Sitting of 13 November 1985

Preamble
The House met at half-past Two o'clock
PRAYERS
[MR. SPEAKER in the Chair]
PRIVATE BUSINESS

  YORKSHIRE WATER AUTHORITY BILL [Money]
  Queen's recommendation having been signified—
  Ordered,
  That, for the purposes of any Act resulting from the Yorkshire Water Authority Bill, it is expedient to authorise the payment out of money provided by Parliament of any increase attributable to that Act in the sums payable out of such money under section 90(6) of the Land Drainage Act 1976.—[Mrs. Fenner.]

  TRADE
  Return ordered,
  of Statistics relating to Overseas Trade of the United Kingdom for the year 1986 and for each month during 1986.—[Mr. Brittan.]

Oral Answers to Questions
  SCOTLAND

    Farmers and Crofters (Assistance)
    Sir Russell Johnstonasked the Secretary of State for Scotland what steps he has taken to assist farmers and crofters following the recent summer weather.
    The Parliamentary Under-Secretay of State for Scotland (Mr. John MacKay): Financial help will be given to the hardest hit sectors of the industry. Details are being worked out and an announcement will be made as soon as possible.
    Sir Russell Johnston: Why are the Government being so slow? Does the Under-Secretary remember that his colleague the Minister of Agriculture, Fisheries and Food said at his conference on 9 October that assistance would be forthcoming soon, and he mentioned Scotland in particular, before the winter, when cash problems would be extreme? Has the Under-Secretary been in Scotland recently? If he has, he will have noticed that it is snowing. When will the help come, because small tenant farmers and crofters in particular have been savagely hit?
    Mr. MacKay: I came down from Scotland only yesterday, so I am well aware of the weather there. We have had to make a careful assessment of the position and evaluate fully the various measures that are available to deal with the problem. This has necessarily taken time, but I assure the House that the matter has been given the highest priority.
    Sir Hector Monro: Will my hon. Friend bear in mind the urgency of this issue and recall that I raised it with Ministers at the end of August? Will he also bear in mind
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    that such aid will help not only the beef sector but the many dairy farmers who have been equally badly hit? Will my hon. Friend find some way to help them as well as those in the less-favoured areas?
    Mr. MacKay: I am aware of the particular problems of the dairy sector, but I think it is correct to say that the sector in most need is the livestock producers in those areas where fodder is in short supply. Buying it in will prove expensive.
    Mr. Michael Forsyth: Does my hon. Friend accept that the fodder producers and others producing non-subsidised crops are in the greatest need? Will he assure the House that not only will there be an announcement of what measures will be taken urgently, but that the Department will ensure that help goes to farmers in greatest need rather than to sectors in greatest need and that resources are not spread too far by giving money to those who do not need it?
    Mr. MacKay: My hon. Friend has highlighted one of the problems, which is that we must try to ensure that the money goes to those sectors of the industry that are in most need. However, it would be difficult to target in on individual farmers. We are aware of the problems, for example, in Stirling, in my hon. Friend's constituency. That sector is being considered along with others.
    Mr. Donald Stewart: Is the Minister aware that already some loads of fodder have been imported from Canada? That shows the seriousness of the problem—it is not even possible to buy winter feed from the Scottish mainland. As the weather was apparent several months ago, and as Lord Gray saw the situation several weeks ago, is not this delay unacceptable?
    Mr. MacKay: I am aware that hay has been imported from Canada, and that highlights the problem. It is not just a matter of cost, but of the availability of hay. There is more to the harvest problem than hay—there is also a cereal problem, which has a knock-on effect to the feeding sector. We had to wait until we saw the whole picture, and we have to consider carefully how we should set about giving help so that it goes, in the most appropriate way, to the sectors most in need.
    Mr. O'Neill: Does the Minister not appreciate that when his hon. Friend the Member for Stirling (Mr. Forsyth) asks for public expenditure to be increased things must be in a bad way? It is not good enough for the Minister to tell the House that the matter is under consideration. Is he aware that the farmers in my constituency, who welcomed Lord Gray earlier this year, left him in no doubt of the gravity of the position and demanded quick action? The House, particularly Labour Members, knows that the farming community often cries wolf, but on this occasion the wolf is there and we have seen the devastation. Does the Minister accept that action must be taken quickly?
    Mr. MacKay: As I have said, financial help will be given to the hardest hit sectors of the industry. Considerable public money is already given to agriculture. This financial year, Scottish agriculture received about £157 million in various allowances and schemes, and that is part and parcel of the Government's aid to agriculture and of public spending. Nobody on this side of the House denies that that is an important part of the Government's role in the economy.
    Mr. Corrie: Is my hon. Friend aware that the worst hit area in the whole of Britain is that of our right hon. Friend the Secretary of State? Is he further aware that many farmers are selling their breeding stock to pay for the fodder that they must buy, and, therefore, are liable to lose the premium headage payments of their entire herd? Will he consider a derogation for this year because of that?
    Mr. MacKay: My hon. Friend is right to point out those particular difficulties, and we have them in mind. We have already secured and announced a small but useful extension of the closing date for applications for the Buckler cow subsidy from 30 September to 30 November this year.
    Mr. Home Robertson: We welcome the promise of emergency aid for agriculture, just as we would welcome aid for other hard-pressed industries in Scotland. However, I must press the Minister on the intolerable delay in implementing that promise. Is he aware that Lord Gray said on BBC radio on 3 October that the aid package would be finalised in weeks rather than months? Is he further aware that the weeks are turning into months, and that many livestock farmers are facing a critical position now? We have had the general promise. When will we get the hard cash?
    Mr. MacKay: I have made it clear that we hope to make an announcement fairly soon. I appreciate the hon. Gentleman's personal interest in the matter. One of the factors that we had to take into account was the cereal harvest, and the amount of straw that would remain after it to help with feeding. I hope that there was not too much burning of straw where the hon. Gentleman farms. I should be interested to know whether he saw straw burning, and whether he and his neighbours took a responsible view on burning straw.
    Mr. Kennedy: May we take it from this afternoon's exchanges that the Minister and his Department have been shaken out of their political complacency on this issue? As hon. Members on both sides have stressed, for between a month and six weeks the upland farmers, the hill sector of livestock farming, have had great problems buying winter feedstuffs. Is he aware that the Government have driven Scottish agriculture so deeply into indebtedness that many farmers are not financially capable of handling one bad harvest? Is that not a general indictment of the Government's policies in this area?
    Mr. MacKay: My right hon. and noble Friend Lord Gray, my right hon. Friend the Secretary of State and I have been well aware of the problem for some time. That is why I said that we were taking steps to work out a programme which would bring maximum help to those in greatest need. Some time ago I visited some farms in my constituency and attended markets to see what the price of livestock would be. Therefore, the hon. Gentleman is talking rubbish when he suggests that only he is concerned.

    Crosshouse Hospital and Prestwick Airport (Contingency Plans)
    Mr. Lambieasked the Secretary of State for Scotland if he has any plans to pay an official visit to (a) Crosshouse hospital and (b) Prestwick airport to discuss
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    Her Majesty's Government's contingency plans for their use in time of crisis or war; and if he will make a statement.
    The Secretary of State for Scotland (Mr. George Younger): I have no plans to visit Crosshouse hospital or Prestwick airport for this purpose, but any contingency plans involving the use of those facilities would be the subject of appropriate consultations with the authorities concerned.
    Mr. Lambie: Is the Secretary of State not ashamed that the people affected by the plans had to read about them in the Sunday Mail? Why have no consultations taken place between Ayrshire and Arran health board and the local authorities in the area? What contingency plans have been made for the patients in Crosshouse hospital who will be ejected from the wards when American troops take over?
    Mr. Younger: I have no responsibility for what appears in the Sunday Mail or any other newspaper. As the hon. Gentleman will know, any plans of this sort are necessarily classified, and are never confirmed or denied, for obvious reasons. I assure him that in the event of any such contingency plans, the requirements of the home and resident population always take priority.
    Mr. Bill Walker: Does my right hon. Friend agree that Prestwick is one of the few fog-free airports in the United Kingdom? Does he accept that it is essential that it is retained so that it can be used as an emergency airport in times of hostility?
    Mr. Younger: I am grateful to my hon. Friend. I know the wide range of uses for which Prestwick is suitable. Fortunately, the Government, in their recent review, confirmed Prestwick airport's present role, and that is being developed.

    Prison Overcrowding
    Mr. Ewingasked the Secretary of State for Scotland if he will make a statement on overcrowding in Scottish prisons.
    Mr. John MacKay: Substantial overcrowding in Scottish prisons is currently limited to four penal establishments—Barlinnie, Edinburgh and Inverness prisons, and Longriggend remand unit. The position will remain difficult until the refurbished Greenock prison and phase II of Shotts prison are ready for occupation in March 1986 and March 1987 respectively.
    Mr. Ewing: Does the Minister appreciate that overcrowding is causing great concern to Scottish prison officers, who are being asked to work in impossible conditions which apply beyond the establishments to which he referred—to Peterhead, for example? Was it not a disgrace that in the last financial year the capital budget for the prison service was underspent by the Scottish Office? Does that not illustrate the Minister's concern about this very serious problem?
    Mr. MacKay: We are concerned about the problem. The fact that the projects at Greenock and Shotts are coming on stream in the medium term shows that we are and have been concerned about the problem for some time.
    Mr. McQuarrie: I am sure that my hon. Friend will have listened with interest to the comment by the hon. Member for Falkirk, East (Mr. Ewing) about Peterhead

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    prison in my constituency. Peterhead is overcrowded. Serious problems occur because long-term prisoners need more accommodation. What is happening about the building of the new prison?
    Mr. MacKay: My hon. Friend should table a question on the subject raised in the latter part of his supplementary question. Peterhead is a problem because of the nature of the prisoners in that institution. We always want to ensure that the conditions there are such that the staff can cope with the most difficult prisoners that we have to hold in our penal institutions.
    Mr. Maclennan: Does the Minister believe that the provision of additional places will completely remove the overcrowding? Is he not worried that the availability of additional spaces might simply lead to further and additional incarceration sentences?
    Mr. MacKay: I do not think that the judiciary considers whether the prison service has expanded before it decides on a medium-sized sentence or a long sentence. It is difficult to project into the future. My Department is considering ways of producing reliable projections to guide us in our plans.
    Mrs. McCurley: In discussions will my hon. Friend pay particular attention to the regrettable conditions in which prisoners on remand are kept?
    Mr. MacKay: That is one of the problems. One of the factors which has led to overcrowding is the increase in the length of time that remand prisoners are kept in custody awaiting trial. I am asking my Department to examine that problem.
    Mr. Hugh Brown: If the Chancellor's statement yesterday means extra resources for the Scottish Office, will the Minister get his hands on some of them to establish more designated places?
    Mr. MacKay: As the hon. Gentleman knows from experience, such matters have to be discussed by Scottish Office Ministers. I shall be putting in a plug for designated places.

    Scottish TUC
    Mr. McKelveyasked the Secretary of State for Scotland if he has any immediate plans to meet the Scottish Trades Union Congress to discuss the state of the Scottish economy.
    Mr. Younger: I met representatives of the STUC yesterday to discuss Ravenscraig and Gartcosh. I have no other immediate plans for a meeting to discuss the Scottish economy.
    Mr. McKelvey: Between now and when the Secretary of State again meets the STUC, will he reflect on the unacceptably high level of unemployment in Scotland, and its effects and pressures on social services?
    Will the right hon. Gentleman explain why he has decided not to establish an inspectorate of social services in Scotland, which would have protected the most disadvantaged in our society, such as the mentally handicapped, the elderly and the young offender?
    Mr. Younger: I appreciate the hon. Gentleman's concern about a genuine problem. One of the happier features of the difficult times for public expenditure during
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    the past few years has been the increase in provision for social work and social services, precisely because a larger number of people have been unemployed.
    Mr. Henderson: When my right hon. Friend meets the STUC, will he point out the benefits of a low inflation policy, which would result in increased jobs in Scotland? Indeed, does it not enable my right hon. Friend to provide more money for the assistance of essential services such as health, social work and education?
    Mr. Younger: My hon. Friend is right. Were I to have such a meeting, I would certainly mention the points to which he referred. If the STUC requested a meeting about the current Scottish economy, I should draw to its attention the fact that all the trends—with the exception of the difficult question of unemployment—are extremely good. What is more, the number of people in employment in Scotland is rising.
    Mr. Roy Jenkins: Will the right hon. Gentleman allow the Secretary of State for Trade and Industry to get away with his view that there is no connection between the future of Gartcosh and the future of Ravenscraig?
    Mr. Younger: I am still evaluating the evidence that was presented to me by the shop stewards committee, which came to see me a few weeks ago. The matter is complex and involves digging deeply into the working methods of the industry. The current position is that the Government have secured the future of Ravenscraig; management has decided that Gartcosh must close.
    Mr. Ernie Ross: When the Secretary of State next meets the STUC to discuss the economy, will he be in a position to say exactly when decisions will be made about the LEGUP scheme? In particular, will he be in a position to say when a decision is likely to be made about LEGUP assistance for the Landfall development in Dundee, on which construction, service and tourism jobs are heavily reliant?
    Mr. Younger: I warmly welcome the hon. Gentleman, who I am very glad to see back in the House. The matter to which he refers is currently under consideration. It is an important proposal, and I assure him that we shall urge those concerned to reach a decision as quickly as possible.
    Sir Hector Monro: In view of the Chancellor's very encouraging statement on the economy yesterday, will my right hon. Friend say how much more is being spent in real terms on health and roads in Scotland compared with the miserable amount spent by the Labour Government in 1979?
    Mr. Younger: My hon. Friend is correct in his assumption. It seems almost impossible to get people to understand the plain fact that the real growth in spending on the Health Service is about 7 per cent., even at the most pessimistic forecast. It is high time that people gave more credit where credit is due.
    Mr. Dewar: Does the Secretary of State not recognise that he is almost wholly isolated on the issue of Gartcosh? Even within the Scottish Conservative party there is a great deal of growing discontent and doubt about the way that he has represented Scottish interests. Does the right hon. Gentleman accept that his failure to intervene on Gartcosh is every day looking more and more like an abdication of responsibility? Will he guarantee that when he is evaluating the evidence he will do so with a genuinely

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    open mind? If, as we believe, it is clear that there is a connection between Ravenscraig and Gartcosh, and that Ravenscraig will be lonely and exposed if Gartcosh is closed, will he at least join the remainder of Scotland and fight to save the plant?
    Mr. Younger: The hon. Gentleman knows that my right hon. and learned Friend the Secretary of State for Trade and Industry and I have both made it clear that if it were established that the closure of Gartcosh would lead inevitably to the closure of Ravenscraig we would have to review the position, but that is not the case. I am sure the hon. Gentleman will recall that no Labour Government ever intervened in ordinary management decisions of the nationalised industries that they set up. It would be wrong to do so. Indeed, the type of evidence presented on the matter is an eloquent testimony to the wisdom of nationalised industries being run by those appointed to run them and not being managed in detail by the Government of the day.

    Polkemmet Bing
    Mr. Dalyellasked the Secretary of State for Scotland if he will make a statement on his action to help the National Coal Board to alleviate the emissions to the Whitburn/Blackburn/Bathgate area from the smoking Polkemmet bing.
    The Parliamentary Under-Secretary of State for Scotland (Mr. Michael Ancram): The question of emissions from Polkemmet bing is a matter for the local authority to pursue with the National Coal Board.
    Her Majesty's industrial pollution inspectorate has given advice previously about the problem and is available to do so again if it is asked.
    Mr. Dalyell: Are the emissions not a major environmental hazard?
    Mr. Ancram: Obviously there must be concern about any emission, but in this case it is the responsibility of the district council, under the Clean Air Act 1956 to decide whether action can be taken against the owners of the mine if they fail to take all practicable means to prevent combustion and to prevent or minimise the emission of smoke and fumes.
    Mr. Dickens: The emissions from the bing or tip, call it what we will, must be intolerable to local residents. Cannot the Government press the National Coal Board to remove the offensive heap? The local residents must be suffering greatly from the terrible smells.
    Mr. Ancram: I am sure that both the district council and the National Coal Board will note with interest my hon. Friend's question. The district council is obtaining advice on the health aspects from the community medical specialist employed by the local health board.

    Teachers' Dispute
    Mr. Willie W. Hamiltonasked the Secretary of State for Scotland if he will make a statement on progress made in solving the Scottish teachers' dispute.
    Mr. Younger: I refer the hon. Member to the statement I made in the House on 22 October.
    Mr. Hamilton: Since the Government are embarking on a brainwashing national exercise to persuade us that we
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    are on the brink of a marvellous, prosperous era, does the Secretary of State not think it appropriate to allow the teachers of Scotland a share of that prosperity by setting up an independent review board? With the impending Christmas season, would it not be a nice Christmas present for parents, teachers, children and Scottish education generally if he were to concede that request?
    Mr. Younger: I am glad to welcome the hon. Gentleman's conversion to the message that is being sent round from this side of the House. I have been trying hard to persuade the teachers to accept more money on any reasonable terms since December last. The tragedy is that a very large number of teachers have not yet appreciated how much the offer of extra money that I made them in August involves or could involve. I hope very much that they will pay more attention to that.
    Lord James Douglas-Hamilton: Is my right hon. Friend aware that many teachers in my constituency would like a first phase interim pay settlement linked to negotiations on contracts of service?
    Mr. Younger: I am grateful to my hon. Friend for reminding us that the teachers suggested when I met them in late September that that might be a way out of the dispute, but that is not a realistic proposal, amounting as it does to a request for a very large increase in pay now with nothing in return for the public. We have to remember that the public must expect to get decent value for the money that they spend on teachers.
    Mr. Canavan: Is the Secretary of State aware that at the all-party meeting held last week in the House of Commons during the teachers' lobby of Parliament, the spokespersons of all parties got a fair hearing, with the exception of the Tory party spokesperson, the hon. Member for Edinburgh, Central (Mr. Fletcher) who got such a belting from the teachers that I, as the neutral chairperson, had to come to his rescue to allow him to be heard? Is that not indicative of how much the Tory party is isolated and completely out of touch with the opinion of teachers, parents and the general public in Scotland? Will the Secretary of State now face up to his responsibilities and set up an independent pay review to bring about an end to the damaging dispute, which has been dragging on for well over a year?
    Mr. Younger: If I were the hon. Gentleman and had been in the chair at the meeting, I would be ashamed to admit that everyone had a fair hearing except my hon. Friend. As chairman, the hon. Gentleman had an obligation to ensure that my hon. Friend had better treatment than that.
    I hope that the hon. Gentleman will have told his former colleagues in teaching and his constituents who are in teaching to look very hard at the offer made to them. It was an offer, over a four-year period, of extra money from the Government amounting to 10 per cent. over and above the annual increases negotiated in the normal way. There are many workers in many other industries who would be very glad to receive such an offer.
    Mr. Hirst: Is my right hon. Friend aware that my constituents are doubly hit by the EIS targeting of Lenzie and the primary school feeders of Kilsyth? Does he think that it is any accident that the bulk of the targeting action is directed against children who go to schools in the constituencies of Conservative Members of Parliament?

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    Does he agree that it is as morally indefensible as the targeting of schools in his constituency and those of his ministerial colleagues? Will my right hon. Friend remind the EIS that, since the dispute must be solved by negotiation, the best thing it can do for Scottish education is to respond to his invitation to come back and talk?
    Mr. Younger: My hon. Friend is correct. Whatever happens, the dispute is bound to end by negotiation. I do not think that anyone would disagree when I say that I have played my part in trying to get negotiations going between the parties as quickly as possible, and I again urge them to do so.
    I express my deepest sympathy to my hon. Friend about the effect of targeting on schoolchildren in his constituency. Having suffered severely from targeting for most of last year, we have discovered in our area that it is extremely counter-productive, as all parents of almost all political persuasions think that it is a grossly unfair practice.
    Mr. Bruce: Will the Secretary of State acknowledge that there is real concern in Scotland among parents and teachers that he is no longer able to maintain an adequate education system? There is particular concern that he will not be able to ensure that there is proper provision for pupils not only to take examinations but to be fairly assessed and marked. Will he acknowledge that the statement he has just made and the one that he made last week at the Scottish Council are a misrepresentation of the Government's position, and that the offer he has mentioned would not even guarantee teachers a cost of living increase for the next four years?
    Mr. Younger: If the hon. Gentleman, as a Member of Parliament with every access to information, thinks that that is a proper description of the offer, we are indeed in a bad position. One of the chief difficulties is that very few people seem to have bothered to find out what the offer amounts to. The hon. Gentleman's description of it is totally incorrect. The offer to the teachers was of extra Government money over four years amounting to 10 per cent. over and above the annual increases negotiated. That has no relation whatever to the description given by the hon. Gentleman.
    Mr. Strang: The teachers are perfectly aware of the offer on the table, and they have determined repeatedly that they are not willing to accept it. When will the Government recognise the determination of the teachers in the campaign and come forward with a new initiative to settle the dispute?
    Mr. Younger: I am looking all the time for any way forward in the dispute. Most of the teachers' representatives would agree that great efforts have been made by the Scottish Office and themselves to find a way forward. I am in no doubt whatever that teachers feel that they are under-remunerated, under-appreciated and badly treated. That is why I have been trying since December last year to find a way of paying them more money. It is time that the vast majority of teachers responded and came to discussions to make use of the offers.
    Mrs. McCurley: Does my right hon. Friend agree that the teachers are in their present position because they were treated so badly under the Labour Government?
    Mr. Younger: As I pointed out to the deputation last week, if the teachers are concerned about the erosion of their position since the Houghton awards, more than half of the erosion happened under the Labour Government.
    Mr. Ewing: Will the Secretary of State confirm that the 10 per cent. to which he refers is 10 per cent. of the first year's salary, and not—this is the impression that he giving—10 per cent. of the third or fourth year's salary. It is very important that that should be made clear. The Secretary of State said at Gleneagles last week—and he has repeated it today—that he appreciates that the teachers are fed up and feel that their value to society is not being recognised. What will he do about that in practical terms? If he sits down and does nothing, as he has been doing over these past months, the promise and commitment that has has given on his own behalf and on behalf of the Scottish Examination Board, that the examinations next year will go ahead, will simply be incapable of fulfilment. The examinations will not go ahead unless he gets the dispute settled quickly.
    Mr. Younger: No amount of fancy arithmetic alters the fact that the extra money offered from the Government is £125 million over and above the annual increases that will be negotiated year on year by the normal machinery. That is what has to be understood.
    As regards the examinations, I go a long way with the hon. Gentleman in what he says. There is no doubt whatever that if the boycott by all the teachers of the examination process really does take place, while the Examination Board will do everything it can to run the examinations, such a boycott is bound to cause considerable damage to the examination system. That is an additional reason why all concerned ought to try their best to change their positions to resolve the dispute. I shall certainly do all I can to bring that about.

    Rates Relief
    Mr. Kirkwoodasked the Secretary of State for Scotland when he expects to announce the amount of rates relief available to domestic and commercial ratepayers in Scotland for the financial year 1986–87.
    Mr. Ancram: The level of domestic rate relief in 1986–87 is one of the elements of the rate support grant settlement that I plan to discuss with the Convention of Scottish Local Authorities on 29 November. My right hon. Friend is still considering the future level of the revaluation rate rebates, which affect both domestic and commercial ratepayers.
    Mr. Kirkwood: Is the Minister now in a position to tell us what level of claims has been made in the current financial year of the £50 million earmarked? It would be an interesting figure. Could he give us an assurance that there is a commitment on the Government's part in principle to continue the scheme into next year? If that is the case, it would be necessary to give the important additional assurance that it would be financed by new money and not just by the aggregate Exchequer grant available for local authorities next year.
    Mr. Ancram: The hon. Member must be aware that both my right hon. Friend and I fully realise the problems facing ratepayers in Scotland, as shown in the action that we took this year in increasing domestic rate relief eightfold, from £14 million to £102 million. We also gave

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    relief to the domestic and commercial ratepayers who had valuations over three times. That is an indication of our concern. We shall have to consider, in the light of all the circumstances arising out of the rate support grant settlement, the level of future help to be given in these areas.
    Mr. Hirst: Will my hon. Friend bear carefully in mind the substantial benefit that came to people through the revaluation rebate scheme, notwithstanding what may have been said by Opposition Members? Will he and his ministerial colleagues do all in their power to ensure that the scheme is retained until such time as we have rate reform in place?
    Mr. Ancram: I am grateful to my hon. Friend, because I have found that the scheme that we introduced was warmly welcomed by ratepayers across Scotland, hard hit by revaluation—more warmly welcomed than it was by hon. Members on the Opposition Benches, particularly those in the Liberal party and the SDP. At the same time, it is worth remembering that the best protection for ratepayers in Scotland lies in local authorities keeping expenditure down.
    Mr. Maxton: Is the Minister aware that there is already considerable anger among the ratepayers in Scotland that the full £50 million promised by the Secretary of State was not forthcoming, and that that anger will be as nothing compared to the anger among ratepayers when bills come through the postbox next year if no rate relief is given? If there is no new money forthcoming, how will he and his right hon. Friend explain this humiliating defeat in Cabinet to the Scottish conference and to the electors in next year's regional elections?
    Mr. Ancram: May I take this opportunity to congratulate the hon. Member on his first appearance at the Opposition Dispatch Box, and say that on the Government side, at least, we look forward with relish to his future contributions from that position.
    I listened to what the hon. Member had to say and I hope that, as he is so concerned about the interests of ratepayers and the anger that they will undoubtedly show if rate bills go up next year, he will press those local authorities that are controlled by the Labour party to keep their expenditure down and to keep rates down accordingly.
    Mr. Fairbairn: Will my hon. Friend reconsider the rebates? A rebate that does not remove the difficulties of the domestic or commercial ratepayer having his principal bill of the year multiplied by a factor of 10 times inflation is not a service to the domestic or commercial ratepayer. Unless the factor is realistic, it will have no political or economic effect.
    Mr. Ancram: My hon. and learned Friend and I have discussed this matter previously. The decision to set the eligibility factor at a multiplying factor of three times was taken after very careful consideration of the proper measure of relief required to be given. I believe that my hon. and learned Friend's constituents have benefited from this. I am sure they will let him know whether they wish a scheme of this sort to continue.

    Agricultural Capital Grant Schemes
    Mr. Wallaceasked the Secretary of State for Scotland whether he intends to revise the Agriculture
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    Capital Grant Schemes Regulations in the light of the damage to the industry occasioned by the poor summer conditions.
    Mr. John MacKay: As I have already indicated, the Government are currently considering how we can best aid those farmers most seriously affected by the bad weather. A number of options are being explored, and it would not be appropriate for me to anticipate the outcome.
    Mr. Wallace: Is the Minister aware that due to the bad weather in the summer a number of drainage schemes undertaken under the former capital grants scheme might overrun the cut-off date of 31 December? Furthermore, a number of farmers will next year have to undertake reseeding as a result of the bad weather, even though they had not planned to do so, and that will limit their opportunities for future investment under the new capital grants schemes. In those circumstances, will the Minister accept that not to make any appropriate relaxation of the regulations to meet the problems would be unduly niggardly?
    Mr. MacKay: I accept that this year there may have been some grant-aided activities that have proved to be less than satisfactory or, indeed, a total loss. If a farmer decides that he wishes to start afresh next year, our Department will be prepared to look sympathetically at such a proposal within the context of the new grants schemes.
    Mr. McQuarrie: Although we thought that most of these farms had satisfactory drainage and liming and would not require major capital grants schemes, is my hon. Friend aware that that is no longer the case because of the severe climatic conditions in the summer? Will he therefore consider the inclusion of full money for liming and drainage grants in any future capital grants allocation?
    Mr. MacKay: The new capital grants schemes that came into operation on 1 October were devised following extensive consultation, and they are designed to reflect the priorities in European Community regulation 797/85. Notwithstanding that, I am satisfied that these grants constitute a worthwhile package of assistance.

    Teachers' Dispute
    Mr. Foulkesasked the Secretary of State for Scotland what response he has made to the suggestion from the organisation representing parents of children in targeted schools that an independent arbiter or conciliator be appointed to help settle the dispute in Scottish schools.
    The Under-Secretary of State for Scotland (Mr. Allan Stewart): My right hon. Friend met representatives of the co-ordinating committee on 24 September. Since then he has, as he told the House on 22 October, been in direct contact with the teachers' side, and the discussions that ensued have produced useful clarification of their position. For the time being, therefore, there seems little further that could be contributed by an intermediary, but we shall continue to bear the possibility in mind.
    Mr. Foulkes: I am more encouraged by that response than I expected to be. As on earlier questions my hon. Friends were strongly seeking a new initiative, why has not this very good initiative been taken up? I have spoken to the Minister about this on a number of occasions, and

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    he will understand that a conciliator could act as a go-between, solve this damaging dispute and do so perhaps within one or two weeks. We are not talking about bringing in a wise man—an arbiter—to decide something that the Secretary of State is unable to implement, because the Secretary of State has ruled that out. We are talking about a conciliator. Why has that been turned down? As the Under-Secretary has indicated that this has not been ruled out for the time being, will he say when he might make a substantive decision about the suggestion?
    Mr. Stewart: Technical discussions, not negotiations, are continuing with the teachers' representatives. It is not, therefore, appropriate to introduce an intermediary, but we shall continue to bear that possibility in mind.
    Mr. Malone: Does my hon. Friend agree that while conciliation may sound fine in principle, each initiative that has been taken by him and his right hon. Friend has been met by increased targeting by the teachers? Does not this show that, at least until now, the teachers have been more keen to exercise political muscle than to conciliate?
    Mr. Stewart: I agree with my hon. Friend that targeting is not only unjust, discriminatory and counterproductive, but that it will not lead to a resolution of the dispute. The dispute can be resolved only by reasoned negotiation.
    Mr. Buchan: The resolution of the dispute has been held up because of the Government's refusal to accept an independent pay review, presumably on the ground that it might lead to an increase in public expenditure. In view of the highly publicised declaration in the last few days of the Government's new-found love of high public expenditure, will they now give evidence of their belief in it by granting an independent pay review?
    Mr. Stewart: As the Government have made clear on numerous occasions, pay cannot be considered in isolation from the duties for which teachers are paid. That is the position, not only of the Government, but of the employers, the Labour-led management. The hon. Gentleman referred to public expenditure. As my right hon. Friend told the House earlier, he is prepared to permit an extra £125 million to be used over four years to finance the kind of pay and conditions package that has been suggested by the management.
    Mr. Henderson: Is it not the case that virtually everybody who is concerned about this disastrous dispute has put forward proposals for breaking the deadlock, except the EIS? Is my hon. Friend confident that if he accepted the proposal of the hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes) it would be met with any greater response from the EIS than the hon. Gentleman's very sensible proposal in February of this year?
    Mr. Stewart: My hon. Friend is right. The hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes) will recognise that he obtained a more reasoned response to that suggestion from the Government than he obtained from the EIS.
    Mr. Douglas: Does the Parliamentary Under-Secretary of State accept that during this period there has been a hardening of the teachers' attitude because they feel so disadvantaged? How long does he expect the dispute to
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    continue, to the damage of the educational prospects of all schoolchildren in Scotland? When will he take resolute steps to halt the dispute and acknowledge that the teachers are disadvantaged? When will he take steps to obtain an independent view of that, even for himself?
    Mr. Stewart: I do not think that the hon. Gentleman has been listening to what my right hon. Friend and I have said. Of course this is a very damaging dispute. Some of the tactics used by the EIS are without precedent. The Government recognise the concerns of teachers. That is why they have consistently said that they would be prepared to make extra resources available to finance a sensible pay and conditions package.
    Mr. Bill Walker: Does my hon. Friend agree that the real problem is that the teachers' leaders do not have confidence in their own ability to reach a negotiated settlement on factors that suit them admirably? There is money on the table, and changes in conditions have been proposed that would enhance their pay in many areas. They are in a unique position. If they were in a position to exploit it, as would any sensible trade union leader, they would do so, instead of calling for this nonsense of an independent review of pay alone.
    Mr. Stewart: As my hon. Friend rightly points out, the kind of package that has been suggested would have great advantages for the teaching profession.

    Rating Reform
    Mr. David Marshallasked the Secretary of State for Scotland when he intends to announce the timetable for and scope of the reform of the Scottish rating system; and if he will make a statement.
    Mr. Ancram: We are looking carefully at the whole system of local government finance, including rating. A consultative document setting out the Government's proposals will be published at around the turn of the year.
    Mr. Marshall: Is the Minister aware that his answer does nothing to stop the further disenchantment with his party in Scotland, nor the feeling of betrayal at the absence of any mention of rating reform in the Queen's Speech? Will the hon. Gentleman come clean and tell us that he has absolutely no idea what to do about rating reform—this year, next year, sometime, never?
    Mr. Ancram: The hon. Gentleman should not be so hopeful. We realise that it is not in the interests of the Labour party that there should be reform of the rating system, which suits the overspending authorities controlled by Labour. Had there been an announcement about legislation on rating in the Queen's Speech before the production of the Green Paper, I am sure that the hon. Gentleman would have been the first to criticise us for doing so.

  SOLICITOR-GENERAL FOR SCOTLAND

    Crown Immunity
    Mr. Canavanasked the Solicitor-General for Scotland on how many occasions in each of the last six years he has been obliged to discontinue prosecution proceedings on the grounds that Crown immunity is involved.
    The Solicitor-General for Scotland (Mr. Peter Fraser): I know of no such case. Criminal proceedings should not be instituted in the first place if Crown immunity is a bar to prosecution.
    Mr. Canavan: In view of the statement yesterday by the Minister for Health that the Government were giving further consideration to Crown immunity in hospitals—whereby hospital authorities cannot be prosecuted if, for example, their kitchens fall below statutory standards of hygiene—will the Solicitor-General give a commitment that abolition of Crown immunity will be extended to Scotland? Why should the Secretary of State not be prosecuted if he fails to give hospitals enough resources and puts patients at risk by failing to keep the hospitals up to statutory standards?
    The Solicitor-General for Scotland: The matter of Crown immunity is of United Kingdom application. As the hon. Gentleman rightly says, yesterday my right hon. Friend the Minister for Health said that he was considering the matter in respect of food hygiene regulations. If any change were to come out of that, prosecution would have to be considered, but first, we have to wait for what comes out of the review.
    Mr. Forsyth: Does my hon. and learned Friend accept that this is a serious problem, because not only are hospital catering departments protected from competition, but they are now protected from action against them when they fall down because of incompetence?
    The Solicitor-General for Scotland: I can only repeat that the matter of Crown immunity is there, and it covers hospitals. There can be no doubt about that. It is essentially a matter for my right hon. Friend the Secretary of State for Social Services. There has already been a clear sign that the matter is under review.
    Mr. Kennedy: Will the Solicitor-General be directly involved in the review that he mentioned? Given that today all-party delegations have been to see his right hon. Friend the Minister for Health south of the border, have the Scottish Office or his Department had any input into the considerations thus far?
    The Solicitor-General for Scotland: On the latter point, the hon. Gentleman will have to ask that question of the Secretary of State for Scotland. He will appreciate that the review is a matter for the Department of Health and Social Security to consider. As I have said, the issue of Crown immunity is of fundamental constitutional importance, and I anticipate that, if it were breached, there would be a wide-ranging review.
    Mr. Ewing: Will the Solicitor-General clear up the implication of the question asked by his hon. Friend the Member for Stirling (Mr. Forsyth)? Would a private contractor operating in a National Health Service hospital kitchen be subject to prosecution if the kitchen was unclean?
    The Solicitor-General for Scotland: The situation is this. Even a number of employees within the NHS could be subject to prosecution if they were in breach of regulations. The position of private contractors is different. From what the hon. Member for Falkirk, West (Mr. Canavan) said, I understand that the point of greatest concern is what happens now, when there are no private contractors and the catering work is undertaken by the health board itself.

    Coal Industry Dispute
    Mr. Ron Brownasked the Solicitor-General for Scotland how many policemen were prosecuted for alleged offences during the miners' dispute.
    The Solicitor-General for Scotland: None, Sir.
    Mr. Brown: Does not the Solicitor-General's answer show that the dispute in Scotland was a relatively peaceful affair? Can the hon. and learned Gentleman explain why more than 200 miners have been dismissed by management and why very few of them have been reinstated? What do the Government intend to do about that.?
    The Solicitor-General for Scotland: I must tell the hon. Gentleman once again that reinstatement is a matter for the Coal Board, not for me. Failing satisfactory resolution, it is a matter for an industrial tribunal. The hon. Gentleman described the dispute as relatively peaceful. I have told him before that about 1,000 people were prosecuted for incidents and that 721 of them were convicted. That is a fairly clear indication of our assessment of a peaceful dispute.
    Mr. Hirst: Does my hon. and learned Friend agree that his answer confirms that the conduct of the police during the miners' strike was exemplary? Does he deplore the fact that Labour-controlled Strathclyde regional council has persistently refused since the dispute to bring police numbers up to establishment?
    The Solicitor-General for Scotland: My hon. Friend is right. I do not know how it is supposed that the rule of law can be enforced in Strathclyde when the police are not up to establishment. My best information is that there have been just 14 complaints against the police arising from the miners' dispute. As more than 1,000 people were prosecuted, it appears that the police behaved excellently.

    Correspondence
    Mr. Willie W. Hamiltonasked the Solicitor-General for Scotland when the hon. Member for Fife. Central can expect a reply to his recent letter concerning the death of one of his constituents as a result of a car accident involving a drunken driver.
    The Solicitor-General for Scotland: I replied to the hon. Gentleman on 11 November.
    Mr. Hamilton: Does the hon. and learned Gentleman agree that the driver, Mr. Sharp of Glasgow, pleaded guilty to two serious charges—careless driving under the influence of drink and causing death by such driving? Does he further agree that Mr. Sharp had a previous conviction for drunken driving and that he had more than three times the limit of alcohol in his blood, and yet Sheriff MacArthur, in the Kirkcaldy court, sentenced him to 240 hours of community service and suspended his licence for five years? Is that not a travesty of justice? Does he agree that the sentence might have been different if someone generally considered more important than my 69-year-old constituent had been killed? Her husband has been damaged for life and his nose was very nearly torn off. Is that not a disgrace and a tragedy for Scottish justice? What can be done?
    The Solicitor-General for Scotland: As far as I can ascertain, the hon. Gentleman's factual narrative is correct

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    in every detail. Whatever view he may have of the sentence imposed by the court—it is clear that there are reservations about it on both sides of the House—he will appreciate that, in Scotland, the Crown, as prosecutor has traditionally stood apart from sentencing policy. I should have thought that the hon. Gentleman would want us to maintain that distinction in our legal system. When an attempt was made this side of the border to allow the Crown to take an appeal against too lenient a sentence, I understand that the hon. Gentleman's party felt that it was a thoroughly undesirable development.
    Mr. Hamilton: In view of the great importance of this matter, I give notice that I shall raise this matter on the Adjournment at the earliest possible opportunity.

    Productions (Pre-trial Release)
    Dr. Godmanasked the Solicitor-General for Scotland if he will discuss with procurators fiscal arrangements for the release of productions before trials.
    The Solicitor-General for Scotland: I am satisfied that procurators fiscal are adequately instructed on this matter.
    Dr. Godman: This is an urgent and critical matter, especially for people on low incomes who have had articles stolen and, in the event of the criminals being apprehended, must wait a long time for the restoration of their goods. Will the Solicitor-General re-examine the rules of evidence so that there might be an early release of productions?
    The Solicitor-General for Scotland: The hon. Gentleman has identified what we also recognise is a problem. In the interest of fair trials, however, there are
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    evidential requirements with regard to the production of items that have been stolen. Instructions have been given to procurators fiscal throughout Scotland that, if possible, they should return productions to their owners. For example, if an old-age pensioner has had a television set stolen, it should be returned. If that is to be done, however, it may be necessary to secure an undertaking from the person involved that, in the event of a trial and the need to produce the item, it will be returned to the court. If the hon. Gentleman has any particular case in mind, I hope that he will write to me.
    Mr. Fairbairn: Is my hon. and learned Friend aware that this is a major problem in Scotland and gives rise to enormous embarrassment? For instance, a friend of mine had his plumber's gear stolen from his car. Frequently in Scottish courts we have a label in place of the production, which is not required to be brought. If my hon. and learned Friend goes to any production room, especially in Glasgow, he will see a myriad productions which matter greatly to their owners but have no evidential value at all. Surely we could have minutes of agreement between the defence and the prosecution for the return of items which are of immense value to their owners but of practically no evidential value to the court.
    The Solicitor-General for Scotland: I am grateful to my hon. and learned Friend. He sets out a solution which I strongly urge should be followed. In as many cases as possible minutes of admissions or minutes of agreements should be entered into. There is, however, a problem at an earlier stage, as it may take some time before the matter comes to court. In those circumstances, procurators fiscal have now been enjoined to consider the matter carefully and to return items to their owners if possible.

Points of Order
Several Hon. Members rose—
3.30 pm
Mr. Speaker: Order. I will take only points of order concerned with Scottish Question Time.
Mr. James Hamilton: On a point of order, Mr. Speaker. We reached question No. 4, which was identical to my question No. 26. Has the practice of linking questions ceased? Furthermore, are not Members who take the trouble to put questions on the Order Paper at a grave disadvantage when Tory Members are called as many as three times and we are not even noticed?
Mr. Speaker: I am very conscious of what the hon. Gentleman has said. He is quite right—I do my utmost to link questions, but I cannot do it on every occasion. If the hon. Gentleman studies the Order Paper—I am very conscious of this—he will see that only five hon. Members who had put down questions were not called. Moreover, if the hon. Gentleman studies Hansard I think that he will find that Opposition Members were called many more times than Conservative Back Benchers.
Mr. Donald Stewart: On a point of order, Mr. Speaker. Yesterday—
Mr. Speaker: Order. I will take points of order about yesterday later, at the usual point in our proceedings.
Mr. John Ryman: On a point of order, Mr. Speaker—
Mr. Speaker: I think that the same goes for the hon. Member for Blyth Valley (Mr. Ryman), who has given me notice of his point of order.
Mr. Ryman: My point of order relates to the statement expected shortly.
Mr. Speaker: I will certainly not take that now.
Mr. Nicholas Fairbairn: On a point of order arising out of Scottish questions, Mr. Speaker. In relation to question No. 39, the hon. Member for Fife, Central (Mr. Hamilton) made an implicit criticism of a member of the Scottish judiciary in claiming that his sentence and judgment were inappropriate. Is it not a habit of this House that no criticism of the judiciary may be made?
Mr. Speaker: As I understand it, the hon. Member for Fife, Central (Mr. Hamilton) was criticising the sentence and not the judge.
Mr. Donald Stewart: On a point of order in connection with the private notice question that is about to be raised—
Mr. Speaker: Order. I cannot anticipate what the answer to that will be.

TSB (Scotland) Sale (Judgment)
3.33 pm
Mr. Jim Craigen[by private notice] asked the Chancellor of the Exchequer if he will make a statement on the consequences of the ruling by a Scottish judge yesterday that the assets of the TSB (Scotland) belong to the depositors and what course of action the Treasury intends to take on the matter.
The Economic Secretary to the Treasury (Mr. Ian Stewart): We are now carefully but urgently considering Lord Davidson's judgment and opinion, which have only just become available and raise complex legal issues. The Trustee Savings Banks Bill, now the Trustee Savings Banks Act 1985, would not have been presented to the House if the Government had not received firm legal advice, which was reflected in last December's White Paper. It remains the Government's expectation that we shall wish to lodge formal notice of appeal as soon as practicable.
Mr. Craigen: May I take it from the Minister's reply that the Government now regret having embarked on this legislation, supposedly as honest brokers for the TSB central board? Does the Minister accept that he now has a duty to tell the TSB to take no further action about the flotation of the sale until the outcome of any pending appeal is known? Finally, how far are the Government prepared to go with taxpayers' money over litigation? Is this matter to be taken as high as the House of Lords? What does the Minister think about the relative sparsity of Scottish Law Lords in that formidable body?
Mr. Stewart: After the recent remarks about the Scottish judiciary, I hesitate to enter further into that field. The hon. Gentleman asked about the actions of the TSB. Clearly, the TSB will have to take into account the current judgment and anything further which transpires in the course of this case. I should like to clear up one misapprehension that was expressed about the decision announced yesterday. The Government have never planned to receive any of the proceeds of a flotation of the TSBs. It has no impact on the privatisation programme and will not be a sale of Government-owned assets. It is a matter for the TSB and no doubt it will consider the implications most carefully.
Mr. Alex Fletcher: In view of the onus on the Government to encourage best practice in financial regulations, not least in City affairs, would it not be better if the Government, while the appeal is pending, were to ask the TSB to cease advertising the prospectus—or at least the fact that the offer is about to be made?
Mr. Stewart: I am sure the TSB will take note of what my hon. Friend has said. It is not for me to instruct the TSB what to do. I am sure it is aware of the sensitivities and the implications involved.
Sir Russell Johnston: Has the Minister taken on board the fact that Lord Davidson stressed the mutual nature of the society and the consequent rights of depositors? All the questions to the Minister so far have stressed that it would be quite improper, pending an appeal, for any prospectus of the sale of the assets to be issued. In view of that, can the Government exercise an influence to ensure that this will not happen?
Mr. Stewart: As I understand it, Lord Davidson did not say that the depositors were members of the banks. Nevertheless, he said that in his view ownership was vested in the depositors. Clearly, the opinion itself raises complex legal issues that we will have to consider most carefully. I do not imagine that the TSB will want to make any hasty judgment or move on that, particularly with regard to flotation, which is not imminent in the immediate future anyway.
Mr. Nicholas Fairbairn: I declare an interest; I am a depositor. [HON. MEMBERS: "How much?"] I still have ls lld in the Haymarket Savings Bank. Can the Minister assist me in the following matter? My right hon. Friend the Prime Minister said that the Government will heed the opinion of the Scottish courts. I do not quite know what is meant by the Scottish courts. Although the House of Lords is the last court of redress in a civil action, I am sure the Minister will appreciate that in the House of Lords there are only two Scottish Law Lords, one of whom is the Lord Advocate, who presumably gave the advice that the TSB did not belong to depositors, and the other of whom is a depositor. Is the House of Lords considered to be a Scottish court? If it is, what are the Government going to do about that little difficulty?
Mr. Stewart: We certainly have not reached that stage. My hon. Friend will recall that my right hon. Friend the Prime Minister reminded the House yesterday that the Government have a right to all the legal remedies available. But if, as we would expect, the Government proceed with an appeal, it will go to the Inner House, which is the Scottish Court of Appeal, and not at that stage to the House of Lords.
Mr. Bruce Milian: Is not the effect of Lord Davidson's judgment that, if the Act is proceeded with, this will be a case of privatisation without compensation? In view of the extremely arrogant reaction of the TSB, which says that it will proceed regardless of the court judgment, will the Minister make it clear to the TSB that there can be no question of its trying to go ahead as though the court judgment had not been made? Will he give us an assurance that the Government will not name a vesting day until the legal position has been clarified?
Mr. Stewart: I appreciate the point which the right hon. Gentleman makes. During the passage of the Bill, I made it clear several times that, although the flotation was a matter for the TSBs, before then the Government had to vest the assets and name a vesting day under the Act. We have no intention of doing so in the near future.
Mr. Tam Dalyell: Is it not flouting the law to allow the TSB to go ahead? Will the Minister asnwer the question that was put to him, first, by my hon. Friend the Member for Glasgow, Maryhill (Mr. Craigen) and, secondly, by my right hon. Friend the Member for Glasgow, Govan (Mr. Millan)?
Mr. Stewart: It is for the TSBs to prepare for any aspect of their future, whether that be reorganisation of their internal company structure or preparations for a flotation which they hope will take place. I have already told the House that the Government are required to name a vesting day before that happens. I also said that vesting will not occur in the near future. It depends upon a range of matters quite apart from the legal aspect. At this stage,
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vesting is not at issue, but the Government will take into account any judgements of the court as well as undertakings from the TSBs before they consider vesting.
Mr. David Steel: Since the hon. Gentleman is a Treasury Minister, may I ask him why the Treasury told the media yesterday that an appeal would be lodged, while the Prime Minister was busy telling me and the House that the Government wished to read and reflect upon the judgment?
Mr. Stewart: I will explain that point to the right hon. Gentleman. The way in which he has raised the matter is slightly misleading, although I am sure he did not mean it to be so. What happened was that, at the close of the hearing, counsel for the Treasury said that it would expect to appeal. That is the normal courtesy at the end of a hearing. It is not the same as lodging a formal notice of appeal. My right hon. Friend the Prime Minister said yesterday that we wished carefully to consider the judgment, which is what we are doing and will do. We have not yet drawn up a formal notice of appeal. The comments made expressed our expectation that we would appeal, but no press statement such as the right hon. Gentleman describes was made.
Sir John Farr: Is it not strange to hear Labour Members of Parliament advising the Government to obey the judgment of the courts when only a few months ago, during the miners' strike, they were not at all sure whether they should support the courts?
Mr. Stewart: Yes, Sir.
Mr. Charles Kennedy: Can the Minister clarify what he is saying about the vesting day procedure and the possible tabling of an order? Did he not say this afternoon that the legal judgment and a possible appeal by the Treasury will not be the only factors taken into account when the Government decide whether to name a vesting day? Does that not show, despite his apparent reverence for the Scottish legal system, a considerable irreverence for the law and the judgment—it is not an opinion, as he described it this afternoon—that was given in Edinburgh yesterday?
Mr. Stewart: No, Sir. With respect to the hon. Gentleman, it does not suggest that. I said in July that we would consider our subsequent action in the light of any judgment. I am happy to re-emphasise that today. I did not say that the Government would disregard the judgments of the Scottish court in favour of other considerations. I said only that considerations other than the legal ones have not been resolved, and that we are nowhere near the stage when it would be appropriate to vest. The question of immediate vesting has not yet arisen.
Dr. Oonagh McDonald: Is it not the case that the Government should never have gone ahead with the sale without determining the ownership of the TSB? Is not the hon. Gentleman aware that, during the passage of the Bill, the Labour party raised the ownership point time and again? Should not the Government have tested this in the courts first? What has changed since Conservative spokesmen said in the House seven years ago that the TSB was part of the mutual banking sector? What new advice has the hon. Gentleman had since then?
Is not this flotation the equivalent of the housekeeper selling off the family silver without checking whether the

567
family owned it? Is it not a fact that the Government are now so eager to privatise anything in sight that they will even privatise businesses that do not belong to them?
Will the hon. Gentleman make the position on the flotation clear? The Financial Times reported today:
"the Government intends to press ahead with the flotation of the TSB in February regardless of yesterday's setback in the Scottish courts."
Will the hon. Gentleman make it clear that the Government will not take the action before vesting that they need to take to allow the flotation to go ahead? Will he also make it clear that the Government will await the final decision of the courts before doing anything that would facilitate the flotation?
Is it not clear—[Interruption]—that this is yet another embarrassment for the Government, as a result of which the courts have had to step in to protect the small man against the actions of this Tory Government?
Mr. Stewart: It is a great pity that the hon. Lady prepared her questions before she listened to my answers to the questions asked of me today. Even if she believes everything that she reads in the press, she should perhaps consider what is said in the House by Ministers before she puts too much weight on the press reports.
I began by saying that the Government were not pressing ahead with these matters. If certain newspapers say so, that is their responsibility, not mine. The Government are not placing any pressure or responsibility on the TSBs to proceed—that is a matter for them. I have said, and I shall repeat, that before any action is taken by the Government, we shall take full account of any decision by the courts as well as many other matters, including not only the points that I have already mentioned but the fact of what is potentially within the scope of the existing Trustee Savings Banks Act.
Mr. Donald Stewart: On a point of order, Mr. Speaker.
Mr. Speaker: I think that the right hon. Gentleman's point of order refers to this matter, in which case I shall take it.
Mr. Stewart: Yesterday, when the issue of the TSB was even more immediate and relevant than it is today, my hon. Friend the Member for Dundee, East (Mr. Wilson) applied for a private notice question today—
Mr. Speaker: Order. The right hon. Gentleman knows the conventions about these matters. The names of those who have applied for a private notice question are never mentioned in the Chamber.
Mr. John Ryman: On a point of order, Mr. Speaker.
Mr. Speaker: Does this arise from the private notice question?
Mr. Ryman: Yes, Sir. I tried to raise this matter earlier on, but you overruled me, Mr. Speaker. In my respectful submission, you have allowed a flagrant breach of the sub judice rule to take place in allowing this matter to be discussed when the Government have announced, both formally and informally, that an appeal is pending from this decision. May I refer you—
Mr. Speaker: Order. I can help the hon. Gentleman immediately; I understand that the Government have not given formal notice of appeal. Such points of order take up time.
Mr. Dennis Skinner: My hon. Friend has brought his books.
Mr. Speaker: I am sure that the House would be interested to hear the legal position.
Mr. Ryman: Further to that point of order, Mr. Speaker. You have not heard my submission, so how can you possibly rule on it?
Mr. Speaker: I distinctly heard the hon. Gentleman say that the matter was sub judice. I am saying that it is not.
Mr. Ryman: Will you hear me, Sir? There is a point which would be of interest to the House generally, and on which your guidance is sought. The rule is set out clearly on page 429 of Erskine May and I am sure that you know it by heart. It states clearly that if a notice of appeal is given, the matter is sub judice. A notice of appeal being given does not simply mean that the notice is filed with the court; it can be done in one of three ways: by notice to the court in a document, by the leave of the judge who delivered the original verdict, or by asking leave of the Scottish equivalent of the Court of Appeal. From the Minister's statement and answers, I understand that the Government are considering an appeal to the Scottish equivalent of the Court of Appeal. From the realities, not the technicalities of the matter—judges look at the realities now, not the technicalities—it is common sense that an appeal is about to be lodged. If so—
Mr. Speaker: Order. I must stop the hon. Gentleman, because he is confounding his case. He may be right in saying that an appeal is about to be lodged, but the point is that it has not been lodged, and the matter is not sub judice. That is enough of that.

Breweries Merger (Report)
3.51 pm
The Parliamentary Under-Secretary of State for Trade and Industry (Mr. Michael Howard): With permission, Mr. Speaker, I should like to make a statement on the report of the Monopolies and Mergers Commission on Scottish and Newcastle Breweries and Matthew Brown which was published on 12 November. The Commission has concluded that, while the merger could not be expected materially to benefit the public interest, there are not sufficient grounds for concluding that the proposed merger may be expected to operate against the public interest. In the absence of an adverse public interest finding by the Commission, my right hon. and learned Friend the Secretary of State has no powers under the Fair Trading Act 1973 to intervene to prevent that merger, or to impose any conditions on it.
Following press reports at the end of last week, it has been suggested that there may have been a leak of confidential information in advance of the report's publication. An investigation is under way to establish whether there has been a leak.
My attention has been drawn to the existence of a letter from my right hon. Friend the Secretary of State for Scotland, about which he has written to the hon. Member for Blackburn (Mr. Straw). That, together with all other material which may be relevant, will be considered in the context of the investigation.
Mr. John Smith: Is the Minister aware that this is an extremely serious matter because it reflects on the capacity of the Government and agencies responsible to them to hold commercially confidential information until the appropriate time for a public announcement? In those circumstances should not the Secretary of State for Trade and Industry who is responsible for the whole Department have come to the House to make the statement, instead of a relatively recently appointed junior Minister?
Is the Minister aware that it is a little more serious than information "perhaps" having been leaked? It is well known that on 8 November, some days before the public announcement was made, newspapers carried stories predicting, not what the result of the Commission might be, but the result in terms which showed clearly that they knew the contents of the report, particularly the recommendation to which reference has been made.
Is the Minister further aware that there was a significant movement of shares, whereby the shares of the company in question moved from 478p to 520p—an increase of 42p—on the information being made available fairly widely through the press? As a result of that, is it not clear that an investigation in considerable depth should be held—I welcome the fact that an investigation is being undertaken—with a full disclosure of what it reveals? Will the Minister guarantee that that will be done?
Furthermore, should not the Government consider whether Ministers and officials, whether of Departments or agencies responsible to them, fully understand the important rules which exist about commercial confidentiality, and should they not take urgent steps to ensure that if those rules are understood, they are also enforced? It is disgraceful that a Government are unable to hold
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commercially confidential information as they are expected to. If they cannot do so, they are breaching an important trust to the British people.
Mr. Howard: It is of course a serious matter, and a serious investigation will take place. Of course that investigation will be in depth, as the right hon. and learned Gentleman suggests. All the matters to which he has referred will be carefully and fully investigated in that inquiry. It has not, however, been the practice of this or previous Governments to publish reports of internal inquiries and I therefore cannot give him the guarantee of publication which he requests.
Mr. D. N. Campbell-Savours: Is not the most remarkable aspect of this affair the letter which the Minister sent to me yesterday in which he said:
"Although Matthew Brown have no present intention of closing the Carlisle and Workington breweries, the jobs there could not be regarded as totally secure in the longer term even if Matthew Brown were to remain independent."
Is the Minister aware that that is simply not true? I have correspondence in my possession from Matthew Brown giving me almost indefinite assurances about the future of the brewery in my constituency.
Since Matthew Brown made £7 million profit last year, until the takeover was approved by the Monopolies and Mergers Commission, the brewery at Workington was as safe as the Bank of England and the hundreds of jobs directly and indirectly dependent on that industry were absolutely secure.
Is it not clear that the Minister himself has given the green light to Scottish and Newcastle to close my brewery? He is encouraging Scottish and Newcastle to take that decision. Should he not resign because he has acted irresponsibly?
Finally, may we have an assurance from the Secretary of State for Scotland who leaked—and it was his leak which led to speculation on the Stock Exchange and the rise of 50p in the price of these shares, whereby City slickers have lined their pockets? It is for him, too, to resign. He has offended the House, he has undermined the Monopolies and Mergers Commission and he has done a disservice to the company Matthew Brown which has made an honourable contribution historically to my constituency.
Mr. David Maclean: Mr. Speaker, on a more reasonable note may I ask my hon. and learned Friend—
Mr. Campbell-Savours: Answer.
Mr. Speaker: I must say to the hon. Gentleman that the question was a bit long so I was taken in myself. I apologise and call the Minister to answer.
Mr. Howard: In the letter which I wrote to the hon. Member for Workington, I did not express any personal views, but I recited the conclusions reached by the Monopolies and Mergers Commission. That report has been published and is available for all to see. I invite those who wish to test the hon. Gentleman's wild allegations to refer to that report.
Mr. Maclean: May I say in all reasonableness that many of my constituents believe that the conclusions by the Monopolies and Mergers Commission are at variance with the evidence presented to it? In view of the inquiry that my hon. and learned Friend announced today, does he

571
agree that it is better to put the whole matter on ice and to have a fresh submission to the Monopolies and Mergers Commission?
Mr. Howard: No, Sir. The commission's report is available and I do not wish to make any further comment on it.
Mr. Jack Straw: Will the Minister explain why he skated so gingerly over the letter which the Secretary of State for Scotland wrote to a member of the public in Leyland, Lancashire, last Friday, four days before the publication of the report, in which he disclosed the contents of the Commission's report and the Government's decision upon it? I do not impugn the integrity or the honour of the Secretary of State, but does not the fact that he sent that letter disclose a degree of incompetence and carelessness within the Scottish Office and the Department of Trade and Industry which is unacceptable when handling market-sensitive information?
May I press the Minister on the nature of the investigation and its publication? There have been few examples of market-sensitive information being leaked, but when that has happened it has sometimes led to a full tribunal. Therefore, the precedents for the widest possible inquiry, including into share profiteering, are very good. I urge the hon. and learned Gentleman to ensure that the investigation is wide and that its results are published.
Mr. Howard: The letter to which the hon. Gentleman referred will be considered in the investigation. It will be a thorough one, and as wide as is necessary to discover the facts. Unlike the hon. Member for Blackburn (Mr. Straw), I would not wish today to prejudge or anticipate the results of that inquiry.
Mr. Ron Lewis: Is the Minister aware that there is very strong opposition in Cumbria, among all the political groups, to the decision to allow a takeover? Cumbria's unemployment problem is grim, and despite everything that the Minister has said today we expect that in less than two years the breweries will be closed. Will he stand on the sidelines and act as Pontius Pilate, or will he do something about it?
Mr. Howard: All those matters were drawn to the attention of the commission, which is an independent body. As I said at the outset, my right hon. and learned Friend the Secretary of State for Trade and Industry has no power to intervene to prevent a proposed merger under the Act in the light of the conclusion of the commission in its report.
Mr. Nicholas Winterton: While I warmly welcome the internal inquiry that will look into the unfortunate leak, may I support the request made by my hon. Friend the Member for Penrith and the Border (Mr. Maclean), bearing in mind the mass speculation from which many people—nothing to do with the brewery, but the city slickers described, quite rightly, by the hon. Member for Workington (Mr. Campbell-Savours)—have made a great deal of money?
Will my hon. and learned Friend consider setting aside the conclusion in the report of the Monopolies and Mergers Commission, and ask it to consider the matter again? Will he bear in mind the fact that many Conservative Members
572
are deeply unhappy about and strongly opposed to a decision that will undoubtedly wipe out an important private brewery in the north-west of England?
Mr. Howard: I recognise the unhappiness to which my hon. Friend referred. However, the legislation pursuant to which the commission operates has been in existence for some considerable time, under Government of all political complexions. In this instance, it has been operated in the usual scrupulous manner, with all the procedures being properly followed. The Secretary of State has no power to intervene, for the reasons that I have given.
Mr. Robert Maclennan: Does the Minister recognise that, now that the finger of suspicion has been pointed at a Cabinet Minister, a number of public authorities and civil servants, it would be wholly inappropriate merely to conduct an internal inquiry, however wide-ranging? Is it not now necessary to ensure that a completely objective inquiry is conducted, by someone outside the public service?
Mr. Howard: No, I do not accept for one moment that a thorough internal investigation will not be objective. It will identify and ascertain all relevant facts relating to the matter.
Mr. Ivan Lawrence: Is my hon. and learned Friend aware that there is widespread concern that smaller breweries are being swallowed by larger breweries, a process which may not be in the public interest?
If the Government do not have powers to overrule the decision of the Monopolies and Mergers Commission, will my hon. and learned Friend seriously consider taking powers to give the Government of the day some right to take action if, in the political of social interest, it is thought necessary to do so?
Mr. Howard: I do not think that it would be wise to consider that aspect of the matter in the light of one case. However, it is my right hon. and learned Friend's intention to review competition policy generally next year. These matters will be taken into account in the context of that review.
Mr. Dennis Skinner: Is the Minister aware that the mass of the public will view this matter as one where a Minister has managed to tip off certain favoured people with information to which the remainder of the population is not privy? [HON. MEMBERS: "Disgraceful."] As a result, will not many people make a financial killing? The Minister then comes to the Dispatch Box and blithely says that, instead of a proper public inquiry, the matter will be dealt with either by self-regulation or an internal inquiry.
I put it to the Minister that, if someone in a betting shop had managed to land a big coup on the basis of backing a string of winners after they had passed the post, that would be a matter for the Attorney-General, the fraud squad and all the rest. Why does that not apply also to people in the City?
Mr. Howard: The investigation into the facts of the matter will be thorough. I have nothing to add to what I have already said.
Mr. Piers Merchant: Is my hon. and learned Friend aware that, despite the views of some hon. Members, there are areas in which the findings of the Monopolies and Mergers Commission will

573
be welcome? They include Newcastle, where people have wide experience of the Scottish and Newcastle operation and are aware that its reputation and expertise will enable it to run Matthew Brown efficiently and effectively.
Mr. Howard: I note what my hon. Friend said. No doubt many representations to that effect were put before the commission.
Mr. John Ryman: I wonder whether I could ask the Minister to give a sensible reply to my question? Although it is true that the Secretary of State cannot interfere with the recommendation of the Monopolies and Mergers Commission, does the hon. and learned Gentleman agree that the Secretary of State is under no obligation to accept that recommendation? He can accept or reject it.
Mr. Howard: No, the hon. Gentleman has not accurately summarised the effect of the legislation or the powers of my right hon. and learned Friend. Where the commission concludes that a merger is not likely to be against the public interest, my right hon. and learned Friend has no power under the Act to prevent it from taking place.

Anglo-Irish Talks
4.8 pm
Mr. Harold McCusker: On a point of order, Mr. Speaker. I wonder whether you can tell the House if you have had a request from the Prime Minister, or any other Minister, to make a statement to the House today about the outcome of the Anglo-Irish talks? I ask because the Dublin newspapers this morning gave the precise details of the agreement—in particular, the front page of the Irish Press, the mouthpiece of the party led by Charles Haughey, one-time paymaster of the Provisional IRA.
Is it not deplorable that hon. Members, who have been systematically and deliberately kept in the dark about the outcome of the talks, should learn of the conclusions from a newspaper published in Dublin? Is it not despicable that hon. Members from Northern Ireland should learn of their betrayal and the diminution of their citizenship from a newspaper published in Dublin?
Mr. Speaker: I do not read the Irish Press. I have no knowledge of this matter.
Mr. James Molyneaux: Further to that point of order, Mr. Speaker. We entirely accept what you said about acting on the basis of press reports. Are you aware that the Irish Government intend to circulate the full text of the agreement tomorrow morning? Is it not intolerable that this House will be kept in the dark until at least next week? Is it not possible for the Leader of the House to arrange that the Secretary of State for Northern Ireland makes a full and comprehensive statement tomorrow when he answers Northern Ireland questions?
Mr. Speaker: The Leader of the House is present and I am sure that he will have heard that question.

BALLOT FOR NOTICES OF MOTIONS FOR FRIDAY 29 NOVEMBER
Members successful in the ballot were:

Dr. Norman A. Godman

Mr. Andrew Rowe

Mr. Terence Higgins

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 Reginald Eyre].—
  Question again proposed.

  The Economy
  Mr. Speaker: I inform the House that I have selected the amendment in the name of the Leader of the Opposition and those of his right hon. and hon. Friends. In addition, under the powers given to me by Standing Order No. 35, I have selected for a second Division at the end of the debate the amendment in the name of the right hon. Member for Plymouth, Devonport (Dr. Owen) and those of his right hon. and hon. Friends.
  A very long list of right hon. and hon. Gentlemen wish to take part in the last day of the debate on the Queen's Speech. May I again appeal for brief contributions so that not too many are disappointed?
  4.11 pm
  Mr. Roy Hattersley: I beg to move, at the end of the Question, to add:
  "But humbly we regret that the Gracious Speech includes no proposals which can reasonably be expected to reduce the level of unemployment, revive manufacturing industry and utilise the full potential of the income temporarily gained from the exploitation of North Sea oil."
  Yesterday during his statement to the House the Chancellor of the Exchequer invited us to take advantage of today's debate to discuss the autumn statement. It was not an invitation which we needed or which he was entitled to make, but I propose to accept it. Of course, I begin with a re-examination of the central plank of yesterday's manifesto, the sale of British Gas to finance temporary tax cuts.
  In reply to my question yesterday the Chancellor insisted that the sale of British Gas simply brought tax cuts forward. I have the quotation here lest he should choose to deny it today, as he denied it yesterday afternoon. What the Chancellor said could mean only that, on his own assessment, without the sale of British Gas there would be no tax cuts next year and probably none before a general election. The tax cuts are to be financed by the sale of British Gas. The Chancellor ought to know, as I believe the country knows, that a policy of selling assets to raise revenue is one which no respectable or responsible private company would contemplate for a moment.
  I ask him again the questions that he failed to answer yesterday. After the sale, how would he propose to make up the losses in annual revenue previously obtained from those assets? When the sale has financed a couple of years
  576
  of tax cuts, how does he suggest that those temporary tax cuts will be sustained? When I asked him that question yesterday he mumbled a generalisation about the sale of other assets. May I therefore ask him specifically if what he hinted at as the afternoon went on is true? Is it the Government's intention to sell into private ownership the water industry? [Interruption.]
  If the Government claim that the water industry should be sold to a private monopoly and that that private monopoly should control the price, supply and quality of something as basic as the water, the Chancellor had better tell us now whether he agrees with those Members in the backwoods behind him who are urging that that should happen. He must know that if water is sold into the ownership of a private monopoly few restrictions will be placed upon it to protect the consumer, for that is the pattern of privatisation. It will be the pattern of privatisation of British Gas as it was the pattern of privatisation of British Telecom.
  If obligations were placed on the new private monopoly the selling price would not be as great as the Government need and will demand. What will happen with gas and with water will be exactly the same as recently happened with British Telecom. Vast profits have been made but enormous price increases have been imposed in an area where British Telecom has a monopoly and can exploit consumers.
  The Chancellor denied all this yesterday. I see him nodding because he intends to deny it again today. When he makes a forecast or offers statistics, I think of those famous words from Through the Looking-Glass:
  "'When I use a word,' Humpty Dumpty said in a rather scornful tone, 'it means just what I choose it to mean'",
  with which he fell off the wall. That view was expressed in less generous language by the Daily Telegraph today; it made the same point about the Chancellor's veracity in language which I would not dare to use. It described his statement as
  "a combination of dodgy accounting and electoral cynicism".
  Despite all the talk about expansion, growth and success, what we are to have over the next year or two years is an increase in consumption financed by temporary tax cuts paid for by the sale of British Gas. On his own figures, which again the Chancellor denied yesterday, there is a predicted growth over the next financial year in gross domestic product of £6·4 billion while consumption is to rise by rather more—£6·5 billion. At the same time imports will increase at twice the rate of exports and interest rates will be kept high by the Chancellor as an item of policy by which he can keep something like the present exchange rate. The net result must be a continuation of the damage to manufacturing industry which has characterised all that the Government have done for six years.
  I know very well that the Chancellor and the Secretary of State for Trade and Industry derided the report by the House of Lords Select Committee on Overseas Trade, but Government policy and the Chancellor himself vindicate what that report said; it warned that if we are to avoid a major social and economic crisis attitudes towards trade and manufacturing have to be radically altered.
  Let us look at the real state of manufacturing industry about which the Chancellor made some boast yesterday and about which the Prime Minister made equally unlikely claims a week ago today. The real facts of manufacturing industry are these. For four years in a row net investment in manufacturing has been negative. Total manufacturing

  577
  investment is 20 per cent. lower than it was in 1979. Output is 6 per cent. lower than in 1979. The balance of manufactured trade has changed from a surplus of £5 billion in 1978 to a deficit of £4·7 billion.
  The Government's attitude towards manufacturing trade has not changed at all despite the claims made by the Chancellor and the Prime Minister. All that has changed in the Chancellor's attitude towards manufacturing industry is his language. He no longer insults it as if he were a knight on the Tory Back Benches. He pretends that he is concerned about its welfare, but he and the House know that manufacturing industry remains crippled by high interest rates. The Confederation of British Industry was right to describe the autumn statement in one simple sentence:
  "nothing in it for manufacturing industry except £250 million of extra costs".
  Month after month and year after year we have tried to convince the Chancellor of the Exchequer that while manufacturing industry and the construction industry founder, unemployment will remain at a level which should be unacceptable in a decent society.
  Despite the central continuation of the Government's proposals and plans to which I have referred, and despite the continuing destruction of manufacturing industry, the hon. Member for Stockton, South (Mr. Wrigglesworth) told everybody who would listen to him yesterday that we are witnessing a U-turn. That is what the hon. Gentleman and other Social Democrats were intended to believe from the Chancellor's statement. The Chancellor assumed that they would be easily satisfied, but I suspect that he did not believe that they would be quite as rapturously satisfied as the hon. Member turned out to be.
  Last year, during the debate on the autumn statement, the SDP fell in behind our demand for a £5 billion boost, to be spent in the public capital sector. This year the Government propose 10 per cent. of that amount to be spent on construction of one sort and another.
  The change in the Government's position, as I shall demonstrate in a moment, is far more a matter of presentation than of substance. The truth is that the argument for public sector capital spending advocated by the Opposition, the CBI, the TUC, a large number of Conservative Back Benchers, and by some right hon. Members in the Cabinet has actually won the day. There is now a virtually unanimous consensus that the Government should be spending more on public sector capital. What the Government announced yesterday afternoon was very little indeed, said in order that they could not be accused of doing nothing.
  The basic economic policy remains, and it involves a writing off of 3·5 million men and women who are unemployed. They have been written off because they are politically expendable. Although, no doubt, the wets in the Cabinet will seize on the announcement as a sop to their consciences, the minuscule increases in housing renovation and hospital building will finance virtually no jobs. I have it on the authority of the Prime Minister. [Interruption.] The hon. Member for Harlow (Mr. Hayes) may laugh at that authority. Some of his hon. Friends around him may take the Prime Minister more seriously than he does.
  On 10 December, the Prime Minister told me that the cost per job through increasing infrastructure can vary from £35,000 to £55,000 a year. Let us take the position in the middle. Let us assume that the Prime Minister was
  578
  right and that a job financed by investment in construction costs £45,000. If the Prime Minister was right, what the Government announced yesterday and what was heralded as a U-turn by the SDP will produce 11,000 new jobs. The infrastructure proposals, the capital works, will produce one new job for every 3,000 men and women unemployed.
  If we are witnessing a U-turn, it is a U-turn of a very strange shape, and it should be described in a little honest detail. The Chancellor certainly will not do that. This year there has been some reflation. The Prime Minister has denounced reflation. She promised that there would be no reflation, but there has been reflation. It has come about not by intention but by incompetence.
  Social security payments were increased by £1·2 billion above the original estimate as inflation is higher than anticipated because of the mismanagement of the exchange rate by the Chancellor in January.
  Mrs. Elaine Kellett-Bowman: Is the right hon. Gentleman saying that he begrudges the increase given to the pensioners and others?
  Mr. Hattersley: I am saying that if we had been in power we would have paid them the full increase that they were promised, rather than a few measly coppers.
  Several Hon. Members rose—
  Mr. Hattersley: No, I shall go on to list all the other reasons why we have had the reflation that the Prime Minister promised we would not have.
  The payment has been larger than the Chancellor intended because inflation has been higher than he prophesied. Inflation has been higher than he prophesied because of the catastrophe that he caused for the exchange rate in January. But that is not the only reason.
  The external financing limits on the nationalised industries were relaxed by £1 billion, largely because of the miners' strike, which, the House will recall, was regarded by the Chancellor as a sound investment for the nation.
  Local authority spending was £1 billion more than the Government planned. Local authority spending is always more than the Government plan, because the Government never expect to hold it down to their planning figure. The planning figure is always devised artificially low in the hope that the local authorities can be intimidated. The local authorities never are intimidated, so the Government's local authority spending plan is always out of line.
  The cost of EEC membership was £500 million more than anticipated. The extra cost of EEC membership was alone virtually as much as the combined extra funds being made available next year for house building and renovation and hospital building.
  Mr. Jerry Hayes rose—
  Mr. Hattersley: I do not want the hon. Member for Harlow (Mr. Hayes) to be over-anxious. He will have to wait with patience until the end of this entire passage.
  The Government are spending £5 billion more than they intended on programmes. They have exhausted the reserves entirely with five months left to go. The Government—the Chancellor will correct me if I am wrong—have established the precedent of talking to the House about the sums left in the reserve. That is something that Chancellors in the past have never felt they had to do. In addition, the Government have exceeded the PSBR

  579
  target by £1 billion. All those things have added to this year's involuntary reflation, and that is not the only thing that has happened.
  The policy of reflation—not the policy but the accident—which the Prime Minister promised would not happen while she was in Downing street has been supplemented by other factors. They are all factors of which the Government disapproved but over which they were unable to exercise any control. Wage increases have outstripped inflation. The American deficit has attracted British exports. The collapse of the pound, for which the Chancellor was responsible, temporarily helped those exports. Investment decisions have been brought forward to beat the Government's decision to phase out capital allowances. Those are the reasons why there has been a reflation this year, but none of them is likely to be repeated next year.
  The Chancellor's intention is to hold next year's programmed spending below the level at which it stands this year. So those right hon. and hon. Members in his party who feel that he has abandoned the financial rectitude by which he has made his name can rest in peace. There has been no U-turn in the statement. There has been a sort of L-turn.
  I will remind the Chancellor of what is meant by no U-turn. No U-turn means the continuing collapse of manufacturing industry, the continual deficit on our manufactured trade, the continual squandering of North sea oil revenues on unemployment rather than on jobs, and, above all, no U-turn means 3·5 million men and women still condemned to unemployment.
  Mr. Hayes: It is always a great joy to see the right hon. Gentleman jumping through the hoop so well, but he has a nerve to stand there talking of honouring promises with the eloquence of Satan denouncing sin. After all, he was a member of a Government which actually robbed pensioners, by changing to the forecasting method, of over £1 billion. His Government also cut hospital expenditure by about one third. Is not the real reason why he is huffing and puffing at the Opposition Dispatch Box that his enthusiasm for putting his own economic policies before the electorate is the enthusiasm of a turkey looking forward to Christmas?
  Mr. Hattersley: I am grateful for the opportunity to have a drink of water.
  What I was talking about, and what the House will on all sides have to concentrate on sooner or later, is the level of unemployment which, as the hon. Member for Harlow ought to know, is a rather more serious matter than the intervention that he has just made. He will, I hope, know that Opposition Members and the country in general will not be fooled by the softening of the language of the Prime Minister and the Chancellor on these matters, but will be influenced only by a change of attitude and of policy.
  The pathetic package presented yesterday by the Paymaster General will make no substantial difference to the level of unemployment. The first half of the statement simply repeated previously announced palliatives and cosmetics. Then we turn to the latest contrivances invented by Lord Young.
  When Lord Young was appointed, we on the Opposition Benches said that his task was to obscure rather than to solve the problem. How right we were, as witness
  580
  the evidence of yesterday's package from the Paymaster General. With unemployment running at 3·5 million, he promised us that we are to have an expansion of unemployment clubs at which the unemployed can come together to discuss their problems. The unemployed know what their problem is. Their problem is the Government, a Government who base their job creation programme on a mistake and a slander. Virtually every one of the proposals outlined by the Paymaster General yesterday was based on the slander that things have to be done to persuade the unemployed to go to work.
  That is the reverse of the truth. The unemployed want to work. The unemployed do not want advice on how to go about the business of rehabilitating their attitudes towards work. They want jobs. Those jobs could be provided by a massive investment in roads, railways, sewers, new schools and hospitals and, above all, new housing.
  Mr. Patrick Nicholls: The right hon. Gentleman is obviously returning to the theme of blaming unemployment on the Government. Does he perhaps recall a speech by his hon. Friend the Member for Paisley, South (Mr. Buchan) in 1978, in which he accurately predicted the figure for unemployment as it exists today, said that it was due to demographic factors and added that any attempt to blame that on a Conservative or a Labour Government would be wrong?
  What has changed since then, apart from the fact that the right hon. Gentleman is now on the Opposition Benches and is clearly likely to stay there for some decades to come?
  Mr. Hattersley: The hon. Gentleman is to be congratulated on his perception, for I am blaming 2 million unemployed on the Conservatives. I am delighted that, after all these years, he has begun to understand that point. I propose to deal with the demographic point when I turn to the false claims made by the Prime Minister and others about how many jobs have been created in this country. If the hon. Gentleman will contain himself in patience, I promise the House that I will deal with that point exactly. At the moment, I am telling him and the House what we believe and what the majority of people in the country believe, that the best way to reduce unemployment is by concentrating available resources on public sector capital investment which, as well as reducing unemployment, will do jobs which, in the national interest, are in desperate need of being done.
  The Government's report, published only yesterday, said that we need to spend £20 billion on public sector housing repairs. Yesterday, we were promised £230 million. The difference between these two figures is wholly consistent with the Government's record on public and private housing.
  Speaking in this debate last Wednesday, the Prime Minister said that Labour could not hold a candle to the Government's record on housing. I thought that it might be worth a small comparison to see whether the Prime Minister on this occasion had made a boast that she could substantiate. Let me tell the House the figures on which, according to the Prime Minister, the Conservative record is such that we cannot hold a candle to it.
  Since 1979, public and private housing stock has increased by 1 million. In their five years in office, the Labour Government increased it by 1·5 million, an annual

  581
  increase in housing stock 50 per cent. better than the Conservative record of which the Prime Minister boasted. I can use the Prime Minister's phrase from another debate: we did better every year than they did in any year.
  Yesterday, the Chancellor could have begun to make amends for these six years of appalling levels of house construction. He could have provided money to build houses and to create jobs, but he did not choose to do so. No wonder the Paymaster General was shamefaced in his statement about unemployment, and no wonder he was confused during his performance on Newsnight on Monday, in which he claimed, as I understand even honest Ministers are required to claim, that the Government had achieved a growth rate of 3 per cent. It was pointed out to him that the real average growth since 1979 was 1·3 per cent. a year, to which the Paymaster General retorted, "You've chosen the period carefully". That was the lifetime of a whole Government.
  Mr. Gerald Howarth: Before the right hon. Gentleman leaves the question of public sector capital expenditure, will he tell us, when the sewers have been rebuilt and the new hospitals finished, what happens to all the people who have been temporarily employed on all these social programmes? Secondly, will he tell the House where the funds are to come from? If from the taxpayer, will he tell the taxpayer by how much? If from borrowing, will he tell industry by how much its interest rates will have to rise to finance it?
  Mr. Hattersley: Three points can be extracted from the hon. Gentleman's question. The first is on taxes, and I promise the House that I am coming to that. The second is on interest rates, and I promise the hon. Gentleman that we shall not maintain interest rates at uniquely high levels for a uniquely long period, which is the record of the present Chancellor. The third is what happens when we all have the decent house that we deserve, the roads are perfect and all the hospitals are in use. That is the process by which we generate some real growth. By investing in capital, one generates growth. By selling off capital, one does no more than promote the temporary consumer boom which is the object of the Chancellor's policy.
  I do not wish, however, to over-estimate the Government's achievements. I have mentioned a 1·3 per cent. growth during the Government's lifetime. Without the gratuitous bonus of North sea oil, growth under this Government would have been barely 0·75 per cent. a year. Before the Chancellor begins to take credit for North sea oil, let me tell him that the only connection North sea oil revenues have with the Government's current economic policy is that the policy wastes and dissipates North sea oil by spending every penny on the cost of unemployment—larger numbers of benefits, lost tax revenue—instead of using that money to put Britain back to work.
  Whenever we talk about putting Britain back to work, we are told by the Prime Minister, as we were told by the Chancellor yesterday, that there are in this country 675,000 new jobs which have been created as a result of Government policy. This is an attempt by the Government to switch the argument from unemployment to employment. For my part, it is a switch in which I am perfectly prepared to take part, because the assertion that this Government have created, or have caused to be created, 675,000 new jobs is simply not true.
  Even within the rules by which the Prime Minister attempts to justify her contention, the figures are wrong.
  582
  Nearly 40,000 of those so-called new jobs are part-time—perhaps only a few hours a week. We know from the Government's own statistics that the fall in full-time jobs over the period is 100,000. We have 100,000 fewer full-time jobs than two years ago, and the 675,000 is therefore made up either of part-time jobs or the self-employed. I say "either" because none of us knows the figure for the self-employed. There is no statistical basis on which it is calculated. There is simply a guess made by the Government, and that guess increases every time they want to boast about how well they have done on job creation.
  Even if we accept all this and believe—incredible though it may be—that 675,000 new jobs have been created by this Government, there are still 1 million fewer jobs in the economy than there were when they were elected. Do not let the hon. Member for Teignbridge (Mr. Nicholls) tell me that this is all due to demographic failure, to women coming back into the labour market and to a temporary bulge in the birth rate. There are now 1 million fewer jobs in the economy than in 1979, and that must be the result of economic policy.
  Mr. Nicholls: The point that I put to the right hon. Gentleman a few moments ago is precisely the same as the one that I shall now put. I was saying that one of his own colleagues—a previous Labour Minister—accurately predicted the unemployment figures as they exist today. He said that it was due to demographic factors. The right hon. Gentleman must now tell us what has changed since then, other than the fact that it now suits him to say something entirely different.
  Mr. Hattersley: Two questions immediately arise. If the hon. Gentleman, with his powers of perception and careful study of the speeches of Labour Ministers, knew that there would be an inevitable rise in unemployment, what were all those "Labour isn't working" posters about? Secondly, what is the demographic factor, the bulge in the birth rate and the pressure of women coming back to work that have lost 1 million jobs in the economy over the last six years? The hon. Gentleman should understand that that argument will not wash, and he does himself no service by copying the Prime Minister's peddling of this crude propaganda, because no one is any longer deceived by it. That is part of the Prime Minister's style, but it no longer deceives the country.
  I promised to answer the question on taxes. Last Wednesday the Prime Minister claimed that Labour would increase the tax paid by school teachers, nurses and metal workers. She based her claim on a grotesque misquotation of what I had said. It was a misquotation so grotesque that it is only reasonable to assume that it was intentional. I cannot believe that the Earl of Stockton would demean himself by behaving in that way, but while I do not accuse the Prime Minister of telling a lie, I can at least tell the truth about the taxes for the three groups that she picked out.
  She said that when Labour comes to power, school teachers, nurses and metal workers would on certain assumptions all be paying substantially increased rates of tax. That is simply not true. But we do not need to look into the crystal ball; we can examine the record for the three groups whom the Prime Minister chose to defend from high taxation.
  Each of those three groups has been faced with the burdens of substantial increases in indirect taxation, but on

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  direct taxation each has suffered very considerable tax increases over the past six years. On the Prime Minister's assumption, a school teacher now pays £9 a week more than when this Government were elected, a nurse £7 a week and a metal worker £8·50 a week.
  Mr. Lawson: Proportionately.
  Mr. Hattersley: As I heard what the Chancellor in his ignorance said, I should tell him that that is in real terms and is now proportionately more of their income than they paid in 1979.
  When the Chancellor asks such a question without knowing the answer, I wonder whether the Tory tax promises have been broken because of intention or simple incompetence. The figures that I have just given are the reality of the Tory tax promises. Having won twice on the promise of tax cuts, they have increased the national annual tax bill by £29 billion. They are now desperate not to fight the next election without the least pretence of keeping their word. They will therefore sell off British Gas and, in the Chancellor's own words, will use the money, to bring tax cuts forward. They will do so without knowing what will happen in three years' time to sustain their policy, without knowing how to make up the lost income from capital revenue, and without caring what happens after polling day.
  Mr. Gerald Howarth rose—
  Mr. Hattersley: I do not know whether I ought to give the Chancellor time to read the papers, but my final word is that in working this stratagem and in believing that a short-term bonanza can buy them votes, the Chancellor and the Government grieviously under-estimate the nature and character of the British people. The British people are more sensible than that, are less cynical than that and understand these matters better than the Government imagine. That is why they will certainly have no truck with yesterday's confidence trick.
  4.47 pm
  The Chancellor of the Exchequer (Mr. Nigel Lawson): The right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) today offered us another vivid illustration of the effectiveness of market incentives. His articles in Punch, for which he is handsomely paid, are always so much better than the speech he has just given us free of charge. If the right hon. Gentleman had his way and imposed his punitive taxes on those he calls "the bloody rich" who earn more than £20,000 a year, he would deprive himself of the incentive to go on writing his Punch column. We would all be the losers.
  It would not just be Punch columnists who would be driven to consider early retirement if they found themselves punished by the taxes proposed by the right hon. Gentleman, but I understand that he also has a remedy for that—he will make it not worth their while to retire either. Once the pensioners' savings have been handed over to his national investment bank, the prospect of retirement on secure income will look very uncertain indeed.
  I do not like to reopen wounds that have barely healed, but when the right hon. Gentleman was standing for the leadership of "that great movement of theirs" he said in his personal manifesto:
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  "We must know the cost of our programme and be prepared to explain the way in which the bills will be paid".
  Quite so! We are still waiting for the answer. We listened to the right hon. Gentleman's speech, but we did not hear that answer once. We shall continue to ask for it.
  By contrast, this is a Government who know their mind, a Government with a long-term strategy and the practical means of pushing it forward. The Gracious Speech admirably exemplified the strategy. The Government's aim is to follow the maximum of freedom within a framework of law and financial discipline. We believe in the freedom to earn and to spend, to set up businesses and to invest, to own the family home and a stake in one's firm and to trade at home and abroad.
  These freedoms should be cherished in themselves, but they are also the foundations of prosperity. The Labour party thinks little of them. It subordinates them to the collectivist impulse. That is why after five years of Labour rule these freedoms needed strengthening and why the economy had lost much of its dynamic force.
  The legislative programme in this Session has as its top priority the freedom of the individual to participate in wealth and enterprise. There is the legislation to expand the right to buy council homes. Some 870,000 houses and flats have already been sold to their tenants, and many more will follow as a result of the changes we intend to introduce.
  The financial services Bill will mark a major step forward in the regulation of our liberalised financial markets, and the building societies Bill will increase competition to the benefit of individual savers and borrowers. The Bill to reform shop opening hours is another which will expand individual freedoms and at the same time contribute to economic wellbeing. All these measures, and many more, have one clear aim: to expand individual freedoms and make our country a freer and more prosperous place in which to live.
  Mr. Eric S. Heffer: Can the right hon. Gentleman explain to my unemployed constituents what freedom they have under this Government to earn and to spend?
  Mr. Lawson: They have the same freedom as they have had under Governments of this country for many years, but I shall come in due course to unemployment. First, I wish to deal with privatisation because the right hon. Member for Sparkbrook dwelt at some length on the privatisation programme, which is central to the process that I have described. It is without precedent in this or any other country and it has been steadily gaining momentum. Right hon. and hon. Members on the Opposition Benches wish that privatisation would go away, and I understand their feelings. They recognise that it is a policy whose time has come. It is popular with the whole country and increasingly it is being emulated abroad—in Canada, Japan, Germany and even in Socialist France and Sweden. It is a policy whose economic rationale is not in doubt.
  I could not be more pleased that the right hon. Member for Sparkbrook selected this aspect of our programme as the target for his attack both yesterday and today. In doing so, he displays all the flair of a General Cardigan leading the Light Brigade into the valley of death: identify the enemy's strongest point and then send in your most lightly armed troops. The best that the right hon. Member for Sparkbrook can do is to complain, as he did today, that the

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  proceeds might be used to finance cuts in taxation—a curious example of trying to maintain that two rights make a wrong.
  The privatisation programme will continue and accelerate because of the benefits it brings to the nation in the form of increased enterprise, increased efficiency and increased employee and individual shareholding. The decision to privatise British Gas stands on its merits. The fiscal judgment is quite another matter, and one that I shall justify to the House in my Budget speech next year. There can be no doubt about the outstanding success of privatisation so far.
  We have transferred 20 per cent. of the state sector of industry that we inherited in 1979 into public ownership in its truest sense. All of those companies are doing well. In all of them the commitment to the future, the commitment to success, is stronger than ever before. The employees have demonstrated their commitment in no uncertain terms. Over a third of a million employees in nationalised industries have so far taken advantage of the opportunity to invest in their own company. And from British Aerospace, the first sale, onwards we have been attracting first-time investors to the stock exchange. The massive British Telecom issue alone acquired on flotation 2 million individual shareholders, of whom 1¾ million remain shareholders of BT. Half of them had never before in their lives held a share.
  Opposition Members have now taken to saying that privatisation is all very well, but what will we do for an encore? That was the burden of the right hon. Member for Sparkbrook's speech today. He also dealt with this point yesterday. I hate to disappoint him but there is no possibility of the privatisation programme running out of steam. British Telecom has paved the way for British Gas, and British Gas will pave the way for other candidates. And so it goes on. I could remind the House that the current cost value of the assets of nationalised industries is still over £90 billion. But I will make a promise to the right hon. Gentleman. He asks me what I will do when the privatisation programme is complete. This is my promise. If he is still shadow Chancellor at the end of the next Parliament, which his question presupposes, I will tell him the answer then.
  In the meanwhile, let me put an immediate question to him. Which privatised companies would a future Labour Government, if there were to be one, renationalise, and on what terms? Would they renationalise British Telecom, British Airways, British Aerospace, Britoil, the British Gas Corporation? Would the right hon. Member for Sparkbrook care to answer that question? I should be pleased to give way to him. [HON. MEMBERS: "Answer."] The right hon. Gentleman is coy, he is shy, he does not know what to say. But we shall continue to ask him the question so that he has time to think up an answer and tell us precisely which of those companies he would like to renationalise, and on what terms, because the nation and the House have a right to know.
  The charge that privatisation does long-term damage to public finance is absurd. Privatisation reduces the need to borrow and thus the burden of debt interest. Moreover, members of the Opposition—right hon. Members in particular—appear to forget that private sector companies and their shareholders pay tax. As their performance improves, the more tax they will pay. It is equally absurd to argue that the Government's scope for cutting taxes depends upon privatisation receipts.
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  The route to a sustained reduction in tax rates lies, as I stated very clearly yesterday, in firm control of public spending against a background of continued economic growth. My statement yesterday demonstrated that we are maintaining, and shall continue to maintain, that firm control. We are clearly achieving steady economic growth.
  As usual, however, the right hon. Member for Sparkbrook seeks to have it both ways. His own plans would involve a massive inflationary increase in spending and borrowing, yet he talks of fiscal irresponsibility at a time when the public sector borrowing requirement, even if there had been no privatisation proceeds at all, would this year be the lowest as a percentage of gross domestic product that it has been for 14 years—yes, lower even than in 1981–82 when the Opposition howled about the stringency of my predecessor's 1981 Budget. It is lower even than that.
  Mr. Stuart Bell: Will the right hon. Gentleman give way?
  Mr. Lawson: I would rather give way to the right hon. Member for Sparkbrook, but I will give way to his monkey.
  Mr. Bell: I must ask the Chancellor to withdraw that remark.
  Mr. Deputy Speaker (Mr. Harold Walker): Although the expression was clearly discourteous, it is not an expression that I ought to require the Chancellor to withdraw. It has been used in a previous debate. Does the hon. Member wish to pursue his intervention?
  Mr. Bell: The Chancellor referred to a public sector borrowing requirement of £8 billion. Is it not a fact that £1 billion of that £8 billion is due to the diminution in oil revenues? Is that diminution clue to the exchange rate for the dollar or because we have entered a period in which oil revenues will diminish?
  Mr. Lawson: I did not wish to upset the hon. Gentleman as he knows I like him, but I thought it was appropriate and he would enjoy it if I used a remark that Mr. Aneurin Bevan used about Mr. Selwyn Lloyd. In answer to the question, the reduction in oil revenues is as a result of the exchange rate against the dollar being different from what was envisaged at the time of the Budget.
  Rolling back the frontiers of the state sector of industry has meant increased opportunities for private ownership. In the same way, our policy of restraining public expenditure means increasing the freedom of working people to keep, spend, save and invest their own earnings.
  My statement to the House yesterday demonstrates the Government's continued success in restraining the growth of public spending. I was able to announce that expenditure has been contained within the cash totals that we set ourselves last July; that spending will be held broadly constant in real terms over the next three years; and that as a proportion of national output it will continue to decline, as it has in each year since 1982–83.
  I also draw the attention of the House to a new feature in the autumn statement—the charts, which show that those broad trends in public expenditure are not significantly altered even when privatisation proceeds are left out of account.

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  By the end of this financial year public spending will have been falling as a proportion of national output for three successive years. That is the longest consecutive decline since the 1950s. Yesterday's plans show that it is set to fall further over the next three years. That is already, I believe, making a major change to the performance of the British economy, creating room for enterprise and initiative. It will cause a still greater change in the years ahead.
  The right hon. Member for Sparkbrook spoke about taxation. Certainly, proper restraint in public spending is central to the success of economic policy. It is central to the growth of enterprise, to the expansion of the wealth-creating sector and to the creation of lasting jobs; central to rising living standards and to the control of inflation; and central to reducing the burden of tax—on incomes, where it stifles initiative and risk-taking, and on employment, where it destroys jobs, directly and immediately.
  The right hon. Member for Sparkbrook made his usual remarks about the growth of tax revenues since 1979. As I remarked in a sedentary intervention, and I am sorry that it was a sedentary intervention, Mr. Deputy Speaker, he seems to go on finding it astonishing that, as the economy grows and earnings rise, so do individuals' tax bills in money terms.
  The reason for the difference between the two Governments is this. Under this Government, real take-home pay has risen for people at all points on the earnings scale. For a married man on average earnings, that means a real increase in take-home pay of some 13 per cent. since 1979, compared with only a half of 1 per cent. under Labour. And what of the lower paid, for whom the right hon. Gentleman professes such concern? Under Labour, at only half average earnings, a man's take-home pay rose a little more—by some 4 per cent. Under this Government it has risen by 12 per cent.—three times as much.
  Mr. Hattersley: Is the Chancellor glad or sorry about the phenomenon that he has just described? He told the City of London, assembled for a banquet, that wages were rising too much.
  Mr. Lawson: The important point is that our unit labour costs do not rise too much. That is the point that I have made time and again.
  The Government's tax reductions have not been confined to income tax. We have abolished the national insurance surcharge—Labour's tax on jobs. Altogether, we have reduced taxes on employment from 14 per cent. to about 9 per cent. of total tax revenue.
  It is no good for the right hon. Gentleman to imply, as he sought to do this afternoon, that taxes are higher under this Government than they would have been under a Labour Government. No one in his right mind would believe that. No one will believe that the Labour party would have cut the basic rate, increased thresholds by 20 per cent. in real terms or abolished the national insurance surcharge, which it introduced. No, it would have put up taxes. It would have had to, to finance its profligate and unsustainable spending plans. There is, of course, an alternative, or so Labour Members think. They could have tried to borrow their way out of trouble. They had plenty of experience of that in the disastrous years up to 1976.
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  If—heaven forbid!—I had set the PSBR this year at 9¼ per cent. of GDP, as the right hon. Member for Leeds, East (Mr. Healey) did in 1975–76, we would have had a PSBR this year of £33 billion. No wonder the Labour Government had to go cap in hand to the International Monetary Fund. The contrast between the 1970s and today could not be more marked. The benefits of our policies of encouraging enterprise, initiative and individual freedom are now very clear.
  We were told that giving economic power back to the people—shareholder power, members' power within the trade unions—was a foolish gamble. Nothing could be further from the truth. For many years in this country we suffered from a hardening of the economic arteries. New business formation was slow; industrial relations were disastrous. The country could be, and regularly was, held to ransom by small groups of workers in positions of real or imagined industrial power. All that has changed.
  The number of strikes in British industry during the first nine months of this year was the lowest since well before the war. The whole trade union movement is undergoing a sea change in attitudes. The legislative measures that we introduced have now shown their worth. The unions have been given back to their members, and the members are telling their trade union bosses that they want to work and want their companies to succeed.
  The old "them and us" divisions within British industry, which bedevilled industrial relations for so long, are breaking down gradually. I have no doubt that the dramatic expansion of employee share ownership has been a major contributory factor. There are now around 1,000 all-employee share schemes in existence, involving around a million employees. There were just 30 such schemes when we took office in 1979. The initial value of shares distributed under all those schemes is now over £1 billion, and the number of employee shareholders continues to grow day by day.
  Last year's Finance Act allowed companies, for the first time, to establish discretionary share option schemes. They have seen an even more explosive growth. I can now tell the House that, a mere 18 months after the legislation, the number of approved schemes has just passed the 1,000 mark.
  Throughout the 1970s the Labour party talked and talked about industrial democracy, but it did nothing. We have acted to bring about the most direct and influential form of industrial democracy that there is. Perhaps that is slightly unfair on the right hon. Gentleman. Perhaps during its last term of office the Labour party was encouraging other forms of ownership—co-operatives, for example. Certainly the figures show that there were almost 300 co-operatives in the United Kingdom when Labour lost office. And the number now? More than 900. That growth in co-operatives, which I wholeheartedly welcome, is yet another aspect of the revival of the small business sector.
  We have been suffering during the 1980s from the lack of new business formation in the 1970s. It will take a while before we can see the full effect of what has happened to encourage their growth, but we know that the benefits are on the way. Look at the growth of new businesses. Business start-ups outstripped failures by 36,500 last year. That is a net addition of 100 new businesses for every day of the year—a sharp acceleration in the rate of new business creation, which was already at a high level from 1980 to 1983.

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  The Government are assisting that process in every way they can, because it has been demonstrated throughout the world, particularly in the United States and Japan, that countries with a strong, small business sector are best able to adapt to changing economic circumstances and to maintain high levels of employment.
  Mr. Michael Grylls: Will my right hon. Friend give way?
  Mr. Lawson: The business expansion scheme has made a particularly important contribution to the revitalisation of small businesses in the past three years.
  The latest results we have for 1983–84, the first year of the scheme, show that 715 companies raised BES finance of more than £100 million, from about 20,000 investors. Although the following year's results are not yet complete, we already know of more than 500 companies that have again raised BES finance totalling more than £100 million. The final figures for 1984–85 will almost certainly show a substantial increase over 1983–84, the first year of the scheme. Much of this money is going to small-risk enterprises, as the scheme intended it should. Business expansion scheme money is only part of a huge growth of the venture capital industry during the past five years. In 1979 a mere £10 million of venture capital was invested in this country. Last year it was more than £300 million. This is true seed corn investment and the key to the jobs of tomorrow.
  It is a great pity that the right hon. Member for Sparkbrook has not noticed this development. If he had, he might have saved himself the embarrassment that his proposal for a national investment bank has caused him. The right hon. Gentleman wishes to create a state-owned fund run by out-of-work bankers and union bosses, backed by money siphoned out of the pension funds—a political slush fund. He wishes to find investments which the rest of the financial community have failed to spot.
  There are those who say that this is a return to the old game of trying to pick winners, but that is an unfair criticism of the right hon. Member because he has made it clear that:
  "it's almost impossible for the Government to pick winners".
  The national investment bank would be in the business of picking losers. I have every confidence that it would find them, and lose the pensioners' money in the process.
  Mr. Grylls: My right hon. Friend the Chancellor has rightly stressed the importance of the capital venture market and its growth in the successful creation of new firms. The business expansion scheme has been successful. Will my right hon. Friend consider whether people could take advantage of the BES to invest in their own companies? I know that that is a problem but consideration of the matter would fit in with the Government's other policies and such provision would be helpful and popular.
  Mr. Lawson: I intend to look into that and other aspects of the BES in the light of the Peat Marwick report. If there are to be changes, I shall announce them in next year's Budget.
  At the outset I stressed the twin themes of the Gracious Speech—maximum freedom within a framework of law and financial discipline. The results of that strategy are already impressive—steady growth of output and declining inflation. The right hon. Member for Sparkbrook has once again been through his list of selective statistics
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  in an attempt to denigrate that success. The right hon. Gentleman spoke about the performance of manufacturing output and referred to the report of the House of Lords Select Committee on Overseas Trade. It is worth demonstrating the quality of the report's reasoning. I am not saying that all of its conclusions are wrong but on the whole it does not form a helpful contribution to the debate. In paragraph 72 the report states:
  "But sustainable growth has not been possible and will not be possible without a favourable trade balance in manufactures".
  That is bad luck on the United States with a trade deficit on manufactures—no growth for the United States. It is even worse luck on the world because there is no way that the world can achieve a surplus in manufacturing.
  Paragraph 87 of the report states:
  "The committee have received devastating evidence from the Association of British Chambers of Commerce (ABCC) on decline in our manufacturing industries … between 198C and 1983 they estimate that assets and capacity of manufacturing industry fell by 24 per cent".
  The figures given are for only one company, and they are wrong. The share of manufacturing in total output has fallen in the United Kingdom, but although some capacity has been lost in manufacturing, much new capacity has been created. There is no clear evidence to show a loss of capacity between 1980 and 1983. However, manufacturing investment last year and this year combined has risen in real terms by more than 25 per cent.
  I agree that the share of total United Kingdom output of manufacturing has fallen, but that is nothing new—it has been a feature of the past 25 years. It is not peculiar to the United Kingdom. The same has happened in most other major industrial countries, such as Germany and the United States. What matters is manufacturing's future, which depends pre-eminently on its productivity and profitability. In terms of productivity, growth and profitability alike, manufacturing industry under the Government has done far better than it ever did under Labour. Total national output is well ahead of what it was when we first took office and has been growing for almost five years now at an average of 3 per cent. a year.
  The right hon. Member for Sparkbrook also seems to be concerned about our investment performance. Despite the world recession, the level of total fixed investment in the United Kingdom in 1985 looks like turning out some 9 per cent. higher in real terms than when we first took office. How does that compare with the Labour Government? They just about managed to achieve an increase in fixed investment of 1 per cent. They are in no position to preach about capital investment.
  What about the important matters that the right hon. Gentleman chooses not to discuss? The inflation rate next year is likely to be not merely better than that achieved by the previous Labour Government; it is likely to be little more than half the best figure they achieved in all of their years in office.
  Of course, we all recognise that we cannot be satisfied with the way in which the economy is operating when we are faced with unemployment at its current level. Unemployment is a human and social problem of the first importance—to say nothing of the waste. But it is a cruel deception to say that by borrowing and spending more the Government could cut unemployment overnight. If that were true, there would be no unemployment in Europe or anywhere else today. There is nothing easier for a Government than to borrow and spend other people's money. The answer to the problem of unemployment lies

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  in the firm pursuit of anti-inflationary policies, and continued strenuous and painstaking efforts to improve the flexibility of our markets, especially the labour market.
  There are already signs of success. There are about 600,000 more people in work in the United Kingdom now than there were when we were returned to Office in June 1983. Opposition Members are always infuriated by this statistic. They try to claim that these jobs are not real jobs. They imply that self-employment, which has grown explosively in recent years, and women's jobs, are somehow less valuable to the community than other types of work. We reject that view. Our labour markets are responding to changing social patterns. Many married women want part-time employment outside the home. For many people, as they bring up children, that is just what they need to balance the family budget and allow them sufficient time at home. I see no reason to sneer at them for doing so.
  Changes in employment behaviour are part of the increased flexibility we need if the economy is to continue to grow.
  Mr. Hattersley: The Chancellor has got the script wrong. He should not say that there are 675,000 more jobs. He should say 675,000 new jobs. That is not true either, but that is the propaganda line that he should be taking.
  Mr. Lawson: The right hon. Gentleman seems to have as much difficulty listening as he does understanding. I said that there are about 600,000 more people in work, and that is true.
  Mr. Hattersley: We want more jobs.
  Mr. Lawson: There are more people in work. Hansard will record that very clearly.
  Unemployment has recently started to show welcome signs of a reduction. Last month's small fall was further encouraging evidence that the prospects for the second part of this Parliament are considerably better than for the first. The Government intend to maintain the same policy framework that has produced the impressive results for output, inflation, investment, balance of payments, productivity and employment that I have already described. That is the framework set out in the medium-term financial strategy, and in my Budget next year I shall again set out the guidelines for the medium-term financial strategy.
  Many hon. Members are still anxious about the international financial scene. They see growing protectionism and the persistent problem of international debt as two clear risks to the generally favourable world scene. The Government are trying to resolve those problems. In the past two months there have been two significant developments. First, the group of five meeting, which I attended in New York on 22 September, produced the so-called Plaza agreement, which addressed itslf to the threat of protectionism. The United States Administration showed their concern about the high level of the dollar and their determination to act to correct it. A concrete and practical agreement was reached collectively to take the necessary action to secure adjustments in the exchange rates between the dollar and other major currencies.
  The results of that meeting are there for all to see. Since 22 December the dollar has depreciated by 14 per cent.
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  against the yen, by 8 per cent. against the deutschemark and by 3 per cent. against sterling. Further action will be needed, not least to reduce the huge fiscal deficit in the United States and to remove obstacles to the free operation of financial and other markets in Japan. The threat of protectionism has thus receded slightly. There has been a change of mood in the United States Congress and there must now be a far better chance that if protectionist legislation is proposed it will not be put into effect.
  The Plaza agreement has shown the potential for increased co-operation among countries which follow the same economic strategy.
  Mr. Anthony Beaumont-Dark: How can the Government hope to solve America's problems when America shows no willingness to solve its own problems? The United States had a $15 billion deficit in one month and now has a total deficit of $200 billion. The Americans want the rest of the world to solve their problems because they will not impose the financial stringency which my right hon. Friend the Chancellor considers to be the hallmark of Government policy. Why is it right for the Americans to continue spending while sterling and our interest rates are kept high to help them when they will not help themselves because they fear the consequences?
  Mr. Lawson: I hope that my hon. Friend the Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) will be able to catch your eye, Mr. Deputy Speaker, and develop his arguments later in the debate. In all seriousness, the threat of protectionism is not just America's problem but the world's problem and it is right that we should combine to combat it.
  The United States Treasury Secretary, Mr. Jim Baker, has launched an important new initiative to deal with the threat of international debt. He has proposed a new role for the World Bank and the regional development banks. Those banks would be provided with additional capital to support increased lending, but that lending would be linked to, and conditional upon, sound and realistic economic policies in the recipient countries. Her Majesty's Government fully support this initiative, which offers a sensible way forward for countries in the grip of severe financial difficulties. I believe that it makes good sense to develop the role of the World Bank in this way.
  Let me make one thing clear. It cannot and should not be for Governments to determine the attitudes of commercial banks towards the prospects of debtor countries or to tell them what decisions they should take. Those decisions, the level of individual banks' exposure to particular borrowers and the management of the banks' portfolios, must remain theirs and theirs alone, within the proper constraints set by their supervisory authorities. Both those international developments will be welcomed by the House. They increase the chance that we shall continue to enjoy a combination of steady growth and falling inflation unknown in this country for a generation.
  We are now close to the mid-point of this Parliament. Since the British people returned us to office with an increased majority at the last general election the Government have amply justified their confidence. Inflation has averaged 5½ per cent. per year, economic growth has been running at 3½ per cent. per year, and manufacturing output has risen by more than 3 per cent. per year.

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  The House will wish to know how I see the prospects for the second half of this Parliament. I am afraid that I have to disappoint the Opposition and say that the prospects are rather good. I hope that hon. Members can grit their teeth and get over that. Inflation is now firmly on a downward path and should be under 4 per cent. by the middle of next year. The CBI's latest survey reports that cost pressures on industry are the weakest for 20 years and the outlook for prices is the best since the 1960s. Inflation is firmly under control, and steady growth will persist. There is no sign of the long-heralded downturn on the horizon, provided that we continue to pursue cautious, sensible financial policies in combination with our other measures to encourage enterprise.
  The measures that we shall be bringing before the House this Session represent a broadening and a deepening of the strategy that we have followed for the past six years. They will move us steadily and resolutely towards greater prosperity and a better society in which, within the law and within the overarching framework of financial discipline, each individual can exploit his or her talents to the full.
  5.28 pm
  Dr. David Owen: I beg to move, at the end of the Question, to add:
  But humbly regret that the Gracious Speech contains no evidence that the Government seriously plans to tackle Britain's most fundamental problems; believes that further action is needed to stimulate manufacturing industry through a cut in interest rates and a more competitive exchange rate via sterling's entry into the exchange rate mechanism of the European Monetary System; and calls on the Government to seek a reduction in unemployment through selective capital investment, a fair and durable incomes strategy, lower employers' National Insurance contributions, and an expansion of the community programme and skill training.
  The amendment draws the attention of the House to the Government's failure to tackle the most fundamental problems in Britain.
  On the first day of debate on the Gracious Speech, the Prime Minister devoted the latter part of her speech—that was the part that the newspapers highlighted—to law and order. In her speech the Prime Minister embarked on a course that I hope the Government will not pursue—I am glad that the Home Secretary did not pursue it in his speech—which appeared deeply to polarise the Government and the Labour party. The Prime Minister tries to paint the Conservative party as the party of the police and the Labour party as the anti-police party. There are enough genuine divisions in British politics without seeking to exacerbate a division over the police force.
  The debate on crime revealed the seriousness of the position. The figures for violent crime, crime involving firearms and arson are all now at record levels. This betokens a sense of decline not just in the inner cities but in the values of this country, and that is causing much concern. The declining social scene revealed by the raw crime statistics must be placed beside a record of serious economic decline.
  Had the House debated this Gracious Speech in 1950, Britain would have been the third richest country in the world, with an average standard of living exceeded only by the United States and Switzerland. We were then a relatively strong economic power. Britain is now 19th in the industrial league table and we are now in the third league of industrial nations. In 1985, six years into this Government, Italy has surpassed the average standard of living in Britain. On present trends, despite the
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  Chancellor's optimism, it is likely that by the early 1990s Spain will have a higher average standard of living than Britain. In the next two to three years East Germany may surpass us.
  That is the background of our economic decline—of Toxteth, Brixton, Handsworth and Tottenham. They are scenes of violence which when seen from abroad on TV are not totally dissimilar—though we may not like to face it—to some of the scenes of violence we have seen in South Africa. We must view the realities. The Chancellor may not like to hear it, but one of the characteristics of his period in office is his blithe disregard for the social consequences and the scarring of generations to come resulting from appalling unemployment.
  A clear divide is beginning to emerge in British politics. It is certainly not a divide which cuts straight across the House, but cuts deeply into the Conservative party. It is personified by the Chancellor and the Prime Minister, who clearly believe that the next election can be won even with high levels of unemployment, and that the crucial thing is to address the aspirations and dreams of the predominantly Conservative electorate—those in work—for whom it is thought the most crucial thing is to cut the standard rate of income tax, give them a higher standard of living and create the sort of consumer boom at which the Conservative party is a past master.
  Before we extol the merits of Lord Stockton, I should mention that I remember spending many years as a prospective candidate decrying the 13 wasted years of Tory misrule. Lord Stockton was then known by the rather different name of "Supermac". He could have taught even the Chancellor of the Exchequer a thing or two about how to manipulate the economy to produce a consumer boom prior to an election.
  The Chancellor will not lecture us any more about the public sector borrowing requirement, and M3 will again be what it is for most people in this country—a motorway. The monetarist statistics to which we have had to listen and the lectures from the Prime Minister on the fiscal probity of this Government are a thing of the past. We are now beginning to see a relaxation of the fiscal stance in order to produce the same candy floss consumer boom that we experienced from Conservative Governments through the fifties and early sixties. The only problem then was that Reggie Maudling got his timing wrong.
  Our criticism of the Chancellor of the Exchequer is not that he has relaxed his fiscal stance; we have been urging him to do that for many years. It is not that he has relaxed his public sector borrowing requirement; we have also been urging that for many years. What we criticise is that the direction of the relaxation is not towards resolving our deep-seated economic problems; it is not to use the assets from sales to build up other assets; it is not to use the proceeds from British Gas to try to rebuild the manufacturing sector which was savagely destroyed as a result of the exchange rate policy pursued by the Chancellor when he was Financial Secretary to the Treasury and by the then Chancellor in 1980–81.
  The Government intend to use those assets to massage the electorate. The truth about the Chancellor's strategy, which is of course wholly identified with the Prime Minister, is not that it is an economic strategy—it is an electoral strategy. The Budget he is preparing will never again be called a Budget for jobs; it will be a Budget for votes. Towards the end of the year the rate of

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  unemployment will probably move down slightly. That is possible, and I certainly hope that towards the end of 1986 and in early 1987 we will see a real fall in unemployment. I will rejoice if that is the case. However, if we are looking to the Government to mount a Serious attack on unemployment and to face the devastation that has occurred in our northern industrial towns; if we are looking to them to try to restore, revitalise and regenerate the inner cities or for hope for young school leavers that they will not spend three or four years without a job; or for investment in higher education and science and in the skilled training which is the only real asset we can build up for the next century, we will look in vain.
  The Government are not seeking to restore the real strength of the economy or to prepare for the day when the oil revenues start to decline. That is the real indictment of the Chancellor and the Prime Minister. It is as if they do not wish to face the reality of economic decline. It is as if they do not want to use the fortunate circumstances of the present, when we still have quite substantial oil revenues. Looking at their policies for privatisation, one finds that it is not as if they are prepared to analyse the real purpose of privatisation.
  We have yet to see the legislation which the Secretary of State for Energy is to produce. Will we see a real regulation which will try to protect the consumer from the monopoly power of British Gas? The Chancellor says yes. I hope that he is right. Will we see a freeing up and a creation as far as possible of competition? Of course, the trouble is that to do that would reduce the attractiveness of the sale of British Gas. There is a dilemma here and I hope the consumer interest and the competitive and strong economic interest triumphs. We will ask, "Where is that money going to be spent?" Is it going to be spent on improvements to the infrastructure that are still demanded by many of the outside critics of the Government, whether they be the CBI or British industry, or is it going to be spent, as the Chancellor hints and as Tory Back Benchers appear to want, on a reduction of the standard rate? There is even a division of opinion about whether or not it should be used to take more people out of taxation.
  A deep and almost moral argument will go on in the country over the next couple of years. The Chancellor of the Exchequer and the Prime Minister have misjudged the views of even the traditional Conservative voter. The Chancellor will find in the south of England just as much as in the midlands and the north a sense of deep anxiety among the people about how we ought to be diverting our resources. Even those with a job who are reasonably well off will question the case that they should be made slightly better off while they see millions of their fellow citizens without a job. The Government have a particularly cynical and rather too market-oriented view of their fellow men and women if they believe that votes are going to be bought at the next election in quite the same cynical way as they were bought in the fifties and early sixties. [AN HON. MEMBER: "Bought by your party."]
  Not many people would argue that votes were bought by the 1979 Government. They were lost by that Government, not bought. Whatever else was being done in 1979, votes were not being bought. The 1979 election defeat stemmed more than anything from the fact that "Labour was not working". That was the headline, and a very effective attack was made on that Government
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  because unemployment was then over 1 million. Did anybody believe in 1979, even those Conservatives who voted for the Government, that unemployment would rise to 3·5 million—or 4 million if we take the true, adjusted figures? Not many people thought that. If many people had thought that that would be the consequence of voting for the Tories, they would have hesitated.
  Perhaps it is perfectly open and reasonable to argue that the Chancellor and Prime Minister are right, that the people do not want to be warned of economic decline or to face Britain's real position in the world. Perhaps they do not want to face the realities of crime and drug addiction in our midst or the despair and disillusionment that exists in all too many families up and down the country. Perhaps the Government believe that votes can be bought and that all that is necessary is to generate again the candy floss society, putting the emphasis on private affluence and allowing public squalor to continue.
  The Prime Minister has made a major political misjudgment. I shall relish the ensuing political argument, because I believe that it is about time that we said to the people, "Your responsibility is to forgo those tax cuts." Those who have work and who are reasonably prosperous should tell the Government, "We want you to invest for the future because we are worried that oil revenues will start to decrease in the early 1990s." I do not believe that oil revenues will decrease as quickly as some people expect, and there will still be substantial gas reserves. But people have become more conscious of the vulnerability of our economy in the medium and long term, and with it the standing of Britain in the European Community and the world. A growing body of Conservative voters will find the style of the Chancellor and the Prime Minister deeply unattractive, and we will relish the challenge of gaining their votes.
  Mr. Tim Yeo: Does the right hon. Gentleman recognise that British voters know that our economic problems and the causes of our decline are rooted in the excessive trade union power which the Government of which he was a member fully supported, and in the investment measures which his Government fully supported? Those matters must be resolved if we are to reverse our economic decline, and the fact that the Government have started to resolve those problems is reflected in our present high investment and the fact that growth is increasing while inflation is decreasing.
  Dr. Owen: Great mistakes have been made in the economic management and government of the country through the 1950s, 1960s, 1970s and 1980s. If none of us has the capacity to learn from some of those mistakes, whichever Bench he or she sits on, heaven help Britain in the next century. I have certainly learnt from some of the mistakes which I helped to make, and I am not ashamed to say so. Furthermore, 64 per cent. of the members of the Social Democratic party were not previously members of any political party, Conservative, Labour or Liberal. It is a wholly new political force. When those members listen to some of the sterile debates in the House and outside, they wonder whether we will ever learn or whether we will ever think afresh and anew. Is the Chancellor prepared to learn from the experience of 1980 and 1981?
  Mr. Lawson: Yes.
  Dr. Owen: He says, "Yes," and I believe that he is right to say that inflation will be kept down. But what

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  mechanism is he using to keep down inflation? The present high interest rates will devastate manufacturing industry even further. Another mechanism is the unrealistically high exchange rate. Apart from his prejudice towards the idea, he does not want Britain to join the EMS because he knows that the present rate is far too high. Britain needs a competitive exchange rate if its manufacturing industry is to prosper.
  Mr. Lawson: Inflation would increase.
  Dr. Owen: The Chancellor is right. If we reduce the exchange rate to a realistic level for our manufacturing industry, inflation will be affected. That is a great worry. We should not go into the EMS above about 72 to the basket of currencies; it is currently running at 79 and I would prefer it if we could go in lower. It would be much better to enter the EMS at a rate that we can hold and sustain. I believe, too, that a stable exchange rate would be of inestimable help to British industry. One way to reach a more realistic exchange rate would be to reduce our extraordinarily high interest rates. But the Chancellor will not do that because he is afraid that it might increase inflation. It appears that he is prepared to pay almost any price to keep inflation down.
  The Chancellor is right to be worried about inflation. Anyone who believes that we can increase it lightly is wrong. But on the other side of the equation is our tremendous wasted capacity. I am referring not only to the 3·5 million people unemployed, but to our incapacity to rebuild our manufacturing industry, which is essential if our prosperity is to be guaranteed into the next century. Of course, we can and rightly do support other industries. I welcome the modest measures to help tourism and the service industries, but time and again the Government ask manufacturing industry to pay the heaviest price.
  I would like employers' costs to decrease further, which is why the SDP advocates a reduction in the national insurance contribution. I do not like the fact that the employment measures—some of them desirable—announced by the Paymaster General yesterday must be financed by industry. Everything should be done to help to keep down unit costs and to keep Britain competitive—[Interruption.] The Chancellor may laugh, but one of the most worrying signs is the extent to which Britain is losing its competitive edge—something to which the CBI drew attention recently. It is no use comparing Britain now with the Britain of the past; if we compare ourselves with our Western competitors, we can see that we are losing our competitive edge.
  I hope that the Chancellor will not repeat in 1986 the folly of 1980 and 1981: that to hold inflation down he will not saddle British industry with a long period of uncompetitive exchange rates and too high interest rates. If we have to pay the price of slightly increased inflation, I am prepared to pay it. The alliance will discuss the necessity for an incomes strategy to grapple with the problem. Private sector pay is increasing at about 8 per cent. a year—
  Mr. Yeo: That is going back to the incomes policy of the 1960s.
  Dr. Owen: No, it is not going back to the 1960s. We should try to learn from some of the mistakes of those incomes policies. We must try to retain competitive market pressure in the private sector, but, with an
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  understanding to bargain within a certain range, competitive bargaining can be highly advantageous. That is what happens in many European countries. The "concertation" among unions, management and Governments in many western European countries has been beneficial in allowing them to expand, to reduce unemployment and to have a proper regard for the consequences of extremely high wages in some key sectors.
  The key is to justify high wages through productivity. It is no use the Chancellor continuing without a sensible incomes strategy for the public sector. As grievances abound and unfairnesses multiply, we shall need an incomes strategy that embraces the public and private sectors. I do not wish to return to statutory controls; we know the difficulties and anomalies that they create. But to ignore the need for an incomes strategy, as the Government have tried to do in some areas, and then arbitrarily interfere in the sector which they most closely control—the public sector—is a recipe for division and for inefficiency. Market forces have not yet controlled the movement of wages from the private sector.
  The Chancellor will ignore what I am saying, because he will not take risks with inflation, do anything serious about unemployment or markedly reduce interest rates. He is prepared to continue with our present high exchange rate. But I hope that he will realise from the comments that have been made on his announcement yesterday the unease that exists, not just in the City but in industry generally. His autumn statement was not received with great acclamation. "Creative accounting" is the nicest criticism used about it. I saw the description "dodgy" used in one newspaper that normally supports the Conservative party. We all know that the Chancellor is dodgy when quoting statistics and making predictions. He has an unparalleled record of failing to anticipate the facts, whether on unemployment, inflation or especially interest rates. He is wrong as frequently as he is right.
  However, the Chancellor is right to claim credit for some things. As my right hon. Friend the Member for Glasgow, Hillhead (Mr. Jenkins) said yesterday, the economy is not altogether bleak and there are some good signs. But our underlying weaknesses, whether social or economic, are not being tackled. All the signs are that the Government are heading for a rather cynical election ploy. They believe that, if they can put more money into the pockets of their traditional voters, their dissatisfactions will disappear and the Conservative party will be returned, it hopes, for a third term of office. The Government underestimate their own supporters and the morality, altruism and generosity that still exist in the British people.
  We now see Conservative wets, like the Secretary of State for Energy, adopting privatisation. It seems to be a necessary move in the struggle for the leadership of the Conservative party. The Secretary of State for Defence is privatising the dockyards against the recommendations of the Select Committee on Defence and the Public Accounts Committee. Such proposals are of little value to the real economy but everything of value to the dogmatism that seems to be a necessary part of aspirations to Tory leadership.
  The Chancellor appears to have no such aspirations and, watching the Government Benches when he speaks with his usual rudeness to most of his hon. Friends, I know that there is no need for any of us to fear that he is a candidate for the leadership. However, we fear that his

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  period of office will hasten the decline of the British economy and exacerbate the social tensions that already exist and to which the Government should be addressing themselves.
  5.51 pm
  Mr. Edward Heath: The Gracious Speech is a comprehensive survey of Government policy, but the way in which we debate it allows it to become compartmentalised. We take each aspect of it separately for a day. However, in his closing words, my right hon. Friend the Chancellor moved on to the international sphere, certainly in as far as it affected economic affairs. He pointed to two important developments in the past few months, both of them undertaken by Secretary of the Treasury Baker in the United States.
  In the past two months, there have been four major developments—the two mentioned by my right hon. Friend, plus the arrangements for the summit which is to take place shortly and the movement of my right hon. Friends the Prime Minister and the Chancellor and the Government further away from dogma and into pragmatism. All four interlink. I have become more and more impressed by the fact that in the 1980s we see that all of these aspects are irretrievably interlocked and one cannot deal with any one of them without dealing with the others.
  The summit is of vital importance economically because of the burden of defence expenditure on the United States and its allies, as well as on the Eastern bloc. For that reason alone, let alone the danger of the arms race, it is in the interests of both East and West to reach a solid agreement about the limitation of arms. Therefore, it is not enough to wish the President well when he has his dialogue with Mr. Gorbachev in Geneva. What is required is a firm decision at that summit, by both men, on the principles of the limitation of arms, on which they will then embark. That is absolutely essential in the interests of the West.
  Having agreed on the principles, the President and Mr. Gorbachev should then delegate to advisers, trusted not only by themselves but by those also taking part in the negotiations, the working out of the detail of the agreement that they wish to reach. This happened in 1963 with the first test ban agreement, the first of the post-war agreements between the super powers, and the one in which Britain was involved, the succeeding agreements of the non-proliferation agreement, the agreement on no testing on the sea bed—when I was Prime Minister—and the first and second SALT agreements.
  We shall never get an agreement on these intricate matters with 150 officials sitting around the table in Geneva. We shall get agreement only by the principals settling the basis and then detailing those who will work them out. In 1963, Averell Harriman represented the President. He was trusted in Moscow because he had been ambassador there during the war. Lord Hailsham was asked by the Prime Minister to represent him, and he was trusted by the Americans because he has an American mother. Mr. Gromyko was was asked by the Russians because there was nobody else, and he was always there. In 14 days, those three worked out the first test ban treaty, which was signed in Moscow. I went there with Lord Home. That is the importance of a summit and that is what
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  should and, I hope, will happen on this occasion. However, I must confess that I have little confidence in it doing so.
  That brings us to the international economic situation. Some 29 per cent. of the United States budget, and 13 per cent. of our budget, is devoted to defence. Even with a loyal ally, there is a difference. The burden is simply immense, and has led to the large American budget deficit that has already been mentioned. That requires high interest rates, which in turn produce an uncompetitive dollar height. That means that a vast trade deficit is accumulated. In addition, the developing world has to pay high interest rates, and the burden on it is already intolerable. Therefore, there is a direct connection between the military and political budget and the economic situation in the United States, with a high budget deficit, a high trade deficit, high interest rates and the impact not only on the developing countries but on us in Europe and the rest of the world.
  What will happen about those factors? In the light of what I have said about the summit, I cannot see that there will be any basic change in those aspects of the United States economic situation. The economy is wavering there and we shall not see substantial growth in it. Therefore, we all face the problem of the difference between the President and the Congress and what can be done about the budget deficit. As long as that remains, there will be high United States interest rates.
  Therefore, it was an important development when the Secretary of the Treasury called the five together to try to find a way to reduce the strength of the dollar. My hon. Friends would term this as devaluation, and therefore deplorable. However, we should welcome it if the United States decides that it can devalue the dollar. That is the only way to try to deal with its trading position. By dealing with that, one can deal with protectionism. When sterling went down at the beginning of the year from $1·30 to $1·05, did anybody condemn my right hon. Friend the Chancellor for devaluation? No, nobody did.
  Mr. Yeo: The United States has the most massive trade deficit in world history. The British economy is running at a substantial trade surplus and that is why devaluation is appropriate for America but not for us.
  Mr. Heath: To talk in terms of devaluation with floating currencies involves determining at what level we can effectively trade in sterling. We must have regard to that, just as the United States should be moving into a dollar position at which it can redress its trade balance. If we can achieve that for sterling, we shall be doing a good thing.
  I come now to the nature of the summit to get agreement to deal with the economic affairs. There must be no attempt to link any arrangement about armaments with any other factor. In 1963 we did not do so and we did not do so in any of the succeeding negotiations. To attempt to link the Geneva armaments talks with freedom in the Soviet Union or with Afghanistan or Latin America is doomed to failure automatically. One can deal with such problems in other forums. The Helsinki agreement deals with human rights, and there has been a review conference on that recently. There is the United Nations for other problems, and regional arrangements for central America. Therefore, any attempt to have a general agreement on all of these

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  spheres or to put armaments in the context of individual rights is dooming the conference to failure, which I hope will not happen.
  The situation in the developing world is deteriorating rapidly, and is bound to affect us as an exporting country. Twenty three per cent. of the exports of the developing world are used solely in the repayment of debt and the payment of interest after all reconstruction. That is bound to lead to reduced imports, and a reduction in their standard of living, and those reduced imports will affect us as a manufacturing country.
  For the first time in the first quarter of this year the flow of capital was reversed. Instead of capital going from the developed richer world to the developing countries, it went from the developing countries, the poor, back to the rich. That is continuing, and is a fatally damaging movement. What is more—this ties up with the concluding words of the Chancellor of the Exchequer—that movement ties up with the position in banking. Some people say that that movement will enable the banks, which are getting payment of interest and repayment of debt, to invest in other more profitable, more useful, more valuable and more interesting projects. However, that is not happening. The decisions are, rightly, left to the banks. The banks, having felt that they made mistakes in earlier years, are over-reacting and not putting that money into useful capital investment. Therefore, that represents a loss to the developing world, and to the trade of both developed and developing countries.
  It is right to leave the decisions to the banking world, but I would not go so far as to say that nothing should be done to help commercial banks out of difficulties. I do not think that the Chancellor on principle can argue that that should never happen. The proper structuring of the debt burden can be done only if some burden is taken from the commercial banks, for which they must pay, by central banks, and if the international institutions take some burden from the central banks. The International Monetary Fund can do that with an issue of special drawing rights.
  That is why the other initiative of Secretary of the Treasury Baker is so important. It is the proposal to provide $30 billion over three years to help the Third world in its indebtedness. That is a complete reversal of American policy, as the American Government openly admit. I sometimes wish that the Chancellor would follow the example of the Secretary of the Treasury. We can now urge other developed countries to follow his example. Thirty billion dollars will not be enough to deal with the position. In 1980 the Brandt Commission report recognised that $70 billion was required, and by now we must need nearly $100 billion if restructuring is to be successful and if we are to create the demand that we in the developed world want for our exports.
  Many of the changes that the Chancellor announced in his statement yesterday are to be welcomed, particularly those which involve a change of attitude and approach. He is right to be proud of the achievements that he and his predecessor have brought about. His emphasis yesterday that he and the Government feel that they are getting nearer to 1973, 1972 and 1971 was impressive. They have every right to take pride in that because many of them took part at the time and helped in those achievements.
  The Chancellor has nothing to report regarding manufacturing industry. Both investment and output is less than in 1979, and far less than in 1973, which is to be regretted. On unemployment, the contrast is between
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  580,000 and, to talk in round figures, 3,580,000. Although I welcome what the Chancellor has done, I cannot help comparing it with what is now widely acknowledged to be required. I agree with the Secretary of State for the Environment that what is needed cannot be done overnight. One can regret the speed at which it has happened, for example, in housing, but more can and should be done in that respect. Again, that elicits the cries of "Inflation!", or "Reflation means inflation!", which, by definition, is nonsense, or, "We can never borrow money or have debts". Even The Sun, well informed as it is, seems to take the view that we borrow nothing at present. The Chancellor should write to the editor and say that if he wants a knighthood he must recognise that there is a public sector borrowing requirement which is being satisfied, although it may not always be at the level that he wishes.
  The question is one of balance, which is pragmatism. How much should we do in these spheres? We should be doing still more, and because of the amount of resources available, that will not lead to roaring inflation.
  I now turn to one aspect of manufacturing which worries me. I do not see how the Chancellor's forecast of a fall in inflation to his projected level can occur by the middle of next year unless he keeps sterling high in dollar terms or makes it even higher. That will require interest rates to remain where they are or to become higher. They are high enough already. What is the consequence of that for industry? Every industrialist—not only the Confederation of British Industry as an organisation—says that he is doubtful whether his industry can possibly compete effectively for long with sterling at its present level. Immediately the shout goes up, "What would you have it at?" Industrialists will reply that they want it at £1·20 to the dollar, and lower for the mark, if the Chancellor likes to talk to them. The Lords Committee talked frankly to them—and the Government were a little unwise to react quite so quickly to an excellent report, particularly as it is on a theme on which they cannot produce answers, that is, the decline of the manufacturing sector. Sterling must be lower if we are to be effective in the export markets. As we are now in a pragmatic period, the Chancellor can handle that, and I hope that he will do so.
  I now turn to manufactures and exports, and shall mention what the Secretary of State for Trade and Industry said yesterday about financing particular joint ventures. That is welcome, but it is inadequate and far too late. The five years' grace in payment, for example, does not compare with what is being offered by the United States, Japan and other members of the European Community. If there is an interest reduction, perhaps to 5 per cent., it will not compare with what is being offered by our competitors. One can point to innumerable cases, for example, to the Istanbul bridge. I was there when the whole affair occurred. Everyone was astonished that the British should blow their tops at not winning that tender. They said that the difference was $112 million, yet the British expected them to pay it so that the British could build the second Bosphorus bridge because they had built the first. That is unrealistic, and the gap is enormous.
  Again, we have lost a contract for four conventional power stations in south-west China simply because our contractor put in the highest tender. It was 10 per cent. above the next highest, and 35 per cent. above the group which was put on the short list. That is what we must

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  contend with, and manufacturers must know that they cannot compete unless they can get the same sort of financial arrangements as their competitors and unless our interest rates are brought down. That is basic to the manufacturing crisis. Wherever one goes in the world one finds the same problem. There is a contract for housing in Istanbul that is open to us, but unless we can provide a 15-year period of grace we shall have the utmost difficulty in winning that contract, although the Turks want the British there. They beg us to give the same terms as our competitors.
  We are terribly slow in reacting to these situations because of the whole process of going through the Departments. I am not one who knocks Departments because I know their problems well, but we are terribly slow in dealing with such proposals compared with our competitors. We ask whether the project is suitable, and now we also ask whether it will fit in with a suitable economic policy of the country that is borrowing the sums. All that takes months. In the meantime, our competitors walk in and take the contracts. I was Secretary of State for Trade and Industry once, so I know the bureaucratic problems. If we are to achieve contracts, we must speed up the process and be prepared to do things which, in the old days of conventional dogma, seemed horrifying.
  We might emphasise the importance of the free market. In Britain, Government can determine the free market through legislation and regulations, but we cannot impose our form of free market on the rest of the world. If the rest of the world likes to have a free market like that of the Belgians, in which there are no interest charges or repayments for 10 years and repayments are over 15 years, we cannot expect them to accept our form of free market. That is what the world is about today. There is a gap between Government, banking, and industry—the manufacturers and exporters.
  I hope that the Chancellor of the Exchequer will not hesitate but will persevere in his efforts. The changes that are taking place are most acceptable, and there is room for a considerable number of further developments in the sphere in which he is moving. However, there are two dangers in using resources for a reduction in taxation. The first is that if that reduction goes to individuals, it will be used largely for the consumption of imports from abroad, which will damage the industrial base. That is a problem for the trade balance.
  The second danger involves the freeing of the nationalised industries. When a nationalised industry is bought, a large amount of investment money is involved. That goes out in a reduction in taxation for the whole range of taxpayers and is used for consumption. That is the real point about freeing the nationalised industries and putting them on the market. The timing is important. It is also important whether the resources are used to reduce taxation, which will lead to increased consumption and an increase in imported goods, or whether they are spent on infrastructure—schools, hospitals and so on. That is the point on which we should concentrate.
  Much has to be done if we are to rebuild industry. The emphasis is always on the individuals. That is good. They have a rough time in a semi-depression, such as that which we are experiencing, keeping themselves going for more than a year. They have a tough time. The Chancellor smiles, but individuals do have a tough time. In my
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  constituency, members of firms which are going bankrupt ask me how they can be rescued. That is a problem, but it does not mean that people should not take risks.
  Such people complain that the Government urge them to export goods and ask whether I can get them finance to do that. I ask what sort of finance they need and I might be told "I want money to pay for my air fare". I tell the person "I am sorry. You are not in a position to organise exports to Japan if you cannot even pay your own air fare."
  We must be careful about small business men, but we must ask how Government and finance work with existing companies to ensure that they remain and expand. The Times today contained a report from the CBI saying that 12 of our major 72 firms are considering moving all their manufacturing from Britain because of conditions here. That is immensely damaging. I suggest that the Chancellor devotes his attention to creating a sound manufacturing base.
  Even if oil does not run out as quickly as many predict, 1995 is only 10 years away. How long did it take Nuffield to build up his motor business from the cycle shop opposite Balliol in Oxford? How long did it take GEC to become established so that it could undertake real manufacturing exports? A tremendous job is involved. We are talking about only 10 or 15 years, so the job must be dealt with at once. I urge the Chancellor and his colleagues to tackle the problem. They should carry on with plans for individuals and employers, but they must tackle the manufacturing problem. Let us provide money for research. Let us provide an education system on the scale provided by the Americans and the Japanese which will give our manufacturers the engineers and scientists that they need. Let us back that up with a foreign service which has the resources to deal with trade overseas.
  China was mentioned yesterday. We have just established our first consulate-general outside Peking in Shanghai. The Americans, Germans, French and Japanese already have consulates-general in all the major Chinese cities. This is our first. Our staff consists of three in a city of 12 million people. They can carry on because they have part-time wives. Two of the wives help out. The Chancellor of the Exchequer may laugh, but the Japanese consulate-general and business group in Shanghai comprises 510 people. That is the contrast.
  We have made a mistake in cutting our foreign services, in cutting our consulates-general and overseas broadcasts and in cutting the numbers of foreign students. All those cuts seemed to be principled at the time and saved a little money, but they have cost us an immense amount in the last five years.
  The Chancellor could help by organising a campaign to restore the manufacturing base and to give manufacturers the facilities that they need. If we did that, we should be looking forward to 1995 and afterwards.
  Several Hon. Members rose—
  Mr. Deputy Speaker: Order. A large number of hon. Members wish to take part in the debate, so short speeches will help to avoid disappointments.
  6.17 pm
  Mr. Willie W. Hamilton: I hope that the Chancellor of the Exchequer will stop sneering when he hears speeches such as that made by the right hon. Member for Old Bexley and Sidcup (Mr. Heath). Much

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  of the Government's trouble is that whenever a speech, either by the right hon. Member for Plymouth, Devonport (Dr. Owen) or the right hon. Member for Old Bexley and Sidcup, disagrees with the Government, the Chancellor sneers or laughs outright, as if all wisdom resided in the Government.
  I have listened to the Chancellor and the Prime Minister over the last few years, and I would not dream of buying a second-hand car from either of them. Nobody believes a word that they say any more. In the six years that they have been in government, they have had the power to do exactly what they like, and yet 4 million people are unemployed. The figure is likely to be higher in two years, and yet the Government are embarking on a campaign to convince people that their Government have been an unmitigated success. They claim that everything is rosy and that people will not regret it if they vote for them a third time. People would be extremely stupid to be taken in a third time. Despite all that the Government have said, I guess that the unemployment figure two years from now, or whenever the next election comes, will be higher and the problem worse.
  As a representative of Scotland, I know that regional policy is a dead duck. The Government do not believe in it because it runs counter to all their arguments about the law of the market. The Chancellor of the Exchequer talks about the magic of the market. He does not believe in regional policy or in intervention. Public sector housing is worse than it has been since 1919—since the end of the first world war.
  Reports by Prince Philip and remarks by Prince Charles—members of a family that I greatly admire—have drawn attention to the problems that this Government have exacerbated, such as deteriorating housing and tension in our inner cities. Various experts—both political and non-political—estimate that to prevent our housing from deteriorating further we require additional expenditure of thousands of millions of pounds.
  The Government, in their great statement yesterday, said that they would allocate another couple of hundred million pounds to housing. That will not even scratch the surface of the problem. Yet neither the Prime Minister nor the Chancellor can resist sneering at members of the royal family who draw attention to our housing problems and to the social and economic tensions in our inner cities—created by the Government's attitude to unemployment—where there is a feeling of injustice, unfairness and hopelessness. All that is a direct consequence of six years of the magic of the market.
  The Prime Minister and the Chancellor have spoken of how important it is that everyone should obey the rule of law. No Government have been more guilty of breaking the law than this Tory Government. On no fewer than eight occasions during the past year or so, Ministers have disobeyed the law. Only last week the Secretary of State for Transport was hauled over the coals in the High Court because he interfered with a GLC decision on heavy lorries. The High Court told him to mind his own business. He was unlawfully trying to undo a legal decision taken by a council that the Government intend to abolish because it dares to go against their beliefs and convictions.
  Year after year, private employers—many of them sitting on the Conservative Benches—disobey the law on minimum wages. The Government say, "Obey the law", but not to their friends. The other evening I watched a television programme about massive fraud in the City
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  —that great citadel of Toryism. It involves not tens of pounds—the sort of sums involved in social security payments or income tax for which the Government are pursuing my constituents—but hundreds of millions of pounds. What are the Government doing about that? They are doing precisely nothing.
  It is the same story with those firms disobeying the law by not filing their annual accounts and reports with Companies house. I refer not to tens of firms or hundreds or thousands of firms, but to hundreds of thousands of firms that are statutorily obliged to file their annual accounts and reports. The Government are doing precisely nothing about that either. They should not talk to us about law and order—they should put their own house in order from the City right down to the private firms that shovel money into the Tory party election fund.
  The Prime Minister never ceases to lecture our people about law and order and crime. The Government have poured thousands of millions of pounds into the police force and the prison service during the past five years. No Conservative Member can deny that the Government have lectured nurses, teachers and others in highly responsible but low-paid jobs, saying the the country cannot afford to pay them a decent salary. The police have never been subject to that, and I say good luck to them. There is no shortage of money for law and order, the police force or the prison service.
  What about the Falkland Islands? The Government have poured £2,000 million into those little islands 8,000 miles away, yet say that they cannot afford a few quid extra for our teachers. They cannot deceive the people. If they can find £2,000 million to pour into the Falkland Islands, they can find it for the teachers, the nurses and others who deserve it. It is a question of priorities and willpower.
  The Prime Minister tells us that we cannot solve a problem by chucking money at it. Since 1979, she has done nothing else but chuck money at the police, the prison service and the armed forces, yet the level of crime today is 40 per cent. higher than when she began. I hazard a guess that in two years it will be even higher.
  I challenge the Minister on three issues—law and order, housing and unemployment. Dare he assert that, as a result of the Government's new policies announced yesterday, unemployment and crime will be less and the housing problem nearer a solution two years from now? I bet my last halfpenny that the problems will be worse in 1987. No presentation by the Government will conceal that. The people have tumbled the deceit, the deception and double talk of a Government led by the most superficial woman ever to have been in Parliament. They will not be deluded a third time. The day of reckoning is coming, and the sooner the better.
  6.27 pm
  Mr. Julian Amery: I wish at the outset to congratulate my right hon. Friend the Chancellor on having continued to make the reduction of inflation his first priority. It is the only basis from which sustained growth can develop. I join others in congratulating him also on the remarkable correlation that he has achieved between our growth levels and the rate of inflation that we hope to achieve during the next few months.
  That is a good prospect, but I see on the horizon a cloud a little larger than a man's hand. The real threat to the growth that we hope to achieve comes from the rise in our

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  unit labour costs and general wage settlements. Earnings in our manufacturing industry during the past 12 months rose by 9·5 per cent., while those of our main competitors rose between only 2·5 and 4 per cent., with the exception of France, which is not the most efficient member of the class, where they rose by 6 per cent.
  Our unit labour costs in manufacturing in the second quarter of last year rose by 6·8 per cent., and in July by 7·9 per cent., while our competitors endured rises of 2 per cent. or less. If we continue to carry that handicap, can British industry hope to compete either in the export market or against imports? If we cannot compete, can we avoid a serious setback in the last quarter of next year involving a check in growth, a rise in unemployment and, conceivably, even the renewal of rising inflation?
  My right hon. Friend the Chancellor of the Exchequer saw all this clearly in his speech at the Café Royal the other day. He exhorted industrialists not to cut wages but to keep down the rise in wages to about the level of the competition that we face. Will his exhortations succeed? Will he even succeed in the public sector in achieving a lesser rise? It is interesting to remember that a 1 per cent. rise in public sector wage settlements costs about £400 million.
  If the Chancellor cannot succeed by exhortation to persuade industry and the public sector to do as they should in economic terms, can he avoid bailing out industry and the economy by reducing interest rates and leaving it to the market to judge what the exchange rate should be? To bail out industry in that way is not right by sound economic principles, but can he avoid it? Can we avoid the reality where, if we do not intend to have a statutory incomes policy and if we leave it to market forces, the only alternative may be to reduce the exchange rate by reducing interest rates?
  I can understand why my right hon. Friend has so far set his face against that. He sees in a strong currency protection against a renewal of inflation. In that he is right. He believes that high interest rates will hold up the currency and help to contain the money supply. That is true. He may also see in high interest rates and a high exchange rate a means of compelling industry to take a more realistic approach to wage settlements. But suppose it does not. Is there any alternative to contemplating what some might call a more realistic exchange rate for sterling? I am not saying that he has to act now, but much damage has been done in the past 18 to 12 months. Our costs have become very distorted compared with those of our competitors.
  I hope that in all this the Chancellor will not be unduly influenced by the summit meeting of Finance Ministers or by any obligation to bring down the dollar. Of course, we have to avoid protectionist tendencies in the United States Congress, but no action taken by the reserve banks, unless carefully concerted, will have any influence. Will it even then? So far Germany and Japan have said that they are not obliged to bring down their interest rates. I am not sure how far the Federal Reserve Bank has moved. Anyway, are central bank resources adequate to influence markets in a world where the Euro market deposits alone total nearly $2·5 trillion dollars?
  The first priority is not to check protectionist tendencies in the United States but to prevent a position where growth is checked here and unemployment goes up again. Of
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  course, industry should do the job for itself. The crisis is not of the Government's making, but at the end of the day the buck stops with my right hon. Friend.
  6.34 pm
  Mr. Robert Sheldon: Yes, the buck certainly stops with the Chancellor of the Exchequer. I was particularly grateful for the speech of the right hon. Member for Old Bexley and Sidcup (Mr. Heath). As he went on, we noted the discomfiture of the Chancellor of the Exchequer, who has been compelled to accept the first instalment of the pragmatism urged by the right hon. Gentleman over so many years. I was only sorry that the right hon. Member for South Down (Mr. Powell) was not here. We have in the House several interesting antagonisms which lend colour to our debates. It is a pity that the full colour was not shown on this occasion.
  In the early days the Government stated that our problems stemmed from public expenditure and that control of the money supply would solve the problem of inflation. Those were the glorious days of early youth of the Government. We have had sterling M3 in double figures every year since then, but the Government continued with their dogma until a couple of months ago. Admittedly the dogma had started to get ragged at the edges but it still continued. At last within the past few months they have repented. I only wish that the academics who took up political positions would likewise repent. It is not for academics to take up a political stand and they too should admit their error.
  The Government sought to run the economy on automatic pilot. The automatic pilot had a basic fault in that it was nonsense. Now the Government are running on the principle of the exchange rate. All Governments to a certain extent run the economy on the assumption of a certain exchange rate. What is different is that this Government have always proclaimed neutrality.
  When the dollar-sterling exchange rate exceeded 2·40 they did nothing. When it fell to nearly parity with the dollar they realised finally that the nonsense had to stop. That was the turning point, the moment when truth broke in upon the convoluted theories which monetarism had become. So MO, M1 , M2, PS11, PS12, M3 and sterling M3 all collapsed and were replaced by the simple single standard of the exchange rate as the prime determinant of economic policy. That is to be between 80 and 81 against the old Smithsonian level. That is what determines the interest rates, the success or failure of manufacturing industry, the level of inflation and the Government's economic policy.
  I have nothing against using the exchange rate as a prime determinant of economic policy. I welcome the move to realism, although I wish it had come earlier. What concerns me is that the exchange rate should be fixed in relation to the needs of industry rather than to the needs of the Government. The needs of the Government are to retain the one success they claim, reducing inflation. After all these years we are back to the pre-1967 position of defending the pound. We are enduring great economic and industrial privations just for that. For the Government, the important aim is a strong pound. A strong pound means that imports are cheap and the cost of living remains artificially low. It also has the important consequence that it is of benefit to the City of London and hence to the south-east, even though it causes great damage to the rest of the country.

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  As evidence I can cite no better organisation than the Manchester chamber of commerce and industry which describes the position as it is. It does not talk about money supply or any nonsense like that. It tells us what order books are like and about sales and output. It is to be commended for that purpose. Perhaps I should declare an interest: I am an ex-officio member of it. It says:
  "The results of the latest quarterly survey of manufacturing industry indicate a significant fall in orders and deliveries for both home and export markets."
  That is very sad:
  "The decline in exports has been especially sharp, and must be attributable to an overvalued exchange rate against key European currencies, such as the Deutschemark. It is therefore not surprising that the data highlight a substantial increase in the percentage of respondents requiring a lower exchange rate for improving business prospects. Measures are needed now if the disasters of 1979–81, characterised by high interest rates and an overvalued exchange rate, are not to be repeated … Over four years ago the Manchester Chamber warned that manufacturing industry, and the region's industrial base, was being eroded by the damaging effect of an overvalued exchange rate and high interest rates."
  That is not the message from the City of London, which has the enormous advantage of being close at hand and having people who understand Whitehall completely, know which Minister to go to, and how to put their points. It is the message of those who deal with the world as it is and face the commercial and industrial realities.
  Mr. Grylls: I have been following the right hon. Gentleman's arguments about the exchange rate and its effect on industry and inflation, but will he recognise that for business the most damaging single thing is when inflation gets out of control? That destroys more businesses than any other measure. When the right hon. Gentleman says that inflation is important only for the Government, that is surely nonsense. It is crucial for the survival of British industry and commerce as a whole.
  Mr. Sheldon: Nobody can doubt that inflation is important, but we are not talking about hyper-inflation. We are talking about those who represent commerce and industry in the regions, who have a proper understanding of what it means to them, and who understand that political factors are not their concern.
  When Sir Terence Beckett talked about a bare-knuckle fight, and thought he was speaking for industry, he found that he was speaking also on behalf of those who were politically interested, and that some of their political interests even overrode their commercial and industrial interest. The Manchester Chamber of Commerce and Industry talks about things as they are, and that is its particular value.
  The Chancellor of the Exchequer is selling off £5 billion worth of assets that belong to the people of Britain. Some of them are monopolies. The Chancellor will be transferring a public monopoly and creating to some extent a private monopoly over which he will have less control. Even more, he will be selling capital assets to spend in consumption. The Chancellor of the Exchequer asks what is wrong with consumption. The answer is nothing, as long as the money to buy that consumption is earned.
  We are consuming at present the windfall of North sea oil. To that must now be added the regular consumption of our capital assets. It is only a quirk in our accounting arrangements that counts sales of Government property as negative public expenditure. So long as that was limited
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  to small sales, such an eccentricity in our system of Government accounting did not much matter. It is an error to transfer capital to consumption in so profligate a way.
  I can understand the ideology of privatisation, although I strongly oppose it. If the Government sold public assets but ensured that the proceeds went into investment, whether in the infrastructure or elsewhere, the charge of profligacy could be avoided. What they are doing allows of no defence. We are seeing the decline of ideology. Privatisation was seen at one time as the triumph of private enterprise over public enterprise. It fitted in with all the beliefs that owed their origin more to speeches at Tory party conferences than to reflection and consideration. The new version of privatisation means much more in terms of increasing consumption by means of tax reductions than removing the state from the ownership of public enterprise. But another matter that concerns me is the price at which those assets are being sold.
  When the sales were counted in tens or maybe even hundreds of millions of pounds, the cost to the taxpayer and to the nation was limited if the price obtained was too low. When we are talking of thousands of millions of pounds, the matter becomes much more serious.
  Every year the Treasury, through the Government broker, sells billions of pounds of Government stock. The price is finally pitched and stock is released in amounts to maximise the price eventually paid to the Treasury. As a Treasury Minister I visited the Government broker—as I suppose many other Treasury Ministers have in the past, and still do today—to satisfy myself that the sales of stock were being efficiently managed to produce the best deal for the taxpayer.
  In the years from 1980 to 1984, the Government's annual sales of marketable securities were £12 billion, £4 billion, £4 billion, £11 billion and £11 billion. Those figures are not all that dissimilar to the sums of money now being raised by privatisation.
  It is interesting to look at the 50 issues a year of Government and Government-guaranteed marketable securities, at £100 million or £200 million every week or so. We are now in the same league as that of the Government broker selling Government stock in having to sell off our national assets. It is no less important for the sales of Government assets to be managed so that the Government obtain the proper price, in just the same way as they try desperately to obtain the proper price for the securities that they sell on the open market.
  What worries many who have at heart the proper control of public finance is the fact that the Government are in such a hurry to sell off so much in so short a time, and that they are not being nearly as scrupulous as they should be in those sales. We must call for a less hurried approach. If they have to sell, it should be done in tranches so that the price can be pitched at a level that is acceptable to the British public who do not share the Government's ideology. The control of public finance is a crucial matter and should be of importance to everybody in the Treasury and the Government.
  My final point concerns the appointment of Lord Young as the Secretary of State for Employment. Problems always arise when a Minister is not a member of this House. There are democratic arguments as well as practical arguments concerning exposure to the views of elected members. I am principally concerned at the relative security that such a Minister has in facing the polite comments in the other place in contrast to the

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  probing, searching and sometimes angry questions on unemployment which can be put by Members of this House, representing and expressing the views acquired by them in meeting their constituents. It is very easy for a Minister to impress the House of Lords. It is much harder to do the same in this Chamber.
  I have always held that one of the reasons for the selection of Lord Home as Prime Minister, in preference to the far wider choice available in 1963, was that Lord Home would not have to face the pointed, direct and necessary criticisms that this House offers.
  A Minister with such an important portfolio and responsibility, and who is directly concerned with unemployment, should be answerable to this House. It is no solution to offer this House a substitute, however able he may be, who informs the Secretary of State indirectly of the feelings of this House. Responsibility at one remove is not responsibility at all. The House should express itself collectively on matters such as this. It has done so in the past; it ought to do so again.
  6.49 pm
  Sir William Clark: It is always a pleasure to follow the right hon. Member for Ashton-under-Lyne (Mr. Sheldon). Perhaps I might return in a few moments to his point about privatisation.
  I listened with interest to the speech of the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley). As far as I could gather, he was advocating the same policy for today's conditions as was advocated by his own Government who, I remind the House, ended with a bank rate of some 17 per cent. and a visit to the International Monetary Fund, with the IMF determining what our economic policy should be. It seems surprising that after all these years the right hon. Gentleman has not even learnt that lesson—nor indeed the right hon. Member for Plymouth, Devonport (Dr. Owen), who was a member of the same Government.
  Most Conservative Members welcome the mention in the Queen's Speech of a reduction in taxation. The autumn statement, issued yesterday, will also be generally welcomed, though not by the prophets of gloom and doom. Opposition Members had great difficulty in attacking it. It seems that they relish only the bad news. The fact that the autumn statement showed how buoyant the economy was and what could happen with continued growth did not please them, so they picked on privatisation.
  A Member of another Opposition party accused us of a U-turn. In his Budget statement of March this year, the Chancellor said that total Government expenditure for the next year would be £139 billion. In his autumn statement he said precisely that. So there has been no increase in public expenditure, although it is true that within the £139 billion there has been a reallocation of resources. I remind the House, however, that in that amount some £24 billion is allocated to capital projects. When the hon. Member for Fife, Central (Mr. Hamilton) spoke about the amount going to housing, he sneeringly said that only £220 million was to be allocated to the housing programme next year. That is nowhere near the truth. That amount is in addition to the £3 billion being spent on housing next year. So the housing allocation for next year is some £3·25 billion, very different from the £220 million that he mentioned.
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  We can take some comfort in the fact that the Chancellor pointed out—and it is quite obvious from the autumn statement—that we now have the lowest borrowing requirement since 1971–72, and that we shall have the lowest proportion of public expenditure for gross domestic product since 1972–73. My right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath) took pleasure in that, and I do not blame him. I was in the House at the same time as he was in 1971–72 and, 13 or 14 years later, we have just got back to that. I remind the House that in the meantime we have had quite a severe recession. We can take pride in having come out of that and in the fact that the economy is so buoyant at the moment.
  My right hon. Friend the Member for Old Bexley and Sidcup also mentioned overseas aid. We ought to nail the lie on overseas aid. In this coming year £1,187 million of British taxpayers' money will go on overseas aid, in addition to investment by the private sector. The Government are accused of not meeting the United Nations target. Who determined the United Nations target? It was mainly those countries which receive aid. Obviously, they will pitch their demands or targets high.
  Of course, the Third world needs more investment. Here the World Bank and the IMF could do a good job of work. One aspect of overseas investments to which not many Governments have paid sufficient attention is the security of those investments. If one has an investment overseas, there is very little one can do about it. If the overseas Government want to expropriate it, there are no sanctions that the investor can impose. What we could do, through the IMF and the World Bank, is to give an assurance to new investors in the Third world that if their assets or profits were confiscated the guarantee of the World Bank and the IMF would operate. This would give confidence for more investment. The Third world countries cannot continue merely to take cash and food from Western democracies. They must look at their own structures and their own environment to see how they can grow their own food. This is something to which we must pay attention.
  On the question of taxation, there is a strong rumour that the Government have made up their minds to reduce the standard rate. I hope that the rumour is absolutely baseless. It is true that we have reduced the standard rate from 33p to 30p in the pound, a welcome reduction. If we were to reduce it from 30p to 29p, that would cost the Exchequer some £1,200 million. To reduce the standard rate by 1p is nothing, however. In order to mean anything, it must be a substantial reduction. A reduction of 5p would cost the Exchequer something in the order of £6 billion.
  If the Chancellor has £6 billion over the next few years, would it be wise to reduce the standard rate from 30p to 25p, or would it be better to look at the thresholds? Indexing the thresholds for next year, a married man will start paying tax when he earns £70 a week. When one considers that the national average wage is well over £170 a week, it is ludicrous to start paying tax at £70 a week. If indeed we had £6 billion with which to relieve taxation over the next two years, it would surely be much better to increase the thresholds by some 30 per cent. That would bring a married man up to, say, £91 a week. It would be a definite help to the low paid. I hope that the Treasury Bench will take this message, that thresholds are extremely important and must be tackled.

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  Everyone welcomes the fact that for long-term unemployed persons there is to be a pilot scheme of an extra £20 a week, so that if a person who has been unemployed for a year or more takes a low-paid job he will be given an allowance of £20 a week for six months. But let us look at that. Suppose that a man has been unemployed for just over a year. He takes a low-paid job at £70 a week. With his £20 a week allowance, he is up to £90 a week and at that figure he is subjected to tax at 30 per cent. on the difference between £70 and £90. Of the £20, he has to pay £6 back. How stupid can we get? It would be much better to tackle the threshold so as to take such a person out of the tax bracket altogether. I would like to see the tax brackets much nearer the national average wage than they are at the moment.
  The Government's privatisation proposals have been castigated by many Opposition Members and by some of my right hon. and hon. Friends too. It is all very well for people to say that assets such as British Rail, British Airways or the British Airports Authority belong to the general public, but it is absolute rubbish to tell our constituents that they have a share in such organisations. Such organisations are owned by the state.
  If one looks at our record on privatization—the National Freight Corporation, Cable and Wireless and all the rest—one will see that the profitability of those organisations has gone up enormously. The National Freight Corporation was a loss leader year after year, but it is now extremely profitable, and that in itself is of advantage to the economy. The National Freight Corporation now pays dividends, whereas previously it did not know what dividends were. It also makes profits, and that increases the revenue to the Exchequer. That is a good thing.
  There are still the siren voices of those who want to increase public expenditure, but the cold fact is that even next year we as a nation will be overspending by £8,000 million. Further increases in expenditure will mean that the Chancellor must tax, borrow or print more money. We have been down that road, and it is clear that all of them fuel inflation.
  As in the past, the scourge of the economy is inflation, which erodes the wealth of any country or individual. I hope that the Chancellor will turn a deaf ear to the siren voices who want him to increase public expenditure. I am absolutely convinced that we must stick to the policy that we have had since 1979. That is the only direction in which success lies.
  7.3 pm
  Mr. Stan Thorne: As well as the Queen's Speech, the debate now includes the two statements that were made yesterday. I and many Opposition Members are far from convinced that our economy, industry and employment will radically improve—if they improve at all—as a consequence of the plans announced yesterday by the Chancellor and the Paymaster General. Those statements contained no real economic initiatives from which real jobs will emerge. Unhappily, the same is true of the Gracious Speech.
  We have record dole queues, and young people face a continuous dilemma, particularly on Merseyside where I live, and in the north-west generally. For example, my own son-in-law has not worked for six years. Like many others who live in that area, I am therefore well aware of the real problems that we face.
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  Economic planning to reduce unemployment is the major priority, but we shall not achieve that by the example to which I shall now refer. British Rail Engineering Ltd. employs 25,300 people, but over the past four years 11,200 BREL jobs have been lost. The management is presently planning to close the Swindon works in March 1986, which will mean 2,263 redundancies, and is now running down its Glasgow works, which will mean a further 1,171 redundancies.
  The main line locomotive renewal programme for 1985 to 2009 envisages 1,000 units and an expenditure of £900 million, yet it is planned that Sweden's ASEA be invited to compete to supply electric and the United States be invited to compete to supply diesel. We should ensure that British Rail Engineering Ltd. produces the engines for the late 1990s and early 21st century. The skill clearly exists within the present workforce, and in my view there is no justification whatsoever for inviting those foreign tenders.
  Not long ago, when I had a couple of hours to spare, I walked around the streets of Paris and took the trouble to count the number of motor cars made in Britain. I found three. The rest were made in France, Germany, Italy or Japan. It is clear that the open, free market exists in Britain, given the number of foreign vehicles that come in, but the same does not apply in other parts of Europe.
  In my own constituency at present, 18,452 people are looking for work in the Preston travel-to-work area. In the north-west region, 16·3 per cent. of the work force are looking for a job. The Manchester chamber of commerce has referred to the over-valued exchange rate, high interest rates and a lack of confidence among the business community, and, as has already been mentioned, the ABCC report entitled "British Manufacturing Decline 1975–1984" refers to a balance of payments deficit on manufactures in 1984 of nearly £4 billion. That is for a country which was once described as the workshop of the world.
  Do we improve industrial prospects by selling off public assets such as British Telecom, British Aerospace and British Gas? Do we really contemplate selling off the electricity industry, parts of British Rail and the profitable coal mines that exist in Britain? On the contrary, we must diminish the sale of such assets. Like other Opposition Members, I am opposed to the stripping of our public assets.
  We should be seeking to restore Britain's crippled manufacturing base. Inner city squalor should be a main line of attack. Virtually every day the financial pages of the media refer to millions of pounds involved in takeover bids and to foreign money coming into Britain while British money seeks a more favourable profit overseas. I appreciate why shareowners seek the best profits, but they do not seem to have regard to what is best for Britain.
  We recently celebrated Remembrance Sunday, when we remembered those who laid down their lives in the last war in order to protect Britain. It is clear that we should not expect the wealthy to consider the children of those who fell, because narrow self-interest dictates the policy of the wealthy and the policy of the Government.
  Why cannot Britain's immense wealth be used to build decent homes, to extend the National Health Service, to improve the provisions for the disabled and the elderly and to ensure that educational opportunities are provided not just for the five-year-olds but for the 55-year-olds? Why have our industries not developed the drive to meet people's needs? Why has there been no major investment

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  to overcome starvation and premature death in the Third world? All these activities, and many more, would create hundreds of thousands of jobs. Why are we not engaging in them? We have not done so in recent years because in Britain private profit is the motivating force.
  Conservative Members probably attended church services last Sunday and had the temerity to participate in Christian worship, but I wonder how many of them considered the real message of Jesus Christ.
  Mr. Robin Squire: Oh, come off it!
  Mr. Thorne: I understand why the hon. Gentleman says, "Come off it." He will not look at the message that Jesus Christ gave, because it is the complete antithesis of the policies, ideology and philosophy of Conservative Members. I do not claim not to be a Christian, but it sticks in my craw when those who claim to be Christians reject in real life the teachings of Jesus Christ. They do so in the cause of private profit.
  Regrettably, the Gracious Speech is virtually irrelevant to the crisis that faces 8 million British people and it underlines the need at the earliest opportunity to replace this Government with a Labour Government who are committed to democratic Socialism.
  7.12 pm
  Mr. Francis Pym: I am delighted to follow the hon. Member for Preston (Mr. Thorne), because I hope to touch on some of the points to which he referred.
  I thought that the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) was in poor order this afternoon. He was a poor advocate for the Opposition's amendment. He was long on criticism and absolutely void on a constructive alternative. My right hon. Friend the Chancellor of the Exchequer gave a characteristically robust reply, although I noticed that he studiously avoided any reference to the autumn statement and the pragmatism that it so clearly and sensibly implied.
  I welcome the Gracious Speech and, perhaps just as much, the three or four statements that have been made since then. They show that there is still plenty of life and energy left in this Government, which is just as well, because they have plenty of work still to do. I want to suggest to the House some additional strands which should be added to their strategy. Despite many advances in six years, many problems still remain, to which I shall turn later. I very much commend the Government for what they are trying to achieve in Northern Ireland. Although the House does not yet know the full details, I hope that success will attend their endeavours.
  I have only two points of dissent with the Gracious Speech. The first relates to the time scale in which it is proposed to provide private funding for agricultural research. I support the principle of the industry providing some of this funding, but the speed with which the Government want the industry to do it means that a sensible transition cannot take place. Research may be damaged as a result. My second point of dissent relates to shop opening hours, but I shall not develop that argument tonight.
  Since the Gracious Speech a year ago, there have been many gains, some of which were referred to this afternoon by my right hon. Friend the Chancellor of the Exchequer.
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  There has been a healthy level of economic growth in the last year. There has even been some growth in manufacturing industry and in the number of people employed, and we have inflation under control. But, more important than all that, we have defeated the miners' strike. That is very much to the personal credit of the Prime Minister, among others. I support entirely the stand that she took on sanctions against South Africa and the arguments that she used on that issue.
  None of these achievements has been lightly gained and none of them is lightly to be dismissed. However, other disturbing features of our economy and society exict alongside the achievements. They are not lightly to be dismissed, either. The first is the huge scale and duration of unemployment, about which I have been speaking for four or five years. As the expanded youth training scheme takes effect, there will be a reduction in the unemployment figures. I hope that the Government will not be tempted to treat this as in any sense a victory. The youth training scheme is absolutely right, because training is crucial to our recovery, but it does not represent solid new jobs. The fact is that, despite recent growth and six and half years of a sustained economic policy, there is, as yet, no sign that the creation of secure new employment on a sufficient scale is even on the horizon.
  As for the inner city riots, I condemn their violence, as do all my hon. Friends, and, I believe, all hon. Members. I agree with the Government that unemployment was not the direct cause of the riots. No one factor was the direct cause. It is one thing to say that unemployment and related factors did not cause the riots, but quite another to say that those factors are irrelevant. Among the reasons are boredom—the boredom of having nothing to do and no money with which to do it—and a future which looks pretty bleak. I think that most of us take the view that if there were better homes in which to live and better prospects for jobs, riots would be much less likely.
  An analysis of our economy is described in the report of the House of Lords Select Committee on Overseas Trade. I wish that Ministers had not reacted so hastily and in so hostile a fashion to that report. It contained well-informed and constructive criticism but also conclusions and recommendations that reinforced the Government's belief about the economy. It referred to the need for a change in the national attitude, to the vital importance of manufacturing and trade, to the need for this to be recognised in our education system and to the need for greater industrial competitiveness—all the things which the Government have been exhorting us to do for years.
  The Select Committee report echoes what I and a number of my hon. Friends have been saying for some time: that manufacturing industry has suffered a major decline and that there has been a loss of competitiveness. Both these facts are a threat to our future. We have been giving serious warnings about that future, inspired by a passionate desire that our country should be prosperous in the long term. Urgent corrective action is essential if we are to remain true to our history and if we are to retain international influence.
  By rubbishing the report, and by rubbishing the same analysis when made by me and by others, the Government give the impression not only of rejecting our remedies but of wishing to turn their back on the factual evidence upon which it is based. Even if the reality proves to be only half

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  as bad as the report envisages or as I have expressed it on other occasions, the problems remain very great and they will not go away. They must he faced.
  In my view, such a situation requires a mixture of consolidation and radicalism. I am glad that my right hon. Friend the Leader of the House is to reply, because he is portrayed as the captain of the consolidators. There is much to be consolidated: success in containing inflation, success in bringing responsibility to industrial relations, success in transferring state monopolies to private enterprise. But one cannot consolidate 3·5 million unemployed people; nor can one consolidate bad housing, or the decline in international competitiveness, or the breathing space that has been afforded us by North sea oil, especially when there is no sign of anything to replace it.
  Consolidation is not an option. Events move forward and our responsibility is to anticipate those events and prepare for them. If that requires radical action, let there be radical action. It is not a question of the Government turning back or standing still. I do not suggest that the Government do either. The question is: in which direction should the Government move forward? I do not want to see the Government's approach abandoned. I want to see it broadened, and I am glad if that is what we are now beginning to get.
  There are already some encouraging adjustments. We have seen the great demise of M3. I admire the Chancellor of the Exchequer for his daring in burying that idol of the monetarists' faith in the glare of the lights of the Mansion house. I do not think that even the deputy chairman of the Conservative party has thought of anything as brazen as that.
  Following on from that is the looser fiscal stance, the less rigid finance policy that many of us have been advocating. The autumn statement showed that. My hon. Friend the Member for Croydon, South (Sir W. Clark) referred to the adherence to the public expenditure total of £139 billion, but it was clear yesterday that the Chancellor was talking about spending more money.
  There is a great deal more enthusiasm for a regional policy, which I have long advocated. My right hon. and learned Friend the Secretary of State for Trade and Industry made that clear at the party conference, and in a recent speech the Paymaster General did the same. I hope that they will look at regional policy in the context of the completely different needs and requirements of the regions in decline and the regions where there is expansion.
  An encouraging sign last summer was when my right hon. Friend the Prime Minister said that if current policies failed to create new jobs, new policies would be introduced. Those policies did not produce enough new jobs and new policies are now beginning to be introduced. That is extremely welcome, and I congratulate my right hon. Friends on that. However, I want to encourage them to go further, act more boldly and think beyond short-term policies to longer-term objectives.
  The approach that I favour includes two basic elements. First, the Government must unswervingly maintain their commitment to industrial regeneration, greater competitiveness, increased modernisation and investment and the spirit of free enterprise. Secondly, they must offer more to the casualties of that process. They number more than 3·25 million when one includes their families. Many of them—not all—need better housing. There is
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  certainly a need for better training, a better life and a lot more hope. Those are the basic elements in the approach, but I should like to see it go much further.
  First, in view of the present levels of unemployment and the fact that more jobs will be lost if industry becomes more efficient, which it certainly needs to, the Government must take more direct action than they are at the moment to promote new employment. They should play a part in providing a proper industrial strategy and generate the finance to sustain it. By "industrial strategy" I do not mean the lowest common denominator of Government, management and unions. A fudge like that is worse than useless. I mean a partnership in which each party plays its proper role. The Government for their part must play a supportive and co-ordinating role, providing response to foreign competition. My right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath) produced a good example in the overseas contracts that he referred to. That form of partnership is practised extremely successfully by some of our overseas competitors, and I hope that my right hon. and learned Friend the new Secretary of State for Trade and Industry will provide it.
  Secondly, I want to see a sustained programme of public works concentrating mainly on housing and the inner cities. That programme started modestly yesterday. I welcome it, and look forward to seeing it extended. That programme should address not only the quality of housing but mobility within the housing market, and should therefore tackle the thorny question of rent control, because mobility of labour will be very important for the revival of our economy.
  Thirdly, I want to see more emphasis on research, not less. That has been one of our national success stories. It has kept us as world leaders in several areas. I want to maintain that. We are a nation of inventors, and the Government made a cut, which I believe is a strategic mistake. I am delighted that yesterday the Chancellor of the Exchequer restored £20 million to the research programme, but that does not make good the reductions that were previously made. Already there are reports that the brain drain has started again. I cannot think of anything more stupid for this country than to allow that to happen. I want to see an increase in the emphasis on research.
  Fourthly, I should like to see a complete overhaul of the tax and benefit system. I know that the Government are working on that, but we do not yet know how far they intend to go. There needs to be a unified system to ensure a decent standard of living for everyone, and at the same time to provide a permanent incentive to work. Elsewhere I have advocated the basic income scheme. I shall not dwell on it tonight, but I want to draw a distinction between it and the national minimum wage favoured by the Labour party. It amazes me that the Labour party fails to appreciate the folly of the national minimum wage, which imposes on employers certain wage levels irrespective of conditions, therefore certainly giving rise to increased unemployment and a lack of competitiveness. The minimum income guarantee scheme is quite different.
  Finally, we must tackle the future of our public services, particularly education and the National Health Service. We need to separate the economic objective from the social objective. The social objective is to improve standards of care, to improve the service. The economic objective is to provide that service and care as cost effectively as possible. If that can best be achieved through privatisation, as far as I am concerned, there is no

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  argument whatsoever against it, provided that the social objective remains intact. Some time ago, I recommended that there should be a pilot scheme in one of the regions. I still think that there is some merit in that.
  That balance between economic and social objectives, and the distinction between the two, is the central feature of the approach that I have been recommending to the House tonight. We must become more efficient economically and more competitive industrially, but that process has caused and will cause social hardship, which often applies to people in an arbitrary and unfair way. Therefore, we must alleviate that effect by promoting new employment, ensuring decent living standards and improving housing conditions, health care and education.
  Whether it is too much to call such a broadened approach a "new deal" is a matter of opinion. I prefer that description to "new agenda", which my hon. Friend the Member for Aldershot (Mr. Critchley) used the other day. After all that has happened in the past six years, there is a need for a new deal. That stage has been reached in the life of the Government. I hope that the statements yesterday heralded the beginning of it. If they did, the Government must not pretend to be doing something different.
  I think that people would welcome such a new deal and are ready for it, and I see enormous political advantage in it. It can be funded out of privatisation and would be seen as a reinvestment of national assets, which is understandable and acceptable to people. That use of those resources is preferable to tax cuts. I agreed with what my hon. Friend the Member for Croydon, South said about raising the threshold.
  At any rate, such an approach is radical. It is in keeping with the Government's own committed objectives. It is also in keeping with historic Tory principles and practice. I think that it would appeal to the common sense and fairness of the British people and give a positive sense of direction and progress. I think that that is what people want, and the time for it is now.
  7.29 pm
  Mr. Eric S. Heffer: The right hon. Member for Cambridgeshire, South-East (Mr. Pym) has clearly outlined the vision of the future of those in the Conservative party who have been described as the Centre Forwards or the wets. I describe them as those who seek to go back, within reason, to the middle-road policies of a previous Conservative Prime Minister, Lord Stockton. Not all the right hon. Gentleman's ideas appeal to me, but they are certainly a jolly sight better than anything I have heard from the Government Front Bench in the past few years.
  It is not sufficient to return to Keynesian-type policies because of the character of the present deep, capitalist crisis which will not be easy to get out of. Keynesianism is not the answer. There are people, even in the Labour party, who believe that reverting to Keynesianism and straightforward interventionist policies can solve the problem. I do not agree, but such policies are better than anything suggested by those arguing for the straightforward monetarist policies that have led to our terrible crisis.
  I agree with those who say that Thatcherism is not responsible for all of our faults. We live in a capitalist society and capitalism is responsible. Thatcherism is a
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  form of capitalism that has made the crisis deeper and worse than it might have been. That is why we have higher levels of unemployment than the rest of Europe, the United States of America and other countries that are also suffering from the crisis of capitalism.
  We must understand the nature of the crisis. It has occurred for many reasons, one of which cannot be avoided—we are living through a second industrial revolution. The first industrial revolution created all manner of problems. As a boy I sat at the feet of the old Socialist economists who explained to me that the solution to the problems of the industrial revolution created by capitalism was a planned Socialist economy. If such an economy was important during the first industrial revolution, my God, how much more important it is now during the second. The Government's policies are not the only reason for the crisis, although they have made it worse.
  When I first came to the House we had a Labour Government. The docks in Liverpool, London, Bristol and Glasgow were working. They declined over a long period.
  Mr. John Townend: That was the dockers' fault.
  Mr. Heffer: The hon. Gentleman does not understand what I am talking about. Perhaps he should leave the Chamber.
  The docks declined for many reasons. We no longer had a great empire, patterns of trade changed and there were new technological developments inside the docks industry. Now, granaries in the Liverpool docks are worked by five or six people, when before they were worked by hundreds. This raises fundamental questions that I never hear asked when I come here. Indeed, no answers are even suggested. Keynesianism will not solve that. Thousands of workers could be put back to work immediately if there were programmes for house building, road building, rail building, and sewerage repair. All that is important and we need it, but, having got it, we would still be faced with technological advances and the fact that we do not have a proper distribution of wealth because production is for profit rather than for use.
  It does not matter whether we talk of going into the European monetary system and about the snake. They all try to achieve a balance in the exising system, and it is the system that is wrong. We must consider building a new society. It would give us entirely different attitudes to employment, the distribution of wealth and public and private ownership. We must look at things differently. It is time that the country faced up to that.
  Yesterday, the Paymaster General rubbished my hon. Friend the Member for Kingston-upon-Hull, East (Mr. Prescott) and quoted a pamphlet that my hon. Friend has written. The best part of the Paymaster General's speech were his quotations from that pamphlet—the rest can be forgotten. They were important quotations because they concerned planning resources and developing social ownership.
  I could describe Liverpool's unemployment, but everybody knows about the crisis there and about poverty, misery and the horror of living in a society in which neither the old nor the young have any hope of employment. We cannot continue in that way, but change requires a fundamental approach.
  My right hon. and hon. Friends should not be ashamed that, in our party's constitution, we have something called

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  clause four and that we believe in Socialism. The Prime Minister believes in her principles of free enterprise and a capitalist system. She fights for those principles—rightly, as that is what she believes in. She does not care about what happens to people or about the fact that they become poor. She has no compassion for them. If she believes that, we should not be ashamed of believing that only Socialism is the answer to the country's problems—Socialist planning, Socialist ownership, democratic—
  The Lord Privy Seal and Leader of the House of Commons (Mr. John Biffen)rose—
  Mr. Heffer: I should just like to conclude.
  I emphasise the word "democratic". I do not believe in the great bureaucratic system that exists in the Soviet Union and in eastern Europe. I do not want to see a lack of freedom because freedom is right. It consists not only of freedom of speech, which is essential, but the freedom to have a job and a decent home. Freedom has many sides and we must fight for it. Equally, we must fight for the freedom of thought and ideas and to express our views without being put into prison or a gulag for doing so. That is what democratic Socialism is all about and democratic Socialism is necessary if we are to begin to deal with the problems of unemployment in this country.
  7.42 pm
  Mr. John Townend: The hon. Member for Liverpool, Walton (Mr. Heffer) said that I know nothing about the docks. I come from Hull and served on the city council there, was chairman of the finance committee and leader of the county council, and I saw my town destroyed by the dockers. With the advent of the EEC, we had every chance to take the trade that was coming from the west to the east and so become the Europort of Europe. Due to the bloody-mindedness of the Hull dockers, with their perpetual strikes and demarcation disputes, we lost that opportunity and the trade and investment went to Felixstowe, where the dockers hardly ever go on strike and there was no dead hand of the national dock labour board. After that, the hon. Member for Walton cannot tell me that I know nothing about the dockers who destroyed my city.
  I strongly welcome the passage in the Gracious Speech which states:
  "Firm control of public expenditure will be maintained, with a view to diminishing its share of overall national output and facilitating further reductions in the burden of income tax."
  That statement gives the impression that the Government have at last got public expenditure under control. Although we continuously hear the Opposition talking about cuts in spending, we all know that there have been no overall cuts in total spending. Each year, departmental spending has risen remorselessly and the forecast given last January in the Government's expenditure plans for 1985–86 and 1987–88 has been exceeded by more than £2 billion in the current year. Since the Government came to power, expenditure in real terms has risen on average by 2 per cent. per annum. That increase in expenditure has been somewhat disguised by the Government's creative accounting—by which I mean the practice of showing asset sales and receipts from privatisation as a reduction in public spending. I shall not repeat the arguments showing that that is wrong, as they have been made often in reports from the Treasury Select Committee. I merely point out that this year, once again, Government spending has increased and the Government would not have been
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  able to get their figures within the planning totals if they had not doubled the estimated receipts from privatisation.
  I support the policy of privatisation for its own sake, but not as a basis for increasing Government spending or for reducing taxation. In the long term, that could prove to be a very dangerous policy. First, it allows the establishment of spending patterns which are long-term but which are met by income that is essentially nonrecurring. I was heartened to hear the Chancellor say that the present assets held in the public sector would enable asset sales, by my calculations, to go on for about 15 years, though I hardly believe that the Government intend to sell the lot.
  Secondly, such a policy is dangerous because it puts off the day when cutting Government expenditure will be essential, due to the decline of oil revenues, if we are to avoid significant increases in taxation. As a traditional accountant, I should have liked to see a significant part of those resources used to pay off the national debt and thus reduce the burden of interest in future years to offset the reduction in North sea oil revenue.
  Mr. Robert N. Wareing: The best way to reduce the national debt is to reduce it as a percentage of national wealth. The Government should be investing in British industry—not in Hong Kong, Taiwan and South Korea, like so many of their friends—to restore the British economy so that more wealth is created. The burden of the national debt would then decrease. It cannot be dealt with merely by taking sums of money out of the Exchequer or raiding the silver, as Lord Stockton called it, to bring down the actual figure of the national debt. It must be reduced as a percentage of national wealth. To do that we should be creating more national wealth, not more job losses.
  Mr. Townend: With respect, I do not think that the hon. Gentleman knows what he is talking about. If part of the national debt is paid off, the national debt is automatically reduced as a proportion of the national wealth.
  I accept that my right hon. Friend the Prime Minister and Ministers at the Treasury want to reduce public spending, but year after year they have been thwarted in their efforts by the big spending Departments and in particular by the inexorable rise in the cost of the DHSS. I therefore welcome the commitment in the Gracious Speech to bring in a Bill to reform social security, although I am not sure that it will result in significant savings to the Treasury. I warn Ministers that expenditure is likely to run out of control in one area if they are not careful. They are dealing with the board and lodging allowances for young people but not for older people. In tourist towns such as Bridlington, the conversion of hotels to old people's homes is mushrooming at a frightening rate.
  One way to reduce the enormous cost of unemployment, which forms one of the major costs of the DHSS, is to reduce the increasing size of the black economy. I believe that the real unemployment level—people drawing benefit who actually want to work—is no more than 2 million and possibly even less.
  Mr. Wareing: The hon. Gentleman does not know what he is talking about.
  Mr. Townend: If the hon. Gentleman will listen to my argument, he will see why I come to that conclusion. More

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  than 790,000 people are registered as unemployed in the south-east. Everyone accepts that the south-east is entirely different from the north, where my constituency is and where we have real unemployment. Of that total, 400,000 are in greater London. I believe that very few people in the south-east and certainly in greater London who are employable, prepared to travel and ready to accept any of the jobs available need be unemployed.
  There are thousands of jobs available in central London, especially in the hotel, restaurant and tourist industries. My own daughter found a job within six hours. She walked off the street into a hamburger place and got a job. It was a menial job with anti-social hours and the pay was not high, but it was a job. Many employers in the tourist industry have had so much difficulty filling vacancies that they have brought in thousands of Filipinos, Spaniards, Greeks, Italians and French to man the hotels and restaurants. Some hotels are virtually 100 per cent. manned by Filipinos. There are 250,000 foreigners working in and around London, mainly in the tourist industry, doing jobs that our own people will not do.
  Without doubt, many people registered as unemployed in the south-east are working in the black economy and drawing benefit as well, at considerable cost to the Treasury. This is borne out by the fact that more long-term unemployed are registered in the south of England than in the north. That is incredible. Everybody accepts that the north is far more depressed than the south of England. The only reason, of course, is that there are more long-term jobs in the black economy in the south.
  Some people are unemployable because of their lack of motivation or the failure of our education system. Some prefer to live on benefit, subsidising it with part-time work. I regret to say that a growing number supplement their income from the proceeds of petty crime. The Government must address themselves to solving these problems. I welcome the move that I understand the Department is making in the more prosperous areas of the country to return to the practice whereby people who are claiming benefit will lose that benefit if they consistently refuse to take the jobs that are available.
  Now that we have a guarantee of a two-year youth training scheme for every young person, benefit should be withdrawn from those under the age of 18. We should increase the incentive to work by reducing income tax. Ideally, that reduction should be financed by spending cuts, but it is so important that I am prepared to support partial financing from the proceeds of privatisation.
  Because of the importance of taking people from the black economy back into the white economy, I strongly urge the Government to ensure that the vast majority of any funds available for reductions in tax should go towards progressively lifting the thresholds. Over the next few years, I should like to see a target of progressively taking out of tax everybody earning less than £150 a week.
  I welcome the measures to create jobs by deregulation, particularly the proposals in the Gracious Speech to amend the regulations for wages councils. I understand that that change will take young people out of the jurisdiction of wages councils. As all hon. Members know, I have campaigned for many years in this House to have wages councils abolished, and I welcome this as a start. The Government have accepted the proposition that young people should be allowed to price themselves back into
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  work. Why should people over 21 not be allowed to do the same? I find that strange. If deregulation is what we need to stimulate the labour market and open it up, then surely partial deregulation is not as good as full deregulation.
  I welcome the radical tone of the Gracious Speech, particularly the privatisation proposals. I was saddened to see that Lord Stockton, a man who was one of my political heroes when I was a young Conservative chairman, a man who was leader of the party and who led the fight against Socialism, and who was strongly opposed to nationalisation, should in extreme old age be extolling the virtues of the public sector. To compare British Airways which has cost the taxpayer so much in recent years with the family silver is, to say the least, eccentric.
  For too long, nationalisation has proved to be a dead hand on a large section of British industry. Privatisation is good for the customer, good for the workers and good for the shareholders. My own company recently benefited from the privatisation of British Telecom and the liberalisation that followed. We had an antiquated switchboard and telephones and we let it be known we were proposing to put in a modern system. The price came down and we got a much superior system for half the price and over 10 years we will save £10,000. That is the benefit of privatisation.
  The other great advantage is that it enables former nationalised industries to obtain finance without affecting the public sector borrowing requirement. All those people who have been complaining about water authorities putting up the water rates would not need to complain about that if the water authorities were in the private sector and could obtain finance on the market.
  There are always omissions that Back Benchers regret from any Gracious Speech, but I congratulate the Government on putting forward a radical policy. I shall support them in the months to come, but I shall continue to encourage them to make savings in public expenditure.
  7.55 pm
  Mr. Robert C. Brown: The hon. Member for Bridlington (Mr. Townend) seemed fairly excited about the control of public expenditure which he said would facilitate further reductions in the burden of income tax, a matter that was referred to in the Queen's Speech. What about the burden of taxation generally? Everyone is carrying a much heavier burden than before because of the steady increase, year by year, in indirect taxation, such as the 100 per cent. increase in value added tax, which no one can avoid.
  Reducing the burden of income tax is a monstrous con trick being played by the Chancellor. He knows well enough that 95 per cent. of taxpayers are paying more today than they were paying in 1979 when we left office. We should remember that not all taxpayers are income tax payers. A considerable amount of tax taken by the Treasury is not in the form of income tax. To expect ratepayers in north-east England who over many years have carried the burden of steady losses on Newcastle airport, a municipal airport of which we are extremely proud, to hand over this successful municipal enterprise to private enterprise is, to say the least, a piece of damn cheek in any language. That is what the Government are proposing in the Gracious Speech.
  As we all know, the hon. Member for Bridlington is almost fanatical in his hatred of wages councils. Can the Leader of the House tell us just how wicked and depraved

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  this Government can become? In the Queen's Speech they talk about removing the protection of wages councils from the lower paid in our society. In the main, such people do not enjoy the protection of trade unions, because only a few of them are organised. To suggest such a thing is like stealing from a charity collecting tin. That is about the level of morality of this Government.
  I should like to say something about the so-called reform of social security. Why do the Government not come clean and admit that their real purpose is to rob Peter to pay Paul? In this case, Peter represents the poor and needy, and Paul represents those who are already doing very nicely, thank you. On Monday night the Evening Chronicle in Newcastle had a leading article entitled "Selling a service." The article said that when family income supplement was introduced the DHSS ran a campaign to make people aware of this new benefit. The city council in Newcastle carried out a survey which showed that fewer than 50 per cent. of the people eligible for family income supplement applied for it. Let us remember that those are people doing a full-time job, but whose earnings are such that they cannot subsist on them. That fact entitles them to claim family income supplement. The city council agreed that £14,000 of ratepayers' money will be spent publicising the rights of people to claim family income supplement.
  The editor of the Evening Chronicle rightly complained that this should be a Government responsibility. There is something radically wrong when less than half the people entitled to a state benefit are claiming it. That will not be lost on the electors of Tyne Bridge on 5 December, when I am sure that they will give the Tory party in the area a bloody nose. I represented much of Tyne Bridge for 17 years. In one of its wards—Scotswood—more than 70 per cent. of people live on state benefits, including family income supplement.
  If ever there was a clear issue of conscience, it is Sunday trading. Will the Leader of the House give an unequivocal undertaking that on the Second Reading of the Sunday trading Bill all hon. Members, including Ministers, will have free votes? It would be monstrous if Ministers were whipped into the Division Lobby to vote against their consciences. Some of my colleagues may disagree with me, but I believe that even Tory Ministers have consciences and the right to act according to their beliefs.
  Although I have not yet seen the detailed proposals on police powers, I believe that we would all wish to support them, especially those relating to disorder, drug trafficking and the confiscation of the spoils of drug trafficking. But is it not about time that we had some return on the money that we spend on the police? Let no one forget that the Government must take credit for an enormous increase in expenditure on the police during the past six years. But it is about time that that increase led to better detection. If Joe Bloggs knows that he has a good chance of being apprehended as a result of his villainous activities, he would commit fewer crimes. Indeed, less crime would be committed generally. Burglaries cause a great deal of distress. I speak from the experience of having been burgled no fewer than five times, but the police apprehended the villain in only one case. The Metropolitan police caught the man who burgled my flat in London, but I have regained none of the property that he stole.
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  Those who know my background of 30 years' employment in the gas industry, private and public, will not be surprised by my following remarks. It is extremely difficult to understand how a Government who are committed to free enterprise and to competition can seriously create a private monopoly in a key energy industry such as gas. I see no evil in a public monopoly that is responsible and answerable to the public through Parliament. But a private monopoly is a horse of a very different colour. It would be accountable only to a few major shareholders. We shall lose safeguards such as the general directives that Ministers can make on behalf of taxpayers. Those major shareholders will be able to make demands of a democratically elected Government to the point of causing policy changes, which would be a negation of democracy. That cannot be right on anyone's terms.
  Greater efficiency cannot be part of the Government's case, because the British Gas Corporation has, on any test, surpassed the Government's efficiency targets. The cost to the taxpayer will be astronomical. The corporation is worth about £16 billion, but Treasury-inspired media reports estimate a take of about £8 billion on flotation. Therefore, Joe Public will immediately lose £8,000 million. To add insult to injury, Joe will be asked to pay the City vultures about £300 million to sell him short by £8 billion. But worse is to come. At present, Joe Public looks forward to the Government raking in £1,000 million every year from the British Gas Corporation. That will be gone for ever. We must be in the unique position where Joe Public is being compelled by the Government to pay a group of muggers to inflict grievous bodily harm on him. It can only be described as organised corruption on a massive scale, or at least as economic vandalism.
  Last year, the public monopoly spent more than £1,100 million on new and replacement investment, much of which was spent on British goods and services. One of the first acts of the privatised British Telecom was to place major orders for equipment with foreign firms. What guarantee do we have that a privatised British Gas Corporation will not follow the same path?
  I suspect that, as in the case of other privatised industries, the financial institutions will corner the lion's share of the industry on flotation or shortly afterwards. But £8,000 million is a massive amount for the markets to find. If many small shareholders are encouraged to buy, there will immediately be a shortage of capital for job-creating investment and a big strain on bank and building society savings. That could lead to an increase in interest rates, mortgage rates and prices, and a consequent increase in unemployment. One side effect of privatisation will be to give the "haves" more and to take from the "have nots".
  I have heard it said that employees of the BGC are anxiously awaiting the flotation for their share of the loot—the employees' shares. That may be so, but another consequence for employees will be massive job losses. The closure of gas showrooms has a snowballing effect which could result in the loss of more than 30,000 jobs. A private BGC will have no reason to wish to provide the excellent cover of showroom service at present provided by the nationalised industry, and cross-subsidisation of loss-making showrooms by the profitable ones will be no part of its concern. What about the future of the gas industry employees? The Gas Acts 1948 and 1972 provided for continuing pensions provision. However, if the example of British Telecom, British Airways and the

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  transport employers on pensions is anything to go by, unless there is statutory provision, we cannot be certain that index-linking will continue for present pensioners, while future pensions policy will be anybody's guess.
  The high standards of safety and service established during the past 35 years by the publicly owned gas industry will be put seriously at risk. I am not just crying foul. We have the evidence of British Telecom, which is now charging for emergency repairs of exchange facilities outside normal working hours. If a private gas company adopted a similar policy, would a customer telephone the emergency service during the night or at a weekend to be charged at premium rates? I think not. Such a matter must give the House cause for concern.
  There is not much family silver among the people whom I represent, so I shall not weary the House by paraphrasing what was said by the Earl of Stockton, although I do not share the opinion of the hon. Member for Bridlington that Lord Stockton is an eccentric old man. Let me put it into working class parlance. This proposal is as daft as selling all the furniture to take the family to Malta for a two weeks' holiday. Why not do the sensible thing, and drop the measure before it is too late?
  Several Hon. Members rose—
  Mr. Deputy Speaker (Sir Paul Dean): Order. I renew Mr. Speaker's appeal for brief contributions. Six right hon. and hon. Members still hope to speak before the winding up speeches, which are expected to begin at about 9.10.
  8.10 pm
  Mr. Geoffrey Rippon: From your position of eminence, Mr. Deputy Speaker, you will have noticed the increase in rising damp on the Front Bench. This is not a cause for alarm. It is a cause of great satisfaction that views that were heretical a few years ago are now acceptable. I particularly welcome the fact that what I used to call motorway madness—M1, M2 and M3—has been abandoned. Little MO has taken the stage, but will be allowed to remain there only as long as she performs satisfactorily.
  Over the past few months we have seen an abandonment of bad monetarism, the rigid, statistical inflexible monetarism that has done the country no good. It is a good thing to see that go. I am also happy that it is now recognised that the provision of roads, houses and hospitals creates real wealth and real jobs, and it is no longer "wet" to recommend that this should be done.
  There has been no U-turn,—the Gardarene swine did not have to make a U-turn, only a change of direction. We have had the change of direction to which the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) referred—an L-turn. I hope that the Government will continue in the right direction. They can improve the situation in a number of ways. First, we need lower interest rates and hon. Member after hon. Member has explained how the CBI and everyone else knows that high interest rates have fuelled inflation, harmed British industry and done enormous damage by creating the Third world debt crisis. I have said time and again that it is all right being a Mafia loan shark if one has enforcers, but one cannot break the leg of the president of Brazil. Instead, one has to lend him more money and give him a tip for not
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  defaulting. I was glad to hear the Chancellor say that he did not expect commercial banks to go on pouring money down the drain.
  Secondly, I hope that the Government will make the progress, to which my right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath) referred, towards a new stability in monetary policy, beginning with the necessary first step of joining the exchange rate mechanism of the European monetary system. We must see the free floating, which has not worked, replaced by the old managed floating or crawling peg. We should bear in mind the old Chinese proverb that the snake in the bamboo is still a wriggling animal. We can have much flexibility while avoiding some of the difficulties that have arisen in recent years.
  Thirdly, as hon. Member after hon. Member has said, we must resist the temptation to use capital receipts to finance current consumption rather than putting them into reinvestment. There has been much talk about the family silver. If one is lucky enough to have some and can sell it, it is important to realise that one can only sell it once and that one must spend the proceeds wisely. It is foolish to spend them on a holiday to Malta, but it may be sensible to use them to repair the roof.
  There are encouraging signs in the Government's policy. It is no longer possible to divide the Conservative party into wets and dries. That distinction has becomed blurred. We have been told that we must now be radicals or consolidators. I hope that there is a possibility of preferring consensus to confrontation, and of not differing too often on too many matters. I hope that it will not upset them, but I share the views of those of my hon. Friends who recently wrote a pamphlet called, "No Turning Back".
  If there is a dividing line, I am on the side of the radicals. That is not surprising as I am rather pleased that I myself produced a pamphlet in 1969, which I somewhat pretentiously called "Right Angle—Philosophy for the Radical Right". That was thought heretical at the time. The great thing in politics is not to be right at the wrong time. At that time I was thought extremely Right-wing by those of my colleagues who subsequently served with me in Cabinet. They teased me and called me "Monday Club Rippon". I advocated not only tax cuts and tax reform but the denationalisation of the steel industry, the telephones, the air line corporations and other services. Therefore, I very much welcome the proposed privatisation measures in the Queen's Speech.
  I believe in a free market, choice and competition, but I do not believe in the old 19th century concept of each man for himself and the devil take the hindmost. There must be safeguards for both public and individual rights and if we are concerned with the defence of freedom in all its aspects, we must be prepared to ensure that there is fair competition whether in regard to Sunday trading or any other trading.
  I hope that we shall have a free vote on Sunday trading, as the hon. Member for Newcastle upon Tyne, North (Mr. Brown) said. There must be a fair balance between the conflicting interests on the basis that trying to achieve consensus is better than seeking confrontation. In a civilised society, one cannot have an unregulated free-for-all.
  I welcome in particular the declaration in the Queen's Speech:

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  "Measures will be introduced to establish a new regulatory framework for the financial services sector, which will enhance its efficiency and competitiveness whilst providing greater safeguards for the interests of investors".
  That may be relevant in the light of some of the exchanges that we had earlier this afternoon. When, in that pamphlet in 1969, I wrote of the dangers of a society that had become merger mad, I did not foresee the disorder that would exist today or that I would have to declare a personal interest. I shall do so. I am chairman of a public company, Britannia Arrow Holdings. It is now the target of a hostile bid, about which I shall not speak.
  I hope that the Government will pay attention to the whole series of speeches, not just the one a week or so ago, by Mr. David Walker of the Bank of England. He drew attention to the way in which the long-term economic and business interests are being undermined by short-term considerations—what he called last year the "shortening focus". When one looks at what is going on in the City today, one has to ask oneself, "Who is minding the shop while the casino games are being played?" The late respected Patrick Hutber rightly foresaw the damage that could be done to an economy dominated by
  "appalling young men pushing about pieces of paper."
  Mr. Walker has challenged us to consider how far official attitudes to mergers and acquisition activities remain apt in the present fast-changing environment. Ministers have said that they want self-regulation within the statutory framework. That subtle theme has been used in the face of what the chairman of the stock exchange called the biggest revolution ever to hit a great capital market. We have to act decisively before next year's so-called big bang and we shall be on fairly dangerous and difficult ground when we deal with this legislation. I fancy that the debate will range beyond what the Government have in mind.
  For example, we have to review the question whether Whitehall, the Bank of England or some other body will have to sort out the market distortions that have been created. It may be thought that the regulatory processes of the Bank of England are, in the circumstances of today, too secretive and uncertain to be regarded as satisfactory. We may have to consider whether we need something along the lines of the Securities Exchange Commission in the United States. In some respects our regulatory processes are stricter than those of the United States, and in others they are not. We must try to marry the two, and ensure that we have something better than we have today.
  I have been impressed in the United States by the boards of independent directors who have the sole responsibility of protecting the interests of the shareholders and of ensuring that the financial services are properly run. In the United States, as here, there is growing recognition that action is essential before an outraged public demands excessively punitive regulations against the coterie of corporate raiders and speculators playing Monopoly, sometimes with junk bonds, at the expense of companies, their shareholders and employees, and the nation.
  The consequences of next year's big bang in the City and its effect on the national economy may turn out to be the most important matter that we must consider this Session.
  8.20 pm
  Mr. A. E. P. Duffy: Yesterday, the Chancellor of the Exchequer presented to the House
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  the Government's outline public expenditure plans, and made it clear that the Government's priorities were now running in the direction of tax cuts and privatisation. Indeed, the second is partly to finance the first, and I suggest that that objective is pursued with crossed fingers.
  I wish to show how the Government' s intentions show little accord with the needs of south Yorkshire and, indeed, with the needs of the Yorkshire and Humberside regions, both of which need improved infrastructure, the regeneration of traditional industry and the cultivation of new industry to stem the drift from north to south.
  Yorkshire and Humberside is one of the great traditional manufacturing regions. Shipping, steel, heavy and light engineering, coal, textiles and clothing all helped to forge the industrial reputation of our country, and they are now at risk. Those industries still form the backbone of the region's economic structure, but are now deemed to be unfashionable smoke-stack industries, and apparently unsuitable for the economic and environmental needs of a modern, fully developed Western industrial society.
  In previous recessions, Sheffield and the towns around it fared better than other parts of Yorkshire and Humberside. The last five years, however, have seen the reversal of that position, largely due to the steady erosion of the United Kingdom cutlery industry in the 1970s, and the savage decline in the steel and engineering industries subsequently. For the first time, Sheffield and south Yorkshire face a major long-term problem of remedying structural decline in their basic industries of steel, engineering and coal mining. The economy of south Yorkshire is possibly in worse shape than any other part of the United Kingdom, and that of the rest of Yorkshire and Humberside is not much better.
  A delegation from the Yorkshire regional Trades Union Congress briefed Yorkshire Labour Members a week ago in the House on the manner in which the economic decline of their region was affecting its members. Since the Tory Government came to power, 18,500 mining jobs have been lost, the public services have been decimated, and 13,000 jobs at the west and south Yorkshire county councils are at risk from abolition. The Transport Act 1985 has been the cause of reduced rural transport services, and the water industry is gearing up for privatisation proposals. The youth training scheme has been masking the real educational needs of the region, and in any event mode B schemes are being reduced. The operational fire services were being reduced by 17·5 per cent. and 20 per cent. in west and south Yorkshire respectively.
  Yorkshire and Humberside face the major social problems of high levels of unemployment, land dereliction, obsolete buildings and poor grade housing stock. The senior trade union officers argue that the region urgently requires major manufacturing and infrastructure investment. They see no evidence of the record job creation, to which the Government lay claim.
  In a report published last week, the Yorkshire and Humberside county councils association shows that much of the region's fixed capital stock is in need of renewal. Particular problems are found in housing, water supply, sewage disposal, river pollution, coastal protection and the road network. The association wishes to underline the need for more regional public expenditure, and the beneficial effects that that would have on the one in eight of Yorkshire's 300,000 unemployed who are from the construction industry.

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  Last week the association of Yorkshire and Humberside chambers of commerce called for the region's traditional manufacturing base to be encouraged and redeveloped, and not allowed to
  "deteriorate slowly in the vague hope that the vacuum will be filled by services and tourism."
  As Lord Weinstock remarked to the House of Lords Overseas Trade Select Committee during its recent inquiry into manufacturing trade,
  "What will the service industry be servicing when there is no hardware, when no wealth is actually being produced?"
  That raises the all important question of business confidence, which is the prerequisite of investment decisions, which in turn lead to output and jobs.
  That recent report shows how concerned large sections of industry are, not only about the present state of the economy, but particularly about the prospects for the rest of the decade. We even have the Institute of Directors calling unashamedly for reflation.
  That, taken together with the views of the chambers of commerce, the county councils association and the regional TUC in Yorkshire and Humberside—there are no more representative, more credible, weightier authorities in the region than those bodies—all of which have been made known only during the past week, suggests that the Government's policy of reviving business confidence simply by opting out of the economy has failed lamentably.
  Apart from the development of the petroleum, petrochemical and oil-based industries on Humberside in the 1960s, Yorkshire and Humberside as a whole has not attracted new technologies.
  Mr. Michael Brown: The institutions to which the hon. Gentleman referred are weighty and well-respected, but how does he square his analysis of the position with the fact that the unemployment figure for Scunthorpe, which, like his constituency, went through terrible times in the early 1980s, is 1,000 lower today than a year ago?
  Mr. Duffy: The hon. Gentleman does not say what the unemployment figure is today, and how it compares with the level of employment six years ago when the Government came to office. It is that which has moved all those representative bodies, at least two of which speak for him as well as for me, to publish those reports last week. If the hon. Gentleman has not already done so, I recommend that he looks at their contents.
  Apart from the development of the industries that I mentioned in the 1960s, there have been no new technologies in the regions. There have been some homegrown developments, particularly in the Leeds area, and Harrogate has attracted scientific research and development, but the conclusion that Yorkshire and Humberside have done less well than Scotland, London and the southeast is inescapable.
  South Yorkshire has an extremely low level of employment in computing and microprocessor related activities. In 1981, the latest date for official figures, those industries accounted for only 1,055 jobs or 0·2 per cent. of total employment. That is well below the national average of 1 per cent., or the national high of 1·6 per cent. in the south-east.
  The South Yorkshire county council has tried in several ways to stimulate growth, but it is constrained by limited
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  finance. The county's employment promotion and development budget of £2 million compares with Government aid totalling £298 million, available under the support for innovation programme in the current financial year.
  The south-east, the most prosperous region, with the highest proportion of high tech industry, received £25·1 million—almost 10 times the assistance of £2·7 million offered to Yorkshire companies.
  The problems of the older industrial areas such as Yorkshire and Humberside are clearly primarily economic. In the absence of active policies to promote regeneration—precisely the policies called for by Government Members today—their relative position is likely to worsen. Yesterday's autumn statement is not enough.
  The drift to two nations in economic terms will continue unless the fundamental economic problems of the northern industrial districts are tackled. That calls for an open acknowledgement by the Government that they recognise the crisis that faces regions such as Yorkshire and Humberside and that they are prepared to do something fundamental about it.
  According to the association of Yorkshire and Humberside chambers of commerce business confidence requires a serious, open, declared commitment to sustained expansion at a stable but realistic exchange rate, not a grudging, hidden, one-off, pre-election tax cut partly financed by sales of assets and higher nationalised industry prices accompanied by an unsustainably high exchange rate.
  8.32 pm
  Mr. John Browne: I rise to congratulate the Government and to ask them one question. However, before I ask the question I stress the Government's economic achievements. We have today both high growth and low inflation, which has eluded all Governments since the war. It has eluded all past Prime Ministers and Chancellors of the Exchequer, and it is the envy of most democratic countries. Growth is 3 per cent. and inflation next year will be heading for 3·25 per cent. For the first time since the 1960s the differential between the inflation rate and the growth rate is less than 1 per cent. That is a great achievement.
  When one considers the circumstances, that achievement is all the more admirable. The Government have faced a world recession, which in some respects is worse than that of 1929, and terrible labour relations. We all remember the winter of discontent and the problems of restrictive practices. The ambience is different. Old industries operated at vast losses. Today even the larger industries run at considerable profit. The growth in new companies is huge, particularly in high tech and service industries.
  The lack of enterprise which was typical in 1979 has changed. The enterprise spirit is on the way. It is here. Attitudes are different from those which persisted in 1979. We should be thankful for that outstanding achievement. If Opposition Members were truthful, they would admit that they wish that they could announce the same type of achievements as were announced by the Chancellor yesterday and today.
  Real growth is tough, but it allows for healthy increased Government spending by taking less of a share of the national wealth. It takes less of the national cake, leaving

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  more in the wealth creators' hands and so allows for lower tax rates which again increase the enterprise spirit. The fall in North sea oil revenues is taken into account. People ask what will happen when the North sea oil revenues fall. The Chancellor's calculations include that eventuality and allow for increased spending on infrastructure.
  Many people say that the Government have changed. I do not believe that. The Government's aims have not changed one jot. They are still out to beat inflation, as they were in 1979. Of course they have changed their spending. The reason is that there is more money to spend. We have real growth and therefore the Government can change their spending habits while not losing sight of their goal.
  As the right hon. Member for Plymouth, Devonport (Dr. Owen) said, we slipped from being number three to number 19 in the league of industrial nations in our decline. To change from that stagnation and inflation to growth and lower inflation has a serious price. The price is unemployment, that terrible scourge. Terrible and dreadful though unemployment is, we all knew in our heart of hearts that the massive overmanning—about 5 million people in jobs that did not exist—cost money rather than made money. We knew that massive unemployment would result from reversing the enormous investment in unprofitable and unproductive businesses.
  That transition has been dreadfully hard and tough. I know that unemployment levels are dreadful and high, but they could have been worse without the Government's constructive measures.
  We have resisted competition for years and we now have to compete. Suddenly in 1979 we were faced with the prospect of going down the tube and becoming a Third world country or facing competition and trying to retain our status as a developed country in the modern technological world. To do that we had to face the competition of hard-working, low-wage economies.
  Cutting wages was never a political alternative. We had to push for the technological revolution. In doing that we had to accept the new services and high tech industries. We had to move out of manufacturing into the new industries of today and tomorrow.
  The right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) was right to say that we must not deceive people about unemployment. I was interested in the way that he talked about that. He seemed to fear deception. Neither Government nor employers create genuine, profitable jobs—only customers can create them.
  Some people urge massive Government spending to create jobs. They are calling for investment in unprofitable companies and projects. They are urging higher taxes and higher interest rates which will result in higher inflation and lower growth. Those remedies have been tried by Governments of both parties. We have seen the disasters and we know that they do not work. Such remedies are mere electoral bribes—borrow more, tax more and spend it on projects that might win votes. The result is national decline. At long last, we have a Government who are showing us the way to success. Why do Opposition Members laugh and scorn? Why do they not back the Government and admit that they wish that they were in a position to announce such achievements?
  My right hon. Friend the Chancellor has said that we must not take a risk with inflation. If there were to be an untoward drop in interest rates, that could lower the level of sterling and cause a rise in inflation. With that in mind, on 30 October I asked my right hon. Friend the Prime
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  Minister whether, with the low levels of sterling then, which became even lower—[Interruption.] Opposition Members might not agree, but if we had entered the European monetary system at those lower levels, would we not be in a better position today? We could accept lower interest rates without having the kick-on effect of a lower exchange rate and, therefore, higher inflation.
  I realise that entering the European monetary system would have enormous political effects. However, high interest rates also have enormous political effects. Should not my right hon. Friend the Chancellor, despite political implications, consider the growing demand to enter the European monetary system? That would allow us to have much more flexible interest rates. It is silly to remain the one country without a currency in a major currency block. There is talk of Britain being a petrocurrency, but that, is nonsense. Oil is a small amount of our national revenue—about 6 per cent. for oil and gas together.
  I congratulate my right hon. Friend the Chancellor on his proposals. Government policies are arresting our economic decline and putting us on the threshold of real growth.
  8.42 pm
  Mr. David Winnick: I must first emphasise that, yet again, the Queen's Speech offers no prospect of a reduction in unemployment. Indeed, most forecasters believe that the high level of unemployment will continue for some time. We must concern ourselves with the present level—more than 40 per cent. of those unemployed have been out of work for a year or more.
  In the area covered by the West Midlands county council, the figure for those out of work for one year or more is 50 per cent. and many have been unemployed for over three years. Perhaps the hon. Member for Winchester (Mr. Browne) should bear that in mind. It is understandable that those made redundant in their fifties give up any hope of finding a job. Unfortunately, that is also becoming true for those made redundant in their forties.
  It was deeply offensive to hear the new deputy chairman of the Tory party, Mr. Jeffrey Archer, say that the unemployed should get off their backsides and find work. We tried yesterday to get the Secretary of State for Trade and Industry to dissociate himself from those offensive remarks, but he did not wish to do so. My local newspaper, The Express and Star, in an article headlined "Hundreds in job rush", said that hundreds of work-hungry people besieged a Wolverhampton jobcentre last month after hearing of jobs being offered by a local tyre factory. Men and women began queuing at 2 am. Should they be told to get off their backsides? The jobcentre manager said that there were several thousand applications, and that jobs were going fast. One of those who queued for a job was a 57-year-old man, who stood shivering through a chilly night for more than five hours. He said that he did not mind that because
  "I thought they might give me a job if I came early."
  That man had been out of work for some years. I wonder what sort of lecture he requires from the deputy chairman of the Tory party.
  Mr. Archer claimed that he knew what unemployment was like, and gave an example of when he had debts of £400,000. What he said in that notorious interview must have been embarrassing for Ministers. However, in truth, what he said was probably what a number of Ministers and

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  Conservative Members believe. The difference is that Mr. Archer decided to blurt it out. He is not a Member of the House and is not subject to the electorate. I believe that he reflected the feelings of a number of Conservatives. I should not be at all surprised if he said what the Prime Minister privately believes.
  However, the Secretary of State for Energy does not believe that. In his speech to the Tory Reform Group during the party conference, he said that voters who had accepted Tory arguments about unemployment in 1983 would not accept the same excuse a second time. How right he was. Indeed, the hon. Member for Staffordshire, Moorlands (Mr. Knox) made that very point when he spoke last night.
  The Times, in its leader, said that the Secretary of State for Energy must decide whether, following his extraordinarily clear assault on the heart of Government policy, he could in decent self-respect continue to sit in the Cabinet. The right hon. Gentleman has answered that question. Although he does not agree with the main thrust of Government economic policy, he has no wish to offer his resignation. He likes being in the Cabinet.
  Between June 1979 and June this year, there has been a 30 per cent. drop in the number of people employed in manufacturing industry in the west midlands. That shows what has happened in the region since the Government took office—factory closures, massive redundancies, large-scale unemployment, the accompanying poverty and hardship and so on. The region has been devastated, and it is inevitable and right that there should be such harsh criticism of the Government from the people there.
  What is true of the west midlands generally is true of the Black Country and certainly of the area that I represent. When I was elected in 1979, unemployment in the Walsall travel-to-work area was just 5·1 per cent.—the figure for the west midlands as a whole. It is now 17 per cent., and has been around that for three or four years. Those made redundant find it so difficult to obtain work. Having reached a certain age, they conclude that their chance of ever working again, without a real change in economic policy, is very remote. They can look forward only to receiving the old-age pension and continuing to live in poverty.
  In addition to all that, having penalised so many people because of their economic policies and made so many redundant, the Government follow other policies that make it difficult for those people and their families to manage.
  Mr. James Hamilton: In fairness to the Secretary of State for the Environment, he wanted £600 million more to renovate houses. Does my hon. Friend agree that it is iniquitous that some Conservative Members are getting as much as £20,000 worth of grant to renovate old houses, which they sell? Is that not a travesty of justice?
  Mr. Winnick: That is an interesting comment. I am reminded that the first time I heard of the Chancellor of the Exchequer was in 1966 when he managed to get a council mortgage for what was then a very large sum of money for a property in Lord North street; it was not the sort of property that Labour Members live in.
  Ministers have tried to rubbish the report of the Lords Select Committee on Overseas Trade, but it spells out
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  clearly the bleak future for Britain when oil runs out unless there is a change of economic policy. Ministers and Back Benchers like the hon. Member for Winchester have been telling us about how things are changing for the better. We should perhaps note that yesterday the CBI brought out a report entitled "Managing for Success" which said:
  "Manufacturers are especially concerned about government policy—60 per cent. of all the interviews subscribed to the view that the 'government had written off manufacturing'. Some of these stated quite openly that in view of this, one of their strategic goals was to get out of manufacturing in the UK."
  In the same report the CBI states that seven of our most successful companies are planning to pull out of manufacturing in Britain because of Government policy. That is hardly what one would describe as optimism on the management side of industry about the policies being pursued by the Government.
  My hon. Friends and I have always criticised Government economic policies We have spoken about mass unemployment. Our job is to convince the country that there is an alternative. We did not unfortunately succeed last time. An increasing number of people who gave the Tories the benefit of the doubt two years ago because of various factors, including the Falklands, will not be willing I believe to give them the benefit of the doubt at the next election. There is a growing wish among the people, including many in employment, for a change of economic policy. They do not believe that we should have permanent mass unemployment.
  Our job as an Opposition is to persuade our fellow citizens that there is an alternative and to see to it that a Labour Government are elected so that the disaster that has befallen the country in the last six years can be wiped out. That is the best prospect for Britain—a Labour Government with a working majority.
  8.52 pm
  Mr. Terence Higgins: Her Majesty's Gracious Speech contained two main themes—law and order and a series of measures related to the economy. I welcome the passage in the Gracious Speech which says:
  "Measures will be introduced to strengthen the powers of the police".
  In particular, I welcome the proposal that we should take
  "power to confiscate the proceeds of drug trafficking and to penalise the handling of such proceeds."
  Such a measure is long overdue.
  A great deal of extra resources will be needed if we are to win the battle against drug trafficking. We still have a chance of avoiding the tragic position that has developed in the United States if we get sufficient co-ordination between the police, the Home Office, Customs and Excise, the Department of Health and Social Security and the Foreign Office, all of whom will necessarily be involved in the most important social battle we face. Therefore, I welcome the proposal just announced to increase the number of Customs and Excise officials concerned with that problem, although still further resources will be necessary. Certainly the Bill which is envisaged on penalties is greatly to be welcomed.
  I want to concentrate on the economic aspects of the Queen's Speech, to some extent because of the statement made yesterday by the Chancellor and his speech today. I welcome the improvement in presentation in the document which reflects the recommendation of the Select Committee on the Treasury and Civil Service. That is a considerable advance.

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  Obviously the Select Committee will wish to take evidence from officials and Ministers on the autumn statement before we have a debate which I hope will take place as soon as we have been able to make our report. I regret that the Chancellor has decided not to publish a fiscal adjustment. It makes it more difficult for the House to have a coherent and sensible debate. Although the Chancellor argued that the announcement last year had an effect on speculation in the exchange rate, that was also due to a considerable extent to statements made by Ministers about cutting taxes. We are still getting such statements, but the cuts are not quantified. That does not help the debate which will ensue on the autumn statement.
  I am also worried because revenue forecasts have been suppressed. The Chancellor, whom I am glad to see in his place, has repeated time and time again that finance must determine expenditure rather than the other way about. How are we to judge the expenditure plans in the autumn statement if we are not given an idea of what the revenue is? No doubt we will wish to pursue that point with him.
  I support the way in which the Government are pursuing the privatisation policy. It will improve efficiency and it is right to encourage wider share ownership. It will be necessary to make sure that the antimonopoly legislation is adequate to deal with the setting up of many more private monopolies. In the exchange earlier today in the House it was made clear that the Secretary of State for Trade and Industry will review competition policy. That matter is more urgent than he suggested, given the changes which are taking place in the major monopolies in the public sector which are to be transferred to the private sector.
  That brings me to the accounting convention for asset sales. Although I am strongly in favour of the policy, it is important that the financial consequences should not be allowed to conceal the effects on the economy. I find it strange that the Government should continue to regard the proceeds of asset sales as a reduction in public expenditure and borrowing. The Select Committee has made it clear that it regards it as a means of financing the borrowing requirement itself. If that adjustment is made—the Chancellor says it is possible to make it—the emphasis is different.
  In the autumn statement the Chancellor has published a figure for public expenditure both with asset sales proceeds and without. He does not make a corresponding adjustment for the public sector borrowing requirement, which should be done if one regards the asset sales proceeds in the way that the Select Committee has suggested. If that adjustment is made, the overall impact of the measures which the Chancellor is taking is different. That being so, it is inevitable that any Government, whatever they do and even if they do nothing in the light of a given economic situation, are endorsing reflation of the economy, deflation or trying to leave it where it is. We must not be afraid of expressing a view; otherwise the position will become very confused.
  The presentation of the Government's policies gives great cause for concern to all those outside who will be taking business decisions. For several years we have not succeeded in cutting or controlling public expenditure adequately. That is clear from the reports of the Select Committee. But we have had the worst of both worlds, because we have been saying that we have been cutting expenditure when we have not, without pointing out the advantages of the increased public expenditure that has
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  taken place. I am glad that the point has penetrated to the Front Bench, and that we are now getting recognition of the benefits which may flow from public expenditure on sensible projects. To that extent we have benefited by our presentation.
  My fear is that in the future we shall not stress that we have been flexible in our approach and that, as a result, we shall continue to be blamed for matters which were never the case and will not be the case in the future. That being so, there are real presentational problems with which I hope the Chancellor of the Exchequer will be able to deal adequately. In the context of reflation, deflation and so on, that is extremely important in relation to international monetary affairs, as was stressed by the Chancellor and by my right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath).
  It may well be that, as a result of the very difficult international monetary problems, a situation will arise in which there is a world recession created by a hard landing for the dollar or by some other conjunction of events in the United States. If that is so, it will be necessary for the Chancellor of the Exchequer, for other EEC countries and for the Japanese to take offsetting action. Therefore, if we stigmatise reflation in the way that I have described, we shall be inhibited in taking such action, and that will be very dangerous for us.
  The Chancellor referred to the great increase in intervention in exchange markets, which I welcome, but it is limited in what it can achieve. If we are to achieve real progress in this area, there will have to be more international co-ordination of economic policies. In the difficult situation that I have just described, it may mean having to take measures to adjust the pattern that the Chancellor would otherwise have followed in the normal course of events.
  It is not a question of tax cuts on the one hand or infrastructure expenditure on the other. Some tax cuts may be good or they may be bad. Some infrastructure expenditure may be good or it may be bad. We need to hit the right balance. I welcome the fact that in his statement yesterday and in his speech today the Chancellor adopted a more flexible approach, but I wish that he would make that more explicit; otherwise, we shall not get the credit for what is rightly being done.
  I believe that the measures taken by the Chancellor will help to reduce unemployment, but I must recall the shakeout of labour three or four years ago, when many people became redundant as a result of the world recession, the Clegg pay settlements and so on. At that time many companies cut their labour force by 30 per cent. and found that they could produce just as much with a much smaller labour force. In reality, those jobs did not exist, and the problem now is that we must create that many new jobs. It will inevitably mean a long, hard journey, but the Chancellor's statement yesterday is of assistance in that respect. I hope that, in the light of the further analysis of the Chancellor's remarks by the Select Committee, we shall be able to make even greater improvements.
  9.3 pm
  Mr. Michael Portillo: My right hon. Friend the Member for Worthing (Mr. Higgins) has been generous in keeping his remarks so short, and I am sorry that I have to begin by disagreeing with him on one point. I welcome the fact that on this occasion the Chancellor of the Exchequer has not published a fiscal

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  adjustment, because the fiscal adjustment has been given an importance which it did not merit, and that led to all sorts of speculation. I have had the opportunity previously of making that point in the House.
  I welcome the commitment in the Gracious Speech, in rather specific terms, to reductions in income tax. I equally welcome the Chancellor's commitment, not only through the Gracious Speech but through the autumn statement, to the continuing containment of inflation, which is so important. For all the time that the Government have been in office, fiscal and monetary policies have worked together to reduce the rate of inflation, but I wonder whether recently there has not been something of a contest between monetary policy on the one hand and fiscal policy on the other. I wonder whether, like two great stags, they have not locked antlers and done battle on this occasion and whether it is not fiscal policy that has come off, not dead in the end, but at least limping. I say that because the PSBR this year will be £1 billion higher than we thought and it is conceivable that it will turn out higher still.
  It is also conceivable that my right hon. Friend the Chancellor will be influenced in his Budget judgment by the importance of tax cuts. Of course, while it would not be right to add asset sales to the PSBR to arrive at a new figure for borrowing, nevertheless the stance of the PSBR is somewhat looser than is indicated by the pure £8 billion published in the autumn statement. That is why I wonder whether fiscal policy at this stage is not limping.
  If it is, I can perfectly understand why, because there are certain arguments for saying that there is a weaker case nowadays for a tight fiscal stance than there was before. In particular, the theory that a very large amount of Government borrowing tends to crowd out borrowing by the industrial sector is far less convincing than it used to be in today's internationalised money markets to which companies find it easy to turn for finance. The other thing is that a low PSBR used to be considered essential for the achievement of low interest rates, but if under our monetary policy we shall have high interest rates anyway, there is some reason for saying that one can borrow rather more because the interest rates make it very easy to finance a slightly higher PSBR.
  Then again, there is the rather tempting example of President Reagan whose policies have provided a supply-side stimulus. Although Thatcherism and Reaganomics are very often considered the same thing, they are approached from different angles in that President Reagan has addressed the question of tax cuts without much regard to the effect on deficits, whereas here we have addressed the matter of deficits without cutting taxes as much as we would otherwise have liked.
  I am, therefore, a little concerned that we are defending the inflationary position through monetary policy alone and less through fiscal policy than previously. It seems to be a rather thin red line. It seems to me that the present monetary position must be right because that is indicated by both the exchange rate and the downward path of inflation itself, but the problem is that the exchange rate can change very rapidly, and inflation is more an indicator that yesterday's monetary conditions were right than that today's are right.
  In the very few minutes remaining, perhaps I may turn to what may happen in the next Budget. Here is where I fear I must disagree with my hon. Friend the Member for
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  Croydon, South (Sir W. Clark) when I say that I would like to see any tax cuts made on the standard rate and not on the thresholds. If we look at international comparisons, what sticks out like a sore thumb about this country is the point at which people begin to pay tax at 30 per cent.
  The threshold itself is not out of line with the rest of the EEC and is a great deal higher than in a certain number of other countries. The important point is that the single man here is paying 30 per cent. tax when he earns just over £2,000 a year. The equivalent figures for France are £8,000, for the United States £22,000 and for Japan £31,000. In those countries the single man would pay tax at 30 per cent. only at those very much higher levels. Our starting rate of tax in this country is the highest of any country bar one, the Republic of Ireland, which is 35 per cent.
  If we believe, as Conservative Members do, that cutting taxes can have an incentive effect, we must be concerned about cutting the marginal rate. What is important to us is how much of any extra pound earned a person can keep for himself. If we tackle the thresholds, we are not attacking that problem—another very important problem, but not that one. While it is also true that raising the thresholds relieves people from the poverty and unemployment traps, a large number of those people are brought back into those traps by the end of the year through the effect of inflation, whereas, if we reduce the standard rate of tax, we are reducing the effect of the traps for everybody who is in them.
  I do not think that privatisation and tax cuts are as closely linked as the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) would imply, nor are they as far apart as my right hon. Friend the Chancellor has suggested. There are very good reasons for privatising companies that have nothing to do with cutting taxes. On the other hand, the proceeds from the sale of those assets can be extremely helpful in producing tax cuts. That is a reasonable policy to follow. After all, the assets were acquired for the public sector by the spending of taxpayers' money and have been sustained through years of loss making by the spending of more taxpayers' money. Since the nationalised industries were brought into being, the rate of return to the taxpayer has, on average, been zero.
  I do not regard the tax cuts that would result from this as temporary. We now see that the way ahead is through growth, so that in the future we can produce tax revenues as great as those of the past, but at lower rates of tax.
  9.10 pm
  Mr. Peter Shore: We are concluding what I suspect will be the last debate on the Gracious Speech that the House will hold in the relative privacy of the Press Gallery and sound radio. Last Thursday the Lord Privy Seal hinted that in his reply tonight he would say something about televising our debates.
  What really matters is the conversion some months ago of the Prime Minister—she who must be obeyed—to the belief that she, her Ministers and the Conservative party would benefit from still greater exposure to the television cameras. Those who listened to our six-day debate may find that an extraordinary belief. In any event, it will be for the House itself to decide.
  If the House does say yes to television, I for one will welcome the opportunity of exposing our affairs without editorial bias and proprietorial prejudice, direct and

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  untarnished to the gaze and judgment of the nation. We shall welcome that because under fair rules, policy presented, debated, probed and opposed without intermediaries directly before our own people is the best possible antidote to the sleek and glib public relations presentation of policy upon which the Government now place their hope of survival.
  The Prime Minister and Chancellor can plunder the record and carefully select supportive statistics to raise morale. They can speak of the economy as a dream come true. But given the glum faces behind the Prime Minister last Wednesday and again during the Chancellor's speech today, I can only conclude that "Exercise Economic Hype" will simply not work. It will work still less when the television cameras are in place.
  There was not much pleasure for the Chancellor in the speeches that we have heard today. I heard all but two—I have notes on those that I missed—of the 19 speeches that were made. It is fair to say that only one was overwhelmingly in favour of the Chancellor's general economic strategy, and not surprisingly that was delivered by the Chancellor himself. However, he had some considerable support from the hon. Member for Winchester (Mr. Browne), who I understand has had to leave us. That hon. Gentleman is one of the more impressionable hon. Members of this House, particularly when the Government Front Bench is giving a clear lead.
  The Opposition speeches properly reflected our growing concern, anxiety and anger about the state of unemployment and the collapse of manufacturing industry. Speeches from Conservative Members were also interesting, because though they varied in emphasis they picked up the theme of real concern about where we are going as a country. I refer particularly to the speech of the right hon. Member for Old Bexley and Sidcup (Mr. Heath) and that of the right hon. Member for Cambridgeshire, South-East (Mr. Pym), with his call for a new agenda.
  Those leading speeches expressed deep anxiety about the general direction of our present economic policy. However, I shall treasure most the words of the right hon. and learned Member for Hexham (Mr. Rippon). He defended the Chancellor of the Exchequer against any accusation of having made a U-turn. He said that there was no question of the Government having made a U-turn. After all, the Gadarene swine did not make a U-turn either. They simply went over the edge of the cliff. That was memorable indeed.
  Mr. Rippon: I do not like to be misquoted. I said that there was no need for a U-turn because the Gadarene swine only had to make a change of direction. That is what has happened.
  Mr. Shore: I am entirely happy with the right hon. and learned Gentleman's explanation.
  Three major facts testify to the continued failure of the Government's economic strategy. The first is the scourge of nationwide unemployment, which shows no sign of abating. Unemployment in October of this year—I am looking at the Department of Employment's own handout—stood at 3,175,000. This figure is 81,000 higher than it was when we debated the Gracious Speech a year ago. As we all know, this figure would be much higher but for the statistical adjustments that were made two years ago and the exclusion of at least 300,000 temporary jobs, not real jobs, that the Government are directly financing.
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  Therefore, despite all the spurious optimism of the speeches that we heard both yesterday and today, the fact is, as the autumn statement revealed, that the unemployment assumption that the Government had to make for national insurance purposes in the autumn statement stands at 3 million for the next three years.
  Secondly, linked to unemployment is the continuing and disastrous decline of British manufacturing industry. I agree very much with what has been said about this by so many right hon. and hon. Members. On Wednesday of last week the Prime Minister was quite brazen when she spoke about British industry having exported more manufactured goods last year than ever before in our history. She boasted:
  "Manufacturing investment was up last year by more than 14 per cent."—[Official Report, 6 November 1985; Vol. 86, c. 21.]
  Yet she knows very well that manufactured imports continue to flood in and that our manufacturing trade deficit is running at well over £4 billion a year. The Prime Minister also knows that, despite the two-year short-term but time-limited boost that the phasing out of capital allowances has provided, manufacturing investment is 18 per cent. lower than it was in 1979.
  The third basic fact about the failure of the Government's economic strategy is that today we are viable only through the accelerated run-down of our North sea oil supplies. Last year our net exports were £7 billion. This year the figure is likely to be £8 billion. Britain is exporting more oil than Saudi Arabia, but we do not possess the Saudi Arabian reserves. Such exports cannot, therefore, continue.
  I well understand the Government's irritation with the House of Lords Select Committee on Overseas Trade. They did not conceal their irritation. Apart from the mass of damning evidence that was presented by leading British manufacturing firms, the Select Committee looked ahead to 1990, only five years away. On very reasonable assumptions it looked to the falling off of our North sea oil export surplus to something like self-sufficiency by 1990 and the accompanying growth of a current account deficit of over £13,000 million a year. It issued a warning, which is worth repeating:
  "Unless the climate is changed so that the manufacturing base is enlarged and steps are taken to ensure that import penetration is combated and that manufactured exports are stimulated, as the oil revenues diminish the country will experience adverse effects which will worsen with time. These will include:

  (i) a contraction of manufacturing to the point where the successful continuation of much of manufacturing activity is put at risk;

  (ii) an irreplaceable loss of GDP;

  (iii) an adverse balance of payments of such proportions that severely deflationary measures will be needed;

  (iv) lower tax revenue for public spending on welfare, defence and other areas;

  (v) higher unemployment, with little prospect of reducing it; and

  (vi) the economy stagnating and inflation rising, driven up by a falling exchange rate."

  The Committee concluded with the words:
  "These prospects constitute a grave threat to the standard of living of the British people. Failure to recognise these dangers now could have a devastating effect on the future economic and political stability of the nation. The situation in which we find ourselves is not self-correcting: things will not come right of their own accord."
  Against that prospect the Queen's Speech proposals and the ministerial elaborations upon them are a monumental irrelevance. The Government are complacently presiding

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  over an accelerating and historic decline of the British economy. That decline is temporarily concealed by the incontinent plundering of North sea oil and by the massive sale of national assets, as was announced yesterday. I say "temporarily" because by 1990 the game will be up.
  Perhaps the most depressing fact in the Gracious Speech is the Government's inability to learn from their own experience. It is true that the Chancellor of the Exchequer has eaten his words about the money supply. The control of M3 was his and the Prime Minister's own sovereign remedy for the nation's ills, and those who recall the devastating impact of 17 per cent. base rates and the pound at $2·40 will know the price that the nation paid in collapsing industries and in lost jobs, for their monumental folly, from 1979 to 1981. As Mr. Peter Jay, who helped to instruct the right hon. Lady in the mysteries of monetarism in the pre-1979 period, is reported to have said:
  "It was like showing Genghis Khan a map of the world."
  Not only have we had not a single word of regret from either the Prime Minister or the Chancellor of the Exchequer for having misled themselves and inflicted such damage upon the British economy, but they are still firmly wedded to the doctrines of high interest rates and an artificial exchange rate that goes with that. Of course, there have been increases in productivity, but increases have also taken place in the economies of our major competitors. The net effect is that British industry is at least 19 per cent. less competitive internationally than it was six years ago—[Interruption.] That is the truth.
  Mr. Barry Sheerman: They are squirming.
  Mr. Shore: I am quoting from the IMF relative normalised labour costs index, which is normally accepted as the measure of international competitiveness. I am comparing the second quarter of 1979 with the second quarter of 1985, which is the latest date available.
  What is the Government's remedy? It is very simple. First, it is to ease slightly the rigours of public expenditure cuts and then to cut taxes, both financed by capital receipts from the accelerated sale of publicly owned assets. That will do little to stimulate the economy, but, as the right hon. Member for Old Bexley and Sidcup said, it will certainly accelerate the menacing flood of imports of consumer and other goods.
  Secondly, it is part of the Government's strategy to cut wages. The Government have already announced their intention to reduce the scope of our already emasculated wages councils. Of course, labour costs matter. Nobody would deny that. However, competitiveness also involves quality of management, excellence of design, product innovation through research and development, fiscal, monetary and exchange rate policies. In all those areas, Government policies have directly damaged, not assisted, competitiveness. To put the whole onus of competitiveness on wages is a recipe for industrial divisiveness, lowering the living standards of the least well off and maintaining the present army of the unemployed.
  Nowhere has the impact of Government economic policy been more harshly felt than in the inner cities. To make matters worse, there has been a massive switch of resources of Government finance away from the inner cities. Eight years ago, when unemployment was only one
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  third of what it is today, the Labour Government designated, out of the 364 local authority districts in England, just 14 as areas of exceptional deprivation and need, for which additional resources had to be found. Those 14 authorities were grouped into what we described as seven partnership areas—Birmingham, Liverpool, Manchester—Salford, Newcastle—Gateshead, and, in London, the three further areas of Lambeth, Hackney and Islington and the five dockland boroughs. We used three instruments of policy to assist them—the rate support grant, which was based on the assessment of needs, the housing investment programmes, which came directly under ministerial control, and the refurbished urban programme.
  What has happened since? In real terms—[Interruption.] The House should listen. I do not think that the magnitude of what has happened has sunk in. In real terms, the urban programme in those partnership areas has increased from about £150 million in 1979 to about £200 million last year, in constant prices—an increase of £50 million. However, the rate support grant has been reduced in constant prices by no less than about £720 million a year in 14 inner city districts alone. In the same period and in the same 14 districts the housing investment programmes have been cut by over £270 million, in real terms. Therefore, the 14 areas of the greatest deprivation in our inner, cities have been savaged in just six years to the tune of £900 million a year.
  We have, indeed, an inner city crisis. Of course, there is social tension in those areas. Of course, there is vandalism and graffiti. Of course, there is more petty theft and housebreaking. Of course, there are aggravated racial tensions when black and white unemployed are competing for a wholly inadequate supply of jobs and housing.
  When old people in the inner cities are afraid to go out after dark, when women are mugged in the street and assaulted, even in their homes, when Asian families are abused and attacked and their homes are even set on fire in the dead of night, we do not need to be told by the Prime Minister or anyone else of the need for law and order. That is essential.
  Strong, sensitive and even-handed policing is only one ingredient of an effective inner city policy. Last Wednesday, the Prime Minister addressed herself to inner city problems. She said:
  "Of course, there are very severe social problems in the inner city areas—problems of family breakdown, of racial tension, of drug abuse, of youth unemployment, of bad housing. In so far as money can help, those problems are taken into account in public expenditure".
  In so far as money can help? The Prime Minister obviously believes that there is a connection between public expenditure and social problems in what she called
  "the areas affected by riots".—[Official Report, 6 November 1985; Vol. 86, c. 25.]
  It is unique to the Prime Minister that, having deprived the most blighted of our inner cities of some £900 million a year, she apparently believes that the less spent on inner cities, the less likely those areas are to be affected by disturbance and riot. That is a flight from reality bordering on the insane.
  The most sensible statement on this issue was made by Lord Scarman in 1981, following his examination of the first wave of urban riots in Britain. He said:
  "The social conditions in Brixton—many of which are to be found in other inner city areas—do not provide an excuse for disorder. They cannot justify attacks on the police in the streets, arson or riot … At the same time the disorders in

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  Brixton cannot be fully understood unless they are seen in the context of complex political, social and economic factors. In analysing communal disturbances such as those in Brixton and elsewhere, to ignore the existence of these factors is to put the nation in peril."
  It is interesting to recall the words of the Prime Minister when in opposition. At the 1977 Tory party conference she said:
  "I do not intend to sit on the sidelines wringing my hands while London, Glasgow, Manchester, Birmingham and the rest of our cities go the way of New York."
  The truth is that they are going the way of New York. Once again, there is nothing in the Gracious Speech or the Chancellor's autumn statement to show that the Government have the faintest glimmer of an understanding of the problems.
  No amount of public relations or improvement in the presentation of policy will conceal the stark reality of national decline, ever-increasing division and social strain. The tiny sum of £250 million to be allocated to the housing programme was announced yesterday at the same time as the publication of a new and serious estimate of the need for £19 billion expenditure on refurbishing the public sector housing stock. That epitomises the tokenism and gimmickry of the Government's policy. For all those reasons, we shall vote for our amendment.
  Mr. Harry Ewing: On a point of order, Mr. Speaker. As only four members of the Cabinet are present, may I suggest that the sitting be suspended to allow more of them to come in to support the Government's case?
  Mr. Speaker: I call the Lord Privy Seal.
  9.34 pm
  The Lord Privy Seal and Leader of the House of Commons (Mr. John Biffen): We are now in the closing moments of the debate on the Loyal Address. This is Parliament's central debate of the Session. It began a week ago with speeches from my hon. Friends the Members for Birmingham, Hall Green (Sir R. Eyre) and for Aberdeen, South (Mr. Malone).
  As the debate has proceeded—[HON. MEMBERS: "Where are they?"]
  Mr. Speaker: Order. This is very unseemly behaviour. I call the Lord Privy Seal.
  Mr. Ewing: On a point of order, Mr. Speaker.
  Mr. Speaker: Order. I have heard the hon. Gentleman's point of order.
  Several Hon. Members: They are not here.
  Mr. Biffen: As the debate has proceeded, it has blended into a national debate, and never more so than today, when the affairs of the economy have been under scrutiny. It is nevertheless symbolic of the unifying character of the Chamber that what sets out as a matter of constituency representation becomes part of that wider debate. It is well worth making that point, given that the Queen's Speech is redolent of ceremony and tradition. [Interruption.] There is a convention—
  Mr. Speaker: Order. There is a convention, as the Lord Privy Seal said, that every right hon. and hon. Member is given a fair hearing.
  Mr. Biffen: There is a convention that I spend at least part of this speech considering the work of the Chamber
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  in the coming Session. I should therefore like to say something about our procedures, about the work of Select Committees and about the televising of Parliament.
  The House recognises the valuable work of the Procedure Committee under the chairmanship of my hon. Friend the Member for Honiton (Sir P. Emery) Last Session, the Committee produced a report on public Bill procedure. Its major recommendation concerns the creation of a legislative Business Committee with considerable powers over the timetabling of Bills likely to require more than 25 hours in Standing Committee. The importance of those suggestions needs no underlining.
  The House will wish to consider in due course whether it would seek to reform our public Bill procedures, taking account of these proposals. For their part, the Government, in consultation with the usual channels, will be arranging a debate reasonably soon, probably after the Christmas recess.
  A second procedural matter was raised obliquely by the right hon. Member for South Down (Mr. Powell) last Thursday and concerns the availability of time for highly contentious legislation introduced by a private Member. The matter was underlined by the ingenious motion tabled last summer by my hon. Friend the Member for Brighton, Kemptown (Mr. Bowden). This is a highly sensitive topic. Any alteration by the House in the Standing Orders or conventions governing the use of private Members' time, I judge, should follow after a report from the Procedure Committee.
  I understand that the Procedure Committee will be considering the use of time on the Floor of the House and thus giving some attention in the coming Session to this topic. We shall await any recommendations it may make with great interest. Meanwhile, much as I admired the ingenuity of my hon. Friend the Member for Kemptown, I feel that his motion put at risk the somewhat delicate balance of time and tactics that is the feature of private Members' business. I feel that we should allow the conventions of the status quo to stand until the House has had a chance to vote on any changes which might be recommended by the Procedure Committee.
  I should therefore tell the House that I would advise hon. Members to vote against a motion similar to that proposed by my hon. Friend the Member for Kemptown if it were introduced again in the context of any private Member's Bill.
  Since 1979, the Committees has produced a total of 275 reports, many of which have received parliamentary and notably media attention. Much of the effectiveness of Select Committees is due to the continuing and unsung labours of my right hon. Friend the Member for Worthing (Mr. Higgins) as Chairman of the Liaison Committee. I hope that that good relationship will continue.
  I have promised to say something about the possible televising of this Chamber. I have already told the Leader of the Opposition that the debate will take place later this month. Such a decision belongs to the House, uninfluenced by the Treasury Bench, but it might be helpful if I make it clear that the forthcoming debate will be to decide whether there should be an experiment in televising the proceedings of this House and, if so, to establish a Select Committee on how such an experiment might be conducted. That would broadly follow the form of previous debates on this matter. Whatever our views, I am sure that the House is united in underlining the importance of that decision.
  Mr. Heffer: Will this be a one-day or a two-day debate? That is a matter of great importance to the House and we want to discuss it in some depth before we take a decision.
  Mr. Biffen: I take note of that point, but it is a matter which might be more appropriately raised on tomorrow's business statement.
  My right hon. Friend the Member for Cambridgeshire, South-East (Mr. Pym) reminded the House earlier this afternoon, in a speech which was generously supportive of the Government's position, that we had a formidable load of legislation ahead of us. That is undoubtedly true, as there are in prospect upwards of 30 Bills which will be at the centre of a constructive legislative programme which will further enhance the Government's position in debates in this House and elsewhere.
  It has been forecast that the Session will centre on fierce controversy about law and order. I judge that many of those comments, in particular those made outside the House, were made in the context of the public order Bill. I was delighted that the hon. Member for Newcastle upon Tyne, North (Mr. Brown) gave his support to that measure and I believe that support will be accorded generally throughout the House.
  Mr. Sheerman: On a point of order, Mr. Speaker. The Leader of the House seems to have lost the economy.
  Mr. Speaker: That is not a point of order. The Leader of the House has only just started his speech.
  Mr. Biffen: I hope that the hon. Member for Huddersfield (Mr. Sheerman) will exercise a modicum of patience. I was dealing with a point raised by one of his hon. Friends and I judge that to be a courtesy. Of course I will return to the economy, but I am winding up a debate which has gone on for the past week.
  I should like to say a little more about Home Office affairs before moving to the economy. Although the hon. Member for Huddersfield and others would like to suggest some atavistic mood on the Government Benches, my right hon. Friend the Home Secretary made it clear that the genesis of the public order Bill long predates the riots in Brixton, Handsworth and Tottenham, so there can be no question of any reaction by the Government in that context. There is, of course, great public interest in that matter and the House is entitled to reflect on the reason for that interest. I believe that the domestic condition of the Labour party is as much a factor as anything else. There was a time when those in the Labour movement who led the great urban city parties were part of the solid dependable elements of Socialism. One thinks of George Lansbury, a spokesman for Christian Socialism, of Clement Attlee and of Herbert Morrison.
  Mr. Heffer rose—
  Mr. Biffen: I appreciate Labour Members' distaste for this argument, but they are going to hear it. Those names have now been replaced by those of Bernie Grant, Paul Boateng, Ted Knight and Derek Hatton—names as much a disgrace to the Leader of the Opposition as they are to the Government. It is their existence which puts a question mark over debates on law and order. It is legitimate to observe that in society and politics today there are radical forces determined to challenge established values and those who have the authority to uphold them.
  Mr. Frank Cook rose—
  Mr. Biffen: I shall not give way. By popular request, I am going on to the economy. We may leave the militant wing of the Labour party to carry out its scorpion role on the Labour Front Bench and those behind it. What I wish to suggest to the House is far more significant than the Hattons and the Boatengs—the public judgment made on economic management and the social values that it expresses.
  The main characteristic of the Queen's Speech is that it consolidates and takes forward the main strands of policy that have been evident since 1979—strands of policy designed to strike a balance between the liberal traditions of individual enterprise and freedom and the collective traditions of the state accepting a protective role in defence, domestic order and social welfare. The successful striking of that balance is the act which will secure consensus in public affairs without which Government in a consultative democracy cannot proceed. [Interruption.] I know that the very word "consensus" is embarrassing to the Labour party, floundering in search of a new sense of direction as years in opposition take it further and further from the realities of the political situation. We have sought to rebuild a consensus which, by 1979, had been shattered by high inflation and the intemperate use of trade union power.
  Since 1979, we have sought constructive development in three vital areas. The first, as my right hon. Friend the Member for Brighton, Pavilion (Mr. Amery) has said, is the reduction of inflation. Under the Labour Government, inflation reached a peak of 26 per cent. in 1975. They now wish to dismiss and cast aside that record, hoping that it will fade from public memory, but it is there to haunt them and an indicator of what will come again if their unreconstructed policies are ever put into effect.
  Today, the rate of inflation is just below 6 per cent. and, as my right hon. Friend the Chancellor said in his autumn statement, it is expected to fall below 4 per cent. in 1986. Central to that, of course, are responsible levels of public spending, as my hon. Friend the Member for Croydon, South (Sir W. Clark) emphasised. I was also delighted to have the endorsement of the right hon. Member for Sparkbrook that the autumn statement shows no significant relaxation in control of total public spending.
  Secondly, we have sought a more equitable balance in the mixed economy by encouraging private ownership in the sense of home ownership and wider share ownership. Since 1979, 800,000 public sector tenants have become owner-occupiers. Do Labour Members deplore that or is some sense of revisionism leading them to revise their stance? Assets of £6,500 million covering 400,000 employees have been transferred to private ownership since 1979.
  Earlier today, the right hon. Member for Sparkbrook was invited to itemise all those assets that would be taken back into public ownership by a Labour Government. In a fit of modesty, presumably intended to express a desire for silence on the Benches behind him—a desire not fulfilled on this occasion—the right hon. Gentleman said absolutely nothing. That debate will be taken forward in the new housing Bill, designed further to facilitate home ownership and in the Gas Bill, affecting major assets and 90,000 employees.
  In that context, I take at once the very thoughtful speech of the right hon. Member for Ashton-under-Lyne (Mr.

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  Sheldon) about the importance of well-judged flotation. This is, however, an argument about employee ownership, the wider casting of share ownership and the total ambivalence of the Labour party in these matters.
  Thirdly, we must examine and reform the great corporate institutions which decisively influence our economy. That task was begun in the last Parliament with trade union reform. We do not know quite where the Labour party stands on that either. We do not know whether there will be a root and branch repeal or whether the matter is being kept to one side in the hope that the sheer relentless course of events and boredom might bring them to office. Heaven knows, it will never be their ideas or their policies. They are concealed behind the growing pragmatism which characterises the Leader of the Opposition.
  This Queen's Speech promises major changes in areas which, although possibly less controversial than trade union reform, are nonetheless important. I have particularly in mind the financial services Bill and I should like to underline the remarks made by my right hon. and learned Friend the Member for Hexham (Mr. Rippon) about the great importance of this legislation and its far-reaching significance. The three areas I have identified are central to the political authority of this Government, an authority that is being enhanced as Parliament proceeds. That development will be incomplete without a tangible recovery in employment. I should like the House to consider that theme, because it will feature in our debates, whatever the merits of the legislative programme. The House has a right to judge the situation.
  The hon. Member for Fife, Central (Mr. Hamilton) asserted that unemployment will be worse two years hence than it is now. I do not know whether that view is shared by the Opposition Front Bench or whether its occupants are taking their cue from the right hon. Member for Sparkbrook, who has decided that silence may not be golden, but it is the best that one can contrive at this stage of the Queen's Speech. [Laughter.]
  Mr. Allan Rogers: What is funny about people on the dole?
  Mr. Biffen: There is nothing funny about people on the dole. It is only those hon. Members who try to ensure that a speech on the topic is not heard who lend the debate a so-called spurious humour.
  The level of recorded unemployment has levelled off over the last five months. Of course, that is but a modest contribution, but it is certainly a most welcome change and is in contrast to the seemingly relentless rise over the last few years. I invite Opposition Members to take encouragement, hope and optimism from the fact that we now have what seems to be an alteration in the pattern of unemployment, a levelling off after a period of increase.
  Secondly, the number of jobs has risen by 600,000 since the spring of 1983 and that development is welcome. Then there is the matter of unfilled vacancies. They now stand in the latest month at the highest figure since March 1980, and show an increase of 18 per cent. over the last 18 months. In all these matters I am not resting my case on absolute figures, because unemployment figures do not have a precise exactitude. [Interruption.] The trend at least is a matter for serious consideration and the fact that Opposition Members squirm and shout means they do not welcome good news. They know that the one card they
  650
  hold to their chest and hope to play to win the next election will be snatched away if there is a tangible and perceived recovery in employment.
  I regard all of this as a question of knowing. These signs are harbingers of modest hope and they do not permit any of the harsh rhetoric of certainty. Politics with hope is perfectly legitimate and we are perfectly entitled to take satisfaction from the fact that there are now signs of a recovery, and in the hope and belief that the other policies will supplement—
  Mr. Ewing: Will the right hon. Gentleman give way?
  Mr. Biffen: The hon. Gentleman sought to impede the beginning of my speech and I am now going through to the peroration. I would gladly give way to him on any other evening, but not tonight, Josephine.
  The House will shortly have the opportunity to pass judgment on the Queen's Speech. The Treasury Bench seeks the support of the House and the endorsement of the public for a policy which has three major objectives.
  The first and central objective is the lowering of the rate of inflation, partnered by an improvement in total employment. Those are not only economic goals, but social imperatives. Stable prices are the precondition for equity and justice in a society. Furthermore, there is now tangible evidence that inflation can be contained and reduced while employment within the economy begins to rise. Of course, these are early days to judge the extent and nature of the recovery in employment. Even so, the increase of 600,000 jobs during the past two and a half years should be welcomed.
  Secondly, the Gracious Speech commends to the House and the nation the belief that ownership should be widely spread. We shall debate this—I shall repeat it many times, because it is central to the public debate—in the context of taxation, knowing that taxation supremely concentrates resources and their use in the hands of politicians and officials at the expense of the individual. I should tell the right hon. Member for Plymouth, Devonport (Dr. Owen) that the present level of taxation bears especially heavily on many working-class people who earn below average wages. In 1938, they would not have been touched by the income tax structure. In no way do I regard it as an immoral crusade to try to rectify the matter.
  However, in this Session of Parliament, the issues of ownership will be most keenly contested in the arguments over the Gas Bill. We look forward to that debate so that the public may then judge on the merits between state-financed monopoly and private shareholding with an emphasis on employee ownership. If Opposition Members find the concept of employee ownership so distasteful, let them make that clear in the many debates that we shall have on this issue. The issue will be extrapolated into questions such as who stands for concentration, who stands for central control, who stands for the encroaching authority of Whitehall and the politicians and who, at the end of the day, believes in employees having an interest in their firms?
  Thirdly, as the Chancellor of the Exchequer mentioned in his autumn statement, the Government are committed to a level of public spending consistent with our economic performance. The Tory party is not hostile to the positive and protective role of the state and the honest financing of such responsibilities. The autumn statement points to

  651
  increased spending on public sector housing renovation, science, hospitals, roads and overseas aid. That substantial increase in public spending properly sets out the Government's priority commitments. Furthermore, the planned increases in public capital spending should be set alongside a substantial increase in private sector capital spending, and, more especially, in manufacturing industry.
  The autumn statement repudiates those who have parodied the Government's policies as negatively Victorian. However, as the right hon. Member for Sparkbrook will agree, there is this difference between the two sides of the House on this topic: the autumn statement is the result of a discipline on total spending—a discipline that the right hon. Gentleman kindly reinforced in his remarks this afternoon. It is the product thereafter of a choice of priorities.
  Furthermore, the figures are related to an expected growth in national resources able to bear the burden. Those economic judgments and disciplines will keep us from the humiliating recourse to the International Monetary Fund experienced by Britain in 1976. That will always haunt Labour Members, for there is nothing more humiliating than to have to ask the IMF for its imprimatur for the policies which they knew in their hearts they would have to carry out but with which they did not have the kidney to confront their supporters.
  As this debate has proceeded, it has become clear that the Labour Benches have a nostalgia for the past. The dreamland is the so-called Wilson Socialism of 1966–70. It has the memories of growing public expenditure, economic planning and the centralised control of prices and incomes. It was the Labour party that existed before the right hon. Member for Chesterfield (Mr. Benn) frightened the life out of the revisionists after 1970. The Leader of the Opposition is yearning to return to such a Wilson era. Thus, the emerging pragmatist would make rendezvous with Labour's master pragmatist. There he will find waiting for him the right hon. Member for Devonport. However, we have an alternative to such a barren reunion and that alternative is in the Queen's Speech, for which we shall vote.
  Question put, That the amendment be made:—
  The House divided: Ayes 223, Noes 351.

  Division No. 3]

  [10 pm

  AYES

  Abse, Leo

  Bray, Dr Jeremy

  Adams, Allen (Paisley N)

  Brown, Gordon (D'f'mline E)

  Alton, David

  Brown, Hugh D. (Provan)

  Archer, Rt Hon Peter

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

  Ashley, Rt Hon Jack

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

  Ashton, Joe

  Brown, Ron (E'burgh, Leith)

  Atkinson, N. (Tottenham)

  Bruce, Malcolm

  Bagier, Gordon A. T.

  Buchan, Norman

  Barnett, Guy

  Caborn, Richard

  Barron, Kevin

  Callaghan, Rt Hon J.

  Beckett, Mrs Margaret

  Callaghan, Jim (Heyw'd & M)

  Beggs, Roy

  Campbell-Savours, Dale

  Beith, A. J.

  Canavan, Dennis

  Bell, Stuart

  Carlile, Alexander (Montg'y)

  Benn, Tony

  Carter-Jones, Lewis

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

  Cartwright, John

  Bermingham, Gerald

  Clark, Dr David (S Shields)

  Bidwell, Sydney

  Clarke, Thomas

  Blair, Anthony

  Clay, Robert

  Boothroyd, Miss Betty

  Clwyd, Mrs Ann

  Boyes, Roland

  Cocks, Rt Hon M. (Bristol S.)

  652

  Cohen, Harry

  Leadbitter, Ted

  Coleman, Donald

  Leighton, Ronald

  Conlan, Bernard

  Lewis, Ron (Carlisle)

  Cook, Frank (Stockton North)

  Lewis, Terence (Worsley)

  Cook, Robin F. (Livingston)

  Litherland, Robert

  Corbett, Robin

  Livsey, Richard

  Corbyn, Jeremy

  Lofthouse, Geoffrey

  Cox, Thomas (Tooting)

  Loyden, Edward

  Craigen, J. M.

  McCartney, Hugh

  Crowther, Stan

  McCusker, Harold

  Cunliffe, Lawrence

  McDonald, Dr Oonagh

  Cunningham, Dr John

  McGuire, Michael

  Dalyell, Tam

  McKay, Allen (Penistone)

  Davies, Rt Hon Denzil (L'lli)

  McKelvey, William

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

  MacKenzie, Rt Hon Gregor

  Dewar, Donald

  Maclennan, Robert

  Dixon, Donald

  McNamara, Kevin

  Dobson, Frank

  McTaggart, Robert

  Dormand, Jack

  McWilliam, John

  Douglas, Dick

  Madden, Max

  Dubs, Alfred

  Maginnis, Ken

  Duffy, A. E. P.

  Marek, Dr John

  Dunwoody, Hon Mrs G.

  Marshall, David (Shettleston)

  Eadie, Alex

  Martin, Michael

  Eastham, Ken

  Mason, Rt Hon Roy

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

  Maxton, John

  Evans, John (St. Helens N)

  Maynard, Miss Joan

  Ewing, Harry

  Meacher, Michael

  Fatchett, Derek

  Meadowcroft, Michael

  Faulds, Andrew

  Michie, William

  Field, Frank (Birkenhead)

  Mikardo, Ian

  Fields, T. (L'pool Broad Gn)

  Millan, Rt Hon Bruce

  Flannery, Martin

  Miller, Dr M. S. (E Kilbride)

  Foot, Rt Hon Michael

  Molyneaux, Rt Hon James

  Forrester, John

  Morris, Rt Hon A. (W'shawe)

  Forsythe, Clifford (S Antrim)

  Morris, Rt Hon J. (Aberavon)

  Foster, Derek

  Nellist, David

  Foulkes, George

  Oakes, Rt Hon Gordon

  Fraser, J. (Norwood)

  O'Brien, William

  Freeson, Rt Hon Reginald

  O'Neill, Martin

  Freud, Clement

  Owen, Rt Hon Dr David

  Garrett, W. E.

  Park, George

  George, Bruce

  Patchett, Terry

  Gilbert, Rt Hon Dr John

  Pavitt, Laurie

  Godman, Dr Norman

  Pendry, Tom

  Gould, Bryan

  Pike, Peter

  Gourlay, Harry

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

  Hamilton, James (M'well N)

  Powell, Raymond (Ogmore)

  Hamilton, W. W. (Fife, Central)

  Prescott, John

  Radice, Giles

  Hancock, Mr. Michael

  Randall, Stuart

  Hardy, Peter

  Rees, Rt Hon M. (Leeds S)

  Harman, Ms Harriet

  Richardson, Ms Jo

  Harrison, Rt Hon Walter

  Roberts, Allan (Bootle)

  Hattersley, Rt Hon Roy

  Robinson, G. (Coventry NW)

  Haynes, Frank

  Robinson, P. (Belfast E)

  Healey, Rt Hon Denis

  Rogers, Allan

  Heffer, Eric S.

  Rooker, J. W.

  Hogg, N. (C'nauld & Kilsyth)

  Ross, Ernest (Dundee W)

  Home Robertson, John

  Ross, Stephen (Isle of Wight)

  Howell, Rt Hon D. (S'heath)

  Ross, Wm. (Londonderry)

  Howells, Geraint

  Rowlands, Ted

  Hoyle, Douglas

  Ryman, John

  Hughes, Dr. Mark (Durham)

  Sheerman, Barry

  Hughes, Robert (Aberdeen N)

  Sheldon, Rt Hon R.

  Hughes, Roy (Newport East)

  Shore, Rt Hon Peter

  Hughes, Sean (Knowsley S)

  Short, Ms Clare (Ladywood)

  Hughes, Simon (Southwark)

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

  Janner, Hon Greville

  Silkin, Rt Hon J.

  Jenkins, Rt Hon Roy (Hillh'd)

  Skinner, Dennis

  John, Brynmor

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

  Johnston, Sir Russell

  Smith, Cyril (Rochdale)

  Jones, Barry (Alyn & Deeside)

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

  Kaufman, Rt Hon Gerald

  Smyth, Rev W. M. (Belfast S)

  Kennedy, Charles

  Snape, Peter

  Kilroy-Silk, Robert

  Soley, Clive

  Kinnock, Rt Hon Neil

  Spearing, Nigel

  Kirkwood, Archy

  Steel, Rt Hon David

  Lambie, David

  Stewart, Rt Hon D. (W Isles)

  Lamond, James

  Stott, Roger

  653

  Strang, Gavin

  Wareing, Robert

  Straw, Jack

  Weetch, Ken

  Taylor, Rt Hon John David

  Welsh, Michael

  Thomas, Dafydd (Merioneth)

  White, James

  Thomas, Dr R. (Carmarthen)

  Williams, Rt Hon A.

  Thompson, J. (Wansbeck)

  Wilson, Gordon

  Thorne, Stan (Preston)

  Winnick, David

  Tinn, James

  Woodall, Alec

  Torney, Tom

  Wrigglesworth, Ian

  Wainwright, R.

  Walker, Cecil (Belfast N)

  Tellers for the Ayes:

  Wallace, James

  Mr. Ron Davies and

  Wardell, Gareth (Gower)

  Mr. Mark Fisher

  NOES

  Adley, Robert

  Cope, John

  Aitken, Jonathan

  Cormack, Patrick

  Alison, Rt Hon Michael

  Corrie, John

  Amery, Rt Hon Julian

  Couchman, James

  Amess, David

  Cranborne, Viscount

  Ancram, Michael

  Critchley, Julian

  Arnold, Tom

  Crouch, David

  Ashby, David

  Currie, Mrs Edwina

  Aspinwall, Jack

  Dickens, Geoffrey

  Atkins, Rt Hon Sir H.

  Dicks, Terry

  Atkinson, David (B'm'th E)

  Dorrell, Stephen

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

  Douglas-Hamilton, Lord J.

  Baker, Nicholas (Dorset N)

  Dover, Den

  Baldry, Tony

  du Cann, Rt Hon Sir Edward

  Banks, Robert (Harrogate)

  Dunn, Robert

  Batiste, Spencer

  Durant, Tony

  Beaumont-Dark, Anthony

  Dykes, Hugh

  Bellingham, Henry

  Edwards, Rt Hon N. (P'broke)

  Bendall, Vivian

  Eggar, Tim

  Benyon, William

  Emery, Sir Peter

  Best, Keith

  Evennett, David

  Bevan, David Gilroy

  Eyre, Sir Reginald

  Biffen, Rt Hon John

  Fairbairn, Nicholas

  Blackburn, John

  Fallon, Michael

  Blaker, Rt Hon Sir Peter

  Farr, Sir John

  Body, Richard

  Favell, Anthony

  Bonsor, Sir Nicholas

  Fenner, Mrs Peggy

  Bottomley, Peter

  Finsberg, Sir Geoffrey

  Bottomley, Mrs Virginia

  Fletcher, Alexander

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

  Fookes, Miss Janet

  Bowden, Gerald (Dulwich)

  Forman, Nigel

  Boyson, Dr Rhodes

  Forsyth, Michael (Stirling)

  Braine, Rt Hon Sir Bernard

  Forth, Eric

  Brandon-Bravo, Martin

  Fowler, Rt Hon Norman

  Brinton, Tim

  Fox, Marcus

  Brittan, Rt Hon Leon

  Franks, Cecil

  Brooke, Hon Peter

  Fraser, Peter (Angus East)

  Brown, M. (Brigg & Cl'thpes)

  Freeman, Roger

  Browne, John

  Fry, Peter

  Bruinvels, Peter

  Gale, Roger

  Bryan, Sir Paul

  Galley, Roy

  Buchanan-Smith, Rt Hon A.

  Gardiner, George (Reigate)

  Buck, Sir Antony

  Gardner, Sir Edward (Fylde)

  Budgen, Nick

  Garel-Jones, Tristan

  Bulmer, Esmond

  Gilmour, Rt Hon Sir Ian

  Burt, Alistair

  Glyn, Dr Alan

  Butcher, John

  Goodhart, Sir Philip

  Butler, Hon Adam

  Goodlad, Alastair

  Butterfill, John

  Gorst, John

  Carlisle, John (N Luton)

  Gow, Ian

  Carlisle, Kenneth (Lincoln)

  Gower, Sir Raymond

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

  Greenway, Harry

  Carttiss, Michael

  Gregory, Conal

  Cash, William

  Griffiths, Sir Eldon

  Channon, Rt Hon Paul

  Griffiths, Peter (Portsm'th N)

  Chapman, Sydney

  Grist, Ian

  Chope, Christopher

  Ground, Patrick

  Churchill, W. S.

  Grylls, Michael

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

  Hamilton, Hon A. (Epsom)

  Clark, Dr Michael (Rochford)

  Hampson, Dr Keith

  Clark, Sir W. (Croydon S)

  Hanley, Jeremy

  Clarke, Rt Hon K. (Rushcliffe)

  Hannam, John

  Colvin, Michael

  Harris, David

  Conway, Derek

  Haselhurst, Alan

  Coombs, Simon

  Hawkins, C. (High Peak)

  654

  Hawkins, Sir Paul (SW N'folk)

  Maxwell-Hyslop, Robin

  Hawksley, Warren

  Mayhew, Sir Patrick

  Hayes, J.

  Mellor, David

  Hayhoe, Rt Hon Barney

  Merchant, Piers

  Hayward, Robert

  Meyer, Sir Anthony

  Heath, Rt Hon Edward

  Miller, Hal (B'grove)

  Heathcoat-Amory, David

  Mills, Iain (Meriden)

  Henderson, Barry

  Miscampbell, Norman

  Hickmet, Richard

  Mitchell, David (NW Hants)

  Hicks, Robert

  Moate, Roger

  Higgins, Rt Hon Terence L.

  Monro, Sir Hector

  Hill, James

  Montgomery, Sir Fergus

  Hind, Kenneth

  Moore, John

  Hirst, Michael

  Morrison, Hon C. (Devizes)

  Hogg, Hon Douglas (Gr'th'm)

  Morrison, Hon P. (Chester)

  Holland, Sir Philip (Gedling)

  Moynihan, Hon C.

  Holland, Stuart (Vauxhall)

  Mudd, David

  Hordern, Sir Peter

  Murphy, Christopher

  Howard, Michael

  Neale, Gerrard

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

  Needham, Richard

  Howarth, Gerald (Cannock)

  Neubert, Michael

  Howell, Rt Hon D. (G'ldford)

  Newton, Tony

  Howell, Ralph (N Norfolk)

  Nicholls, Patrick

  Hubbard-Miles, Peter

  Norris, Steven

  Hunter, Andrew

  Onslow, Cranley

  Irving, Charles

  Oppenheim, Phillip

  Jackson, Robert

  Oppenheim, Rt Hon Mrs S.

  Jenkin, Rt Hon Patrick

  Osborn, Sir John

  Jessel, Toby

  Ottaway, Richard

  Johnson Smith, Sir Geoffrey

  Page, Sir John (Harrow W)

  Jones, Gwilym (Cardiff N)

  Page, Richard (Herts SW)

  Jones, Robert (W Herts)

  Parkinson, Rt Hon Cecil

  Jopling, Rt Hon Michael

  Parris, Matthew

  Joseph, Rt Hon Sir Keith

  Patten, Christopher (Bath)

  Kellett-Bowman, Mrs Elaine

  Patten, J. (Oxf W & Abdgn)

  Kershaw, Sir Anthony

  Pawsey, James

  Key, Robert

  Peacock, Mrs Elizabeth

  King, Roger (B'ham N'field)

  Pollock, Alexander

  King, Rt Hon Tom

  Porter, Barry

  Knight, Greg (Derby N)

  Portillo, Michael

  Knight, Dame Jill (Edgbaston)

  Powell, William (Corby)

  Knowles, Michael

  Powley, John

  Knox, David

  Prentice, Rt Hon Reg

  Lamont, Norman

  Price, Sir David

  Lang, Ian

  Prior, Rt Hon James

  Latham, Michael

  Proctor, K. Harvey

  Lawler, Geoffrey

  Pym, Rt Hon Francis

  Lawrence, Ivan

  Raffan, Keith

  Lawson, Rt Hon Nigel

  Rathbone, Tim

  Leigh, Edward (Gainsbor'gh)

  Rees, Rt Hon Peter (Dover)

  Lennox-Boyd, Hon Mark

  Renton, Tim

  Lester, Jim

  Rhodes James, Robert

  Lewis, Sir Kenneth (Stamf'd)

  Rhys Williams, Sir Brandon

  Lightbown, David

  Ridley, Rt Hon Nicholas

  Lilley, Peter

  Ridsdale, Sir Julian

  Lloyd, Ian (Havant)

  Rippon, Rt Hon Geoffrey

  Lloyd, Peter, (Fareham)

  Roberts, Wyn (Conwy)

  Lord, Michael

  Roe, Mrs Marion

  Luce, Richard

  Rossi, Sir Hugh

  Lyell, Nicholas

  Rowe, Andrew

  McCrindle, Robert

  Rumbold, Mrs Angela

  McCurley, Mrs Anna

  Ryder, Richard

  Macfarlane, Neil

  Sackville, Hon Thomas

  MacGregor, Rt Hon John

  Sainsbury, Hon Timothy

  MacKay, Andrew (Berkshire)

  Sayeed, Jonathan

  MacKay, John (Argyll & Bute)

  Shaw, Giles (Pudsey)

  Maclean, David John

  Shaw, Sir Michael (Scarb')

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

  Shelton, William (Streatham)

  McQuarrie, Albert

  Shepherd, Colin (Hereford)

  Madel, David

  Shepherd, Richard (Aldridge)

  Major, John

  Shersby, Michael

  Malins, Humfrey

  Silvester, Fred

  Malone, Gerald

  Sims, Roger

  Maples, John

  Skeet, T. H. H.

  Marland, Paul

  Smith, Tim (Beaconsfield)

  Marlow, Antony

  Soames, Hon Nicholas

  Marshall, Michael (Arundel)

  Speed, Keith

  Mates, Michael

  Spence, John

  Maude, Hon Francis

  Spencer, Derek

  Mawhinney, Dr Brian

  Spicer, Jim (W Dorset)

  655

  Squire, Robin

  Vaughan, Sir Gerard

  Stanbrook, Ivor

  Viggers, Peter

  Stanley, John

  Waddington, David

  Steen, Anthony

  Wakeham, Rt Hon John

  Stern, Michael

  Waldegrave, Hon William

  Stevens, Lewis (Nuneaton)

  Walden, George

  Stevens, Martin (Fulham)

  Walker, Bill (T'side N)

  Stewart, Allan (Eastwood)

  Walker, Rt Hon P. (W'cester)

  Stewart, Andrew (Sherwood)

  Wall, Sir Patrick

  Stewart, Ian (N Hertf'dshire)

  Waller, Gary

  Stokes, John

  Walters, Dennis

  Stradling Thomas, Sir John

  Ward, John

  Sumberg, David

  Wardle, C. (Bexhill)

  Tapsell, Sir Peter

  Warren, Kenneth

  Taylor, John (Solihull)

  Watson, John

  Taylor, Teddy (S'end E)

  Watts, John

  Tebbit, Rt Hon Norman

  Wells, Sir John (Maidstone)

  Temple-Morris, Peter

  Whitfield, John

  Terlezki, Stefan

  Whitney, Raymond

  Thatcher, Rt Hon Mrs M.

  Wiggin, Jerry

  Thomas, Rt Hon Peter

  Wilkinson, John

  Thompson, Donald (Calder V)

  Winterton, Mrs Ann

  Thompson, Patrick (N'ich N)

  Winterton, Nicholas

  Thorne, Neil (Ilford S)

  Wolfson, Mark

  Thornton, Malcolm

  Wood, Timothy

  Thurnham, Peter

  Woodcock, Michael

  Townend, John (Bridlington)

  Yeo, Tim

  Townsend, Cyril D. (B'heath)

  Young, Sir George (Acton)

  Tracey, Richard

  Younger, Rt Hon George

  Trippier, David

  Trotter, Neville

  Tellers for the Noes:

  Twinn, Dr Ian

  Mr. Carol Mather and

  van Straubenzee, Sir W.

  Mr. Robert Boscawen.

  Question accordingly negatived.
  Amendment proposed, pursuant to Standing Order No. 35 (Calling of amendments at end of debate), at the end of the Question to add:
  But humbly regret that the Gracious Speech contains no evidence that the Government seriously plans to tackle Britain's most fundamental problems; believes that further action is needed to stimulate manufacturing industry through a cut in interest rates and a more competitive exchange rate via sterling's entry into the exchange rate mechanism of the European Monetary System; and calls on the Government to seek a reduction in unemployment through selective capital investment, a fair and durable incomes strategy, lower employers' National Insurance contributions, and an expansion of the community programme and skill training.—[Mr. Cartwright.]
  Question put, That the amendment be made:—
  The House divided: Ayes 33, Noes 350.

  Division No. 4]

  [10.15 pm

  AYES

  Alton, David

  Owen, Rt Hon Dr David

  Beggs, Roy

  Penhaligon, David

  Beith, A. J.

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

  Bruce, Malcolm

  Robinson, P. (Belfast E)

  Carlile, Alexander (Montg'y)

  Ross, Stephen (Isle of Wight)

  Forsythe, Clifford (S Antrim)

  Ross, Wm. (Londonderry)

  Freud, Clement

  Smith, Cyril (Rochdale)

  Hancock, Mr. Michael

  Smyth, Rev W. M. (Belfast S)

  Howells, Geraint

  Steel, Rt Hon David

  Hughes, Simon (Southwark)

  Taylor, Rt Hon John David

  Jenkins, Rt Hon Roy (Hillh'd)

  Wainwright, R.

  Johnston, Sir Russell

  Walker, Cecil (Belfast N)

  Kennedy, Charles

  Wallace, James

  Livsey, Richard

  Wrigglesworth, Ian

  McCusker, Harold

  Maclennan, Robert

  Tellers for the Ayes:

  Maginnis, Ken

  Mr. John Cartwright and

  Meadowcroft, Michael

  Mr. Archy Kirkwood.

  Molyneaux, Rt Hon James

  NOES

  Adley, Robert

  Amery, Rt Hon Julian

  Aitken, Jonathan

  Amess, David

  Alison, Rt Hon Michael

  Ancram, Michael

  656

  Arnold, Tom

  Eyre, Sir Reginald

  Ashby, David

  Fairbairn, Nicholas

  Aspinwall, Jack

  Fallon, Michael

  Atkins, Rt Hon Sir H.

  Farr, Sir John

  Atkinson, David (B'm'th E)

  Favell, Anthony

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

  Fenner, Mrs Peggy

  Baker, Nicholas (N Dorset)

  Finsberg, Sir Geoffrey

  Baldry, Tony

  Fletcher, Alexander

  Banks, Robert (Harrogate)

  Fookes, Miss Janet

  Batiste, Spencer

  Forman, Nigel

  Beaumont-Dark, Anthony

  Forsyth, Michael (Stirling)

  Bellingham, Henry

  Forth, Eric

  Bendall, Vivian

  Fowler, Rt Hon Norman

  Benyon, William

  Fox, Marcus

  Best, Keith

  Franks, Cecil

  Bevan, David Gilroy

  Fraser, Peter (Angus East)

  Biffen, Rt Hon John

  Freeman, Roger

  Blackburn, John

  Fry, Peter

  Blaker, Rt Hon Sir Peter

  Gale, Roger

  Body, Richard

  Galley, Roy

  Bonsor, Sir Nicholas

  Gardiner, George (Reigate)

  Bottomley, Peter

  Gardner, Sir Edward (Fylde)

  Bottomley, Mrs Virginia

  Garel-Jones, Tristan

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

  Gilmour, Rt Hon Sir Ian

  Bowden, Gerald (Dulwich)

  Glyn, Dr Alan

  Boyson, Dr Rhodes

  Goodhart, Sir Philip

  Braine, Rt Hon Sir Bernard

  Goodlad, Alastair

  Brandon-Bravo, Martin

  Gorst, John

  Brinton, Tim

  Gow, Ian

  Brittan, Rt Hon Leon

  Gower, Sir Raymond

  Brooke, Hon Peter

  Greenway, Harry

  Brown, M. (Brigg & Cl'thpes)

  Gregory, Conal

  Browne, John

  Griffiths, Sir Eldon

  Bruinvels, Peter

  Griffiths, Peter (Portsm'th N)

  Bryan, Sir Paul

  Grist, Ian

  Buchanan-Smith, Rt Hon A.

  Ground, Patrick

  Buck, Sir Antony

  Grylls, Michael

  Budgen, Nick

  Hamilton, Hon A. (Epsom)

  Bulmer, Esmond

  Hampson, Dr Keith

  Burt, Alistair

  Hanley, Jeremy

  Butcher, John

  Hannam, John

  Butler, Hon Adam

  Harris, David

  Butterfill, John

  Haselhurst, Alan

  Carlisle, John (N Luton)

  Hawkins, C. (High Peak)

  Carlisle, Kenneth (Lincoln)

  Hawkins, Sir Paul (SW N'folk)

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

  Hawksley, Warren

  Carttiss, Michael

  Hayes, J.

  Cash, William

  Hayhoe, Rt Hon Barney

  Channon, Rt Hon Paul

  Hayward, Robert

  Chapman, Sydney

  Heath, Rt Hon Edward

  Chope, Christopher

  Heathcoat-Amory, David

  Churchill, W. S.

  Henderson, Barry

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

  Hickmet, Richard

  Clark, Dr Michael (Rochford)

  Hicks, Robert

  Clark, Sir W. (Croydon S)

  Higgins, Rt Hon Terence L.

  Clarke, Rt Hon K. (Rushcliffe)

  Hill, James

  Colvin, Michael

  Hind, Kenneth

  Conway, Derek

  Hirst, Michael

  Coombs, Simon

  Hogg, Hon Douglas (Gr'th'm)

  Cope, John

  Holt, Richard

  Cormack, Patrick

  Hordern, Sir Peter

  Corrie, John

  Howard, Michael

  Couchman, James

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

  Cranborne, Viscount

  Howarth, Gerald (Cannock)

  Critchley, Julian

  Howell, Rt Hon D. (G'ldford)

  Crouch, David

  Howell, Ralph (N Norfolk)

  Currie, Mrs Edwina

  Hubbard-Miles, Peter

  Dickens, Geoffrey

  Hunter, Andrew

  Dicks, Terry

  Irving, Charles

  Dorrell, Stephen

  Jackson, Robert

  Douglas-Hamilton, Lord J.

  Jenkin, Rt Hon Patrick

  Dover, Den

  Jessel, Toby

  du Cann, Rt Hon Sir Edward

  Johnson Smith, Sir Geoffrey

  Dunn, Robert

  Jones, Gwilym (Cardiff N)

  Durant, Tony

  Jones, Robert (W Herts)

  Dykes, Hugh

  Jopling, Rt Hon Michael

  Edwards, Rt Hon N. (P'broke)

  Joseph, Rt Hon Sir Keith

  Eggar, Tim

  Kellett-Bowman, Mrs Elaine

  Emery, Sir Peter

  Kershaw, Sir Anthony

  Evennett, David

  Key, Robert

  657

  King, Roger (B'ham N'field)

  Pollock, Alexander

  King, Rt Hon Tom

  Porter, Barry

  Knight, Greg (Derby N)

  Portillo, Michael

  Knight, Dame Jill (Edgbaston)

  Powell, William (Corby)

  Knowles, Michael

  Powley, John

  Knox, David

  Prentice, Rt Hon Reg

  Lamont, Norman

  Price, Sir David

  Lang, Ian

  Prior, Rt Hon James

  Latham, Michael

  Proctor, K. Harvey

  Lawler, Geoffrey

  Pym, Rt Hon Francis

  Lawrence, Ivan

  Raffan, Keith

  Lawson, Rt Hon Nigel

  Rathbone, Tim

  Leigh, Edward (Gainsbor'gh)

  Rees, Rt Hon Peter (Dover)

  Lennox-Boyd, Hon Mark

  Renton, Tim

  Lester, Jim

  Rhodes James, Robert

  Lewis, Sir Kenneth (Stamf'd)

  Rhys Williams, Sir Brandon

  Lightbown, David

  Ridley, Rt Hon Nicholas

  Lilley, Peter

  Ridsdale, Sir Julian

  Lloyd, Ian (Havant)

  Rippon, Rt Hon Geoffrey

  Lloyd, Peter, (Fareham)

  Roberts, Wyn (Conwy)

  Lord, Michael

  Roe, Mrs Marion

  Luce, Richard

  Rossi, Sir Hugh

  Lyell, Nicholas

  Rowe, Andrew

  McCrindle, Robert

  Rumbold, Mrs Angela

  McCurley, Mrs Anna

  Ryder, Richard

  Macfarlane, Neil

  Sackville, Hon Thomas

  MacGregor, Rt Hon John

  Sainsbury, Hon Timothy

  MacKay, Andrew (Berkshire)

  Sayeed, Jonathan

  MacKay, John (Argyll & Bute)

  Shaw, Giles (Pudsey)

  Maclean, David John

  Shaw, Sir Michael (Scarb')

  Maclennan, Robert

  Shelton, William (Streatham)

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

  Shepherd, Colin (Hereford)

  McQuarrie, Albert

  Shepherd, Richard (Aldridge)

  Madel, David

  Shersby, Michael

  Major, John

  Silvester, Fred

  Malins, Humfrey

  Sims, Roger

  Malone, Gerald

  Skeet, T. H. H.

  Maples, John

  Smith, Tim (Beaconsfield)

  Marland, Paul

  Soames, Hon Nicholas

  Marlow, Antony

  Speed, Keith

  Marshall, Michael (Arundel)

  Spencer, Derek

  Mates, Michael

  Spicer, Jim (W Dorset)

  Maude, Hon Francis

  Squire, Robin

  Mawhinney, Dr Brian

  Stanbrook, Ivor

  Maxwell-Hyslop, Robin

  Stanley, John

  Mayhew, Sir Patrick

  Steen, Anthony

  Mellor, David

  Stern, Michael

  Merchant, Piers

  Stevens, Lewis (Nuneaton)

  Meyer, Sir Anthony

  Stevens, Martin (Fulham)

  Miller, Hal (B'grove)

  Stewart, Allan (Eastwood)

  Mills, Iain (Meriden)

  Stewart, Andrew (Sherwood)

  Miscampbell, Norman

  Stewart, Ian (N Hertf'dshire)

  Mitchell, David (NW Hants)

  Stokes, John

  Moate, Roger

  Stradling Thomas, Sir John

  Monro, Sir Hector

  Sumberg, David

  Montgomery, Sir Fergus

  Tapsell, Sir Peter

  Moore, John

  Taylor, John (Solihull)

  Morrison, Hon C. (Devizes)

  Taylor, Teddy (S'end E)

  Morrison, Hon P. (Chester)

  Tebbit, Rt Hon Norman

  Moynihan, Hon C.

  Temple-Morris, Peter

  Mudd, David

  Terlezki, Stefan

  Murphy, Christopher

  Thatcher, Rt Hon Mrs M.

  Neale, Gerrard

  Thomas, Rt Hon Peter

  Needham, Richard

  Thompson, Donald (Calder V)

  Neubert, Michael

  Thompson, Patrick (N'ich N)

  Newton, Tony

  Thorne, Neil (Ilford S)

  Nicholls, Patrick

  Thornton, Malcolm

  Norris, Steven

  Thurnham, Peter

  Onslow, Cranley

  Townend, John (Bridlington)

  Oppenheim, Rt Hon Mrs S.

  Townsend, Cyril D. (B'heath)

  Osborn, Sir John

  Tracey, Richard

  Ottaway, Richard

  Trippier, David

  Page, Sir John (Harrow W)

  Trotter, Neville

  Page, Richard (Herts SW)

  Twinn, Dr Ian

  Parkinson, Rt Hon Cecil

  van Straubenzee, Sir W.

  Parris, Matthew

  Vaughan, Sir Gerard

  Patten, Christopher (Bath)

  Viggers, Peter

  Patten, J. (Oxf W & Abdgn)

  Waddington, David

  Pawsey, James

  Wakeham, Rt Hon John

  Peacock, Mrs Elizabeth

  Waldegrave, Hon William

  658

  Walden, George

  Wiggin, Jerry

  Walker, Bill (T'side N)

  Wilkinson, John

  Walker, Rt Hon P. (W'cester)

  Winterton, Mrs Ann

  Wall, Sir Patrick

  Winterton, Nicholas

  Waller, Gary

  Wolfson, Mark

  Walters, Dennis

  Wood, Timothy

  Ward, John

  Woodcock, Michael

  Wardle, C. (Bexhill)

  Yeo, Tim

  Warren, Kenneth

  Young, Sir George (Acton)

  Watson, John

  Younger, Rt Hon George

  Watts, John

  Wells, Sir John (Maidstone)

  Tellers for the Noes:

  Whitfield, John

  Mr. Carol Mather and

  Whitney, Raymond

  Mr. Robert Boscawen.

  Question accordingly negatived.
  Main Question put:—
  The House divided: Ayes 329, Noes 25.

  Division No. 5]

  [10.30 pm

  AYES

  Adley, Robert

  Clarke, Rt Hon K. (Rushcliffe)

  Aitken, Jonathan

  Conway, Derek

  Alison, Rt Hon Michael

  Coombs, Simon

  Amess, David

  Cope, John

  Ancram, Michael

  Cormack, Patrick

  Arnold, Tom

  Corrie, John

  Ashby, David

  Couchman, James

  Aspinwall, Jack

  Cranborne, Viscount

  Atkins, Rt Hon Sir H.

  Crouch, David

  Atkinson, David (B'm'th E)

  Currie, Mrs Edwina

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

  Dickens, Geoffrey

  Baker, Nicholas (N Dorset)

  Dicks, Terry

  Baldry, Tony

  Dorrell, Stephen

  Banks, Robert (Harrogate)

  Douglas-Hamilton, Lord J.

  Batiste, Spencer

  Dover, Den

  Beaumont-Dark, Anthony

  du Cann, Rt Hon Sir Edward

  Bellingham, Henry

  Dunn, Robert

  Bendall, Vivian

  Durant, Tony

  Benyon, William

  Dykes, Hugh

  Best, Keith

  Edwards, Rt Hon N. (P'broke)

  Bevan, David Gilroy

  Eggar, Tim

  Biffen, Rt Hon John

  Emery, Sir Peter

  Blackburn, John

  Evennett, David

  Blaker, Rt Hon Sir Peter

  Eyre, Sir Reginald

  Body, Richard

  Fairbairn, Nicholas

  Bonsor, Sir Nicholas

  Fallon, Michael

  Bottomley, Peter

  Farr, Sir John

  Bottomley, Mrs Virginia

  Favell, Anthony

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

  Fenner, Mrs Peggy

  Bowden, Gerald (Dulwich)

  Finsberg, Sir Geoffrey

  Boyson, Dr Rhodes

  Fookes, Miss Janet

  Braine, Rt Hon Sir Bernard

  Forman, Nigel

  Brandon-Bravo, Martin

  Forsyth, Michael (Stirling)

  Brinton, Tim

  Forth, Eric

  Brittan, Rt Hon Leon

  Fowler, Rt Hon Norman

  Brooke, Hon Peter

  Fox, Marcus

  Brown, M. (Brigg & Cl'thpes)

  Franks, Cecil

  Browne, John

  Fraser, Peter (Angus East)

  Bruinvels, Peter

  Freeman, Roger

  Buchanan-Smith, Rt Hon A.

  Fry, Peter

  Buck, Sir Antony

  Gale, Roger

  Budgen, Nick

  Galley, Roy

  Bulmer, Esmond

  Gardiner, George (Reigate)

  Burt, Alistair

  Gardner, Sir Edward (Fylde)

  Butcher, John

  Garel-Jones, Tristan

  Butler, Hon Adam

  Glyn, Dr Alan

  Butterfill, John

  Goodhart, Sir Philip

  Carlisle, John (N Luton)

  Goodlad, Alastair

  Carlisle, Kenneth (Lincoln)

  Gorst, John

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

  Gow, Ian

  Cash, William

  Gower, Sir Raymond

  Channon, Rt Hon Paul

  Greenway, Harry

  Chapman, Sydney

  Gregory, Conal

  Chope, Christopher

  Griffiths, Sir Eldon

  Churchill, W. S.

  Griffiths, Peter (Portsm'th N)

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

  Grist, Ian

  Clark, Dr Michael (Rochford)

  Ground, Patrick

  Clark, Sir W. (Croydon S)

  Grylls, Michael

  659

  Hamilton, Hon A. (Epsom)

  McQuarrie, Albert

  Hampson, Dr Keith

  Madel, David

  Hanley, Jeremy

  Major, John

  Hannam, John

  Malins, Humfrey

  Harris, David

  Malone, Gerald

  Haselhurst, Alan

  Marland, Paul

  Hawkins, C. (High Peak)

  Marlow, Antony

  Hawkins, Sir Paul (SW N'folk)

  Marshall, Michael (Arundel)

  Hawksley, Warren

  Maude, Hon Francis

  Hayes, J.

  Mawhinney, Dr Brian

  Hayhoe, Rt Hon Barney

  Maxwell-Hyslop, Robin

  Hayward, Robert

  Mayhew, Sir Patrick

  Heath, Rt Hon Edward

  Mellor, David

  Henderson, Barry

  Merchant, Piers

  Hickmet, Richard

  Meyer, Sir Anthony

  Hicks, Robert

  Miller, Hal (B'grove)

  Higgins, Rt Hon Terence L.

  Mills, Iain (Meriden)

  Hill, James

  Miscampbell, Norman

  Hind, Kenneth

  Mitchell, David (NW Hants)

  Hirst, Michael

  Moate, Roger

  Hogg, Hon Douglas (Gr'th'm)

  Monro, Sir Hector

  Holt, Richard

  Montgomery, Sir Fergus

  Hordern, Sir Peter

  Moore, John

  Howard, Michael

  Morrison, Hon P. (Chester)

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

  Moynihan, Hon C.

  Howarth, Gerald (Cannock)

  Mudd, David

  Howell, Rt Hon D. (G'ldford)

  Murphy, Christopher

  Howell, Ralph (N Norfolk)

  Neale, Gerrard

  Hubbard-Miles, Peter

  Needham, Richard

  Hunter, Andrew

  Neubert, Michael

  Irving, Charles

  Newton, Tony

  Jackson, Robert

  Nicholls, Patrick

  Jenkin, Rt Hon Patrick

  Norris, Steven

  Jessel, Toby

  Oppenheim, Phillip

  Jones, Gwilym (Cardiff N)

  Osborn, Sir John

  Jones, Robert (W Herts)

  Ottaway, Richard

  Jopling, Rt Hon Michael

  Page, Sir John (Harrow W)

  Joseph, Rt Hon Sir Keith

  Page, Richard (Herts SW)

  Kellett-Bowman, Mrs Elaine

  Parkinson, Rt Hon Cecil

  Kershaw, Sir Anthony

  Parris, Matthew

  Key, Robert

  Patten, Christopher (Bath)

  King, Roger (B'ham N'field)

  Patten, J. (Oxf W & Abdgn)

  King, Rt Hon Tom

  Pawsey, James

  Knight, Greg (Derby N)

  Peacock, Mrs Elizabeth

  Knight, Dame Jill (Edgbaston)

  Pollock, Alexander

  Knowles, Michael

  Porter, Barry

  Knox, David

  Portillo, Michael

  Lamont, Norman

  Powell, William (Corby)

  Lang, Ian

  Powley, John

  Latham, Michael

  Prentice, Rt Hon Reg

  Lawler, Geoffrey

  Price, Sir David

  Lawrence, Ivan

  Proctor, K. Harvey

  Lawson, Rt Hon Nigel

  Pym, Rt Hon Francis

  Lennox-Boyd, Hon Mark

  Raffan, Keith

  Lester, Jim

  Rathbone, Tim

  Lewis, Sir Kenneth (Stamf'd)

  Renton, Tim

  Lightbown, David

  Rhys Williams, Sir Brandon

  Lilley, Peter

  Ridley, Rt Hon Nicholas

  Lloyd, Ian (Havant)

  Ridsdale, Sir Julian

  Lloyd, Peter, (Fareham)

  Rippon, Rt Hon Geoffrey

  Lord, Michael

  Roberts, Wyn (Conwy)

  Luce, Richard

  Roe, Mrs Marion

  Lyell, Nicholas

  Rossi, Sir Hugh

  McCurley, Mrs Anna

  Rowe, Andrew

  Macfarlane, Neil

  Rumbold, Mrs Angela

  MacGregor, Rt Hon John

  Ryder, Richard

  MacKay, Andrew (Berkshire)

  Sackville, Hon Thomas

  MacKay, John (Argyll & Bute)

  Sainsbury, Hon Timothy

  Maclean, David John

  Sayeed, Jonathan

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

  Shaw, Sir Michael (Scarb')

  660

  Shelton, William (Streatham)

  Townsend, Cyril D. (B'heath)

  Shepherd, Colin (Hereford)

  Tracey, Richard

  Shepherd, Richard (Aldridge)

  Trippier, David

  Silvester, Fred

  Trotter, Neville

  Sims, Roger

  Twinn, Dr Ian

  Skeet, T. H. H.

  van Straubenzee, Sir W.

  Smith, Tim (Beaconsfield)

  Vaughan, Sir Gerard

  Soames, Hon Nicholas

  Viggers, Peter

  Speed, Keith

  Waddington, David

  Spencer, Derek

  Wakeham, Rt Hon John

  Spicer, Jim (W Dorset)

  Waldegrave, Hon William

  Squire, Robin

  Walden, George

  Stanbrook, Ivor

  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, Sir John (Maidstone)

  Stradling Thomas, Sir John

  Whitfield, John

  Sumberg, David

  Whitney, Raymond

  Tapsell, Sir Peter

  Wiggin, Jerry

  Taylor, John (Solihull)

  Wilkinson, John

  Taylor, Teddy (S'end E)

  Winterton, Mrs Ann

  Tebbit, Rt Hon Norman

  Winterton, Nicholas

  Temple-Morris, Peter

  Wolfson, Mark

  Terlezki, Stefan

  Wood, Timothy

  Thatcher, Rt Hon Mrs M.

  Woodcock, Michael

  Thomas, Rt Hon Peter

  Yeo, Tim

  Thompson, Donald (Calder V)

  Young, Sir George (Acton)

  Thompson, Patrick (N'ich N)

  Younger, Rt Hon George

  Thorne, Neil (Ilford S)

  Thornton, Malcolm

  Tellers for the Ayes:

  Thurnham, Peter

  Mr. Carol Mather and

  Townend, John (Bridlington)

  Mr. Robert Boscawen.

  NOES

  Beggs, Roy

  Penhaligon, David

  Beith, A. J.

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

  Bruce, Malcolm

  Robinson, P. (Belfast E)

  Carlile, Alexander (Montg'y)

  Skinner, Dennis

  Freud, Clement

  Smith, Cyril (Rochdale)

  Howells, Geraint

  Smyth, Rev W. M. (Belfast S)

  Hughes, Simon (Southwark)

  Steel, Rt Hon David

  Johnston, Sir Russell

  Stewart, Rt Hon D. (W Isles)

  Kennedy, Charles

  Taylor, Rt Hon John David

  Kirkwood, Archy

  Walker, Cecil (Belfast N)

  Livsey, Richard

  McCusker, Harold

  Te

  Maginnis, Ken

  Mr. WillianRossand

  Molyneaux, Rt Hon James

  Mr. Clifford Forsythe.

  Nicholson, J.

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

  Anglo-Irish Talks
  10.42 pm
  Mr. Harold McCusker: On a point of order, Mr. Speaker. It relates to the point of order that I raised earlier today with regard to the conclusion of the Anglo-Irish talks. As the Prime Minister is still in the Chamber, is she prepared now to inform right hon. and hon. Members, since further information has become available in Belfast, that she has surrendered to the Irish Republic? This information is contained in a newspaper article relating to locating agents of the Irish Republic in Belfast.
  Mr. Speaker: That is patently not a matter for me. I know nothing of it.

  Foreign Compensation (Czechoslovakia) Order 1982
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Durant.]
  10.44 pm
  Mr. Roger Freeman: I am grateful for the opportunity of this Adjournment debate, and I know that that pleasure will be shared by many British citizens with connections with Czechoslovakia. I am also grateful to the Parliamentary Under-Secretary of State, my hon. Friend the Member for Enfield, North (Mr. Eggar), for being here. This is the first opportunity for him to address the House from that august position on the Front Bench. All my hon. Friends will join me in wishing him the very best and thanking him for coming tonight.
  My hon. Friend the Member for Ruislip-Northwood (Mr. Wilkinson) has my agreement to contribute to the debate, as well as the agreement and permission of the Minister.
  The Foreign Compensation (Czechoslovakia) Order 1982 came into being through recognition by the British Government of the need to recompense British citizens forced by circumstance to leave Czechoslovakia in 1948 following the deposition of Benes and Masaryk. Several were British-born, for example the British wives of Czech men who had returned to Czechoslovakia following the second world war. Most of those who left Czechoslovakia were forced by necessity to leave only with such belongings as they could carry. Their escape to Britain was made even more difficult as many who were not Communist supporters had their passports confiscated immediately after the coup of February 1948. Forced by circumstances to leave the country, taking with them only what they could carry, most left the greater part of their belongings in Czechoslovakia, including the furnishings of their Czech homes. Those possessions were often forfeited by the Czech authorities, and in the 1940s no payment or compensation was given for that loss.
  The Czech Government, after many years of negotiations, paid the sum of £24 million to the British Government, of which approximately £4 million has been set aside for the Foreign Compensation (Czechoslovakia) Order 1982. All of us in the House should acknowledge the success of those negotiations, which have carried on for many years. At least there was a positive result in the end—in other words, the compensation paid by the Government of Czechoslovakia.
  All claims had to reach the Foreign Compensation Commission by 31 August 1983, and I understand that 2,204 claims have been lodged. Once submitted, a claim is given a preliminary assessment and, if it is felt to be justified, evidence has to be submitted to back up the claim. A determination of the amount of compensation can then be made. Once all the cases have been provisionally determined, they all require reviewing before a final award is made, because, if the claims exceed £4 million, successful applicants are paid a proportion of the amount set aside for compensation. Therefore, all determinations must be made before a final figure for the amount of compensation to any one applicant can be reached.
  There was, and is, however, a major stumbling block in the way of most applicants in that the burden of proof rests with the applicant. According to the order, he has to

  663
  show that the property in question had been affected by a Czechoslovak measure. As might be imagined, proving, after 40 years, that one's property was affected by a Czechoslovak measure is no easy matter and, by the end of September this year, of the 2,204 claims received by the Foreign Compensation Commission, 620 or about 30 per cent. had been processed, of which only 173 had been provisionally awarded compensation totalling approximately £285,000. In the two years following the final date for the submission of applications, therefore, fewer than one third have been dealt with.
  To alleviate the burden of proof placed upon applicants, the Foreign Compensation Commission has frequently turned to the Czech Government for evidence, and it is there that many applications for compensation can encounter difficulties. Why that should be so is best explained by reference to the case of Mrs. Delia Hak, a British citizen who was forced to leave Czechoslovakia in 1948 and who lives in my constituency, where she was born.
  Mrs. Hak married a Czech army officer in July 1945, and the newly married couple moved to Prague in October of the same year, taking £800 which had been left to Mrs. Hak in her father's will. With that money and additional funds occasionally sent by Mrs. Hak's mother, Mrs. Hak completely furnished their Prague home. After the coup in 1948 and having been put under pressure—Mr. Hak believes that they were put under surveillance by the Czech authorities—they decided that it would be better for them to leave the country.
  In the late spring of 1948, Mrs. Hak succeeded in leaving Czechoslovakia by train on a Czech passport but Mr. Hak was unable to leave. In November 1948, Mr. Hak succeeded in escaping across the border, leaving behind all of the effects of the Prague flat. On leaving Czechoslovakia, he worked for the British Government. Mrs. Hak, wishing to claim compensation for the loss of the effects in the Prague flat, had to rely on the Czech Government to furnish the compensation commission with evidence to uphold her claim.
  The Czech authorities replied to the commission's request saying that the Prague people's court had passed a sentence on Mr. Hak on 8 February 1954 ordering the forfeiture of all of the couple's goods to the state. However, the Czech authorities added that they had never taken possession of the effects of the Prague flat as they had been sold previously to Mr. Hak's father, which the authorities claim is proven by an affidavit signed by his father on 20 September 1950.
  Mrs. Hak's claim has therefore been dismissed, although my constituents claim that the evidence submitted is incorrect. The 1982 order leaves little discretion to the commissioners. As the Hak's case stands, they are without firm evidence, so they are without compensation. Of all of the requests for information sent to the Czech Government, about 900 still await reply. Applicants who have received a reply from Czechoslovakia are not always as displeased with the outcome as my constituent. Indeed, the Commission has several cases on file of applicants whose cases appeared hopeless until the Czech Government supplied information which revealed that they are entitled to compensation. They appear to be doing their best to have the compensation problem sorted out as thoroughly as
  664
  possible. Unfortunately, however, such thoroughness takes time, and time is one of the applicants' greatest enemies as many are well into their 70's.
  My first request is that the Order should be reviewed to alter the burden of proof and to give the commissioners greater discretion. My second request is that my hon. Friend the Minister should set a realistic target date to clear all claims. Probably the most difficult part of the Order for claimants is the section concerning pensions. Of the 500 or so claims that have been made for compensation in respect of loss of pensions, the commission believes that less than one dozen will probably be successful.
  The commission has found article 21 of the Order, which relates to pensions, too rigid for successful implementation because social security systems are different all over the world, and that to decide whether payment of the pension had been stopped
  "in accordance with the rules governing the payment of the pension"
  is almost impossible. Many left Czechoslovakia before the payment of their pension started, so they are really claiming for pension contributions. Hence those who claim for loss of pension have almost no chance of success. There was obviously a need for compensation for loss of pensions otherwise the article would not have been included in the Order. It would now seem foolish not to pay out that compensation because the conditions of the Order were drafted too rigidly.
  My third request, therefore, is that the Order should be reviewed with special reference to pensions. It will be appreciated that many of those now claiming compensation, including that for loss of pensions, are senior citizens who cannot afford, financially or physically, to wait for years before any payments are made. As the rules of the order stand, no final substantial payment can be made until all the claims have been finally determined and then reviewed.
  The difference between the amounts claimed and the amount available is illustrated by the fact that the original claims totalled £21 million but that the commission has provision to pay only £4 million in compensation. If a substantial interim payment could be made, however, it would be of great benefit to those awaiting the final review. It would alleviate some hardship and reduce, if not eliminate, concern on the part of the claimants. My fourth and final request is, therefore, that substantial interim awards should be made.
  In conclusion, I call upon my hon. Friend the Minister to take whatever action he feels is necessary to ensure a more rapid procedure of the claims system, to consider a review of the order at the earliest possible date with a view to altering the present overly rigid conditions with regard to burden of proof and pension compensation, and to consider making substantial interim payments. I appreciate that there are problems in that the commission must frequently rely upon the Czechoslovak Government to provide information and that this causes complication and delay, but the money in the commission's fund is now British money and should be awarded at the discretion of the British Government and not of the Government of Czechoslovakia.
  10.56 pm
  Mr. John Wilkinson: I am most grateful to my hon. Friend the Member for Kettering (Mr. Freeman) for allowing me to intervene briefly in the

  665
  debate. I pay warm tribute to him for the clear and forceful way in which he has put the case, which I wholeheartedly support.
  My hon. Friend the Parliamentary Under-Secretary of State will know that I recently took a deputation of Czech ex-service men, including squadron leader Ludikar from my constituency, to see the Minister of State, Foreign and Commonwealth Office, my hon. Friend the Member for Mid-Sussex (Mr. Renton).
  I associate myself with the plea made by my hon. Friend the Member for Kettering that the pension provisions especially be reviewed, for the good reason that many of these Czech ex-service men fought with the greatest gallantry and distinction alongside British armed forces and, in some cases, in British units in the second world war, and I can think of no group more deserving of equitable treatment in regard to their pensions. The problem is getting information out of Czechoslovakia to justify their claims which, in all equity, should be met.
  10.57 pm
  The Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs (Mr. Timothy Eggar): I am grateful to my hon. Friend the Member for Kettering (Mr. Freeman) for initiating this debate and to my hon. Friend the Member for Ruislip-Northwood (Mr. Wilkinson) for his contribution to it. I know that my hon. Friends the Members for Stratford-on-Avon (Mr. Howarth) and for Hampstead and Highgate (Sir G. Finsberg) would have liked to be here and that they, too, have been very active on behalf of constituents affected by the order.
  I recognise that a significant number of people who suffered losses in Czechoslovakia a long time ago are interested in these questions and hope to receive compensation for their losses; I very much sympathise with them.
  The House will be aware that the negotiations with Czechoslovakia which led to the signature of an agreement on 29 January 1982 were extremely complicated and lengthy. They began in 1949 and had many ups and downs. Their successful conclusion was not wholly within our gift nor that of the Czechoslovaks. The French and United States Governments were holding their own bilateral negotiations with the Czechoslovaks at the same time and there was a higher degree of interdependence between the three sets of negotiations.
  Although the Order is long and complicated, its principal purpose is straightforward enough. It entrusts to the Foreign Compensation Commission the task of receiving applications to share in the distribution of the compensation received from Czechoslovakia. It reviews and values those claims and deals with the distribution of compensation to claimants in proportion to the valuation assigned by the commission to their claims.
  As my hon. Friend has said, the total sum of money handed to the Foreign Compensation Commission for private claimants in October 1982, was almost £4 million. I am pleased to tell the House that with interest that sum now stands at almost £4·75 million. The 1982 Order gave applicants 12 months in which to make their claims to share in the compensation. A large number did so. Whereas our negotiations with the Czechoslovaks had been concerned with only 1,254 private claims with a face value of some £6 million, no fewer than 2,204 persons applied to take part in the distribution. My hon. Friend
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  might like to know that the nominal value of the applications filed up to the closing date, 31 August 1983, had risen to some £21 million rather than the £6 million which we were previously talking about.
  I understand that my hon. Friend the Member for Kettering spoke of his concern about the pace at which the Foreign Compensation Commission is reaching decisions. Indeed, he has asked me to review the whole order, with a view both to altering the burden of proof placed upon the applicants and also to setting a target date for the clearance of all the claims. While I share my hon. Friend's concern that matters should be speeded up, I am sorry to have to say that there is no possibility of altering the burden of proof. That must still rest upon the applicants. It seems to me proper that in the case of this order, as with all similar orders, it should be the responsibility of the claimant to establish his own claim. No one else can shoulder that responsibility.
  My hon. Friend has spoken of the requests for information in support of claims which the Foreign Compensation Commission have made to the Czechoslovak authorities. Provision was made for that in our agreement with Czechoslovakia. That provision has been of substantial benefit to us and to the claimants. I take this opportunity to pay tribute to the response that we have received from the Czechoslovak Government. Many of the replies they were able to give us were valuable. So far, they have sent 578 replies to the 1,700 requests made by the Foreign Compensation Commission. On further reflection, the commision has withdrawn 225 of those requests and the balance outstanding is still some 900.
  I should emphasise to my hon. Friend that we have sought additional information from the Czechoslovak authorities which the claimants were unable to provide. We asked for that additional information in order to verify the claims. We have not asked the Czechoslovak authorities to verify documents produced by the claimants. The information supplied by the Czechoslovak authorities is treated as evidence which may or may not support the claim, and is read in conjunction with the applicant's own submission. Nothing can replace the applicant's own submission. I should like to make that clear. That submission is of primary and fundamental importance to the whole procedure.
  As I said, I share my hon. Friend's regret that it has not been possible to proceed faster. In many cases, the difficulty has lain in the 40 years which have elapsed between deprivation and the moment of claim, and the slowness with which evidence has been coming forward. However, I have to say that it has often been in the claimants' own interest to allow adequate time for the production of such evidence.
  My hon. Friend invited me to set a realistic target date for the clearance of all claims. However, as I know my hon. Friend is aware, the FCC is independent in these matters, and I hope he will understand my reluctance to accept his invitation. At this stage, it is better to concentrate upon ways and means of speeding up the procedures of the FCC and the rate at which it makes determinations. The commission is already considering ways of doing that, and I trust that it will be successful. I hope that it will feel able to reach at least provisional decisions in some cases without waiting for replies from Czechoslovakia, especially where the request for information was sent to the Czechslovaks some time ago.

  667
  My hon. Friend gave details of the claims for compensation which Mr. and Mrs. Hak have made to the FCC, and he referred to the sad circumstances which led to that claim being made. As he knows, the claimants have put their cases to the commission and the legal channels open to them are not yet exhausted. This being so, I hope that my hon. Friend will understand when I say that it would not be right for me to comment here upon either case.
  My hon. Friend and my hon. Friend the Member for Ruislip-Northwood asked that there should be a review of the order in so far as it bears upon pension claims. I realise that some claimants were members of the allied armed forces during the second world war and gave distinguished and gallant service then. They have since come to Britain and made their homes here, but they were not British nationals at the relevant time when they lost their pension rights in Czechoslovakia and so, sadly, do not qualify under the provisions of the Czechoslovakia order. I must tell my hon. Friend that we reviewed this matter very carefully last year, when we received representations from my hon. Friend the Member for Stratford-on-Avon (Mr. Howarth) and concluded that it would be wrong to amend article 21 of the order, which bears upon pension claims. I will explain briefly the reasons behind our decision.
  In preparing the 1982 order, the Government thought it right to make provision for some of the compensation received under the 1982 agreement with Czechoslovakia to be used for the benefit of the very limited category of pension claimants described in article 21. Since we had been negotiating with the Czechoslovak Government about compensation for the loss of British property, it was inevitable that the text of this article should be drawn in such a way as to benefit only those who met a strict British nationality requirement.
  We also had a duty to consider the position of all the other claimants under this order. We could not act to their detriment without having a sound legal justification for this. In the present case, we concluded that such a legal justification did not exist and that it would not be proper for us to attempt to relax the nationality requirement. All other claims under this order are subject to a strict nationality test based on international law. That has been our consistent practice in all orders in Council providing for the distribution of compensation moneys received from other Governments. I am sorry to disappoint my hon. Friend, but I do not believe it would be right for us to reconsider the decision that we reviewed as recently as a year ago.
  668
  My hon. Friend also asked me to consider the case for a substantial interim payment to claimants. I listened carefully to what he said and have much sympathy with him. As he argued, all the claimants have already been waiting a very long time. Nevertheless, it may be prudent for the commission to make more progress on the claims before considering an interim payment. The commission is not even halfway through its work. I remind him that there have so far only been 630 decisions in 2,200 outstanding cases.
  However, I do not wish my hon. Friend to think that I oppose the idea of an interim payment. If the facts support it, I will be prepared to suggest a substantial interim payment to the FCC at the appropriate time. If I do so, I shall have to bear in mind the fact that an interim payment or payments would necessarily involve a diversion of administrative resources from the commission's principal task of determining these claims as quickly as possible.
  If procedures can be devised for the more speedy determination of these claims and swift progress proves possible; it might be better for the commission to press ahead and reach provisional decisions in all cases before calculating how much can be paid to each claimant. We should preserve an open mind on this issue until we see whether or not the Commission can make better progress over the next few months. I can assure my hon. Friends that I shall be keeping a very close watch on this.
  Finally, my hon. Friend the Member for Kettering has emphasised that all these claims are a matter for British decision. I agree with him, and so does the FCC. Primarily, the commission's responsibilities are involved here. I acknowledge and to some extent agree with my hon. Friend's disappointment at the rate of reaching decisions under the order during the first two years since the closing date for the submission of claims—since mid-1983. I hope that the commission will be able to follow procedures that will inject more speed into this exercise. I attach importance to its doing so in order that claimants may receive compensation in the near future.
  The commission is already aware of my concern and that of my hon. Friends who have spoken tonight and of other hon. Members who have been involved with this over the years. I have no doubt that it will respond to the concern expressed in the debate. I am sure that it will be reading carefully what has been said tonight.
  Question put and agreed to.
  Adjourned accordingly at eleven minutes past Eleven o'clock.

ENVIRONMENT
  Local Government Reform (Compensation)
  Local Government Reform (Compensation)
  Waste Recycling
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  "Home Improvement—a New Approach"
  "Home Improvement—a New Approach"
  Ethnic Community Schemes
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  Chinese Community
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  Institute of Zoology
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ATTORNEY-GENERAL
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SOLICITOR-GENERAL FOR SCOTLAND
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TRANSPORT
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TRADE AND INDUSTRY
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DEFENCE
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NATIONAL FINANCE
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FOREIGN AND COMMONWEALTH AFFAIRS
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  British Council
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  Northern Ireland
AGRICULTURE, FISHERIES AND FOOD
  Veterinary Laboratory, Lasswade
  Veterinary Laboratory, Lasswade
EUROPEAN COMMUNITY
  Treaty of Rome
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  Budget
  Budget
SOCIAL SERVICES
  Human Embryos (Cosmetics Manufacture)
  Human Embryos (Cosmetics Manufacture)
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  AIDS (Blood Transfusions)
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  Invalidity Benefit
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  Skoal Bandits
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  Liver Transplants
  Liver Transplants
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  Pelvic Diseases
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  Hospitals (Age)
  Hospital Pharmacists
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  EC (Anti-poverty Programme)
  EC (Anti-poverty Programme)
  Artificial Limbs and Appliances
  Artificial Limbs and Appliances
  Doctors, Nurses and Midwives (Derbyshire)
  Doctors, Nurses and Midwives (Derbyshire)
  Abortion Clinics
  Abortion Clinics
  Social Security Review
  Social Security Review
  Human Tissue
  Human Tissue

Preamble
The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Carlisle.
Lord Vernon—Took the Oath.

Nuclear Weapons: Soviet Proposal
Lord Molloy: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what is their reaction to the Russian proposal to reduce nuclear weapons by 50 per cent. and to approve the details of verification of implementation.
The Minister of State for Defence Support (Lord Trefgarne): My Lords, we welcome the fact that the Soviet Union has now come up with specific, if onesided, proposals at Geneva. The latest US proposals build both on American proposals which have been on the table since 1983 and on the positive elements in the Soviet counter-proposals. These include the concept of 50 per cent. reductions in each side's forces. Verifiability is fundamental to the implementation of arms control agreements, and adequate provisions will therefore need to be agreed in the course of the Geneva arms control negotiations.
Lord Molloy: My Lords, I thank the noble Lord the Minister for that very full reply. However, does he not agree that to make it a reality there will need to be a strengthening of the anti-ballistic missiles treaty; that some of the questionable Soviet activities will have to be stopped: and that some of the novel interpretations of that treaty emanating from Washington must cease? If those matters could be achieved they could make a reality of SALT I, and then perhaps lead to an approval of SALT II.
Lord Trefgarne: My Lords, the United States has of course made it clear that it intends to follow the provisions of the ABM treaty. We hope that the Soviet Union will do likewise.
Lord Paget of Northampton: My Lords, since the major powers without doubt each have enough to make the world uninhabitable two times over, what is the advantage of halving the number?
Lord Trefgarne: My Lords, I believe that there is a serious side to this matter. I agree with the noble Lord that the arsenals of the super powers far exceed whatever may be needed for defensive purposes, but clearly what is proposed would be a major first step.
Lord Cledwyn of Penrhos: My Lords, in a speech which the Foreign and Commonwealth Secretary made in the other place on Friday he said that some
262
talks are to take place between him and Mr. Shevardnadze. Will the noble Lord indicate what will be the scope of those talks and when they are likely to take place?
Lord Trefgarne: My Lords, I cannot say when those talks are to take place. However, we have of course made clear on many occasions our position about talks with the Soviet Union, most particularly in connection with our own forces which are not at this stage negotiable.
Lord Mayhew: My Lords, since the noble Lord rightly concedes that both powers already have far more of these missiles than they can possibly need either for deterrence or for mutual destruction, will he also agree that if they cannot agree to halve the number of missiles it would be utterly deplorable?
Lord Trefgarne: My Lords, that depends upon what would cause the negotiations to break down. In my view, it is premature to be quite so gloomy as the noble Lord seems to be, but nonetheless I think that the noble Lord would be right not to be too optimistic at this stage.
Lord Molloy: My Lords, will not the noble Lord the Minister agree that, while it is certainly within the capability of the Soviet Union and the United States of America completely to wipe out all mankind, it is therefore incumbent upon any Government to try to initiate a reduction of these terrific weapons? Could it not be Britain's role—particularly with Geneva in the offing—to eliminate suspicion and mistrust among the super powers and perhaps help to create a climate of realism within Geneva so that what is being proposed, what is being debated, could ultimately lead to a commencement of the reduction of these horrendous weapons?
Lord Trefgarne: My Lords, it must clearly be right that the talks which are now to take place between the Soviet Union and the United States, and which indeed are already under way in Geneva on these matters, should be between the super powers themselves, who are of course the possessors of the two arsenals to which the noble Lord refers. The position of the United Kingdom in these matters must remain peripheral to the main discussions which are taking place, but naturally, as always, we stand ready to help where we can.
Lord Somers: My Lords, is it not true that it is not merely a question of mutual suspicion between the two powers, because the situation is due partly to the rather well-known Soviet desire for world domination?
Lord Trefgarne: My Lords, as the noble Lord rightly says, that is a feature of the philosophy of the Soviet Union, but I believe that it is becoming more and more obsolete.

Motorway Speed Limits
2.41 p.m.
Lord Boyd-Carpenter: 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 in the light of the number of serious accidents on the motorways consideration is being given to the reduction of speed limits.
The Parliamentary Under-Secretary of State, Department of Transport (The Earl of Caithness): MyLords, the Government can see no case for changing the overall speed limit on motorways. We reviewed the arguments fully in 1984 and again in 1985. Following the recent tragic accidents, the Government are looking at all aspects of the speed and safety of vehicles on motorways, especially coaches. We shall announce our conclusions on this as soon as possible.
Lord Boyd-Carpenter: My Lords, I thank my noble friend for that not particularly helpful reply. However, I should like to ask him whether the Government will give an early indication of their determination to do something about the tragic increase in serious accidents on the motorways. Is he aware, and does he give due weight to the fact, that on the magnificent highways in the United States the maximum speed limit is 55 miles per hour?
The Earl of Caithness: My Lords, I can confirm to my noble friend that we shall, without delay, consider all the matters which are relevant to the speed of vehicles on motorways. However, let me take the opportunity to remind the House that it is seven times safer to drive on a motorway than it is on the average of all the other roads of this country. Motorways are used for about 10 per cent. of all mileage travelled, but only l½ per cent. of all accidents occur on motorways.
With regard to the United States, that raises the problem of enforcement. In fact, the car-user death rate per 100 million car kilometres is higher in the United States, despite a lower speed limit, than it is in our country.
Baroness Sharples: My Lords, could my noble friend impress on the public that the outside lane is not in fact the fast lane, as is so often said, but is the overtaking lane?
The Earl of Caithness: My Lords, my noble friend is absolutely right, and we have produced a pamphlet which has gone out to a number of people indicating exactly that. It has reminded them also that it is not only the fast lane but the middle lane as well that they should not be driving in if the inside lane is free.
Lord Winstanley: My Lords, as it is the desire of every motorist not to be run into from the rear on motorways, can the Government do anything to enforce the law regarding the intensity of rear lights, which can sometimes, in dangerous visual conditions, be very dangerous and very disturbing indeed?
The Earl of Caithness: My Lords, we can do quite a lot, but a lot is up to the motorist to keep his rear lights clean.
Lord Ferrier: My Lords, while I agree with my noble friend Lord Boyd-Carpenter, would my noble friend the Minister agree that an immediate remedy lies to hand; namely, the rigorous enforcement of the existing regulations?
The Earl of Caithness: My Lords, my noble friend is right about enforcement, but this is a matter for individual chief constables. However, I can assure the House that my honourable friend the Minister of State is discussing with the Minister of State at the Home Office whether more can be done in this respect.
Lord Wells-Pestell: My Lords, can the Minister say how many summonses have been issued for exceeding the speed limit on motorways?
The Earl of Caithness: My Lords, not without notice.
Lord Underhill: My Lords, would the noble Earl agree that the question of publicity is important, but that although the Bus and Coach Council have issued considerable publicity to their operators we still have this problem of excessive speed by quite a number of coach operators? What plans have the Government to carry out publicity on the whole question of speed? Secondly, can the noble Earl tell us a little about enforcement? It is not much good having limits when there is no enforcement for individual motorists, for a few lorry drivers and also for coach drivers.
The Earl of Caithness: My Lords, the noble Lord, Lord Underhill, is right to raise specifically the question of coaches and lorries. We are looking carefully at every aspect of the speed and safety of coaches on motorways, and we shall announce our conclusions as soon as possible and make them widely known. With regard to enforcement, I can only say again that this is a matter for individual chief constables and is being followed up by both our department and the Home Office.
Lord Moyne: My Lords, would the noble Earl not agree that, apart from the effect of speed on the causes of accidents, the greater the speed the worse the accident, the bigger the number of fatalities and the higher the number of injuries?
The Earl of Caithness: My Lords, indeed the faster one goes the more horrific the accident will be. I think that there is a duty on everybody, regardless of whether they are driving on a motorway or on a road in the suburbs or in any town one cares to choose, to take extra care, and particularly in winter weather.
Lord John-Mackie: My Lords, would the noble Earl not give consideration to his reply to the noble Baroness, Lady Sharpies, that the so-called fast outside lane is only a passing lane? What does the inside lane do about passing?
The Earl of Caithness: My Lords, I hope you do not pass on the inside lane.
Lord Nugent of Guildford: My Lords, is my noble friend aware that greater discipline on motorways will only be achieved if there is a strong force of traffic police? All experience in America, where the regulations both for speed and for non-weaving are effective, shows that it is achieved only by a strong force of traffic police. This is the only way in which we can get better discipline on the motorways.
The Earl of Caithness: My Lords, I agree with my noble friend that enforcement plays one part in it, but surely he must agree with me that for the rest it is up to the individual motorist to play his part in it as well.
Lord Diamond: My Lords, in view of what the noble Earl has wisely said about the overtaking lane, is it the intention to consider making staying in the outer lane for an unnecessary and unconscionable length of time an offence in this country, as it is in Spain?
The Earl of Caithness: My Lords, the problem with that is the question of enforcement. We shall be looking at matters including that one; but I think all Members of the House would agree with me that it is rather pointless to make a law which cannot be enforced to a reasonable degree.
Lord Inglewood: My Lords, when my noble friend spoke about all factors, all considerations, he referred to America, as other noble Lords have done. Can my noble friend not tell us something about our nearest close neighbour, France, where the situation is much more easily comparable with our own than anything in America?
The Earl of Caithness: My Lords, I can tell your Lordships that in France the speed limit on motorways is 80 miles per hour, and they have a death rate per 100 million car kilometres of 3 whereas ours is 1.1.
Lord Cledwyn of Penrhos: My Lords, in answer to a previous question the noble Earl made an important announcement; namely, that an inquiry is now being held. Will he be good enough to tell the House the nature of this inquiry? Is it an inquiry into accidents to coaches? Can he tell us the scope of the inquiry, who is holding the inquiry and when the report will be made?
The Earl of Caithness: My Lords, what I said in reply to an earlier question was not an announcement. If I remember rightly the announcement was made by my honourable friend the Minister for Transport immediately after the tragic accident to a coach on the M6 last month. We are looking into every aspect of speed and safety of coaches on motorways. We are collecting evidence from a number of sources. I understand that it is a departmental inquiry and when the results are known I shall ensure that the noble Lord knows about it.
Lord Mackie of Benshie: My Lords, is the Minister aware that he totally misunderstood my noble friend Lord Winstanley when he replied that people should clean their rear lights? What he raised was the fact that the rear lights are often so bright, particularly in wet conditions, that they are a grave danger on motorways and on other roads?
The Earl of Caithness: My Lords, I apologise to the noble Lord, Lord Winstanley, for misunderstanding him. I thought he meant that they were so covered in dirt from going up the motorway that no one could see them.
Lord Chelwood: My Lords, have the Government given up any idea of raising the limit to 80 m.p.h.? I do hope so.
The Earl of Caithness: My Lords, as I said in my original reply, our review of the speed limits started in 1983 and was fully undertaken last year and earlier this year. We see no case for changing the overall speed limit either up or down.
Lord Paget of Northampton: My Lords, as one who has commuted on M. 1. since it was opened, may I ask the noble Earl whether the existence of a speed limit one way or the other has had any effect on the major pile-ups? Major pile-ups have resulted from people going too fast for the circumstances, which is generally well inside the limits. Is he further aware that on the M. 1. the operative speeds in lanes at the moment in ordinary and normal conditions is about 100 in the fast lane, about 75 to 80 in the centre lane while the inside lane is seldom used?
The Earl of Caithness: My Lords, I disagree with the noble Lord, Lord Paget. The speed limits have contributed to a lessening of pile-ups in accidents on motorways. Indeed he only re-emphasises the point I made earlier that we must all drive with more care. In relation to his average speeds, these do not accord with the figures that I have.
Lord Wells-Pestell: My Lords, is the Minister aware that I find his reply to my question most unsatisfactory? Is he not also aware that his department ought to furnish him with information knowing full well that a question as to the number of summonses taken out against travellers on the motorways ought to be known and available?
The Earl of Caithness: My Lords, I apologise to the noble Lord for not knowing the answer. The Question on the Order Paper regarded serious accidents on motorways. I should be happy to look into his point and to write to him if that would help.

Earnings Comparisons
2.55 p.m.
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 what is the percentage rise in gross earnings of the bottom 10 per cent. and the top 10 per cent. of male income earners between 1979 and April 1985.
The Secretary of State for Employment (Lord Young of Graffham): My Lords, the lower and upper deciles of the earnings distributions for full-time men aged over 21 increased by 76 per cent. and 103 per cent. respectively.
Lord Hatch of Lusby: My Lords, is it not the case that those figures demonstrate that under this Government the poor have got poorer and the rich richer, particularly in view of the fact that, according to a document issued by the noble Lord's department the rise in retail prices over that same period is 74.6 per cent.? Secondly, can the Minister explain how it is that if, as his figures show, the lower 10 per cent. of income earners have had increases in their pay less than the increase in retail prices, he still maintains that the workers of this country are pricing themselves out of jobs?
Lord Young of Graffham: No, my Lords; the lowest decile has had an increase of 76 per cent., yet over that period the increase in the cost of living was 74½ per cent., so the lowest have done better. What the change between the upper and lower deciles shows is a restoration of a proper sense of differences which are earned by ability to create wealth.
Lord Molloy: My Lords, will the noble Lord be good enough to look into one specific case that is causing grave concern, which is the threat now being made to London bus drivers that they could possibly have a reduction in their earnings of between £30 and £50 a week?
Lord Young of Graffham: My Lords, I believe there will be an opportunity to raise this matter before the House in the near future.
Lord McCarthy: My Lords, if I understand the noble Lord, he says that the differences result from a greater ability to create wealth. Does he say that since 1979 all the increases in the upper decile as against the lower decile—which are quite unprecedented and did not occur in any country over this period—were examples of increased ability to get wealth? What has that to do with pricing people into work.
Lord Young of Graffham: No, my Lords, not many other countries went through a period as we did in the 1970s in which these differences were artificially narrowed.
Lord Boyd-Carpenter: My Lords, does my noble friend, who has been asked a question about the gross earnings of these two sections of society, have with him the net figures after tax?
Lord Young of Graffham: Yes, my Lords, there are differences after tax and the differences result in a narrowing in the differentials. But what the Government are determined to do is to let the market allow people to attain their proper levels. This means raising all levels of wages. This means restoring a profitable industry and commercial sector to allow the bottom decile and the top decile to earn more, but not taking a view of the differentials between both.
Lord Hatch of Lusby: My Lords, first may I ask the noble Lord to look again at the figures he has given to the House because, according to my understanding of his own department's new earnings survey, the figure since 1975 was not the 76 per cent. that he gave but
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69.8 per cent. compared with the increase in retail prices of 74.6 per cent?
Be that as it may, is it not very clear that during this relevant period the increase for the top 10 per cent. has been greatly in excess of the increase for the bottom 10 per cent.? If that is the case will he answer my second question, which he has not yet answered? How can he equate that with his constant repetition of the theory that the workers of this country are pricing themselves out of jobs? Surely unemployment is much higher among the bottom 10 per cent. of income earners than among the top 10 per cent.?
Lord Young of Graffham: My Lords, the noble Lord has asked a number of new questions but I can only repeat that the figures given by my department show that the increase in the lower decile is 76 per cent. Should there be any cause to correct that I shall let the noble Lord know, but I see no reason to do so.
One of the greatest causes of misconception on the part of noble Lords opposite concerns the way in which we get a better increase in wealth creation in this country. We do not want low wages but we need low unit costs. This Government are about increasing and improving profitability; getting competitiveness going; getting unit costs down so that income levels in the lowest decile or in the top decile will go up. That is the only way to see this happen. When the Government say that people must price themselves into work they refer not only to wages but, more importantly, to low and competitive unit costs.
Lord Jacques: My Lords, does the Minister agree that, to get lower unit costs, there are many things which ought to take priority over low wages?
Lord Young of Graffham: Yes, my Lords, there are work practices and a whole range of other matters which have to take priority. Low wages is only one factor. It is not low wages by itself but the combination of proper wages and work practices which results in productivity.
Lord Bruce of Donington: My Lords, will the noble Lord please agree that it is not only labour costs that enter into unit cost? The unit costs in fact contain an element of investment, an element of improved machinery, an element of improved supervision and, yes, an improved element in overheads, including management and directors' salaries. These are all part of unit cost.
Lord Young of Graffham: My Lords, I am very happy to agree with the noble Lord, Lord Bruce of Donington. Yes, of course they are all part of unit cost. That is why the Government direct their attention at unit cost and not to low wages.
Lord Mackie of Benshie: My Lords, can the Minister tell us how successful the Government have been? By how much have unit costs fallen since 1979?
Lord Young of Graffham: My Lords, that matter is the reason why the Government are raising it—because our unit costs are going up and up and those of our principal competitors are going down. We

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will continue raising it until the world rights itself, as I hope it will.

British Telecom: Customer Service
3.1 p.m.
Lord Orr-Ewing: 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 improvements in customer service have followed from British Telecom's privatisation.
Lord Brabazon of Tara: My Lords, this is a detailed matter for British Telecom. The company has devoted considerable efforts towards modernising, extending and improving the range of services offered to its customers. Privatisation, liberalisation of products and services and competition have provided additional spurs to British Telecom's own efforts to meet and anticipate its customers' needs.
Lord Orr-Ewing: My Lords, is my noble friend aware that many private users have been agreeably surprised at the speed with which British Telecom is now sometimes able to connect telephones? Is he equally aware however that there are areas, particularly industrial areas, where there is an urgent need for lines and people receive no promises or assurances at all that they will receive exchange lines to run their businesses? Has my noble friend noted that according to the Telecommunications Users' Association price increases have been cleverly disguised? They calculate price increases of 6·2 per cent. in dialled meter units and 8 per cent. on line rentals. Is this sensible at a time when enormously increased profits are being made by British Telecom? Ought we not to see price reductions as it becomes more competitive and more efficient?
Lord Brabazon of Tara: My Lords, I am sure that British Telecom will be grateful for the noble Lord's remarks regarding the connection of lines and I hope that it will also take note of the remarks he made about certain areas of business users. Regarding the recent price increases of British Telecom, my noble friend asked a question only about a couple of weeks ago, which my noble friend Lord Lucas of Chilworth answered. I have nothing to add to what my noble friend said on that day, except to say that, as my noble friend is no doubt aware, the Director General of Oftel has confirmed that the prices meet the terms of the licence but I think he had also other rerharks to make to British Telecom.
Lord Taylor of Gryfe: My Lords, is the Minister aware that the new price structure will benefit business where there is a 2½ per cent. reduction in charges on long-distance calls and where there is competition, at the expense of the domestic user whose prices up to 35 miles have increased by 31 per cent. and whose local calls have increased by 20 per cent. where there is a complete monopoly? Is this not an abuse of monopoly power?
Lord Brabazon of Tara: My Lords, as I said to my noble friend Lord Orr-Ewing just now, the Director
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General of Oftel has stated that these price rises meet the terms of the licence but I gather he also had various other remarks to make to British Telecom.
Lord Bruce of Donington: My Lords, is the noble Lord aware that the figures for the price increases given to the House by his noble friend Lord Orr-Ewing. even though they may conform to the small print of the licence that was ultimately approved, certainly do not square with the repeated assurances given in this House and elsewhere that the price to domestic users would not rise by any more than the stipulated amount, and that they are in fact in breach of those undertakings?
Lord Brabazon of Tara: My Lords, I have really nothing further to add to what I have now already said twice: the Director General of Oftel has looked into these price increases and has said that they are within the terms of the licence. The overall price increase remains at 3 per cent. below inflation and will remain at that level until the end of this decade.
Lord Beswick: My Lords, is it not a fact that the Telecommunications Users' Association have said that these increases have been "an abuse of a private monopoly"? Has the noble Lord noticed that the Post Office, which remains in public ownership, has actually striven to reduce its costs?
Lord Brabazon of Tara: My Lords, I have indeed noticed that the price of a second-class stamp has gone down a penny. As for what the Telecommunications' Users' Association have said, I take note of their views and I am sure that the Director General of Oftel also has taken note of their views.
Lord Harmar-NichoIIs: My Lords, is it not a little early for this kind of criticism to be levelled at what is virtually a new management? If Oftel has expressed itself satisfied, are we to begin by saying that we are not prepared to accept the referee's decision?
Lord Brabazon of Tara: My Lords, I should tend to agree with my noble friend Lord Harmar-Nicholls. I think I should like to say that, as a result of the privatisation of British Telecom, there have been many improvements in the service. My noble friend Lord Orr-Ewing mentioned the reduction in waiting times for a connection of lines. I should also mention that the new telephone kiosks, which are a great deal less likely to be vandalised, are kept cleaner and are also much better for the disabled. Furthermore, one is now able to choose the kind of telephone one wants, which is a choice one did not have years ago. Your Lordships already have an example of that in this House.
Lord Winstanley: My Lords, is the noble Lord in a position to tell the House what progress British Telecom has made in the matter of the provision of detailed, itemised telephone bills where they are requested? Progress on that matter would very much increase consumer satisfaction, if not necessarily improve service. Can the noble Lord tell us what progress is being made on that matter?
Lord Brabazon of Tara: My Lords, not in detail. That is obviously a matter for British Telecom. However, I understand that they are investing an enormous amount in new exchanges and once they are in place they will be able to give more detail on the accounts.
Baroness Burton of Coventry: My Lords, I think the noble Lord, Lord Harmar-Nicholls, has it wrong. The Minister has referred to the Director General of Oftel. Is it not correct that, far from being satisfied with what has been done by British Telecom, he has expressed the opinion that he hopes there will be a more proportionate distribution of profits at a later stage? Do the Government really approve of what British Telecom is doing; in other words, charging domestic subscribers far more than it really is allowed to, which is being hidden by a lesser increase in the rates for business users? When one divides the two it comes out at less than the increase in the cost of living, but really and truly is it not an abuse of what it is supposed to be doing?
Lord Brabazon of Tara: My Lords, I think I indicated to my noble friend Lord Orr-Ewing that, while the Director General of Oftel had said that the price increases were in line with the requirements of the licence, he had made other remarks to British Telecom about exactly what the noble Baroness has just said.
Lord Stoddart of Swindon: My Lords, in the light of what has happened in British Telecom, where the domestic consumers are being asked to pay much more, can we expect the same kind ofthing to happen in the gas industry when the gas industry is privatised? Are the domestic consumers to be expected to suffer?
Lord Brabazon of Tara: My Lords, that is a completely different question, the answer to which is that the noble Lord will have to wait and see when the Bill comes before the House.
Lord Orr-Ewing: My Lords, does my noble friend not agree that Oftel had many qualifying remarks? It was only in one area that they said, "This is just within the formula". However, they were deeply disturbed. Oftel ultimately reports to the Secretary of State. Thus I hope the Government will remember that the Secretary of State has overriding authority and has to provide the teeth and support for Oftel. Also, has my noble friend ever tried to dial the operator or Directory Inquiries between the hours of six and eleven? The staff at BT now seem to be so thin on the ground, owing to its making economies, that one has to wait 10, 20 or even 30 minutes for an answer.
Lord Brabazon of Tara: My Lords, in answer to my noble friend's first question, my right honourable friend the Secretary of State will be well aware of them but I shall certainly make a point of drawing his attention to these remarks. The answer to my noble friend's second question is, no.
Lord Wallace of Coslany: My Lords, is the noble Lord aware that I am one of those people who do not
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like abbreviations? Will he inform the more ignorant of us exactly what Oftel means?
Lord Brabazon of Tara: My Lords, Oftel is the Office of Telecommunications.
Lord Ritchie of Dundee: My Lords, may we hope that the remaks to which the noble Minister referred, made by the Director General of Oftel to British Telecom, will bear some fruit?
Lord Brabazon of Tara: Yes, my Lords.

Business
3.10 p.m.
The Earl of Swinton: My Lords, at a convenient moment after 3.30 this afternoon my noble friend Lord Young of Graffham, with the leave of the House, will repeat in the form of a Statement the Answer to a Private Notice Question in another place on the consequences of the Scottish court ruling that the assets of the Trustee Savings Bank, Scotland belong to their depositors.

Breweries Merger: MMC Report
The Earl of Swinton: My Lords, with the leave of the House, I will arrange for a Statement that is to be made in another place on the Monopolies and Mergers Commission Report on the Scottish and Newcastle Breweries to be printed in the Official Report but not repeated orally.
Following is the Statement referred to:
"With permission, Mr. Speaker, I should like to make a Statement.
"The report of the Monopolies and Mergers Commission on Scottish and Newcastle Breweries and Matthew Brown was published on 12th November. The commission has concluded that while the merger could not be expected materially to benefit the public interest, there are not sufficient grounds for concluding that the proposed merger may be expected to operate against the public interest. In the absence of an adverse public interest finding by the commission, my right honourable and learned friend the Secretary of State has no powers under the Fair Trading Act to intervene to prevent, or to impose any conditions on such a merger.
"Following press reports at the end of last week, it has been suggested that there may have been a leak of confidential information in advance of the report's publication. An investigation is under way to establish whether there has been a leak.
"My attention has been drawn to the existence of a letter from my right honourable friend the Secretary of State for Scotland, about which he has written to the honourable Member for Blackburn (Mr. Straw). That, together with all other material which may be relevant, will be considered in the context of the investigation."

Suicide Act 1961 (Amendment) Bill [H.L.]
Lord Jenkins of Putney: My Lords, I beg to introduce a Bill to provide a defence to a charge under Section 2 of the Suicide Act 1961 of complicity in another's suicide. I beg to move that this Bill be now read a first time.
Moved, That the Bill be now read a first time.—(Lord Jenkins of Putney.)
On Question, Bill read a first time, and to be printed.

Sonia Ann Billington and Norbury Billington (Marriage Enabling) Bill [H.L.]
The Chairman of Committees (Lord Aberdare): My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That the Select Committee to whom the Bill has been committed may hear evidence other than that tendered by the parties entitled to be heard.—(Lord Aberdare.)
On Question, Motion agreed to.

Address in Reply to Her Majesty's Most Gracious Speech
Debate resumed on the Motion moved on Wednesday last by the Lord Middleton—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".
3.11 p.m.
Lord Young of Graffham: My Lords, I should like to support my noble friends Lord Middleton and Lady Lane-Fox on their Motion for a humble Address and to congratulate them on the speeches with which they opened these debates a week ago. I look forward to hearing the maiden speech of my noble friend Lord Wolfson of Marylebone. I started my commercial life working for his father and then for him, and I learnt greatly from both. I am sure that he will instruct your Lordships' House. I look forward to listening to him in the future, as indeed I look forward to the maiden speeches of my noble friend Lord Elliott of Morpeth and the noble Lord, Lord Kimball, during the course of the debate today.
I welcome this opportunity to debate our economic and industrial affairs and to hear the views of some of our critics. If I could express a wish, it perhaps would be that with the return of Halley's Comet there would come back to noble Lords opposite a sense of realisation and appreciation of the facts of economic life. Judging by the terms of the amendment, they certainly have not been living in this world for some time; for not only is our economy strong but it shows every sign of continued good progress in the future. We
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have an economy which not only is growing over four successive years at an average rate of 3 per cent. but is expected to grow a further 3 per cent. next year We have an economy in which inflation is well under control and falling, and is expected to fall to less than 4 per cent. next year. We have an economy which is investing in its future. There was an all-time record level of investment last year of £55 billion, which will be increasing this year to some £60 billion. Next year we shall be looking for a further £64 billion. And we have an economy which is exporting at 7 per cent. more this year and is expected to grow even further next year.
So the economy is strong and employment is growing, but not as much as it might because high pay rises have sapped the strength of our recovery and deadened its impact on economic growth and the economic growth of jobs. Nevertheless, employment has increased substantially since 1983. It was up by 340,000 last year—more than in the rest of Western Europe put together. But as the jobs came, more people came on to the labour market to fill them and so unemployment continued to rise until recently. In three of the past five months unemployment has fallen. I have said that I find this mildly encouraging; and I do. But it must not distract us from the tragedy of high unemployment, from recognising the causes of high unemployment or in any way from our determination to tackle it. And we are tackling it, using all the experience of our country and the experiences of other countries.
I say "other countries" because it is when we look round at the rest of the world that we see that unemployment is the European disease. The gulf between the employment-generation powers of Europe and of the United States of America over the pas 10 years is immense. The United States has seen employment grow by 19 million and Western Europe saw employment fall by 1 million between 1974 and 1983. Unemployment has risen substantially in all major European countries in recent years and faster in a number of countries other than our own during t he past 12 months. And other European countries have learnt by that experience. All of them have a financial policy as tight as, and in many cases tighter than, our own. All of them are looking at ways to make their economies more adaptable to change and to make the markets work better.
Perhaps we shall hear in a few minutes' time the noble Lord, Lord McCarthy, put forward his familiar prescription of a million here and a billion there. No doubt he would want to recommend it also to our other European governments—to the French socialists, for example. But he may find them greeting it with a cry of, "Déjà vu, déjà perdu"; for they created public sector jobs; they raised minimum wages and benefits; they reduced working time; they introduced early retirement and they inflated their economy. And the result? It was not a sustained reduction in unemployment but a sustained rise; not a sustained growth in output but a fall; and it was not a sustained continuation of the policies but a dramatic reversal.
Despite all the efforts in public sector job creation, despite all their efforts in work sharing and despite all the efforts in employment measures, unemployment in France is not only higher than it was four years ago

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but is going up against the background of a reducing workforce. The lesson that spending vast sums of money to reduce unemployment does not work was painfully learnt by us in the 1970s and has been painfully learnt by the French in the 1980s. I hope it is a lesson that we do not have to learn yet again.
But our recognition that those well-trodden paths lead only into the quagmire of economic disaster does not mean that we can do nothing about unemployment. We can create the conditions in which unemployment will fall, and we are doing so. The Autumn Statement shows clearly how the economic policies of this Government are working: low inflation and sustainable growth. It also shows how inappropriate and inept are the cries for more spending on the infrastructure. Governments, like companies, should invest, but they should only invest where the return is best. This Government are prepared to invest, but not in the white elephants of the past; for we know that achievement is not a matter of throwing money at an issue and thinking that it will then go away.
We are providing extra spending on renovating housing—£220 million extra next year and £200 million extra in 1987–88. In total, nearly £10 billion is being provided for capital spending on housing over the next three years alone. Excellent! But is this not also an indictment of the quality of post-war local authority housing? Seventy-five per cent. of it was built post-war and much of this past spending went on the crumbling council estates put up without a thought for quality. Is that the kind of public spending that we really want to see? No, my Lords; for the solution is not just about money but about much greater efficiency.
We all hear about the financial difficulties of some local authorities and their demands for more and more money. But what we never hear about are their claims for greater and even greater efficiency. That is why privatisation is so very important, for wherever we have privatised our national assets they have been better managed. The benefits of better management under greater competition and the thrust of private enterprise will bring benefits for consumers, who will get a better service, and for employees, who will gain a direct stake in the business for which they work. This greater efficiency feeds through to the whole economy.
The way to tackle total unemployment is clear, and our strategy has remained consistent. First, let us create conditions for sustained growth and lower inflation; and, secondly, let us transfer power from the state to the individual and encourage enterprise. The measures announced yesterday and in the gracious Speech form part of that self-same strategy.
The Enterprise Allowance Scheme has encouraged people to take the plunge and set up their own businesses, for their enterprise is the basis of our economy, and the real value of this approach will be seen more and more in the years to come. Such individuals need support and advice in the early years of their enterprises. The extension of the Loan Guarantee Scheme and the development of the network of local enterprise agencies will help to provide that support and encouragement to the newly-emerging businesses of tomorrow.
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All too often in the past Governments have given the wrong signals to industry and diverted funds into industries whose first need was adaptability in the future and not for sustaining the production levels of the past. In encouraging tourism we are assisting an industry largely neglected by previous Governments where the potential for job creation is huge, and where adaptability is the hallmark and not the exception.
Such measures form a part of our strategy to encourage enterprise and for jobs to grow; but we must recognise that our fears about unemployment do not dcrive solely, or even mainly, from our concern over the statistics of the total numbers involved. We worry about all unemployed people but we worry in particular about those people who have been unemployed for long periods of time and who have experienced a loss of hope, which is worse than any loss of income. Of course, they will benefit as employment rises but perhaps less than other groups, for their ability to re-enter employment and to adapt to change may be doubted by themselves and, more importantly, doubted perhaps by their potential employers. The community programme was created to meet just such a challenge, and the scale of opportunities today provided by it is immense: 16,000 places filled today and, by next summer, some 230,000 places.
Our aim is to build on that by an approach which encourages people to develop their own individual enterprise. One approach we are developing concerns job clubs, and our initial indications are that these are working well, with three-quarters of those participating getting jobs. The other new approaches we are developing concern the pilot schemes which I announced yesterday in the House; and the keynote of both counselling the long-term unemployed and helping them to get started in work is for them to be given the support, the encouragement and, most important of all, the confidence to approach the world of work again and be successful. For enterprise is not limited to those who start their own business. Initiative and enterprise are needed by all those seeking work, too.
Indeed, I believe that if we had invested more wisely in the education and training of our young people in the past and had given them support and encouragement to develop their own talents, initiative and enterprise, we would not be facing this problem of youth unemployment today, for they have been failed by the corporatists who do not trust individual freedom. They were dragooned in schools which emphasised the academic at the expense of the vocational; ordered by employers who neglected their training; and marshalled by trade unions which sent them marching up the hill of high pay claims and down the hill to redundancy.
I am well aware that our reform of wages councils will be misrepresented by noble Lords opposite. But our desire to remove young people from the scope of wages councils is a desire to increase their employment. Our view is that young people need jobs and that wages councils have denied them jobs in the past.
Our concern to encourage the individual and his freedom was nowhere more evident than in the trade union legislation we enacted in past years. For many

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years Governments have told unions that the way to jobs is through high quality of work and responsible pay claims. The message has just not got through. We know that we have to compete and innovate so that people choose to buy the goods which British labour has created. That means competing on quality, reliability, design and consumer appeal. And we have to compete on price, too. Nothing, but nothing, crippled the British economy in the past more than fast wage growth not matched by productivity growth and all-round efficiency. The evidence produced by the Lords Select Committee on Overseas Trade was most telling on this point and I welcome the opportunity to debate the report in December.
My view is that those individuals in work—and out of work—have the ability to understand these issues and relate them to their everyday life. The more the power is passed to individuals, the better able will they be to take the decisions which will improve their chances of employment. The greatest of our national problems, as it was in the past, was our failure to set the individual free. Tackling that is the key to reducing unemployment, and that needs individual enterprise—sustained, encouraged and set free by Government.
In contrast to Lord McCarthy's amendment, we do have a strategy to create jobs and to reduce unemployment. We do not despair of the Government's ability, but we do recognise their limits. We would do the unemployed no service at all to indulge in "magic wand economics" or to pretend that Governments can create jobs without individual enterprise. They cannot. We recognise that government can set the conditions for individual enterprise to flourish, and in some cases this means measures—measures to sustain individuals and encourage enterprise. After all, my department will be spending some £600 million more than was planned a year ago—spending to train our young people; spending to sustain the long-term unemployed; spending to develop the enterprise of individuals; and spending to develop the future of our society.
Exactly a year ago I was privileged to participate in our debate on economic and industrial affairs. I spoke then of growth in investment. That growth continues, with investment set to break new records next year and the year after. I spoke then of the growth of jobs—and that growth has continued. We have now achieved nearly 700,000 jobs in just over two years—a record unmatched anywhere in Europe. I spoke then of four years of sustained economic recovery. That recovery continues well into its fifth year.
We, as Government, cannot produce the products or provide the services that others want, but our people can. What we can do is to provide the help and the environment in which they can prosper. As I have shown today, we are doing that to an unparalleled degree. We, as Government, cannot foresee the future, but if we carry on as we are we can say that our people will be working in larger and larger numbers—for themselves or for others. What we, as Government, can say is simply this. We are on the right path, we shall continue on the right path, and we shall restore the fortunes of our nation with the one resource that will never run out—the enterprise and the energy of our people.
3.30 p.m.
Lord McCarthy Lord McCarthy rose to move, as an amendment to the above Motion, at the end of the Address to insert "but regret the failure of the Government to propose measures to achieve a sustained reduction in the present level of unemployment.".
The noble Lord said: My Lords, I rise to move the amendment standing in my name, but before doing that I have two pleasant preliminary things to do. First, I should like, along with the noble Lord the Secretary of State, to look forward to the three maiden speeches that we are to hear today, and to say that 1 am sure we shall all find them very instructive and very helpful in dealing with this problem.
Secondly, I should like to congratulate the Secretary of State, not on his first speech on an employment matter but on his first major intervention, I suppose, on the issue of employment since taking up his new post. Elsewhere, noble Lords will know, in another place, on my side of the House there have been some complaints about the Secretary of State for Employment being in this place. They think that he should be down there. All I can say is that, personally, I am very happy that the portfolio is up here and I hope that it remains so until the next general election——
Lord Young of Graffham: Then you will be here.
Lord McCarthy: My Lords, it is not for me to forecast the ways of God and man. However, I wonder whether the noble Lord realises that he has achieved for him, and indeed, I think, for all Secretaries of State in this post, another first; because since 1918 when the Ministry of Labour was created all Ministers of Labour and Secretaries of State have been in the other place, including of course Mr. Bevin, Mr. Bevan and the present Leader of our own House. But even before 1918, when labour affairs were under the control of the Board of Trade, as you go back into 20th century history you find that the President of the Board of Trade with responsibility for labour affairs was still in the other place; and very distinguised Presidents of the Board of Trade they were, including Winston Churchill, David Lloyd George and Joe Chamberlain.
I do not know whether the noble Lord is aware of this, but you have to go back to Lord Salisbury's first Administration in 1885 to find the Duke of Richmond, who was the last person in this House to be directly responsible for employment affairs. The noble Lord has to last only eight months and he will outdo the Duke of Richmond, because he was put out when Mr. Gladstone's Administration put in Mr. Mundella. So we have here a first, and let us hope that it will be a noble first.
I made no secret in the past of the fact that I rather envied our previous speaker on labour affairs on the Government side, the noble Earl, Lord Gowrie, when he was Minister for the Arts. It always seemed to me that one would do that job for the complimentary tickets. But he could not do it on his salary; so he left us, and now we have a Secretary of State of our own and I think that is rather good. but I hope that the next time the Secretary of State speaks—if I may paraphrase his version of what he said I am going to say—it will not just be efficiency here, enterprise there,

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initiative all over the place, but above all, "None of it is our fault". It seems to me that that was the central theme running through the Secretary of State's speech: "None of it is our fault". It was like Macbeth talking to Banquo:
"Thou canst not say I did this thing, Shake not thy gory locks at me".
We think we can say he did this thing, or at least his Government did this thing; and that brings me to the amendment.
I want to pose four questions in the course of arguing the case this afternoon. What is the best estimate of the present level of unemployment? Why do we claim that the Government have no policy for any sustained reduction in that estimate? Why do we say not that it is a matter for regret—that is a parliamentary phrase—but a disaster? What might we reasonably expect this Government—not a future Labour Government with, as he says, a billion here and a billion there—to do at this time? That is what I want to ask, because I think there are things which even this Government could do.
If I understand the Secretary of State aright in the speech he made at the Conservative Party Conference, he believes that we can take the benefit count as a fairly accurate index of the present level of unemployment—3.3 million unadjusted, 3.1 million adjusted, and a figure of about 13 per cent. unemployed. We think that underestimates the figure. We think it misleads. We think that for four different reasons. First, since 1982 the Government have taken various measures—and I am not arguing today whether they are right or wrong—to take people out of the benefit count. The over-60s and summer school leavers are no longer in the benefit count. If you put them back, in order to see how the present level of employment would compare with previous levels of employment, the level of unemployment then rises to about 14 per cent.
But the Secretary of State's own labour force survey, as he admitted at the Conservative Party Conference, says that there are another 870,000 people who are looking for work but are not in the benefit count. He seemed to be arguing then that we can, in a sense, allow for them in recalculating a true unemployment rate and if we do that the figure rises to about 18 per cent.
I know what the Secretary of State will say at this point, because he said it at the Conservative Party Conference and he has said it since. He said that you cannot do that unless you also take into account the 940,000 people who the labour force survey says claim benefit but are not looking for work. I think that that is a sleight of hand. I do not think you can just knock out the whole of the 940,000 and bring the figure back to 14 per cent., because the greater part of those who said they were not looking for work said, in effect, that they were not looking for work this week. And if you ask, not the question that was asked at the 1985 survey but the question that was asked at the 1984 survey, then you have to add back about another 400,000 people into those who were in fact looking for work.
Moreover, 23 per cent. who said that they were not looking for work said they would look for work if they
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thought there was any chance of finding it, so I think it is only reasonable to include the great majority of those people back into the figures. Then there were many who said they were not looking for work because they were looking after the home. Many had been driven to do this because there was no work for them to do. Then again, many said that they were retired and some of them must have been retired before their proper time, due to the employment position. So I would argue—and it is not just me; other people who have looked at the figures would argue—that only the bulk of the long-term sick, the permanently disabled and the 7 per cent. who said that they did not want work or need employment, should be taken out of the 940,000 (indeed, I would say 20 per cent. of the total) and on this basis I calculate that unemployment is now above 4 million or 17 per cent.
But that of course is what we might call the "intervention" rate of unemployment, because the Secretary of State told us that the Government believed in not interfering with the operation of the labour market. But of course they do interfere in the operation of the labour market; and I am very glad that they do, to the extent that they do; for they have raised the level of employment by the special measures by 450,000 and therefore the "market" rate of unemployment—where unemployment would be if we did not have intervention; if we had a fully uncontrolled labour market—is 19 per cent. Even that does not give us the full extent of it, because we know that figures of this kind can be doubled if you look at the high unemployment groups among the long-term unemployed in the worst, most underemployed areas of the country.
So why do we claim that the Government have no programme for sustaining a reduction in those figures? The first reason I would give is that that is what the Chancellor said yesterday. The Chancellor does not claim to have any policy for significantly reducing unemployment. The Chancellor echoed the position stated in the red book at the time of the Budget. I quote from the red book, which said, explaining why there was no target for unemployment and for reducing unemployment:
"Future levels are not pre-ordained in unemployment. … They depend on enterprise, adaptability and our control of inflation. Therefore we cannot give a figure of reducing unemployment".
That is really an astonishing argument for this Government to use, because if you look at the red book, if you look at the recent Treasury statement, if you look at what the Chancellor said yesterday, and listen to what I have no doubt members of the Government are saying in another place day by day, their statements are full of what is not "pre-ordained"; things which they "cannot control"; things which depend on circumstances beyond the control of any Government.
The Treasury statement, the red book and all the other public statements tell us all the time, with the aid of all kinds of initials, about broad and narrow money aggregates. Nobody controls any of them. Nobody has been able to control any of them. We are now told that it does not matter anyway. They are also full of figures about public expenditure levels which every Government, every year, get wrong. They are full of figures of personal saving ratios which even Keynes

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could not understand. There are figures about intended and expected levels of inflation, for which the Chancellor apologised yesterday after he gave them. Only trends in unemployment, we are told, are not pre-ordained, and because they are not pre-ordained the Government cannot give us any figures. On this occasion the Secretary of State reminds me of W. C. Fields as Micawber:
"I hope to be able to expect a modest improvement in circumstances: in short, my boy, something may turn up".
But in the meantime, no figures.
The second reason is because nothing which was told to us yesterday suggests any significant change in the net job position. We have at this moment from this Government a target rate of growth, to which the Secretary of State made reference, which is just sufficient to avoid a deterioration in the benefit count of employment—for we need between 2.5 per cent. and 3 per cent. a year in order to maintain the employment position where it is. The Secretary of State made a great deal in his speech of the new jobs that we are creating, or have created. The Government always take credit for all these new jobs. The noble Lord tells us that they have created 587,000 jobs since 1983. What we are not told so frequently is that on all the evidence we have the great majority of these jobs are part-time jobs. Indeed, many of them are second jobs. The Bank of England suggested in their recent study that if one calculated the full-time equivalents of the jobs that have been created since 1983 one would have to cut the total by two-thirds.
Moreover, these figures will not help the long-term unemployed. They will not assist areas and groups where unemployment is worst. Very few of the new jobs which have come into being in the past four years will help 45-year-old face workers in Scotland, or 35-year-old clerks facing their third redundancy, or 18-year old youths with no O-levels who have come off YTS and have been unable to find a job. The people who benefit from the new jobs—I am not against people benefiting from these jobs, but they are not the people in the most need—are ladies with charge accounts at Harrods or short-time manual workers who get second jobs during the evenings in pubs. These are the type of new jobs for which the Government are taking credit. What we say is that they will not do anything for long-term unemployment.
But, of course none of the figures which we were given yesterday will do anything for unemployment, either. In this connection I should like the Leader of the House to tell me: what is the net job worth of the additions in public expenditure which were announced last night? I hope the Leader of the House can tell us that. This £4.5 billion increase seems to be not an increase on last year, but an increase in previously announced targets. Half of it seems to be going either in social security payments because inflation was wrongly forecast or because the Government under-estimated the cost of the miners' strike. But, never mind, let us not worry about the details. Can the Government tell us whether there will be a single additional worker employed in the National Health Service or in local government or in repairing houses as a result of the increases in previously announced targets which the Government announced yesterday?
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If we go through all these measures, which the Government are suggesting to deal with the long-term unemployment problem, we can find no reason to suppose that they intend to do anything. Of course, the Secretary of State may say—I have no doubt that the Chancellor of the Exchequer in another place would say—that this is unjustifiable pessimism because they intend next year in the Budget and in the subsequent Budget to cut the standard rate of income tax, or, if not to cut the standard rate of income tax, then to give some other form of tax remission, as a result of what it is not thought nice in this House to call "selling off the silver". But a very considerable body of well-informed expert opinion (whether one takes the studies from the Institute of Fiscal Studies, the National Institute or the London Business School) believes that a cut of that size in the standard rate of income tax would create about 100,000 jobs if you are lucky—about one-fifth of the job creation consequences of a properly directed increase in public expenditure: not £ 1 billion here or £ 1 billion there, but 500,000 jobs as a result of properly directing an increase in public expenditure of a similar size.
We also do not believe that the problem will be solved by taking young workers out of wages councils, about which we shall have a debate later this Session and into which matter I do not have time to go now. Indeed, that is all part of the amazing (I might say last and final) illusion of this Chancellor as he expressed it in his most depressing Mais lecture when he said that,
"high real wages are the fundamental cause of unemployment … The heart of the problem is the level of real wages".
I suppose they believe that by cutting wages council protection they will lower real wages. The Secretary of State seemed to be saying that in his speech this afternoon. This is the last and final expectation that they rely on.
I can see why they do not say "money wages". I can see why they say "real wages". They cannot say "money wages" because since 1979 earnings have fallen by 60 per cent. while unemployment has more than doubled. We have had an almost unprecedented reduction in the level of wage settlements and a quite unprecedented increase in the rate of unemployment, and they have gone one alongside the other. In the face of that even this Government cannot say that employment has anything to do with the rate of fall or the rate of rise in money wages. Indeed, in real terms employment fell fastest when wages were falling fastest and have even reduced in real terms. So we must talk about real wages.
Recently the Treasury published a paper, The Relationship between Employment and Wages, in which they misinterpreted the literature on the subject to conclude:
"Employment might be 110,000 to 220,000 higher if real wages were 1 per cent.' lower".
In order to do this they leaned very heavily on the work of two professors, Professor Metcalfe and Professor Nicol, who were so shocked with the misinterpretation and unfair inferences from their lectures that they themselves wrote an article in which, after showing how the Chancellor and the Treasury had misinterpreted their results, they said:

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"It is safe to say that anyone who asserts that high real wages are the fundamental cause of our problem is talking nonsense. The Chancellor's assertion that the heart of the problem is the real level of wages is simply wrong".
Yet we still get the argument coming out today that there is something wrong with the level of wages, and that if we could get the level of wages down somehow we would get the level of employment up.
I should like to ask a question. Suppose the Government still believe that if we can get the level of wages down we can get the level of employment up. Suppose they do not dispute my assertion that the level of wages was falling until the last two years, and that it is almost certainly going to rise next year. What is the level of pay increases which the Government would like to see in the next two years if the level of employment is, first, to be stabilised, or, secondly, to be reduced? Will the Leader of the House answer that question?
Most commentators believe that next year wages will rise and that the level of earnings movement will be about 10 per cent. rather than about 8 per cent., as it is this year. What do the Government think that will do to the level of employment? They must think that it will raise the level of unemployment. If so, what level of wage increases would they like to see?
This brings me back to a point we were making earlier, and which the Secretary of State did not take on board. We were trying to say that if the Government wanted to lecture industry and workers to the effect that the present level of wage increases is putting people out of work, then they ought to lecture those who are receiving the highest rate of increases. The Government ought to be talking to the judges. They ought to be talking to the chief executives. They ought to be talking to higher civil servants. Maybe they should be talking to the police. However, they should not be talking to young workers in wages councils industries because their rate of increase has been below that of the increase in the cost of living.
Let me deal finally with what we say this Government could do—even this Government. In the past, as a result of the report of the noble Baroness, Lady Seear, we finally achieved a breakthrough with the Treasury because they admitted that the cost now of people on the unemployment register is approximately £6,300 a year. That is the direct Exchequer cost. When we began this argument the direct Exchequer cost was £3,000 a year, but now the Treasury accept that the figure is £6,300 a year. However, we now know that that figure is an underestimate. We know that as a result of the very interesting work done by two men named Sindfield and Fraser at Edinburgh University. They recently estimated the £4,500 a year which the long-term unemployed cost local authorities; that is, the cost of social service payments, the cost of lost rates and the cost of rent subsidies. Thus we may now say, as we could not say before, that the direct public expenditure costs of the long-term unemployed are about £11,000 per annum.
On any reasonable estimate, that expense is far more than the cost of a place in a community programme. It is probably more than the overall costs of jobs in local government or in the National Health
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Service—particularly if one focuses on the lower-paid sections of the National Health Service and local government where people earn less than £100 a week. Therefore, in that respect, the true public sector costs of doubling the community programme or of putting 200,000 more people into local government and the National Health Service would be nil.
We therefore ask this Government to increase provision in a positive way, taking account of the annual job costs, carefully and precisely. We ask the Government positively to expand employment, particularly that directed at the long-term unemployed. We say that nothing stands in the way but ideology. We say that the Government have nothing to lose and that they could achieve an improvement with half of what they have obtained from selling the family silver. Indeed, we could give the Government a slogan. If they are still worried about the charge that they are selling the family silver, then the gravamen of that charge is what they do with the money. If the money is to be given away in order to win elections, and if the money is to be given away to higher-paid workers who will spend most of it on imports, then they are selling the silver and gambling away the proceeds.
However, if that money is to be used to place people in work, then ideologically we might oppose that action, and we might oppose it too in terms of efficiency—but we could not accuse the Government of selling the family silver. Indeed, the Government could claim, since the Secretary of State has commented that the true worth of this country is in its people, that they were going out of silver and into gold. That is the policy we ask this Government to adopt, and if they will not do so, then I invite the House to vote for the amendment. I beg to move.
Moved, as an amendment to the Motion, at the end of the Address to insert "but regret the failure of the Government to propose measures to achieve a sustained reduction in the present level of unemployment".—(Lord McCarthy.)

Trustee Savings Bank, Scotland: Judgment
3.55 p.m.
Lord Young of Graffham: My Lords, with the leave of the House, I will now repeat in the form of a Statement the Answer that has been given in another place to a Question about yesterday's ruling concerning the Trustee Savings Bank in Scotland. The Statement reads as follows:
"We are now carefully but urgently considering Lord Davidson's judgment and opinion, which have only just become available and raise complex legal issues. The Trustee Savings Bank Bill, now the Trustee Savings Bank Act 1985, would not have been presented to the House if the Government had not received firm legal advice, which was reflected in last December's White Paper (Cmnd. 9415). It remains the Government's expectation that we will wish to lodge formal notice of appeal as soon as practicable".
My Lords, that concludes the Statement.
Lord Stoddart of Swindon: My Lords, I should like to thank the noble Lord the Minister for repeating the Statement made in another place, but it sounds to me as though there is a great rustling of chickens coming home to roost. In this House I and other noble Lords raised the question of legality at various stages of the Bill. Indeed, right at the last, when the Commons amendments were being considered by this House, I and other noble Lords again raised the whole question as to whether the Bill was really legal. We argued all the way through that the Trustee Savings Banks belonged to the depositors.
Indeed, we received an assurance from the noble Earl, Lord Gowrie, who has now left the Front Bench opposite, which appears at col. 1266 of Hansard for 24th July 1985, that:
"The Government are satisfied that the legal position is as stated in the White Paper; namely, that neither depositors, staflF, trustees, nor the Government themselves own the Trustee Savings Banks".
Later, at col. 1271, the noble and learned Lord the Lord Advocate, Lord Cameron of Lochbroom, went even further and said:
" … since there has been a suggestion that in this matter there is a peculiarity of Scots law, perhaps it would be only right at this stage to make quite clear that the existing banks are covered by legislation which applies throughout the United Kingdom".
That raises a very serious question indeed.
It appears from what was said by the noble and learned Lord the Lord Advocate in this House that the judgment of the Scottish courts extends to England and Wales as well. Have the Government considered that position? If so, what conclusion have they reached? Furthermore, is the judgment not bound to affect the flotation itself? Have the Government decided not to vest the bank? May we have an assurance that, under the circumstances, they will not proceed with the flotation until all the legal implications are out of the way—including a possible appeal to the European Court?
Does the noble Lord the Minister not agree that if the Trustee Savings Bank went ahead with the flotation, then the flotation could very well be a disaster, since potential investors might be frightened off, or at least the price at which the shares are sold might be affected? In the circumstances, would it not be preferable for the Government to suspend any further action regarding the flotation?
I want to help the Government. Indeed, everyone in this House wants to help the Government. We tried to help the Government when the Bill was going through this House. My noble friend Lord Ross of Marnock, who I see in his place, tried to help. The noble Lord, Lord Taylor of Gryfe, also tried to help. We all tried to help the Government to avoid the trap into which they have now fallen. We want to help them again. I ask the noble Lord: would it not be preferable to suspend any further action regarding the flotation? Would he not agree that to attempt a flotation anyway, even if it were legal in England and Wales, without Scotland would be like floating the Trustee Savings Banks decapitated?
Lord Taylor of Gryfe: My Lords, I should like to follow the noble Lord in trying to be as helpful as possible and to say that we on these Benches have no desire to diminish the total sum realised in the ultimate flotation, under whatever auspices it is
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projected. Neither have we any intention or desire to frustrate the restructuring of the Trustee Savings Bank since it is obvious that the present structure and constitution of that bank is irrelevant to the general purposes which it exercises at the moment in providing a full banking service.
Having said that, I must ask the Minister this: is he satisfied that the complicated situation that has arisen is not due to the insensitivity of the trustees of the Trustee Savings Bank who have been conducting these negotiations on restructuring for three years? At no time during those three years have they communicated, or corresponded, with any of the depositors in the bank whose moneys they were handling. Would it not have been a sensible and wise action for the trustees at least to have communicated with the people whose funds they were handling during that three-year period, explaining just what was happening in the restructuring? That is the first point.
Secondly, I note a reference in the other place yesterday to a statement from the Prime Minister in July of this year. She said that the findings of the Scottish courts must be obeyed. This raises important constitutional questions. If the Scottish courts find that the assets of the Trustee Savings Bank should be in the ownership of the depositors that, in my view, makes a flotation impossible at the moment. That would require to be built into the prospectus of any issue and would obviously diminish the attractiveness for any potential investor. As I said, we have no desire to diminish the total sum that is realised. As the noble Lord said, the issue may be taken to the European Court and in that event, if the European Court found against them, it would be the Government who would be responsible for restoring the funds—the £700 million of reserves—plus the other assets which amount to a total commitment of £ 1 billion i n this bank. It is a £1 billion flotation. If the European Court were to find that the Government had acted in a way which was contrary to the best advice of the Scottish courts and that the Scottish courts were right in this case that would involve a substantial Government commitment.
Let me echo the plea from the Labour Front Bench. Is this not a time for us to consider the complex issues that have arisen from this judgment and also to say that if it is held that the assets of this bank belong to the depositors there is a first-class case for creating a mutual structure rather than a PLC? Will the Government look at that before proceeding further on this matter?
Will the Government also accept that if they are to obey the Scottish courts and at the same time allow the flotation to proceed in England, one solution might be to hive off the Scottish TSB as a mutual and let the flotation proceed for the other part of the TSB bank? These issues should be considered candidly, without dogma and without prejudice, and I appeal to the Government not to rush into an appeal and not. like the TSB trustees this morning, announce bluntly that the flotation will go ahead. That is not acting responsibly and I hope the Government will encourage the trustees to be a little more responsible.
4.5 p.m.
Lord Young of Graffham: My Lords, I am grateful to the noble Lord, Lord Stoddart, for his assurances, which I accept, that the Opposition will do everything in their power to assist the Government. Indeed, for my part I should like to calm the chickens generally—I think that is the expression—and repeat that the advice which the Government received was firm legal advice on the propriety of their action and that was reflected in last December's White Paper. Having now received the long judgment of the court it is only right and proper that we should consider it calmly—and here I agree with the noble Lord, Lord Taylor—and without haste in order to see the full implications. I do not think that at this time it is proper to comment on the behaviour of the trustees. Your Lordships have had the opportunity for long and, perhaps I may say, eloquent debates on this subject and if we are not careful we shall come very close to reopening the whole debate again.
My right honourable friend the Prime Minister said—as I have no doubt every Member of your Lordships' House would say—that the judgment of the court must be obeyed. No doubt it will be obeyed. I really think that this is a time just to wait a little and allow the Government to make up their mind, having read the judgment, and once again taken legal advice.
Lord Ross of Marnock: My Lords, the Minister will be aware that the flotation of shares in this bank (in which we now find there are, if not owners, beneficiaries who have not agreed to such a flotation), cannot go ahead as quickly as was expected. I have been accused of helping the Government. I never sought to help the Government. I am not guilty ofthat. What we did was to warn the Government that what the Minister now calls firm legal advice was not firm at all. The person who gave that legal advice in that direction had at an earlier stage given legal advice along the lines of the judgment that has now been given. Surely this flotation is not going ahead now. In the light of this judgment, can we be assured that it will not go ahead?
Lord Young of Graffham: My Lords, if I made any grave imputation against the noble Lord, Lord Ross of Marnock, that he helped the Government, I would withdraw it; but I did not.
I repeat that the position is simply this. It was only yesterday that the Government received the judgment of the court and it is only yesterday and today that the Government have been considering their future action. The Government will act as expeditiously as possible but they should do so only after proper reflection.
Lord Harmar-Nicholls: My Lords, can my noble friend tell me this: is it not a fact that the Scottish judgement is advisory and not binding in law?
Noble Lords: Oh!
Lord Harmar-Nicholls: I think that is the position, my Lords. If so, ought not the Government to think in terms of trying to keep to their own programme? They talk about going to a flotation. Is there any objection
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to going through all the parliamentary procedures before flotation, after which a decision can be made resulting from the appeal that my noble friend says that the Government are in any case instituting?
Lord Young of Graffham: My Lords, I think I can do no better than repeat the words of my right honourable friend the Prime Minister. The judgment of the court will be obeyed.
Lord Mackie of Benshie: My Lords, the Minister must admit that the whole question has been reopened. I said on a previous occasion that it was morally wrong that the investors should be handed the assets of the depositors. That view has now been upheld by law. What better advice does the Minister want than the testing of the law in the courts? Surely that is the ultimate advice. I remember the amused smiles and the patronising grins when I asked whether Scottish advice had been taken and was told that I must understand that the Treasury had the best possible advice. I think that the whole question of the flotation is now reopened, the whole question of mutuality is reopened, and the Government must admit it.
Lord Young of Graffham: My Lords, I commenced my life as a lawyer but even in those days I never confused law with morals. What we have today is a judgment of the first court. There are such matters as appeal. The Government are considering their position and all will become clear very shortly.
Lord Stodart of Leaston: My Lords, while perhaps resenting the suggestion of my noble friend Lord Harmar-Nicholls that the judgment of the court in Scotland is not binding, at least in Scotland, I should like to ask my noble friend whether he is aware that there really is considerable confusion among those who are not lawyers—who form the vast majority of the population not only of Scotland but of the United Kingdom—on a very, very complex case? Is it not perfectly proper that, though a decision has been given by Lord Davidson, the ordinary process of appeal to the Inner House should be gone through?
Lord Young of Graffham: My Lords, I have often noticed that there is much confusion about law among non-lawyers, and no doubt this continues in this case as well, but until the Government have had time to consider the judgment, take further advice and make up their mind on a course of action, I think that we can do nothing but wait a little more patiently.
Lord Houghton of Sowerby: My Lords, may I ask whether, within the knowledge of the noble Lord, the Trustee Savings Bank has made any announcement that it is going on regardless which gives rise to the press report that that is just what they intend to do?
Lord Young of Graffham: No, my Lords, not within my own knowledge, no—but that may well be so.
Lord Stoddart of Swindon: My Lords, I am sorry to come back again. I understand, appreciate and accept that the Government will want time to think about this; but would the noble Lord assure me that when

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they have done so—and I hope it will be soon—they will come back to Parliament and make a proper Statement?
Lord Young of Graffham: Yes, my Lords, I am glad to give that assurance.

Address in Reply to Her Majesty's Most Gracious Speech
4.12 p.m.
Debate resumed.
Lord Diamond: My Lords, I, too, hoped to be able to start my speech on the amendment which we, on these Benches, shall be supporting in a way which will be acceptable to most of your Lordships. I have already had the opportunity of congratulating the mover and the seconder of the loyal Address, and for a particularly good reason I should like to follow the noble Lord, Lord McCarthy, in saying how much we all look forward to the maiden speeches that we are about to hear. Perhaps I may remind your Lordships that I was recently making a speech in your Lordships' House which, as I am a very modest man, I thought was merely an average speech, and to my great pleasure, surprise and delight I found that the Benches were filling up. In due course it was standing room only and by the time I had reached the end of my speech, believe it or not, even standing room was fully taken. It was just a happy coincidence that my speech was followed by a major speech of the noble Earl, Lord Stockton. In view of the very important maiden speech which will follow mine on this occasion, too, I am hoping that I shall be able to retain quite a reasonable House.
I, too, want to concentrate on unemployment, not only because it is the content of the amendment, but because it is the one matter on which the Queen's Speech was completely silent. I want to be as constructive as possible, but I am bound to say that I am as unhappy as most people on this side of your Lordships' House must be about the situation.
First, I should like to make a few remarks on the number of unemployed. I do not entirely follow what the noble Lord, Lord McCarthy, said, though I recognise his great expertise in this matter. We know now that there are approximately 3.3 million unemployed claiming benefit. There are a further 870,000 unemployed not claiming benefit. Simply adding those two figures together makes the total unemployed figure come to over 4 million. Within that figure are contained over 1.25 million long-term unemployed—that is, people who have not had a job for 2, 3 or even more years, many of whom, not surprisingly, have given up hope of ever getting a job again and who, accordingly, to use the official definition, are not actively seeking work. They have to claim benefit, of course, in order to survive. In fact we know now that there were 940,000 such persons who claimed benefit but who did not actively seek work during the limited period of the latest labour force survey. They have satisfied the test as to availability for work but they are not working. Clearly, by any definition, they are not employed, and equally clearly they are correctly included in the regularly published figures of the unemployed.
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We know that there is an element in the increase of the labour force, in those available to work, called the "activity rate". We know about the activity rate that, as employment gets easier and jobs become more readily available, the activity rate increases. Therefore we know that, were we not going through such a period of high unemployment, the activity rate would be much higher. If one wished, that would be a figure which could be taken into account to make the position even worse, as a parallel to the figure which the Govenment seek to deduct from the number by the subtle argument that some of those who are unemployed ought not to be taken into account because they are not actively seeking work.
There is a certain parallel between those two figures—and I say this with deference to the noble Lord, Lord McCarthy. I could understand that argument. What I cannot understand is the argument that any section of the 940,000 persons who have successfully claimed benefit and satisfied the test for it but who are not actively seeking work, mainly for the reason that I have described, should be taken off the total. I am a simple fellow. I just add together the two figures of those unemployed who are claiming benefit and those unemployed who are not claiming benefit, and the total is clearly over 4 million.
That is 2 disgraceful figure, but I am bound to add that it wouid be as disgraceful a figure if it were 3 or 4 million. The point is merely that we should get the right figure. I do not think that the Government add to their stature either by having taken so long before we were given the real figures—and I am grateful to the noble Lord that we have been given them at long last—or by the attempt to understate the true position, which is how I regard this activity.
Lord Young of Graffham: My Lords, if the noble Lord will permit me, there was no delay in giving the figures. I do not agree with the way in which the noble Lord has analysed them, but that is a matter for him rather than for me. However, there was certainly no delay on our part in the production of any figures.
Lord Diamond: My Lords, the noble Lord may think that there has been no delay since he took on this responsible office (something of which we are very glad), but every time previously we asked for these figures we were not able to get them. If the noble Lord will consult Hansard, he will see questions raised by me in these specific terms: what is the number of unemployed to be added to the figure of those claiming? We do not want only to know the claiming unemployed; we want to know the total, and we have never been able to get hold of the figure. I think that the noble Lord will find that that is correct.
Lord Young of Graffham: My Lords, I hope the noble Lord will forgive me but the figure was published in the Employment Gazette in June/July last year, as it was published in the Employment Gazette this year. It is always available from that time onwards. The labour force survey takes place in the early part of the year and it is published in the Employment Gazette. This year it has had rather more publicity than in the past but the figures have always been available.
Lord Diamond: My Lords, this year, for the first time, we have had what every responsible producer of statistics or series of figures does when the basis is broken for some reason or other. We understand full well that if you are publishing statistics covering a period and there is a break in the basis, then you cannot carry on producing the same figures in the future. But if you are a responsible producer of statistics and want to give the public the correct information, you do not leave it at that. You produce a series that goes backwards to show that the previous figures would be one of two sets, according to whichever formula you use; and therefore you have some reasonable method of altering the new figures on the new formula to what they should be if they were on the old formula. It is normally continued for a period of years. That has been published for the first time in the Gazette of July this year. If the noble Lord wishes to correct me, I shall of course withdraw immediately.
Lord Young of Graflham: Forgive me, my Lords. I do not want to take up much time on this matter. But a similar series was published last year. The conclusions last year were very similar to this year's figures but were not commented upon outside. But they were published in the Employment Gazette.
Lord Diamond: My Lords, I do not recollect the essential feature, namely, the comparative graph, prepared backwards so as to give everyone an opportunity of making a reasonable comparison in their own mind, having been made available before this July.
Lord Young of Graflham: Forgive me, my Lords. This will be my last interruption. We are comparing two different sets of figures. The labour force survey was published last year. This year, that is the one that deals with those looking for work, those available for work and the series, commented upon by the noble Lord, Lord McCarthy, which compares a long line of unemployment statistics looking at adjustments made by Government in the past that both increased and reduced the figure, and published this year, I believe, for the first time. There are two different sets of statistics.
Lord Diamond: My Lords, no doubt therefore we are both in the happy situation of being correct, and we can leave it at that. The noble Lord was referring to one set of figures. I was referring to the recent publication that enabled me for the first time to come to the firm conclusion—one that I have always been anxious not to come to on the basis of hearsay and without having something reliable to go on—that the figure of unemployed is over 4 million; though I repeat, the situation is just as bad whether the figure is 3 million or 4 million. The figure is intolerable in either event.
What has been happening latterly? In order to divert attention from the figure of unemployed, which after six-and-a-half years of the Government's exercise of unrestricted power is still increasing at the rate of 5,000 a month, we are continually invited now to look instead at the figure of new jobs created. Let me say straightaway that this is a very important figure, though it would be a good deal more important if we were talking about full-time jobs for men instead of
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part-time jobs for married women. The trouble, as the Government point out, is that the labour force itself is on the increase at present and that the number of new jobs cannot therefore keep pace with both the loss of existing jobs and the increase in the labour force. All that is true so far as it goes. But what is not true is that the present increase in the labour force is, as the Government imply but do not state, a unique and wholly unmitigated evil. Obviously the increase in the number of people available for work itself creates some more demand and therefore some more jobs.
Very much to the point, there have been several previous occasions when the labour market force has risen and yet the jobless have fallen. The last occasion was in the 1960s. Wild horses would not drag out of me the names of Treasury Ministers at that time, when in spite of an increase in the working population the number of unemployed was reduced to a figure averaging something like one-tenth of the present true figure.
So much for a comparison with the past in our own country. Now let me invite your Lordships to listen to a comparison with the present in other countries. Although the population of working age in Britain has been rising, the rise elsewhere in OECD countries has been faster. Indeed, since 1975—I cannot give figures other than those that are supplied, and those that are supplied go back to 1975—the rise has been slower here than in almost all of the 24 OECD countries. It is clear therefore that the growth in the British labour force does not account for our relatively high unemployment rate. I very much hope that the Government will stop blaming this newly found scapegoat for the continuing rise in the figures. Nor is it due to those with jobs in Britain working relatively longer hours to the detriment of numbers employed. As one would expect from the growing proportion of part-time jobs here, we experienced between 1975 and 1982 the biggest fall in hours worked of all OECD countries.
In short, it is clear that since this Government took office unemployment has risen to the unprecedented level of over 4 million. It is also clear that though we must have regard to the increase in the labour force, in past episodes and in other countries this has not been a major cause of high levels of unemployment. As all the evidence indicates, and in particular the two authoritative reports that I have previously quoted in detail, it is clear that about one-half of the rise in unemployment has been due to the policies followed by Her Majesty's Government.
So what should the gracious Speech have contained to show that the Government were determined to remedy the havoc it had caused? Since the gracious Speech, the Secretary of State, the noble Lord, Lord Young, has made a statement—he made it yesterday—indicating that the Government were trying to think in an imaginative way about how the number of long-term jobless could be reduced. It is fair therefore to take into account both the Queen's Speech and the statement. I wish, however, to ask the noble Lord a question about what he said, because I have anxieties about it.
The noble Lord was referring to the job start scheme, the pilot scheme, which,as I say, is welcome in one sense but which—I am bound to express the

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fear—may contravene EC practice and legislation just as much as the regional employment premium scheme. That was found, to say the least, inappropriate or perhaps illegal. Can the noble Lord, say whether the Government have considered this aspect and whether they are sure that the pilot scheme, if carried on into a permanent scheme, would not offend against our responsibilities to our fellow-Common Marketeers?
So what, then, should the Queen's Speech have included? I come back to the suggestion that has been made many times. There should have been a firm decision to stimulate economic growth and reduce unemployment substantially by funding the restoration of our dilapidated local authority housing stock and our crumbling infrastructure. A recent Government report—it came out only yesterday or today—puts the housing cost alone at £19 billion. That is their estimate of the cost of accumulated overdue maintenance. The AMA estimates that figure at nearly £25 billion, but we can accept the Government's £19 billion as being more than adequate for the argument. Whatever figure one adds for infrastructure, it is clear that the amount of essential and beneficial work crying out to be done is sufficient to cover whatever could be safely financed for many years ahead.
Against all those tens of billions, the £¼ billion added by the Chancellor to the amount that the local authorities will be allowed to spend—itself only a third of what the relevant Minister pressed for—is neither here nor there. It is merely an incidental by-product of the public expenditure haggle—I hope that the Leader of the House will not mind my referring to his activities in that way—and is not a serious contribution either to the country's needs or to help ease the unemployment problem.
I repeat that I know that there is nothing novel about the suggestion that we are making. Indeed, from these Benches we have been putting it forward year after year, and so too now is virtually every other organisation in the country. But no one can be as obstinate as a 100 per cent. committed, blinkered, monetarist. We know the Government's answer. It has been given so many times. Far better to continue existing policies (which even today are adding 5,000 a month to the scrap mountain of despairing unemployed humanity) than risk a resurgence of inflationary pressures such as might arise if the necessary funds had to be borrowed.
I have listened to the wild exaggeration so many times that I must deal with it in some detail. First, how much is involved? So far as these Benches are concerned the Government know that we have published a fully detailed and highly responsible interim set of proposals of a kind which build on existing policies, which are not out of line with Conservative philosophy and which could really be adopted by the present Government overnight. They are calculated to create over 1 million new jobs in the course of the next two years at a cost of under £3 billion. That is the figure we are talking about—£3 billion.
How is that to be funded? We all know that in a substantial measure it would be self-funding as a result of the additional revenue from increased economic activity and the saving of unemployment relief of all
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kinds. But let us assume the impossible worst—that the whole amount has to be borrowed and that the public sector borrowing requirement figure has to be increased by £l½ billion a year. Alas, we are told, one cannot do that without fuelling inflation. We reject that completely.
The first point that I want to draw to your Lordships' attention is that every year that figure is ceremoniously calculated by the Chancellor of the Exchequer at Budget time and every year it comes unstuck. Throughout their period of office the Government have seen it unceremoniously exceeded—indeed, overwhelmed—by a figure of between 25 and 30 per cent.; in concrete terms by a figure in excess of £2,000 million a year on average.
What happened every time the financial world learnt of that horrendous fact? Did the heavens fall apart? No, my Lords, nothing whatever happened. There was not even a ripple on the surface. The financial world took it in its stride year after year without so much as glancing over its shoulder to remind itself about how much the Chancellor had exceeded his target yet again.
Why was that so? It was certainly not because it does not matter how much one borrows; indeed, it does. Every pound borrowed adds to the burden of public sector debt. In essence it is because the lender, whose function and desire are to make good loans, knew every time that the United Kingdom was just as good a borrower at the larger actual figure as at the intended lower figure.
If I may put it in terms of everyday experience. we all know what happens when a would-be mortgagor goes to a building society and asks for a loan. He goes along with suitable security, and the first thing that the building society manager wants to know is how much he wants to borrow. He knows that there is a relationship between the borrower's income and the size of the mortgage which cannot be exceeded with safety. The same is the case in regard to a country, where the mortgage is the public sector debt and the income is called the gross domestic product. The ratio of public sector debt to GDP, far from being excessive here, has fallen to about one half of what it was 20 years ago and is still falling.
Indeed, the lender knows that there is a considerable safety margin. Even if this year the ratio were kept constant at its present extremely low level—that is to say, low in relation to the historical norm and in relation to the ratio adopted by most similar countries—there would be room to borrow an extra £4 billion this very year as compared with the original target of £7 billion. We do not contemplate the borrowing of such a large sum. We propose expenditure of a figure which at worst could result in the need to borrow an additional sum in each of the two years of less than the amount by which the Government habitually exceed their own target without the slightest ill effect in terms of inflationary pressure.
In short, our borrowing has become twice as cautious as it was 20 years ago. If we were to increase our level of borrowing from £7 billion to £11 billion it would still be within today's very high degree of caution. If we borrowed as little as £l½ billion extra

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each year for two years, which we propose, we should still be well within today's safety margin and, as we know from experience, the lenders would be more than happy. There would be no question of having to increase interest rates to counterbalance a feeling of insecurity and consequently no inflationary pressure. And yet such a modest increase could both benefit the economy and reduce the number of unemployed substantially. It is to that practical and human task and not to an academic and unworkable economic theory that we on these Benches are wholly committed.
4.38 p.m.
Lord Wolfson: My Lords, this is my maiden speech, and I am comforted in the knowledge that your Lordships have a tradition of tolerance on these occasions, for which I am grateful.
I have spent my working life in business, and am therefore very much concerned with the soundly based expansion of the economy. As trustee of a foundation which has been associated with a wide range of activities in education, medicine, science and the arts, I am equally concerned that we have adequate resources to enhance the scope of our intellectual and cultural life.
I should like first to refer to additional investment in the latter area. I believe that our future prosperity will require a more ambitious and financially co-ordinated programme of investment than exists at present in scientific, technological and medical research. The talent available to us in our universities and technical colleges needs to be backed by more funding in both pure and applied research, for, as your Lordships are aware, pure research often produces the ideas and techniques that are the basis for applied research and innovation. The economic and social benefits that can be derived from successful discoveries are beyond calculation.
May I offer as a practical example in the area of applied research the technological projects scheme initiated by the noble Lord, Lord Zuckerman, in 1968 and adopted by the trustees of the Wolfson Foundation. Through this scheme—a pioneer one of its kind—some 200 individual grants have so far been made to university departments throughout the United Kingdom to support research of potential benefit to British industry and commerce. As the published record shows, there has been a remarkably good rate of success and in many cases a significant return on investment to the units concerned.
I hope that this project has helped in a modest way to bring the business and university worlds closer together and, like others that have been launched or are in the process of formation, is increasing the awareness of academics to practical challenges that industry itself faces. For their mutual advantage, the universities and higher education establishments must maintain and strengthen their links with industry and commerce. British inventions should surely be manufactured and marketed by firms in Britain; all too frequently this has not been the case in the past.
Investment in the arts is also of primary importance. Recent private initiatives to extend gallery space—in
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which the noble Lord, Lord Sainsbury, and his family have been so prominent—set a splended example for others to emulate. Our magnificent cultural heritage owes a great deal to the foresight and good taste of private collectors over many centures. Before the Summer Recess the Government brought in a very welcome measure to facilitate the gift of art treasures to the nation. I hope that they will continue to seek further measures of this kind so as to enable important works of art to be retained in this country for the pleasure of the viewing public and for the many overseas visitors who visit our museums and galleries.
The resources required for securing the higher standard of living and the social improvements we all desire, have to come in large measure from a thriving manufacturing and business sector. This calls for well-balanced overall policies and for businessmen to be even more active in their efforts to expand the profitable demand for British goods and services, and in this way create new employment opportunities. In a highly competitive world, forceful selling, marketing and reliability are essential.
In recent years I have seen many notable improvements in productivity and performance, as well as a considerable degree of modernisation throughout industry. These augur well for the future. The consumer trades in which I have a particular interest have made remarkable progress in merchandising, quality control, marketing and design techniques, which compare favourably with many of the overseas countries of which I have experience. British goods are becoming more attractive and competitive. While we must face up to the difficulties, which are by no means confined to our own country, we should not underestimate the success that British business is achieving.
We know that prosperity is indivisible, and that current world economic and financial problems require continued determined and concerted co-operation if they are to be resolved. As a nation we can play a constructive role, for happily we are not burdened with the cost of expensive overseas debt. In fact, as your Lordships know, we have accumulated a record total of overseas investment. This is producing a substantial income which makes a significant contribution to our balance of payments, and should become increasingly valuable to us in the years ahead.
We are therefore in a good position to expand our economy in a financially responsible and sustainable manner, without reviving the dead sea fruits of inflation which left us with such a bitter legacy, not least in its effect on human relations. We must also avoid a return to stop-go policies which for over a quarter of century undermined confidence and future investment. Indeed, it was these policies that contributed to the contraction of important manufacturing industries and the import penetration which we are now seeking to reverse.
I experienced the way in which the consumer durable industries were undermined by frequent changes in consumer taxes and credit restrictions. Adam Smith's dictum that,
"consumption is the sole purpose of production"
was disregarded. All too often macroeconomic policy changes have resulted in microeconomic upheavals for

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the businessman, who above all requires reasonable continuity of policy. A social market economy has shown itself on the whole to be the most able to provide the goods and services that people want to buy at competitive prices.
While timing is all important in these matters, in order to strengthen market demand there is still a need to continue the policy of gradually reducing interest rates to bring them more into line with the majority of our European partners and competitors inside the EMS. The maintained stability of sterling, which has helped to contain the cost of imported materials, and the declining level of inflation, are clearly the governing factors to make this possible in due course. Lower interest rates of course would help to stimulate new housing and home improvements, giving a multiplier effect to employment in associated industries where there is now spare capacity available.
I hope that over a period the imaginative programme of urban development grants will be expanded and that further business participation will be sought for a variety of much needed improvements to our inner cities, which in so many cases urgently need better designed and better quality homes and amenities. I am delighted that there is going to be an increase in the current extensive programme of hospital building and modernisation.
Raising the level of employment is clearly a major economic priority. It demands the wholehearted and active co-operation of every section of society, for it cannot be achieved by Government alone.
I wish my noble friend Lord Young of Graffham every success in his very difficult assignment, for it is a crucial one. He has made the point that there are no easy answers, and of course there are not; but as yesterday's Statement indicated, he will be introducing and devising further imaginative and responsible proposals to enhance employment prospects, keeping in mind the serious regional imbalances that exist. The emphasis which the Secretary of State has placed on vocational training is of particular value in the future. It is a theme that requires to be developed vigorously in both the general education system and in the area of business apprenticeship schemes.
We have to maintain firm safeguards to protect the essential interests of the community and the environment, and at the same time ensure that administrative delays do not impede enterprise or hinder employment. The White Paper presented in July recognised the need to simplify the regulations governing the expansion of small businesses.
Equally welcome is the review now under way of the present inequitable business rating system and the high level of personal taxation on lower and middle incomes. To sustain expansion we need and are in the process of moving toward a fiscal infrastructure that is competitive in world terms and that stimulates both enterprise and employment. The proposed 35 per cent. basic rate of corporation tax has been set at an attractive level, provided inflation remains under control.
In the last two decades product innovations have been increasingly responsible for a growing measure of market expansion. Business plans must be flexible enough to match the rapid pace of technological
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change and customer preferences if we are to secure the full benefit of our overall resources whether human, material or financial.
The demand patterns of tomorrow will vary significantly from those of today. The consumer will increasingly shape and determine the choice. The genius of the inventive mind and the flair of the entrepreneur will create new opportunities in the future which at present cannot be fully foreseen. Britain is a highly talented and forward looking country in which to invest with confidence.
4.49 p.m.
Lord Simon of Glaisdale: My Lords, your Lordships are favoured today with a list of speakers of notable distinction: great economists; powerful and experienced employers and organisers of labour; and recent holders of Exchequer and Treasury posts of high and successful distinction. But above all your Lordships have just now been favoured with what your Lordships will agree was a most notable speech by one of those most experienced as a man of affairs in industry and philanthropy.
Your Lordships have been favoured with a maiden speech which was balanced, sagacious and based on wide experience ranging over the whole field that forms the subject of today's debate, delivered, I hope I may say, with notable clarity and felicity of expression. It is a great privilege to be able to express, on behalf of your Lordships, congratulations to the noble Lord on his notable maiden speech. It is certainly not a formula when I express the hope, which I know all your Lordships will share, that the noble Lord will soon and often again favour us with the fruits of his experience in these fields.
Upon such a galaxy I feel considerable trepidation in intruding. It is now over a quarter of a century since I was a Treasury Minister and things have obviously changed greatly, and not least the form of the national accounts. My only excuse is that, rather than make assertions or much less bandy statistics—which is inevitable in a debate of this sort, raising acute party issues—I intend to pose questions on a rather broader basis which I hope the noble Viscount will be able to answer even in the broadest terms.
Before getting on to the important (or perhaps all-important, today) subject of unemployment, I should like to deal with the rather tattered cliché expressed not for the first time, yesterday and which has had echoes today—namely, that what the Government are doing is selling the family silver in order to buy the groceries. When an economic cliché comes in at the door, statesmanship is apt to fly out of the window.
The concept really emodies two separate ideas; the first is the criticism that the Government are spending what an accountant would regard as capital on what an accountant would regard as revenue expenditure; the second is that we are overdrawing on capital. In other words, we are said to be drawing on capital faster, and to a greater extent, than we are creating new capital.
So far as the first proposition is concerned, using capital for revenue purposes is by no means new. In fact, it goes back to the institution—that great landmark in public finance—of the Consolidated

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Fund. But one need not go back so far. One can go back merely to the 1890s, when death duties were introduced. That is a tax on capital, as obviously, from its name, capital transfer tax is today.
Ever since Sir William Harcourt, every Chancellor of the Exchequer has used those capital receipts for revenue purposes, and quite rightly, because it is impossible—although in a debate earlier this year the noble Lord, Lord Diamond, showed some such inclination—that we should put the national accounts in a form that would be more congenial to a chartered accountant. We, on the contrary, put everything into the Consolidated Fund, and then in another place a Committee of Supply decides on the priorities to which that should be applied, and that is everyday finance.
Not only has every Chancellor of the Exchequer since Sir William Harcourt done that but every Treasury Minister has aided and abetted it. So, if there is anything in the charge at all about selling the family silver, it must be that we are drawing on capital and using it for revenue purposes faster than we are creating new capital. Now that simply does not stand up to examination.
That appears from this document (rather curiously called a White Paper, since it has a blue cover) the Government's Expenditure Plans 1984/85 to 1986/87. It comes out early in the year, and the latest figures that it gives—and I take the figures in cost terms, as I venture to agree with the noble Lord, Lord Diamond, that that is the proper way to take them—show that public sector capital expenditure for 1983–84 was nearly £20,000 million at the outturn. That is Table 1.13. If. one turns to Table 1.14, one sees the figure for sale of assets. That must, in the year in question, have been mainly council houses. That was just over £1,000 million—in other words, just about one-twentieth of the new capital created in the public sector. Therefore, one can perhaps leave what I have presumed to call a tired, tattered, economic cliché at that.
I now turn to a matter that was so notably introduced in the speeches of the noble Lord the Secretary of State and the noble Lord, Lord McCarthy. As I said, one tends to have statistics bandied across the House as if they were tennis balls. I am afraid that that is inevitable in our adversarial system of politics, which has served us so well for so long. But I want to ask the noble Viscount if he can give us a rather broader picture. First, obviously in the unemployment figures there is a notable demographic influence. Can the noble Viscount tell us how far the present figures are due to an increased birth rate at the relevant time; how the curve is working; how soon it will flatten out and how soon is will descend? The importance of that is that until we know that we do not know whether short-term or long-term solutions are called for.
I think I am right in saying that the right honourable gentleman the Leader of the Opposition in another place, was in favour, as we have heard today, of a vast injection of public money into the economy—something which I view with grave misgivings if we are not to run the danger of inflation again and take the primrose path to the International Monetary Fund.
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In addition, the right honourable gentleman thought that the problem could not be cured without taking a massive sector out of employment altogether: in other words, his suggestion was to take out the over sixties. If that were necessary, it would be debatable, and I think probably sustainable, that it is better to have the elderly unemployed than the young. But all that does is to create a new class of unemployed. If the demographic curve is to make that unnecessary, then the vast mass of the population, who are puzzled by these statistics, would be able more easily to make a decision.
The second matter is even more difficult: how far is the present figure for unemployment due to permanent social and economic trends? I do not want to stray into the debate tomorrow, but obviously there has been a second industrial revolution in our own time. There is a social trend as well. Earlier I mentioned death duties. They have destroyed a whole mass of employers. For example, in 1901 nearly 2 million people were in domestic employment. In 1981, the latest figures, there were fewer than 100,000. I doubt whether that sort of social trend is reversible, although obviously the less one indulges in spoliation of those who could employ domestic servants the better it will be for unemployment in that area.
The third question is: how far are we pricing ourselves out of our markets? This takes up a theme that was ventilated at Question Time before your Lordships. Obviously we know that it is to some extent true in the domestic market, "who runs may read", and we all see the do-it-yourself shops and self-service stores where previously there was employment. That is almost certainly due to labour being priced out of a particular market. I do not know how far the noble Viscount will be able to help us with that, but even more important is the danger of pricing ourselves out of export markets. With respect I would ask him whether he can help about that. There was obviously some great overmanning during the 1960s and 1970s. Much of that has been shed. How far has it been shed into the present figures for unemployment?
Lastly, I ask the noble Viscount to deal with the so-called black economy. I know, because it is a black economy, that it is extraordinarily difficult to identify and measure its extent. But recently we have had an extraordinary diversity of figures. Sir Michael Edwardes measured the black economy as so extensive that the real figure of unemployment was 1½ million. In his important letter to The Times, the right reverend Prelate the Bishop of Liverpool (who for more than one reason I do not want to get at odds with) was inclined to discount virtually the whole of that. He did a dangerous thing, if I may say so, in labelling the black economy as the "informal" economy, because that diminishes its importance in the public view. A black market is a black market, not an informal market. A black economy is a black economy, all the blacker because it means that it is not meeting its fiscal dues and is throwing the burden upon those who work in the normal economy.
Those are the questions that I want to ask the noble Viscount, but I hope I may end, in view of the notable speech which I am following, by tendering once again your Lordships' congratulations.
5.8 p.m.
Lord Elliott of Morpeth: My Lords, I address your Lordships' House for the first time, very duly conscious of the honour of doing so. In taking part in the debate on the gracious Speech I feel an additional sense of privilege. I am reminded in doing so of one of my proudest memories in another place when, at the opening of a previous Session of Parliament, I had the great privilege of thanking Her Majesty through a motion of thanks. On that occasion also I knew for only the second time in another place the privilege of making a speech without interruption. I understand that I shall have a clear run again today. I hope sincerely that I shall adhere to the tradition of being non-controversial.
I welcome wholeheartedly the suggestions in the gracious Speech and the suggestions in the statements which followed that speech, that every effort will be made by Her Majesty's Government to lower the number of people in our country who are unemployed at this time.
I was born in the North-East of England. I have lived there all my life, and for a quarter of a century I had the privilege of being a parliamentary representative for the city of Newcastle-upon-Tyne. It is always surprising to people when I tell them that the major post-war problem of unemployment in my region began as I began my membership of Parliament. This of course is wholly coincidental, but it was not until the late 1950s that, in the area which possibly knew the longest inter-war dole queues of all, the storm clouds gathered again. The reason—and to some degree that reason remains—was the dependence for employment on heavy industry: coal, steel and shipbuilding. There was falling demand, over-full productive capacity, over-manning (which has already been mentioned many times today) and automation.
This brought the essential requirement of bringing new forms of production to an old industrial area and, with those new forms of production, all essential new skills. The magnitude of that problem at that time led to a governmental inquiry. We had the Hailsham Report, which still today is the blueprint for regional development in all areas of the country. That report set out the immediate requirements for a region such as mine which boasts, with absolute justification, of a proud industrial past. Some of those requirements have been met this time, and met to such a degree that I really believe that the region of my birth is on the verge of playing a major part in our industrial future. No one should underestimate (and I am sure no on does), the enormous task that this conversion has represented. It has been a great business, an enormous business, turning an old industrial region into a new one.
I should like to name two areas in which I believe we in the North-East now compare favourably with any other area in the United Kingdom. Communications from and within the region are excellent. Education in its broadest sense has known an enormous expansion. Here I can be truly politically non-controversial in paying tribute to Governments in the past 25 years, Conservative and Labour, for the part they played in effecting these enormous and beneficial changes. All Governments in the past 25 years have done their utmost to bring an old industrial region into a state of
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modern competitiveness. Their methods may have differed—indeed, they have and they still do—but their aim has been the same.
Thus in a region where particularly one was always told of the enormous disadvantage of the long haul for our manufactured goods to any other part of the country or to the Continent, in a region where travel within that region from east to west was so very difficult, today we have excellent communications to other parts of the country and, within the region, I believe the finest network of roads in the country. At least, if there is a better network of roads anywhere, I do not know where it is. In our region we are also extremely proud of our rapid transport system, the Tyneside Metro, which has now an international reputation and which was approved by my noble friend Lord Peyton during a period of his ministerial responsibility. Our airport in Newcastle is a modern and expanding one. Our ports have known essential development in recent years.
It is in the area of education that I believe we shall now begin to receive enormous dividends. We have fine universities—two of them. We have polytechnics in Newcastle, Sunderland and Teesside. There is a strong spirit of co-operation between those places. Newcastle Polytechnic alone has at this time 14,500 students, full-time and part-time, undergoing some form of training. When I began my political career, when those unemployment storm clouds gathered 25 years ago, Newcastle Polytechnic was not there are all. In recent years also, the college of art and technology was opened by the noble Lord, Lord Glenamara. That college also has 14,500 people undergoing at this very moment some form of training.
I do so agree with my noble friend when he said, in opening this debate today, that we had possibly missed out in the past by an overemphasis on the academic as against vocational training in our educational system. I think that at this time in the northern region we have largely overcome that. Just two weeks ago a new technology centre in Newcastle University was opened. That has the highly commendable aim of bringing technological aid to small business in the North-East of England. Newcastle was built on the technology of its time; it will only survive if it develops the technology of the present day.
Thus I pay tribute to what has been done in training for skill, which is one of the basic requirements for combating unemployment. We need new skills because we have much new business coming to us. Of course we welcome the enormous boost to the North-East of England which the arrival of the Nissan plant represents. We welcome equally those many new firms which have come to us, so many of them successful. Sadly, we often hear about the failures, but many of them have been successful and have brought new forms of production and employment to us. We are grateful to them.
There is English Estates, with its national headquarters in Team Valley, the oldest trading estate in the country. It is very appropriate that its headquarters should be there. It has played a very valuable role in the development areas in general, assisting in this complex task of industrial development. There is the town of Consett in the North-East of England. It is typical of a town which was a single industry town and

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which knew a crushing blow when its steel works were closed. The success of the new trading estate there, Consett No. 1, not only reflects the value of English Estates but to some degree expresses also the spirit and determination of the people of that northern town.
At this point I should like, if I may, to commend the Government most heartily for their suggestion that extra finance will be made available to those unemployed people who wish to set up their own businesses. There is also much evidence, in regions such as mine, of the success of enterprise zones. They were very controversial and also very much suspected, but there is substantial evidence to suggest that they are achieving more than their original aim of bringing new business into them. There is evidence at this moment suggesting that existing business in the zones is expanding, which may well not have been the case but for this original courageous concept.
There is no easy answer. I agree with my noble friend. There is no magic wand to wave in the face of unemployment. However, much has been achieved by legislation, much more by the control of inflation and much more can still be accomplished by an end to self-denigration in areas such as mine. Far too often bad news has been emphasised to the detriment of good, giving such a false impression in a region which so longs to contribute to our national well-being.
There is much good news. A few days ago, that most welcome of all visitors to Tyneside, Her Majesty the Queen Mother, opened a new coal processing plant right there on the Tyne. How welcome it will be! We still occasionally have news of industrial disputes on the Tyne and round about it. However, we have also our successes. Her Majesty's ship "Illustrious" was prepared on the Tyne at high speed to take part in the Falklands war. In June of this year, the Navy's latest, most modern fighting ship, "Ark Royal", sailed from the Tyne, where she was built four months ahead of schedule. We have many success stories.
I am sometimes asked: where are the industrial giants of the present day in the North of England, where are the latter-day Stephensons, Parsons and Armstrongs? Perhaps because new business is smaller than the great giant concerns of the past, names do not emerge so quickly, but we have entrepreneurs aplenty. I should seek, above all else, to dispel for ever the myth that there are two nations in this country, North and South. After all, in the past it was the North of England which created our national wealth and the North of England is now poised to play its fullest part in our industrial future.
If I may, I want to end on a personal note. In the Spring of 1983 in the other place I ended what I thought would most certainly be my last parliamentary speech with these words:
"It has been a great privilege to represent the city of Newcastle-upon-Tyne and the people of the North-East for the past 25 years".
The enormous honour of becoming a Member of your Lordships' House gives me the opportunity of doing my very best to be of some further service.
5.20 p.m.
Lord Jacques: My Lords, first, I should like to congratulate the noble Lord, Lord Wolfson, and the
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noble Lord, Lord Elliott of Morpeth, on their maiden speeches. I congratulate them both on the content and the delivery. As one who spent a lifetime in retailing, I particularly welcome Lord Wolfson and, as one who was born near Morpeth, I particularly welcome Lord Elliott of Morpeth. I would also anticipate the maiden speech of Lord Kimball, wish him the best of luck and assure him that this House is extremely tolerant, especially its Leader.
I am one of those who believes that the greatest need of our nation is full employment. Ever since my period as a young man in the 'Thirties when I had neighbours, friends and relatives out of work, I have been of the opinion that the demoralisation which accompanies unemployment is completely unacceptable in the kind of society which we desire. It is not civilised. Furthermore, I believe that observation shows that over the post-war period there is really no excuse for the waste which comes with unemployment. In the first 25 years after the war we experienced the greatest increase in our standard of living that we have had in the whole of our history. We also had the development of the welfare state. We were able to afford it because we were using all our resources. We would not have had that increase in the standard of living nor would we have had the welfare state if we had not had the full employment which we had for those first 25 years after the last war.
If we are going to maintain our welfare state we have to bear in mind that it has existed only under two conditions: under full employment and under great subsidy from North Sea oil. If we have not got back to full employment before the North Sea oil runs out, then we are going to have great difficulty in maintaining the welfare state; because in full employment people pay taxes, they do not draw benefits. That is the difference.
I accept that in the long view if we are going to have full employment we have to be competitive. If we are not competitive, we shall not get full employment. There are two countries which have been particularly successful in the post-war period and which have performed better than we have on the open market. They are West Germany and Japan. I want therefore to make comparisons between Great Britain and those two countries—and I warn the Front Bench opposite, which appears almost to have disappeared, that that comparison will not show that what we need is lower wages; it will show that what we need is better management, more technical training, more flexibility in the use of labour and, above all, co-operation rather than confrontation in our industrial relations. Those four things form a key.
Let me start with West Germany. Here I base what I have to say on a report in the National Institute's Economic Review in February 1985, when a team of researchers reported on what they had found in making a comparison between Great Britain and West Germany. Their comparison was in the metal industry. They chose firms of approximately the same size, small and medium, and firms which were making roughly the same things; so that their comparison was fair and reasonable. First of all, they found that the productivity in West Germany was 63 per cent. higher than it was in Great Britain. They also found that this

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was mainly—not wholly, but mainly—due to the lack of technical training in Great Britain as compared with Germany.
For example, they visited 16 firms in West Germany and 16 firms in Great Britain. In West Germany, they found that every one of the works foremen in the 16 firms had an academic qualification; that 13 of the 16 had the master craftsman's certificate and that the remaining three had the craftsman's certificate and were working for the master's certificate. That was the position in West Germany. In Great Britain, they found that two of the 16 had served an apprenticeship and that the other 14 had no qualifications whatever except for their workshop experience. That example gives us a measure of the great difference between the technical training in West Germany and the technical training in Great Britain.
In West Germany, the differential of trained workers, or skilled workers, is greater than it is here. In our country, especially quite recently, we have had a great deal of advocacy of the idea that the differential between the skilled and unskilled worker should be reduced. I believe that that is mistaken. I believe that we need to have a trained workforce; I believe that we have to have an incentive to encourage them to train and I believe that if we have a trained workforce we shall have a higher standard of living and that that will be enjoyed by the unskilled as well as by the skilled. I believe that that is what Germany has found and what we should find if we improved and did not depreciate the differential of skilled workers.
Furthermore, the research team found that the machines which were used in West Germany were of very much the same age as ours and that they were very much the same machines. But they found that the West Germans were much more ingenious in their use of machines. For example, they usually had an automatic feed to the machine; whereas in Britain the machine was fed by hand. That, I think, was largely because the technical skill was available in the factories of West Germany and was not available in the British factories.
The researchers also found—and this was distressing and very important—that there were far more breakdowns in the machines, and breakdowns for longer periods, in Britain as compared with West Germany. In investigating this, they found that the frequency of breakdowns was due to training. In the case of West Germany the machine operator was trained not merely to operate the machine but to clean it, to lubricate and to look for parts that were wearing and repair them. Consequently, the machines broke down far less frequently than in this country. Furthermore, they found that our factories had a maintenance staff readily available which was less competent than the maintenance staff readily available in the West German factories. Consequently, because ours were less available there was delay while the maintenance people were brought in from elsewhere, particularly from the machine manufacturers. They also found that there was much better quality control of the raw materials, which of course is exceptionally important.
In addition to their findings, I would add two other points. First, I would say that the German manufacturers have not been handicapped as much as our manufacturers have been due to an unnecessarily
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high rate of exchange. We have been handicapped for years by a rate of exchange which does not reflect the prices in this country, compared with the prices in other countries with which we were competing. West Germany has not had that handicap. Furthermore, West Germany has looked after its infrastructure far better than we have done during the past few years. During those years the expenditure on construction in West Germany, as a percentage of national income, has been twice that of this country. We have neglected our infrastructure, and consequently we are making things even more difficult for ourselves in the future.
Having made a comparison with West Germany, may I now make a comparison with Japan? For that, I do not need to go to Japan, because the Japanese are established in South Wales and in Plymouth, and shortly they will be established in the North-East. They are giving us a demonstration of what is wrong with our industrial relations. First of all. the management in the Japanese factories regard their workforce not as servants but as partners. They deliberately avoid making threats or laying blame, because they want not confrontation but co-operation; and they seek the co-operation of the trade unions in electing committees in the works, which can be used for consultation purposes and for informing them. That is something we have in some of our factories, but it is not at all popular.
The Japanese do not ask for lower pay and poor conditions. The wages they are paying in the factories they have established here are above the average in British industry. Furthermore, they have more than achieved the level of employment which they promised. In the case of Plymouth, I understand they promised to employ 300. They now employ more than 1,000, so that even though their wages are a little higher, they still need a larger workforce. But what they do demand is punctuality, regular attendance, flexibility of labour and arbitration rather than strikes. In particular, they prefer "pendulum arbitration''; that is to say, the arbitrator does not compromise but makes an award to one side or the other. That brings great discipline to the negotiations on both sides, because if either side comes with an outlandish attitude it is certain that the arbitrator will be against it; so there is great discipline in the negotiations which precede an arbitration.
There are many things in the Japanese industrial relations that we must copy. We may not need to copy the lot, but we must copy a great deal because there, I believe, lies the most important factor in getting back to full employment. Indeed I would say that the greatest sin of our present Government is that, by example, they have encouraged confrontation and division of our people at a time when we needed not confrontation but co-operation.
5.35 p.m.
Lord Kimball: My Lords, I hope I am not overtaxing your indulgence by asking for it for a third time this afternoon, but I do find myself in a somewhat curious situation, as indeed did my distinguished predecessor from another place—the late Lord Crook-shank—when he addressed this House for the first time in this debate some 30 years ago today. He said then that he found himself doing something novel and yet

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something familiar: something novel to be addressing your Lordships' House and something familiar to be making a speech in reply to the loyal Address. I find myself in a similar situation but, for once, without the spur of having to get the winter constituency speech done before the distractions of the rest of the winter in the English countryside take over.
My only excuse for trespassing on your Lordships' time today is the mention in the gracious Speech of the new regulatory framework for the financial services section. My noble friend Lord Young of Graffham, in introducing this debate, made great play of the removal of restrictions. I hope that when the Bill comes before your Lordships' house we are not going to see any further restrictions places on the expanding side of our economy.
I am a firm believer in self-regulation. I was privileged as the Privy Council representative of the Royal College of Veterinary Surgeons, and a member of their disciplinary committee, to see self-regulation at work in the best regulated, the most successful and one of the most profitable of the professions in this country. I stress the word "profitable" because, for self-regulation to work, it has to be worth one's while to be on the inside of the regulations.
For the last two years I have found myself drafted on to the Lloyd's Council, working hard to establish a modern system of regulation under the 1982 statute which Parliament gave to the Society of Lloyd's, to give a measure of protection which members of Lloyd's have a right to seek in the very high-risk business in which they are engaged. The essence of the régime which Parliament gave to Lloyd's was self-regulation, and self-regulation is a particularly British institution. Parliament delegated to the Council of Lloyd's the power to make the rules and regulations under which to run the society, and I hope that during the course of the year this House will resist any attempt to dilute or change the powers which Parliament has given.
Dealing with the broader field of self-regulation and its application right across the board to all the financial institutions in this country, I would just delay your Lordships for a few more minutes to stress the six points which I believe make self-regulation the right way to govern financial institutions in this country. The only way self-regulation will work is if it is applied to a close circle of members—a well-defined group of people, and a group of people for whom it is a financial advantage to be on the inside of those regulations and a disadvantage to be on the outside.
A statutory framework is necessary, with a last resort to the courts if people kick over the traces, and an acceptance within the community which is being regulated of those rules—a recognition of the benefit which those rules bring. Self-regulation must always be founded on a dual process: consultations between the regulators and the regulated. But that does not mean that consensus is necessary, because it is not. Voluntary participation in the rule-making is essential but, most important of all, the public interest must be recognised. If self-regulation has all the advantages which Parliament gives it-the advantage of regulation at law—then public interest is the most important thing for Parliament to protect. Therefore, during the
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course of the coming year, as foreshadowed in the gracious Speech, the decision that I feel this House will have to make is a political one. It will have to make a very clear decision on the advantages of self-regulation as against the statutory form of regulation.
Self-regulation, I believe, is more efficient. The rules are made by those to whom they apply. It is quicker and flexible. I certainly have a horror, and I hope that most Members on this side of your Lordships' House have the same horror, of bureaucracy and Government regulation. They do not have a great record of running anything and I should hate to see the City of London shackled with a sort of "Yes, Minister" bureaucracy in the one area of our economy which is really expanding.
The great snag of a statutory form of regulation, as all parliamentarians know, is that you can change the rules only by coming back to Parliament and there is never time to come back to Parliament to get the rules changed. Self-regulation by a self-regulatory body is swift, which parliamentary regulation is not. I hope, in this great desire which I see for self-regulation within the financial institutions in the City, that our enthusiasm for the moment will not overrun, so that we make regulations which make it impossible to carry on business profitably and correctly in the future. I hope that we will see these regulations coming forward and I trust that this House will resist any attempt to stiffen them at the expense of employment in the one expanding area of our economy.
5.41 p.m.
Lord Taylor of Gryfe: My Lords, we have been fortunate today to hear three distinguished maiden speeches. I must confess, in my congratulations to the noble Lord, Lord Kimball, that I suspected he would dwell on matters of the countryside rather than on matters of the City. I hope he will be tempted to leave the cloisters of Lloyd's or the wide open spaces of Leicestershire to come down occasionally and give us the benefit of his wisdom in both fields. In the case of the noble Lord, Lord Elliott—again, an old hand in a parliamentary sense—how much we welcomed his references to the danger of two nations in our society!
Finally, I turn to the noble Lord, Lord Wolfson. He is a very old personal friend of mine and I am glad that he has found time from his many business commitments, as well as from the vast amount of work that he does in dispensing to worthy causes the largesse of the Wolfson Foundation, to attend your Lordships' House. I hope that, with his experience of business and his experience in the Wolfson Foundation, he will be able to come and speak from time to time. His maiden speech today was the product of a keen analytical business mind and revealed the concern of the head of a very large and important foundation. I say to the noble Lord, Lord Wolfson, simply: "Your father would be proud of you today."
I want to say a word or two about one of the key items in the gracious Speech. I refer to the programme of privatisation which is now, in the words of the Chancellor, getting into top gear. I want to talk about privatisation in general and say a word or two about British Gas in particular. I regret to say that within 24 hours of the announcement in the gracious Speech

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that British Gas was to be nationalised, there was an announcement—an inevitable response—from Roy Hattersley that one of the first priorities of a Labour Government, if it were elected in two and a half years' time, would be to nationalise British Gas.
I ask noble Lords: is this any way to run a country? Here we have a very important basic industry which the politicians have decided is to be a political shuttlecock. This cannot provide any stability or investment in that industry. Neither can it provide any security to the management of the industry, or to workers in that industry, who are the people who make it profitable and successful.
Unfortunately, there is an obsession with dogma in British politics. Indeed, the reason we sit on these Benches is that we want to get away from dogma on the question of nationalisation and privatisation. There is an assumption on the other side—it is more pronounced in the other place than here—that state ownership in its very nature is bad and inefficient, and, on the other hand, that private ownership is good and efficient.
Some noble Lords in this House—and I see the noble Viscount, Lord Caldecote, sitting opposite me—have had experience on the boards of nationalised industries. We tried in those industries to operate against performance targets, and, in many cases, nationalised industries are efficient. There are good nationalised industries and good private enterprise businesses. On the other hand, Rolls-Royce and Dunlop are examples of industries that have suffered and failed as private enterprise companies. So there should be no acceptance of this foolish and facile generalisation about state industries and private industries.
Unfortunately, we have had experience in the recent bid for the United States military electronics communications system—which has caused a good deal of embarrassment to the Government Benches—of a French state enterprise producing a more acceptable bid than a British privately-owned business. This gives me no joy. I quote it simply to illustrate that nationalised idustries are not inevitably less efficient than private industries. We in the Alliance are totally undogmatic about these matters and feel that each case should be examined on its merits.
I want to say, too, that this idea that we should sell capital assets to distribute the proceeds in tax concessions is a practice which no businessman in this House would ever apply in business. I am delighted that the noble Lord, Lord Wolfson, is here. I wonder what the many shareholders of GUS might say if they started selling off capital assets to distribute in dividends. I am quite sure that the institutional shareholders, the key analysts of these matters, would have something to say if that were so. Why should we apply these correct standards in the management and financing of private industry and then do something completely opposite when we are dealing with state assets and state industry?
I want to say a word about British Gas, because that is not an inefficient industry. Last year, it made an operational profit of £930 million. It finances its own enormous capital investment programme out of its own profits; it pays corporation tax; it contributes handsomely to the Treasury; and in the last five years
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the Government have creamed off from British Gas a further £2 billion through a profits surtax known as the gas levy. Once you take that out of the state sector, the steady flow to the Treasury will cease, except in so far as British Gas will be taxed as a plc in the normal way of a company. This is a sizeable and important asset, and the profits will cease to flow from that asset to the Treasury when it becomes privately owned. Theirs is not a bad record; and I do not think that the Government have the right to proceed with these massive exercises in privatisation when we arc still digesting the full implications of the privatisation of British Telecom.
We have not created the statutory regulatory framework for governing a private monopoly, and that is evidenced in the recent conflicts between Oftel and British Telecom. We had questions in the House today about the fact that domestic users of telephones are being charged 20 per cent. more in order to help finance a discount of 2½ per cent. to the long-distance users of telephones—an obvious abuse of monopoly power.
There are many other evidences of this abuse in the new private monopolies that we are creating. On a future occasion we shall have the opportunity to debate the disastrous purchasing policy of British Telecom in relation to British industry. Science-based industry in this country is being by-passed by British Telecom. Orders are being placed elsewhere, and research and development in this important electronics industry will be conducted in Sweden when we have a tremendous resource in our own country. No one from the great electronics industry will be able to sell his product abroad if he cannot sell it to the British Telecom consumer in this country. This is a very serious matter. The creation of private monopolies devoted to the earning of profits for their own investors can have serious consequences for domestic manufacturers.
I compare this relationship, this rather soured relationship, between British Telecom and companies such as GEC and Plessey, which are important to us, with the behaviour now of the CEGB, a state concern. The CEGB sit down with British suppliers. They sit down with Babcock, GEC and NEI, and they tell them and discuss with them their future investment programme so that these suppliers can anticipate and invest in anticipation of orders. That relationship no longer exists with British Telecom, and it can be very serious for the manufacturing industry of the United Kingdom. So let us think twice before we create another private monopoly in the case of gas, which might be subject to the same abuse of power.
One point in relation to the justification for this programme is that it distributes wider share ownership. It is very interesting to study the movement of shares in these companies since privatisation. It is too early to assess the movement of British Telecom shares because there is an in-built incentive to hold on to the shares for a limited period, but let us take the case of Cable and Wireless. At the flotation the number of people owning 500 shares—the small chap who was going to hold shares in this great share-owning democracy—was 129,421. Today there are 22,178. The stags have sold their shares and have gone off, or the people have realised.

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So the dream of the wider share ownership is not working. What is happening is that privatisation has resulted in the substantial institutional shareholding. I think that ought to be faced.
I should like to make one point in respect of the cost of the programme. In the case of British Telecom the fee to float the company was £90 million. Advertising and other costs added another £100 million. British Telecom was a substantial flotation of £1·2 billion. In the case of British Gas, the flotation will certainly be three tranches of £2,000 million each. One can appreciate the expense of selling the shares, of advertising in the Japanese market, of winning the American investors, of all the underwriting and of the other fees that are involved. This will not be an inexpensive exercise, and at the end of the day it will add nothing to the total prosperity of the United Kingdom, or create more jobs.
I wish to say a final word about general economic strategy. I was delighted yesterday to listen to the very interesting speech of the noble Lord, Lord Mellish. I am sorry that it was not delivered in this debate, because it had some relevance to this debate. The noble Lord told us a little about the London Docklands Development Corporation. I could speak at some length, and may do so on a future occasion, about a similar experience with the Scottish Development Agency in terms of creating new jobs, not by state ownership but by sensible state intervention here and there as a creative and catalytic force in stimulating economic development.
There is no reason why that non-doctrinaire sensible approach cannot be applied in solving some of our national problems. I commend it to your Lordships to tackle these problems on a consensus basis. As the noble Lord, Lord Jacques, said, let us get away from the confrontation; let us be concerned about the national welfare, and let us try to plan sensibly and pragmatically to achieve economic progress.
5.56 p.m.
Lord Harris of High Cross: My Lords, I should like to add my congratulations to the three maiden speakers. I shall hope to match their brevity though I would find it impossible to match their charm and practised eloquence.
I wish time allowed to comment extensively on the speech of the noble Lord, Lord Jacques, who I thought excelled himself today in making a thoughtful and highly constructive speech on which we could all devote a great deal of attention and further discussion. But I must get on with the gracious Speech, which I must admit I found something of a cliff-hanger when it was being read by Her Majesty. It was only at the last gasp that we were informed that the Government were, after all, pursuing their policy on the repeal of restrictions on shop opening. I want from the Cross-Benches to congratulate the Government on their resolution in this matter.
We already have the unholy clamour audible from a strange alliance of "ye old Church of England", a minority trade union, and other dwindling forces of reaction. I am delighted there is a prospect that this Bill will be introduced in this House so that noble
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Lords can demonstrate that they are more responsive both to public opinion and to changing economic requirements than the spokesmen for sectional interests.
The Earl of Longford: My Lords, perhaps I may interrupt the noble Lord. Would the noble Lord say that all the forces of Christianity are just one big sectional interest? Does the noble Lord speak as an atheist, or in what capacity?
Lord Harris of High Cross: My Lords, we will no doubt come to this matter when we debate the issue. I was shocked in my local church to have to wait for the sermon while two dear ladies, briefed by USDAW I should imagine, delivered themselves of miscellaneous thoughts on the evils of Sunday opening. I found that deeply disturbing, and I did not enjoy the sermon when it came.
I want to devote my remarks mainly to a welcome for the Government's renewed commitment to what they call,
"a framework of firm monetary and fiscal policies designed to secure a continuing reduction in inflation".
Uncomprehending critics have had a great deal of innocent fun mocking the monetary policy which they sometimes describe as "mumbo-jumbo". I have noticed that as the criticisms multiply they become ever more contradictory: Some blame unemployment on monetary contraction. Others say the trouble is that money supply has got out of hand and has increased too fast. Some say that money supply cannot be measured and that it does not matter anyway, yet they go on to blame the Chancellor for quietly dropping it. Others again even combine all three criticisms as though the Chancellor is guilty of doing too much, of doing too little and of doing nothing, all at the same time.
As Samuel Brittan never tires of instructing us, the simple truth on which the Government's policy rests is nothing more arcane that the argument that, and I quote Mr. Brittan.
"prolonged and sustained increases in the quantity of money will boost demand and spending in an inflationary way".
Even Mr. Hattersley has applied his mind to these matters. After much huffing and puffing against particular Government measures he went on to say:
"No one doubts the need for targets".
The admitted practical difficulty we face is how to match the German performance by finding some definition of money supply that provides a stable measure of total spending.
It is no new discovery of—shall I say?—"Professor" Peter Walker that the velocity of the circulation of money may vary with changes in business confidence and inflationary expectations, although such changes have generally been such that some allowance for them can be made. However, recent experience suggest that the chosen measure of sterling M3 has consistently exaggerated future spending. It appears that this false reading is partly because of changes in competitive banking and partly because sterling M3 includes a large amount of deposits, which are held longer before being spent when interest rates are high. That explains the Chancellor's recent announcement

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that sterling M3 will cease to be the annointed aggregate and that he will also monitor other indicators of monetary tightness, including the exchange rate.
I must admit to some reservations about that abrupt change, but I concede that responsible observers have given the Chancellor the benefit of the doubt that a shift in tactics does not mean a departure from the continuing strategy against inflation. One reason for that lenient verdict, I suspect, is that Her Majesty's Government, and the Chancellor in particular, have amply demonstrated their commitment to ending the damaging excesses of previous Labour and Tory governments.
Another ground for hope was recently provided by a respected political commentator by the name of Hugo Young, who may be known to some of your Lordships. For those carefree souls who do not feel obliged to read the Guardian every day I will reveal that on 16th July Mr. Young wrote a remarkable article entitled, "We are all Thatcherites now". I only wish that more of your Lordships would own up. As a modest example of hat well-hidden truth, I will direct the attention of the noble Lord, Lord McCarthy, to the Charter for Jobs, whose council includes three former prime ministers and 100 other assorted malcontents, including the noble Lord himself. It is true that in the council's first manifesto, entitled We can cut unemployment, they called for an unspecified increase in spending on the dear old infrastructure, and all that. But read on.
In the small print, the manifesto's authors were at pains to emphasise that,
"A budget deficit need never imply a growth in the money supply".
They went on, in the accent of Milton Friedman, to emphasise that money can be borrowed outside the banking sector or attracted from abroad, if—and I quote their words,
"if interest rates are kept high enough".
They then turned their minds to the question of whether a higher deficit must necessarily weaken the sterling exchange rate. Their answer was as follows:
"A purely British fiscal reflation can work without a major fall in the exchange rate if it is accompanied by a properly cautious monetary policy".
That charter, when one reads it, has more than a whiff of mumbo-jumbo monetarism. It is surprising that the council includes many ornaments of the Labour Benches here present and the manifesto from which I have been quoting carries the health warning that:
"This document has the broad agreement of all members of the council".
After the primary proposal of the budget deficit, Charter for Jobs offers a second remedy for reducing unemployment:
"A cut in employers' national insurance contributions to reduce the cost of labour".
Here is another cat let out of the bag. Here we have another sly nod at the Thatcherite thesis, which is that a major cause of unemployment is excessive labour costs per unit of output.
One answer to the Opposition amendment is that so long as incomes continue to rise faster than output, there is little hope under any party of a significant and
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sustained fall in that part of the unemployment total which is truly involuntary. Indeed, that is the logic behind Labour's secret hankering after an incomes policy, as it is the logic behind the Government's proposed reform of wages councils.
Such analysis reinforces, in my view, the case for reducing taxes on low incomes, which would not only increase the incentive for unemployed people to take paid work rather than social benefits. Lower income tax would also make it easier for employers to resist giving away unearned increases in gross pay, for the simple reason that employees would be left with higher net take-home pay from their existing earnings if taxes were less high.
In conculsion, we hear from the trade unions never-ending lectures about the need for someone else to do something about reducing unemployment. But supposing that the trade unions wanted above all else to demonstrate their practical concern for more jobs. They could give a lead in negotiating differential wage agreements whereby employers could take on new workers at wages lower than those paid to established employees but still well above value of social benefits. I have no doubt that such a development would help keep costs down and so keep employment moving upwards—well within the Government's monetary strategy.
6.8 p.m.
Lord Williams of Elvel: My Lords, I must first echo the previous comments of noble Lords about the distinction of the maiden speeches which the House has heard this afternoon. I am sure that all three noble Lords concerned will in the future make a very great contribution to the debates in your Lordships' House.
I should like to echo also the sentiments of my noble friend Lord McCarthy when he said that he missed very much the presence of the noble Earl, Lord Gowrie. I too miss his presence. That is not because I have any disrespect for either the noble Lord, Lord Young, or the noble Viscount, but because when we last debated economic affairs, on the Second Reading of the Finance Bill in your Lordships' House, I had a slight passage of arms with the noble Earl, Lord Gowrie, over what exactly was the Government's financial policy. I was glad that I was supported by the noble Lord, Lord Bruce-Gardyne, from the Benches opposite in my contention that there had been a subtle shift in Government financial policy from purely setting a sound monetary framework in the direction of exchange rate targeting.
At that time the noble Earl, Lord Gowrie, told me that I was wrong and that the Government's policy remained as it had been in the Budget red book for 1980, that:
"Control of the money supply will over a period of years reduce the rate of inflation".
He said that there had been no change in Government policy except—and he let the cat slightly out of the bag at this point—that the response was flexible. I think your Lordships would have benefited on that occasion from the presence of the noble Lord, Lord Harris of High Cross, who could perhaps have more nearly informed us exactly what the Government were getting at in referring to a flexible response.

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I believe that in his Mansion House speech the Chancellor has substantially confirmed the views that the noble Lord, Lord Bruce-Gardyne, and I were offering at that time. I believe that the Government have made a substantial shift in their financial policy over the past few months. In particular, the admission that sterling M3 is no longer to be a monetary variable at the centre of Government financial policy, and that over-funding has now ceased, seem to me to indicate that the Government have moved away from this idea that the money supply is all-important in predicting and, therefore, controlling the rate of inflation in the future. I welcome this development because I believe that it will contribute to greater rationality in economic thinking in the future.
The exchange rate to which the Chancellor pointed us in his Mansion House speech, together with MO, has its dangers when it is used purely as a counter-inflationary measure. M3 was never a very satisfactory predictor of inflation. The exchange rate is an equally unsatisfactory predictor of inflation. M3 was unsatisfactory, as I think the noble Lord, Lord Harris of High Cross, pointed out, because it was difficult to calculate. It changed its composition over time and, in the event, in three out of the five years since 1980 there was a substantial over-shoot of the target in M3.
The exchange rate suffers the same problem. It can be extremely volatile. It is subject to external forces. It is subject to oil prices and to international interest rates, and it is subject to a number of exogenous factors which the Government have great difficulty in controlling. The one central point about keeping an exchange rate where one wants it to be is that one has to keep the differential interest rates between competitor currencies wide enough to ensure that your currency is going to be the most attractive one under the circumstances. It is that, above all, which I believe has led to sustained high interest rates in this country. It is sustained high interest rates in this country that I believe have brought about the reduction in demand and the reduction in capacity which have given rise to the unemployment which your Lordships are discussing this afternoon.
In passing, I should note that the Government's record on inflation—about which they are quite proud—is perhaps not as good as it might be. I hope the noble Lord, Lord Young, will forgive me if I quote some figures. Since 1980, prices in the United Kingdom have risen by 43 per cent. In the United States, prices have risen by 31 per cent.; in West Germany, by 21 per cent.; and in Japan, by 15 per cent. In August 1985 the United Kingdom published an inflation rate of 6.2 per cent. The average OECD inflation rate was 4.5 per cent.and the average rate in the European Community was 5.4 per cent. In that respect, while we all welcome inflation coming down—and I do not think any noble Lord would quarrel with that—our record on inflation still leaves something to be desired.
But whereas we can argue and discuss the domestic effects of Government policy in controlling and reducing inflation, I hear very little about the effects on the third world of our so doing. The reduction in demand for commodities and the reduction in industrial capacity have meant that there has been a
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decline in the demand for commodities, raw materials and intermediates from the outside world, and particularly from the third world.
For a moment or two, if your Lordships will permit, I shall digress slightly and refer to the tin crisis. This is a perfect case of how the third world is helping to pay for our reduction in inflation. It is a perfect example of how, unless one achieves a soft landing when the demand for products declines, the financial markets can be thrown into chaos. The major producers of tin in the world are Malaysia, which at present has 23 per cent.of world production; Indonesia, which has 14 per cent.of world production; Brazil, with 13 per cent.; Thailand, with 12 per cent.; and Bolivia, with 11 per cent. The major consumers are the industrialised countries.
Nearly 30 years ago the International Tin Agreement was set up as a mechanism to stabilise commodity prices between producers and consumers. This is an extremely difficult exercise. I do not think that at the time anyone thought that it would be easy. There have been major shifts in the sources of production and there have been major shifts in the use of tin as an end product. I am not going to ask the obvious question why the United Kingdom is still in the tin agreement and did not retire when the United States retired from it in 1982. The United Kingdom is there as a consumer, rather than as a producer. I am not going to draw attention to the Cornish tin industry which would be in a state of chaos if there was a sharp fall in the price of tin.
The point I want to make, and which I make very seriously to the Government—and I refer to the noble Lord, Lord Kimball, who spoke about self-regulation—is that the markets that operate and which are at present self-regulated (the London Metal Exchange being the fundamental market in which tin is traded) are going through a major crisis. The major crisis exists not only because trading in tin has been suspended, and not only in the fact that the International Tin Council, which has been responsible for running the buffer stock and operating the tin agreement, looks as though it may well default on its debts, but also, and even more fundamentally, because with the inter-relationship between the dealers in the market if one dealer goes under there is a chance that another will, and then another and yet another, and that the whole exchange will collapse.
The London Metal Exchange has announced that dealing in tin will recommence on Monday. The Government have issued a number of exortations to member Governments of the International Tin Council that the council should not default on its debts. Two things could happen. If the ITC meets its debts the crisis can start to be averted. I say "start" because there is still a long smoothing-out process during which we have to get the price of tin back to a realistic level. There is, I am afraid, very little chance in the time allowed that the International Tin Council will agree to meet its debts in full. In fact, there is every sign from recent discussions that there is disagreement between members of the International Tin Council. Not least, the European Community is opposing any settlement of this sort.
If the ITC defaults and nothing else happens, when dealing in tin restarts on Monday—if dealing

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restarts—the London Metal Exchange will be in a state of chaos. The price of tin on the metal exchange will go into free fall. There will be substantial defaults. There will be substantial provisions to be made by banks which are lending, not only to the ITC but also to dealers on the exchange. Your Lordships can make your own estimates on what the price may be, but against the suspension price of just over £8,000 per tonne the price could easily open round about £6,000 per tonne, or even lower. That is a substantial fall, and one which would put the market into chaos. I believe that a number of dealers on the London Metal Exchange would go into bankruptcy. It is quite uncertain at the moment how many parent companies of those dealers would support them in such an event. There would be a domino effect on other dealers in the market, and the London Metal Exchange would lose its predominance as a metal market in the world.
I think it is time that the Government told us what they propose to do if this situation occurs on Monday. Yesterday I took the opportunity to warn one noble Lord on the other side that I intended to raise this matter, and I hope that the noble Viscount, when he comes to sum up, will tell us what the Government's proposals are in respect of this very grave situation. In my view, exhortation is not enough. Either the Government, in the form of the Bank of England, effectively, must make enough funds available to the market for the re-entry into dealing to be sensibly organised and sensibly achieved, or they must be prepared to stand up and see disappear the London Metal Exchange, which is one of our prime commodity exchanges and one of the prime institutions in the City of London.
I have spent a little time on the tin question because I believe it is a point which has not received as much discussion in your Lordships' House as it should have done, and I hope that when the noble Viscount sums up he will be able to respond. Nevertheless, the amendment of my noble friend Lord McCarthy refers to unemployment, and I come back to the central issue of unemployment. We have looked in vain for any indications in the gracious Speech, in the Chancellor's Mansion House speech or in the Autumn Statement, of any comfort on this subject. If we are performing relatively badly on inflation, we are doing relatively much worse on employment. The OECD average is 8.2 per cent. and the EEC average is 10.8 per cent. On whatever interpretation of the figures you like to adopt, it looks as if ours is around 13 or 13.2 per cent.
The Autumn Statement speaks about growth, but we must remember that a large part of that growth will come from consumer expenditure and that exports will decline. The noble Lord, Lord Young, has talked at some length about the position of wages relative to unemployment. Consumer spending comes from high wages, and I imagine that if the CBI and industry were to listen to the exhortations of Ministers, noble and right honourable, and if pay increases were in fact restrained in the way that Ministers required, then next year this source of growth would probably decline.
The Autumn Statement speaks about capital expenditure, with priority given to roads and the renovation of local authority housing. We on this side of the House generally welcome all these things, but we
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note that, of the extra £2·5 billion that the Autumn Statement claims will be raised from asset sales, just over one-tenth will go towards capital expenditure and the rest will be held up the Chancellor's sleeve. We ask: what will the Chancellor do with the money that he is holding up his sleeve? Here, we come to the crux of the matter, I think. If the Government are really serious about their concern over the level of unemployment—and many Ministers, including the noble Lord, Lord Young, have expressed their concern—they must make use in the optimal manner of whatever funds are available to reduce unemployment and to create employment, and this does not—and I repeat "not", my Lords—mean lowering the standard rate of income tax.
This is the litmus test of the Government's sincerity. If the Government lower the standard rate of income tax in the next Budget, then I, for my part, will be less than convinced about the sincerity of the Government's concern for the unemployed and I shall wish them at that point to explain. I believe that the Government are looking at the opinion polls and at the attitude surveys to see the importance of unemployment in the minds of the electorate, and are looking forward to the next general election, and that that is really what this is all about.
I have taken up too much of your Lordships' time. I wanted to talk about tin; I have talked a little about unemployment. Finally, I wish to say that I propose to support my noble friend Lord McCarthy in the Division Lobby this evening.
6.25 p.m.
Viscount Eccles: My Lords, like other noble Lords I have listened with interest and admiration to three excellent maiden speeches, which were all the better from my point of view because they all came from this side of the House. The only thing I missed was that I thought that my noble friend Lord Kimball would have told us that fox hunting was good for employment; but he preferred to talk about the City.
My noble friend Lord Wolfson mentioned interest rates and I am very glad to follow the noble Lord, Lord Williams, who has mentioned interest rates and the exchange rate, because it is about those two factors that I wish to speak. I hope to show your Lordships that the extent to which the United States dominates these monetary factors is not easily understood here. Having said that, I want to make a few suggestions as to how we should deal with it.
First, do not believe the predictions of professional economists about the course of either the exchange rate or interest rates. They always get it wrong. Earlier this year not one of them foresaw that the dollar would rise to almost one dollar to one pound. Only the other day the United States Treasury took them completely by surprise by agreeing with other central banks to intervene in the exchange market. The American Treasury took that concerted action for political reasons. They wanted to cool the campaign for protectionist legislation. They were aiming not really at Europe but almost exclusively at Japan. It is also for political reasons that interest rates remain so high. Whether or not rates come down here and elsewhere depends on the political decisions taken, or fudged, or not taken at all on the other side of the Atlantic.

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The arguments now going on in Washington are therefore of vital interest to us because if American rates come down, ours can safely follow. That is one reason why we by ourselves can do only a limited amount to reduce unemployment. I very much admire what my noble friend Lord Young of Graffham is doing. He is improving the prospects for today's unemployed and he is helping industry to prepare for the time when the oil revenues decline. We should not accept the gloomy views of your Lordships' Select Committee. To me their report read as though it had been written by very distinguished gentlemen—the chairman is sitting next to me—and I thought it was because they were so distinguished that they underrated the skills and enterprise of the younger generation. Britain is going to be much stronger in the future when the present better educated and better trained recruits have entered industry.
Having said that, it is also true that a really big and lasting reduction in unemployment cannot be achieved without international action on a very large scale. The leaders of business and politics in America are begining to think about international action to deal with the problems of unemployment and stagnant trade outside the United States. The number of men and women out of work is either stationary or increasing in almost every important economy. Of course, the growth of population is partly responsible. In Brazil half the people, it is said, are under the age of 15; in more developed countries more women are competing for work; and in Europe industrial relations and the structure of industry reduce the number of jobs on offer. In all countries new skills and new systems of production are replacing old machines and human hands. We have to realise that present-day unemployment is so rooted in the astonishingly rapid changes in industry and agriculture that it cannot be drastically reduced without immense and continuous new investment—worldwide investment.
One asks why interest rates (which, after all, are the key to servicing debts and financing new investment) are so high, when inflation in the United States and here is under control and the world is awash with uninvested money. The chief cause is political and lies in the United States. Its rates would tumble and ours could follow if the 200 billion dollar deficit on the federal budget were cut in half. That is not happening because the President is unwilling to raise taxes and Congress is unwilling to reduce expenditure. The result is obvious—a humilitiating political deadlock which can continue unresolved only by the United States maintaining rates of interest high enough to attract billions of capital from the rest of the world.
Must we in Britain wait upon American politics? Maybe some noble Lords cherish the dream that we could have a unilateral substantial cut in British interest rates. They ought not to. We are in no position to contract out of the international network of capital movements. Suppose that tomorrow, with the idea of forcing British rates well below New York rates, the old socialist controls or Mr. Hattersley's rum new version of those controls were resurrected here; the failure would be even quicker and more disastrous than last time. Those responsible would soon find out that the world is too small for Britain to play at living an island unto herself.
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If your Lordships want any proof of that you have but to turn to the business pages of The Times or of the Financial Times and there day after day you will see how swiftly all the markets of the world are becoming one single market—financially, commercially, structurally and managerially—one interdependent market. It is quite impossible to isolate our economy from that gale-force movement.
President Mitterrand, as has been said already in this debate, has had to reverse the programme upon which he was elected. China is doing the same; Soviet Russia may soon follow suit. All governments, if they are to deal effectively with their own unemployment, should be eager to share in the making and executing of a world financial system. Together we should be able to produce much more wealth, and then we can leave the domestic argument—and it is a very great argument—to the ways and means of how the wealth is distributed among our fellow citizens.
Therefore, the immediate question is how we can influence the political decisions in Washington. I have recently talked to leaders on the East and the West Coasts of America. No one expects the 20 per cent. decline in the dollar to have much effect on the volume of imports into the United States. The huge deficit on its trading account, which has done us so much good, is partly due to the loss of export markets in Latin America and elsewhere, but it is much more due to the explosion of purchasing power in its own economy. The United States has been sucking in, and will go on sucking in, imports in quantities for which it cannot pay in exports so long as prosperity in the rest of the world lags far behind its own.
That is why Washington keeps pressing Europe and Japan to expand their economies. Unless we have more money to spend the modest fall in the dollar, which is all that can be contrived by intervention, will not be enough to enable the United States substantially to increase its exports. But then how can the rest of the world expand their economies while interest rates remain so high?
American prosperity is the good news. The bad news is the deficit on the federal budget. But I would expect—and I have talked to a great many people in influential positions—that when the negotiation with Mr. Gorbachev is over the United States will deal with the deficit. I need not tell your Lordships that there are many good and wise men in the Senate and in the House who are ashamed of the way in which they are telling other countries through the IMF to balance their budgets while doing absolutely nothing about their own.
If I am right about that future course of American politics, what should Her Majesty's Government be doing now? My right honourable friends need not be so reticent about telling the public that our interest rates will come down as soon as the United States reduces hers. Inflation is under control—all praise to the Prime Minister and the Chancellor of the Exchequer. We can afford to cut the real return on Government borrowing, but not until the United States has given the lead.
What are the prospects? Finance ministers and central bankers recently met behind gilded doors in an hotel on Fifth Avenue. Those eminent gentlemen by

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tradition do not like telling the public what they are up to. But we can take comfort from the fact that the United States was willing to concert with others to intervene in the exchange market. That is a very great step forward for the nation which has had the best possible reason to believe that it can do without the rest of the world. Is it not equally desirable to take joint action to reduce interest rates? Whether debtor or creditor economy, either would benefit; world purchasing power would begin to increase and world unemployment—it is no good thinking about only our own—would begin to disappear.
The essential action has to be taken by the United States. But it invited us to join it in lowering the value of the dollar. Is it not right that we should now invite the United States to join with us in lowering world interest rates?
In conclusion, I ask my noble friend when he comes to reply to tell us how Her Majesty's Government see the prospects for a stable sterling exchange and for lower British interest rates. Does he agree that those objects, so much wanted by British industry, can be achieved only by international actions? Will his right honourable friends now work for such action? I pray that the answer is yes.
6.40 p.m.
Lord Hankey: My Lords, it is a particular pleasure to follow the perspicacious speech of the noble Viscount, Lord Eccles. I recall that we used to sit together at the feet of my noble friend Lord Robbins whose death we still so much regret. I should like to begin by saying, strictly from these Cross-Benches, how much I have admired the Government's painful work of controlling and reducing inflation. That work clearly has to be continued and completed. Even Mr. Lawson's optimistic forecast of 3¾ per cent. by the end of next year, while very welcome, is really none too low. Inflation is a most dangerous and insidious disease. However, let us all face the fact that this has been a very painful process for all our countrymen.
Unemployment has risen from a bit over a million to three and a quarter million, made greatly worse, of course, by the world recession. But it must not be forgotten that if industrial and commercial countries as large as the United Kingdom and the United States, which is alone about 23 per cent. of the world economy, damp down their economic and commercial activity with high interest rates and fiscal measures, that has a very restrictive effect on the rest of the world, especially the third world. This is reflected back into our own economy. We find it harder to export. Our businesses cannot employ so many people. It does us indirect as well as direct damage.
I said in 1979 that, while I approved the Government's economic policy, if they did not keep industry going they would not really be successful. I believe that the time has come when the Government should look at this problem a good deal moré from the industrial standpoint. After every past recession in my lifetime our industry has been very slow to recover, much slower than most of our competitors. If industry functions properly and prosperously, we shall have no difficulty at all in meeting our needs for building and repairing council estates, building new hospitals,
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improving the schools, even buying school books, modernising this and that, looking after the pensioners, keeping up the armed forces, et cetera, and, above all, reducing unemployment. The key to all this is industry.
North Sea oil and gas are a prodigious bonus. But, by comparison with the income from the whole of industry, it is rather a small addition to our economy. The Government rightly say that industry must organise its own progress. They are continuing to privatise public sector industry. On the whole, I applaud that and believe that it will continue to be a great success. We are not good at conducting nationalised industries. The politicians interfere, and the Government have done so. The Treasury interferes a great deal and will not allow investment expenditure. It is an absolute dead hand.
The leap forward of British Telecom seems to me extremely encouraging. But we need much quicker industrial progress and the Government cannot order this directly now. I believe, however, that the Government have a really vital duty to study the needs of each and every industry in detail and to knock away the obstacles that impede its progress. I believe that there are a great many local obstacles. In this, the Government have a common interest—I repeat, a common interest—with management, with labour, with the City, and with all the citizens of our great but still sadly diminished country.
I am fully aware of what a lot I am asking. I maintain that it is not enough to study figures of the GDP or money supply, important as those are. What is needed, and it is far more trouble, is to get down to the nitty-gritty of every industry and to alter or remove the factors that impede or prevent its progress. Many of these factors are common to all industry. I shall deal with these later. There are many particular difficulties in particular areas—local difficulties of planning, construction permits or rates, housing for staff, especially new staff, shortage of school or training facilities, local transport, rented accommodation, or room for new factories to be built. All of us—I repeat, all—have a common interest in seeing these difficulties removed so that industry can make better progress.
I am impressed with the fact that the machinery for doing this detailed study is already in existence and is not being used. The National Economic Development Organisation, affectionately known as Neddy, has 45 industrial committees bringing together both management and labour from most of the important industries in the United Kingdom. Not the motor-car industry, for some reason. Certainly, there ought to be one. These committees combine expert knowledge, local and industrial, from both sides of industry. Let the Government turn the starter key and this now neglected engine will leap into life. I do not say that our truck will at once purr along the road of progress, but we shall be shown where we must fill up potholes, remove an out-dated obstacle or two and improve the road of progress generally. With Mrs. Thatcher prodding the driver and organising what you might call the road mending in which labour and all of us, especially the unemployed, have a major common interest, I am sure that the great vehicle of our industry will be truly on the move again. It is high time, very high time, that we did something like this.

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I know, of course, that some people do not like Neddy. But there is now a very new feeling of realism in the labour and trade union world. I congratulate everyone for this. It has a very important connotation. It is time for all of us to grow up out of these vulgar Scargillistic party confrontations. The confrontations spill over into industry and make everything more difficult. They really do not correspond to, or serve, our common interest any more. We are all in this together. We want no more Wars of the Roses.
Our once splendid country is in a dreadful mess, even though our economy is at last making some progress. It is time for the Government to lead us all by the hand to make the better times that we all need. On the industrial front, Neddy is the vehicle that brings us all together, to handle our common interest with common effort and to help advise the Government and Parliament on what must and can be done with common agreement. This requires a greatness of spirit and a new outlook by all parties. I do just hope that they are capable of it.
I come back to knocking away obstacles to progress. There are a few factors that are common to the whole of industry. I feel that I must mention them. They are holding us back enormously. A great deal has been said about them today. Rates of interest are much too high. I know that it is very hard to reduce them in the face of United States rates of interest. The noble Viscount, Lord Eccles, made the point with great distinction and clarity. However, if we are to get new investment, new businesses and new factories started, a reduction is really vital Anyhow, we need stability. Businessmen often postpone decisions when conditions are unstable or uncertain. In this, rates of interest are a major factor.
In my view, we also need much better stability of the exchange rate. I am, of course, aware that you cannot separate the exchange rate altogether from interest rates. The noble Viscount, Lord Eccles, made that point extremely clearly. I press the Government to join the exchange rate part of the European Monetary System to which we otherwise already belong. The new Europe, as a whole, ought to be a sufficiently heavy mass to form an anchor for our currency. We do an immense amount of trade now with Europe. Instability in exchange rates with Europe is a great embarrassment to our business community. For instance, why can we not have an organised float for the whole of Europe?
Another factor which I have mentioned is housing. In my humble opinion it has been rank bad housekeeping not to let the local authorities spend the funds which they have set aside for buildings and repairs and maintenance. I am glad that the Government will now assist in this connection. I do not believe that if the authorities are allowed to go ahead it will cause inflation. We pay huge sums for those men now unemployed who will be drawn into work. In real terms, it will be the cheapest building and repair and maintenance that we have done for years. The rise in morale for the unemployed men and women who will get jobs will be immense. Economics is about men and not just about goods and money.
However, from sad experience I can tell your Lordships exactly what would happen if we wait until
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times are better, to unleash the building industry. The Treasury would say once more that the extra expenditure and demand for labour would put too much strain on the economy and would cause inflation—and the Treasury might then be right. Therefore, I warmly support this small beginning by the Government and I hope that it will be rapidly extended.
We must have houses now—houses where industry needs them. More existing housing really must be brought into the rented sector by the necessary changes to the law. As a former director of a building society, I am extremely conscious of the terrible difficulties which are encountered when there are chains of sales which hold up people so that they cannot move near to the jobs which they hope to obtain. It is a very bad situation for the mobility of labour. The present immobility of labour is extremely harmful to both sides of industry. There must also be spare school places, and teachers must be where they are needed. The matter goes much further than housing. I am sure that Neddy's industrial committees will pinpoint the needs.
I should like to thank the noble Lord, Lord Young, for what the Government are doing to promote training. It is exceedingly important and I should like to think that our educational system can be made much more responsive to the needs of industry. I can certify that at present there if often much difficulty in getting people with the right outlook to take the training which industry has to offer, because their schooling has been of the wrong type, or very inefficient.
To sum up, I do not want the Government to weaken their attack on inflation. I know quite well that, "the lady is not for turning". But with solid successes to build on, I want the Government to go forward now with a full-scale drive to help industry both at home and abroad. Let them deal rapidly and effectively with the general and also the local changes which industry requires. Let them use the National Economic Development Organisation to identify and meet the local and individual requirements of each industry up and down the country. Let them do so soon; let them do so now, for we all have a common interest in their success.
Mrs. Thatcher's Government have already achieved notable victories both on the home front and abroad. However, we now need something much more—real magnanimity in drawing all sections of our people into an effective joint attack upon slump, degeneration, unemployment and hopelessness. We are all in this together regardless of party, class, sex or colour. Let us remember Sir Winston Churchill's famous slogan:
"In war, resolution. In defeat, defiance. In victory, magnanimity. In peace, goodwill".
6.45 p.m.
Lord Mottistone: My Lords, I too should like to add my congratulations to my three noble friends who have made their maiden speeches.
I propose to speak to your Lordships mainly about competitiveness, but I must mention inflation in the first instance. The Government are greatly to be congratulated on the way in which they have brought

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inflation down and kept it down. I welcomed their Statement yesterday which said that inflation would come down to 3¾ per cent. by the end of next year.
Those of your Lordships who, like myself, were involved in wage negotiations during the time of high inflation and prices and incomes policies, will remember how absolutely disastrous it was for industrial relations and how extremely difficult it was fairly to allocate any type of wage increases. I am talking of 10 years ago and, sadly, as that period was 10 years ago it tends to be forgotten. It is extremely important that people remember the happily all too brief period when we had high inflation and prices and incomes policies which were so disastrous in their operation. I hope that we shall take opportunities to remind people of that period when necessary.
On a personal basis, I should like to tell your Lordships that my main source of income, my main pension, is so constructed that I receive either a 3 per cent. increase or the rate of inflation per year, whichever is the lower. Therefore, I am particularly keen not only that the Government should do better than their 3¾ per cent. at the end of next year, but that they should keep it there. As I suspect that noble Lords opposite, of whatever parties, would not keep it there, I trust and believe that they will never sit on these Benches on this side of the House.
I now turn to competitiveness. It seems to me that the solution to our immediate problems depends upon being competitive with all our products both in world markets and at home in competition with imports. All is not bad. I should like to refer to an interesting recent report by the CBI which tells us, for example, that as regards manufacturing exports only West Germany, among the larger OECD countries, exports significantly more than we do per capita. For example, the United Kingdom exports one-third more per capita than Japan. The United Kingdom exports are also highly diversified both by product and by market. In some areas we are particularly good: we hold more than 20 per cent. of the world market in light aircraft, aircraft parts and engines; alcoholic beverages—and I hasten to add that that is very much a manufacture—and piston engine generators, all of which are manufactures of the type which people are perhaps beginning to think that we are not good at. We are good at them.
What the CBI calls for is that our share of the world market across the board should grow from 6 per cent. to 9 per cent. in manufactures and from 8½ per cent. to 12 per cent. in services. It also calls for a growth in the economy of 4 per cent. per year. The Chancellor told us yesterday that growth this year would be 3½ per cent. and that in the succeeding two or three years it would be 3 per cent. That is not quite good enough. I trust that my noble friends will give thought to explaining why they cannot do a bit better in that area. Perhaps it partly depends upon the manufacturers getting their extra share of the world market. I do not propose to touch on this matter, but it comes back to that part of the argument which concerns interest rates, upon which my noble friend Lord Eccles so wisely expounded.
Fundamentally we have a problem in this country. I was reminded of it by the CBI's booklet, though I am also reminded of it for other reasons which I shall
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describe. I am referring to the fact that for the past 100 years or so the question of manufacture and trading has been treated as a rather dirty activity by all of us, whoever we may be.
I am reminded of it particularly because it just so happens that at this moment—and I have been prevented from attending it—a good friend of mine, Mr. Kenneth Adams, whom some of your Lordships may know, is giving a lecture. He was the Director of Studies at St. George's House for many years, and at that time he initiated a series of consultations, as they were called, in order to persuade people (and that is people of all sorts and types) that trading and manufacture are absolutely at the root of this country's survival.
We can only survive as members of a democratic nation if we have an understanding of our utter dependence on successful and efficient manufacture. Kenneth Adams and various other people—for that matter, some of your Lordships—have worked for some time to try to rectify the lack of this understanding and to explain particularly to parents and schoolteachers, as well as both sides of industry, that it is a vital factor. As your Lordships will know, this led to Industry Year 1986.1 am hopeful that that will turn out to be a successful venture, and I mentioned Kenneth Adams because he is at this moment delivering a lecture to the Royal Society of Arts entitled, "The Encouragement of Manufacturers and Commerce in Britain Today" in the context of Industry Year 1986.
In addition to all businesses working positively towards working together, which other noble Lords have mentioned, and breaking down the antipathy to trading, which I have mentioned, they must overcome the "them and us" divide. This is one of the factors which the CBI identified as one of the major British weaknesses, especially in big companies. I noted with interest that my noble friend Lord Young told us yesterday that one of our problems was that we had the lowest rates of self-employment and business creation in western Europe. But now we have a better position than for 60 years, and I welcome that.
The CBI tells me that the numbers of self-employed people are increasing at the rate of 5 per cent. per annum. This is hopeful not only for the self-employed but for the growth of small companies, because they will find it easier to get on together. I hate to say it. but the major industries with the old-fashioned trade unions have great difficulty in conquering the "them and us" divide because it is not in the interests of trade union officials that they should conquer it.
From this we really have to tackle the problem of unit labour costs, which were mentioned in one of the Questions today and which in the United Kingdom are higher than in our major competitor countries, with an annual increase of 5.8 per cent. to June 1985. In the same period the Netherlands had a decrease of 1.9 per cent; the Japanese a decrease of 0.2 per cent; West Germany an increase of 0.9 per cent; the United States of America an increase of 2.4 per cent; Italy an increase of 4.1 per cent; and France an increase of 4.8 per cent. In 1983, which is only two years earlier, the United Kingdom corresponding increase was 0.8 per cent. I suggest to your Lordships that this is an

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extremely bad sign of the tendency of our wage negotiations. One of the main reasons for this return to the bottom of the unit labour costs league is that our wage demands are ridiculously excessive. I have recent—within the last fortnight—information that trade union officials still concentrate on comparability with other industries and comparability with a minimum wage target (which was debated at this year's Labour Party Conference) instead of giving priority to what a company can afford if it is to compete.
To give your Lordships an idea of why this matter is so important, I can quote figures recently provided by the chairman of a major British company to show how the wealth created by his company has been distributed. The proportions were averaged over the last 10 years, and he believes that the national picture is similar. The proportions of added value were as follows: employees, 70 per cent; reinvestment, 20 per cent; lenders, 5 per cent; and tax, 5 per cent. Furthermore, only 1 per cent. of the added value going to employee benefits went to persons earning more than £20,000 a year.
An excessive wage demand, therefore, takes far more than it should, usually at the expense of reinvestment. Your Lordships may remember that the noble Lord, Lord Bruce of Donington, in a supplementary question earlier today, was drumming into my noble friend on the Front Bench that reinvestment was an important part of competitiveness and of unit costs. The fact is that the reinvestment itself can be badly affected by ridiculous wage demands if they are satisfied.
In any case, it is ridiculous to pay people a wage increase of, say, 2 per cent. above inflation when they have not earned it, just because they think that somebody else is getting such an increase. I suspect, from what I have heard, that employers have weakened in the last year or so in a way that they did not in the earlier part of this decade. That is bad news, and it needs to be put right.
Perhaps I may mention a couple of small points. I welcome the introduction of commercial management to the naval dockyards reported in the gracious Speech. As your Lordships will know, I spent many years in the Navy, and it was abundantly clear that because there was no competition in the naval dockyards their efficiency was ridiculously limited. I can tell your Lordships that the only decent refit that I had in the whole of my something like 35 years' service was in Singapore, where they were properly managed and gave us a refit of which we could be proud. If you went to a commercial yard in this country, or more especially a yard in the United States, the comparison was so odious—and I am talking of 30 and 40 years ago—that nothing could be better than to have commercial management and a measure of competition introduced to the naval dockyards.
Another small point arising from the Statement of my noble friend Lord Young yesterday is that I welcome the additional £2·5 million that he is giving next year towards local enterprise agencies. I hope that he will be able to read what I am saying and tell me in due course whether the Isle of Wight will be included in that £2·5 million. We can do with it, and our enterprise agency is doing a jolly good job.
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Turning quickly to unemployment, of course it must be brought down. The various measures of the Government, including those announced yesterday, will help a lot more than the Opposition will credit. It is in the interests of the Opposition not to do so, but sometimes one gets to feel that they are a bit more mean than they need be.
I especially welcome the pilot schemes for counselling long-term unemployed persons announced yesterday by my noble friend Lord Young. Some 10 years ago I suggested to your Lordships that unemployed people must be treated as individuals and not as statistics. I recommended at that time that their re-employment be seen as a responsibility of the local authority rather than central Government. I still think that that would be a good plan, because then people could be known by their names, known by their families, and all sorts of help could be given to them which central Government are not so able to give. However, there have been great improvements over the past 10 years in the work of local offices, particularly since they were taken over by the MSC. It is likely that this new plan for a counselling scheme will help even more.
However serious the employment situation is, we must remember that the proportion of people of working age actually in jobs is higher in the United Kingdom than in France or Germany. There is a higher proportion of women in the labour force than in most other countries. In the EC the United Kingdom had a lower percentage in June 1985 than Italy, the Netherlands, Belgium and Southern Ireland. In addition, the CBI reports that shortage of skilled labour is far from widespread in manufacturing industry and shortages of unskilled labour are almost non-existent. However, it has to be admitted that 15 per cent. of the firms reporting to the CBI expect skill shortages to continue to restrict output still further.
All sorts of evidence from sources other than those of the Government, to which I have referred from time to time in this speech, proves that things are changing and improving, and are doing so faster than the statisticians can cope with. I welcomed the cheerful and hopeful Statements yesterday from my right honourable friend the Chancellor and my noble friend Lord Young of Graffham. I am full of confidence that the number of persons unemployed will start to drop during the coming years. Therefore I strongly recommend your Lordships not to support the amendment of the noble Lord, Lord McCarthy, if he is unwise enough to move it.
7.12 p.m.
Lord Houghton of Sowerby: My Lords, like other noble Lords, I thoroughly enjoyed the three maiden speeches that we listened to earlier in the day. It was fascinating to see how, when Members of another place come to this House, they are converted from politicians into statesmen. That is a good thing.
My reaction to the Queen's Speech was directed towards a reference to reductions in income tax. It is unusual for the gracious Speech to refer specifically to the need to reduce taxation, or at any rate to reduce a particular tax, as this year's gracious Speech does. The Prime Minister, in her speech on the Address in another place, gave prominence to this by referring to

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the low thresholds of tax liability and giving examples of the actual tax burden which is borne by typical workers of different kinds who generally receive public sympathy, such as nurses, for example.
I take it that anything mentioned in the Queen's Speech is in order here, though when I rise to talk about taxation on the Finance Bill that always seems to strike a sensitive nerve on the Front Bench opposite. Noble Lords wonder what exotic procedures I am about to embark upon, such as calling a Division on Third Reading, or something of that kind, which might excite the moribund hatred of another place to your Lordships' House. I think we can cease to have fear of what another place might attempt to do to us. We ought to be bolder in future in giving more adequate consideration to the Finance Bill, particularly those parts of it which relate to the liberty of the subject but which are embargoed by Mr. Speaker's certificate that it is a Money Bill.
When we consider next year's Finance Bill, if it contains some of the recommendations of the Keith Committee on tax enforcement, questions about the liberty of the subject will arise: for example, the recommendation about a taxpayer who has been discovered fiddling his tax affairs but who they do not feel was so wicked that he should be prosecuted. The suggestion is that unless he has made a full voluntary disclosure the Inland Revenue should have power to pillory this man or this woman by publishing his or her name in the newspapers and indicating what the delinquency was. If we get that recommendation we really ought to have something to say about it. On an earlier occasion when we had a debate on the Keith Committee's report, I said that I thought we ought to move an amendment to put these people into the earlier form of punishment, the stocks, and throw rotten tomatoes at them. It seems that anything goes on enforcement if it is certified as being in order in a Money Bill. However, I shall leave that. The time for further activity on it has not yet arrived.
I want to refer to the need for lifting the threshold of tax liability in the income tax scales. That is very necessary and quite urgent. But for the speech of the noble and learned Lord, Lord Simon of Glaisdale, on what I would call the Stockton legend, I should have gone into that as well, but any who wish to see the Stockton silver sale adequately dealt with should read the speech of the noble and learned Lord. However, I fear that it may go into financial gossip. I read in the Financial Times today of the Stockton silver. We also remember that the noble Earl once said, "You never had it so good"; and that stuck for a very long time.
I need not dwell on that either, because it has been adequately dealt with; so I now come to what I think is wrong with personal taxation. Any noble Lord who has studied the matter fairly closely will realise that our tax system is an awful conglomeration of political and fiscal policy. It has lost its discernible principles and contains much social injustice. There is no doubt about that. Another thing is that the income tax system was never devised to be a burden on the poor. I do not think it was ever contemplated, when we abolished purchase tax and went in for a comprehensive VAT, that the tax system would run parallel with VAT at the level that the combined taxation system now imposes on the public.
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I doubt whether we ever dreamt that the wartime expedient of taking tax out of pay packets would distort for a generation attitudes towards rewards for work and service. What we have done is create a phantom figure representing a sum of money which one never sees, never handles and never spends. That is called gross pay. This phantom amount is to be continued indefinitely, so it seems, under our present system. It will have no real meaning whatsoever in the economics of family life or personal spending, because people live on take-home pay. It is the take-home pay that is the stimulus behind wage demands, not gross pay. What people have to live on is the stimulus behind demands for pay increases.
Thus the tax system has created a scale of national values which now permeates the whole of our pay system. When one looks at tax at the present time, for the current year, it begins to bite for a single person at £42 a week. Next year, when the allowances have been indexed and increased, it will be £45 a week. That is the starting point of tax for a single person. For a married man, whose wife is not working, the starting point is £66 a week this year and will be £70 next year. Those thresholds of tax liability are far too low. I think that we shall want to know whether the new job start allowance of £20 a week will come within the taxable income of the recipients. Will it be added to the tax on their pay packets? If so, there is further confusion. We reduce national insurance contributions to make lower paid workers cheaper. We will pay them an allowance to help them live on pay which would be rather low without it, and, at the same time, we may be levying tax on the combination of their pay and the £20 a week allowance. That is a nice dog's dinner in taxation if you like.
If we are to aim at restoring real money and giving positive encouragment, especially to young people, to embark on careers on rates of pay which are not necessarily as high as they have been or as high as they would like, then one way of alleviating that situation is to get tax out of the lower ranges of pay. I think we must widen the gap between social security for those not in work and the pay for those who are. One way of doing that is to take tax out of the remuneration at that particular point.
I think young people are finding difficulty about work because there are many jobs being advertised at the present time for those with skills or experience. The difficulty is to get a job if one is just going to be a kind of apprentice, a learner, having to be taught and trained. The employer is taking the view that one is then not really worth the adult rate of a skilled worker. Such people are finding jobs hard to obtain and often jobs are at rates of pay which do not particularly attract them because the gap between what they are receiving for no work and what they would receive for a full week's work is not very favourable.
I think that the Chancellor of the Exchequer intends to do something with income tax in the next Budget. If the gossip columns are anything to go by, there is a discussion taking place in the Cabinet at the present time as to whether the reduction should be by lifting the threshold or by a reduction in the standard rate of 30 per cent., or a combination of the two. There is no news in Cabinet harmony. There is always plenty of

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fun in a Cabinet split if there is one. If the noble Lord, Lord Young of Graffham, is on the side of lifting the threshold, all I do is declare that I am on his side.
It would cost over a billion pounds to reduce the lowest rate of tax by lp, and that would do very little for the lower end of the scale. My noble friend Lord McCarthy was very scathing about the economic advantage of a tax reduction in the standard rate. I do not think it is absolutely necessary to look outside the tax system itself for some of the resources needful to give tax concessions. I think it is becoming quite indefensible that tax should reach down so low while at the same time we give such generous benefits to those who are buying their houses on mortgages and those who are in occupational pension schemes. They are over-generous tax reliefs and they are purely political. I think the politics of taxation ought to take into account the claims of other people as well.
Thus I believe that the need for reduction in the tax on particularly the young people and the lower paid people, both single and married, is a matter of some urgency and of great importance. It would cost quite a lot of money to lift the threshold allowances by 20 per cent. However, if that could be done it would take something like 1¾ million people out of the tax net altogether and they would pretty well all be, or could be, in the lower ranges. It is not necessary to carry threshold concessions all the way up to the top. They can be used as a means of limiting the benefit in the higher ranges of incomes and taxation.
That is what I offer to the Chancellor of the Exchequer for what it is worth. I have no doubt that every little bit of support that comes his way one way or another will be welcome. However, I emphasise that I am not in favour of raiding capital resources, or anything else for that matter, to make tax concessions in order to preserve some of the preferential treatment given to taxpayers within the system. We should bear in mind that whatever concessions are given in direct taxation will certainly have a spin-off so far as VAT receipts are concerned. With that, I beg leave to put my offer of support to the Chancellor of the Exchequer and to the noble Lord, Lord Young of Graffham, on the table.
7.29 p.m.
The Earl of Onslow: My Lords, it is extraordinarily pleasant to offer congratulations on three such excellent maiden speeches. It is extremely lucky that the noble Lord, Lord Kimball, did not talk about fox-hunting because the noble Lord, Lord Houghton of Sowerby, would then not have been able to congratulate him. What is even more odd is that I am going to follow, and I hope develop, exactly the same theme as that on which the noble Lord, Lord Houghton, has been talking.
I do not know whether your Lordships are aware that if you were a Lesbian living with another Lesbian, with one child each, in April 1984, if you earned £45 a week each, you would have a total income support of £145·62. If you were a respectable married man earning £85 a week, with two children, you would have a total income support of £107·14. If, by peradventure, one of these mythical Lesbians left her
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friend and a mythical homosexual male walked in, she would lose out because the cohabitation rule would apply. I am taking my mockery of the present tax and social security system almost to the edges of decent taste because I think that it has the most terrible effect on the mobility of labour and the fairness of the present system of taxation.
In the Queen's Speech of 1979 tax reform was promised. It was acknowledged that the tax on high earners was a disincentive, and that has been very fairly rectified. Corporation tax has been equally fairly rectified and made a much more sensible tax. The noble Lord, Lord Wolfson, also commented on the lower limits of the tax brackets as being where the unfairness lies.
It seems to me imperative that the tax system is reformed at the same time as the social security system. It is idiotic to have one little Noddy in a pinstriped suit taking money out of your right-hand pocket and handing it to the Treasury who then hand it to the Department of Social Security and to another little Noddy in a pin-striped suit who puts it back in your left-hand pocket. That is exactly what is happening at the moment. Unfortunately, the Green Paper on social security has not met this point.
There is a book published by the Department of Health and Social Security called The Department of Health and Social Security Tax Benefit Tables which has some absolutely fascinating figures. I am literally opening this book at random. If you take a married couple with one child aged 3 and the man is earning £44 a week, his total income support (which includes tax, national insurance, family income supplement, child benefit, rent, rent rebate, rate rebate, fares to work, free school meals and free welfare milk, averaged out) comes to £62·72. If he pushes his wage up to £122—and 25 per cent. of manual male workers earn less than that according to the Department of Employment's lastest figures—his total income support is £72. This is absolutely crazy. By pushing his wages up by £80 he is about £6 a week better off. What is the result of that? The result is that he puts in an inflationary wage claim which ruins the business he is in or knocks the hospital's budget sideways, and it does not in any way make his life or standard of living better.
We have acknowledged the importance of the work for the top end of the scale and we have acknowledged it for corporation tax, but we still seem to be incapable of acknowledging it at the middle and at the bottom end of the income tax scheme. Just for fun, I will open the book at another page. I come to a married couple with two children aged four and six. If the man's wage goes from £130 to £ 131, the marginal tax rate on that extra £1 is 254 per cent. What crazy goon is running a system like that? I am sure that it is not my right honourable friend Nigel Lawson. We must do something about this. If we could do something about it we would then get mobility of labour, we would bring incentives back into work and we would make sure that it was worthwhile for people to work.
There is a system which has been proposed which can help pay for this. I go back again to the point made by the noble Lord, Lord Houghton, about the mortgage tax relief and the pension funds. Together, they collect a combined £10,000 million a year in tax

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relief. I think I am correct in saying that mortgage tax relief came in because under schedule something-or-other you paid tax on the notional rent that you paid yourself for owning your house. That was all considered unfair, so it went out of the window. But they did not go on to say, "Because you have a mortgage, the notional rent that you pay yourself has a cost, so you allow your mortgage interest against it". It came in because it was very nice not to pay tax on the notional rent under the schedule, but it was politically unpopular to throw away the relief on the mortgage interest that you paid.
Of course I am not suggesting that it has got to go now. What I am suggesting is that it has to be phased out gradually. All that we do by doing these things—and the £4,000 million that is on pension fund releases—is to distort the investment market. We make sure that if you buy your own stocks and shares and possibly leave them to your children, you get taxed to the hilt: if you do it through an institution, you do not get taxed. Our mediaeval forebears were very wise on this subject. They passed things called statutes of mortmain, which meant that you could not leave your money, goods and chattels to the dead hand of the Church. I suggest that we are now encouraging our citizens, not so much to look after themselves and take their own decisions, but to do their saving and investment through the dead hand of the Pru. I have nothing against the Pru. If one wants to do it, one should do it by all means: but one should do it on equal parity with any other form of saving.
If we could go to what is called a basic income guarantee scheme, we would have a system whereby everybody got something equivalent to child allowance and there would be age, incapacity and housing allowances. I will not go into it in too much detail; it is fairly well known. Then you tax all income above that. In that way you would have a fairer and more incentive scheme which would do something for the rigidities of the labour market. And, above all, it would do something for the fairness of the tax system. I feel very strongly that we have got some parts of our tax system fairer and better but we have not got the rest fairer and better. Until we do so, we will not really get ourselves out of the muddle of unemployment. It is essential for unemployment and mobility of labour that we encourage people to work and that we do not have silly things like 254 per cent. tax margins.
7.36 p.m.
The Viscount of Falkland: My Lords, it may not surprise your Lordships to hear that that part of the gracious Speech which caught my attention was the mention of wider share ownership. I think it is well known in your Lordships' House that we on these Benches attach a great deal of importance to wider share ownership as a means of broadening the owning of assets in this country. It was a fleeting mention; nothing much was said about it in the papers the next day; but I was encouraged this morning when the Chancellor was being interviewed about his speech yesterday to hear that again he mentioned wider share ownership. I will not criticise the fairly superficial way in which this complicated subject has been tackled so far. It is encouraging at least that this is seen as an
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avenue which we can go down to broaden the asset ownership in this country which is at present so narrowly held.
Apart from that mention this morning, I was dismayed—and some noble Lords may share my dismay—to hear the catalogue of good things which are going on in our economy as they came from the Chancellor's mouth yesterday. He must be living in a different world, as the noble Lord, Lord Young of Graffham, said he was living in a different world; I think I am living in a different world from that of the Chancellor when he tells us that all seems to be well in our Kingdom, when we know full well the social situation in this country.
Social and economic balance, surely, is one of the essentials of a democracy working correctly. The social and economic balance of this country must be out of kilter. We have inexplicable violence in places intended for recreation and pleasure; we have racial tension growing again to an extent which is alarming to all sections of society; we have the desolation of our inner cities. We know the kind of society we have and most of us have a clear idea of the society that we want. It was here that I was disappointed with the economic content of the gracious Speech. It seemed to me that Government strategy, as expressed in the gracious Speech, lacked a relevance where achieving the social and economic balance is concerned.
It seems to me that in a capitalistic, free enterprise system—which is largely what we have, though some of us are loath to recognise it—the creation of wealth is of paramount importance. The creation of wealth is that upon which depends ultimately the standard of living of our people. The assets on which you concentrate your wealth creation can lead to a different emphasis. I think that your Lordships will have the opportunity next month to debate the report of the Select Committee on Overseas Trade. Views will then be expressed on what emphasis we ought to be placing on the assets that we have and what wealth we should be expecting to produce from them.
However, generally speaking, there are three different ways of controlling your wealth. First, it can be done by state ownership. We know all about state ownership; we have seen it operate. It was a socialist principle which was put forward here. State ownership is less fashionable than it was and it has been seen not to work successfully in many third world countries and in countries nearer home. In state ownership there is of course one capitalist: that is the state. The benefits that accrue to that capitalist are passed out in benefits to the people to meet need. That is one road we can pursue.
Then we can have concentrated ownership, which is basically what we have now. It is the narrow ownership of assets, becoming narrower and narrower. Here again, in order to spread the benefit of these assets the Government are forced to think of ways of distributing them by means of transfer payments in order to create in society the equalities they would wish to see.
However, we on these Benches would wish to see a development along the lines of expanded ownership: that is to say, a positive, planned broadening of the ownership of the country's assets. Wider share ownership is the obvious initial path down which to go

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to achieve this. But exercises such as the recent one concerning British Telecom—my noble friend Lord Taylor of Gryfe mentioned that in his excellent speech—have only scratched the surface. Many of those who became new share owners have reverted to their former state and no longer have shares. As my noble friend put it, "The stags have already left".
There is a big cultural gap to be bridged in our society and so far, unfortunately, it has not been done. I am anxious not to criticise this point too much because I think the Government have already gone some way towards considering this particular way of broadening the assets. It is a question of basic approach. Perhaps when it becomes a more obvious way to redistribute assets and new wealth, the Government will pay heed to some of the excellent work which has been done by the Alliance, and particularly by the Liberal Party—I must give credit to them—over a long period of time.
A further commitment to employee share ownership by way of tax concessions would be an even more hopeful sign. Employee share ownership is something that we do not hear too much about. It is a complicated area, but it seems to me to be an obvious field for creating a new sense of involvement and purpose on all sides of industry and commerce. A nation which is committed to a private enterprise system, as I believe it should be, must surely conduct its policy as regards tax so as to give every assistance to the electorate to have a personal stake in that system. It is surely a foolish and short-sighted strategy for any Government to preside over a situation where the principal wealth expectation of the citizens comes from Government transfer payments by way of unemployment benefit or welfare entitlement. The best way to reduce Government spending is surely to reduce the need for it.
Our aim must be wealth creation and to encourage companies to finance newly created capital. I am not advocating here the taking away of wealth already created, but I am advocating a way of spreading new wealth in order to create, among other things, purchasing potential. In our society purchasing potential is often created in an inflationary manner. The only way to create purchasing power among people in a non-inflationary manner is to spread the assets, and the rewards from the profitability of the assets, among a greater number of people.
I do not believe that a democratic system such as ours, with all the institutions which maintain it, can survive indefinitely. Many of your Lordships may not agree with me but I think that the system cannot survive indefinitely—unless the majority of our citizens enjoy an increasing degree of economic independence. In a capital intensive economy the right to a decent standard of living surely involves more than just the right to work. We hear a lot about the right to work. To receive a fair day's pay for a fair day's work is an excellent principle, but surely it must also involve the right to participate according to the current state of your technology.
The increasingly dominant role of capital in the productive process—and let nobody make any mistake about it: it is not confined just to us but is happening all over the developed world—as opposed
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to labour, is a reality in a competitive world. Surely urgent steps should be taken now to expand the ownership of capital and the rewards of its productivity. It is a reality—an unpalatable reality, I think—that capitalism is based on production for profit and not for employment. Companies value their earnings above everything, rather than the jobs they create. That is something I think people need to bear very carefully in mind. The present terrible plight of the increasing number of unemployed is surely the result of a failure to grasp the inevitable shift of economic emphasis from labour to capital. Job creation alone is just not adequate. The full employment approach, which some people still advocate, really does not make sense, because it does not recognise the extent to which productive capital is now the most important factor in production and in producing the goods and services of a modern economy.
There is of course the "Alice in Wonderland" approach, and I will touch briefly on that in conclusion. We have heard it said that in this country we have become a nation of hoteliers and amusement park operators (beefeaters were mentioned publicly by a Member of your Lordships' House) because they are the only things left, along with the speculators of course—that is for those who are lucky enough to have anything left to speculate with in this horrifying situation. Of course, it is nonsense. The terrible social consequences of abandoning our traditional manufacturing and becoming entirely devoted to being a tourist paradise are just too terrible to imagine.
My final remark, my Lords, would be this. To raise the quality of economic opportunity in this country is absolutely essential. If you raise the equality of economic opportunity on a broad base, then perhaps many other pressing social problems will suddenly become easier to solve.
7.48 p.m.
Lord Elibank: My Lords, I should like to return briefly to the main subject of this debate, the subject of unemployment. One of the surprising features of unemployment and the sudden rise that has occurred over the last decade or so is how it has taken us by surprise. When I think back to my youth—and I am sure this goes a great deal further back than that—we were being warned by writers, economists and forecasters that we were advancing to what was often called "a post-industrial society": a society where machines would do the drudgery and where men would be free to do what they wished, to follow their hobbies and to lead a fuller life. It has been held up to us as a most attractive advance for the human race. But what is the reality? This has not come to pass at all. In fact we have heard a number described variously as 3 million, 3½ million or 4 million of unemployed. It is a grave national problem and a source of constant misery to a large minority of our population.
So what has gone wrong? I think the principal thing that has gone wrong is the rate of change. I believe that, if these developments had all happened over 30 or 40 years, we, as a society, could probably have coped with them, but because they have all happened and there has been this rate of increase in unemployment in a mere decade or less, there has

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really been something of a breakdown in our society. When we look at our rivals who have managed these things rather better and whose rates of unemployment are noticeably lower than ours, we realise that they have bought for themselves rather more time in which to solve this problem. They will be able to take perhaps 20 or 30 years, whereas we have been precipitated into it in half a decade.
If we ask ourselves why they are more favoured than us, I am afraid that it comes back to the old explanations of our poor economic performance since the war, variously attributed to bad management, blind and inflexible trade unions and inappropriate policies of the Government of the day. I think that one places the blame according to one's political persuasion.
There are two aspects of unemployment that particularly concern me, because I can see no obvious remedy for them either in the short term or in the medium term. The first of these is what is to happen to the lower 25 per cent., say, of our population—lower in the sense of intelligence and education. These two groups do not necessarily overlap, but they do substantially. They have been protected up to now by the number and level of jobs available, mostly in manufacturing. As the manufacturing base decreases in size, they can to some extent move over to the service industries. But that is a temporary palliative and even if I conceive the most benign Government, with large reserves of cash to spend, I cannot really see how they can profitably benefit this sector of our population.
The other preoccupation relating to unemployment which worries me particularly is the divide of the country into North and South—them and us. In the South, apart from a few inner London boroughs, we enjoy a high measure of prosperity. In the North, they do not. It is becoming increasingly an industrial and a business wasteland. If this persists for a short period of time no doubt we shall be able to adjust as a nation, but if it continues decade after decade I have grave fears for the unity of the nation and for the common outlook of the British. When you think how much more attractive it would have been if, by a freak of nature, it had been possible to bring the Channel tunnel out in the North-East, you realise that is the sort of opportunity we must seek. But of course we cannot distort geography.
When one contemplates the problems of unemployment, one also tries to think constructively of ways of alleviating it, and one of the popular ways which we have heard discussed in this House tonight is the investment of vast sums of Government money. I am no economist, but I feel instinctively, I suppose, that there is a relationship between the investment of money, the rate of inflation and the number of jobs created. To me, it seems self-evident that any Government can invest only so much in the creation of jobs before the level of inflation becomes intolerable. I do not believe that these three factors have an arithmetical relationship and so one can only offer a subjective viewpoint, but, in my view, a Government would do extremely well to create a quarter of a million relatively short-term jobs before the level of inflation became intolerable.
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It is often said that money should be spent on infrastructure—large construction projects. Times have changed. The times when you could employ hundreds, or maybe thousands, of men on building roads and on repairing sewers have passed. By and large, these jobs are done by huge and expensive machines operated by a small band of highly trained technicians. If your Lordships are motoring down a motorway at any time and pass a contraflow system indicating that a repair of the highway is imminent and then motor down several further miles without any perceivable human activity, you will come upon a small group of men and a very expensive collection of machines. That is how the highways are constructed and repaired and that is how most major engineering projects are operated in this modern world.
It would be theoretically possible, I suppose, to forgo the possibility of expenditure on machines and elect to return to a more primitive system where gangs of men did the work. Then, again, I think we should have a problem. How many of the unemployed who are at present modestly cushioned by the state would forgo that benefit to take up picks, shovels and other rather primitive instruments in order to work in gangs on construction projects? This does not seem to me at all a realistic alternative.
So where is the money to be spent? The only way that I can see that must be wholly good, wholly productive and wholly certain of producing a beneficial effect is in education and training. So far as education is concerned, this is primarily academic but there, again, one has to sound a cautionary note.
Much has been said about the value of vocational training. One has to be very careful when working up to the university stage, because the risk is that the undergraduate will embark on some form of vocational training which, at the end of his period at university or polytechnic, will no longer be required by the market, and, even if it is then required, 10 years later it may not be.
So my feeling is that academic education should be as broadly based as possible—a reversion, if you like, to the old-fashioned thinking that the classics were the best form of training for the mind for a previous era. And, of course, once the graduate or polytechnic student has qualified and embarked on his career, he will need substantial injections of specialist training in the course of it. But these forms of specialist training will have to be flexible and adaptable to the changing needs of the industrial society. Much has been said in the past about the fact that it will be extremely difficult for future generations to follow a single career right from graduation to retirement, and I think that that cannot be emphasised too strongly.
The other form of preparation, apart from the academic, is psychological. We have been brought up to think of the nine-to-five type of job, whether on the factory floor or in business, as the ideal. A man having such a job is considered a success, while a man not having such a job is broadly considered a failure. Employment in the future will change. It will change to part-time employment, to employment for part of the working life, to employment from the home, to employment in a consulting capacity, to work in a small business at irregular hours.

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It is very important that this message about the employment of the future is put across to our young people right through their academic careers, beginning as early as possible. To the extent that they look forward to a nine-to-five occupation, they are, in my view, doomed to disappointment. This is a form of work pattern which is already obsolescent, and which, at some point in the next century, will become totally obsolete. In this connection, the monthly employment statistics that are produced by the Government, and that are really a major political football in our life, are singularly unhelpful. They direct workpeople's eyes to the past, to a golden age of full employment which is extremely unlikely ever to return. They should be looking to the diversity of employment opportunities that the future will offer them. In my view these statistics are an obsolete standard which we could well do without and which we should be well advised to remove from the prominence in our lives which they presently enjoy.
8 p.m.
Lord Granville of Eye: My Lords, I was very interested in the speech of the noble Lord who has just spoken and in his reference to the North (to which I hope to refer later), which is going to be our great problem, and also in what he had to say with regard to trained engineers. In any newspaper today one can find six or seven pages advertising vacancies for skilled engineers, and probably one of the mistakes we made some years ago was not to concentrate more on their training.
We have had three very remarkable maiden speeches in this debate and I wish to add my own tribute to those of other noble Lords who have spoken. We also heard another speech from the Secretary of State for Employment, who has had quite a marathon in the past two days. The noble Lord has made a very interesting progress report, but if we cannot revive these great manufacturing industries in the North and in the West Midlands, if we cannot revive those factories and give them new ideas, new designs and new plant, they will be left to taking in each other's washing.
I went to the Cologne industrial fair where I met many buyers from all European centres and nationalities. I asked them why, when we are all in the Common Market and with this enormous adverse balance of trade in manufactured goods, they do not buy British. I was a little startled at some of the answers which the buyers there gave me. The answers were: "You cannot deliver on time"; the usual one, the English disease, which was on television day and night—the miners' 12-months strike; and, "Your prices are too high". I asked them why they said this and they replied, "We understand why it is, but don't ask us to buy your goods. You have serious industrial problems, employment problems, political problems and television problems".
I asked them what they meant by that. They said, "Well, your Government make a statement in the House of Commons. It is repeated on television in the six o'clock news. Within seconds it is immediately contradicted by other important speakers who say that it is all wrong and that you don't have to accept it".
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One said, "You are really going through a period in your country of government by see-saw on television. Remember that television is the biggest sales agent in the world". We went for a meal and I asked one man to develop what he was telling me. He said, "Why do I say you are suffering from government by see-saw? Your Government announce a policy of privatisation. The Opposition announce that they will renationalise. How can we depend on this in two or three years' time? This really is government by democratic seesaw". How can we get a national effort in our country if what this friend of our country says is true?
We never had that in 1931. We ought to look back occasionally to 1931. In 1931 there were 3 million unemployed; we had an international crisis and problems about the gold standard, but we had confidence. The word "confidence" was vital then. Whatever may be said about Ramsey MacDonald's National Government, the pound, which was collapsing, revived the day after they were formed, because there was confidence abroad. In a country such as this, with its great manufacturing industry, it is absolutely vital to restore that confidence.
I have listened to the Government's statements on the policy they are carrying out. The noble Lord, Lord Elibank, referred to it in his speech. Looking at those great industries to which he referred, and despite the wonderful maiden speech of the noble Lord, Lord Elliott of Morpeth, can we hope to revive those areas of the North and the West Midlands by taking in each other's washing? I always remember what the noble Earl, Lord Halsbury, said in a remarkable speech. He said that when you are reviving these new companies today—companies which cannot compete abroad or are falling down on their export trade—management is an art, not a science. Perhaps we need that. Perhaps we need more skilled managers in industry and fewer accountants, and, as the noble Lord, Lord Elibank, said, more trained engineers. Above all, we need the co-operation of the shop floor if we are to achieve the maximum productive effort to get that balance of trade with the EC put right.
However well intentioned one may be towards the policy of the Chancellor of the Exchequer and the Secretary of State for Employment, the vital problem remains how to achieve co-operation on the shop floor, as the noble Viscount, Lord Falkland, said in his speech. Why not take a leaf out of the Liberals' policy on this? With a hung Parliament in the future it may be the price of co-operation—it may be inevitable—so why not now? I very much hope that the policy the Government are pursuing will give some hope of revival to the industries in the West Midlands and the North of England, but I doubt it. The industries in that part of the country must be revived by modernising them and by implementing the kind of co-operative social policies which the Japanese have in their factories. However much we may hope that the Government will succeed, something definite must be done.
Some years ago, I paid a visit to the Gulf and to Qatar. The Emir of Qatar is now making a very important state visit to this country. Qatar is a wonderful country and we have a marvellous opportunity to develop our exports there, but will we follow it up? It is vital that we should do so.

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I ask the Government to give serious consideration to what was said by the noble Lord, Lord Elibank. What are the Government going to do about the North of England and the West Midlands? Nothing will be achieved by just taking in each other's washing. Instead, with co-operation on the shop floor, the Government must help and revive the great industries there, so that they may again employ the great numbers they employed before the war.
8.11 p.m.
Viscount Caldecote: My Lords, I listened very carefully to what was said by my noble friend Lord Young when he opened today's debate. I wish that he was here now, because I would have wished him well and every success with the great responsibilities he has recently taken on. I was encouraged by much of what he said and by the actions which the Government have taken and about which the Chancellor spoke yesterday. However, because I believe that not enough is yet being done I shall be making some rather critical remarks. Before doing so, I want to make clear that no one has greater admiration than I for what this Government have achieved under the leadership of the Prime Minister in controlling inflation and the trade unions and in encouraging enterprise. They have done a marvellous job and nothing can detract from that.
When I first became a Member of your Lordships' House nearly 40 years ago, I was working in a shipyard on the north-east coast. I have a vivid recollection of asking one of my friends who was a foreman there what he did before being employed by that yard in 1937. He told me that he had been unemployed for eight years and something about his experiences. Perhaps that is why I feel rather strongly about unemployment. His description of it made a great impression on me.
The depression of the 1930s and all the unemployment that came with it was increased and prolonged by severe deflationary policies. The depression was ended very largely by the re-armament programme. The then Chancellor of the Exchequer eventually agreed, but very reluctantly, to a defence loan of £400 million, which is equivalent to some £6 billion today. That loan did not bring financial ruin as was predicted by many "experts". It brought work and hope to many employed in shipyards and factories. The fact was that in those days, needs must when the devil drives. Then, Hitler was the devil. Other kinds of devils threaten us today through unemployment. The need for action now is just as urgent as it was 50 years ago, for reasons which I shall give in a moment.
At this late hour, I will not waste your Lordships' time in mentioning unemployment statistics, for we are all agreed that unemployment is too high, particularly among the young. In a similar debate on the gracious Speech last year, my noble friend Lord Young made two statements that I should like to quote. He said first:
"I believe that on every major count—public expenditure, inflation, growth and investment—the economy is sound and the economy is on course".—[Official Report, 3/11/84; col. 301.]
At the conclusion of his speech, my noble friend said:
"This Government are as concerned as any to return to full employment. We shall follow the path that we have to follow until
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in the end we will let loose the spirit of enterprise in the land and return, I hope, to fuller employment".—[col. 305.]
I am sure that my noble friend meant a return to less unemployment. Sadly, and although my noble friend has made similar remarks today, we have not seen lower unemployment since the time of his earlier remarks, but instead we have higher unemployment.
I do not believe that economic growth, higher investment, lower inflation—desirable and necessary as they are—are enough in themselves. They are not sufficient national achievements. Our target must surely be national prosperity spread throughout the whole country. To me, prosperity means satisfying activity for all who want it, with a sense of belonging to a caring community. That target will not be achieved with 3½ million unemployed, however good may be the other economic indicators.
Why do I place such emphasis on unemployment? It is for three important reasons: first, because of the moral and spiritual decay which results from long-term unemployment. Hope deferred becomes hope abandoned. We need say no more about that. Those who have worked with people who have been unemployed for a long period—and perhaps even Members of your Lordships' House who have lost their jobs and been unemployed for a few months through no fault of their own—will understand a little of what I mean.
Secondly, when hope is abandoned a sense of grievance follows. Unemployment makes a seed bed for anarchy and strife. It is not fully appreciated what opportunities and leverage the feelings stemming from unemployment give to the troublemakers. Sadly, we must admit to the fact that there exists in this country a small minority whose objective is to destroy our democracy and way of life. They have diverse motives: a lust for power, grievances to settle, or perhaps loyalty to some other power. Such people will use every opportunity to pursue their evil objectives. They will use the grievances and unhappiness which prolonged unemployment causes for their own purposes.
Thirdly, unemployment involves a shameful and terrible waste of human effort and resources. It is not as though there are not great tasks to perform. We cannot afford such waste. Each day brings competing claims on limited resources of wealth creation, and each claim is well justified. There are claims for more resources or more pay, to improve law and order, for inner city reconstruction, housing improvements, scientific research, better schools and teachers, more support for the arts, more conservation and pollution control, more care for the old, more support for the handicapped, for overseas aid, and for improved health care. The list is endless.
Ministers compete in the star chamber for funds. Councils and authorities of every kind seek grants from ministers, and charities appeal to individuals and industry for donations. Almost all such demands are worthy but they cannot all be met because the pool of wealth we create is too small.
Long ago, Sir Stafford Cripps used to say that inflation resulted from too much money chasing too few goods. He was right. The Government also were right to concentrate first on controlling the money supply and achieving cost reductions, as they have

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done with outstanding success—just as a company in trouble must first reduce its borrowings and costs. However, if one goes too far along that road for too long growth is retarded, opportunities are lost and employment suffers because wealth creation takes second place to saving money or building cash mountains. I believe that the time has come for the Government to make wealth creation their primary objective, their top priority.
Because of the odd things which are said by responsible people from time to time in this country, I may remind your Lordships that real wealth is created in the agricultural, extractive, energy and manufacturing industries. Financial, distribution, communication and other service industries make a vital contribution to wealth creation, and they earn money overseas which gives us access to wealth created by others—but those services create no wealth in themselves. The Prime Minister rightly maintains that the Government can create no real wealth themselves. But Government fiscal and monetary policies have a major influence on the climate for wealth creation and, therefore, on the amount of wealth created in our economy and so the opportunities for greater employment.
I was delighted to see from yesterday's Statement that the Chancellor of the Exchequer has moved from M3 and taken the first steps along the road to Damascus and conversion to new ways. Your Lordships will remember that a light shined round St. Paul and a voice from on high convinced him of the need to change his ways. When he asked what he should do he was told:
"Arise, go into the city and it shall be told thee what thou must do."
I am sure that the Chancellor, if he does that, will find that the one thing which many people will ask him in the City is to please stop treating asset sales as negative expenditure. If Great Britain was a public limited company he would not get away with that in the statement of source and application of funds in the annual accounts.
But it is not just accounting—that would not matter; it distorts judgment. Therefore, my plea to the Government is to press ahead with privatisation, because business is better taken out of the hands of politicians and civil servants, as the noble Lord, Lord Taylor of Gryfe, said. I support tax reductions for the lower paid but, for heaven's sake, do not let us use all the proceeds of those sales to finance major tax reductions. I have seen it mentioned that we might have tax reductions of 5p in the £ in the standard rate. That will not make an optimum contribution to wealth creation and to jobs. It would be mainly frittered away in attracting more imports. We should use those proceeds of the asset sales for much more attractive purposes. We must finance research, to which the noble Lord, Lord Wolfson, referred in his excellent maiden speech. We must build more new houses and renew our decaying infrastructure. I make no apologies, in spite of what the noble Lord, Lord Elibank, said, for suggesting that.
There is much to do in making better roads which will improve communications and thus make our industry more efficient. We have to renew the sewers
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and repair houses and schools at some time. We need to provide better equipment for hospitals. I emphasise that that sort of work has to be carried out at some time. Is anyone suggesting that it can be deferred indefinitely? Can you defer indefinitely mending a leak in the roof of your house however poor you are? Now is the time to act and to remedy those deficiencies when there is plenty of spare capacity in industry. If we wait until the economy is humming and we put more demands upon it, that really will be inflationary. What I have suggested will create more jobs as quickly as anything can over the next five years; and as the noble Lord, Lord Taylor, said, it will have a catalytic effect.
The Government have made a start but much more needs to be done if unemployment is to fall and not rise in the next three to five years. I say that advisedly for this reason. There is a real danger. Industry—both manufacturing industries and the service industries—must become more competitive if we are to recover a greater share of world trade, and so by selling more create more jobs. We need to reduce costs. The only way of doing that—or at least a great contribution to it—is to instal new equipment, advanced manufacturing technology, new office equipment and new communication equipment. In almost every case in the first place the result will be to reduce employment but then, in a year or two, new jobs will come from the growing competitiveness, the greater sales and share of the market that we would obtain. Again, in a few years' time the effects of the Government's policy on encouraging enterprise and competitiveness will come to fruition.
Small companies are being formed. I wish to heaven they had started forming 25 years ago, as they did in America. They too will create the jobs in a few years' time, but not yet. If we do not do something really effective, and do it quickly, in some of the ways I have suggested there will be not a fall in unemployment in the next three to five years but an increase, for the reasons I have stated. Therefore, I most earnestly hope that my noble friend the Leader of the House, who is to wind up this debate, will show that the Government do appreciate this problem of timing and that they will act to prevent a rise in the present level of unemployment, with all the misery and the catastrophic results which would follow from it.
As to the amendment, I have some sympathy, as your Lordships will have understood, with the wording of it, but I cannot support it. The party of the noble Lords opposite has no understanding, no appreciation whatever, of what is required to encourage enterprise and of the incentives necessary to create wealth on the scale needed. Therefore, I shall vote against the amendment.
8.26 p.m.
Lord Blease: My Lords, I certainly welcome the strong pronouncement of the noble Viscount opposite as regards his concern about the consequences and implications of high unemployment, and I go a fair way down the road with him when he calls for further public expenditure on housing and on training to meet the present needs in connection with the remedies for unemployment. Indeed, I think he follows closely along the lines of a former Tory Party Cabinet Minister, Sir Ian Gilmour, who is reported on the

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tapes today to have said at a rally for a charter for jobs, held in Cardiff, that the Government requires to change its budgetary and monetary policies in order to cope with rising unemployment.
However, subject to some reservations, I welcome the paragraph in the gracious Speech which states:
"In Northern Ireland my Government will continue to support the security forces in enforcing the law and in working for the eradication of terrorism. They will seek widely acceptable arrangements for the devolution of power. They will seek to improve further their co-operation with the Government of the Irish Republic. Renewed efforts will be made to create and sustain employment, particularly by the encouragement of the private sector".
I am aware that today's debate takes place in accordance with the customary arrangements for the series of topics arising from the humble Address. The main part of my remarks will be concentrated on the reference in this paragraph of the Queen's Speech which declares:
"Renewed efforts will be made to create and sustain employment, particularly by the encouragement of the private sector."
At the same time I am sure it will not be considered out of context if I refer to other issues which arise from this paragraph.
The Government's search for further co-operation with the Government of the Irish Republic has been under the media searchlight for some time. It is obvious that the Anglo-Irish negotiations are nearing the public pronouncement stage. We may well ask: will the outcome of these negotiations be an internationally binding registered agreement? Or will it mean the forging of a new protocol between the United Kingdom Government and the Government of the Irish Republic? Or, will it mean a statement of intent to widen and improve the existing structures of the Anglo-Irish Inter-Government Council?
Whatever the form and content of the pronouncement, may I invite—indeed, may I appeal to—all noble Lords to use their influence to ensure that the outcome of these Anglo/Irish talks is the subject of urgent, parliamentary debate and decision? It is important that the initiative should be under the control of Parliament and not allowed to become the rallying point for the promoters of mob rule or for para-military pressure and terrorist groups. I suggest that the establishment of peacemaking principles and political stability, the improving of understanding and relations between the two Northern Ireland communities, the formation of improved political and trading relations between Ireland and the United Kingdom and the eradication of terrorism are the essential elements for employment, industrial development and the genuine prosperity of the peoples of these islands—Britain, the Republic and Northern Ireland.
Concerning the reference in the gracious Speech to "acceptable arrangements for the devolution of power" in Northern Ireland, perhaps I may draw to the attention of the House the agreed report of 29th October from the Northern Ireland Assembly. The report deals with the issues of how the Assembly might be strengthened and progress made towards legislative and executive devolution. I suggest that this report provides a firm basis for negotiation on a fair and democratic devolution of powers in Northern Ireland. It proposes a framework whereby the principles of justice and parliamentary democracy may be upheld
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and it could enable the Unionists and Nationalists to find an accommodation and the two communities to work together for the well-being of all the people of Northern Ireland. I suggest that this report of the Assembly is worthy of urgent consideration by the Secretary of State for Northern Ireland and the Government and that it is a vital part of any Anglo-Irish pronouncement.
I should like to say a brief word on the renewed efforts to create and sustain employment, particularly in the context of Northern Ireland. I have no objection to the proposal for the encouragement of the private sector, nor do I believe that there are any impediments in that respect from this side of the House. However, I have no hesitation in saying that, if it is intended to give particular encouragement to the private sector to the disadvantage or the neglect of the public sector, then there is little hope of sustaining the present levels of employment in Northern Ireland and no hope of creating new jobs.
Northern Ireland has many of the attributes which are necessary for successful economic development. It has an infrastructure which has seen a vast improvement over the past decade, enterprising and hardworking people, high standards of education and training and excellent industrial relations which are at least as good as any in any other part of the United Kingdom. Among all parts of the community there is a remarkable degree of consensus on economic and social goals and a wide range of agencies, public and private, which are available to give every possible assistance to companies prepared to invest in the Province.
The view is that fortunately we in Northern Ireland have been spared the worst excesses of this Government in their misdirection of public expenditure. There can be no doubt that the public expenditure in the Province has been put to good effect in improving housing, roads, recreation facilities and the environment in general, despite the fact, of course, that unemployment still runs at over 20 per cent. there. I would hold that this is mainly owing to the failure of private capital and private enterprise and the closure of many branch factories.
Visitors to Northern Ireland are increasingly impressed by the vitality and the life of the Belfast city centre. I believe that these results have been achieved mainly through the public expenditure policies pursued by Roy Mason and Jim Prior during their periods as Secretary of State for Northern Ireland and by their parliamentary colleagues in the work that they have pursued in the Province—policies which have been denied to the rest of the United Kingdom during the past six years.
Today I wish to make a plea that those policies should continue to be pursued with vigour within the Province. There is still a great deal to be done. With unemployment running at such high levels, we not only have the opportunity but we have the duty to pursue policies of public expenditure in order to continue to improve education, training, housing and environmental conditions over the next decade. In no way can I envisage the private sector meeting the needs of the public services in these matters in Northern Ireland. The current economic situation presents an opportunity to get the best possible value for money out of public expenditure.

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I also suggest that the improvements which are taking place present in turn opportunities to improve the economy itself; but for that we require in Northern Ireland, and indeed throughout the United Kingdom, a political will—characterised by simple values with which all citizens may be able to identify—we need a sense of common purpose rather than marketplace values with some of the worst forms of selfish interest, the active political promotion of personal private gain without any regard for efficient productive employment and the polarisation of our society into the "haves" and "have nots", those with jobs and those who have no hope or stake in our society. These are matters which have already been referred to by the noble Viscount and by others in their speeches and in recent statements about unemployment.
Unemployment erodes the morale of the community. It certainly erodes the way in which the community can participate and give of its best to society, and it is something which will eat into the moral fibre of our society unless we take the proper actions to promote that society's well being. I believe that can be done by supporting a public expenditure policy.
Government investment can encourage private investment and within Northern Ireland conditions are much better than the public image would lead us to suppose. I believe that what I have stated is clearly borne out by the report of the Northern Ireland Assembly in the 1985 Public Expenditure Survey, which was recently published and consists of four volumes of very detailed argument and analysis, arguments which I believe sustain the point I am making—that the Northern Ireland economy would have sunk into oblivion if it had been solely dependent on private enterprise.
I therefore commend for your Lordships' consideration the experience of Northern Ireland under a different public expenditure regime than has been in force in the rest of the United Kingdom and for these reasons I indicate my support for the amendment proposed by the noble Lord, Lord McCarthy.
8.38 p.m.
Baroness Carnegy of Lour: My Lords, we have just been reminded by the noble Lord that noble Lords on the Benches opposite are this evening attempting to vote down the humble Address on the grounds that the Government are not doing enough about unemployment. No one could take issue with the treatment of unemployment as a major problem. This day of debate deals with the economy, and, as the gracious Speech indicates, the economy and employment are inextricably linked. From listening to the speeches from the Front Bench at the opening of the debate, however, the reasons for this particular amendment on this particular occasion do not seem to me to be so clear.
Both the Front Benches opposite complain in different ways about the manner in which the statistics of unemployment are presented by the Government. The noble Lord, Lord McCarthy, said that the Government had no policy because they did not see fit to say precisely what they anticipated the figures for
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unemployment would be in future years. The noble Lord also said that the many hundreds of thousands of jobs now appearing on the scene were being taken up by ladies with shopping accounts at Harrods. He lives in a different world from the world I live in.
The suggestions of the noble Lord, Lord Diamond, seemed to me to be extremely close to what the Government are now doing. No one from the Front Bench opposite, and few, I think, from any other Benches, contradicted what my noble friend Lord Young said at the beginning: unemployment is a problem for every democratic, developed nation at the present time; to try to find entirely new strategies for an entirely new situation is what we have to do. The old solutions do not work any more and we are learning from the experience of other countries as well as our own.
I can suppose only that the amendment is being moved for reasons of political expediency. There may be nothing wrong with that. We are politicians in a political Chamber. But that brings me to a point that I want to make about the interaction of politics at the present time with the problems of the unemployed. I want to suggest to your Lordships extremely briefly that, whether or not we agree precisely with the way that the Government are tackling the problems of the unemployed, it is the duty of each and every one of us to do our best to ensure that the opportunities that now exist, and will exist whatever Government are in power, are known to those unemployed people for whom they have been designed. Too often in my experience, and I am sure in the experience of other noble Lords, political people, probably not intentionally but in an attempt to do their political thing, run down, denigrate and misinterpret various schemes now available to help the unemployed, thus putting those very people off finding out about and taking advantage of the schemes.
The youth training scheme, as it now is, should mean that not a single 16-year-old in this country need be unemployed. By April next year no 17-year-old need be unemployed either. However, if we look at the statistics, quite a large number are still unemployed. People are told that it is not worth involving themselves in the youth training scheme because it has been invented by the Government just to massage the figures; they may be exploited if they go on it; it is a way to low wages and of no use. Therefore, those young people miss the chance of getting the broad based foundational qualifications that they need, of possibly being kept on by the employer with whom they go on to the scheme, or of getting a reference if they cannot stay with that employer. It seems to me that everyone who is in a position to explain to young people what the scheme is has a duty to do just that. It may not be perfect but it is developing well and is an important part of our training structure.
The community programme, which has been mentioned several times in the debate, provides a chance for long-term unemployed people to take a job for a year, to get back their work abilities and to brush up their motivations and skills. The Government have doubled that programme. It is a success in many ways. It is working, and it is working not least because those who involve themselves in the environment in which they Uve, having helped to improve it, do not want to vandalise and spoil it.

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But too frequently people make it very difficult indeed to get schemes going. One of the noble Lords on the Front Bench opposite expressed the view that the scheme could be expanded and pointed out that that could be done at a net cost of nil. It would be of enormous service to long-term unemployed people if noble Lords on the Front Bench opposite threw their weight behind the community programme, influenced the trade unions, which are so nervous about it and are trying to frustrate schemes being started on the ground, and persuaded people to go on the schemes.
It would also help if they backed the new measures announced yesterday in the Statement of my noble friend Lord Young. The opportunities for long-term unemployed people to attend counselling interviews at jobcentres to help them learn to perform well at interviews and how to search for work should be encouraged. They should also be encouraged to go on short courses to brush up their skills. Those are important measures and they need the backing of everybody on all sides of this House, of Parliament and of local government.
Likewise, many new measures are in operation now to help people into self-employment. It seems to me that the responsibility of everybody on the political scene—those who have not traditionally encouraged self-employment in the past and those who have—is to help people take advantage of the loans, the business advice and the other help that they can get after they have started their self-employed business.
I could go on, but your Lordships will be relieved to hear that I will not. I hope that the point is made. I hope that noble Lords on the Front Benches opposite will desist from dividing the House at a time when the country is looking for a united effort in the search to help the people who are unemployed. If they feel that they cannot, I hope that at the very least they will encourage their colleagues to back the schemes that there are and to help them forward.
8.46 p.m.
The Earl of Halsbury: My Lords, I should like to concentrate on one sentence in the gracious Speech:
"Within the framework of firm monetary and fiscal policies designed to secure a continuing reduction in inflation, my Government will do all in their power to encourage the growth of new jobs".
What is it that the Government have it in their power to do? It is anything that bears on their target provided that it has not been tried before, weighed in the balance and found wanting. There is no good going back to where we came in.
I say "tried and weighed in the balance". What is a balance? The function of a balance is to balance. For example, one makes a weighing machine balance by adding weights to the appropriate pan. On a balance sheet one puts the assets on one side and the liabilities on the other, subtracts one from the other and shows the result on the liabilities side as the capital employed in the business. A year later it is out of balance again, so one adds the balance on the profit and loss account and, bingo!, it balances once more. It is the same with the foreign exchange. One subtracts imports from exports, and that is one's foreign earnings. It is a kind of capital import.
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It is much in the air that we ought to consider repatriating some of our foreign earnings in order to finance the growth of industry at home. There is no difficulty in that. The Government can confiscate the lot—they did that in wartime, and proceeded to manipulate our foreign assets themselves—or they can apply disincentives (that is the popular scheme that was under discussion in the conference period) to retaining as opposed to repatriating foreign assets; or they can leave the matter alone on a basis of laissez-faire, laissez-aller.
But the mechanism is irrelevant. What actually happens if one repatriates something is that one buys sterling and sells foreign currency. That must induce a rise in sterling—an overvalued pound—and that is where we came in in 1925. The overvalued pound proceeds to promote imports and inhibit exports, and so one gets a double dose of unemployment. How anybody in their senses thinks that one can cure unemployment by incurring a double dose of it I cannot imagine. I see the noble Lord, Lord Barnett, shaking his head. If he disagrees with me I hope that he will comment on what I have said in winding up for the Opposition.
I was entirely with my noble and learned friend Lord Simon of Glaisdale on the difference between selling the family silver and chucking it over the cliff into the sea. One does not diminish the family assets if one transfers the family silver from one member of the family to another. In the same way one cannot diminish or add to national assets if one privatises something by transferring the ownership of it from the nation (called the Government) to the nation (called the collective of individuals).
I listened with great interest, as all your Lordships did, to the maiden speech of the noble Earl. Lord Stockton, on American borrowing accompanied by raising the interest rates to a level with which we cannot compete. The noble Viscount, Lord Eccles, made very much the same point this evening. Without in any way disagreeing with the noble Viscount, I shall draw attention to the reason why the Americans are able to do this. It is because they have such fantastic productivity in their industries that they can afford to pay interest rates that we cannot. We can only rectify that, in a sense, by raising productivity in our industries. But that is a time-consuming process. It cannot be done overnight.
There is, however, something that we could do. It is to agree not to devalue the dollar but to have an overall worldwide reduction of interest rates. I do not see why they could not come down by 1 per cent. a quarter until we reach the situation in which money borrowings can match up to the needs of the investor. I should like to ask the noble Viscount the Leader of the House whether that cannot be negotiated.
The great enemy is, of course, inflation. That is where the sentence from the gracious Speech that I quoted comes in. Both inflation and deflation are dishonest, because they alter the equity in freely negotiated established bargains. Inflation benefits the debtor at the expense of the creditor; deflation benefits the creditors at the expense of the debtor. Both induce unemployment. This is one of the great misunderstandings of our age—that unemployment is

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induced only by deflation. It is not. The mechanism is different, but it can be induced either by inflation or by deflation.
If what you are suffering from is inflation, you cannot cure unemployment by more inflation. Spending more inflationary money than you are spending already cannot possibly be the cure. Even now, wages are leading the inflation. It seems quite impossible to induce people to moderate their wage demands. We are talking of getting inflation down to 3½ or 4 per cent. But anyone opening the newspapers will see wage demands of 10 per cent., 6 per cent. and 7 per cent.
It is interesting to look at the percentage of the gross national product taken up by wages and salaries. It is a very flat figure taken over a quarter of a century. In 1960, wages and salaries accounted for 58.3 per cent. of the expenditure generating the national product. In 1983—that is, 23 years later—it was 56.1 per cent. So it has not changed by more than 2 per cent. over nearly a quarter of a century. If you take a flat rate of 57 per cent., then, if you imagine an economy in balance and you feed in a 10 per cent. transient on the wages front, you will get a 5.7 per cent. rise in prices. If you compensated for that, you would get 3.2 per cent. in the next year. And so it goes on—1.8 per cent., 1 per cent. and so on; and you end up with a 13 per cent. overall inflationary increase in prices. If the economy, instead of being in balance,was growing at 3 per cent., that 5.7 per cent. in the first year would come down to 2.7 per cent. and would be extinguished in the second year. We lack just that element of patience to allow these changes to be absorbed.
When I was a schoolboy, my father gave me a book by one Adam Smith to read. It was called The Wealth of Nations. It had a long and, I thought, very dull chapter at the beginning on how to make pins. I got terribly bored with making pins. I did not think that economics was a subject for me until somewhat later, post-public school, I came across a much more fascinating book. It was written by a gentleman called George Bernard Shaw and entitled The Intelligent Woman's Guide to Socialism and Capitalism. I learnt for the first time, in perusing this, that capital always starts as someone's spare income. Unless people have spare income, they cannot invest. Therefore, since I see no evidence that the amendment has been drafted by someone who is aware of this, I cannot support the amendment.
8.54 p.m.
Lord Gisborough: My Lords, I come from a place not far from a town where there is 25 per cent. unemployment throughout the town. There is one particularly harrowing area of 18,000 population with a housing estate where unemployment approaches 90 per cent. I do not believe that this sort of area is unique in the country when it comes to inner cities. The social consequences of this sort of unemployment must be highlighted. It obviously produces great boredom, depression and inactivity among the people who live there. It brings on despair and so little motivation that even the playing fields there are not used. There is no chemist, because the chemist's shop gets vandalised.
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There are only one or two shops. There is no doctor, there are no professionals. The only people working there effectively seem to be two clergymen.
The youngsters are bored and, needless to say, prone to get into trouble. They have time on their hands. They are a nuisance. They run across the roofs; they vandalise; and they are callous. I have a headline here which says, "Yobs laughed as pensioner lay dying". They chased the pensioner until he started dying, then surrounded him and laughed at him. That sort of headline is not unique to the town. It can be found, now and again, in any of the bad inner city areas.
While there is this deprived area, one must not suggest for a moment that good people do not come out of it. However, they are not the ones I want to talk about. Obviously, a great deal of dissatisfaction exists there. This leads to violence. The violence that one sees on television is, I believe, particularly unfortunate. I am sure that it provides the seed that itself grows into violence in the breeding ground of such areas. There is a tendency among children from this area and similar areas not to be responsive to education. They are therefore inevitably ill-educated. It does not help that most of the sanctions have been taken away from the schools so that the last sanction they have against a badly behaved boy is simply to remove him from the school when that is all that he wanted in the first place.
There are inevitably a number of low achievers in this area. They are not only not responsive to training schemes, but many of them are not acceptable to training schemes. Either the training schemes will not have them or, if they do go on them, they get sacked. Some are therefore not only unemployed but unemployable. They look for something to do that they can enjoy. They form, very often, early sexual liaisons which, again, one reads about. The girls deliberately go and get themselves pregnant so that they can obtain from the state—I refer to one particular case—a three-bedroomed house. But, very often, it is their own flat. They get a social security income. They get independence. They get a form of status that they want. They also have a child which is a toy and which gives them something to do. This involves children between 14 and 16. In one school, 61 out of 63 children are illegitimate. The town has a 25 per cent. illegitimacy rate, while in Manchester the rate reaches 35 per cent.
Of the children born to teenagers, the number of the illegitimate is more than double the number of the legitimate. As most of us know, the next stage in the lives of these youngsters is that they remarry, if they marry at all, and are then in a situation where the new husband often becomes involved in cases of child abuse such as we know about. These children suffer enormously, and are deprived. I want to stress again that many of the one-parent family children do survive, and survive well. They cope. Many of the one-parent family mothers cope very well. There are good examples ofthat. They cope against all the odds and their children grow up to be normal against all the odds.
These illegitimate youngsters tend to leave home early and to repeat the whole process; there is, as it were, a multiplying factor. They perpetuate the

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increase in under-privileged and one-parent families. I shall read a quotation which appeared in the press last month:
"The number of teenage mums is on the increase and big families are getting bigger … Trends towards the younger mum also continued during the last 12 months. Teenage births were up eight per cent. and the number of births to women in their late 20s also rose significantly".
The increase in that population will inevitably be dependent upon social security in the future and, therefore, dependent upon the decreasing number of people who are able to work and support them. To my mind the situation is bad now, but I believe that it will become worse and that the spiralling problem will be a great danger to the social structure not only in the areas about which I am talking, but elsewhere. In the long term there must be a proper study of the problems and the long-term damage to the country as a result of illegitimate children and teenage families.
What is to be done about the situation? The whole subject is one which is taboo. People do not like to talk about it or have difficulty in talking about it. It is considered to be an extremely sensitive subject. I hope that I have not been insensitive myself when talking about it. However, the problem must be discussed and appreciated and the danger to the future structure must also be fully appreciated.
My noble friend Lord Young and the Government have made enormous strides in connection with training schemes and other schemes for youngsters. I should like to congratulate my noble friend on the efforts which have been made. I hope that the counselling service for Durham, Middlesbrough and the other places will go some way towards meeting what I have already said and what I wish to say in a moment.
I wonder whether enough has been done for these under-achievers, many of whom will resist the efforts made to help them and to give them training. I believe that there should be special training courses for people living in these very deprived areas even if the work on those training courses is more suitable to low achievers than perhaps to others. It is necessary to make these training courses attractive and irresistible to these youngsters.
I am reminded of a lady who used to teach ski-ing in Aviemore for just two or three weeks. As she was only a temporary teacher she always used to have the worst of the Glasgow children put into her class. When they arrived in her class the first thing they did was to try to get away from the teacher, and so about eight out of 10 left and she was left with about two. She immediately made a small ski jump and made those who remained in her class jump over it. Five minutes later the rest of the class returned and said, "Can we join you, Miss?" She then had them for the rest of the day.
It is an extremely difficult problem, but however difficult it may be we must not let these under-achievers rot into unemployables. However difficult the problem may be at present, it will become much worse in the future. There would be a disastrous effect if we were to allow a large number of people to become unemployable for ever in the future and it would be a sad waste of human resources.
9.4 p.m.
Viscount Hanworth: My Lords, in my speech today I shall deal with several matters which I believe are important to the future of the country. However there is a central theme running through my remarks: men of integrity must put their shoulder to the wheel in the national interest and not simply reflect or give priority to party prejudices and shibboleths. As a nation, we are still divided in a way which other European countries have, to a great extent, overcome. Unfortunately the "them and us" syndrome is still with us and, for different reasons, the Government and the Labour parties have, if anything, fostered those differences. I shall expand on that later.
Rather surprisingly and quite suddenly, there has been a welcome change of direction both by the Government and by the Labour parties. At last they seem to have heeded what the majority of our electorate want: a sensible, moderate policy. I believe that my party offers, and has offered, just that. Indeed, that is why I joined it, in the hope that the nationalised, denationalise, renationalise syndrome of steel could be overcome.
On the Government side, they at last seem to realise that, whereas the public relations of all governments have been poor, theirs to date has been abysmal. To take only two examples, they have increased the funds available to the National Health Service, but if you asked the man in the street he would say that the service has been cut. Not so; in real terms there has been a considerable increase injected on good socialist lines into helping where it is most needed—for example, in the North. We must face a constant increase in high-tech equipment. Whether the ethic of prolonging life in a very uncertain world by massive expenditure on high-tech equipment is more important than the quality of life is a matter which certainly could be considered, because people are now waiting very long periods for operations for painful conditions—for example, varicose veins and hip ailments.
Secondly, there has been an ever-increasing cost of bus services, and something had to be done. This fact should have been made quite clear. Whether privatisation is the right answer is of course debatable. The failure to get public support for what appear to be many unreasonable and doctrinal measures by the Government is what worries me. Of course it prejudices their chances at the next election. One should not needlessly make enemies, because enemies do not forget too easily.
In the Government's view their policies have paid off and the nation is well on the road to complete recovery. I only hope that they are right. If not, they will stand condemned for selling off national assets simply to avoid making more drastic and unpopular cuts which they hoped could be avoided if recovery continues and North Sea oil does not run out too soon. Some of those assets are being used for tax reductions, which many people think is a most inefficient way of stimulating the economy. Too much will go overseas for luxury goods.
The policy of privatisation may be convenient (I now class it as dogma), but increased efficiency and competition are something I do not expect to see from

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privatising gas. If the consumer is to be adequately protected it is no longer free enterprise, and there can be no competition. Sensibly, the Government should leave time to see how privatisation of Telecom works out before embarking on other major projects, particularly having regard to the American experience in this field. I fear that they will not do that.
Returning to the theme of promoting one nation, I still wonder how it was that responsible people in the Opposition managed to support the miners' strike, with the weakest of reservations. They could logically have maintained that there was something wrong with the West's capitalist system, but for the taxpayer to have to pay approaching £1 billion to support uneconomic pits is something, whatever the social consequences, that no government could afford to do. We regretfully had to accept similar sacrifices from the steelworkers and the shipbuilders, to mention only two.
Why should the Opposition blame the Government for what any government should have done? What about the pickets in relation to the problem of law and order? The Opposition should now search their consciences as to what, even in political terms, is justifiable when it is the national interest that should matter most. While I am mentioning the miners' strike, perhaps I may say that there are continued rumours that the Government may force up electricity and gas prices simply to pay the cost of the strike. That is not the way to finance this deficit. It negatives the efforts of all concerned to improve efficiency in the industry in the consumers' interest.
One of the things we desperately need in this country is more responsible and thinking unions controlled by moderate people. Such unions exist and are vital to our future. In fact, I am connected with one of them. Surely the Labour Party, in its own long-term interests, should help this aim and support reasonable Government legislation.
I now want to raise briefly the vital issue of unemployment. There are many causes and there are also many possible remedies, but each remedy has its side effects. At the outset, we should remember that only a few years ago many people said that if unemployment rose beyond 1½ million it would start to destroy our society. It is doing just that. The devil soon finds work for idle hands to do is a good maxim.
I do not think the Government are doing as much as the gravity of the situation demands. There are many things that could be done. I shall mention a few, without elaboration: more opportunities and encouragement for part-time, as opposed to full-time, working; early retirement and reduction of overtime; job sharing, with the Government chipping in on wages; avoiding immediate redundancies in service industries; a short-term injection of money into industry, much more important in my view than tax cuts. There are of course other possibilities with which I have not time to deal tonight.
In all this we should keep in mind that it costs in social benefits, loss of tax, and so on, about 70 per cent. of what it costs to keep a man employed. In addition, you lose what he would produce to the benefit of society if he were working. This implies that
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the Government have at least £10 billion to spend if by so doing they could substantially reduce unemployment; and in the end they might not be out of pocket.
What worries me about the future is that not just one or two matters need to be put right to ensure our future competitiveness. Some of them require a decade to effect any important improvement. I shall mention only two. Compared, for example, with Germany, not enough of our really able people go into industry. "Industry" is still to some extent a dirty word. We are good inventors, but we always seem to fail in developing a product or in marketing it. In the 19th century it was our engineers who produced our wealth. Today, in spite of efforts, they are still second-class citizens, eclipsed by the marketing man or the accountant. There are still too few really able recruits. Never mind the screams about the cuts in pure science; it is the engineers we need most. If we cannot afford enough of both, the engineers should receive first priority in our national interest.
9.15 p.m.
Lord Monkswell: My Lords, I crave your Lordships' indulgence for arriving so very late at this debate. I must also tender my apology to Hansard because in the last 24 hours I have written and torn up about three speeches, so I shall not be able to provide them with written notes. I hope to remedy my transgressions a little by making a very short contribution.
I was interested in what was said by one of the earlier speakers, who made the point that asset transfer from the people represented by government to the people not represented by government was of no significance. But that is not the reality. The reality is that we the people, over 50 million of us in this country, have in the last year or so seen ourselves, our wives and our children—all with a stake in a particular national asset—deprived of that national asset in the sense that we are no longer the owners of it. It is now owned by a much smaller number than 50 million-odd of us—by those who were already rich before—to ensure that people who were already rich pay less tax in proportion than the rest of us.
Having said that, I welcome the Government's, particularly the Chancellor's, abandonment of monetarism, although that may not yet be accepted by the Chancellor. We can all accept it even though he does not.
Your Lordships will recognise that I am a citizen of Manchester and you may realise that I have an interest in a topic raised by an earlier speaker. When I am talking with my fellow Mancunians I do not ask, "Are you a bastard?" I know they are all bastards, for we are all bastards in Manchester from the point of view of people who come from south of Watford. I must apologise if I have used unparliamentary language: I sincerely do. But where I come from up North we call a spade a spade.
One of the points I would make strongly as a citizen of Manchester is that we do not want to see our women and children shot with plastic bullets any more than the citizens of London want to be shot by ordinary bullets. I shall leave my comments there because I do not think it is altogether fair for people in our position

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to criticise public servants. That sort of discussion should be kept within the forum of the appropriate organisation. There has been some public controversy about the situation in Manchester vis-à-vis the police committee and the chief constable and I felt it necessary to make my point of view plain.
With regard to law and order, we on this side of the House, and me in particular, are disturbed by the Government's emphasis on dealing with the symptoms of the problem rather than the causes. Perhaps I may just refer to one of the fundamental causes, which is mass unemployment in this country. We all know that there is an enormous amount of work to be done in this country, from rebuilding, renovating, and replacing substandard housing to re-equipping, rebuilding and modernising the whole of our industry. To be honest, I am grateful for the little scraps that the Chancellor has pushed in this direction. However, they are really too little and too late.
9.20 p.m.
Baroness Faithfull: My Lords, I am the 27th speaker in this debate and I seek to make a speech in a different category from any other speech made by any of your Lordships. I hope you will forgive me and bear with me while I take up some of the points made by the noble Lord, Lord Gisborough.
Unemployment is about people and people were once children. I maintain that we must see to it that our children are cared for in a way that produces maturity, security, education, ability and, above all, as the noble Lord, Lord Gisborough, said, motivation. All the plans in the world will not help unless we have children who are growing up into well-motivated people. I think that many of our unemployed find it very difficult to fit into the present systems which we have.
I have two pleas to make on behalf of children, and here I say they are ouside anything that has been said in your Lordships' House today. My pleas are that we should look at child benefits, and, as the noble Lord, Lord Gisborough has said, at illegitimate children. In yesterday's debate on home and environmental affairs, my noble friend the Minister, Lord Glenarthur, said that we should be debating the future of the National Health Service and social security in a debate to be initiated by the noble Lord, Lord Ennals, on 20th November. Why, then, do I seek today to speak briefly on the subject of child benefit and the economic implications, one of the aspects of today's debate? Perhaps it is because, like John the Baptist, I seek to be a forerunner of the pleas which will be made from all parts of the country for the real value of child benefit to be maintained and pray that I shall not be a voice crying in the wilderness.
The financial position of families with children has deteriorated relative to that of the childless in recent years. Growing numbers of children are being raised in poverty. The Prime Minister and the Conservative Women's National Committee have emphasised the importance of child benefit for the family. A recent survey of 2,000 mothers carried out underlined the
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importance attached to child benefit by mothers in families on modest incomes who would not qualify for means-tested support. Furthermore, in 1980 the Government committed themselves to maintaining the real value of child benefit, "subject to economic and other circumstances". I shall say no more. However, these are the families which, if we do not help, will not be well motivated and will not form a stable workforce.
I turn to the second plea on behalf of children, which was mentioned by the noble Lord, Lord Gisborough—that is, the question of illegitimacy. In 1976, the Law Commission set up a working party to consider the law on illegitimacy. This resulted in Working Paper No. 74, published in 1979. As a result of this working paper, a Bill was drafted. The Law Commission's recommendations were accepted by the Government, yet no parliamentary time has so far been set aside for the necessary piece of legislation.
Sadly, a letter written by the department of the noble and learned Lord the Lord Chancellor, in October 1985, states:
"The Government have accepted the Law Commission's recommendations on illegitimacy. However, the draft Bill annexed to the Law Commission's Report would confer jurisdiction on county courts to hear affiliation applications and would thus result in a shift of work from magistrates' courts to county courts".
The letter goes on to say that this would place constraints upon legal aid expenditure and that this reform could not be looked at until the necessary resources became available.
I would suggest that this is an area where we could save money rather than feeling that it was an expensive social policy. For instance, we could set up family courts and we could encourage family life. If the Illegitimacy Bill, which would change the status of illegitimate children, were to come before your Lordships' House, this would change the attitude of the many children who have a chip on their shoulder, who feel resentful and who, in some cases, though certainly not all, are the low achievers, and who often cause great difficulty in the communities in which they live.
Your Lordships will remember that Ogden Nash defined the family as a unit composed not only of children but of men, women, an occasional animal and the common cold. Many people have said to me that passing the Illegitimacy Bill (or considering it and finally passing it) would undermine the concept of the family. I would say that I strongly support the concept of the family from personal experience not only in my work but also in research. I would also say that such children suffer and although they are not necessarily the most difficult, they do tend to have difficulty in finding and sustaining jobs.
I do not believe in planned, unmarried parenthood. I think that it is very important that as a nation we support the concept of the family. I would say that this is perhaps a most unusual speech to make in this debate; but it is about people that we are talking, it is about children that we are talking; and unless we get our social policies in alignment with our economic policies then this world will suffer.
9.28 p.m.
Baroness Seear: My Lords, I must first apologise to the House and in particular to the noble Lord, Lord Young, that for reasons that I explained to the Leader of the House it was not possible for me to be here at the beginning of the debate. The amendment of the noble Lord, Lord McCarthy, speaks of the importance of sustained reduction in unemployment. It is the words "sustained reduction" on which I wish to put particular emphasis. It is because it is worded as it is that we on these Benches will be supporting the amendment put forward by the noble Lord—not because, as a speaker on the opposite side of the House implied, we endorse in the least his party's other policies. But as I understand it, we are not tonight debating the whole of the Labour Party policy, for which your Lordships will be very thankful. We are, in fact, debating this particular amendment, which is an amendment that could have been put down by anybody on our Benches and, I strongly suspect, by a considerable number of people on the Benches opposite.
The amendment refers to a sustained reduction in unemployment. It is because in the gracious Speech there seems to me to be so little real understanding of the urgency of sustained reduction in unemployment that we on these Benches remain critical of much that is in the gracious Speech. I was very interested indeed in the speech of the noble Viscount, Lord Caldecote, who is no longer in his place. He said many things that we on these Benches have said and echo again tonight. In particular, he stressed the urgency of dealing with the problem of unemployment. It is not something which, if left, will get better by itself. Tonight I do not want to anticipate the debate I think we are going to have on 3rd December on that outstanding report of your Lordships' House on overseas trade. Yet there is much in that report that is highly relevant to the discussion tonight and it would be quite unrealistic to leave out of account all reference to what has been included in that extremely good report.
There is a need for great urgency about the problem of unemployment. We know from that report that between 1964 and 1983 the percentage of world trade gained by our manufacturing industry and by our exporting industry fell from 14.2 per cent. to 7.9 per cent. We know that the decline in manufacturing industry in this country has gone on for a considerable time. Indeed, it started before the end of the last century; but it is accelerating, and if it gets beyond a certain point recovery is going to be extremely difficult.
It is not true, as the Government reaction to the report on overseas trade suggested, that in some miraculous way when oil runs out the recovery will come, by a kind of magic of its own. However, I will not develop that argument tonight because, as I say, we shall be debating it on 3rd December. But I want to underline the extreme urgency of this situation.
I know that the noble Lord, Lord Young, will agree that unemployment is a matter of the greatest importance and that a sustained reduction is vital. I did not have the opportunity to hear his speech today, and I hope he will not think it impertinent for me to say that I suspect he spoke, at all events to some extent, about small businesses; because it would be unusual if the noble Lord, Lord Young, did not speak about
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small businesses. I have nothing against small businesses—one cannot have anything against them—and we know that in this country the small business sector has for decades been far too small. The noble Lord, Lord Young, always insists that small is beautiful. That is not a doctrine to which I subscribe. It can be beautiful, but it can be very ugly. But whether or not it is beautiful, there is also another slogan, which says that beauty is skin deep; and the trouble with relying on small businesses as a cure for unemployment is that it does not get to the heart of the matter. It is a skin-deep cure for unemployment.
The fact of the matter is that we need a full recovery of manufacturing industry as a whole—large, middle-sized and small—and the trouble with the gracious Speech is that there is nothing in it to suggest that there is going to be a really determined attack on the decline in manufacturing industry as a whole. A response to that in the creation of small businesses is a tiny contribution; it is not a cure. The noble Lord shakes his head. Time will show, but I shall be extremely surprised if he finds there will be success without action to do something about large-scale industry. After all, a great deal of the success of small industry depends on its being able to service and to subcontract for large-scale industry, and if large-scale industry goes down the drain where is the small-scale industry going to get its orders from? It has to be an attack on the problems of the total manufacturing industry. That is the first point I should like to make in criticism of what we have had in the Queen's Speech this year.
It is late, and I will take up only a few points. I should like to make a few practical suggestions of ways in which some attack might be made on the urgent problem of improving the position of manufacturing industry as a whole and not just the small business sector. The Queen's Speech talks about a reduction in income tax. Other speakers today have said—and I am repeating and amplifying somewhat what they have said—that they would prefer, and they believe a great many people in this country would prefer, that if there is any money that can be spent or given back from Government expenditure it should not go on income tax reductions, with one exception. It should be used to help industry to be more effective, to reduce industry's costs.
It is surely disappointing that there is no suggestion that there will be a reduction of national insurance costs to employers, except to a very small degree in relation to the lowest paid. Those costs remain very high indeed. This has been compounded, surely, in what to me was the astonishing statement yesterday that the contribution from the redundancy payments fund to employers is not to be continued, putting a further charge on employers.
Incidentally, is it not true—it surely is—that the employers have over the years contributed to this fund? Does that not give them a legal entitlement to contributions from the fund, when they are having to make redundancies and to make payments to people who are declared redundant? In any case, if there is money to spare surely it should go into reducing the costs of industry, thereby making possible the employment of more people, rather than into reducing income tax as such.

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However, I agree that there is room for improvement at the lowest level. There is an opportunity to take more people out of paying tax; or, if that is not possible, can we not consider once again having a lower band of tax at the lower level, so that people do not pay 30 per cent. straight away, plus the national insurance contribution, which makes it an extremely high marginal rate? We have on previous occasions had two levels of tax at the lower level—the standard rate and a rate below the standard rate—and that would at least improve the position in regard to the poverty trap and make it more encouraging for people to come back into employment.
But it is not only on the question of tax that I wish to speak. We are already aware of skill shortages in this country. In the area with which I am concerned, in relation to the Manpower Services Commission, we have had continuing skill shortages in a number of places for a considerable time. There are two problems associated with this. It is absurd that with knocking on 4 million unemployed—because that is what it is—we should have continuing unfilled vacancies.
One problem in the area with which I am concerned is still acute; that is, the differential cost of housing. If people want to come from the North-East and the North-West—and enterprising schemes are bringing them into the Buckinghamshire area, which is the area of which I am talking—then, if you are selling a house there and attempting to buy accommodation in Buckinghamshire, you can whistle for it, unless somebody comes forward with a way of making it easier to get accommodation. The Government have done something in this direction, but the differential cost of housing is an increasing problem, with considerable pockets of unemployment in one area and unfilled jobs in another.
If we get the recovery that is promised, this problem will get more intense. This is the time to look at what we can do, so that we do not have this absurd problem of unemployed in one area and unfilled vacancies in another. In my own area, one employer is bussing people in from Birmingham, putting them up in a hotel for a week and then sending them back by bus at the end of the week. That is because of the housing shortage, and it is an absurd state of affairs.
It is ridiculous that we have been unable to fill jobs that require training, while we have large numbers of people who either need refresher courses or have never been trained, because of our past policy on training, and therefore do not have the skills. For the people who have had no training—and I know that the noble Lord, Lord Young, agrees entirely on this—the future is bleak indeed, whatever happens to the state of the economy. In fact, in some ways the more and the faster the economy recovers the worse will be the problem of the unskilled. We now know a lot about how to train people, but on this occasion it needs even more money than we are getting at the present time; and I am not denying that the Government are spending a great deal on training, because they are.
Perhaps I may give your Lordships one example of the kind of thing I mean. One of our real difficulties arises when there are vacancies and unemployed people. You try to find a course to put them on so that
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the unemployed person can be turned into a skilled worker. What do you find? You find that it will take months to get the course going and that, like as not, both the man and the job will have disappeared by the time the course is operational.
Only a week or two ago I went to a place in Watford where money had been put up for new machinery and where work is being done on what is known as an access course of training where individuals come in saying that they want to learn such and such. They are given a very careful personal assessment and very quickly—the next week in many cases—they are put on to appropriate training. This is expensive. I do not deny it. That college has had £250,000 for the equipment, but if by doing this one is converting tens or perhaps scores of unskilled or semi-skilled people into skilled people for whom jobs are waiting it is a very good investment and a far better use of the money than a cut in income tax.
Then there is the whole question of wage inflation. Noble Lords are aware of the danger of our wage rates going up faster than those of our competitors while our productivity is not going up as fast as theirs. Other noble Lords have referred to it. There can be only one answer—the gap between us and them will be greater. The Government have never said how they think they are going to deal with the problem of pay when unemployment ceases to hold pay down. Although we on these Benches still support some kind of incomes policy, we are all aware of the problems involved in it. But there is a simple way in which we can do a great deal to take the sting out of increased payment. That is a much greater extension of profit sharing by which relatively small increases in pay can be supplemented by a substantial share in the profits once the company has made the profits.
There is all the difference in the world between paying out higher wages in anticipation of being successful and paying out a large share of the profits after you have been successful. When you do that you do not run into the inflationary difficulties. I see nothing in the gracious Speech to suggest that there will be a determined attack on encouraging employers to give a much greater share of their wage increases through sharing in profits, which gives them the opportunity to resist high pay claims because there is some other way of remunerating their people and, what is more important, perhaps, also educating them in what is really involved in achieving a decent standard of living without having inflationary consequences.
Time is getting on and I see that it is very late, but I wish to mention two other matters. The economies in the universities are very short-sighted. I am the first to admit that there have been some abuses in the universities. There was plenty of room for reform. I worked in one for 30 years and I did not work there with my eyes shut. But to starve universities at the present moment not only in regard to technological training but in pure research is very short-sighted. You can live on your capital of pure research for months, perhaps for years and perhaps even for a decade, but if you let it go for very long your ability to compete in a high technology, fast changing world will become

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less. I beg the Government to think again about what they have been doing in relation to university expenditure.
While I am talking about universities—this may be beside the point, but I believe it is not—will the Government also think again about the way they have treated overseas students, not this time in the interests of overseas students but because these people are our best ambassadors? These young men and women will go back into companies in, say, the Far East—we had many of them in the London School of Economics and we know how this worked out—and when they are in a position to make big purchases they go to the countries in which they were trained. It is extremely short-sighted for a country which has to export, and which aims to be a great manufacturing country again, to deprive itself of that enormously important market. Will the Government please think again?
I want to congratulate the Government, and they have our support from these Benches, on their resistance to protectionism. It is a very easy temptation to fall into and it is probably one of the biggest perils facing the world at the present time. Country after country—alas, led by the United States—is turning to protectionism as a short-term way of looking after its own interests. It is no answer. Of course, action has to be taken when other countries are wilfully abusing their position, but, in general, protectionism is not and cannot be the answer.
One of the greatest protectionist devices is having an undervalued currency. My last plea to the Government is to do all they possibly can to stabilise currency rates. The first step is to get into the EMS and the regulatory mechanism. We have often urged this but the time has now come for it to be done. Still, that is only a beginning. One of the major tasks confronting the Government must surely be to work on a worldwide basis towards a new Bretton Woods, or some variation of it, so that industry will not be faced with rapid changes in currency relationships, and in unreal currency relationships, which are a concealed and very powerful form of protectionism. If the Government will follow just a few of these developments, I believe that we may move in the direction of a sustained reduction in the level of unemployment.
9.46 p.m.
Lord Barnett: My Lords, this has been a lengthy debate, and we have heard in the course of it three excellent maiden speeches. The noble Lord, Lord Wolfson, spoke with great clarity in a most distinguished maiden speech. He brought to our debate the huge experience he has of running a highly successful company. I know that all noble Lords who were present to hear his contribution were delighted to do so and will look forward to hearing him speak again often.
We also heard maiden speeches from former colleagues in another place. My noble friend Lord Houghton remarked how strange it is that when colleagues come here from another place they seem to convert from politicians to statesmen. That certainly applies in his case, although I am not sure about anybody else. However, as far as the other two maiden
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speeches are concerned, they were equally distinguished. The noble Lord, Lord Elliott of Morpeth, I know well, having served with him in another place. He was a much respected Member who was highly regarded on all sides. Coming, as he did, from the North-East as a Conservative Member, he spoke then as he spoke today: with great emotion about the worries and problems of that area of the country. I know that his contribution today was much appreciated by all who heard it, and we look forward to hearing him speak frequently in this House.
The noble Lord, Lord Kimball, was also someone with whom I served in another place, although we invariably served in different Lobbies. Tonight, I might even persuade him to serve in the same Lobby, but I have my doubts about that. I shall try my best. The noble Lord spoke about self-regulation. We in this House are all experts on that subject because we regulate ourselves. I do not think that is quite what the noble Lord had in mind. Nevertheless, his was a very interesting speech and we look forward to hearing his contributions often in your Lordships' House.
The hour is late and I hope that your Lordships will forgive me if I do not speak at too great a length about all the many excellent speeches we have heard during the course of this debate. An excellent speech was made by the noble Viscount, Lord Caldecote, who was primarily agreeing with much of what many of us on this side of the House would say. My own view is that the thinnest part of the noble Viscount's speech was his explanation as to why he did not intend to vote with us. However, I urge noble Lords to read his speech because it will be found that most of it agrees with much of what I propose to say.
Your Lordships will appreciate that although I have welcomed the three maiden speakers I cannot welcome the speech of the noble Lord, Lord Young, the Secretary of State for Employment, quite so cordially. I cannot be quite so complimentary about what he said although, as we have grown to expect, he said it very pleasantly. My noble friend Lord McCarthy answered him completely and comprehensively. Indeed, many of my other noble friends—my noble friends Lord Williams and Lord Jacques—in thoughtful speeches, equally showed so clearly why it is that the noble Lord has got it wrong. Indeed, I hope he does not mind my saying so but I thought his speech was so extraordinarily complacent that it could almost have come from the Chancellor himself.
We have had from the Prime Minister and from the Chancellor, and again from the noble Lord today, the constant repetition of the fact that the Government have done all they can, and are doing all they can, about the problem of unemployment; that the main task they have is to create the right climate. That is what they tell us, and I see the noble Lord is nodding. After six-and-a-half years they have created a climate where, no matter how the noble Lord juggles with the unemployment statistics, we have a record level of unemployment in this country, whether it be 3 million, 3.5 million or 4 million, and the climate clearly is not helping.
If evidence is needed, like the noble Baroness, Lady Seear, I, too, turn to a very interesting report. It is the report recently published by our own Select

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Committee on Overseas Trade. The chairman of that distinguished Select Committee is not noted for his socialist tendencies—if I may put it that way, given that tendencies are the "in" things these days. In paragraph 231 of that report the noble Lord said (with his committee, I hasten to assure your Lordships, because it was unanimous):
"Unless the climate is changed … as oil revenues diminish the country will experience",
among other adverse effects,
"higher unemployment, with little prospect of reducing it."
Those are not my words but the words of a very distinguished Select Committee of this House headed by the noble Lord, Lord Aldington.
Your Lordships will be aware that we are to debate this report, but what it says is so relevant to this debate on the economy and unemployment that I hope your Lordships will not mind if I quote a few other extracts. 1 believe it is vital that we learn the lessons from the essential facts in the report—and I am not talking about conclusions—even if, like myself, your Lordships may believe that the report's conclusions and recommendations do not quite match the seriousness of the situation it sets out; although I personally understand that in an all-party Select Committee it is more difficult to be specific about recommendations and conclusions.
I am bound to say that the Chancellor and the Secretary of State for Trade and Industry—not, I noted with interest, the Secretary of State for Employment, who was rather more sensible—were foolish enough to rush into instant criticism of this report. However, the fact is that the report is not just a criticism of this Government. The committee rightly says that manufacturing industry has been declining for the last decade. It could have gone even further and mentioned some other former Prime Ministers who presided over declining industry, but it did not; it referred to the last decade. The facts are indisputable. The committee agrees with the Chancellor that all advanced countries have seen a decline in manufacturing industry. The trouble is that others have declined in relative importance but, as the committee pointed out, the United Kingdom has seen an absolute fall.
I concede at once that industry was declining under a Labour Government, too, as the committee indicated. However, it is much worse now as we are further down the road; and not only is the climate wrong but we have been using North Sea oil resources as if they were to go on forever—or, as the Government argue (again, not the noble Lord, who is rather too experienced) and as the Chancellor certainly argued, as manufacturing industry declines and North Sea oil revenues decline we shall see a resurgence of manufacturing industry and a growth of the service industries.
The great service which the committee and its witnesses have done for your Lordships' House, and indeed for the country, is to show clearly why that will not happen. In their conclusions they again point out in paragraph 231:
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"new industries and new products usually grow out of long established activities and require a long time scale for development; … lost markets will be difficult to regain; and … lost manufacturing capacity will take a long time to restore".
Anybody who, like the committee, knows anything about industry will of course agree with that statement. Those are in fact modest statements of the obvious, and certainly they should not have brought down on the heads of this committee the abuse that they received from the Chancellor and the Secretary of State for Trade and Industry.
As to alternative employment from the service industries, we had a graphic answer from a colleague of ours, the noble Lord, Lord Weinstock, which I think is worth quoting. In paragraph 73 he said:
"… what will the service industries be servicing when there is no hardware, when no wealth is actually being produced. We will be servicing, presumably, the production of wealth by others. We will supply the Changing of the Guard, we will supply the Beefeaters around the Tower of London. We will become a curiosity. I do not think that is what Britain is about; I think that is rubbish."
The noble Lord, Lord Weinstock, said that. Your Lordships may find those words a trifle strong.
The committee used more restrained language. In paragraph 79, when talking about the likelihood of automatic recovery, they said of that view that:
"it is unrealistic and dangerously short-sighted".
That is a more restrained way of putting what the noble Lord, Lord Weinstock, said, but nevertheless it says the same thing. Taken together, the committee's views in paragraph 231 are that it all constitutes a grave threat to the standard of living and to the economic and political stability of the nation. Having read that report, no one can doubt it. That is rather different from the self-congratulatory Statement made yesterday by the Chancellor and the somewhat complacent speech made today by the noble Lord, Lord Young. 1 see the noble Lord nodding in agreement; I am obliged.
The committee's views are very worrying, based, as they are, on the harsh reality that they have found My own disagreement with the committee is not on the facts but on the remedies. As the committee points out, we are well on the way to a grave situation. If the worst is to be avoided, much stronger action is needed now.
Of course living standards will fall when North Sea oil runs out, but the necessary action must be taken now, as many in this debate have rightly argued. If room is to be made for capital expenditure and help for industry, there cannot also be an increase in living standards. Indeed, there may have to be some fall in living standards among those who can most afford it, though I am bound to say that with a public sector borrowing requirement as low as the percentage of the gross domestic product that the Chancellor boasted about yesterday there is certainly some room for an improvement in public expenditure without any serious danger of increasing the rate of inflation. Indeed, to claim with pride that you have reduced the borrowing requirement to that level at a time of such a level of unemployment as we have now is something of which to be ashamed rather than proud.
Against the background that I have described the Chancellor talks, as he did yesterday, of a "boom situation". Not surprisingly, our own Select

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Committee, to which I have referred, has set out a very different picture of the economy, and it has done so in very restrained and moderate language. Yet the only conclusion that can really be drawn from that report is that the Government's present policies are both economically unsound and, frankly, socially immoral.
I want to explain to your Lordships why I say that. The policies are economically unsound not only for allowing a catastrophic decline in manufacturing industry. Some of that was probably inevitable and some of the decline was outside the control of this or of any Government. Their policies are unsound because they fail to measure up to what the Select Committee rightly describes as the grave threat that faces the nation, particularly the threat to our economic and political stability. The very best that we shall see is continuing high levels of unemployment in the climate created by the Government.
I say that the Government's policies are socially immoral, for how else can one describe policies that are so clearly and deliberately designed to provide perhaps £3 billion income tax relief at a time when there is a clear need for additional capital expenditure which virtually everyone except the Government accepts? Nobody doubts—and it has not been denied by any Minister, certainly not in your Lordships' House or in another place—that increased capital expenditure would create more jobs than any cuts in taxes. Nobody has disputed that; certainly the noble Lord, Lord Young, did not. It is surely immoral—that is not too strong a word—when millions at home and abroad are crying desperately for help for a Chancellor of the Exchequer by deliberate plan and design to make available £3 billion for tax cuts.
I happen to agree with my noble friend Lord Houghton, and indeed with the noble Earl, Lord Onslow, and the noble Viscount, Lord Caldecote. I should like to see some raising of the tax threshold. I do not know whether it is true that the noble Lord, Lord Young, is having a battle with the Chancellor on how to allocate the tax relief. If it is, I wish him all the best. I hope that he wins that battle. However, if there is any tax relief going it should go on the threshold to help the lower paid, but the Chancellor wants to go down in history as the man who reduced the basic rate of tax to 25 per cent. If he does that he will go down in history but not for the reasons he thinks.
The plain fact is that, rather than give any tax relief, it would be much better and socially a better thing to concentrate the resources that have been created where the need is greatest and help to deal with the problems of unemployment and our inner cities, especially as at the same time that would go some way to meet the grave threat so graphically described by the Select Committee. I hasten to assure your Lordships that I refer only to going some way. I have never pretended that there is a simple and easy way, at a stroke, to bring down the catastrophic levels of unemployment that we now face.
In any event, the money that the Chancellor is planning to give away in his tax bonanza next March or April represents a gigantic accounting fraud. It is more than selling the family silver, and now the Canalettos which we hear that the noble Earl, Lord
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Stockton, is suggesting. In fact, that is grossly unfair to the noble Lord, Lord Diamond, who was the first person to mention it, but no doubt it will go down in history as the phrase of the noble Earl.
But the proposal is worse than that. If, as many demand, the nation's accounts were presented in balance sheet form and the Government proposed to use the proceeds from the sale of capital assets which belong to us all to pay dividends—that is, tax relief—to those who already have the highest incomes, that would rightly be widely condemned. Indeed, as one noble Lord said in the debate, if a publicly quoted company did that with its assets, that would.be treated as a major scandal in financial circles. For the Government to do that with the nation's assets is a national scandal.
Incidentally, I hope that it will not be argued that the Government will use the proceeds of the sale of assets put forward in the White Paper published yesterday to increase capital expenditure. The facts should be known to your Lordships. In 1986–87 there will be additional capital expenditure on housing of some £220 million. If I may say so, I am grateful to the Star Chamber and to the noble Viscount, Lord Whitelaw, for ensuring that we at least have that, although I am not too sure that the noble Viscount was quite aware of what the Treasury was up to all the time and it may yet have the better of him.
But £220 million extra is to be spent on housing and £54 million extra on roads. That is against capital receipts from asset sales of some £5,000 million. That I hope puts in perspective what is proposed to be done with the £5,000 million available. It is all irrelevant to the central problem that the nation faces. I must return again to those critical words of the Select Committee in paragraph 231, which states that unless the climate is changed the country will experience among other adverse facts higher unemployment with little prospect of reducing it. Yet the Chancellor makes clear that he has no intention of changing that climate.
Against that background, the amendment that was moved so cogently by my noble friend Lord McCarthy regretting the failure of the Government to propose measures intended to achieve a sustained reduction in the present level of unemployment is modest indeed. The Autumn Statement complacently sticks to the climate that has created the problems which the nation faces. It has certainly failed to propose measures to bring about a sustained reduction in unemployment. I urge your Lordships to support the amendment.
10.5 p.m.
The Lord President of the Council (Viscount Whitelaw): My Lords, my first task—this is a particular pleasure for me—is to congratulate three of my noble friends who have made their maiden speeches in this debate. My noble friend Lord Wolfson brings to the House great knowledge in business. He has done much in the sphere he spoke about today to forge links between our universities and business as a whole—a crucially important part of our national life that he knows very well. He is, of course, as a result, a specially significant addition to the wealth of knowledge and

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experience in your Lordships' House. I am sure that we all hope that in his very busy business life he will still have the time to give us the benefit of his considerable advice frequently in the future.
I first met my noble friend Lord Elliott of Morpeth when I spoke for him in a by-election at Morpeth over 30 years ago. I do not recollect that, being very inexperienced at the time, we were notably successful. Nevertheless, later he got into the other place as a Newcastle Member. He worked with me in the Opposition Whips' office there. Throughout his parliamentary career as a City of Newcastle Member he has been a staunch supporter of the North-East with its many difficult employment problems. As a fellow northern Member myself, although on the other side of the Pennines, I also worked closely with him and know something of all that he has done. Today, in his speech, he has again shown that knowledge of, and interest in, his home area for which he has worked so hard over the years. I know that he will never allow your Lordships to forget the North-East; I am sure that all his contributions whether about that area or on wider issues will be very much welcomed.
My noble friend Lord Kimball has also been a longstanding colleague of mine in another place. There he earned a deserved reputation as a parliamentary tactician, particularly on Private Members' Bills. Those in this House who are considering getting away with anything in the field of Private Members' Bills, or want to get away with something and outwit the authorities of the House, which is very much easier here than in another place, had better ask my noble friend Lord Kimball how to do it! He spoke today about the problems of the City, where he has been working recently to uphold the standards of conducting business in institutions which make a major contribution to our tradition in the City of London as a financial centre and, indeed, to our invisible exports. When the Bill concerned with financial services comes to the House, I am sure he will play an important part in it. Your Lordships will also find that he has a great knowledge of the countryside, about which I am sure he will speak in the future. We shall be keen to hear him when he does so.
At the end of my speech, I shall respond particularly to the points made by the noble Lord, Lord McCarthy, in support of his amendment, which, I must make abundantly clear at the start, the Government reject for reasons that I consider to be perfectly excellent. As I shall be giving them myself at the end, it would be surprising if they were not.
First, I shall seek to reply to some of the points made by noble Lords during the debate. If I miss some, my excuse will be that as an advocate of shorter speeches I must practise what I preach. In any event, I certainly do not intend to incur the displeasure of my noble friend the Chief Whip who always accurately reflects the mood of the House at the end of a long debate and shows it.
I wish to start with an assertion which I hope will be widely accepted in your Lordships' House, even by the sternest critics of Her Majesty's Government. All of us are united in our determination to encourage the creation of jobs, so that we can offer job opportunities
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to our people and so reduce the seriously high levels of unemployment. Against that background, of course, there are many arguments about the best way of achieving this objective. However, so far as 1 am concerned I want to make it clear to your Lordships' House—and I hope that I take your Lordships with me—that there can be no doubt about the objective itself.
I do not intend to become involved in all the statistical arguments. There are two very good reasons why I do not wish to do so. First, I do not understand them and cannot clearly go through them. Indeed, I would have been for a much longer time in mathematical education if anyone had thought it would have been worth it and if I had been able to understand it. So I do not do so. I never believe in dealing with things which I do not understand, unless I am absolutely forced to do so.
My noble friend Lord Young has made the position very clear and the arguments will no doubt continue. However, suffice it for me to agree with my noble friend Lord Caldecote that quite simply the unemployment figures in this country today are too high. Forget the statistics; in my judgment I simply say that they are too high. On behalf of the Government I make it very clear that that is the Government's position and I hope that, coming from me, it will be accepted. I occasionally hear strains suggesting that the Government do not really feel that to be so. I want to make it clear that Her Majesty's Government do.
The noble Lord, Lord Diamond, said something during his speech which absolutely fascinated me. I was not quite sure whether I had heard him aright and so I had to go and ask whether my hearing was a little short. He said that £200 million of expenditure on housing—which I am very grateful to the noble Lord, Lord Barnett, for welcoming—was neither here nor there. I do not know what has happened to the Treasury and I do not know what has happened to an ex-Chief Secretary when he can say that £200 million is neither here nor there. But, of course, all things change. Perhaps the noble Lord, Lord Barnett, would like to take his fellow ex-Chief Secretary out of the door—in time, not now—and give him a little instruction on the question of what the Treasury consider to be £200 million, because I must say that in the last few weeks, to which the noble Lord, Lord Barnett, has referred, I have found that arguments about figures very much less than £200 million have occupied me for more than a day. So if I have found that to be so, what can I say about "neither here nor there"?
The noble and learned Lord, Lord Simon, first demolished the old cliché about the family silver. I am sorry to be unkind to the noble Lord, Lord Barnett, again so soon but I really believe it to be a cliché. I cannot understand the argument that when you are transferring something to wider ownership, and indeed to make it more efficient, then to receive income back from the taxation on it, it can ever be regarded as selling the family silver. I should have thought that the Government's privatisation programme is perfectly clear and stands on its own in that connection.
The noble and learned Lord, Lord Simon of Glaisdale, also questioned the demographic trends and I think that I should reply to him about that. The

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labour force rose by 510,000 in 1984. It was the largest rise in a single year since figures began to be collected. I love the little note I have that follows, saying,
"Not possible to quantify accurately".
However, as there are no better statistics than that, I shall tell you what they say. More married women are taking jobs and the 1960s baby boom generation is entering the labour force. That explains why, in spite of a large rise in new jobs, the number of jobless has not come down overall. The labour force is likely to grow in future, but at a lower rate. Over the next three years the labour force is expected to grow at just over 100,000 a year. I hope that answers the important point that the noble and learned Lord, Lord Simon of Glaisdale, raised.
The noble Lord, Lord Jacques, made, if I may humbly say so to him, a most excellent speech. He gave us a comparison of technical training with West Germany. He also discussed their training programmes, the way the Germans work their machines, and the way they mend their machines when they go wrong. His conclusion was that those were many of the reasons we were not competing as successfully with West Germany as we should, quite apart from any other reasons. He also said that the comparison we had with the Japanese now setting up in this country was in fact to our detriment so far as industrial relations were concerned.
The noble Lord, Lord Taylor of Gryfe, raised the question of the privatisation of gas and the argument that Mr. Hattersley in another place said that he would renationalise it. I cannot speak for what Mr. Hattersley says, but I personally think that the privatisation of gas is a sound measure on its own and certainly is not a dogma of nationalisation. I come back to my point: it is a change to wider ownership and greater efficiency. I believe that to be so.
Noble Lords: No!
Viscount Whitelaw: My Lords, the noble Lord shakes his head, but that is what I believe and I am entitled to believe it; and, what is more, an awful lot of other people believe it too.
The noble Lord, Lord Harris of High Cross, welcomed the shop opening Bill. He asked whether it was going to be introduced in this House. I had better be a little careful, because I have told noble Lords on a previous occasion that I was fighting my battles to ensure that your Lordships had, early in the Session, some important Bills before you. I am still fighting my battles, but I do not think I shall disappoint my noble friend in the end; though I have had a little bit of what has been described as not local difficulties, because they appear to have happened far away from this House and far away from me. I have read the ripples elsewhere. I hope that we shall be able to have that Bill, and I very much welcome the robust support that the noble Lord, Lord Harris of High Cross, will give on that occasion. I am also grateful to him for the welcome he gave to our firm efforts to reduce inflation, and I can assure him that they will continue.
The noble Lord, Lord Williams of Elvel, said that inflation, though he welcomed it up to a point, was not as good as it might be. If the noble Lord, Lord
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Williams, considers that inflation today is not as good as it might be, I am bound to ask him how on earth he managed to remain a member of the Labour party throughout all the period of the last Labour Government. But he did, and it must have been difficult for him, because after all one thinks of what their inflation rate was at that time.
He made some important comments about the problems of the Metal Exchange and the tin market, on which he is an acknowledged expert. I cannot give him tonight, in advance of the meeting, the assurances he expected, and I think he realises how difficult it would be for me to do so; but I certanly shall see that his important remarks are passed on to my right honourable friend the Secretary of State for Trade and Industry.
The noble Lord, Lord Hankey, supported the control of inflation, and he said that we must continue in that way. He stressed the value of NEDO and the little Neddies. I think he knows that the Government support that position.
My noble friend Lord Eccles made a most important speech about the whole problem of interest rates and the international position. He made it clear to us, from his great knowledge, that it is impossible in the modern world to believe that you can act as a small island in isolation. He made clear how much we are bound to be dependent on the Americans' efforts, and indeed American interest rates. He asked whether I could ensure that my right honourable friend in another place, the Chancellor of the Exchequer, would work hard for this international co-operation which he believes to be so vital in the interests of the world. I certainly can give him that assurance.
My noble friend Lord Mottistone also welcomed the control of inflation. Indeed, he believed very much in the idea that we should introduce commercial management into the dockyards. With his great knowledge of the Navy I was delighted to hear this. When I hear my noble friends expressing themselves strongly in favour of a Bill which will come before your Lordship's House during the Session it gladdens my heart and I hope that of my noble friend the Chief Whip as well.
The noble Lord, Lord Houghton, said that income tax thresholds were too low and hit the poor and he wished to see the thresholds raised. I think that is something on which many speakers in the debate, including my noble friend Lord Onslow, agreed with Lord Houghton. I believe that is something that many people in this House wish to see. I have heard the views that have been expressed about thresholds and other taxation, but it is welcome to know that there are many supporters of that view, particularly the noble Lord, Lord Houghton, who has great knowledge of these matters.
I should say to my noble friend Lord Onslow that, for those who have been out of work for some time and have not had high benefit entitlement, the pilot scheme announced by my noble friend the Secretary of State for Employment, Lord Young of Graffham, today will, we expect, be a real help in improving their financial incentives to take up a job.
The noble Viscount, Lord Falkland, raised the question of wider share ownership—I come back to

373
my point, somewhat disputed, evidently. It appeared from that that he was giving some support to the question of privatisation, and I was glad to hear that.
My noble friend Lord Elibank stressed the importance of avoiding the North-South divide. I agree very strongly with him about that and I also agree with what my noble friend Lord Elliott of Morpeth said in trying to refute that. As one who lives in the North I feel it very strongly. My noble friend Lord Elibank felt that the Channel Tunnel could be in the North and wished it could be. But even if it has to be in the South-East it surely will create jobs throughout the country during its construction and. indeed, would bring orders to the North-East which would be extremely important.
The noble Lord, Lord Granville of Eye, raised the question of vacancies for skilled engineers. I must say to him that the Government training schemes should go a long way to meet the points that he made.
My noble friend Lord Caldecote welcomed many of the measures taken by the Government. The noble Lord, Lord Barnett, seemed to seek to drive a wedge between my noble friend Lord Caldecote and myself. 1 do not think that he wholly succeeded in that task because I was grateful for the support given by my noble friend on controlling inflation, encouraging enterprise and on the trade unions. He certainly had his reservations about unemployment, but he was prepared to press ahead with privatisation. He wanted to see more money spent on the infrastructure and he felt that the amount of wealth being created was too small. On the whole I think the balance of assets when added up comes down on my side rather than that of the noble Lord, Lord Barnett, but that is for my noble friend Lord Caldecote to decide.
The noble Lord, Lord Blease, spoke about Northern Ireland. He has every reason so to do. From my own personal knowledge he made a very great contribution to that very difficult area over the period of time when I was there. I was immensely grateful to him and so I believe everyone should be.
Noble Lords: Hear, hear!
Viscount Whitelaw: My Lords, the noble Lord, Lord Blease, asked about the discussions with the Government of Southern Ireland. I can say nothing further about that today, nor do I think he would expect me to do so. I can assure him that if there is an initiative it will, of course, be under the control of Parliament and this House would have an early opportunity to debate anything which might come forward on that front. I give him that complete assurance.
My noble friend Lady Carnegy of Lour spoke about the need for people to explain to young people the many features of youth training schemes, the community programmes and the new measures announced today by my noble friend Lord Young. They should be explained to people and that should be done by those who may have doubts about some of the schemes, and by noble Lords opposite as well, she felt.
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I too feel that it is very important. There is a widespread acceptance of many of these Schemes. There is a widespread acceptance of what the Government are doing for training and the more we can ensure that these young people have it properly explained to them the better it will be.
The noble Earl, Lord Halsbury, again disposed of the "family silver" cliché. Noble Lords will be pleased to hear that I have in my notes "Wider ownership" from the noble Earl, Lord Halsbury, so I am reinforced in my view and I shall not retreat from it for one moment. The noble Earl also spoke about the importance of negotiating a reduction in interest rates and the need for international co-operation, in which he agreed very much with what my noble friend Lord Eccles had said.
My noble friend Lord Gisborough raised the problems in an area of very high unemployment where he lives and where I know he works and does so much. He spoke about the social problems and the problems of the under-achievers. One has a great sympathy with what he said. I hope he will feel that some of the training schemes that are coming forward, if properly pursued, will be of value in that respect.
The noble Viscount, Lord Hanworth, spoke of having a sensible, moderate policy. I am not quite sure of those expressions but there they are. I was grateful to him for also saying that he believed that the health service had not been cut. I am glad that he recognised that and I hope that perhaps he will tell some of his noble friends who have not always been quite so clear about it as he is.
My noble friend Lady Faithfull seemed to apologise for raising in this debate the question of children and child benefit, illegitimacy, and the family. She needs to make no apology because she has a very considerable knowledge of these matters and wished to put them before the House. She will have another opportunity to do so, but I am glad she did it tonight because it is central to the problems we face.
The noble Baroness, Lady Seear, made, if I may humbly say to her, as good a speech as I would expect from her. There was only one disappointment I had with it. I felt that many of the points she made led to the conclusion that she might have supported the Government and not have been aligned with her friends on the amendment of the noble Lords opposite. However, that was her decision. Nevertheless, she made some extremely important points about training, on which she is an acknowledged expert and is always much to be listened to on the subject. Also regarding the community programme, she made the point about wage inflation and our costs. I could not agree with her more. If we are to reduce unemploymnt in this country we have to be competitive—and that means in our wage costs as well. The sooner we all realise that, the better. Thus I was extremely grateful to her for what she said.
The noble Lord, Lord Barnett, had clearly decided that on the whole he was going to avoid many of the problems which arise from his past. I have great sympathy with the noble Lord because so do I from time to time. On the whole, we all have pasts in various jobs and sometimes it is as well to avoid them. The noble Lord felt that on the whole he was a strong

375
advocate of controlling public expenditure in his days as Chief Secretary and therefore he decided to move off into what perhaps I may call more profitable pastures so far as he was concerned: the report of the Select Committee on Overseas Trade.
I shall not be led down that route for two very good reasons. First, there is to be a debate on it in this House and that is the proper way to proceed. I look forward to hearing that debate, though, I must assure your Lordships, not taking part in it. Equally, I do not wish to become involved because of the personality of the chairman. I have to confess to your Lordships' House that when I was a very small boy at school the chairman of that Select Committee was a very senior boy. I have always been very frightened of him ever since. Therefore, I am not likely to disagree with him too easily.
I turn now, very briefly at the end, to the amendment in the name of the noble Lord, Lord McCarthy. The essence of this is, your Lordships may know, that the Government have failed to produce measures to achieve a sustained reduction in unemployment. I want to rest my answer on the positive measures which the Government have taken. We have been totally consistent in our conviction that unemployment can only be successfully tackled through a stong and growing economy.
As I will show—and as my noble friend Lord Young of Graffham has sought to explain—we have made considerable progress towards that aim. Many would envy our record of sustained growth over the last four years—growth which has averaged 3 per cent. a year over that time. Manufacturing output, in fact, rose by 4 per cent. in 1984—the biggest percentage increase in any year since 1973. It cannot be stressed too often that this growth, which has been secured in the face of difficult circumstances worldwide, has only been possible because of the success of the measures we have taken against inflation.
Since this Government came into office inflation has averaged under 10 per cent., was around 5 per cent. in 1983 and 1984, and is forecast to fall to 3¾ per cent. by the end of 1986. Compare this with the record of the previous Administration, under which inflation averaged more than 15. per cent. and at one point nearly touched 27 per cent. I mention these figures because I think it is too easily forgotten how far we have come in the last few years, and how unattainable low inflation looked when we came into office in 1979. The measures we have taken against inflation to permit growth and the creation of new jobs are therefore the first reason I put to your Lordships for rejecting this amendment.
Some of those who have spoken have suggested that our policies to reduce inflation in some way are to be blamed for unemployment. That, if I may say so, is turning common sense on its head. As my noble friend Lord Young of Graffham pointed out earlier today, in the last two years 677,000 jobs have been created; that is over two-thirds of a million—I do not know why I said that. However, it is more than all our partners in the European Community put together. I do entirely accept the attitude that at the same time as these jobs have been created more people have been coming onto
376
the labour market and so the new jobs have not yet therefore led to the fall in unemployment which we all desire so much, for it is only by even more jobs being created that the unemployment totals can ultimately be brought down.
There are those of the Government's critics who do not seem to care about the risks of inflation. But, surely, public spending without control would surely lead to all the inflationary excesses which undermined recovery in the past. No one knows that better than the noble Lord, Lord Barnett. They would be bound to lead to a deterioration in our competitiveness. If we cannot sell our goods, more jobs will be lost. Surely, that must be accepted.
The noble Lord, Lord McCarthy, seemed I thought to get some sly pleasure in the fact that possibly wage increases might be 10 per cent. next year. If wage increases are 10 per cent. it will be a very serious matter for the unemployed in this country; and the sooner we understand that, the better for all concerned. It is not just our experience that one has to keep costs down but that of other countries, including, very recently, socialist France, which tried a certain course but then had very quickly to draw back from the consequences.
That is why we continue to believe that public expenditure must be kept under control. Any Government which take their responsibilities seriously must try to do that, for there are always more calls on the public purse than money to answer them. I hope those who attack the Government for getting public expenditure under control will realise that. But, within the overall total, we have looked carefully at the balance between programmes and at what should be the priorities. We are entitled, in my view, to claim credit for the results of that work, which has been going on for the whole of our administration.
The crucial points are these. Public spending is set to fall by 1988–89 to its lowest level as a proportion of GDP since 1972–73. Within this total, however, there will, for example, be more money for the National Health Service and more for social security.
Many of the other measures which have been set out very well in the White Paper I will not refer to because of the lateness of the hour. But they are there for all to see, and much improvement can result from them, I believe. Then there are the measures described in detail by my noble friend Lord Young of Graffham in what I regarded as an excellent speech in his own area of responsibility. These, I believe, are very important measures which, added to the training schemes and the community programmes already set in place, will be of the very greatest importance to our employment prospects in the future.
That is our case, my Lords. I believe it is a very strong case. It is the case on which I rest in rejecting this amendment. Indeed, I now feel more strongly, because I thought the noble Lord, Lord McCarthy, would arrive with an alternative strategy. I thought it would be vague; I thought it would be fraught with inflationary dangers. But he did not arrive with a strategy at all, and so all the more do I ask your Lordships decisively to reject the Opposition's amendment.
10.36 p.m.
Lord McCarthy: My Lords, I shall not keep the House very long. We have listened with care and close attention to the case against our amendment which has been advanced on the other side. No measures were proposed by the Secretary of State, and least of all by the noble Viscount, which would achieve
"a sustained reduction in the … level of unemployment"
Misrepresentations of our position on inflation (suggestions that we welcome, or might welcome, inflation) or exaggerations of the Government's own record on inflation are not of help and do not butter any parsnips.
I asked the noble Viscount to answer two specific questions about the effects of the inflation that is in the system on the present level of employment and on the generation of employment from the present expenditure measures. The total absence of any answer to these two questions reinforces what we are saying. There are no arguments against the proposals that we have advanced. There are no arguments in relation to the use of the proceeds of sale of the silver. The noble Viscount says it is a cliché. "There is no alternative" is a cliché; "He must be one of us" is a cliché; but we have to live by these clichés. There is no reason why we should not press this to a Division and ask for a vote on our amendment.
10.38 p.m.
On Question, Whether the amendment (moved by the Lord McCarthy) shall be agreed to?
Their Lordships divided: Contents, 91; Not-Contents, 147.

DIVISION NO. 1

CONTENTS

Airedale, L.

Jenkins of Putney, L.

Ardwick, L.

John-Mackie, L.

Barnett. L.

Kagan, L.

Bernstein, L.

Kennet, L.

Beswick. L.

Kilbracken, L.

Blease, L.

Kilmarnock, L.

Boston of Faversham. L.

Kirkhill, L.

Bottomley, L.

Kissin, L.

Brooks of Tremorfa, L.

Llewelyn-Davies of Hastoe, B.

Caradon, L.

Lloyd of Kilgerran, L.

Carmichael of Kelvingrove, L.

Longford, E.

Cledwyn of Penrhos, L.

Lovell-Davis, L.

Collison. L.

McCarthy, L.

Crawshaw of Aintree, L.

Mcintosh of Haringey, L.

David, B. [Teller]

Mackie of Benshie, L.

Dean of Beswick. L.

McNair, L.

Denington, B.

Milner of Leeds, L.

Donoughue, L.

Mishcon, L.

Elwyn-Jones, L.

Molloy, L.

Ennals, L.

Monkswell, L.

Falkender, B.

Morton of Shuna, L.

Falkland, V.

Mulley, L.

Foot, L.

Nicol, B.

Gallacher, L.

Ogmore, L.

Galpern, L.

Oram, L.

Graham of Edmonton, L.

Pitt of Hampstead, L.

Grey, E.

Ponsonby of Shulbrede, L.[Teller.]

Hampton, L.

Hanworth, V.

Prys-Davies, L.

Hatch of Lusby, L.

Raglan, L.

Hooson, L.

Rea, L.

Houghton of Sowerby, L.

Ritchie of Dundee, L.

Howie of Troon, L.

Roberthall, L.

Hutchinson of Lullington, L.

Robson of Kiddington, B.

Irving of Dartford, L.

Rochester, L.

Jacques, L.

Ross of Marnock, L.

Jeger, B. I

Seear, B.

378

Sefton of Garston, L.

Turner of Camden, B.

Serota, B.

Underhill, L.

Silkin of Dulwich. L.

Wedderburn of Charlton. 1.

Simon, V.

Wells-Pestell, L.

Stallard, L.

Whaddon, L.

Stewart of Fulham, L.

White, B.

Stoddart of Swindon, L.

Williams of Elvel, L.

Taylor of Gryfe, L.

Winchilsea and Nottingham. E.

Tordoff, L.

Winstanley, L.

NOT-CONTENTS

Abinger, L.

Jessel, L.

Airey of Abingdon, B.

Kaberry of Adel, L.

Aldington, L.

Killearn, L.

Ampthill, L.

Kimball, L.

Arran, E.

Kinnaird, L.

Barber, L.

Kinnoull, E.

Bauer, L.

Lane-Fox, B.

Belhaven and Stenton, L.

Lauderdale. E.

Beloff, L.

Layton, L.

Belstead, L.

Lindsey and Abingdon, E

Bessborough, E.

Long, V.

Boyd-Carpenter, L.

Lyell, L.

Brabazon of Tara, L.

McFadzean, L.

Brentford, V.

Macleod of Borve. B.

Bridgeman, V.

Mancroft, L.

Brougham and Vaux, L.

Mansfield, E.

Bruce-Gardyne, L.

Margadale. L.

Butterworth. L.

Marley, L.

Caldecote, V.

Marshall of Leeds, L.

Cameron of Lochbroom, L.

Massereene and Ferrard, V.

Campbell of Alloway, L.

Maude of Stratford-upon- Avon. L.

Campbell of Croy. L.

Carnegy of Lour, B.

Merrivale, L.

Cathcart, E.

Mersey, V.

Chelmer, L.

Middleton, L.

Chelwood, L.

Molson, L.

Chesham, L.

Monk Bretton, L.

Clitheroe, L.

Montgomery of Alamein, V

Coleraine, L.

Morris, L.

Colville of Culross. V.

Mottistone, L.

Colwyn, L.

Mountevans. L.

Cork and Orrery. E.

Mountgarret, V.

Craigavon, V.

Moyne, L.

Cranbrook, E.

Murton of Lindisfarne. L.

Croft, L.

Nugent of Guildford, L.

Davidson. V.

Onslow. E.

De La Warr, E.

Orkney, E.

Denham, L. [Teller]

Orr-Ewing, L.

Donegall, M.

Peel, E.

Eccles, V.

Pender, L.

Eden of Winton, L.

Penrhyn, L.

Elibank. L.

Peyton of Yeovil, L.

Ellenborough, L.

Polwarth, L.

Elliot of Harwood, B.

Portland, D.

Elliott of Morpeth, L.

Reay, L.

Elton, L.

Redesdale, L.

Erroll of Hale, L.

Renwick, L.

Fairfax of Cameron, L.

Rodney, L.

Faithfull, B.

Romney, E.

Forester, L.

Salisbury, M.

Fraser of Kilmorack, L.

Saltoun of Abernethy, Ly.

Gibson-Watt, L.

Sanderson of Bowden, L.

Gisborough, L.

Sandford, L.

Glanusk, L.

Savile, L.

Gray of Contin, L.

Simon of Glaisdale, L.

Greenway, L.

Skelmersdale, L.

Hailsham of Saint

Southborough, L.

Marylebone, L.

Stodart of Leaston, L.

Halsbury, E.

Sudeley, L.

Hankey, L.

Swinton, E. [Teller.]

Harmar-Nicholls, L.

Taylor of Hadfield, L.

Harris of High Cross, L.

Thorneycroft, L.

Henley, L.

Trefgarne, L.

Hives, L.

Trumpington, B.

Holderness, L.

Ullswater, V.

Hood, V.

Vaux of Harrowden. L.

Hooper, B.

Vickers, B.

Hylton-Foster, B.

Vinson, L.

Inglewood, L.

Vivian, L.

Ingrow, L.

Waldegrave, E.

379

Ward of Witley, V.

Wolfson, L.

Watkinson, V.

Wynford, L.

Westbury, L.

Young of Graffham, L.

Whitelaw, V.

Zouche of Haryngworth, L.

Windlesham, L.

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

British Railways Bill South Yorkshire Passenger Transport Bill
Brought from the Commons and (pursuant to Resolutions of 28th October last) deposited in the Private Bill Office together with the declarations of the agents; read a first time; read a second time pro forma, and committed to Select Committees.
House adjourned at eleven minutes before eleven o'clock.

  LOCAL GOVERNMENT ACT 1985: STAFFING ISSUES
  LOCAL GOVERNMENT ACT 1985: STAFFING ISSUES
  REPLAN PROJECTS PROGRAMMES: GRANT-AID
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