Coal Board has to pay considerable sums of money in repairing property above ground which is affected by subsidence. In the coalfield there is certainly a great tradition of hard work and, indeed, of competition, which results in a good level of production per man hour.
It is however understandable that there should be great anxiety in those areas of the country where the pits are in danger of being closed and where, in consequence, the life goes out of the whole community and unemployment reaches even greater proportions than in other places. We just cannot close our eyes to these fears of unemployment and social deprivation. To offer "golden handshakes" may be all very well for those nearing retirement age or those who have the chance of finding or making for themselves useful employment; but, at a time when there are not enough jobs to go round, what is achieved by a golden handshake is the required reduction of the workforce in the industry at the cost of increasing unemployment.
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Unemployment is devastating to the human spirit and all of us have the duty to try to prevent it. Mr. Scargill is therefore right when he fights for those men who face perhaps a lifetime of unemployment because of the closure of their pits. It is not very easy, as is sometimes suggested, for a man to move his family from, say, Durham to Nottinghamshire in search of a job. Coal miners no longer tend to live in coal board properties. They buy their own houses, so moving house is a much more traumatic experience than it was in the old days when in fact a not inconsiderable number of miners did move down from Durham to Nottinghamshire. We must heed the cry of those men who fear for their livelihood, even if we disagree, as I often do, with many of the words that are said, and certainly with the tactics that are employed in making the points.
But there will be no peace in the coal industry by defeating the miners. I feel that I must try to get across what I believe to be the feeling of Nottinghamshire miners. They do not like to be thanked for supporting the Government. They are not against their own union. They do not want to destroy the NUM or set up a union of their own. They are good union men. Indeed in the heart of many there is a submerged guilt about the crossing of picket lines.
They are at work to preserve their pits and their jobs. No more, no less. As good union men they expect to be consulted by their union and to have their views truthfully represented at the highest level. I do not know which way a ballot would go if the Nottinghamshire miners were to be given what they have always sought; namely, a proper ballot of their views. At the beginning of the dispute if there had been a ballot they would certainly have voted to strike.
Sadly, the dispute has developed political overtones which have turned it into a confrontation with Government. If this was purely a mining dispute all miners would be rock solid in the support of their union, and this would have been true even in Nottinghamshire. Moreover I believe that it would be unwise for the Government to read into the present trickle of men returning to work the idea that the strike is ultimately cracking. Some men in desperation are crossing picket lines to keep their families fed, but they will not thank the Government if they are starved into submission.
The Nottinghamshire miners want a strong and effective National Union of Mineworkers. It would therefore help greatly if the Government could be genuinely seen to value the unions and to be working with them rather than, as often appears, they are concerned more with clipping their wings. If we are to have genuine co-operation in industry it can only be if the unions are honoured as reputable and responsible bodies. This means of course that unions must themselves behave responsibly, and I believe that they must accept the fact that they cannot be above the law.
All your Lordships will wish to condemn, as I do, the violence on the picket lines with which the police have to deal. This intimidation, which is present in some measure in nearly all industrial disputes, is wholly counter-productive to the interests of the striking miners, the National Union of Mineworkers' leadership, and the trade unions in general. I repeat, the rule of law must prevail.

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I believe too that it would help enormously if the inevitable closure of some pits were not undertaken too precipitately. All down the years pits have had to close if they have become exhausted or uneconomic. Pits will still have to be closed. But—and this is the point I want to make—there is need for alternative employment to be created before the pits close, not afterwards. There must be a long-term strategy. There must be concrete proposals for the redevelopment of those areas where there is economic or social deprivation. Vague promises will not do.
When miners demand jobs for their sons, they are not seeking those jobs primarily in the coal industry. It is jobs for their sons, not necessarily jobs in the pits, that they want. I know that the coal board desires this very thing and is taking steps to help in this respect, but the Government must not pressure the Board into a too hurried programme of closures with all the consequent personal hardship. I realise that the end result has got to be a smaller, increasingly efficient industry, employing less people but still providing all the coal we need.
It is not what the Coal Board is doing but its method of doing it that needs to be looked at. There surely ought to be agreement possible between the NCB and the NUM on a programme which would achieve a more humane process of closures. I am not saying that in this dispute the fault lies on one side or the other. Indeed, my Lords, it is this apportioning of blame which is highly counter-productive. Both sides are at fault. Agreement was nearly reached, I am told, the other day and it was only the face-saving formulas which could not be found. The time has come for great men to be prepared to lose face in order to prevent total disaster.
I feel I must say a brief word about the role of the Church in this dispute. Pronouncements by bishops are the least important part of that role. Those who are at the sharp end of the business are the parish priests, who have to stand by their people in their distress. I have the greatest admiration for the pastoral work which is being done by clergy of all denominations, though obviously I know best the work of my own priests. They have endeavoured not to take sides in the dispute. Once they have taken sides they become neutered, unable to help the situation.
The Vicar of Ollerton, the scene of some horrific battles between police and pickets early on in the dispute and where one picket was killed in the mélée, is himself the son of a miner. He is torn apart by the agonies of the situation where families are divided, with one at work and one on strike; where the Miners' Welfare is boycotted by one side because the other uses it. He is a man who is trusted by both sides and who will therefore be able to help not only now but later when a lot of mending of fences will have to take place. Another of my priests, the Rector of Warsop, has two pits in his parish, one on strike and the other working. The tension in the town can be appreciated when you remember that men may work in different pits but they live side by side.
It is not my wish to support either side in this dispute, nor have I the right or the expertise to offer advice, let alone solutions, but I hope and pray that humility will prevail so that there is, first of all, an
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acceptance of the miners' case for the survival of the communities in which they live and for their future chances of employment; secondly, a recognition of the value of trades unions as essential partners in industry; thirdly, a more leisurely programme of pit closures so that hardships can be softened; and, fourthly, some gestures of goodwill made. This will only be possible if concessions are not regarded as defeats but as gestures of trust. A fight to the finish will destroy the industry and produce increasing poverty and violence.
The Government have a very difficult task in tackling unemployment. All of us know in the bottom of our hearts that this is a world-wide problem and a very intractable one. I am no economist and, as I said just now, my Orders do not entitle me to make economic judgments. All I can do is to observe the effects of Government policies. For this reason, I do not think it is sufficient to say, as is said in the gracious Speech, that Her Majesty's Government,
"will continue policies designed to achieve better opportunities for employment and to help the unemployed obtain the training or work experience needed to fill them."
My Lords, in the end we must create the jobs for them to go to.
I was glad to hear the noble Earl, Lord Gowrie, say that new jobs are coming on stream. I ask, my Lords, are they coming on stream in the right places? I am aware that the CBI is not uncritical of certain aspects of Government policy, suggesting that that policy does not enable the expansion of our industries which alone can create the necessary development of our economy. This view, I believe, might be expressed thus: economic policies must serve industry; industry must not be sacrificed to policies. Those words, my Lords, are in fact a misquotation of my own archbishop, the Archbishop of York, who has said,
"Economic policies must serve people: people must not be sacrificed to policies."
The saddest element in the present situation is the fact that in the mining industry mutual trust, so long a feature of the relationship between employers and employed, has given way to anger, distrust of each other's political motives, refusal to compromise and, finally, an inability to communicate with one another. Indeed, we cannot escape the conclusion that this is becoming a political fight to the finish. I believe that the miners, like the rest of us, are more interested in prosperity than politics. I hope we can all get back to finding proper industrial solutions to this dispute. We look to the Government to pursue policies which will give better hope of essential long-term work for our people, young and old. It is this for which the Nottinghamshire workers are working.
Viscount Hanworth: My Lords, before the right reverend Prelate sits down, may I say that I agree with much of what he said? Does he realise that there are many in the unions whose sole objective is to destroy our existing society as we know it? Does he take that into account in his assessment?
The Lord Bishop of Southwell: My Lords, I am as aware as the noble Lord opposite, whose name I am afraid I do not know, that this is sadly true of some people in the unions. I was trying to express what I believe to be the attitude and feeling of the

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Nottinghamshire miners, who I do not think have had their case very clearly stated over the course of these months.
Lord Taylor of Gryfe: My Lords—
Viscount Massereene and Ferrard: My Lords, I thank the noble Lord for giving way. I believe I had risen before him. May I suggest to the right reverend Prelate that redundancy is not compulsory for any miner. The coal board has promised miners that if they do not wish to be made redundant they will be found other jobs in the mines.
The Lord Bishop of Southwell: My Lords, I am aware of what the noble Viscount says. I know that this is true. The industry has offered a great many assurances of that kind.
6.23 p.m.
Lord Taylor of Gryfe: My Lords, the House this afternoon has heard at least two remarkable speeches: one from the noble Earl, Lord Stockton, and I add my tribute to all the others that have been heaped upon him. But your Lordships have just heard another outstanding and remarkable speech. It is not often that we look to the Bishops' Benches, if I may say so with due respect, to hear the authentic voice of the coal miners of Nottingham, yet I feel that there was a great deal of truth in what the right reverend Prelate said. Is it not a pity that his voice of quiet reason, great wisdom and Christian sensitivity should not have been expressed at an earlier stage in this confrontation between the miners and the coal board? I almost feel that after hearing the right reverend Prelate the Bishop of Southwell, anything that I have to say is an intrusion. A few moments' silence to digest his wisdom and his guidance might have been useful at this stage. But I return to the economic debate and the gracious Speech which is the matter before us. I agree that the contribution of the right reverend Prelate is relevant to the gracious Speech and to the economic situation.
My colleagues on these Benches will be dealing with the broad issues of economic policy. I hope that noble Lords will excuse me if I tend to concentrate on one aspect of the Government's economic policy. Coming as I do from Scotland and living in the region, many miles from London and remote from this city, I feel a certain responsibility in the area of regional policy. I believe that this country is in danger of being divided, not simply in terms of class interests and class conflict, but if one considers voting patterns one realises that we are in grave danger of dividing the country between the North, neglected, and the South, affluent. There can be no peace in any society where tension arises from that poor division of resources. I believe that it is essential to good government and stability in our nation, as well as being good economic strategy, if we pursue a sound policy in the regions.
As I have said, I live in Scotland. Scotland has suffered over the past two or three generations from massive deprivation because of the economic structure of Scotland and its heavy dependence on traditional industries like steel, shipbuilding and so
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on—the industries that are losing their competitive position. A massive re-structuring is required to be undertaken there.
That is equally true of other regions such as the North-East. In the gracious Speech the statement is made that we are
"deeply concerned about unemployment and will continue policies … to achieve better opportunities".
I suggest that the present regional policy view of the Government is not likely to achieve this aim. The steps anticipated, and already quoted yesterday in the Chancellor's Statement, show that there are to be cuts in regional assistance which are not likely to provide the better opportunities promised in the gracious Speech.
Scotland, like other parts of the country such as the North-East and Wales, has suffered from too great a dependence on one or two basic industries—steel, coal and shipbuilding. These are the industries that have been heaviest hit. They are low-wage industries. The city of Glasgow had its great hey-day 100 years ago. As a result, the properties—the commercial buildings and the housing—are decaying because they are nearly all a century old. It is a city of deprivation, of massive slums and large-scale unemployment. Scotland has been badly hit. It was badly housed and over the past 50 years average incomes in Scotland have never reached the national average.
There is an imbalance and a great deal has been said today about the need for investment in infrastructure. But it is madness for any country that allows an imbalance in the economy to take place where the infrastructure—schools, education, universities, roads and communications—is already in existence.
Despite that infrastructure in the North, industry has moved steadily South and schools and other places have closed. There is an economic imbalance. Allowing that to take place poses serious consequences for the people who have grown up in these areas and want to live there.
One of Scotland's greatest exports over the years has been people. We see, all over the world, the skilled engineers, teachers and missionairies who have left their native heath, many of them simply because they could not find opportunities for their skills within their own country. A change is taking place, thanks to the intervention of the state. If I may, I will say this to the Government: that they must not rely too greatly on market forces solving economic problems. Market forces have a habit of being somewhat inhuman and not concerned with social situations. In the case of Scotland, the change is taking place—and what a delight it is!—but it is due almost entirely to two measures of state intervention. One is the existence of regional policy, a positive regional policy, and the other is the existence of a special agency, the Scottish Development Agency, which was set up as a vehicle for stimulating the change in our economic structure which is so necessary.
A week ago, I visited Nippon Electronics in the town of Livingston. It is the largest Japanese manufacturing investment in Europe. It is now about to be doubled after two years of operation because of its success. They recruit substantially in the 16-to-18 year age group. They feel that they can train them in the skills

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at that age, and train them in the techniques of management and involvement in the industry which is typical of the Japanese system. I looked into a window and there were 16 to 20 youngsters sitting round a table, a "quality circle" meeting in which management and workers were discussing how they could improve their productivity and their quality controls. National Semiconductors at Greenock, a £ 100 million project, is Europe's lagest manufacturer of semiconductor wafers. The IBM factory in Greenock is the sole manufacturer of the new IBM computers for export to Europe. Scotland has now 80 per cent. of the output of integrated circuits for the United Kingdom and 20 per cent. for Europe. Some 40,000 employees are now actively engaged in high technology electronics in Scotland. They are heavily involved, too, in health care and biotechnology.
The point about quoting these figures is not to offer congratulations to the Government although they have been fully supportive of the change that has taken place. The Scottish Development Agency was initiated, I think, under previous governments, but in fairness to the Government they have played their part in the stimulation of economic activities that I have mentioned. But one of the two agencies that made this possible was the Scottish Development Agency which has an £83 million grant in aid. According to yesterday's Statement by the Chancellor of the Exchequer, he has cut the budget of the Scottish Office and they will impose a cut on the Scottish Development Agency.
What kind of economic madness is this? Expressed in the gracious Speech is a concern for new opportunities for the unemployed, yet there are to be cuts in the agency which is responsible for the stimulation of that economy and the employment of people. Equally true, the Scottish Development Agency is not only an agency for developing partnerships in industry, for giving guidance to small companies, for taking direct investment, for advising in management and for being a complete stimulant to economic activity; it also has a responsibility for urban renewal.
If one goes to Glasgow nowadays one sees evidence of these dramatic changes. I believe that bad industrial relations in many industries are caused by bad environment. There are fewer strikes in the new towns, where people work in a pleasant environment, than there are in some of the mass production factories in which people earn their living today. So the Scottish Development Agency has a responsibility for urban renewal; and there are many examples there.
But, my Lords, the biggest stimulus to economic activity is in the regional development policy. It is the powerful incentive to attract the IBMs, the Nippon Electronics and all the other companies that contribute substantially to new wealth creation in Scotland and in other parts of the neglected areas. I understand that it is the intention of the Government not only to cut the budget of the Scottish Development Agency but also to impose an overall cut in regional aid throughout this country. In view of the success of regional aid in attracting new employment, in view of the success of regional aid in transforming the structure of some of the areas of this country, which is so necessary, I cannot for the life of me understand
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why we should be thinking in terms of cutting. I understand that a figure like £ 100 million is envisaged in the re-drawing of the map and the cutting of regional aid. Indeed, the Govenment will, in addition, take account of any assistance from Europe for regional aid and reduce the aid that is directly attributable to these regions by the amount they receive from European funds.
I must say to the Minister that I would be glad to have his confirmation that, in the interests of the creation of employment, the Scottish Development Agency and these other development agencies will be free from the cuts. In view of his desire to do something serious about reducing the high unemployment rate—and I say that quite sincerely—I would be very glad to have some assurances from him regarding regional aid. May I quote just one thing? The cuts in regional aid are not only promised—I think there is in the pipeline something like £ 100 million to be cut—but they say that figures released in the annual report of the 1982 Industrial Development Act show that automatic grants to the special development areas dropped by more than one-third last year: to £438 million in the year to March 1984 compared with £689 million in the previous 12 months.
The biggest fall affected Scotland where payments fell by a half in the last year; so that, in addition to cutting a half from regional aid in Scotland, a further cut is now envisaged. I say seriously to the Minister that this is unlikely to create any new jobs; that, in fact, the contrary will be true. But I say above all to the Minister that this is not only a matter of creating new jobs. I believe in the unity of this nation. I believe in it among social classes as well as in national groups. But if in our country there is one area seriously neglected or which feels that it is seriously neglected—as many people in Ireland have felt over the years that they were discriminated against—it has the roots of social tension which can be extremely serious. I would rather see money spent in creating jobs, creating employment and in improving the environment of these neglected areas than having to spend money on police forces in order to impose some kind of social peace.
6.39 p.m.
Lord Alport: My Lords, anyone who takes part in this debate has a particular privilege. However trite or commonplace our own contributions may be, we share in an occasion distinguished by the magnanimity, eloquence and vision of the maiden speech of my noble friend Lord Stockton. I can only say that my own sense of political values has been strongly influenced by him over a period of half a century, indeed, ever since I first read in the 'thirties his book, The Middle Way. But I never admired him more than I did this afternoon.
My Lords, the paragraphs of the gracious Speech with which this debate is mainly concerned must I think have been concocted by a coterie of chartered accountants. I have nothing against chartered accountants. Many of my friends belong to that admirable profession. Lord Bruce of Donington is a chartered accountant, I think. I rather think that the noble Lord, Lord Barnett, is a chartered accountant, and it may be that the noble Lord, Lord Diamond, who has also spoken this afternoon, is a chartered

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accountant. The profession plays a great and increasingly influential role in the business life of the nation, advocating financial prudence and discipline. Many members of that profession occupy high positions in industrial companies. They carry out important duties in the realm of bankruptcy and fraud and in the recovery of funds on behalf of the Government, the courts or shareholders. But I suggest to your Lordships that the mental approach and scale of values which are necessary to judge the health or otherwise of the balance-sheet of a company, to anticipate the dangers of over-trading, to forecast profit trends or to advise on the commercial good sense of some projected acquisition have only very limited application to what F. S. Oliver once called "the endless adventure of governing man".
On the face of it, the gracious Speech and the Chancellor's Statement yesterday represent financial prudence. Inflation has been contained; Government borrowing has been controlled; various national assets have been realised to help the cash-flow of the Treasury; and there is the promise that those who pay direct taxes (the better off) will have the taxes reduced. I would find it very difficult, if I were a chartered accountant, to fault the logic of the Government's policies. But the problems of governing a nation with an educated electorate, a population of over 50 million, with powerful institutions and wide differences of political and social attitudes, is not the same as running a public company. It is essentially a problem of management, not so much of material resources and money—although my noble friend Lord Stockton said that money was about the only thing Government could control—but of managing human resources; men and women.
We have heard over these last years a good deal about over-manning, of increased production through a smaller labour force, of saving money in the public services by sacking workers or by early retirement. But the fact at the moment—and this has been brought out in almost every speech we have listened to—is that we have today 3½ million unemployed. We have at the same time a marked decline in the social fabric of our country and the gradual erosion of the general benefits of what was called "the welfare system", in the development of which the Tory Party, to which I belong, rightly claimed to have a share.
Take as an example of what I am trying to say—and it was referred to particularly eloquently by the right reverend Prelate of the Bishop of Southwell—the present coal strike. It started from what I would describe as balance-sheet considerations, the closure of uneconomic pits. But uneconomic pits have been closed regularly over the last 50 years or more. I am well aware that the National Union of Mineworkers is under the influence of leaders, some of whom have political, and even perhaps Marxist, aspirations. But, my Lords, 150,000 miners on strike—Englishmen, Scotsmen and Welshmen! They are not Marxists. Have the Government really thought why these men are accepting a reduction in their material standards of living from the highly-paid élite of industrial workers in this country to a level which would have been called in Victorian times "pauperism"? What will be the balance-sheet entry to show the advantage of the
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savings of the closure of uneconomic pits against the cost of the strike to the taxpayer of this country and the cost of the social consequences of the strike in Northern England, Scotland and Wales for a generation to come? Whatever may be the political motives of the leaders of the National Union of Mineworkers, their success in carrying on this long and damaging strike had been fed by the fear, in those areas particularly which were to be affected by closures, of unemployment.
Although there has been in the gracious Speech a very general reference to unemployment, neither there nor in the Chancellor's speech yesterday is there any indication that the Government are prepared to make any significant changes in their strict adherence to what I have called "the policies of the balance sheet"—changes in order to tackle unemployment, even in the face of the fact that the cost of unemployment on that balance sheet is £7½ billion a year. We are assured that there is no alternative to the Government's present financial policies, but—and I would say this to my noble friends on this side of the House—any Government, their policies and actions, are judged eventually by results. If by the time of the next election there are still 3½ million unemployed in this country, the electorate will look to some other party with some other solution to a problem which in human and social terms, as opposed to balance-sheet terms, is one which affects men and women in all parts of the country and in every walk of life.
It is surely time that the Government accepted the risks involved in adopting what I can only think of in the old Rooseveltian term as a "New Deal" for Britain. If they were prepared to tell the country that they regarded the task of tackling unemployment as their major priority, that they would accept the risk, whatever might be the effect on their policies and record, that inflation might rise to 8 or 9 per cent.—though frankly, as my noble friend Lord Stockton has mentioned, this has not happened in the United States, despite their deficit financing—and if they would use their financial resources to repair and develop the structure of the public services, which are in sad decline, that reductions in direct taxation have to wait perhaps for three years or more, that the income from North Sea oil and the sale of British Telecom will not be used simply to keep down Government borrowing but would be available to foster research and development of the new industries which are to lead Britain in the new industrial revolution, so that we can enter the 21st century confident and united—all this would involve restraint and sacrifice. But if that were observed and shared equally, I feel that the nation would respond. There would be risks, certainly; but the Government stand for enterprise and risk-taking and I suggest that in the field of national finance they should not take some risks themselves.
6.48 p.m.
Lord Harris of High Cross: My Lords, I find much to applaud in the gracious Speech—the harmless circuses as well as the bread of life, which was touched upon by the noble Earl, Lord Stockton, in his delightful and uplifting maiden speech. If I join my old

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friend the noble Lord, Lord Alport, in lamenting, though from a rather different standpoint, the lack of radical policies to tackle unemployment, I do not of course doubt that Her Majesty's Government are deeply concerned about this grave problem. At least in this House we can agree that the issue dividing the two sides is one not of motives but of methods. Put simply, the critics think that the remedy for unemployment is always to increase public spending, measured in nominal pounds, while the Government believe (as the noble Lord, Lord Bauer, explained lucidly) that the planned increase by the Government in the money supply is already sufficient to create more real demand for labour if we hold down costs and improve incentives for more efficient production.
Quite apart from the differences in temperament mentioned by the noble Earl, Lord Stockton, it is natural, in my view, that the parties in opposition would always take more risks in expanding demand and have their fun mocking monetary policy as being either mean or meaningless. But, from the vantage point of the Cross-Benches, it carries more weight, as the noble Earl, Lord Gowrie, said, that throughout Europe, governments—whether run by Social Democrats, Christian Socialists, coalitions or in France by, nominally, Socialists—all end up deploying prudent monetary management to check inflation. For all the most amiable rhetoric of the noble Lord, Lord Barnett, the last Labour Government, when it came to the pinch, were not bad monetarists, especially after 1975, with the nudge and guidance of the International Monetary Fund, despite unemployment rising remorselessly towards one and a half million in 1979.
It is also natural that unemployed politicians in opposition can always afford to be more supremely confident that increased spending will create jobs, whereas experience in office teaches again and again that unchecked spending creates inflation. We have all learned the lesson that by distorting and discouraging investment, inflation in turn destroys future employment.
The question which keeps asking itself is: where are the new jobs coming from? In a paper with that very title for the National Economic Development Council last November, the TUC admitted, in what I can only describe as a rare lapse of candour, that nobody really knows. Indeed, it took refuge in history, as the following remarkable, if somewhat opaque, passage will show. I quote from the TUC document of 24th November 1983:
"Two centuries ago, the overwhelming majority of the working population was employed on the land. If, during one of the periodic crises of recession and unemployment in that period the question of where new jobs were coming from had been raised, it would have been impossible to envisage that the answer lay in a rapid upheaval characterised by a massive move of population from the land to the cities and a rapid restructuring of economic activity from agriculture to manufacturing.".
That paragraph may not exactly be a literary gem, but it is struggling to convey what I believe to be a seminal historical insight. The TUC are saying that no-one could have foreseen the transformation of the first industrial revolution but that, on the day, it turned out all right for employment. A moment's reflection will explain why the trade union leaders were unable to
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draw the correct and hopeful lesson from this shrewd observation.
Can anybody imagine that the industrial revolution could have worked its wonders of increasing jobs and raising standards of living fourfold in a century if the dear old TUC had been around at the time to stop it? How could Lancashire cotton have circled the world if some rustic Arthur Scargill had been able to preserve in perpetuity the handloom weavers? Would the new factories, railways and docks have sprung up if fancy apprenticeships, closed shops, demarcation and other restrictive practices had been allowed to stand in the way? Could jobs have been found for the multiplying children of our Victorian forebears, if minimum wage laws had said that they must be paid a half, or more, of adult rates? Would even the devoted working class readers of Samuel Smiles' Self-Help have sought out new jobs, if high taxes had cut their take-home pay to within a few pennies or shillings of social benefits?
The questions ducked by the TUC are without end. Anyway, how could the new works have been developed if planning laws had frozen development and imposed delays of years between the conception and completion of new buildings? And how could workers have moved to new jobs if rent control had destroyed houses to let? If only the TUC had persevered with their history lesson they would have learned that the way forward for the first industrial revolution was prepared in the early years of the 19th century by a liberalising programme of monetary reconstruction, free trade and the radical reform of such obstacles to economic advance as taxation, trade unions and the old Poor Law.
I would argue on the Government's behalf that since 1979 a nominally Conservative administration has shown a more truly liberalising intent than any British administration for 100 years. It has been the first to begin to reverse almost a century of progressive collectivism which has weakened the vigour and flexibility of this economy. The trouble is that there is still a long way to go if we want production and employment to adapt to changing markets, new methods and novel ways of living, to which the noble Earl, Lord Stockton, lifted up our eyes.
It seems to me that the best pragmatic test of economic policy for employment, as Samuel Brittan never tires of teaching us and as the noble Lord, Lord Barnett, almost conceded, is its effect on labour costs per unit of output. Total demand is increasing sufficiently to raise real production and to employ more people, so long as the extra spending is not absorbed in higher costs and faster inflation. The reduction of labour and other costs should, in my view, become a crusade to release more purchasing power to spend on new production. Wherever overmanning is tolerated under the pressure of trade unions in the public services, wages should be allowed to fall. Where the market value of a worker's output rises, as at Jaguars, then wages can safely rise—and rise quite steeply—so long as management is left with enough profit to maintain and extend the capital equipment without which there can be no lasting jobs.
I believe quite passionately that the tragedy for Her Majesty's Government is that they are confronted and partly hypnotised by a nostalgic, backward-looking Labour and trade union movement which professes

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overriding concern about reducing unemployment yet which in practice always shrinks from helping to sweep away policies, practices and institutions that restrict progress to the desired end. If wages and salaries are to be more flexible, we should not only abolish wages councils and weaken the wrecking power of union Luddites. In the end we shall have drastically to reform and prune the monstrous tax benefit jungle. The most urgent requirement is to restore incentives not only for able-bodied men to seek work, but for efficient employers to offer more people the boon of a job at wages which can be afforded by performance in a competitive market.
6.58 p.m.
Lord Bottomley: My Lords, I find it difficult to follow the noble Lord, Lord Harris of High Cross. We are certainly not on the same wave length—not for the first time. I find myself much more in tune with the noble Earl, Lord Stockton. May I congratulate him upon his maiden speech. It was delivered with great personal dignity, elegant style and real concern and compassion. Like him, I shared the experience of the hungry 'thirties. We represented adjoining constituencies in the North-East: Stockton and Middlesbrough. Today they are experiencing the highest unemployment in the country. I quote the noble Earl when I say:
"Nothing can ever blot from my memory the terrible tragedy of mass unemployment. I am determined that as long as I am responsible this shall not happen again."
I wish the members of the present Government were as moved by the present tragic situation. I acknowledge that they do not want unemployment, but their policies make it inevitable. They blame the world recession for our economic ills. They say we are pricing ourselves out of the world's markets because wages are too high and our productivity has to be improved. There is truth in these views, but it does not follow that there is no further action to be taken.
The Government made much emotional capital out of the Falklands campaign, although as time goes on it will be seen as a political and economic disaster. But we must praise the military skill and bravery of our armed forces in mounting a highly successful campaign; this could not have been done by private enterprise. I believe that the same kind of skill and operation is needed to overcome our economic ills. Instead of dismissing the National Enterprise Board, the Government should seek to strengthen and reorganise this body. It should be the board's duty to direct investment into those industries which can hold their own in the face of world recession. It is useless to invest and increase productivity in industries which are outdated or where goods can be produced just as cheaply and more efficiently in other countries. The British are able to produce high quality goods and there is still a demand for them in many parts of the world.
In the past, our inventive skill has been responsible for the world's higher standard of living and improved benefits and comforts. The National Enterprise Board should concentrate also on assisting research into development, design and initial production. This could assist in finding substitutes for imports, thus
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saving the expenditure of foreign currency on imported raw materials. We should seek to replace these with home products, both natural and synthetic, and make raw materials go further. This was done when man-made fibres were used to replace cotton imports, and it can be done today in other areas.
I was present when the first oil produced from the United Kingdom section of the continental shelf was landed. It was an event of great significance in the history of our country. Together with our massive coal and natural gas reserves and our nuclear know-how, it provides us with the strongest energy base in Western Europe. It has saved us from spending hard currency on imported oil. With the hope of even greater supplies, we must direct investment into those industries where we can hold our own in the world's markets; in chemicals, transport, communications, specialised engineering, high-quality textiles, micro chips and electronics. Capital investment should be directed also into industries having a low import content and a high labour content.
The advantage of investment in selected industries is illustrated by what has been achieved by the Scottish electronics industry. It now employs more workers than the shipbuilding, coal and steel industries in the whole of Scotland. These are positive ways of facing the world recession. Low wages are not the answer to unemployment. The less money people have to buy goods, the more the number of people unemployed. If low wages were the criterion, then India should be a prosperous country.
The Government are encouraging the acceptance of low wages by the suggested abolition of the wages councils, a system of legal minimum wages which has protected workers in low-paid services and manufacturing employment since 1909. Low pay is no route to job creation. Indeed, the growing poverty and hardship engendered by low wages can only serve to depress demand and further reduce prospects of recovery.
Unemployment and low pay create a divided society, with half the nation enduring low standards of living and unhappy at the dim prospect of leading normal, healthy lives in the future. I wonder how many of your Lordships are aware that the unemployed are worse off today than they were in the 1930s. In the 1930s, an unemployed person received 28.7 per cent. of the average wage. In 1983, he received 23.7 per cent.
Of course we have to be realistic and recognise that with modern scientific knowledge and technical developments, there will be no need for so many hours of labour. Automation and computers are making much physical and mental labour redundant. In the area which I represented in another place, I saw all the Terylene for the domestic market and for the Commonwealth being produced by machines attended by only a few workers. British Steel's basic oxygen steel-making plant in that area produced an amount of steel in minutes which previously had taken two hours to produce. The labour force was reduced by four-fifths. This is real progress. No one wants to see men toil in dirty, gas-fumed, hot and dangerous conditions. But there are many services vital to our

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well being which are being run down and in which people could be employed without expenditure of precious foreign currency.
The nursing and ancillary services, and the ambulance and fire services—which all performed so marvellously after the recent bomb outrage at Brighton—should be retained at full strength and even expanded. Another instance which is of concern to me is the manning of double-decker buses. When I ride in a double-decker bus full of passengers, it shocks me that there is only one person in charge. I feel that it is enough responsibility for any driver to navigate in crowded streets without having the added responsibility of collecting fares. The employment of a conductor to issue tickets and marshal passengers is a necessity, and it would certainly provide more employment.
The greater leisure which people will have as a result of modern technology must be enjoyed to the full. People should live full lives, and if wealth can be produced by machines, it must be distributed to provide leisure services for everybody. It is an interesting thought that the leisured and aristocratic members of our society have no difficulty in finding enjoyable and fruitful ways of using the time which the possession of wealth has allowed them.
Far from being unemployed, the new leisured classes—freed from daily labour—will be able to pursue their own choice in a wide and hitherto unimagined range of scientific and cultural interests. The whole of our economic and social life is being revolutionised and we shall have to re-organise our thinking if we are to avoid disaster at a later date. This will require more teachers and better educational facilities, which will again provide more employment.
We should take heed of what Winston Churchill said during the last war; that high and stable employment should henceforth be regarded as one of Government's chief objectives and responsibilities. I have indicated ways in which new technological and scientific industries can provide work and leisure services to alleviate unemployment. Instead of being hostile to the unions, the Government should be seeking their co-operation in changing attitudes to work, promoting schemes for early retirement, and achieving a reduction in the number of hours worked.
The Government argue that investment in the public sector could only provide additional jobs in the short term, at the expense of longer term higher inflation and ultimately increased unemployment. To the extent that we have to use more raw materials imported from overseas this would be true, but most of the raw materials and labour that would be required can be produced in this country. In the construction industries, house building, roadmaking and leisure amenities the labour used would not be costly in terms of foreign exchange and would find work for our people. To achieve this, of course, there has to be investment in the public sector of the economy. This investment would also obviously result in more work in the private sector, thus creating even more jobs.
There are some who are not averse to using unemployment as a means of weakening the trade unions, which they feel are too powerful an influence in our society. Some also favour unemployment as a
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means for reducing wage costs. But the continuation of unemployment will undermine the morale of our people and encourage revolutionary elements, opposed to our democratic way of life, to take full advantage of the situation.
7.11 p.m.
Lord Sandford: My Lords, I rise to speak for a few moments on a sector of the economy representing some one-quarter of the whole of public finance; namely, the financing of local government—a topic which I think has not received much attention in this debate so far. I rise to express three notes of welcome, the first of which is a welcome for the absence in the Queen's speech of any more of the kind of legislation which we have received over the last three or four years. I welcome that absence, because most of that legislation has demonstrated what my noble friend Lord Ferrers describes as the Ferrers principle. He has often referred to this and many of your Lordships will remember that this principle is that "most legislation has the opposite effect of that intended". That has been true of most of the legislation relating to local government finance that we have had over the last three or four years.
It is not necessary for me to elaborate on that, because it has all been done for us by the first report of the Audit Commission, which I have in my hand. That is the body appointed by the Government themselves, which issued its very first report in August this year, headed:
"The impact on local authorities, their economy, their efficiency and their effectiveness, of the block grant distribution system".
The pages are shot through with examples of the perverse effect of this legislation. I would commend a study of this report to those of your Lordships who are not already thoroughly familiar with all the intricacies and complexities of local government finance, because it explains those matters, and the things that have gone wrong over the last three or four years, with admirable and almost unique clarity.
I say that not to criticise Her Majesty's Government for their determination to curb local government expenditure. If they are going to curb public expenditure, they must curb local government expenditure, because it constitutes one-quarter of all the public finance that there is. My criticism is that they have not set about it in the right way or tackled the subject sufficiently radically.
That brings me to my second welcome, which is a welcome to Her Majesty's Government's commitment now to embark on a proper review of local government finance. This has been expressed in quite unequivocal, and therefore very welcome, terms at the Conservative Party conference at Brighton, where the Secretary of State said:
"I have asked Kenneth Baker—
now his Minister of State—
"and William Waldegrave"—
now the Parliamentary Under-Secretary—
"to take a look at the entire system of local government finance.
Secondly, I have asked them to look at the way we distribute rate support grant.
Thirdly, I have asked them to look at the balance between local finance and Exchequer financing of council spending.

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Fourthly, I have asked them to see how we can strengthen the accountability of local authorities to their own electorates.
Fifthly, I have asked them to look again at how in any new system local revenues may best be raised."
My goodness! That is indeed welcome. I welcome it very much.
But what an immense amount of trouble my noble friends on the Front Bench took only last April to prevent the House of Lords adopting a reasoned amendment to the Rates Act which said all that in terms far milder and far less emphatic. If that is now the new policy of the Government towards the review of local government finance, I would ask my noble friend on the Front Bench whether he will confirm that that is what they are going to do and that it be put in the parliamentary record in other terms, if they are more appropriate. That is my second welcome.
My third welcome is for words taken from a recent statement of the Confederation of British Industry. They, and the Institute of Directors, have been recommending their members to engage positively and constructively with local councillors in the consultations prescribed in the Rates Act over the way in which local councils are financed. That is all welcome. But the CBI goes on to say—and this is what I welcome even more—
"and, better still, stand for election to local councils."
If that message goes out strongly, not only from the CBI but from the Institute of Directors, to their members to take their full and proper part in local government, we really shall be getting somewhere.
In the course of preparing to say what I have just said, I took a historical look at the membership of the Birmingham City Council. There are now 19 businessmen on that council of 115, which constitutes 16 per cent. of the council. These are members who, from their own description, one can safely say are engaged in running a business of their own. I am not counting consultants and professional people who might have some involvement, but people who are actually running their own businesses in that city. That 16 per cent. is one-half of what it was 15 years ago; it is one-third of what it was 30 years ago and it is one-quarter of what it was before the war, when 60 per cent. of the members of Birmingham City Council were businessmen running businesses in that town. That is a situation which we must get back to.
This is not to say that members of the trade unions, professional people, retired people, housewives and so on are not also welcome on local councils, but surely it goes without saying that, before a council decides how it will spend the wealth in its own community, it ought to have some part in generating the wealth in question. To be concerned entirely with the consumption and expenditure of wealth and to have no involvement with the creation of it cannot be right, and that is one of the weaknesses in local government at the moment.
Those are the three matters that I particularly welcome in the context of this debate on the gracious Speech. I welcome the abandonment of the kind of legislation that we have had over the last three or four years, the commitment to a proper review of local government finance and the commitment to full engagement in local government by the businessmen of this country.
7.20 p.m.
Viscount St. Davids: My Lords, I am happy to say that I can reduce my speech very considerably, because a large part of what I wished to say has already been said by my noble friend Lord Harris. Although he urges me to repeat it, I am against repeating things in your Lordships' House. I shall merely say that I thoroughly agree with him.
It cannot be concealed from the Government, although it seems to be concealed from one or two of their Back-Benchers, that the funds that they have available for all purposes are not unlimited, and therefore what one must ask for at any time must be modest. I must say that I am much surprised and gratified when I see the enormous faith that the Opposition seem to put in Her Majesty's Government on the subject of raising cash for any conceivable purpose. Much as I put my faith in Her Majesty's Government, I do not take it that far. My head, I assure your Lordships, is stuffed full, almost to bursting point, with perfectly splendid ideas for improving this country. Unfortuantely, since they all involve a certain outlay of cash, I shall not put many of them today. Some of them in fact may never be put. But that is how things go.
The truth of the matter is, as Lord Harris said, that one phase is changing slowly into another, and one cannot change or fight against these major phases. I believe that the manufacturing and industrial phase which followed the agricultural phase is itself slowly passing out and is giving way to a service phase, in which the service industries are becoming the great things. To promote more employment—which we all wish to do, without exception, I believe—we really should not be trying to throw good money after bad by trying to support or reinforce the old industries.
I can say this from the Cross-Benches because obviously I have nothing to lose. If at this moment I were a member of the Labour Party, as I once was, I feel sure that for saying that I should now be shot at dawn twice nightly for a fortnight. No doubt if I were a Tory, I should be gently tapped on the shoulder and told, "You cannot say that, old boy. You will endanger our support in", some constituency or other which was vital at the time. Thank God, I am free from those difficulties. I can say what I like. Any dirt which falls will fall on my head alone. Anyway, I believe it to be wrong to support old, debilitated industries. I believe it to be wrong even to try to dole them out as small bits of co-operatives. Really it is not doing the workers of any industry any good to hand them small bits of dying duck. It is living, and not dying, industries that they must have.
The main industries—the old industries—are certain to reduce for the same reason that Lord Harris spoke of on the matter of agriculture. As we know, agriculture at one moment employed over half the people in this country. Its actual production is now up on those days. Its productivity is astronomical, and of course to match that the actual numbers employed are a very small percentage indeed. The same thing is going to happen in industry. There is going to come a time when our industrial employment will be very small. Our industrial productivity is going to be

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wherever it gets to, which in our days will be, as we see it, an inconceivable height; and things will have moved on.
It is quite clear, as I said, that the service industries are the next clients for building up. We need ideas on how to give employment in the service industries. Of course in my particular corner of the inland waterways I have certain ideas, and I shall put forward to the Government only those which do not involve them finding large sums but which nevertheless produce a good level of employment.
I do not believe that even the service industries will be the last of the various phases that we go through. I believe finally that what we are going to have as the industries of Britain are the caring industries. The Labour Party has always supported the caring industries. Therefore they have always had my heart with them, though sometimes not my mind when it came to expenditure of cash. I believe that when we have finally reached the state where the service industries are fully developed, that will be the next, and possibly the final step.
It is the duty of humanity to support man. Many things will be done by a robot, but to have a robot pat you on the shoulder and say that it is all right, you are a nice chap and it will help you, does not have quite the same effect as having a charming lady do it. It is really in the end only a person who is going to be able to help a person. That is where we must get finally, I believe, but it can be done only by a rich society.
It is no good saying that the poor can help the poor. We can see, for example, in Ethiopia that this is not the truth. It is the rich there who are helping the poor; and it is by making ourselves richer that we shall be able to help the poor better. That is the great truth which is obscured by so many people. If we are really to help those who are in need of help—and there are many, their needs are great, and I suffer with them, as I am sure all your Lordships do—we have to make ourselves well off, or we cannot help them. That is the real truth. On that idea, I leave your Lordships.
7.28 p.m.
Viscount Massereene and Ferrard: My Lords, before I commence the main part of my own speech I must say how delighted I was to be in the Chamber to hear the remarkable speech of my noble friend Lord Stockton. I remember well when, quite a few years ago, he came down to my house in Kent, where we had a great south-east rally of Conservatives. I think about 15,000 or 16,000 people were there. The noble Earl—or the Prime Minister, as he then was, Mr Harold Macmillan—made the most magnificent speech and received a standing ovation lasting about five minutes. I must say I am happy to have heard the noble Earl this afternoon.
I am afraid that I also am going to speak about unemployment. I would say that it is the most pressing issue of present times. The Labour Opposition remind me of an old, cracked gramophone record on which the needle has got stuck, because they keep on playing the old refrain, "Unemployment, unemployment, unemployment" .That appears to be the only criticism that they have of the Government.
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However, I have been looking up some statistics. I am not going to quote too many statistics because it is a very boring thing to do. But counting the miners out on strike, the number of registered unemployed today is 3·2½ million. Of course that is a very large figure. However, as we know, though that is the registered number, it is freely admitted that there are certainly 500,000 of that number who have no wish to work. Any civil servant in the department will reaffirm that. Then there are others who are unable to work through ill health or because they are not temperamentally suited to it. So I do not know from where the Opposition get this figure that they have been bandying about, of 4 million unemployed. You see, we have forgotten that over the first half of this year we have employed an extra 245,000 people. That has brought us up to a total of 24 million employed. That is the employed working population. That is the highest that we have had for two and a half years.
We also appear to have forgotten that the working population has increased very greatly in the last few years. The working population since 1979 has increased by 400,000. This year alone it has increased by 160,000. So 20,000 new jobs have to be created each month for unemployment not to increase, just to stand still. I think the Government have done very well, with unemployment not increasing unduly even with an increase in the working population. When I was a boy, the population was only 36 million. It is now getting near 60 million. True enough, people will say, "It is a larger population, you have more employed in the services and for home goods you have more jobs in manufacturing". But of course the truth is that our manufacturing has been declining because we are importing far more goods than we ever used to for home consumption. That is a very worrying point. But we cannot all live in this country by hanging out each other's washing.
However, you have also got to remember that the number of women on the dole now is quite considerable. I remember the days when there were no women at all on the dole because, certainly before the war, all married women were in the home. But now quite a lot of married women who have been in jobs for a short time can claim the dole. I personally think that a married woman, if her husband is in good employment, ought not to be allowed to claim the dole. Probably I shall have to steer clear of a few married women for a time!
From the point of view of the small employer—and I am a small employer—one of the chief troubles which has been mentioned is the great rise that has occurred in wages. I imagine that most of those who are most vociferous on unemployment have never in their lives employed people with money out of their own pockets. To employ people today is very difficult because the employer has so many things, such as national insurance contributions and so forth to pay. Therefore it is very difficult to increase your labour force. Mine is now very tiny. But if there were some decrease in wages, then one could employ one or two more people. I know my noble friend Lord Gowrie does not agree with that because he has said—and of course I agree with him—that high wages are a very good thing, provided you can pay for them. I think my noble friend mentioned the coal miners,

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who are the highest paid people in the country. But, we must remember they are heavily subsidised by the taxpayer: for every tonne of coal that is mined in the country the taxpayer has to pay £60.
The Earl of Gowrie: My Lords I am most grateful to my noble friend. The point I sought to make was that in some parts of British industry I thought traditionally low wages had encouraged continual overmanning and that, as productivity and restored competitiveness came back, it was reasonable that fewer workers would have higher wages. That does not mean to say that I dissent from my noble friend about people pricing themselves into work in other parts of the economy.
Viscount Massereene and Ferrard: My Lords, I quite agree with my noble friend that overmanning proves to be a bad thing in a factory: you do not want a lot of people just idling around since some of the good workers who want to work are perhaps inclined to catch the habit. It is not really a good thing at all. However, I think we have to a great extent now got rid of overmanning.
Another trouble is this. For the last three years I think that our wages have been about 3 per cent. ahead of prices. They have been ahead of inflation. That is the road to ruin. I think we are the only country in Europe that has had that situation. As I said previously, if you take the period from 1970 to 1979, wages increased by over 400 per cent. and productivity by only 9½ per cent. We cannot go on in that fashion. We must really try not to exceed inflation in what we pay ourselves.
I am afraid I must blame the unions to a great extent for forcing wages above productivity. I do not want to attack the unions this time. I have attacked them for long enough in my life. I think we now have some really good union leaders, and that relations are going to get a lot better in that way.
Of course unemployment is an absolute curse. This summer I employed a man, aged about 40, from the Midlands who had been unemployed for some time. He could not have been better at his work. It is sad to think that such a man, who showed such excellence, had had to be unemployed. What is even more sad is this. I have been treasurer and have served on the executive for 24 years of the Kent Association of Boys Clubs, a branch of the National Association of Boys Clubs. Unemployment for the young is very serious. If they are unemployed for, say, over six months, they lose heart. It is only natural perhaps that some of them should develop the habit of feeling they do not want to work. Not with all of them, of course, but with some that is the case. I congratulate the Government on the great deal of money that they have spent on training schemes for the young. It is among the young that unemployment hits most seriously.
During the last year, unemployment—I am now talking of all unemployment—has shown a lower increase in the United Kingdom than the EC average. There has already been mention—I have spoken about it myself on previous occasions—of a rosy future in regard to wealth for everyone provided that we can train enough people in techniques involving the silicon chip, the microchip and automation. The trouble is
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that there will be a most appalling social problem. There will not be enough jobs but there will be a lot of wealth produced which, by means of taxation, can be divided among the population. The problem will be to devise a system in which people will not become bored. If they have hobbies, that will be one answer. But it is a matter that will require much thinking about.
The financial cost of unemployment is, I understand, far greater than that spent on defence or by some other Government departments. It is horrific. Some of this is due to the fact that benefits have been greatly increased. In the creation of new jobs, small businesses are always good things to support. However, with respect to civil servants, I do not think that they would be the best people to choose the candidates for small businesses. A panel of business men should, I think, choose those who are to run small businesses. That procedure might be more satisfactory. However, there would, of course, have to be one or two civil servants from the department on the panel.
To create jobs through deflation is very expensive. I know that the work of the Highlands and Islands Development Board cannot be compared with what happens in the Midlands or the north-west of England. The board has, however, created quite a number of jobs—low cost net job creation, I would call it. This has been done at a cost of £20,000 a job, but it has only cost the board £6,000 per job. The board provides the £6,000 and private capital the rest. It is on a share and share basis. That is a very good way to help the unemployed. Of course, it will not be possible to employ hundreds of thousands of people in this manner, but the board has done well.
I think that I have said enough, but I feel that the Government have been rather unfairly taken to task. It is easy enough for a Government to reflate the economy and to put 2 or 3 million to work digging a hole and filling it up again. However, we would soon be out of the frying pan into the fire if we did that. I feel that the Government could not really do much more in respect of unemployment than they are doing. I read in the papers only this morning that another £80 million is going into job creation.
7.45 p.m.
The Lord Bishop of Norwich: My Lords, I am particularly glad to follow the noble Viscount. Usually, he and I meet only when we are leaning over a five-barred gate helping to judge Highland cattle at the Salen show on Mull. As your Lordships know, this is the social height of the year on Mull. It is lovely to be close to each other here, far south. If your noble Lordships need to know, the noble Viscount is extremely good at judging Highland cattle as well as many other things.
Having made that passing reference, I am now in some difficulty. I am anxious about the speech that I have prepared. As our most senior maiden speaker ever has suggested that when bishops speak about the economy they are likely either to be eccentric or idiosyncratic, it makes what I now have to say a little embarrassing for me, although I trust not for your Lordships. Nevertheless, we naval chaplains live dangerously, and I shall proceed with the speech.

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I want to congratulate Her Majesty's Government on two aspects of the gracious Speech in the economic area. Your Lordships will remember the words:
"My Government will continue to work closely with other nations and international institutions to strengthen and spread economic recovery".
With that, although it takes us towards last week's debate, I touch upon as an example, the words:
"My Government will continue fully to support the Commonwealth, to play a constructive role at the United Nations, to maintain a substantial aid programme, and to encourage investment in developing countries".
I believe that the economy is a whole and cannot be divided between at home and overseas. I wish to make two comments about the gracious Speech in terms of the economy. In both those areas, I want to congratulate the Government.
I wish then to make a third reference for their consideration. I managed last night to obtain from another place a copy of the Chancellor's Autumn Statement. I have also now read the full reports of last night's debate in another place in both The Times and the Daily Telegraph. I find that if you mention newspapers by name, you are more likely to get those newspapers to report you. Of course, there are others, and we must not differentiate between newspapers. As a theological student I was asked to give the names of the major and minor prophets in the Old Testament. I could not remember them. I therefore wrote,
"Far be it from me to differentiate between these holy gentlemen".
That will have to do for the press gallery. I found in reading the major reports of last night's debate in another place that the two words I want to share are confirmed in detail.
Since the dreadful violence at Brighton and the merciful deliverance of both the Prime Minister and the Cabinet, for which we humbly thank Almighty God, and since the horrifying TV pictures which Michael Buerk's BBC team brought to our screens, which really have a say on the conscience of our nation, I believe that these two aspects of Government policy have become ever more clear. I would encourage Her Majesty's Government to deepen and increase them. The two words, or the two themes, are efficiency and compassion. As regards efficiency, I notice that the Secretary of State for Employment was reported as saying that the new money put aside to help the unemployed would allow for unemployed people to be paid £40 a week for a year to compensate for loss of unemployment and other benefits while establishing businesses, providing that they had invested at least £1,000. In our experience in the Lowestoft area of our diocese, where we are giving a good deal of church support to community work in relation to the establishment of small businesses, this is just the sort of boost for the jobless to set up on their own that we need, and it is both efficient and compassionate.
I am glad that the noble Lord, Lord Young, is going to reply tonight—so my Order Paper tells me—because we owe a lot to him for the work he has done in the MSC. There again, efficiency and compassion have been coming together. One can only speak from one's own experience, but the advantage of speaking in the House is that all of us can bring our
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varied local knowledge of a situation to test whether it is a trend which may be true across the country or offer it as a direction in which we might move nationally.
For instance, in relation to the Youth Training Scheme, we have been deeply involved from the Church point of view in this economic area of our country. We have been supporting the local authority work in Thetford, in King's Lynn and in Lowestoft. In Norwich city itself my own Diocesan Church Youth Committee are the main sponsors of our project there. I checked up today for my facts. We have got about 1,000 in training, and 60 per cent. of those who left in this current year, before the 12-month period was up, left because they had employment to go to already. Others, at the end of their time, got jobs within two to three weeks.
I believe therefore that there is a sense in which efficiency and compassion are the two notes which we want to encourage the Government to continue with and to deepen; and sometimes they should recognise that that compassion is something that is to be shared with those who are better off. I refer to the economic background to student grants as an example. We know that the minimum student grant of £205 a year was abolished a day or so ago in a package of measures which will involve the parents of 250,000 students in paying more towards their offspring's higher education. At first glance, that may look as though there are cuts for parents, but I am not so sure because, if efficiency and compassion go together, then surely it is right to encourage the Government to help the poorer students from the poorer families who really need grants, so that the richer parents of the more well-to-do students can in fact stand upon their own feet.
Because we are, on the whole, rather an elderly House, apart of course from notable exceptions among Her Majesty's Government on the Front Bench, many of us who were students before the second world war know the tremendous struggle that our parents had to get us to university. My own parents never owned a motor car; they never owned a refrigerator. It was too early to own a television; I think there were no televisions before the second world war. I remember how hard they worked to make it possible for me to get to Cambridge. I have always been grateful for that, and for their work. I speak as a parent who is comfortably off as a bishop—that is, if you can call a bishop with half a dozen children comfortably off. But they are slowly coming off our hands. We are now moving into the grandchildren syndrome. If your Lordships are interested in bishops, I can tell you that we had a new grandchild just last week, making 10.
It seems to me right and proper that these twin words "efficiency" and "compassion" should go together, and in this case I believe it right that student grants should be selective for those who need them rather than general for anyone who thinks they are simply on the shelf to be picked up. So I use those two words "efficiency" and "compassion" together. I find that, on the whole, from these Benches we do not on average appear as bishops to give to the Government that support which, when they are doing good things, they have every right to receive. On the whole, from these Benches we try to speak not in a narrow, party

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way but in the national interest; and of course we feel free to criticise when we desire to do so.
I have been struck by the fact that in the Chancellor's Autumn Statement, in two areas particularly concerned with compassion—namely, health and personal social services on the one hand and social security on the other—there are enormous figures showing that we are moving now to £ 16,480 million to be spent on health and personal social services; and this Autumn Statement says that this is an increase of £210 million. On social security, the amount is £39,990 million. This is an enormous figure, showing an increase of £470 million. So the size of the cake concerning those in need, whether of finance or of health or of care under that enormous spending area of health services, is such a large part of national income that it is probably a good thing for us to recognise that.
Having said that, I want to say that it is all too easy for us to say, "Well, as long as we make sure that our economic patterns and packages are suitable at home, then the rest of the world must look after themselves". I was therefore delighted to see, again from the Chancellor's report, that in his budgeting and his forecasting there are to be no cuts in the Foreign and Commonwealth Office grant, which includes ODA; that still stands at £ 1,870 million, which is a very large figure. I trust that the Foreign Office itself will continue on that path concerning immediate Government aid.
Your Lordships will remember that we had that very clear speech from the noble Lord, Lord Trefgarne, speaking in detail about the Government's immediate response to Ethiopia. This is where it seems to me today that the conscience of the nation has been touched by the Ethiopian tragedy, and Government and voluntary services have so joined together in meeting an immediate human need that I believe we are building patterns for the future in our nation which will increase those two twin words of "efficiency" and "compassion" in the whole atmosphere of our national life and of our Government. It was encouraging to see, at col. 455 of Hansard for 30th October, the noble Lord, Lord Trefgarne, saying that the Government had,
"also agreed to make available two further civil aircraft—one of them a Hercules"—
that is, as well as the other two Hercules—
"to support the voluntary agencies who are doing such a fine job".
He spoke about the water drilling rigs, the medical requirements, and so on.
I hope, therefore, that compassion will continue to be part of our economic policies for our overseas aid. I make a special plea here for Uganda. I have just returned after three weeks in Uganda and I find a tremendous love for this country. As your Lordships will remember, Uganda was a protectorate, not a colony. They look to us for support more than to any other of the more wealthy and developed nations. The particular area in which we have invested money there recently is, I believe, already paying big dividends. I want to stress to Her Majesty's Government my third aspect of our economic policy. One could call it value for money—that is one way of putting it—but I should prefer to call it productive use of available resources. I give a particular example from Uganda. As your
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Lordships know, we have now established our British military training team at Jinja Barracks in Uganda. Of course there are criticisms about the army and I believe that some of them are justified and others are not. But there is no doubt about it: that 13-man training team is doing a remarkably worthwhile job, paid for by money which the Chancellor has deliberately put aside, earmarked for that particular task; namely, to train the young officers of the Ugandan Army and the young NCOs of the Ugandan Army in discipline and in all the great principles and traditions of the British Army which they want to have from us and which they remember from the old days of the East African Rifles.
It was significant that when I spoke to the senior NCOs of that particular training team—they numbered six or seven—they said, quite simply, "If we could double the number of our team, we could double the usefulness of our work". What is the cost of 13 young officers and senior NCOs over in Uganda for a training team? It is minuscule in relation to the figures that we see before us here. If, therefore, in the Foreign Office work and in the economic patterns that we develop overseas, we can watch for these particular productive tasks, it would be tremendous.
I return to the words of the gracious Speech which refer to investment overseas. I found throughout Uganda—and I believe that it is typical of many other parts of Africa which have been part of our great Empire in the past and which are part of the Commonwealth now—a desire that we should seek to invest there. The people whom I met there were young agriculturalists, young Christian doctors and young Christian nurses. They were tremendous, first-rate young people who were idealistic and energetic and who were out there for two or three years. The same is true of Ethiopia today. We have been following, as have many bishops, the business of "Bishops' buckets for Ethiopia" and on Sunday a week ago we had a bucket in every parish church in Norfolk. When I rang through today to ask my chaplain for the figure, I was told that £14,400 has come in already from villages all over Norfolk, in sums of £30, £50 and £100. That will go straight through to Ethiopia.
I believe that we are at an idealistic moment and because of that I simply ask that Her Majesty's Government increase their efficiency, their compassion and their productivity in relation to their economic progress. I believe that if we capture the tide now, we may be able to change the weariness of the nation and gain again the idealism of the nation.
8.3 p.m.
Lord Roberthall: My Lords, all the speakers tonight except one have been very highly privileged in being allowed to speak in the debate which has contained the maiden speech of that one remaining person. Like a good maiden speaker he succeeded in being non-controversial. However, he ventured to remind your Lordships that when he was Prime Minister this country enjoyed both the lowest inflation and the lowest unemployment. At that time I was fortunate in being economic adviser to the Government, so I saw quite a lot of Mr. Macmillan, as he then was, when he was Chancellor. But during my 14-year period of office he was the only Prime Minister who was interested in

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economics. When he was Prime Minister he used to consult me and talk about the economic situation. He was very kind to me. However, what struck me when he was reminding us of that period was how fortunate Governments were at that time, because their economic policies rested on a consensus. The word "Butskellism", which was coined at the time, was an indication of that. It made it much easier than it has since become to run the economy more or less efficiently. If I do not forget to do so, I hope to come back to that point towards the conclusion of my speech.
I want to say a little about the long-term prospects in relation to unemployment. As always happens when one speaks towards the end of a debate such as this, the points that one wants to raise have probably been raised already, and in my case they were raised particularly well by the noble Lords, Lord Barnett and Lord Diamond. However, I shall try to develop a little the theme that they were putting forward—that on present policies we shall go on having something like the present amount of unemployment indefinitely. The Government themselves have already agreed that we are likely to have the present figure—which one can say is 3 to 4 million, according to how one counts—next year. Almost all the forecasters who are prepared to stick their necks out any futher than that would agree that that figure is likely to be about the same—some of them say that it will be even higher—in the years after that.
Why do we say that? To find the answer one has to look at the policies of the present Government. When they came to power their top objective was to get control of inflation, and their other main objective was to improve the competitiveness and the efficiency of the economy. The instrument for that was the monetary policy and, to some extent changes in the law, especially the law as regards trade unions.
As we all know, the monetary policy was applied with very great severity, and, as we are quite fairly constantly reminded by Government speakers, they have succeeded in reducing inflation and in particular, have stopped the terrifying tendancy, which was becoming so evident in 1979, for the rate to accelerate. I do not think there is any doubt that they have helped to improve the efficiency of industry. They have done so by making the climate very much colder: by forcing employers who want to stay in business at all to cut their costs and by pressing on the bargaining power of labour, both directly by making it harder to get jobs, and indirectly by the rather courageous things that they have done as regards trade union law.
The cost of all this is the tremendous waste of resources represented by the enormous and unprecedented volume of unemployment and by all the misery and suffering which that entails for people of whom we do not see as much as we might. When the noble Viscount, Lord Massereene and Ferrard, was speaking he implied that a great deal of unemployment was caused by people who did not want a job. I live in Cornwall, and a few weeks ago a lady who is a sheep farmer told me that she had been advertising for a shepherd. She had received 96 replies, and she could hardly bear to read them because of the desperation and the hope that they contained that they at least would get lucky with her. If we apply that generally
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throughout the country, it gives us some idea of the price.
The Government's present policy is much the same as it was when they came to office. In particular, their policy is that inflation is still the top priority and that they cannot do anything about stimulating demand because it would lead to a recrudescence of high wage demands and, therefore, inflation. We must therefore assume that their view is that, with the present state of mind of employers and workers, and with present attitudes, we need about 3 to 4 million unemployed in order to hold the inflation figure at its present level, which is about 4½ per cent.
Is there a policy for employment? It is difficult to understand exactly what the Government's policy is, but primarily it seems to be made up of reducing costs, and that mainly means reducing wage costs. The Government point to the United States as a country which has had an enormous increase in employment, with small wage increases or hardly any. It is rather a bitter commentary—the noble Lord, Lord Barnett, has already dealt with this point but I must repeat it—that a Government that are committed to doing everything to which Keynes was not committed are pointing to the United States to support their policy when they are carrying it out by deficit financing, which would have made Lord Keynes' hair stand on end.
Returning to the matter of policy, it is, as I understand it, that if the money supply is kept within the present limits, with the fiscal policy required to limit the public sector borrowing requirement (because the Government believe that that affects the money supply), we must somehow keep the product of the level of employment and the price level within these constraints. In the end that comes down to the Government thinking that they must somehow keep down wage increases. Their policy on that aspect is, of course, to maintain the severe pressure on industry, but it is also to have a very tight target in the public sector and to urge employers in the private sector also to be austere.
I do not think that that is the right approach, and I believe that it is very unlikely that they will be successful in this policy because the country is now in a stable position with a great deal of unemployment, with output rising slowly and with profits very high. These are just the conditions which in the past have led to the leapfrogging process in the wages field. We are now beginning to see signs of it. Every union which thinks that its industry is fairly prosperous will try to do as well as the best settlement. In the public sector the Government might be able to hold down wages for a little while, but we know from long experience that this generates a great sense of unfairness, which is one of the strongest forces in the human make-up, and in the end one has to give way.
Therefore, even if the Government were right in supposing—and I do not think they are—that if they could get wage settlements down low enough there would be an expansion of employment I do not think we are likely to get it. Having had long experience of this sort of thing, I have gradually come to the conclusion that we are not likely to have a combination of low inflation and high employment without some sort of consensus. That is where I return to my

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reference to Mr. Macmillan. At the moment we have confrontation. It is quite evident that this polarisation is taking place. I do not think that we have any hope of getting out of this without moving away from this atmosphere and trying to reach some sort of agreement about an economic policy that will allow us to do better than this. We should not be content with staying in that position.
Perhaps I may close on a slightly party note. The Alliance, to which I have the pleasure of belonging, is at least hoping to do something in that direction and is not pushing in either of the extreme directions of the main parties. I cannot help thinking of one of the early books of the noble Earl, Lord Stockton, which made a great impression on me and which was called The Middle Way.
8.16 p.m.
Lord Campbell of Alloway: My Lords, in following the noble Lord, Lord Roberthall, may I borrow his nostalgia for consensus and his search for some new approach and also, if I may, endorse his tribute to my noble friend Lord Stockton. It was said by the noble Lord, Lord Cledwyn of Penrhos, when moving the adjournment of this debate on the gracious Speech, and it has been repeated by other noble Lords today, including the noble Lords, Lord Barnett and Lord Diamond, that our country is a divided country, that on unemployment the policies of Her Majesty's Government are wanting in imagination and in resilience.
Neither assertion is well founded. As to being a divided country, it is true that a private army, as seen on television, roams the approaches to our pitheads; that intimidators brutalise the police on £14 a day blood money—apparently blood money acceptable from any source, even Libya, the veritable hydra of terrorist supply; that Tammany Hall Teamsters Union practices, imported from the Mafia, are used against the private pits and those who work in them and other trade union members who have nothing to do with the coal industry, and the name of that game is extortion; it is true that before levying a campaign of violence to unseat a duly elected Government, to compel Her Majesty to change her measures and counsels, to overawe Parliament, Marxist commanders, Moscow-trained, squirrelled away £8·5 million of their own members' funds to defeat the due process of law for calculated breaches of the rule of law. All within this realm owe allegiance, and that conduct is treason.
I speak not of prosecution in any individual case. That is a matter for my right honourable and learned friend the Attorney-General, and there may be evidential considerations of which I am not aware. But I speak of this state of lawlessness, which, far from dividing us, unites us. It unites us as we close our ranks against the forces of subversion in defence of our own free society. The reality of this situation is that we are no divided society at all. Irrespective of political affiliation, this is no divided nation. We are a trading nation, in partnership. As such, we are obliged to recover our lost markets; to find new markets; to sell to the world at a profit, and so to maintain our means of livelihood and our way of life. How is it then that policies which reduce inflation, reduce taxation,
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encourage new business, and so engender productivity for export can be stigmatised as wanting in imagination? How is it then that the commitment of Her Majesty's Government to spend £2¼ billion in the current year on various training schemes can be said to be devoid of resilience?
The long-term policies are right. They have worked: they are working. The prediction of my noble friend Lord Caldecote is well founded. The question is whether we should derogate, or superimpose, a short-term job-creation policy, accepting a measure of inflation, providing jobs on the infrastructure. But will it get rid of the poverty trap? What will be its impact? How much inflation? My noble friend Lord Alport says 8 per cent. With the greatest respect to him, how does he know? How does anyone know? How many jobs are involved, and how much needs to be done to the infrastructure? Is this a viable proposition, or merely a form of instant, temporary relief unrelated to productivity?
Viscount Caldecote: My Lords, would the noble Lord not agree that if money were spent on the infrastructure instead of being given away—I use the word loosely—as relief for personal taxation, that would not be inflationary?
Lord Campbell of Alloway: My Lords, I am obliged to my noble friend. I cannot agree the proposition as a broad proposition. It is all very well to state it as a theory; the theory may be right or it may be wrong. But in my view—I may be wrong about this—what you have to do is to see how much inflation, how many jobs, what needs to be done, and so on and so forth. Therefore I do not accept that you can approach this question on a matter of pragmatic theory. I think it needs looking at.
In the contest between my noble friend Lord Stockton's nannies I am on the side of nanny starve because I am against inflation and in favour of real jobs related to productivity, especially as this type of short-term job creation—on which I hope I had an amicable exchange with my noble friend—will not provide jobs at the end of the training period—jobs for which the training has been given.
If productivity is the key which opens the door to the new jobs when the training period is over, then surely the creation of a job unrelated to productivity is to some degree a cosmetic exercise. Perhaps not wholly so. There is, as I conceded to my noble friend in our exchange, some essential work which no doubt needs to be done on the infrastructure, and no doubt Her Majesty's Government have this well in mind, not only on economic grounds but also of course on grounds of compassion.
However, even sound policies—and I wholly support Her Majesty's Government's policies as sound—can founder on the submerged reefs of industrial strife. This is why it is of imperative concern—and here I take the point made by the noble Lord, Lord Roberthall—that our industrial relations should evolve to foster business confidence and fuel the expansion of productivity to hasten the creation of those new jobs at the end of the training period.
How should this be done? Ought we not to build upon, and extend, our existing voluntary structure of

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collective bargaining? Should we not have the voluntary conclusion of industry-wide procedure agreements which contain built-in mandatory arbitration in return for no-strike clauses?—voluntary in the sense that they can only be made if the majority of the members of any proposed signatory union entitled to vote by secret ballot so decide, for do we not accept that, since Beatrice Webb coined the phrase, collective bargaining is the only acceptable way of conducting industrial relations?
Do we not accept that collective bargaining is wholly dependent upon the existence, the strength, and the recognition of trade unions? Do we not accept now that the industrial action as a weapon of first resort is not appropriate, and that the will of the rank and file majority should prevail? We surely also accept that the ethos of consultation should obtain in this age of consultation? And, if so, that disputes as to recognition, should they arise—and they will not of necessity arise—in context with the proposed procedure agreements should be settled by some independent arbitral tribunal on which representatives of trade unions and employers sit under a chairman acceptable to both?
The tribunal, which would have no powers of committal or enforcement, would also adjudicate on the substantive dispute arising under the agreement—relevant again to the leap-frogging consideration raised by the noble Lord, Lord Roberthall—in context with predictabilities. The procedure would be informal. Its decisions would be final; there would be no appeal. The only sanction would be that in any proceedings instituted in a court of law its decisions would be treated as conclusive and would not be subject to lawful extra-judicial challenge by industrial action. Declaratory amendments to the statutes could easily be made. It involves declaratory amendments to the Act of 1974, to the Act of 1980 on secondary action, Sections 12 to 14 of the Act of 1982, and building in this concept into the balloting procedures of the Act of 1984.
The proposal, as such, is not inflationary. By increased productivity and exports we should have earned the full face value of every extra coin of unit wage cost we hope to be able to spend. It would in no way weaken the trade unions. On the contrary, it would strengthen the authority and enhance the status of any trade union which concluded such an agreement at the behest of its members. The proposal serves the interests of the membership—continued employment. It serves the interests of the economy by achieving this measure of predictability and reducing the burden of financing strikers and their families out of taxation. Not wholly of course, but only those who enter into the voluntary schemes.
In conclusion, if we affirm the virtue, and extend the scope, of our indigenous system of collective bargaining, is it not then idle to seek to divide industry into the manufacturing sector and the service sector, or to attempt to define what are, and are not, essential services; or to distinguish between civil servants, as they are called, and others who render services? Services produce goods; services maintain the means of production and distribution of goods; services finance and safeguard goods; services sell goods and even invent and adapt goods. Services ensure the
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health and wellbeing of all in this country concerned in the complex achievement of a favourable trade balance, and they also ensure the proper ordering of our industrial and economic affairs.
This is how it is because that is what we are—a trading nation in partnership.
8.30 p.m.
Baroness Seear: My Lords, we are all deeply indebted to the noble Earl, Lord Stockton, for a most moving address, a great House of Lords occasion. In many messages that he gave to your Lordships' House there was surely a clear message to the Government Front Bench—a message which it seems strange for a great Conservative leader to have to give to a Conservative Front Bench; do not get hooked on any dogma. He did not of course put it as crudely as that, but that message was plainly there. Do not get hooked on any dogma, and certainly not on the dogma of monetarism.
The truth is that because this is a Conservative Front Bench it is not really hooked on the dogma of monetarism, except when it is convenient to use that dogma to refuse to do things that it does not want to do. The Government are a very interventionist government. When they feel like it they forget all about their monetarism and they decide to spend—I am extremely glad they did and that they continue to do so—over £2 billion on training schemes which they consider should be financed. They did not do that in the name of monetarism, but because they had the sense to see that it needed to be done. We should not be fooled by this talk of monetarism as the reason why the Government cannot adopt policies that have been urged on them from all quarters of the House. They will not intervene to do things which they are being urged to do because those are not the things they wish to do; it is not because of any dogma to which they consistently subscribe. So let us get that right out of the way.
Everybody speaking today in your Lordships' House has spoken about unemployment. Indeed the noble Earl, Lord Gowrie, in opening the debate, himself spent a great deal of time speaking about unemployment. It will not surprise your Lordships that I believe this is the issue to which we and the Government should be paying the very greatest attention. The noble Earl, Lord Gowrie, told us, and the Chancellor told us last night, that there will be some money to spend, about £1½ billion to give away in tax reductions. May I urge the Government not to think that this money is best spent in the interests of improving the employment position and the economy just by a tax give-away?
I believe that it is desirable—I agree with the noble Earl, Lord Gowrie, though not entirely for the reasons he gave—that it is very important to take more people out of taxation altogether. It is absolutely ridiculous that when a man moves into employment at a level of pay full time which practically no adult man in this country receives, he moves into a marginal tax position of virtually 40 per cent., if one adds together income tax and social security contributions, which one must do because that is simply another tax. It might be very much more sensible if social security

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contributions were treated simply as another tax. I entirely support the idea that more people should be taken out of tax altogether and we could then take a step towards the removal of the poverty trap.
Where I did not go along with the noble Earl, Lord Gowrie—if I understood him correctly—was when I think he said that this in itself would be the greatest contribution to getting rid of unemployment because it would lure more people back into employment. That is saying that a great many people refuse to go to work because of the poverty trap. No doubt some do, and I am sure it would have a marginal effect on the level of unemployment, but it would be only marginal and would not be the major contribution which I understood the noble Earl to say he believed it would make.
Having raised the question of the threshold of taxation, may I also put in a plea once again for the possibility of an additional step in tax levels? Why do we have to go straight into 30 per cent.? We used to have a lower starting point of taxation when people began, and we abandoned it. I have never understood why that was so. I was under the impression that it was because the Government would not stand up to the Inland Revenue. Whether that was true or not I do not know, but if it was true, it is about time that the Government's capacity to stand up to nearly everybody else was extended to their capacity to stand up to the Inland Revenue.
But once that is done why is it necessary to say that everybody at every level of tax has to benefit from that increase? I have never understood why, if the starting point of tax is raised, it is not possible to adjust the points at which further taxation increases take place. One does not have to make people at a higher tax level better off just because people at a lower level are taken out of taxation altogether. Adjusting a point at which the tax changes take place can theoretically have a perfectly neutral effect on the total tax take.
I urge the Government not to give tax reliefs to people at higher levels just as a consequence of trying to take people out of taxation altogether. Instead, the money should be used for sensible job creation for two major reasons and in at least two directions. The first direction surely should be—as other noble Lords have said and as we from these Benches have said again and again—in capital investment in the infrastructure. There is a great deal of work here calling out to be done. It would have an immediate impact on the construction industry and that would have a multiplier effect on other industries. In addition, these are expenditures which sooner or later will have to be made. If one saves on consumption, the money saved does not have to be spent at a later date, but if one saves on capital investment, one is only postponing the evil day and having to spend more when the time comes. This is the tremendous difference between money which will have to be spent for capital investment and money which is spent on consumption.
However, perhaps I may put in a plea for some Government expenditure on the most essential down-to-earth services such as home help services which have been absurdly restricted in many parts of the country and which are an extremely economical use of
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public money. They keep in their own homes people who would otherwise have to be taken into extremely expensive institutions.
We on these Benches have always understood the importance of controlling inflation and not spending a great deal of money if it would lead to an increase in inflation. But if £1½ billion is to be given away, I would add my voice to those who have urged that a minimum amount of that money should be used for relief on taxation and a maximum amount should be used for job creation, especially in capital infrastructure. I say this for two reasons. The first is that whatever the Government succeed in doing in improving the condition of the economy, there is no doubt that many of the long-term unemployed will not be drawn back into employment. The nature of the jobs which are to be created is not such that many of those who are in the ranks of the long-term unemployed will be able to take them. This is the hard core of the unemployment problem, which is growing worse all the time. And it is growing worse because of our neglect of training in the past which has resulted in a swollen number of people in our labour force who have no skills and competences to sell and who are not going to acquire them in the time that is available. Unless there is job creation, we shall remain (whatever happens in the economy) with this under-class, as it has come to be known, of people who are falling out of our society altogether. The case of job creation to meet the needs of those people is surely very strong indeed.
A second and quite different reason why we need job creation at this time is as a complement to the youth training scheme. I am a very strong supporter of the youth training scheme. I believe it should be further developed and extended; but it still has to prove itself in the eyes of the public as a whole. People have to be convinced that the youth training scheme is going to lead to jobs at the end of the training programme. If it does not do so, the confidence which, I believe, is slowly building up in the youth training scheme will be dashed. Unless youngsters coming off the training courses get into jobs, even if it means that the Government have to take special steps to see that they do so, then the whole concept of the youth training scheme, which is vital to our future recovery, is going to be seriously undermined. Money spent on job creation for this purpose will be money very well invested.
It is, however, important—I do not think that much stress has been put on this and I confess that I have not been into every speech during this debate—to look beyond the immediate picture into the middle distance. I do not believe that we in this country are going to be successful unless we have a successful manufacturing industry. It has been fashionable to say that we are moving away from manufacturing into a service economy. There is much to be said for the development of the services, but this country cannot live on service industry except such service industry as has an export value. The invisibles, yes! But we cannot keep ourselves going on services except where they are also exports. This is because, after all, we have to buy so much of our raw materials from overseas. We need to salvage our manufacturing industry and to give every support we possibly can in the middle distance; and to start now, so that we continue to have a sound

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manufacturing sector which can succeed in export markets. Otherwise, we shall have a service economy, maybe, but it will be at a continually falling standard of living because in no other way can you work it out if you depend entirely on services with inadequate export success.
What can we do therefore, to salvage our manufacturing industry? Far too little has been said about the appalling fact that this great industrial nation, for the first time for decades and decades, imported more manufacturing goods than it exported. And one reason why we do not want to put all the one and a half billion into tax reliefs is that it would simply lead to an increase in imports and not into a strengthening of the economy. What can be done? I think it is disappointing that in this debate so little has been said about the need to foster manufacturing in two areas—to salvage what can be salvaged and to stengthen what can be strengthened in the old industries.
I am the last person to suggest that we should bolster up industries which have no future. But we have already seen (for example, in the textile industry) that there are sections of that industry which have found new markets and which by updating themselves can, in fact, compete. This, I have no doubt, is true in many other industries. What can we do to see that this process is fostered in every possible way? One thing, surely, is that the Government must think again about their apparently totally neutral attitude towards the exchange rate. Nothing did more damage to the British export industry than the over-valued pound; and the Government were entirely complacent about allowing the over-valued pound to continue, although it was devastating sections of manufacturing industry which was trying to export overseas.
But that is just one facet of what can be done. More than that, how are we going to ensure that we have a manufacturing industry which can really consistently compete? We have talked about trading. That is very important. But we have ducked the fact that pay is an important element. The United States, as other speakers have said, has been able to pull down their rates of unemployment without inflation largely because they have not had runaway pay increases as the economy begins to recover. We have done nothing to prepare for the effect upon pay of revovery in the economy.
I no not believe in social contracts. For the social contracts that we have had so far we have had to pay far too high a price in the contracts that have been made between the Government and the trade unions. But I believe, as it appears do other speakers, in the importance of a degree of consensus and understanding and development together through consultation of common policies. And I do not believe in this only at national level. I believe in it at the level of the plants. We must do far more to see that people inside individual undertakings understand that their success and their improved standards of living really depend on the success of the organisation.
Now we are back to the old policies that have been advocated from these Benches so often—a much greater extent of common ownership of industry and a much greater extent of profit sharing, full works
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consultation and participation of one sort or another so that people can at last identify with the undertakings in which they work. How I wish the noble Lord, Lord Campbell, was right when he said that we are not a divided country. But the history of so much industrial relations in this country gives him the lie. It ought not to be so but it is. Unless we take positive action to reverse that position, the minute that there is recovery in the economy we shall be faced with the old adversarial conflict in industry, and our hopes then of building up a manufacturing industry that can compete in the world will be very small indeed.
8.47 p.m.
Lord Bruce of Donington: My Lords, we are drawing towards the closing stages of the three debates that we have had on the gracious Speech and this day, of course, is a most important day in that we have been trying to deal, as best we may, with the economic and industrial aspects of the gracious Speech. First of all, I should like to offer my felicitations for the first time to the noble Earl, Lord Gowrie, on his accession to the Cabinet and generally to welcome him as a person with whom I believe it is possible to reason. I am bound to say, without casting any undue reflections on his colleagues, that I find this a most agreeable prospect and I sincerely hope that we have many arguments together. Also on this occasion, I should like to give a welcome to the noble Lord, Lord Young of Graffham, whom I have not had the pleasure and honour of meeting previously and to express the hope that he will find his office, his very onerous office, agreeable to him.
My Lords, my greatest felicitation must be offered to the noble Earl, Lord Stockton, whose maiden speech in this House today reminded me so vividly of the occasions when in another place I had the opportunity not only of listening to him but, at least on one or two occasions, even of arguing with him. The noble Earl today touched on matters of the utmost importance to the nation as a whole, delivered, if I may say so, with his usual panache, wit and charm. The House will therefore not need to forgive me if I return at a later stage to some of the observations that he made.
I think the House will agree with me generally that today we are as a nation very troubled indeed. All of us are worried, in one way or the other, not only in the country outside and in another place but also in this House. None of us is really certain as to the direction which is going to take place in our affairs; and I am bound to say that the gracious Speech really gives us very little clue as to how the Government propose to act in relation to the appalling situation, in regard both to employment and the manufacturing industries, with which we are now confronted. Indeed, it is necessary to turn to some remarks of the Chancellor himself to illuminate the rather bleak prospect that is laid before the House in the Queen's Speech itself.
I think the Government's attitude may well be summed up in the Statement that was made by the Chancellor on television on Sunday, 21st October, when he said:
"What the Government can do to create jobs is very, very little indeed".
He amplified that statement by saying this in terms of unemployment:

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"What we are talking about is not an economic problem but a social problem and a human problem".
Those words, I would submit, provide the clearest possible indication of the Government's general intention towards the solution of what must be one of the most tragic and important problems of the age in which we are living. But that, too, has to be read in conjunction with some remarks made by his right honourable friend Mr. Tebbit on 11th October, when he said:
"The market system, allied with free enterprise, gives a better allocation of capital and human resources than any other yet devised".
That is a plain declaration of the belief of the Government in relying virtually entirely on market forces, on free enterprise, to solve all their problems for them. But, as the Chancellor said, unemployment is not an economic problem: it is a social and human problem.
Then from the economic standpoint—and I am not questioning the desire to effect a degree of social amelioration which ought to be the Government's responsibility—there is nothing in the field of economics that they can do about it, apart from allowing the free play of market forces. I ask your Lordships to contemplate just what that really means. It means this: that for an indefinite period some 90 per cent. of the people of Great Britain are to be dependent on the caprice, intelligent or idiotic, greedy or altruistic, determined or weak, of a minority of the population who own and control the means of production or the capital resources to procure them. That is what it means: the free play of the market.
In recent years there has grown up an alleged science called Econometrics, which is alleged to interpret in statistical terms the variations that can take place in business expectations, in optimism or pessimism, confidence or the lack of confidence, as the case may be, and to produce the most weird curves and the most weird answers. But the fact of the matter is that what we are really doing by allowing market forces alone—I repeat "alone"—to determine the economic future of the country, is throwing most of our population to matters of caprice, to matters of whim, to matters of decisions which say, "I won't do this" or "I will do that", exercised by those who control and own the means of production or, as I say, have the finances to be able to procure those means. The rest of the country who are not owners in any sense, even remotely and even after taking direct participation in pension funds, and who are not remotely in control of any means of production to enable goods or services to be produced, are therefore literally to be left at the mercy of varying whims.
This means that the Government's whole weight has been deliberately thrown behind the capital interests of this country. There may be good reasons that can justify taking this step. Perhaps they are superior people and perhaps they are the real élite on whom everybody should rely; but that seems difficult to justify in view of some of the most extraordinary events that have taken place both in manufacturing industry and in banking over the last 20 or 30 years.
The fact of the matter is this—it has been realised a long time since Keynes and it was realised more
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particularly by the noble Earl, Lord Stockton, both when he was a Back-Bencher representing Stockton and later when he was a member of the coalition Government in the war. He knows, and I shall cite the passages to show, what an important part investment has to play, not only in unit costs but in terms of employment of resources. The noble Viscount, Lord Caldecote, put the position so succinctly when he summed up the task. He said:
"The task is to bring the tasks, the people and the money together".
That is the task, and that is the task to which the Government should be addressing themselves; and in that investment plays a vital part. It is well known that investment in manufacturing industry in this country—I have given the figures on previous occasions and there have been plenty of opportunities to challenge them—expressed as a percentage of gross domestic product has, ever since 1951, comparing one year with another, lagged 30 per cent. below that of France, 40 per cent. below that of Germany and 60 per cent. below that of Japan.
This situation was envisaged in 1944 by the coalition Government. My noble friend Lord Barnett has already referred to the Prime Minister's habit of carrying in her handbag the White Paper on unemployment policy. By this time, presumably the Prime Minister has got past the introduction. The important point which was realised by the coalition Government was that there had to be investment and that if investment in the private sector fell short it was the responsibility of the state to invest in order to prevent violent fluctuations in public and private expenditure.
I shall give to the noble Lord just one example of what was in the mind of the coalition Government. Their White Paper stated:
"It should be possible for the Government to maintain the stability of public investment when private investment is beginning to fall off at the onset of a depression. This may not be enough. For the purpose of maintaining general employment it is desirable that public investment should actually expand when private investment is declining and should contract in periods of boom."
There were further detailed proposals, which I could cite if I had the time, for maintaining the stability of public investment, for mobilising quickly public investment and also for maintaining consumer expenditure. Almost at the conclusion of the document paragraph 77 sets out the way in which it should be financed:
"The policy of steadily decreasing the deadweight debt while other forms of debt are increasing does not mean a rigid policy of balancing the budget each year, regardless of the state of trade. Such a policy is not required by statute, nor is it part of our tradition. There is nothing to prevent the Chancellor of the Exchequer in future, as in the past, from taking into account the requirements of trade and employment in framing his annual budget. At the same time, to the extent that the policies proposed in this paper affect the balancing of the budget in a particular year they certainly do not contemplate any departure from the principle that the budget must be balanced over a longer period."
The noble Earl, Lord Stockton, referred also to a practice which has now become obsolete. I thought I detected a slight sense of regret when he said that in his time there used to be above the line and below the line expenditure, when tax revenue was used in order to finance current expenditure and when capital expenditure was funded by savings. The policies which

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were followed were, by and large, quite successful. Even the noble Earl, Lord Gowrie, referred to the good times.
The fact is that in the years immediately following the war the Government which I had the honour to support overcame the transitional difficulties far more easily than was anticipated in the coalition White Paper. The policies broadly set out in the coalition White Paper of 1944 were, with varying degrees of emphasis, carried out after the end of the 1939 to 1945 war. When Labour Governments were in office there was a tendency to seek to proceed faster and to seek to attain, quite lawfully, the commanding heights of the economy in order to enable the economy to be more efficiently run. When Conservative Governments were in office there was a tendency to go slower in order to protect capital and establish what they termed a property-owning democracy.
Those policies continued until 1974. It is quite true that from time to time there were periodic balance of payments difficulties. As my noble friend Lord Barnett pointed out, every now and again a rein-back was needed, but by and large those policies were successful until, as the noble Earl, Lord Stockton, pointed out, the quadrupling of oil prices in 1974 created turmoil in industry and commence throughout the world, caused rapid price and wage increases and also gave rise to very considerable difficulties in industrial relations, not only in this country but in other countries of the world.
So far there can be little dissent with my interpretation of the record. What happened next is very important. My view is that equilibrium on the basis of the Keynesian policies set out in the White Paper of 1944 could have been re-established—with difficulty, perhaps—and today we could be proceeding with the same kind of policies, with their central aim of full employment.
The noble Earl, Lord Stockton, was very careful to point out that one of the highest priorities—he put it as the second highest—was the maintenance of full employment. The policy of successive governments in varying degrees, right from the coalition White Paper of 1944—which I had the opportunity of reading while I was still in the services 40 years ago—was to put people before property; to make full employment the aim of government policies. That was the undertaking given to the forces during the war. Some of your Lordships were only boys or girls then, but the noble Viscount, Lord Whitelaw, will remember it very well indeed.
That was the undertaking. It was going to be a new world. No longer were the people of the United Kingdom to be subject to the same free enterprise, laissez-faire uncertainties and mass unemployment which they had experienced before the war. The production of employment and the continuance of full employment as a main objective of government policy remained until the introduction of the Thatcher Government in 1979. The moment the Thatcher Government came to office, full employment as an objective of policy was abandoned. Indeed, there are many instances when that has been formally expressed.
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Since 1979, there has been an abrupt reversion to the completely discredited policies of the inter-war years, and complete and uncritical backing for the aims of capital expressed as an interest in this country. This has been accompanied by the statement—the ridiculous, arrogant statement—that there is no alternative. However, that statement was modified a little this last month, when the Prime Minister was recorded as saying,
"I know of no alternative".
This marks a slight but perceptible shift.
In the meantime, because of the adoption of a laissez-faire policy and because of the abandonment of all the principles which since 1945 have—with the occasional setback—been successively put into operation in the United Kingdom large sections of British manufacturing industry have been decimated. Production is still 13 per cent. below the level when the Government came into office.
The public assets belonging to the nation as a whole have been sold or dismantled, mainly for the benefit of a small minority of the nation. Only 1.3 million individuals in the United Kingdom are wealthy enough to own shares. The rich have got richer and the poor have got poorer. Unemployment has reached a total of approximately 4 million, including 1½ million people under the age of 25. There are now approximately 4½ million people on supplementary benefit.
It is in that context that we might review what the noble and learned Lord, the Lord Chancellor, had to say about this matter in a rather surprising intervention at the conclusion of a debate on home and social affairs. When I read his words in Hansard, I could hardly believe my eyes. This was what was said by the noble and learned Lord, the Lord Chancellor—a responsible person in a Conservative Government, a member of the Cabinet, and one of the senior Law Officers:
"We are not living in a world where there is a gap between rich and poof".—[Official Report, 8/11/84; col. 202.]
As an utterance of stupendous stupidity and insensitivity, I have yet to meet its like. There are many people in the Conservative Party, in the Conservative Government, and who are Conservatives outside those organisations, who are good, kindly and compassionate people. But we are getting a little tired of the carefully-elocutioned declarations of concern and crocodile tears of compassion coming from those who are not always familiar faces in the House.
What we want now, and what the country is looking for, is some action on the lines suggested by the noble Baroness, Lady Seear, by the noble Viscount, Lord Caldecote, and indeed by the CBI itself. There must now manifestly be some capital investment by the Government in the infrastructure of this country, in the construction industry, bearing in mind that a house, a warehouse or a factory is the end product of 100 different manufacturing trades and that the impact of that could be immediate. I have no doubt that this will be passed over on the basis that it has all been said before. Over the next few months it will be said again and again, whether or not the mathematics of the noble Viscount, Lord Massereene and Ferrard, are capable of sorting themselves out in the meantime.

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I do not envy the noble Lord, Lord Young of Graffham, in winding-up this debate, because, of course, he is bound to expatiate on the new measures for training, which are indeed very welcome on this side of the House, and we shall give him support, as I am quite sure will the noble Baroness, Lady Seear, and those who sit with her, in bringing them forward. But we still have to bear in mind, as many noble Lords have said—the noble Lord, Lord Campbell of Alloway, touched on the matter—that these measures do not produce jobs at the end. What they will have the effect of doing, however, as the Financial Times pointed out recently, is conveniently to reduce the number on the register, and therefore the number of registered unemployed will decrease.
I trust that the Government will not seek to take advantage of the cosmetic effect of this, because we on this side of the House, and indeed noble Lord in parts of the other side of the House, will certainly mark this well. We therefore acquit the noble Lord, in view of his recent appointment, of any responsibility for the inaction in the economic and industrial field of which the Government are guilty. They will not be able to expiate their guilt until and unless they act more within the spirit that animated the Governments presided over by the noble Earl, Lord Stockton.
9.17 p.m.
The Minister Without Portfolio (Lord Young of Graffham): My Lords, I rise this evening with some trepidation to sum up what is a first major debate on this subject, and my trepidation is, I fear, all the greater, for I feel rather unfit to compliment my noble friend Lord Stockton on his maiden speech. I have probably had as many hours in this Chamber as he has had years in Parliament, but I think that I can speak for the whole House in saying to him how much we appreciated his wise words. The overriding impression they have left on me at least, if I may say so without upsetting any of the noble Lords here this evening, is that his was the most forward-looking speech to grace this debate. Now that he has actually broken his duck, perhaps I may say that I have in my short time in this Chamber heard another noble Lord, fully 10 years his senior, make at least one speech and ask a number of questions, and I hope that we may have the opportunity of hearing also from my noble friend many times in the months and years to come.
I have enjoyed this debate, because it has been a particularly valuable opportunity to consider the fundamental economic policies being pursued by the Government. It is also an opportunity to offer an explanation or two and perhaps to dispel a few myths, some powerfully propagated this evening by the noble Lord, Lord Bruce of Donington. But one statement of his from which I should not wish to dissent is in regard to the White Paper so favoured now by the Prime Minister and seemingly so popular this evening—the proposition that public investment should well contract when private investment expands. It is a theme to which I hope I may return in a few minutes' time.
I must say that as I listened to the noble Lord it brought back some memories of my youth. I presume that the phrase, "commanding heights of the
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economy", referred to the nationalised industries. I must say that they were mere foothills by the time that I came into government in 1979.
A number of noble Lords raised concerns about the effect of the Government's spending plans in relation to the economy generally and in relation to particular industries and particular needs. I make no apology whatsoever for the fact that this is the third successive year that the Government have held the planning total for public expenditure to the level announced in previous plans. This is no more than good husbandry.
The vital importance of keeping public expenditure under control cannot possibly be overstated. The Prime Minister said at the Guildhall last night that public expenditure was about one-third of GDP when the noble Earl, Lord Stockton, was Prime Minister in 1959. By 1975–76 it had reached almost 46 per cent. No one now doubts that that increase had to be halted if the economy of this country were once again to prosper.
Now, I am glad to remind the House, public expenditure is on a declining trend, particularly if the exceptional impact of the coal strike is ignored. The estimated outturn for 1984–85 is about 42 per cent. The following year, our plans imply public spending at about 41 per cent. of total spending. But no economy is more difficult to manage than during a period of contraction of government spending. Within that difficult process, the Government have protected the important social programmes.
I started this evening by talking about myths. In education, expenditure per pupil in this country is at record levels. It has increased in real terms since 1978–79 by 16 per cent. in primary schools. It has increased since 1978–79 by 8 per cent. in secondary schools. Pupil-teacher ratios generally now stand at their best level ever.
In the health service, the provision for health spending in England in 1985–86 is over £14 billion, which is 1.4 per cent. more than the figures in the 1984 White Paper. Expenditure on the health service alone has risen by 17 per cent. in real terms since 1978–79. We have 12 per cent. more doctors and 13 per cent. more nurses than when this Government came to office. Even in the arts—and no doubt my noble friend Lord Gowrie had some part to play in this—central government spending has also risen in real terms since 1979.
But it is not this Government's policy just to spend more money. It is this Government's policy to ensure that we get better value for money. The fact that public expenditure is now under control, although it is still too high, is one of the key factors behind the fact that we are now into the fourth year of economic recovery.
A number of noble Lords—for example, the noble Lord, Lord Kaldor—questioned the strength of our economic recovery. I should like to remind him that the average annual growth in GDP between 1981 and 1985 is forecast at a healthy 2¾ per cent. per annum. That compares extremely well with the rest of the EC, and it includes the effect of the coal strike. Indeed, for next year, the United Kingdom is likely to show one of the fastest growth rates in the whole of the Community.

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I believe profoundly that the key to that success has been our anti-inflation policy. Inflation was about 12 per cent. in 1981. It is now below 5 per cent., and next year it will be about 4½ per cent. That is good, but not, I fear, as good as the example set by my noble friend Lord Stockton during the course of his administration. While he was Prime Minister the annual rate of inflation was about 2 per cent. Indeed, that is the very reason why interest rates were in the region of 4 to 6 per cent. For someone who was out in the commercial world in those years I can remember the real sense of shock when interest rates in the middle '60s started to go above 6, 7, 8 and 9 per cent. as inflation rose. I suspect that when we get inflation down to those levels again and interest rates follow, so will full employment.
A number of noble Lords, including my noble friend Lord Caldecote and the noble Lord, Lord Barnett, have stressed the importance of investment. I agree with them. But I think I should remind them and this House that fixed investment across the whole economy is likely to set a post-war record in 1984 of £45 billion at 1980 prices. At current prices, that is something close to £55 billion. That is 7½ per cent. higher than last year, and we expect it to be higher still in 1985. This is a consequence of the reduction of inflation.
Of course, there is some change in the split between public and private sector investment. That is only to be expected in view of the success of the privatisation programme and the changed relativities and priorities between the public and private sectors. But that is all to the good. Private investment has to be self-supporting if it is to continue. Private investment has to produce a real return.
A number of noble Lords (for example the noble Lord, Lord Diamond) referred to particular projects or particular industries to which they would like more public expenditure to be committed. The noble Lord, Lord Bottomley, even referred to the National Enterprise Board. My first two or three years as a civil servant in the Department of Trade and Industry were closely concerned with the results of some of those investments. I suspect, without much fear of doubt, that on this side of the House we would rather see investment proceed in those organisations which have to stand up and pay the full cost than in those inspired by the public sector, which somehow never seem to make their full return. The Government are not opposed to investment in the public sector but that investment, as the CBI said only last week, must yield a proper return.
The sheer fact is—again to dispel a myth—that the Government's record on investment is a good one. Take, for example, roads and railways. Spending on trunk roads this year is 12 per cent. higher than it was last year. Since 1979, 400 miles of trunk roads have now been completed; and earlier this year, in July, we announced the electrification of the London to Edinburgh East Coast main line at a cost of some £300 million. Take sewers—again a favourite topic. The current investment programme provides for about £800 million to be spent in this particular year. Thus I believe that on every major count—public expenditure, inflation, growth and investment—the economy is sound and the economy is on course.
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Of course—the noble Lord appears amused—concern over unemployment must remain. But that concern is no prerogative of any party; it is no prerogative of any Government. The concern that has been expressed today in your Lordships' House is a concern that is expressed up and down the land. It is a concern that is shared not only by the Government: it is a concern that one who has spent two and a half years of his life working for the Manpower Services Commission, travelling up and down the land and seeing the waste produced by unemployment, cannot but also share. But employment, and unemployment, again, are one of these myths. In a society in transition—which is ours—with six million job changes occurring a year, the majority of the unemployed are in transition, with days weeks or months between jobs. They are perhaps the out of work. The real unemployed are the long-term unemployed: 1·2 million today, 60 per cent. of whom are manual unskilled, clearly out of their time for tomorrow's jobs. That is why I am glad that the Manpower Services Commission is now adding a retraining element to the community programme—a programme that is working very hard and, I believe, very successfully towards returning to the world of work those who have been out of it for some time.
But it is not enough just to concentrate on unemployment. We should really look at employment. What is not widely appreciated is that employment in this country has turned a corner and is now on the way up. My noble friend Lord Gowrie referred to 300,000 more people in work between March 1983 and June 1984. But what is not often appreciated is that even today in this country we have a bigger percentage of our population of working age employed than has either Germany or France. In fact, over 66 per cent.—two-thirds of the population of working age in this country—is in employment.
Since 1979 there has been a rise of more than 10 per cent. in the number of self-employed people—now more than 2 million. Only recently, the CBI expected that smaller and medium sized firms would continue to produce more jobs in the next five years. If we suffer from a real defect in the field of unemployment—and of course we do—it is the fact that for 20 years we had the lowest birth rate of new firms in the whole of Europe. For 20 years—a period, I may say, which ended in 1979—we had policies which did not encourage the growth of enterprise and the birth of new firms.
Of course, many of the jobs which have been created in the last year or 18 months are part-time. But all our jobs are part-time compared with the hours that our forefathers worked. I make no apology for part-time jobs. Many in our society, and many women—we have, I think, the largest percentage of working women in the whole of Europe—want to work part-time. It helps to make the labour market flexible, and can only be encouraged. Many of these jobs are in services. I have no apologies for that.
Of course, manufacturing industry continues to be important in this country. But if we look at United States experience, we see that there now only 21 per cent. of the employed work force is working in

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manufacturing. We have 28 per cent. What is clear and undeniable is that, as the years pass and we move into the next century, fewer and fewer people will be employed in manufacturing, making more and more goods. It is the wealth that they produce that is going to support the vast growth in our service sector jobs in this country.
Since we are still on the question of myths, I should perhaps say a word about the United States and about President Reagan. The United States of America, in this last year, had a deficit that has just come up to 3·1 per cent. of its GDP. In this country ours has come down to 2·8 per cent. A year or 15 months ago the two were the same. If your Lordships think that that differential is enough to encourage the vast outpouring of jobs in the United States, I fear that it is a conviction that I do not share.
But none of this playing with figures mitigates our concern about unemployment. I hope, however, that it puts it into context. There are new jobs being created. But they are not being created fast enough at the present time to keep pace with the growth of our working population. The reason for that is not least that real wages in this country continue to grow faster than the underlying rate of productivity increase.
But this Government are concerned. We are currently spending over £2 billion on a range of measures to improve training provision and to help the unemployed back to work. The youth training scheme, as I said in your Lordships' House a short time ago, only in its second year is well on its way, I think, to changing for all time the way that we regard the transition for young people from school to work. Of course, we are looking at ways of making those measures more effective. To that end, only yesterday my right honourable friend the Secretary of State for Employment announced some changes in the programme. But I should like to stress one fact. These measures are investments. They are the real capital investments in this country—investments in people, in helping people to maintain, improve and exercise their working skills, helping them to remove obstacles to better functioning of the labour market. In that way it is an investment that fits into this Government's overall economic policies.
Two elements of my right honourable friend's statement are of particular importance. The Enterprise Allowance Scheme is highly successful. Since it was announced, 55,000 people have gone to work for themselves—all unemployed for more than 13 weeks. The changes announced yesterday mean that the Manpower Services Commission will be able to increase its programme by 25 per cent. Twelve hundred and fifty new entrants each week will work for themselves. How well does that work? The facts are that, after 18 months, 70 per cent. of the businesses supported are still trading—six months, that is, after the allowances had stopped. For every 100 people established under the scheme, 50 more jobs have been created.
Secondly, the Government have endorsed proposals for the Manpower Services Commission to extend the scheme in which I have some paternal pride: that is,
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TVEI—the technical and vocational education initiative. I hope that every single local education authority in the land will be able to come forward and bring into their own school system, in ways which are suitable to them and to the needs of their own people, vocational and technical courses that will help to repair some of the harm done during the 1950s, the 1960s and even the 1970s in our educational system, in bringing young people out into the world of work with the attitudes and approach and, yes, the skills that are at least the equivalent of their contemporaries in other countries.
I hope I have dealt with the major economic points mentioned today. There are a number of other points which I should like to raise. If I may say so, I am grateful for the agreement of the noble Lord, Lord Barnett, that there is indeed a correlation between wages and jobs. I am also grateful to the noble Lord, Lord Diamond, for the observation that pay in relation to output is the critical factor. If only they had been aware of that in the 1970s, would not our problems be all the less today? And if they had persuaded their colleagues, then perhaps many of our problems today might not have occurred.
A number of noble Lords, including my noble friend Lord Stockton, the noble Lord, Lord Rochester, and the right reverend Prelate the Bishop of Southwell, have referred to the current coal dispute. No one more than this Government wishes an early and reasonable settlement. No one on this side of the House doubts that the coal strike is causing great harm, not only to the miners themselves who have never been given the opportunity of voting on this dispute in a secret national ballot; there is also the harm and damage it does to the employment prospects of many others. I should like to correct the right reverend Prelate. Nottingham did vote, as I recall, and voted overwhelmingly against the prospects of a strike. This dispute must surely rank as one of the most unjustified, senseless and self-defeating of modern times, with the uncompromising demand by the NUM executive that no pit should be closed on economic grounds regardless of the scale of losses being made. Over 5,000 miners have returned to work in the last seven working days. Denied a vote by their union, they are voting with their feet, despite all the pressures—violent picketing and intimidation. I suspect that too little was made of that intimidation in your Lordships' House this afternoon.
The noble Lord, Lord Rochester, raised the question of employee involvement. This is, of course, a matter for my right honourable friend the Secretary of State for Employment, and I will draw the noble Lord's remarks to his attention. However, the Government's general position, as the noble Lord will know, is that we believe strongly that employees should be informed and consulted about matters that affect them; but this is best achieved by a voluntary approach.
The noble Lord, Lord Taylor, referred to the question of expenditure on regional programmes and on the Scottish Development Agency. As regards regional policy, the noble Lord will be aware that an announcement on this subject will be made shortly. I

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am sure that he would not expect me to anticipate that announcement. I am advised that the Scottish Development Agency's budget for 1985·86 has yet to be firmly determined. But the noble Lord is as aware as I am that today in Scotland more people are employed in electronics than in ships, steel and coal put together. Indeed, Scotland has a supreme virtue, and one which he might perhaps appreciate, of putting R and D together with the R and A. There are many who go to Scotland and who are employed in electronics today who are attracted by the many advantages of working there.
I am grateful to the noble Baroness, Lady Seear, for her revelation that this Government are not monetarist. I have been in it, perhaps only as a civil servant, since 1979 and I was never under any illusion. Indeed, with the PSBR that the Government consistently run, they could never have been a monetarist Government. But we believe in good husbandry, and I hope that we shall always do so. It is important that we ensure that, whatever expenditure the Government enter into, it is expenditure that will help towards real return and will not be a waste of actual resources. I hope that the expenditure which the Government have entered into in the youth training scheme, for example, is one which the weeks will show will lead more and more to young people going into jobs.
We have had an interesting debate and I do not wish to detain the House for more than a moment or two longer. However, several noble Lords have been kind enough to refer to my own role in helping to bring about improvements in our economic performance. I hope that my role will be a very broad one. But, to describe it in one sentence, it is about removing barriers—barriers to the employment of young people, particularly the 14 to 18 group; barriers to the growth of small firms (and looking at the growth of small firms is, I believe, the way ahead for employment in this country); barriers to the development of enterprise, competition and deregulation initiatives. I have no magic wand to wave. There is no single, simple answer. Nor do I believe that one is needed, because I believe firmly that we are on the right road. My contribution will be simply to help my colleagues remove one or two of the obstacles that we may find along that route.
We have heard a great deal in this House about consensus. We have heard a great deal in this House about compassion. I, for one, have spent many years in the business of consensus. What else was the Manpower Services Commission? I, for one, would defend to the end this Government's sense of compassion. But I do not believe that consensus or compassion are substitutes for soft options. I believe that there are decisions that have to be made. This Government are as concerned as any to return to full employment. We shall follow the path that we have to follow until in the end we will let loose the spirit of enterprise in the land and return, I hope, to fuller employment.
On Question, Motion agreed to nemine dissentiente: the said Address to be presented to Her Majesty by the Lords with White Staves.
Bournemouth Borough Council Bill [H.L.]
London Transport (Tower Hill) Bill [H.L.]
Nottinghamshire County Council Bill [H.L.]
Hereford City Council Bill [H.L.]
Worcester City Council Bill [H.L.]
The Chairman of Committees acquainted the House, That (pursuant to the Resolutions of 30th and 31st October) the Bills had been deposited in the Private Bill Office together with the declarations of the agents; the Bills were presented, read a first time, passed through all their remaining stages pro forma and sent to the Commons.

Leicestershire Bill [H.L.]
The Chairman of Committees acquainted the House, That (pursuant to the Resolution of 29th October last) the Bill had been deposited in the Private Bill Office together with the declaration of the agent; the Bill was presented, read a first time, read a second time pro forma and committed to a Select Committee on Unopposed Provisions.
Oxfordshire Bill [H.L.] Surrey Bill [H.L.]
The Chairman of Committees acquainted the House, That (pursuant to the Resolution of 29th October last) the Bills had been deposited in the Private Bill Office together with the declarations of the agents; the Bills were presented, read a first time, read a second time pro forma and reported from the Committees.
Valerie Mary Hill and Alan Monk (Marriage Enabling)Bill [H.L.]
The Chairman of Committees acquainted the House, That (pursuant to the Resolution of 29th October last) the Bill had been deposited in the Private Bill Office together with the declaration of the agent; the Bill was presented and read a first time.

Associated British Ports (No. 2) Bill Merseyside Development Corporation Bill
Bills brought from the Commons and (pursuant to the Resolutions of 29th October last) deposited in the Private Bill Office together with the declarations of the agents; the Bills were presented, read a first time, read a second time pro forma and committed to Select Committees.
House adjourned at sixteen minutes before ten o'clock.

  SPECTACLES: ADEQUACY FOR DRIVING
  SPECTACLES: ADEQUACY FOR DRIVING
  DRIVING: NOTIFICATION OF HEALTH DEFECTS
  DRIVING: NOTIFICATION OF HEALTH DEFECTS
  AGRICULTURAL DEVELOPMENT AND ADVISORY SERVICE
  AGRICULTURAL DEVELOPMENT AND ADVISORY SERVICE