Sitting of 19 November 1986

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

    Broads Bill
    Mr. Patrick Thompsonasked the Secretary of State for the Environment what representations he has received about the proposed Broads Bill.
    The Minister for Environment, Countryside and Planning (Mr. William Waldegrave): A number of right hon. and hon. Members and a number of representatives of organisations which care for the Broads have been in touch with me over recent months. Our decision to legislate has been widely welcomed in East Anglia and elsewhere. I hope that the Bill which we introduced yesterday will win general support in the House.
    Mr. Thompson: I thank my hon. Friend for his reply and join those who are congratulating him and his colleagues on introducing the Bill so promptly. The Bill is welcomed by people in Norfolk and elsewhere who have a high regard for the Broads and see the Bill as a way of helping conservation measures. Will my hon. Friend bear in mind the interests of the boating community and ensure that those interests have good representation, especially on the navigation committee?
    Mr. Waldegrave: My hon. Friend is right. The purpose of the Bill is to draw a proper balance between the various interests so that the area, which is of outstanding interest and beauty, is preserved for all who want to enjoy it in future.
    Sir John Wells: Is my hon. Friend aware that the Norfolk Broads are a great national asset and do not belong only to the people of Norfolk? My constituents go there for holidays — as naturalists and to enjoy the boating. Is he aware that each boat brings employment to the area and £5,000 a year in spending money to the locality? Will he ensure that this is preserved, commensurate with an adequate balance of conservation?
    Mr. Waldegrave: My hon. Friend is right. By giving the Norfolk Broads status equivalent to a national park we are recognising that the area is of national and international importance. I repeat that it is in the interests of everyone, boat owners included, to ensure that the Broads are conserved for the long-term future. That is the objective of the balance that we shall seek in the Bill.
    Dr. David Clark: I can give the Minister the assurance that if this Bill is the Bill that he was due to introduce last July, generally it will have the support of the Opposition in ensuring that it reaches the statute book.
    Mr. Waldegrave: May I be the first to congratulate the hon. Gentleman on his appointment as shadow Minister for "environmental things"—which is probably what he is called. His right hon. Friend the Leader of the Opposition had two applicants for the post of shadow Environment Minister and he has acted decisively by giving both of them the job. I am grateful to the hon. Member for his support. The Bill is indeed recast from Norfolk's original Bill, but it has been made a good deal shorter. However, it has exactly the same purpose.

    Public Sector Housebuilding
    Mr. Skinnerasked the Secretary of State for the Environment what are the latest yearly figures for public sector housebuilding; and if he will make a statement.
    The Secretary of State for the Environment (Mr. Nicholas Ridley): A total of 33,500 new public sector dwellings were completed in England in 1985.
    Mr. Skinner: Is the Minister aware that during the last full year of the Labour Government three times that number of public sector dwellings were completed? Is it not a scandal that when we have an aging population and when many old-age pensioners are crying out for public sector bungalows, the Prime Minister can build a £500,000 house for herself at Dulwich? At the same time, the Government arc refusing to allow duly elected local authorities to spend £6·5 billion of capital receipts on building bungalows for the pensioners which would put construction workers back to work and get some people off the dole queue.
    Mr. Ridley: We have to consider the total number of completions rather than only public sector completions. Last year the private sector completed 129,000 houses, making a total of 162,000 houses for the whole country. That is a very fine record. It is always a good idea to consult one's local authority before coming to the House and asking silly questions. Bolsover district council has said that in general there is no unsatisfied demand for rented family housing within the district. The district council went on to say that it is also encouraging private builders and looking to the Housing Corporation to fund further sheltered housing for the elderly, so I advise the hon. Gentleman to find out the facts before he comes to the House and asks such a question.
    Mr. Phillip Oppenheim: As the hon. Member for Bolsover (Mr. Skinner) is so clearly interested in the state of housing in Derbyshire, perhaps my right hon. Friend will inform him that the hon. Gentleman's Socialist friends on the county council allowed a large number of houses in the town of Alfreton, which borders on Bolsover, to remain empty for many years and that they deteriorated until public pressure on the county council forced it to put them on the market. Perhaps the hon. Gentleman should have a word with his friends on the county council.
    Mr. Ridley: My hon. Friend confirms that it is desirable for hon. Members who come here to ask questions to get their facts right first.
    Mr. Cartwright: The Secretary of State advises lion. Members to consult local authorities. Is he aware that the

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    Conservative-controlled Association of District Councils has seen through the Chancellor's conjuring trick and has worked out that what is presented as extra Government spending is in fact an 11 per cent. cut in real terms? What possible hope will such a policy give to the many thousands of homeless families, to those on council waiting lists and to those who have to wait for years for essential repairs to be carried out?
    Mr. Ridley: That is not the case. The resounding success of the Government's right-to-buy policy has greatly increased housing receipts, which in turn has enabled about £450 million of additional gross provision to be made for housing. That is a wonderful result, but it has been made possible only by the recycling of public capital through the right to buy.
    Mr. Heddle: Does my right hon. Friend agree that building more and more council houses over the years has not reduced housing waiting lists and that the cure for homelessness is a greater and better utilisation of the existing housing stock, with existing council tenants being encouraged to take in single people on short stay accommodation through the tenants' charter? Is it not a national scandal that nearly 30,000 council houses have been standing empty for nine, 12 or 18 months? Will my right hon. Friend do something to encourage councils to bring those houses back into use?
    Mr. Ridley: I agree that before talking about housing shortages we should ensure that all council houses that can be occupied are occupied. Some councils have a disgraceful record in this respect. I have given the Housing Corporation an additional £20 million for 1987–88, which will enable it to attract private finance and to spend £60 million or £70 million on the provision of sheltered housing for the homeless in stress areas. That is the best contribution that this Government could have made, and they have made it.
    Mr. Heffer: Has the right hon. Gentleman had time to read the answer to the excellent question that was asked by my right hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) in today's Hansard? It suggests that stress areas, particularly Liverpool, have faced very serious problems over a long period. Is the right hon. Gentleman aware that during the last three years Liverpool city council has built over 3,000 houses and has put on over 5,000 construction workers? Should not local authorities that have tried to deal with their housing problems in that way be given the fullest support instead of the Government trying to restrict the amount of financial assistance that they receive?
    Mr. Ridley: I have not had an opportunity to read the question to which the hon. Gentleman refers, but I shall respond to him, as I have great respect for him, by making sure that I read it. I gather that Liverpool council owns nearly 10,000 vacant houses. Surely the right way to deal with the Liverpool problem is for the council to stop playing Militant politics and fooling around and to get on with putting the houses right for people to live in.
    Mr. Powley: May I draw my right hon. Friend's attention to the fact that most district councils and local authorities own great acres of land in small and medium-sized parcels, of which they could easily dispose to private
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    builders and developers, thus allowing the private sector to build houses for owner-occupation? Would this not relieve many housing waiting lists?
    Mr. Ridley: I agree with my hon. Friend. Approximately 60,000 acres of land are owned by local authorities which could and should be put to productive use. We intend to seek extra powers in the Local Government Bill, which will be coming before the House shortly, to ensure that those acres are used for the benefit of the people instead of being sterilised by the local authority.
    Mr. Tony Banks: Is the Secretary of State—
    Several Hon. Members: Where is the family silver?
    Mr. Speaker: Order.
    Mr. Banks: At least the family silver is safe in my hands. I do not intend to sell it off.
    Is the Secretary of State aware that in the London borough of Newham in 1984 only 10 families were in bed-and-breakfast accommodation, but today 300 families are in bed-and-breakfast accommodation? Is he also aware that the cost next year to Newham ratepayers will be £3 million? If that £3 million could attract the normal money from the Government for house construction, it would finance a programme of £125 million, which would enable us to build 2,000 houses in Newham. Does the Secretary of State not realise that the Government's housing policy represents, not collective responsibility, but collective lunacy?
    Mr. Ridley: I do not know whether it would be sub judice to ask the hon. Member a question. We have been accused of selling the family silver, but he has been accused of stealing it.
    Mr. Banks: On a point of order, Mr. Speaker.
    Mr. Speaker: Order. I think that the words are "taking care of".
    Mr. Banks: On a point of order, Mr. Speaker.
    Mr. Speaker: Order. It takes up time.
    Mr. Banks: I am not letting that pass. The Secretary of State should apologise for that comment.
    Mr. Speaker: Order. We shall deal with this later.
    Mr. Banks: On a point of order, Mr. Speaker. I want the right hon. Gentleman to apologise. I am not sitting down until I get an apology from the Secretary of State.
    Mr. Winnick: Apologise.
    Mr. Speaker: Order. I understand. The hon. Gentleman did not get his answer.
    Mr. Heffer: Apologise.
    Dr. Cunningham: On a point of order, Mr. Speaker.
    Mr. Speaker: Order. I am on my feet. I know what happened. It is my fault. I did not call the Secretary of State to answer the supplementary question.
    Mr. Ridley: I am delighted to say that the hon. Gentleman is taking control of the family silver, as you suggested, Mr. Speaker. I was careful to say that I did not wish to make a remark that was sub judice. I owe the hon. Gentleman an answer to his substantive question about

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    housing in Newham. The record of Newham borough for collecting rents is deplorable, and if it were a better record it would be possible for Newham to afford to refurbish and build more houses.
    Several Hon. Members rose—
    Dr. Cunningham: On a point of order, Mr. Speaker.
    Mr. Speaker: Order. No, I cannot take points of order in the middle of questions. I shall take them at the end of Question Time.
    Later —
    Dr. Cunningham: On a point of order, Mr. Speaker. I tried to raise this point of order at the time, and I still believe that it would have been more appropriate if the Secretary of State for the Environment had been asked to withdraw the totally groundless allegation that he made against my hon. Friend the Member for Newham, North-West (Mr. Banks). The Secretary of State was given the opportunity to withdraw and to apologise. He has not done so. I hope that you will invite him to do so now, Mr. Speaker, especially since "Erskine May" makes it clear that unfounded allegations or imputations against Members should be withdrawn immediately and if not, that the Chair should act.
    Mr. Speaker: Order. It might be appropriate to say that I gave a lead to the Secretary of State. Perhaps he will now respond.
    Mr. Ridley: In response to what you said, Mr. Speaker — I repeat it now — I did withdraw the allegation of stealing and substitute your suggested form of words, of taking care of the family silver, just as someone took care of my silver two years ago, but he has not returned it yet.
    Mr. Tony Banks: Further to that point of order, Mr Speaker. One can take many things in the House, and I am more than ready to take more than my fair share of common abuse coming from Conservative Benches. Today, during Question Time, the Front Bench has descended to levels that none of us in the House have heard for a long time — and I include the new Parliamentary Under-Secretary, the hon. Member for Southampton, Itchen (Mr. Chope), for what he recently said. My point of order is this. I find that what the Secretary of State has said is unacceptable. He made an imputation of the most serious nature against me. He actually used the word "stealing". He has not withdrawn it. [HON. MEMBERS: "Yes."] He has merely rephrased it. I must insist that he not only withdraws but apologises, or comes outside and says the same thing.
    Hon. Members: Oh.
    Several Hon. Members rose—
    Mr. Speaker: Order. I do not think that hon. Members can help with this matter, and I do not think that it has anything to do with the hon. Members who are now rising. [Interruption.] Order. I am on my feet. The whole House knows that any charge touching upon the integrity of an hon. Member is out of order. The Secretary of State has withdrawn what he said. I ask him now if he will specifically withdraw the word "stealing".
    Mr. Ridley: At the third time of asking, I do.
    Mr. Ashby: Would the situation not be resolved if the hon. Member for Newham, North-West (Mr. Banks) were to put the swag in the Petition Bag and we promised not to watch?
    Mr. Tony Banks: On a point of order, Mr. Speaker.
    Mr. Speaker: Order. The hon. Gentleman has had an apology and I do not think that I can do any more about the matter.
    Mr. Banks: It is a further point of order, Mr. Speaker. As I view this matter so seriously, and as I have heard the Secretary of State's somewhat reluctant withdrawal, I ask you, Mr. Speaker, whether it is possible for the withdrawal to be inserted in the Official report at the point at which the allegation was made. It was at that point that the right hon. Gentleman should have made a withdrawal.
    Mr. Peter Bruinvels: Further to that point of order, Mr. Speaker. I had the misfortune this morning to hear the hon. Member for Newham, North-West (Mr. Banks) on LBC. He was interviewed about the non-return of the silver and he referred to various employees of the London Residuary Body in a threatening manner. I should like your guidance, Mr. Speaker, on whether it is ethical or correct for an hon. Member to threaten unnamed employees of the former GLC and the London Residuary Body in the most menacing way on the radio.
    Mr. Speaker: This matter was raised earlier and I repeat what I said at that stage. Let us all take great care about the way in which we use our words in making charges against those outside the House who do not have any redress if parliamentary privilege is involved.
    I tell the hon. Member for Newham, North-West (Mr. Banks) that I shall ensure that the passage to which he referred is put in the proper place in Hansard. I think that that can be done.

    Urban Housing Renewal Unit
    Mr. Rathboneasked the Secretary of State for the Environment if he will report on the achievements to date of the urban housing renewal unit.
    The Minister for Housing, Urban Affairs and Construction (Mr. John Patten): The unit has visited 129 local authorities in England and so far 73 schemes, involving nearly £40 million in 44 local authority areas, have been approved. Nearly 40,000 homes will benefit. More schemes are in the pipeline and will be announced shortly.
    In addition, in August the unit launched a further initiative to help tackle the problems of homelessness. For 1987–88, £75 million will be made available for targeting on schemes approved by the unit. This represents an increase of 50 per cent. on this year.
    Mr. Rathbone: Does my hon. Friend accept that as this year is the centenary of the Victorian jubilee, that programme is particularly worthy of pride? Does he further accept that it is a better way of going about urban rejuvenation than tapping ratepayers in other areas to pay for that rejuvenation? Will he continue his effort to ensure that the urban unit continues to operate at maximum efficiency, as, clearly, it has been doing?
    Mr. Patten: I agree with my hon. Friend. Through the urban housng renewal unit we shall continue to target

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    resources where they are most needed to help with urban regeneration. Local authorities of all political colours throughout the land are queuing up to receive help from this excellent unit.
    Mr. John Fraser: Obviously the Opposition welcome any move that improves the quality and state of repair of urban housing. Will the Minister confirm that the urban housing renewal unit involves no allocation of money from central Government to local authorities? It involves stealing or taking control — [Interruption.] — of the housing investment programme allocations of other local authorities from a reduced housing investment programme net of capital receipts. If the Government believe so strongly in urban housing renewal, why do they not allow some capital receipts which have been generated to be added as new money on top of the housing investment programme, instead of simply robbing Peter to pay Paul under urban renewal schemes?
    Mr. Patten: The hon. Gentleman does not understand the figures or the facts. The housing investment programme for next year has been increased by 11 per cent. in real terms. As part of that considerable increase we are targeting all spare available money to help inner city regeneration in the worst run-down estates. I had hoped that there was all-party concensus on that.

    Local Government Act 1986
    Mr. Coombsasked the Secretary of State for the Environment if he will make a statement on the operation of the Local Government Act 1986.
    The Minister for Local Government (Dr. Rhodes Boyson): The Act prohibits local authorities from spending ratepayers' money on party political publicity. We shall bring forward proposals this Session to strengthen its provisions.
    Mr. Coombs: Will my hon. Friend look carefully at the use of the magazine Labour Weekly as a medium for advertising posts in local government by a large and increasing number of Labour-controlled local authorities? Does this contitute a contravention of section 2(3) of the 1986 Act? If it does not, when he considers the Government's response to the Widdicombe report will he take steps to ensure that it is outlawed in future?
    Dr. Boyson: I have looked at the question of advertisements from Labour authorities in Labour Weekly. Indeed, I have a vast list of them for the past year. Obviously, on one hand, if many people apply and are appointed, so that in that sense those advertisements are value for money, people will doubt the objectivity of local government service. On the other hand, if the advertisements do not result in appointments they are a waste of ratepayers' money and the authorities are subsidising a political magazine. I must draw the attention of the House to the degree to which this has gone on. On 15 August 1986 Wakefield district council advertised in Labour Weekly for a political adviser for the sole direction of the leaders of the Conservative and alliance groups. In America they talk about deep throat, but here we have open throat.
    Mr. Hardy: Does the Minister recognise that if the Government wish to introduce or amend local legislation, they would be better advised to deal with inadequacies
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    such as the one which in the previous Act transferred land in my constituency to the ownership of another authority? Will he make it absolutely clear that the Government will not return to their original intention by seeking to prevent any responsible local authority from ensuring that its electors have access to proper information so that they can be fully informed? Is that not a reasonable position in respect of which the Government should not interfere?
    Dr. Boyson: I agree that objectively to provide information on what a local council is doing is part of that council's job. However, if councils — as I believe has been the case in certain areas — get involved in party political propaganda or partisan material, that is an entirely wrong use of ratepayers' money.
    Mrs. Roe: In the light of the working of the Local Government Act 1986 and the recent remarks by my right hon. Friend the Secretary of State about the misuse of local government, will my hon. Friend investigate the system of co-opting non-elected representatives to council committees?
    Dr. Boyson: This matter is dealth with in the Widdicombe report, and we shall be receiving representations on it until the end of this year. There has been a long tradition of co-option on education committees in England and Scotland. That co-option is being put at risk because on Labour authorities many trade union and Labour representatives who lost their seats are being included to provide majorities on committees. That puts at risk the entire co-option system in local government.
    Mr. Straw: I congratulate the hon. Gentleman on his new appointment. Is he not aware that the present Local Government Act already provides draconian powers to gag local authorities from criticising this Government? These powers are so draconian that in Bedfordshire they were used to stop an all-party campaign against the Government's proposals to place a NIREX disposal site at Elstow? The hon. Gentleman complains about Labour Weekly being used by Labour authorities, but what is the difference between that and Conservative authorities using The Times?
    Dr. Boyson: On the hon. Gentleman's first point, I am looking into that matter and I shall write to him, because support for a legitimate local government function is entirely different from propaganda.
    Anyone who cannot see the difference between Labour Weekly and The Times is very shortsighted. I note that, like myself, the hon. Gentleman wears glasses, but I suggest that he consults my oculist.

    Acid Rain
    Mr. Lordasked the Secretary of State for the Environment what representations he has received on the problem of acid rain; and if he will make a statement.
    Mr. Ridley: A substantial number of representations have been received. I announced on 11 September the Government's decision in principle to authorise the fitting of flue gas desulphurisation equipment to three major existing power stations and to require the use of low acid technology in new power stations.
    Mr. Lord: I thank my right hon. Friend for that answer and congratulate him on the progress that is already being made. Does he agree that it is now absolutely essential to

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    harness all aspects of modern technology, not just to increase our prosperity, but to ensure that we leave the world around us a better place for future generations?
    Mr. Ridley: I am grateful to my hon. Friend and agree with him. We are undertaking massive research into how best to clean up power station emissions. I understand that the CEGB will be putting out to competition the design as well as the pricing for building the equipment for desulphurisation. That in itself will bring many new minds to the difficult task of finding the best way to deal with these problems.
    Mr. Allan Roberts: Does the Secretary of State accept that the 26 per cent. reduction, or thereabouts, of sulphur emissions in this country has been achieved as a result of the Government's economic and industrial policies, which have closed down British industry, and not because of their environmental policies? Fitting desulphurisation equipment to three power stations is totally inadequate. It would be no effort for the Government, and would cost hardly any public expenditure, to join the 30 per cent. club, given that the Government have already reduced emissions by 26 per cent. by closing down industry. After these Government measures have been introduced, we shall still be the major emitter of sulphur in western Europe. We must do much more by reducing emissions by 60 per cent. and by retro-fitting all our fossil fuel power stations, thereby creating jobs and developing British technology.
    Mr. Ridley: I cannot accept that at all. Between 1970 and 1997 the United Kingdom's output of sulphur dioxide is likely to have fallen by about half. That is a splendid record and I defy any nation to equal it, especially when I tell the hon. Gentleman that our output of sulphur dioxide per head is about a quarter of that of East Germany and about one third of that of Canada. The United States emits 50 per cent. more than us. We have nothing to be ashamed of. The hon. Gentleman must stop knocking the country. He might try talking it up one day.
    Mr. Kenneth Carlisle: Does my right hon. Friend agree that it is almost incomprehensible that the Government have not joined the 30 per cent. club? We have gone a long way towards achieving that reduction—we will achieve it by the 1990s—and, by joining the 30 per cent. club, we would show our commitment to reducing this type of pollution in Europe.
    Mr. Ridley: We shall certainly achieve a reduction of 30 per cent. The difficult point is from what date to what date the reduction has to be made. We might do better than some countries who join the 30 per cent. club, but, as with all clubs, I do not think that the rules should be fixed before we join.

    Rent Controls
    Mr. McCrindleasked the Secretary of State for the Environment what representations he has received on the desirability of abating rent controls.
    Mr. John Patten: We continue to receive numerous representations on this important matter. We intend to restore the right to rent.
    Mr. McCrindle: Although I recognise the need to provide security for existing tenants, does my hon. Friend agree that a sizeable section of the population would like
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    an opportunity to choose between renting and buying and that, at the moment, that opportunity simply does not exist for the most part? Will he therefore consider the desirability of some modest relaxation of rent controls which might well lead to the satisfaction of a sizeable number of people who could then take the type of housing that they require on the basis that they require?
    Mr. Patten: Of course we must look after people who already have vested interests in the private rented sector, but it is bizarre and remarkable that we are the only country in western Europe in which people do not have a free choice in renting. In short, they do not have the right to rent. That is why we intend to restore it.
    Mr. Raynsford: Does the Minister agree that talk about restoring the right to rent is utterly hollow coming from a Government who have drastically cut the rented housing programme? Does he further agree that the prospect that his right hon. and hon. Friends hold out would involve steep rent increases for many people in private rented housing and that to talk of giving them means-tested benefits is very hollow coming from a Government who have consistently cut the housing benefit scheme?
    Mr. Patten: We do not need any lectures from the hon. Gentleman while Labour-controlled councils, in the main, keep empty about 115,000 public sector houses and flats and while we have the ridiculous situation in which there are some 540,000 empty privately owned houses and flats. Surely men and women of good sense and good will can get together and find a means of bringing that much needed housing back into use.
    Mr. Gow: Does my hon. Friend agree that if the law relating to existing tenancies remained unaltered and if, in respect of all new tenancies, there were no rent control and no security of tenure, accommodation which is at present unused or underused would be brought into use, mobility would be improved and new investment would be attracted to the private rented sector? Will my hon. Friend please act as soon as possible?
    Mr. Patten: My hon. Friend, who has deep experience of these matters, is probably right. He has gone a long way to convince me, but I doubt whether he will he able to convince the noble prelate the Bishop of Rochester.
    Mr. Meadowcroft: Does the Minister recall his expressions of concern that there are certain landlords in, for example, Liverpool and Leeds who are increasing rents massively so that they are paid by housing benefit, so it is not incumbent on tenants to apply for rent registration? Given that the Minister has expressed concern in the past, does he not recognise that it would be wise to ignore the siren voices behind him and deal with the problem of putting excessive amounts of public money into the hands of private landlords?
    Mr. Patten: We are listening, not to siren voices, but to the voice of common sense. That voice surely says that we need to help people with their housing needs by attaching subsidies to people and not to bricks and mortar.
    Mr. Nicholas Winterton: Although I fully support the plea made by my hon. Friend the Member for Brentwood and Ongar (Mr. McCrindle), does my hon. Friend accept that there is a grave accommodation problem for single people and that a relaxation of rent controls would

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    undoubtedly improve the situation? Clearly, however, we must note the reservations that have been expressed by the hon. Member for Leeds, West (Mr. Meadowcroft).
    Mr. Patten: My hon. Friend is right. That is why, in the coming year, we shall make more money available to the Housing Corporation in order to provide mixed forms of rented tenures specifically aimed at young people. Of course, some relaxation of the Rent Acts for new tenures would, as my hon. Friend postulated, make it possible to house more of those who need homes.
    Mr. Rooker: The Minister said that it was common sense—indeed he agreed with the former Minister, the hon. Member for Eastbourne (Mr. Gow)— and that it would be a good idea to remove security of tenure and rent controls. Will he confirm that the last time a Tory Government took this action—and he knows this—there was a further decline in rented housing after 1957? Frankly, if it is such a good idea to double rents in the private sector and to remove the security of tenure of millions of tenants, why will the Government not do it before the election?
    Mr. Patten: That question is uncharacteristic of the hon. Gentleman. At no stage has my right hon. Friend the Secretary of State said anything about removing security of tenure from present tenants of flats or houses. The views of my right hon. Friend the Secretary of State are set out clearly in an excellent article by Mr. David Lipsey, published in New Society on 7 November this year. I shall make sure a copy is placed in the Library. Anyone interested in rented housing should read the article.

    Urban Programme Funding
    Mr. Cohenasked the Secretary of State for the Environment if he will reconsider his Department's proposal to stop urban programme funding to various local authority areas, including Waltham Forest; and if he will make a statement.
    Mr. Tracey: I am currently considering comments invited from local authority associations and others about our proposals to concentrate urban programme resources on the areas of greatest need.
    Mr. Cohen: Does the Minister not realise that areas such as Leyton have severe inner city type problems, although they are not classified as inner city areas, and that by stopping urban aid he is hurting voluntary organisations such as Age Concern, MENCAP, Dial for the Disabled, and ethnic minority, educational and community organisations which are already finding money hard to come by because of the abolition of the GLC and the Government's squeeze on local authorities? If it is claimed that his Department is concentrating resources on the deprived, how can he justify giving support to Kensington and not to Leyton?
    Mr. Tracey: As I said, our proposals are to concentrate the resources on the areas of greatest need. The need is carefully measured. In Waltham Forest the level of unemployment is considerably lower than in qualifying areas, so I am afraid that Waltham Forest has dropped out of the category.
    Mr. Hayward: Would my hon. Friend not have more sympathy with the request from the hon. Member for Leyton (Mr. Cohen) if it were not for the fact that when
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    Labour councils consider applications for urban programmes, such as in Bristol, they specifically exclude pensioners? They say that consideration will be given to certain groups of people. They identify blacks, gays, the disabled and women, but there is no reference to pensioners and other similarly deserving groups.
    Mr. Tracey: My hon. Friend has made a valid point. We have noted with some concern that, in Bristol, letters have been circulated to various bodies quite specifically stating that consideration will be given to gay men, lesbian women, and so on. Our proposals are to concentrate these valuable resources on the areas of greatest need.
    Mr. Beith: If it is the intention to concentrate on the areas of greatest need, why has the Minister excluded towns, such as Alnwick, which show up on all the indices, merely because they have fewer than 20,000 people?
    Mr. Tracey: As I said, they are proposals. In December I shall meet those authorities which have dropped out of the categories on the basis of need. I shall certainly then be quite prepared to hear the comments of the 24 authorities which come to see me.
    Mr. Steen: Surely the purpose of the urban aid programme is to give pump-priming money to voluntary organisations to get their work started, and then once the work has started, to allow the Government to give the money to other well-deserving causes. If the money is locked up indefinitely in one scheme, it robs the Government of their innovatory operations in urban areas. Is not that pump-priming one of the aims of the urban aid programme?
    Mr. Tracey: My hon. Friend is right. In 1986–87 the urban programme resources provided 24,000 jobs, 900 small workspace units, 800 business starts, 1,600 grants and loans to firms, 1,000 hectares of improved land and 2,400 refurbished buildings. Since being elected in 1979, the Government have put £2,200 million into the inner cities through the urban programme.
    Mr. Robert Sheldon: Is the hon. Gentleman aware that Thameside feels very badly done by and that there is some questioning of the methodology? If that can be substantiated, will the hon. Gentleman look at the matter more carefully?
    Mr. Tracey: I appreciate the right hon. Gentleman's point. We have invited comments, which we are considering carefully. We have offered the authorities which have been dropped a meeting in early December so that they can tell us specifically where there might be some improvement to our needs index. However, at the moment, we believe that we are absolutely right. Indeed, only £3 million of new money went to the 24 authorities in 1986–87, and if the right hon. Gentleman judges that against the total resources, he may be able to see my point.

    Housing and Planning Act 1986
    Mr. Spencerasked the Secretary of State for the Environment what representations he has received from the Leicester city council regarding the Housing and Planning Act 1986.
    Mr. Tracey: None, Sir.
    Mr. Spencer: Is my hon. Friend aware that the city council has put out a glossy magazine at the ratepayers'

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    expense, entitled, "Estates for Sale"? It attacks the Act and gives council tenants the impression that their homes will be sold over their heads. Is that not a disgraceful publication, and does it not show that Leicester city council is at least working for the Labour party?
    Mr. Tracey: My hon. and learned Friend is absolutely right, and I am glad that he has brought the matter to the attention of the House. I have the document here. As he said, it was published using ratepayers' money, and is entitled:
    "Estates for Sale?
    The Case Against Estate Sales in Leicester."
    We believe that that document is another blatant case of misrepresentation and misreporting of section 9. It is causing unnecessary worry to council tenants. My hon. Friend the Minister for Housing, Urban Affairs and Construction has made it absolutely clear that those tenants need fear nothing.
    Mr. Janner: Is the Minister not aware that that iniquitous Act is likely to take away tenants' rights, that there is no provision to prevent estates from being sold, even when all the tenants object to the sale, and that that excellent and accurate document informs the citizens of Leicester of the truth in a way that the Government do not like? That is why Conservative Members who represent Leicester protest against it. They have no interest in the disadvantaged and no interest in housing the citizens of that city.
    Mr. Tracey: I am sure that the people of Leicester will take note of the hon. and learned Gentleman's most intemperate outburst. I should make it quite clear that that sort of document consists of misrepresentation and misreporting. The hon. and learned Gentleman should not add to such nonsensical propaganda.

    Council Spending
    Mr. Greenwayasked the Secretary of State for the Environment if he has any plans to impose controls upon local councils currently spending over the rate of inflation; and if he will make a statement.
    The Parliamentary Under-Secretary of State for the Environment (Mr. Christopher Chope): My right hon. Friend has selected 20 excessively high-spending local authorities for rate limitation in 1987–88. I have no plans at present to extend the scope of rate limitation.
    Mr. Greenway: I congratulate my hon. Friend on his first appearance at the Dispatch Box. Is he aware that the new Labour council in Ealing, with its reckless spending, will cause a minimum increase in rates of 60 per cent., after a year in office? We must bear in mind that rates went down 4 per cent. during the previous year under Conservative control, and the rise is being planned at a time of 3 per cent. inflation. That will have a devastating effect upon jobs and local industry and upon the ability of ratepayers to pay their rates. Will the Government consider what action they can take to control the position?
    Mr. Chope: I thank my hon. Friend for his kind comments. I sympathise enormously with many of the citizens in Ealing. However, contrary to the advice of my hon. Friend, those citizens allowed a mainstream Kinnockite council to be elected in May and will have to pay the price. If Labour is intent on a 60 per cent. rate increase in Ealing next year, that will cost the average
    558
    domestic ratepayer £3·87 a week extra out of taxed income — and the right hon. Gentleman the Leader of the Opposition a lot more. The Government have no power to prevent that happening. Ealing spending is Kinnockism in practice, and it is up to voters to stop it spreading.
    Mr. Pike: When will the Government accept that the criteria by which they judge local government spending are totally wrong and that many councils are not able to spend at the right level necessary to meet the needs of the community and the requirements of the people in the areas they represent? Is it not time that the Government allowed councils to spend the money necessary to deal with problems in the areas that they represent?
    Mr. Chope: In the current financial year the 40 rate-capped and precept-limited authorities are responsible for some £1,167 million of overspending, with the remaining 7 per cent. of overspending shared among the other authorities. In itself, that is evidence that only the extreme authorities are having to overspend so substantially.
    Sir George Young: Is my hon. Friend aware that until the unpopular and extravagant activities of local authorities such as Ealing are roundly denounced by the Opposition I will continue to tell my constituents that a Labour Government, if elected, will be just like Ealing council—only bigger?
    Mr. Chope: I agree with my hon. Friend. Of course, there may be an opportunity in Ealing in the near future for the council's policies to be tested in a by-election. If the chairman of Ealing council's gay and lesbian committee, who was convicted earlier this week of committing an indecent act in a public lavatory, were to resign — [Interruption]—there would be an early opportunity for public opinion in Ealing to be tested on the policies of high spending and homosexuality.

    Rural Development Areas
    Mr. Beithasked the Secretary of State for the Environment if he will make a statement on the assistance available within the rural development areas as designated by the Development Commission.
    Mr. Waldegrave: The Development Commission has a wide range of schemes in rural development areas designed to promote new job opportunities and to help maintain or improve rural services. The budget of the Development Commission has been increased since 1983 by about 21 per cent. in real terms.
    Mr. Beith: Bearing in mind the very high levels of unemployment in areas such as Northumberland, do the Government accept that rural development areas should have access to European regional development funds, as the mid Wales development area already has? Will the Government support an approach to try to secure that? Will they also look again at the funds available to the Development Commission for starter workshops for small businesses, a scheme with considerable potential, which is being held up in areas such as Northumberland due to lack of funds?
    Mr. Waldegrave: As the hon. Gentleman knows, the European Commission has made it clear that any further extension of assisted area status will cause it to review all regional development assistance to the United Kingdom, so the risk might not be worth it. I know that the hon.

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    Gentleman is a strong supporter of the Development Commission and has travelled around his constituency with the commissioners looking at schemes in which the commission is involved. The commission could use more resources and we are giving it more resources next year.
    Mr. Marland: Is my hon. Friend aware that part of my constituency in the Forest of Dean is a rural development area and that the allocation of that status has made a fantastic difference to the morale of the district and the number of jobs created? Is he further aware of the considerable contribution to its success made by the chairman, Lord Vinson, a man of great ability for whom nothing is too much trouble?
    Mr. Waldegrave: I am certainly aware of that. Indeed, I met Lord Vinson this morning to discuss these issues. In the period of farming readjustment now taking place as surpluses are reined back, the Development Commission has, perhaps, an increasingly important role to play.

    Privatisation
    Mr. Macleanasked the Secretary of State for the Environment if he will publish a White Paper outlining his plans to compel local authorities to contract out more services.
    Mr. Ridley: We intend to introduce a Bill as early as possible this Session, which is much better than a White Paper.
    Mr. Maclean: I thank my right hon. Friend for that very welcome reply. Does he understand why Labour Members so bitterly oppose contracting out services, which they describe as an attack on local government? Will he confirm that if local authority employees put in a better offer at a cheaper price that is to the benefit of local government employees and ratepayers.
    Mr. Ridley: I agree entirely. I cannot understand why Labour Members are so worked up about this, especially as the hon. Member for Copeland (Dr. Cunningham) professes to favour greater efficiency in the discharge of local authority functions. If the in-house organisation can show fairly that it is more efficient than the private sector, it will retain the work. It is surely best for the ratepayers that, whoever wins the competition, the best people carry out the function.
    Mr. Clelland: Is the contracting out of local services likely to have the same effect as the contracting out of bus services to private companies, which has created chaos in public transport, and for which the right hon. Gentleman was responsible?
    Mr. Ridley: I am surprised that the hon. Gentleman has the temerity to mention the Transport Act after the extraordinary nonsense that we heard from Labour Members during the passage of that legislation. It is astonishing how little any of them dare say about the success that is now coming through. [Interruption.] I have even heard murmurs about Glasgow, which now has a phenomenon quite shocking to Socialists, namely,instead of passengers queueing for buses, there are buses queueing for passengers.
    Mr. David Atkinson: Is it true that the proposed Bill will oblige local authorities to put only five major services out
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    to private tender? Does my right hon. Friend agree that every service that is available in the private sector should be put to the competitive test?
    Mr. Ridley: I must ask my hon. Friend to await publication of the Bill, which will contain the full list of services to be put out to competitive tender. There will also be an order-making power to add further services to the list as local authorities learn how to adopt the procedures and make them work. There can, thus, be a succession of further services during the next two or three Tory Parliaments.
    Mr. Freeson rose—
    Mr. Robert Atkins: Ken Livingstone's predecessor.
    Mr. Freeson: I will give way to the hon. Gentleman if he wishes to intervene.
    Mr. Atkins: The right hon. Member has given way already.
    Mr. Freeson: I do not need someone else's name to stand in this place.
    However desirable or undesirable their policy may be, why do the Government insist on compelling local authorities to do things when those elected authorities wish to do otherwise?
    Mr. Ridley: I think I heard the hon. Member for Burnley (Mr. Pike) say that the Government have not given sufficient money to local authorities to enable them to perform their functions. If local authorities are going to say that, it is perfectly fair for me to ask first whether they are performing their functions efficiently. I do not see why the Government should be criticised for not financing inefficiency.
    Mr. Hill: Does my right hon. Friend agree that in certain Left-wing councils, such as Southampton, which has been deeply penetrated by Militant Tendency, there is no intention of putting out any further work? In fact, that council is increasing its direct labour force and fudging its accounts to make way for the possibility that all the work in the future will be under the control of Militant in my area.
    Mr. Ridley: I am happy to be able to tell my hon. Friend that the Bill will contain powers to enforce the competitive tendering regime and ensure that it is carried out fairly, including the ultimate power to direct that the service be closed down, as we did recently in relation to a direct labour organisation in a London borough. Those powers will be there to ensure fair play.
    Dr. Cunningham: Is not the reality behind the Secretary of State's refusal to publish a White Paper the fact that all the evidence submitted to his Department, which he also refuses to publish, opposes enforced privatisation? Is it not also the reality that in the Health Service and local government now we see squalor, falling standards and a lack of cleanliness following privatisation? If privatisation is so effective, why do all the Conservative-controlled councils, which the right hon. Gentleman and his hon. Friends support, not privatise their services now? The reality is that even Tory-controlled local authority association oppose what the right hon. Gentleman is doing.
    Mr. Ridley: The hon. Gentleman will know that we published a consultative paper on the subject. Surely that

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    is better than a White Paper. After a Green Paper, I think that a Green Bill is appropriate, and we shall proceed. I do not for one moment accept the hon. Gentleman's premise that services have deteriorated. He does not seem to acknowledge the large savings that have been made in DLOs and the Health Service through a policy of competition. The hon. Gentleman is making a grave mistake if he believes that he will find a popular cause here, because the ratepayers want better services and they want them cheaper. It is the ratepayers who matter.

    Schools (Competitive Sport)
    Mr. Moynihanasked the Secretary of State for the Environment if he will indicate the status of his forthcoming discussions over the future of competitive sport in schools.
    Mr. Tracey: I announced on 25 July, and I have agreed with my hon. Friend, the Minister of State, Department of Education and Science, that our two Departments will jointly host a seminar, on 26 November, to take forward discussions on sport in schools. Over 60 representatives from sport and education have been invited to discuss matters of common concern and to identify means of achieving improvements where weaknesses exist.
    Mr. Moynihan: In view of the fact that some 25 per cent. of our sixth formers do not participate in any form of sport or recreation in our schools and that some Inner London education authority employees in my constituency believe that primary school football leagues should be discouraged, on the grounds that they are sexist and competitive, will my hon. Friend ensure that, immediately following the seminar, a full and urgent inquiry is set up to look into the state of sport in our schools?
    Mr. Tracey: It would be wrong for me to pre-empt what is said at the seminar or the results of it. Certainly my hon. Friend the Minister of State, Department of Education and Science and I will be listening carefully to what is said. I am aware of the extraordinary attitude towards competitive sport within the Inner London education authority, where people seem to face both ways at once. We shall be looking into all those matters, and we shall then decide how to go forward.
    Mr. Denis Howell: Is the Minister aware that we shall have no sport, competitive or otherwise—and we very much support competitive sport— [Interruption.] It is very necessary in the society being created by the Government. We shall have no sport, competitive or otherwise, if we continue to run down the colleges of physical education, if the Government continue to sell educational sports grounds and if we continue to price out of sports facilities the very people whom we should attract to them. Therefore, will the inquiry that is now to be opened consider those matters and reverse Government policies, in the interest of the community and sport?
    Mr. Tracey: I was very interested to hear the right hon. Gentleman say that he is in favour of competitive sport. I do not know to what extent he is alone in his party. He is well aware that there are colleagues of his on the Inner London education authority who do not take that view. Perhaps he will also talk to the National Union of Teachers about that. It may be sensible for him to address most of his question to the Department of Education and Science, where I know it will receive full-scale attention.
    Mr. Madden: On a point of order, Mr. Speaker. I understand that the Under-Secretary of State, the hon. Member for Southampton, Itchen (Mr. Chope) was appearing at the Dispatch Box for the first time today. Therefore, it would be understandable and excusable if he were in a rather excitable frame of mind, but it is not understandable or excusable that he should make disgraceful remarks about an elected member of Ealing borough council — remarks which, if they were made against an elected Member of the House, you would ask him to withdraw. As the remarks were written, will you invite the Under-Secretary of State, on reflection, to withdraw his remarks?
    Mr. Speaker: Order. This is a perennial question and I take the opportunity to tell the House that, because we have freedom of speech here, we should take great care with the way in which we make statements — [Interruption.] it has happened before today — about people outside the House who have no recourse.

Sub Judice Rule
3.36 pm
Mr. Ian Gow: On a point of order, Mr. Speaker. In view of the importance of the matters, as you pointed out, which were raised yesterday in points of order after Prime Minister's questions, and in view of the reports in the press today, would it be helpful if the application of the sub judice rule in the House could be clarified?
You were asked yesterday, Mr. Speaker, whether the sub judice rule in the House applied in the case of the proceedings at present before the Australian courts. You ruled that it did not. Your ruling was based on the guidance given in "Erskine May". That lays down that such cases as are covered by the rule may not be referred to in any debate or question. The rule does not apply to matters which are sub judice in courts which are outside the United Kingdom. It was on that basis that you permitted questions to be put yesterday which related to those proceedings.
My right hon. Friend the Prime Minister made it clear that she accepted your ruling on sub judice so far as the House is concerned. However, it may be that some misunderstanding arose from the use of the words "sub judice" in two senses. First, there is the sense in which the sub judice rule applies in the House. Secondly, there is a wider sense in which the words are used to refer to matters that are before the courts in this country or elsewhere. The first is a matter for you, Mr. Speaker, as guardian of the rights of right hon. and hon. Members. The second is a matter which Ministers may wish to consider when deciding on the appropriate way to answer questions. That is a matter for them. Therefore, it is for hon. Members to see that the questions that they ask are in order. It is for Ministers to decide how to answer them.
Will you confirm, Mr. Speaker, that the position is as I have outlined it and that it reflects accurately your own understanding? It may he that misunderstandings arose yesterday from the two different uses of the words "sub
564
judice", and, therefore, that the Prime Minister yesterday neither challenged your ruling nor said anything that was in any way out of order.
Mr. Speaker: Yes, I can confirm that the position is as the hon. Gentleman has stated it. I have nothing to add to what I said yesterday and nothing to subtract from it.
Mr. Tam Dalyell: On a point of order on this issue, Mr. Speaker. "Ministers may wish to consider" is the kind of classic phrase that comes in a Government brief. Should not we know whether the hon. Member for Eastbourne (Mr. Gow) was reading from a Government brief?
Mr. Speaker: That is not a matter for me.

BALLOT FOR NOTICES OF MOTIONS FOR FRIDAY 5 DECEMBER
Members successful in the ballot were:

Mr. Kenneth Hind

Mr. James Wallace

Mr. Fred Silvester

BILL PRESENTED
  ADVANCE PETROLEUM REVENUE TAX
  Mr. Chancellor of the Exchequer, supported by Mr. Secretary Walker, Mr. Norman Lamont and Mr. Alick Buchanan-Smith, presented a Bill to provide for the repayment of certain amounts of advance petroleum revenue tax: And the same was read the First time; and ordered to be read a Second time tomorrow and to be printed [Bill 7].

  STATUTORY INSTRUMENTS, &c.
  Ordered,
  That the draft Misuse of Drugs Act 1971 (Modification) order 1986 be referred to a Standing Committee on Statutory Instruments, &c.—[Mr. Ryder.]

Orders of the Day
  Debate on the Address

    SIXTH DAY
    Order read for resuming adjourned debate on Question [12 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.—[Mr. Rippon]:—
    Question again proposed.

    The Economy
    Mr. Speaker: I inform the House that I have selected the amendment in the names 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 names of the right hon. Member for Tweeddale, Ettrick and Lauderdale (Mr. Steel) and his right hon. and hon. Friends.
    3.43 pm
    Mr. Roy Hattersley: I beg to move, at the end of the Question, to add:
    But humbly regret that the Gracious Speech provides for the continued pursuit of policies which perpetuate uniquely high real interest rates and seriously worsening balance of payments problems, and which will not sustain the recent additional public expenditure commitments in any coherent and productive way: and call on the Government to introduce policies which will produce some sustained improvement in the strength and competitive performance of the real economy and substantial and persistent reductions in unemployment and poverty, both of which have risen to record levels during the lifetime of this Government.
    Almost exactly two hours ago, a radio party political broadcast on the subject which we debate today was just ending. It was ending with a statement by the chariman of the Tory party, who said:
    "Since 1979, the Government has done all sorts of things which at the time of its election were thought to be beyond it."
    It is a fair cop, and I own up at once. In 1979, I certainly did not believe that, during the next seven years, Britain would suffer the highest unemployment in its history, the highest interest rates in its history, the lowest value of sterling in its history, and the worst balance of trade figures in its history. To be equally frank, nor did I believe that the Tory party would damage its own prospects and its reputation by making the right hon. Member for Chingford (Mr. Tebbit), the Chancellor of the Duchy of Lancaster, its chairman.
    After all those surprises which the chairman prepared for us today, I shall consider for a moment the effects on the economy of the autumn statement and what is left of the Government's economic policy. The day after the Chancellor made his autumn statement, The Daily Telegraph accused me of questioning the right hon. Gentleman's intentions and integrity by means of implication and innuendo. That was not my intention. I
    566
    intended to make that challenge openly and directly. I make it today, in a way which I hope is not too subtle for The Daily Telegraph.
    I do not trust the Chancellor's motives. I do not believe his forecast about the economic future or his explanations for the sudden apparent change for judgment, conviction and policy—the changes which the autumn statement revealed. I do not believe that the lurch in policy for which he now claims credit is even intended to promote the country's best interests. It is meant to further the interests of the Conservative party and Conservative Members in marginal seats. It will fail in that squalid objective
    There is no doubt about the purpose of the Chancellor's swerve. It is a pretence that can be sustained only for a few months and which is intended to last only for a few months. The pretence is that the Government have suddenly developed a compassionate concern for housing, health and education. It is, of course, all a con. In the words of the Spectator, the temple of Conservative rectitude, the Conservative party now offers
    "a collection of economic policies which might have fallen off the back of a lorry."
    The Chancellor has become the Arthur Daley of British politics, with the cut-price sale of our national capital assets as the most disreputable of all his nice little earners.
    I am not alone in that judgment. The City, the Chancellor's favourite and most favoured sector of the economy, has queued up to condemn him during the past 14 days. L. Messel and Company described his policy as
    "containing more than the usual quota of whitewash and humbug"
    and
    "straining the limits of credibility"
    to breaking point. S. G. Warburg and Company judged that
    "the good inflation news is now definitely behind us."
    It went on to say:
    "The Chancellor's inflation forecast for the final quarter of next year is clearly unattainable."
    The Chancellor knows that that is true, but he does not care. For the final quarter of next year will be after the date on which the Government intend to cut and run. An early election is now certain, because after next autumn the failure of the Government's policies will be undeniable.
    Phillips and Drew, the City analysts, have already described,
    "the tough post-election crisis package"
    which the Chancellor anticipates and is already preparing. The Chancellor knows, again in the words of Phillips and Drew, that
    "he has taken a major gamble which cannot he played indefinitely."
    The Tory party will hold an early election in the hope of winning the race between polling day and the next major sterling crisis. Now the Chancellor has no medium or long-term policy. The medium-term financial strategy is dead and discredited and nothing has replaced it. That is why, two weeks ago, the Chancellor refused point blank to answer for me the five crucial questions about the real economy. I repeat them today. When will unemployment, even on the Government's manipulated figures, be down to 3 million? When will the number of jobs in the economy be back to the 1979 level? When will real interest rates fall to their 1979 level or even to the level enjoyed by other industrial countries? When will the balance of payments move into permanent and regular surplus? When will manufacturing investment and output return to the level that the Government inherited?

    567
    The Chancellor did not answer or attempt to answer those questions in our last debate and he will not attempt to answer them today. His failure to answer any of those questions is a brilliant demonstration of the one area of the economy in which he has been an undoubted success—the economy of truth. That, of course, is a wholly parliamentary expression because the Cabinet Secretary explained to us that it is not quite the same as telling a lie.
    Mr. Richard Hickmet: While dealing with the economy of truth, will the right hon. Gentleman say if he is in favour of a 1 per cent. levy on the turnover of companies, and will he say what effect that would have on employment?
    Mr. Hattersley: I miscalculated. I thought I would be asked first about bailing out the councils and that this would come second. I shall tell the hon. Gentleman exactly the position [Interruption.]—if I am given a chance to do so. There is unanimous agreement in the Opposition that we need a major training initiative. There is unanimous agreement that without more training there will never be the expansion in the economy which is desperately needed. We also agree unanimously that because the Government have no training policy there is virtually no training. The new training policy that we will bring in will certainly be financed by the only possible means—a levy and grant system. Again, we are unanimous about that.
    Yesterday, my hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott) could not have been more frank in saying that in his judgment that levy should be 1 per cent. No doubt that is what he will put to the policy committee discussing these matters and we shall see what comes out.
    Mr. John Prescott: That is exactly what I said at Knowsley.
    Mr. Hattersley: I do not know whether I should take next the planted bailing-out questions about councils or whether I should continue on this topic. I shall turn instead to the real issues of today, the collapse of manufacturing industry and the recurring balance of payments crisis—which, like the huge growth in unemployment and the massive increase in poverty, are the direct responsibility of the Government. Indeed, they are part of the Government's economic strategy.
    The Government's response to poverty and unemployment is to obscure the extent of their failure by the constant manipulation of the figures. They cannot do that with sterling. A month of bad figures on money supply, borrowing and balance of payments and we would be back into another bout of speculation and depreciation. Of course, the Chancellor's response to that would be another interest rate increase, even though our real interest rate is the highest in the industrialised world and even though the present rate of interest is doing desperate, indeed in some ways mortal, damage to the prospects of British manufacturing industry, as well as imperilling the secure future of home owners by pushing up the price of mortgages.
    Bad monthly figures, at least for the balance of payments, are now inevitable. Following the autumn statement forecast, Lloyds bank suggested that the balance of payments deficit under present policies would be £2·6
    568
    billion by 1987–88. I chose that figure from the middle of the range. The National Institute of Economic and Social Research predicts a deficit of almost £6 billion. The gradual accumulation of that deficit is bound to be reflected in the published figures month by month from now on. Those figures will provide a regular demonstration of the Chancellor's failure to revive and support the real economy—the economy of investment, output and exports.
    The figures will provide continual proof of the Chancellor's willingness to sacrifice the real economy in the hope of short-term party advantage. The balance of payments crisis will be the direct result of three related causes. The first of these is the consumer and credit boom which the Government have encouraged in the hope of political gain. Secondly, manufacturing industry has been so damaged during the last seven years that its share of world trade has fallen by 16 per cent. since 1979. Thirdly, and perhaps most desperate of all, is the waste of oil revenues, oil earnings, which should have been used to revive manufacturing industry but which have been squandered on the cost of escalating unemployment and which are now beginning to run out.
    Already the deterioration in our manufacturing industries is imperilling our economic prospects. In 1978 there was a surplus of £5 billion in our trade in manufactured goods. In 1985 that turned into a deficit of £3 billion. On the Chancellor's own forecast—for what that is worth the deficit will grow to £7·5 billion by 1987. By then the Chancellor will be working in the City, where I have no doubt at all that he will feel completely at home. His willingness to ignore the needs of the real economy and to allow — indeed, to encourage — an escalating balance of payments deficit proves that his horizons stretched no further and that today they stretch no further than the next general election.
    Mr. John Maples: The right hon. Gentleman has said repeatedly that one of his policies for helping to reduce interest rates is the compulsory repatriation of foreign assets. Would that not drive up the exchange rate and thereby penalise the export of manufactured goods?
    Mr. Hattersley: It would stabilise the exchange rate, which is desperately needed. Under this Government there have been the biggest fluctuations in the exchange rate of any industrialised country in Europe. If the hon. Gentleman were to talk to those who are particularly concerned with the export of manufactured goods, they would tell him—
    Mrs. Elaine Kellett-Bowman: Will the right hon. Gentleman give way?
    Mr. Hattersley: I should like to finish answering one question before I am asked the next.
    Mrs. Kellett-Bowman rose—
    Mr. Hattersley: Those who are involved in manufacturing industries would tell the hon. Gentleman that the problem that is second only to intolerably high interest rates is the fluctuation in sterling. By having a mechanism under which sterling would be subject to upward pressure, we should be able to provide a degree of stability. However, I am unique in my willingness to plead guilty. I think that I am the first Labour Shadow Chancellor to plead guilty to the accusation that I should be acting in a

    569
    way that would hold sterling at an unreasonably high level. I shall now give way to the hon. Member for Lancaster (Mrs. Kellett-Bowman).
    Mrs. Kellett-Bowman: Am I to take it that, in his anxiety to avoid an unduly fluctuating machinery, the right hon. Gentleman is in favour of joining the European monetary system?
    Mr. Hattersley: I made a detailed speech about this matter, and I shall punish the hon. Lady, for she will feel obliged to read it, by sending a copy to her. It makes the position absolutely clear. There are certain circumstances in which the EMS would be beneficial to us, but to use it as a bolt hole, as the last refuge from the Chancellor's failure to stabilise sterling at home, would place us in the hands of the other members of the EMS and would be inconsistent with our economic objectives. It would also be inconsistent with our domestic sovereignty.
    I return to the speech that I was making, rather than to that which the hon. Member for Lancaster hoped that I would make. I repeat that this economic policy is not intended to last. Despite all the journalistic comments about the Chancellor's turnabout, the Chancellor has not made a U-turn but the beginning of an S-turn. Having snaked about for a few months, the Chancellor hopes to return to his original course. Indeed, he will be required to do so, for his present policies cannot be sustained. Without a conversion so sudden that it would make St. Paul seem to have dallied and dithered, the Chancellor cannot possibly want those policies to be sustained.
    Let me examine the internal evidence regarding what the Chancellor claims to believe in now and what he claimed to believe in with such passion until a week last Tuesday. A good deal of the additional public expenditure next year, for which he seeks to take credit, is no more than a continuation of this year's unplanned overspending. This year's overspending was opposed, resisted and condemned by the Chancellor. Are we now to believe that all the time the Chancellor really welcomed that overspending and regarded it as essential to our economic welfare?
    Furthermore, the £440 million of additional spending to revive the economy is actually an increased contribution to the EEC. The Prime Minister's views on an increased contribution to the EEC are clear enough—or at least, they were clear enough. She spoke of
    "long and persistent efforts to correct the budget inequity". —[Official Report, 27 June 1984; Vol. 62, c. 993.]
    She promised "lower contributions" in "the foreseeable future". When she talked in those brave terms, we did not realise that she really meant that paying more to the EEC would be a sign of our economic strength and recovery and of the success of the Chancellor's policy.
    The Chancellor then tried to justify this extra spending of £7·5 billion by telling us that it was possible for two reasons. The first is the fact that the PSBR is to be held steady next year, and if the conversations that he has been having outside the House are anthing to go on, we shall hear a great deal about that in a moment or two. Secondly, tax revenues have proved buoyant. Both arguments are wholly implausible. The PSBR is holding steadyish by the temporary expedient of asset sales, which he has increased to £5 billion for 1987–88. It is foolish to go about the country boasting that one is breaking even on the housekeeping by selling the house bit by bit.
    Secondly, perhaps in terms of the Chancellor's judgment and, even more important, the sudden change of
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    direction, the bounty which he claims has been bought by buoyant taxation is even more a temporary and dubious benefit. The increase of revenue from both personal and corporate taxation is largely the result of the temporary boom in credit consumption. It cannot he sustained on existing policies. The profit levels have already turned down over the last quarter and the Chancellor may care to tell us why he thinks that is.
    What is more important is that the profits that existed, the spend that went on, and the two factors that produced the buoyancy in the taxation system and increased the Chancellor's revenue, have come about almost entirely because for four years earnings have been rising more quickly than inflation. Until a week last Tuesday, the Chancellor used to condemn that. He described earnings rising more quickly than inflation as the heart of the problem that has prevented steady growth over the past few years. It was not until a week last Tuesday that the heart of our problem became our economic salvation. It is the way that he will finance, for a month or two, what he announced a week last Tuesday.
    The truth of the matter is that the economy is no longer the Chancellor's prime concern. We have no long-term or even medium-term economic strategy, just short-term election tactics. The Chancellor offers nothing to solve the problems of the real economy because of that. There is nothing for manufacturing industry, investment or exports. Nor does Government policy offer any remedy for the two great social scandals for which the Government's policy is responsible — the scandals of poverty and unemployment.
    The fall in unemployment or, to put it more accurately, the change in the figures, about which we heard so much yesterday, is not the result of economic policy but the product of manipulation. The seasonally adjusted fall is almost exactly the same number as the total of men and women removed from the register during the period by schemes and measures. Job creation schemes are now what give bogus credence to the Prime Minister's claims about reducing unemployment. Her attitude has dramatically changed, even diametrically changed, since the days when she was in opposition. Then, she demanded
    "real jobs not bogus ones."
    Later she said:
    "Job creation schemes on one hand and job destruction schemes on the other … is the economics of the madhouse."
    Now she has appointed Lord Young to take special responsibility for this area of Government lunacy.
    Mr. Ian Gow: May we take it front what the right hon. Gentleman has said that if he and his right hon. and hon. Friends should ever sit on the Treasury Bench they will revert to the old measure of calculating unemployment and that they will include as unemployed those people who the right hon. Gentleman has said are now excluded?
    Mr. Hattersley: I shall answer that question in one minute. The hon. Gentleman will note that my allegation against the Government is not the 18 changes in numbers, for which they are certainly guilty, but the fact that they have reduced the register only by job creation measures. The hon. Gentleman's guilt prompted him into defending the Government against the charge I did not make, and I shall now answer that.
    The hon. Gentleman is right to say that the Government have held down unemployment figures

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    artificially by 18 changes in the statistics. We propose to reduce the unemployment register by 1 million, whatever the register we inherit. If we are to inherit, as we shall, 3,100,000 unemployed, we shall reduce that by 1 million. If the honest figure is 4 million, we shall reduce it by 1 million. Our figure is absolute. I am delighted that the hon. Gentleman has enabled me to introduce that other element of disreputable Government policy which, for some unaccountable reason, I had previously missed.
    The Lord Privy Seal and Leader of the House of Commons (Mr. John Biffen): If the changes that have taken place recently are distorting the figures, what would the right hon. Gentleman seek to reduce?
    Mr. Prescott: Those are just figures.
    Mr. Hattersley: I shall seek to relieve unemployment by 1 million. The Leader of the House is normally rather more intelligent on these matters. He does his party no service by, as my hon. Friend the Member for Kingston upon Hull, East implied, by being obsessed by the figures, and the manipulation of figures rather than by the real people and the real jobs.
    Ms. Clare Short: We are all agreed that if the 18 fiddles had not taken place, unemployment figures would now be over 3·5 million. Our commitment to reduce the figure by 1 million, wherever it starts, is identical. On the fiddled figures it is nearly 1·5 million jobs, on the figures that there should be, it is nearly 1·5 million. Our job commitment is exactly the same, whichever way the figures are calculated.
    Mr. Hattersley: I agree with my hon. Friend in all but one particular. If the figures had not been massaged, they would be a great deal more than 3·5 million. In her analysis, my hon. Friend is right, but in her judgment she is over-charitable.
    The other disgrace concerns something which the Government have not treated in a way that a decent Government would have chosen. The Prime Minister has said a great deal about job creation, unemployment and the success of the economy over which she claims to preside. She has said nothing about poverty, partly because she does not dare and mostly because she does not care. The increase in poverty is massive and undeniable. It is in part, though not entirely, the product of increasing unemployment. On the Government's 1983 figures, since they came to office there has been an increase of 50 per cent. in the number of people living at or below the supplementary benefit level. The total is now 9 million.
    Now, as the election approaches, the Government have begun to argue about the figures on which the totals of poverty are based. The argument conducted by the Minister of State, Department of Health and Social Security, in the columns of the Financial Times revolves around a simple question: is a man or a woman living on £29.80 a week, or a couple living on £49 a week, poor? The hon. Member for Newcastle upon Tyne, Central (Mr. Merchant), in a public relations exercise that was simultaneously shameful and shameless, has come to the conclusion that attempting to live at or about that level is real poverty. Living at that level of real and grinding poverty are 50 per cent. more people since the Government came to power—at least 9 million of our people.
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    These people will remain in that condition until after the general election because they have been written off by the Tory party, which knows that it has already lost their votes. The same is true of the black and Asian British, of the inner cities, and of Scotland and the north of England which, since they will not vote Tory under any circumstances, are not to be offered the election bribes which are dangled before the rest of the country.
    Last Thursday on television during the election broadcasts the Paymaster General argued passionately that poverty and unemployment in Knowsley were mostly Knowsley's fault. The chairman of the Tory party condemned the whole of the north of England as responsible in no small measure for its hardship and suffering. Part of the Tory party's election strategy is to set one group of the population against another, to exacerbate the divisions that exist and to drive divisions between different groups of our citizens. White is set against black by unjustified allegations about immigration; rich are set against poor by the pretence that if we cut public services we can cut taxes; and the employed are set against the unemployed with the allegation that the men and women on the dole queues have priced themselves out of jobs. This is a shabby Government and they are revealed as such even by their most passionate friends and supporters.
    The Sunday Express, faithful unto death and perhaps in its case even after rigor mortis has set in, rallied to support the Chancellor on the Sunday after his autumn statement. It stated:
    "Cynical? Wicked even? Of course it is. Look at it through Mr. Lawson's eyes, and perhaps you won't judge him too harshly … so his mini budget last week will put pressure on the pound and encourage inflation."
    Then, after a passage of ritual abuse of me, the Sunday Express explained that it was all being done and that it was right that it was being done to prevent a Tory election defeat. Is it, the newspaper asks,
    "really so wicked of him to do everything in his power to prevent that from happening? Even offering the voters a £10 billion bribe with their own money?"
    That is the level of support that the Chancellor can now expect and I hope that his party feels proud of it.
    That support will continue and the Government's policy will succeed only if the British people are the fools that the Conservative party believes them to be—if the British people do not understand and if they forget easily. At the general election, we shall prove how badly the Conservatives have underrated the wisdom of the British people. They will go to the polls, demanding to know what the waste and misery of the past seven years has been for and demanding a better future after the polls close.
    4.13 pm
    The Chancellor of the Exchequer (Mr. Nigel Lawson): As we begin our eighth parliamentary Session in office, I am forced to acknowledge the consistency exhibited by the Opposition throughout that time. Not once have they deviated from the failed nostrums of the past.
    Not that we heard much about the Opposition's policies today. The right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) declined to discuss them even once, let alone to defend them. I suppose that he, as a recent convert to unilateral disarmament, has become so enthusiastic that he has extended it to the sphere of parliamentary debate. He certainly revealed himself with his apprehension about the forthcoming general election, whenever that may be, as an extremely worried man. As

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    always, the right hon. Gentleman expounded on the alleged decline of manufacturing industry, and implied that this could be terminal without a return to the policies that his Government pursued.
    I will come on to our record in a moment. Let us first look at how manufacturing fared under the Labour Government. Output fell. Productivity rose only very slowly, and the world recession of 1980–81 cruelly exposed the extent of the overmanning and hidden unemployment. Britain's volume share of world exports of manufactured goods steadily declined — a decline which under this Government has been unequivocally arrested. I do not want any lectures from the right hon. Gentleman on the balance of payments because under the Labour Government there was a cumulative current account deficit of £5 billion, whereas under this Government there has been a cumulative surplus of £21 billion.
    Mr. Hattersley: Since the Chancellor has given us that glimpse of the ghastly state of manufacturing industry under the Labour Government, will he answer my question and tell the House when this Government will get it back to that level of activity?
    Mr. Lawson: The right hon. Gentleman had his half hour and had plenty of opportunity to make his speech then.
    Today the outlook for manufacturing industry is encouraging. The first half of this year was a difficult period because of the pause in world economic growth, but that pause is now over and, at the same time, the competitive position of British manufacturers has been improved by the inevitable adjustment of the exchange rate which followed the oil price fall. Indeed, the pick-up is already well under way.
    In the third quarter of this year—I would not expect the Leader of the Opposition to know anything about this — manufacturing output was more than 1 per cent. higher than in the previous quarter and manufacturing exports were some 3 per cent. higher than in the first half of the year. With faster world trade and improved cost competitiveness, I see nothing implausible in forecasting an even stronger rise in manufacturing output next year, perhaps of the order of 4 per cent.
    The big difference, however, between this Government and the last on manufacturing is in productivity. Over the past six years, manufacturing productivity has risen by nearly 5 per cent. a year—second only to Japan among the major industrialised countries. After a short pause, it is now improving again. The result is that the growth in unit labour costs is again slowing down. The year on year rise was almost 8 per cent. in the first half of this year, but was down to about 4·5 per cent. in the third quarter. That is still too high—I make no bones about it—but it is getting better.
    As I have often stressed, a reduction in the growth of unit labour costs is of the first importance to the prospect for jobs. Here, too, recent figures are encouraging. On a seasonally adjusted basis, last week's figures showed a drop of 25,000 in the number of adults out of work, and the fall over the past three months has been the largest three-monthly fall for 13 years. I was saddened that the right hon. Gentleman felt wholly unable to welcome that fall in unemployment.
    The way to achieve further falls in unemployment—which we all wish to see—is to continue the economic
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    policies which have already created a million new jobs since 1983, when the electorate last had the opportunity to choose the Opposition's approach to the problem and emphatically rejected it. Yet the Opposition are still trying to peddle the same combination of high borrowing, high spending, and high taxation as the alleged answer to unemployment, despite the fact that it was the right hon. Member for Sparkbrook himself who said, shortly after the last election,
    "Last month, our economic policy … was a net vote loser. Nobody believed that our theories could be put into practice."
    That is what the right hon. Gentleman said then and, as Labour policies have not changed, their reception will be the same from the public at large.
    Mr. Nick Raynsford: Will the Chancellor of the Exchequer please answer the question which my right hon. Friend the Member for Birmingham, Spark brook (Mr. Hattersley) asked him, which was when unernployment would fall below 3 million? In doing so, will he remember the comments of his right hon. Friend the Chancellor of the Duchy of Lancaster in 1983 who said that if there were still more than 3 million unemployed at the next general election, the Conservative party would riot deserve to be re-elected?
    Mr. Lawson: The hon. Gentleman is new to the House. If he were not, he would know that no Government—neither this one nor previous ones, including the Government of which the right hon. Member for Sparkbrook was a member — publish forecasts for unemployment.
    Mr. Hattersley: The right hon. Gentleman always says that Governments do not publish forecasts, and he is right. However, he was not asked for a forecast. Other Governments, including his own, have during an election campaign said what they believed the trend would be and when we would hit certain targets. That is a fair question to which the Chancellor will not give a fair answer. Will the criteria of the Tory party chairman be met, and will unemployment be above or below 3 million by the next election?
    Mr. Lawson: I am glad to say that the trend is downwards and I hope that the right hon. Gentleman and the whole House will welcome that.
    We must accept that the views of the right hon. Gentleman no longer count for much, not even in the eyes of his own leader. The Leader of the Opposition has made it quite clear that in his opinion:
    "The primary role in British strategic planning must he performed by the Department of Trade and Industry." Therefore, in the highly unlikely event of a Labour Government, the right hon. Member for Sparkbrook would become the only man ever to have been Shadow Chancellor in government as well as in opposition.
    However, on most issues the Opposition are at sixes and sevens these days. Let me take just three examples. First, as mentioned by my hon. Friend the Member for Glanford and Scunthorpe (Mr. Hickmet), there is the interesting question of training. Only the other day the hon. Member for Kingston upon Hull, East (Mr. Prescott) called for a 1 per cent. levy on firms to fund new training initiatives— in effect, a new tax on turnover— that he thinks would raise £6 billion from British business. When asked about this, the right hon. Member for Sparkbrook somewhat tetchily replied:

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    "The idea that there should be a 1 per cent. levy is not policy. It wasn't described as policy by John, and I can't imagine it's going to be policy."
    Yet last night, when winding up for the Opposition in this very debate, the hon. Member for Kingston upon Hull, East reaffirmed his commitment to a 1 per cent. levy on business turnover; today, when asked a straight question by my hon. Friend the Member for Glanford and Scunthorpe, the right hon. Member for Spark brook was totally unable to give a straight answer.
    We are always pleased to have the contribution of the hon. Member for Kingston upon Hull, East to our parliamentary debates. The House will recall how earlier this year he said of the right hon. Member for Sparkbrook's pledge to create a million jobs:
    "How did we get this policy of 1 million jobs? Who worked on the programme? Promises such as this simply label us with targets we cannot achieve and expose our credibility."
    That is what the hon. Gentleman said, and quite right too. The right hon. Member for Sparkbrook and his hon. Friend should speak to each other occasionally as that might save them one or two problems.
    As for income tax, the right hon. Member for Sparkbrook tried for some weeks to maintain that while Labour's plans would mean a savage increase in the higher rates of income tax, there would be no increase in the basic rate. Needless to say, no one believed him, but the gaffe was well and truly blown by his NEC colleague, Mr. David Blunkett, who said:
    "In my view there will have to be a return to a higher standard rate of income tax and people will respect us for saying so."
    So much for the right hon. Member for Sparkbrook.
    Where do the Opposition stand on the other interesting question of national insurance contributions? Last year the right hon. Member for Sparkbrook was somewhat dismissive about the reductions that I announced in the Budget in the rates of national insurance contributions for the lower paid. During Second Reading of the Finance Bill the right hon. Gentleman said:
    "the Labour party has never believed that such changes to the cost of labour and employment could contribute to the solution of the central problem of the economy, which is the reduction in unemployment." — [Official Report, 29 April 1985; Vol. 78, c. 35.]
    Yet within a year he was on the air telling Mr. Jimmy Young:
    "If we make jobs less expensive for companies by reducing national insurance contributions that employers pay, then they'll take on more labour. So we'd like to cut the national insurance contributions."
    In other words, on this, as on every other issue, the right hon. Member for Sparkbrook stands on his head.
    About the only area of economic policy where we get a measure of unity and clarity from the Opposition is public spending. They all want as much of that as they can get. As a result, the total cost of their irresponsible pledges is rising all the time.
    The Labour party conference was always likely to be an expensive week for the right hon. Member for Sparkbrook. In conjunction with my right hon. Friend the Chief Secretary, I have costed five new pledges that Labour made at Blackpool. A winter heating premium would cost nearly £200 million; a higher Christmas bonus for pensioners, another £100 million; the abolition of standing charges for pensioners, £550 million; new policies on energy, at least £350 million; and the latest pension
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    increase promised by the hon. Member for Oldham, West (Mr. Meacher), a cool £8 billion a year. All in all, that means yet further spending commitments of some £9 billion a year—an expensive week indeed.
    Once again, the right hon. Member for Sparkbrook has been knocked over in the rush to spend more, and the hon. Member for Dagenham (Mr. Gould), who is sitting quietly, has been brought in, far too late, to try to put Humpty Dumpty together again.
    Mr. Hickmet: What analysis does my right hon. Friend make of the promise of the hon. Member for Kingston upon Hull, East (Mr. Prescott) to use the nationalised industries to employ more men as part of a Socialist policy to reduce unemployment?
    Mr. Lawson: My hon. Friend is right. As I said earlier, massive overmanning was one of the problems with which we had to deal when we came to office. That is what Labour is pledged to recreate in the areas in which it believes it will have responsibility.
    Mr. Dave Nellist rose—
    Mr. Lawson: The economic strategy set out in the Gracious Speech continues the strategy that we have pursued consistently since 1979. Over the past seven years we have gradually brought down the growth of money GDP, so as to squeeze inflation out of the system and hence make room for real growth. We have brought inflation down from the appallingly high levels generated by the policies of the previous Government—when it averaged more than 15 per cent. a year—to the lowest levels seen for a generation.
    Ever since inflation first dropped into single figures in April 1982, the Opposition have made confident predictions that it would rise again. During the last general election campaign the right hon. Member for Sparkbrook told the nation:
    "Inflation is ready to rocket again. By this time next year, it will be back in double figures."
    At the time I said that that was poppycock, and so it proved. Each time the Opposition have predicted higher inflation, and each time they have been wrong.
    To give them their due, it used to be the case in this country that we could not have sustained economic growth without a pick-up in inflation—at least, that is what the record seemed to show. Commentators used to debate endlessly the trade-off between growth and inflation as if they were bound inexorably together. But over the past five years we have shown that we can have steady and sustained growth without a revival in inflation — indeed, while inflation continues to come down. In each of the three years during which I have been Chancellor, the growth rate and the inflation rate have been within 24½ percentage points of each other. In no Labour year was that even remotely true. Indeed, in one of Labour's years the gap was as much as 25 per cent.
    For the past five years, economic growth has averaged almost 3 per cent. a year and is set to continue at this steady rate in 1987. Again, there has been no shortage of predictions that growth was about to peter out. Indeed, such predictions have occurred regularly, year in, year out —ever since 364 economists claimed that the economy could never recover from the Budget of 1981.
    As recently as a few months ago, I was told that the effects of the halving of the oil price would spell the end of the upswing unless I boosted Government borrowing,

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    or cut interest rates, or both. At the time, I ventured the view that we were witnessing only a pause in growth which would soon come to an end. Subsequent events have indeed proved that to be the case.
    Figures published this morning show that total output in the economy rose by 1 per cent. in the third quarter, and is now about 3 per cent. higher than a year ago. Next year, I expect growth of another 3 per cent. Before Opposition Members put that down simply to what they dismissively describe as a consumer boom, let me remind them that growth in consumer spending is actually set to slow down somewhat next year, that exports are picking up well, and that investment is expected to grow broadly in line with the economy as a whole.
    Mr. A. E. P. Duffy: The Chancellor is talking about growth and making confident predictions, but does he agree that a crucial component of growth is the volume of manufacturing output? When does he expect the volume of manufacturing output to begin to rise significantly above its present level, which is only 3 per cent. higher than it was in 1980?
    Mr. Lawson: I make a forecast for one year ahead, and it is that manufacturing output and exports will be well up in 1987.
    This year more than most, the critics seem to have found it hard to know what to think. First they predicted a slump and urged me to take action to expand the economy. That was only a few months ago. I declined to take their advice. As I predicted, growth duly picked up. They then changed their tune and told me that the economy was overheating and that I should take action to damp it down. I have not responded to that either. Now the Opposition arc trying to maintain that the economy is declining and overheating at one and the same time. That was the main burden of the right hon. Gentleman's speech.
    It is not at all clear to me what the Opposition's reaction really is to the public spending plans that are spelt out in the autumn statement. Does the Labour party want us to spend more next year, or less, or the same? It is far from clear. I notice that there is no reply.
    On the opening day of this debate, the Leader of the Opposition seemed to believe that the projected spending increase would ignite what he called a pre-election boom. I believe that that is what he said.
    Mr. Neil Kinnock: No, I did not say that.
    Mr. Lawson: In almost the same breath he asserted that there was no hope of the economy growing next year at the 3 per cent. rate forecast in the autumn statement. Given that the economy has grown at an average rate of nearly 3 per cent. for the past five years, it seems somewhat odd to characterise a sixth year of the same as either unattainable or as some special pre-election boom, unless, of course, he believes that every year of this Parliament has been a pre-election boom year.
    Meanwhile, we have fostered the conditions in which 1 million jobs have been created during the lifetime of this Parliament. The Opposition, however, have persistently criticised our policies as bringing no hope to the unemployed. What could bring more hope than the knowledge that more jobs are being created week in, week out, day in, day out? I have already drawn attention to the latest figures which suggest that there is now a downward trend in unemployment.
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    Thus we have achieved a combination of low inflation, sustained growth and rising employment—and we have achieved it by the consistent pursuit of an economic strategy which is based on a firm monetary and fiscal policy.
    Mr. Hattersley: I have two questions, if the Chancellor will permit me. First, why does he persist in pretending that the world began in 1983? Why is he afraid of taking responsibility for the first four years of Conservative Government? Secondly, I have a question which I keep asking the right hon. Gentleman but which he does not answer: when will the number of jobs get back to the level which the Government inherited? There are now 1 million fewer jobs than were left by the Labour Government.
    Mr. Lawson: I can tell the right hon. Gentleman one thing — it will be under a continuing Conservative Government.
    In operating monetary policy, we have all along taken account of all of the indicators of monetary conditions. It was as far back as 1980 that we said in the Green Paper "Monetary Control":
    "No single measure of the money supply can be expected fully to encapsulate monetary conditions".
    Therefore, anybody who imagines that policy was ever determined simply and solely on the basis of sterling M3, or any other single indicator for that matter, has failed to understand the policy. The fact that the Opposition have failed to understand it is not in the least surprising.
    We shall continue to watch broad money closely, while being fully aware of the difficulties in interpreting sterling M3, which the Governor of the Bank of England has recently described at considerable length and which I have described several times. Other countries are experiencing similar difficulties. We shall continue to target M0, which has proved a particularly reliable indicator of monetary conditions during the past few years. We will, of course, continue to take account of the exchange rate, the necessary fall of which in the light of the oil price collapse has now gone far enough.
    As I have said before, and shown by my actions, short-term interest rates are the key instrument of monetary policy. They will continue to be kept at whatever level is necessary to secure monetary conditions that bear down on inflation.
    Dr. Jeremy Bray: Does the Chancellor claim that the original statement of the medium-term financial strategy in the 1980 financial statement contained any reference to the exchange rate?
    Mr. Lawson: It is quite clear from the policy that we pursued in 1980 that we were using the exchange rate as a major discipline in getting inflation down. I remember the hon. Member being one of those who criticised us at the time for the strength of the exchange rate, which played an important part in the financial discipline which secured a fall in inflation.
    On fiscal policy, too, we can point to a record of consistency. Throughout my time as Chancellor, I have stuck firmly to the path mapped out in the medium-term financial strategy. Indeed, I have each year set the public sector borrowing requirement at or slightly below the figure indicated in the previous year's MTFS. Apart from 1984–85, when I allowed public borrowing to expand to finance the one-off expenditure needed in successfully resisting the coal strike, the outturn has been broadly in

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    line with the PSBR envisaged at the time of the Budget. Yesterday's figures confirm that this year's PSBR is well on track, too.
    The Leader of the Opposition claimed in a recent radio broadcast that the Government were the
    "highest borrowing, highest spending, highest taxing Government ever".
    This is pretty rich—
    Mr. Kinnock: You are rich.
    Mr. Lawson: —coming from the leader of a party whose last spell in government witnessed the PSBR rise to the equivalent of £35 billion in today's terms, public spending taking the highest share of national output ever in time of peace, and income tax at a basic rate of 35p in the pound. What is more, they would do the same all over again.
    Mr. Kinnock: On those three issues, the first, as I am sure the right hon. Gentleman cannot deny, is that, cumulatively, given five years for five years, the borrowing of the Government of which he has continually been a member is higher than the borrowing of the five years of Labour Government. On the second, the right hon. Gentleman cannot quarrel with the fact that the tax burden as a proportion of gross national product has been higher—as much as 18 and 20 per cent. higher—under the Government of which he has been a member than under the last Labour Government. As for the third, the highest spending has been the direct consequence of the policies that the right hon. Gentleman has supported and run — maintaining unemployment at outrageous rates which has cost taxpayers and others immensely. I hope that the right hon. Gentleman will withdraw the idea that he is not part of the highest spending, highest borrowing, highest taxing Government in British history.
    Mr. Lawson: I certainly will not withdraw. On taxes, however, I welcome the right hon. Gentleman's conversion to the cause of lower taxation. I hope that we shall now experience a totally new Labour plan. The right hon. Gentleman knows that public expenditure grew so fast under Labour that the economy had to be handed over from the Chancellor of the Exchequer to the International Monetary Fund so that it could sort the mess out. As for borrowing, the right hon. Gentleman is completely wrong. It was substantially greater under Labour than it has been during our period of office.
    Much of the press reaction to the autumn statement has been fairly predictable, too. On most subjects the press seems to have only two headlines to choose from.
    Mr. Nellist: Will the right hon. Gentleman give way?
    Mr. Lawson: No.
    Mr. Nellist: I asked about 15 minutes ago.
    Mr. Lawson: The hon. Gentleman has been somewhat pre-empted by his leader. He might have a word with his leader to give more time to Back Benchers. It is not a matter for me.
    On public spending, the headline is either, "Cut, cut, cut," or "Spend, spend, spend." The truth is more prosaic. We are continuing on the path we have consistently pursued throughout this Parliament. Our declared objective has been to reduce the proportion of national
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    income taken by the public sector. We have achieved this every year since 1982, and we plan to go on doing so over the next three years, as set out in the autumn statement.
    Mr. Nellist: Will the hon. Gentleman give way?
    Mr. Lawson: I shall give way to the hon. Gentleman, but before I do, I shall say one other thing to the right hon. Member for Sparkbrook. He made an astonishing remark about the public expenditure plans. He said that the great increase in the plans, to a significant extent, was an increase in the British contribution to the Community budget. The House may be interested to know that, as far as planning totals are concerned, contributions to the European Community budget are down by £280 million for 1987–88, and down by £510 million for 1988–89. The right hon. Gentleman got that wrong as well. I now give way.
    Mr. Nellist: Is the Chancellor aware that, some 15 minutes ago, he spoke about the necessity to reduce unit wage costs? Is he aware that in the west midlands, according to the West Midlands Engineering Employers Association, 46 per cent. of all wage supplements in the past 12 months were below 4 per cent., and 80 per cent. were below 5 per cent., yet unemployment is still rising? The right hon. Gentleman wants to do something about rising wages. Why does he not have a word with the 40 members of the president's council of the CBI who are calling for zero wage rises? Those 40 individuals gave themselves a 19 per cent. wage rise last year. One gave himself a 207 per cent. wage rise. Why does the right hon. Gentleman not get the beam out of his eye before spotting motes in other people's eyes?
    Mr. Lawson: I assure the hon. Gentleman that I do not have a beam in my eye. My salary has not gone up by anything like that amount.
    Of course, it is well known that, in real terms, contributions to the European Community have halved since 1978–79.
    Mr. Nicholas Budgen rose—
    Mr. Lawson: I must get on. I have given way a great deal — far more than the right hon. Member for Sparkbrook did.
    In the decade prior to our election in 1979, public sector spending grew at an average annual rate of about 3 per cent. in real terms. In our first Parliament, because of the world recession and the post-dated cheques that we inherited, we managed only to slow the growth of spending to an average rate of 2¼ per cent. a year. But so far during this Parliament, we have managed to curb the growth in spending to 14 per cent. a year. The increase envisaged over the next three years is at the still slower rate of 1 per cent. a year. All these figures, incidentally, exclude the proceeds of privatisation, so as to show the underlying trend.
    The second element of continuity is our determination that spending should not be financed by excessive borrowing. That is why I have made it clear that, in the coming year, 1987–88, I will not allow the public sector borrowing requirement to exceed the 1¾ per cent. of GDP indicated in the medium term financial strategy.
    I can well understand that continuity may be an unfamiliar concept in the party of the right hon. Member for Sparkbrook. The last Labour Government's spending

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    policies were like a big dipper. First, there was a massive increase— 12 per cent. in real terms—in the first two years. Then there was a dramatic reversal when the IMF took over from the right hon. Member for Leeds, East (Mr. Healey). Look at what they chose to cut then—roads and hospitals, both down by 30 per cent. in real terms over the whole of Labour's period of office, with overall capital spending down by a fifth.
    In the new Session, we shall continue to follow the economic strategy that has brought the achievements I have described. But the Government's objectives go wider than growth and stability— welcome and necessary as they are.
    In particular, we are determined to encourage the spread of ownership in society. That means wider home ownership and wider share ownership. The number of shareholders has doubled under this Government, not least because of the opportunities arising out of the privatisation programme. Over 7 million people have registered an interest in the British Gas sale alone.
    Even so, many people still find the idea of share ownership complicated and daunting.
    Ms. Clare Short: And immoral.
    Mr. Lawson: To make it simpler and more attractive, I announced in the Budget the new personal equity plans. These will enable small investors to invest in United Kingdom shares, in a simple way, with no need for record-keeping or dealings with the Inland Revenue. Capital gains and reinvested dividends will be completely free of tax.
    A number of commentators could not wait to predict that this initiative would never get off the ground. In fact, it is now clear that it is set to be a great success. I can announce today that the Inland Revenue has already received over 100 applications from firms that want to run personal equity plans, among them each of the big four clearing banks and over 30 firms of stockbrokers.
    I am laying the draft regulations for the scheme before the House today, so that, subject to approval, it can begin on 1 January next year.
    A second area where we are building on success is privatisation. Our privatisation programme is a historic achievement. It has brought benefits to consumers, investors, employees, management, and the economy as a whole. It is being emulated throughout the world.
    Mr. Edward Leigh: Before my right hon. Friend leaves the subject of the value of share ownership, he may not have heard that, while he was outlining it, the hon. Member for Birmingham, Ladywood (Ms. Short) said, "So what? It is immoral." Is it not incredible that Labour Members are still prejudiced against the rights of ordinary people—millions of them—to own a stake in British industry?
    Mr. Lawson: My hon. Friend is right. The fact that he drew to my attention needs to be widely known. I am sure that he will ensure that it is.
    Ms. Clare Short: Will the right hon. Gentleman give way?
    Mr. Lawson: In a moment. During this Session of Parliament alone, British Gas, British Airways, Rolls-Royce and the British Airports Authority will be privatised, so that the state commercial sector will be down to little more than half of what we inherited in 1979.
    Ms. Short: It is my view, that of most of my right hon. and hon. Friends and, I think, of a large proportion of people, that it is immoral to sell off to a few people, and for a quick buck, assets that belong to all the people and are crucial to the strategic future of the economy.
    Mr. Lawson: There are about 7 million individual shareholders. That is not a few people. The personal equity plans, about which the hon. Lady shouted, "Immoral", have nothing whatever to do with privatisation. Privatisation is a policy that the Labour party cannot stand. Labour Members do not like the opportunities—it is all too clear — that it has brought for millions of people to own shares. They do not want to see the extension of share ownership any more than they wanted to see the extension of home ownership. They do not like the idea that management, not politicians, will run the companies. No wonder that, to a man, the heads of these newly privatised companies point to the dangers of renationalisation.
    For areas which remain in the public sector, many of the benefits of privatisation can be secured by putting out to competitive tender services which were previously provided in-house. This has already brought savings of £100 million a year—much of it available to improve patient care in the Health Service. This Session, as was announced in the Gracious Speech, we shall legislate to make competitive tendering compulsory for a wide range of local authority services, including street cleaning and refuse collection.
    Again, the coming year will be particularly important for the City and the financial world, as it adjusts to the new competitive environment. The growth of the financial services sector has brought great benefits to the economy, not least in terms of jobs£2 million people are now employed in banking, finance and insurance. Indeed, the number of extra jobs generated by that sector since 1979 is more than twice as great as the job losses in the motor vehicle industry over the same period.
    Mr. Eric S. Heffer rose—
    Mr. Lawson: I am coming to the end.
    Effective supervision is essential throughout the financial sector, as recent events have shown. As a Government we are determined to do what is necessary to achieve it. The House devoted a good deal of time in the previous Session to what are now the Financial Services Act and the Building Societies Act. To complement these, I introduced on Thursday a new Banking Bill to modernise and strengthen the rules for banking supervision. As I said, effective supervision is essential, and as a Government we are determined to do what is necessary to achieve it.
    In the year ahead we shall continue to pursue the economic policies set out in the Queen's Speech. They are the policies which have already brought five years of steady growth and inflation down to the lowest levels for a generation. They are policies which the Opposition are committed to reverse. But I am confident that they will not get the chance to do so for a long time to come, if ever; for ours are policies which have captured the imagination of the British people.
    4.50 pm
    Dr. David Owen: I beg to move, as an amendment to the Address, at the end of the Question to add—

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    But humbly regret that the Gracious Speech is irrelevant to the country's most pressing problems: unemployment, poverty, falling standards in the health and social services, and the serious decline in British manufacturing industry; believe that present Government policies have generated a short-term pre-election consumer boom, and that record levels of real interest rates and rising unit costs are undermining Britain's competitiveness; call on the Government to enter the exchange rate mechanism of the European Monetary System, to adopt a more vigorous competition policy, and substantially to increase investment in skill training; further regret the inclusion in the Speech of a measure to replace domestic rates in Scotland with a regressive poll tax rather than a more equitable local income tax; and finally regret that, in what is likely to be the last Gracious Speech before the general election, there is no proposal to reform the electoral system for local, Westminster and European elections despite the deficiencies in the current system, which distorts the wishes of the people and produces divisive governments supported by only a minority of the electorate.
    Mr. Deputy Speaker (Mr. Harold Walker): Order. I think that it would be for the convenience of the House if the right hon. Gentleman moved his amendment formally towards the end of the debate.
    Dr. Owen: No doubt moving the amendment later can be arranged, but I believed that in the past an amendment had been moved at the beginning of the debate on the Queen's Speech, and that that is the usual format, and the one used last year.
    The question before the House is how irrelevant is the Queen's Speech and much of what the Chancellor of the Exchequer said, to the real problems facing the country of poverty, unemployment, falling standards in health and social services, and the appalling state of too much of our manufacturing industry. The problem for the Chancellor of the Exchequer is that he is locked into an electoral strategy rather like an over-burdened stag at bay, and is unable to run or to get out of the problem that he faces if there has not been an election before it is convenient for him and his economic policy. I certainly hope that we have an election before too long.
    The supreme irony is that this Government, who are so keen on moralising and on Victorian values —I think particularly of the Chancellor of the Duchy of Lancaster and the Prime Minister—should find that at this very moment, down under, the Cabinet Secretary, the chief of the Civil Service, is having to answer questions about the Government's truthfulness, and to admit to a certain economy with the truth and to misleading people. I must say that I exclude the Chancellor of the Exchequer from the accusation of moralising, as he is not a moralist.
    That same economy with the truth has been the characteristic of the Prime Minister in her handling of the Westland affair, and has characterised much of the manipulating of the economic statistics. It has also been the hallmark of how the Government have handled the unemployment figures and of how—[Interruption.]—the Chancellor has manipulated the statistics. I warn the Government and the country that we face the prospect of a serious economic crisis after the election, provided, of course, that the Prime Minister gets her election timing right. That crisis is not inevitable, but it is dangerously close. That is the view of many independent analysts and was, only recently, the view of an editorial in The Economist.
    Mr. David Howell: The right hon. Gentleman has made copious references to independent analysts. But many of them completely misreported the rise in interest rates a few weeks ago. They got that completely wrong. Many of them also got wrong the effect of the autumn statement on the gilt-edged market. Many of them have been wildly wrong, and even more wrong than the right hon. Member for Birmingham. Sparkbrook (Mr. Hattersley), in their inflation estimates. Why does the right hon. Gentleman trust their judgment in these matters?
    Dr. Owen: It depends on which independent analyst one takes. I have found The Economist to be a fairly accurate observer of the British economy, although I accept that it is not always perfect. I have found the Financial Times to be a reasonable analyst of the British economy. Indeed, in an editorial on 30 October, the Financial Times said:
    "It was always a nightmare that the symptoms of overheating—rising inflation, increasing skill shortages and the sucking in of imports, even at a competitive exchange rate — might develop with over 3 million unemployed and fading investment, and now the nightmare stands a chance of being realised."
    That is the view of many people, including many stockbroking analysts. It is true that some people thought that it would be necessary to raise interest rates by 2 per cent., and that there was a rise of only 1 per cent., but not that many people can be altogether confident that the Chancellor will not be forced to raise interest rates as a result of international speculation at some future date. I should be surprised if the right hon. Gentleman was absolutely confident either.
    As I have said, I do not believe that an economic crisis is inevitable. If the Government time the election correctly, the next Government will be faced with having to address some of the follies of the past few months. There is a serious imbalance in the economy. The overheating and high demand, despite substantial unemployment and sluggish productivity growth, threatens the economy of the country. We would be extremely unwise not to recognise that. In the short term, the economy is out of gear. Imports of manufactured goods have grown at an annual rate of 34 per cent. in recent months, while exports have grown by only 6 per cent. Earnings increases—the Chancellor was very complacent about this—are stuck at over 7 per cent. despite the increasing skill shortages and a 12 per cent. rise since June in recorded job vacancies.
    Overheating is resulting in upward pressure on inflation, and that is happening despite the highest real interest rates, at 9 per cent., for 12 years, and the fact that they are not choking off consumer spending as many people thought they would. The earlier that corrective action can be taken, the easier it will be to avoid an economic crisis. The critical test for the Chancellor will be his Budget. If he resists the Prime Minister's blandishments and refuses to cut the standard rate, he will be taking fewer risks with international confidence in 1987. He might also restore a little more domestic confidence inhis own judgment. However, only time will tell whether he will resist those blandishments.
    Mr. Lawson: The right hon. Gentleman has mentioned the Budget and has been talking about what he calls corrective action. Contrary to my practice in previous years, I indicated in advance in the autumn statement what I believed the PSBR should be in the Budget. I said that

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    it should be 1·75 per cent. of gross domestic product. Will the right hon. Gentleman say what he thinks the PSBR should be set at in the Budget, so that we can know what he means by corrective fiscal action?
    Dr. Owen: As the Chancellor knows, before this financial year the alliance suggested a PSBR of about £8.5 billion. The right hon. Gentleman castigated us for profligacy. Since then, the right hon. Gentleman, who set his PSBR unrealistically low, has had to raid the contingency reserve and has now been able to claim a PSBR for the outturn of this financial year that will be between £8 billion to £9 billion. That is exactly what was estimated. [Interruption.] The Chancellor has a great habit of manipulating asset sales whenever he forecasts the PSBR. But all the analysts refuse to accept such manipulation of the statistics. Indeed, it is an example of the manipulation that I referred to earlier. The Chancellor likes to have it both ways.
    Overheating and excess demand have led to a worsening of our competitive position. Moreover, we must take account of the balance of payments. The Chancellor boasts about his autumn statement, but there he forecast a non-oil trade deficit of £14 billion next year. That will be the worst in Britain's history. The reason is that consumer demand will largely leak into imports—as it is doing now — and, I fear, into higher inflation. This deterioration stems also from a failure of supply reflecting capacity weaknesses and inadequate investment. After seven years of this Government, British industry is unable to respond either to the domestic consumer boom or to the export potential. The Chancellor made much of today's output figures — up by 1 per cent. That may show a genuine improvement in productivity, but I fear that it shows just a response to the consumer boom and the fall in the value of sterling.
    Manufacturing capacity since 1979 has shrunk by 17 per cent.. so there is a lot of ground to make up. The Bank of England, in its recent briefing, has been far more anxious than the Chancellor about what is happening with unit labour costs. They are running at an annual rate of 5.4 per cent., they are the highest of all the OECD countries and reflect the extremely dangerous underlying lack of cost competitiveness. If the Chancellor continues to sound a complacent note, he will live to rue it. If the Government will not act on consumer credit—and it is hard to see how they can — they must be prepared to contemplate action on unit labour costs.
    What about the Chancellor's figures, about which we have heard so much? Certainly the monetary target has gone. He told us that he would continue to target these figures. Sterling M3 is currently growing at 18 per cent. and the narrow money range is now 6 per cent.—both above their forecast ranges in the medium-range financial strategy. Consumer credit controls have been jettisoned, probably never to return, and financial liberalisation and deregulation have led to a massive increase in consumer borrowing in the absence of monetary controls.
    In the first quarter of 1986, the total new borrowing by the private sector rose by £26·5 billion on an annual rate compared with £14·3 billion at the same period in 1983. Those are pretty substantial figures, and I do not know whether anyone believes that they should be treated as a minor matter. Earnings increases are growing at twice the rate of inflation and three times the rate of manufacturing productivity in May 1986. That is why we are right
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    consistently to ask for an incomes strategy. The electoral advantage is clear to the Conservative party. The spending boom is raising living standards for those in work at the expense of the real economy, at the expense of our underlying competitiveness and at the expense of the living standards of those who are out of work.
    Let us look at public spending and the Chancellor's claims of prudence, which many people would think was betokening the start of extravagance. The autumn statement outlined a £4·75 billion increase in public spending for next year and a £2 billion overshoot this year on planning totals announced in the Budget. The claim that there is no U-turn and that fiscal prudence is still the order of the day is sheer arrant humbug, and the Prime Minister and the Chancellor know that. They have revealed themselves to be cynical in their pre-election readiness to manipulate, and so follow the well-trodden path of Sir Anthony Eden and the Earl of Stockton who, it must be admitted, did so with some electoral success but at some economic cost. Lord Home tried that and narrowly failed. The right hon. Member for Old 13exley and Sidcup (Mr. Heath) failed for other reasons, but at least he had the courage to grapple with the inflation, set up largely in the early 1970s, again with the private sector leading, not the public sector.
    Sir Kenneth Lewis: The right hon. Gentleman may not know, but the Prime Minister has just announced, that she has no intention of having an early election. She believes that the programme should be completed and that the Government should carry on and do the things that they said they would do. Therefore, there will be no early election.
    Dr. Owen: That is an economy of truth, and vie will believe the Prime Minister's prediction when it happens. The fact is, she will run for an election at the earliest opportunity that she thinks that she can win. She will not be alone in that; most Prime Ministers have taken the same course.
    Mr. Lawson: Why would my right hon. Friend do that?
    Dr. Owen: The right hon. Lady would be wise to go early. We can undoubtedly predict that the economy over the next few months will look good for those who are in work in the south — broadly speaking, the electoral target at which the Prime Minister and the Chancellor are aiming. After all, the Prime Minister boasts in private that no Conservative Government has lost an election because of unemployment. Perhaps she is right.
    Let us return to the pre-election manipulation. The more we witness this, the more we believe in a fixed-term Parliament. Whatever may be the arguments about proportional representation—in which I believe—as we watch this cynical pre-electoral cycle, the case for fixed-term Parliaments is very clear. Lord Wilson did this between 1964 and 1966, again with some success It was done again between February and October 1974 and it has been done by Governments of both complexions. As the general economic position of the country becomes weaker, as we—
    Mr. Lawson: Weaker?
    Dr. Owen: Yes, weaker. The Chancellor had better face up to the fact that 35 years ago we were the 3rd industrial nation in the world, whereas we are now the 19th As the

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    economy weakens, so the electoral manipulation gets more damaging both for the short-term and the medium-term economy.
    The Chief Secretary to the Treasury (Mr. John MacGregor): In view of what the right hon. Gentleman has said, would he tell the House whether the alliance is reversing the spending programmes that it was urging on the House earlier this year? What successes are his hon. Friends the Member for Truro (Mr. Penhaligon) and for Stockton, South (Mr. Wrigglesworth) having in trying to curb the spending ambitions of the alliance? As is very clear from the responses earlier in the year, his hon. Friends were receiving no response at all.
    Dr. Owen: Of course, it would be totally irresponsible of us, having reached the stage where the Government are now adopting the public sector borrowing requirement figures which we advocated — [Interruption.] The Chancellor should not fall for that. If the Government have given the spending stimulus for this year which we advocated, we would be crazy not to go back and consider the way that we would grapple with the new position. Our criticism of the Government is that they have used the public spending stimulus in an acoss-the-board way. They have not used it to tackle the real issues, which I will come to later.
    There is no reason for the alliance to be ashamed of the exercises undertaken by my hon. Friends the Members for Truro (Mr. Penhaligon) and for Stockton, South (Mr. Wrigglesworth). The Chief Secretary to the Treasury would be the first to criticise us if we had not embarked on that exercise. He would be costing our programme tomorrow.
    Even with the limitations of opposition, and not having the back-up of the Treasury, we are undertaking a serious exercise to look forward and absorb the position. Unlike the Labour party, early in January we will do what we have done before. We will publish our Budget forecast and figures, having placed them through an econometric model. The figures will be available for everyone to criticise. If the Chancellor had a little more grace, he would admit that our forecast last year of what was sustainable and manageable has turned out to be exactly right. He knows that, even if he tries to manipulate it.
    In another of his manipulations, the Chancellor said that, as public spending is falling as a proportion of national income, no U-turn is taking place. That is misleading —I do not know whether the Chancellor has made that statement under oath. The autumn statement concedes that, in real terms, the public spending share of national income in 1986–87 is 43·75 per cent. That is exactly the same as in 1979–80. If the proceeds of asset sales are excluded, it is higher still, at 45·25 per cent. Public spending and borrowing have been increased and, if coupled with standard rate tax cuts in March, would fuel the consumer boom dangerously and damagingly. That is the point that I made to the Chancellor when I asked him to consider his Budget. I asked him to resist the temptation in the spring to add to already dangerous trends in consumer spending and not to take 2p off the standard rate of tax, which he seems to favour.
    What is the Chancellor after? What is the gamble on which the Chancellor—although, of course, it is really the Prime Minister — has embarked? There is an
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    unhealthy ambivalnece about the Government's attitude to the exchange rate. In place of firm sterling we have a feeble sterling strategy which periodically results in a sterling crisis.
    We are asked to congratulate the Chancellor on getting away with a 1 per cent. increase in interest rates rather than 2 per cent. Higher interest rates are having a devastating effect on some parts of manufacturing industry. This is one of the most serious long-term problems facing us as manufacturing industry grapples with the disastrous consequences of high interest rates on investment and exports. There is no strategy to reassure foreign exchange markets that a falling pound will not lead to higher inflation exacerbated by high interest rates. The real casualties in all this are industry and exporters —and it is all done for votes. Consumers and importers gain, while manufacturers and exporters lose. The autumn statement projection for the housing element of the retail price index is interesting, as it shows how the Government see the movement in interest rates. It is clear that they see no real change in the present rates even by the end of the year.
    As for inflation, the underlying or core rate is close to 5 per cent. Higher inflation linked with potential sterling crises and probable balance of payments deficits next year are all forecast by most commentators. One may argue as to whether unemployment might fall a little, but very few people are prepared to say that it will fall below 3 million, even allowing for the 18 manipulations in the figures.
    What does the Chancellor do about all this? His electoral strategy is to spend now and pay later— the same old cycle. Within months of the elections of 1955 and 1959 the electorate was being asked to pay for the folly of returning a Conservative Government. The longer the gamble continues, the greater the risk of economic suicide. Heaven help us if we have to go right on into 1988 in the stench of the electoral hustings. [HON. MEMBERS: "What about inflation?"] There is no point in talking about our inflation rate without comparing it with the underlying rate in competitor countries.
    Mr. David Harris (St Ives)rose—
    Dr. Owen: No, the hon. Gentleman can make his own speech.
    When one compares the inflation rate in this country with that of the Federal Republic of Germany one can appreciate the anxieties as unit labour costs rise.
    The game plan is to leave monetary policy lax, pray that sterling does not crumble and hope, above all, that the markets will be convinced that the Conservatives can win in 1987.
    Mr. Lawson: I am trying to understand what the right hon. Gentleman is getting at. First, he said that interest rates were too high. Then he said that monetary policy was too lax. How does he reconcile those two propositions?
    Dr. Owen: The Chancellor knows perfectly well that he has given up. We were told about the Government's stance on M3 and MO, but the monetary stance of the alliance has been clear from the start. We have been prepared all along to argue that this country should enter the European monetary system. We have never said that it was an easy or a soft option. There are problems, and this country would have to accept the disciplines off the EMS. From time to time that discipline would be felt in interest rates.
    No one who advocates full entry of the EMS can deny that part of the framework of discipline might sometimes

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    be higher interest rates than we would wish. One of the advantages, however, is that one is not subject on one's own to the fluctuations and pressures that the British economy currently faces. Many people believe that within the EMS it would be easier to achieve exchange rate stability and to keep real interest rates over a period lower than they have been in this country. Retrospective analyses of the past few years have all shown that the overall effect of membership of the EMS would have been lower real interest rates and a more stable exchange rate, both of which are desperately needed by British manufacturing industry.
    It is no secret that the Chancellor, like the Bank of England, has now changed his mind about the need to enter the EMS. The Prime Minister, however, is still off on her own, on television and in interviews with the Financial Times, repeating that she will not enter the EMS with all her usual resolution, which many of us would describe as bloodymindedness in terms of what is good for the British economy. I note that the Chancellor has not hastened to the Dispatch Box to defend Britain's remaining outside the EMS and that neither he nor his right hon. Friend the Chief Secretary has denied that, if we had been in the EMS, interest rates in this country would have been lower.
    Let no one imagine that the alliance is ducking any of the difficult choices. We have been prepared to make realistic economic forecasts. When our target for the public sector borrowing requirement for 1986–87 was announced as £8.4 billion it was higher than the Government's target of £7 billion, but the Government changed the contingency reserve, which we had not assumed in our forecasts, and their outturn by 31 March will be between £8 billion and £9 billion.
    Mr. MacGregor rose—
    Dr. Owen: Perhaps the right hon. Gentleman will wait until I have finished.
    The Government have given a fiscal boost to the economy in aggregate very similar to that proposed by the alliance last March, but the Chief Secretary had to make those adjustments due to lack of control in a whole range of Government Departments. We therefore did not see the action that we urged to stimulate investment and exports, to tackle the balance of payments deficit and to try to increase our competitiveness. There was no targeted fiscal boost to increase employment in areas of high unemployment. In sonic parts of the country unemployment in the construction industry is as high as 40 per cent. Selective rather than generalised investment in the infrastructure — broken down not just regionally but sub-regionally and with a strategy of very little import content in the construction—could be achieved without risking inflation.
    Mr. Harris: I heartily agree with the right hon. Gentleman's comments about targeting infrastructure spending on a sub-regional basis. Perhaps he will explain to me and to his hon. Friend the Member for Truro (Mr. Penhaligon) why he, with one other west country Member, opposed our attempts to achieve the piece of infrastructure which above all others was needed for the benefit of Cornwall. Why did the right hon. Gentleman lead the campaign against the Okehampton by-pass, which would help Cornwall more than any other item of infrastructure spending?
    Dr. Owen: I appreciate that the hon. Gentleman feels under pressure as the prospective alliance candidate breathes down his neck. Had he been in west country politics a little longer, he would know that the reason is perfectly clear. I have consistently upheld the sanctity of the national parks. Like some of his hon. Friends, I am of the "not an inch" school. I do not believe that one should encroach on the margins of a national park. Having been born in the west country and lived on the margins of Dartmoor park all my life, I stand by my record of defending the environment, so the hon. Gentleman cannot get away with that one. As for targeted infrastructure investment, I wish that we had had the hon. Gentleman's support in the Lobbies when, time after time, we argued for such investment in the west country, in the north-east and north-west and in parts of Wales and Scotland.
    The sadness of the Government's expenditure strategy is that it is not targeted selective investment to deal with unemployment in the north or to curb inflation. It is purely accidental. The failure of Departments to take a grip of their budgets has meant that the Chancellor of the Exchequer, fearing a cut in the months before an election, has raided the contingency reserve and accepted a higher public expenditure requirement. That is what has happened. The Chancellor who made a great virtue of the need for a large contingency reserve has, as he knows perfectly well, manipulated the figues yet again.
    Mr. Tim Yeo rose—
    Dr. Owen: Where does the alliance stand on those fundamental questions? Our commitment to entering the EMS is total. We believe that it provides a much better medium-term financial strategy than any of the varied monetary aggregates which the Chancellor has, at different times, seized like a great apostle and thrust at us in the House. For him to try to pretend that there has been a high level of consistency during his time as Chancellor is nonsense and he knows it. The Chancellor has been found out on his monetary strategy and he has abandoned it before the election. The question that will have to be asked were he ever to be returned to office, is whether he would return to his previous belief in the target figures immediately after an election.
    The biggest failure of the Government is that they have not dealt with unit labour costs. Again, there is no apology from the alliance for our support for an incomes strategy and our readiness to use, if necessary and if forced to do so, a tax-based income strategy in order to enforce it. There is no doubt that any Government who are serious about reducing the unemployment figure of over 3 million will have to have a strategy for incomes. There is no way in which one can inject the amount of money that is necessary without risking inflation led by wage movements. It is sad that the Government have not been prepared to take on that issue.
    Sir Peter Hordern: Many hon. Members have been interested in the alliance's proposals for an income strategy. The right hon. Gentleman has now announced that there are to be tax consequences on any pay increases throughout the company sector. Can he tell the House whether that would apply to the nationalised industries and what would happen to the corresponding deficit that the nationalised industries would incur?
    Dr. Owen: If an inflation tax had to be introduced—I did not say that it would, because we would argue for a

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    voluntary income strategy—and if we were faced with a choice of having to relax our attempt to reduce unemployment .we would not hesitate to use a tax-based incomes policy. It would apply to nationalised industries. However, it would not apply to the Government's own sector. There, one has to use the resolution of Ministers to hold the public sector back. Pay increases in all sectors, public and private, can be only those that are justified by a real quantifiable increase in productivity.
    If we get an increase in productivity, then a high wage economy is a thoroughly good thing. It is madness in my view to have an incomes policy which goes across the board and does not reflect the reality in individual circumstances. One of the advantages of a tax-based system is that it would reflect that. One of the other advantages is that it can allow a firm that is doing well to give out to its workers, not just in the form of a wage packet, but in terms of shares which, provided they are not marketable in the early years, would not lead to inflation.
    That may be an area in which there is some agreement. We have long been advocates of wider share ownership and there are ways in which a share ownership distribution can reinforce an incomes strategy. That is the sort of thing we should all be looking at if we are serious about this question.
    Mr. Terence Higgins: The right hon. Gentleman supports an incomes policy in which higher amounts are paid for by higher productivity in an industry where there has been no change in the demand for a product. Why does he want to attract more people into a job when it should require fewer?
    Dr. Owen: I do not quite understand what the right hon. Gentleman said. I do not want to attract more people into the industry than can be justified by productivity. I do not want to increase over-manning. However, if a company has increased productivity and the work force has co-operated in an improvement in productivity, then the workers should be able to benefit just as much as the shareholders.
    If we are to get improvements in productivity, surely there must be a reward system. One of the mistakes of past incomes policies is that they found it difficult to reward genuine improvements in productivity. Therefore, they have been seen as anti an effective and efficient working economy. The advantage of a tax-based strategy is that it is more flexible. It is obviously preferable, I make no secret of it, to have no income strategy.
    However, if one is faced with a choice as to whether to do something about unemployment or go on accepting the depression and the feeling of being unable to contribute to society that is now a hallmark of all too many of our cities in the north, then in all justice, one must be prepared to put forward a strategy that will allow one to keep unemployment coming down without risking inflation. I do not believe that we would be serious if we refused to grapple with the issue of an incomes strategy. Increasingly, the Labour party will find that the lacuna in its policies is that it is failing to grapple with the issue of incomes when trying to grapple with the problem of high levels of unemployment.
    Another issue, which for the long term is probably more important, is an industrial strategy which emphasises improving skill training and employment. If there was to
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    be a relaxation of public expenditure at present, could there be a more urgent area of priority than skill training? It is the absence of that extra spend in the area of skill training which I suspect we will—[Interruption.]
    There is not enough training. This country has the potential for more people to take up a higher educational training opportunity. Only 14 per cent. are participating. Japan has 40 per cent. participation in higher education and the United States has 50 per cent. We are neglecting our skilled manpower. When the Open university has to turn down 24,000 qualified applicants, purely on financial grounds, 13,000 of them in the science and technology training area, when there is a shortage of mathematics teachers and not enough money going into the basic brains and skills of this country, there is something seriously wrong with expenditure priorities.
    That is the real indictment of the Chancellor's relaxation of expenditure. It did not go into the areas that would achieve an improvement in the real economy. It went into the candy-floss economy. It went into the voting economy. It was specifically designed to win votes and the Chancellor knows it. He may succeed, in which case there will be a smile from ear to ear. He knows, and he fears, that if the Prime Minister dare not go as early as he would wish, he may well find that he cannot sustain this economic strategy on into June 1988. That is the problem for the Chancellor. There is a lack of confidence among international markets in the underlying economy.
    It is possible that the Chancellor may be saved. The recent oil ministers' meeting in Quito may achieve an increase in the oil price. If there is a rise to $18 or $20 a barrel, that would give the Chancellor some extra revenue which may see him over the pressure points in the next year or two. He may then be able to see some of the improvements which he thinks are there in the underlying economy. I doubt it. It may be that he will be lucky. He once said that a Chancellor needs a bit of luck. I suspect that he has had more than his share, and it may well be running out.
    Mr. Yeo rose—
    Dr. Owen: I will not give way.
    We see the Queen's Speech as a wasted opportunity. It was an opportunity for the Government to decide that they were intending to have a full year of government of this country. The Government, especially the Chancellor of the Duchy of Lancaster, who cannot make up his mind whether he is the chairman of the Conservative party or a Cabinet Minister, and the Prime Minister, set the tone of electoral fever. Nobody listening to the Prime Minister on the Queen's Speech can have been in any doubt about her heading for the hustings as soon as she can. I say to the Chancellor that the economic strategy is not sustainable. It will be deeply damaging to the economy of the country if it continues for the next 18 months. It will be far better to have an election and get back to the serious problems of making the real choices about the economy of this country.
    It is the judgment of the alliance parties and of an increasing number of the electorate that we will share in those decisions and participate in the formation of the policy of that Government. Therefore, in the next few months, as we lead up to an election, the alliance parties will not fall into the temptation of offering what we cannot deliver or attempting to go for the soft soap and refusing

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    to cost our programme or face up to the harsh choices. It was to the credit of the alliance at the previous Budget that we did not vote for 1p off the standard rate of tax. We said that there were other priorities.
    The Chancellor believes that there is no pool of altruism in this country of ours. He believes that everybody has their price and that they can all be bought off. That is the cynical Conservative view of the electorate. He and the Prime Minister misjudge the quality of the people. They do not need any more lectures on Victorian values from the Prime Minister. They will determine their own values, and those values increasingly will be the values of a society which wants to end the divisions within it, and which is ashamed of the rise in unemployment, of what is happening in some of our decaying inner cities, of the poor quality and standards in many parts of the Health Service and social services, and of the inability to look after people who are less able to look after themselves.
    I believe that those people are prepared, if properly asked by a sound and sensible Government, to hold back a little. I do not think that they are looking for an improvement in their own standard of living through a reduction in the standard rate of tax at the moment. They are conscious of the disincentive effect of the present tax system, which hits hard those on low wages. They are conscious of the fact that the tax and benefits system distorts incentive in the lower scale of incomes and in many ways is riddled with anomalies. They look to the Government to do something about the tax and benefits structure. They genuinely thought that a serious review was under way. They are appalled that the Government have ducked out of the problem of integrating the tax and benefits structure.
    Of course, it is not easy for an Opposition party to produce proposals for integrating the tax and benefits structure, but we shall continue to examine the issue and bring forward proposals because we believe that it offers the key to dealing with poverty and to adding to this country's prosperity. It is an inefficient, arbitrary and unfair system. This country is far too divided. I believe that many people want a different style, a different type of government. After the next election, they will get it.
    5.31 pm
    Mr. Edward Heath: I am sure that all of us who were present when my hon. Friend the Member for Stamford and Spalding (Sir K. Lewis) made his dramatic intervention were interested to hear the good news that the Prime Minister has announced that there is not to be an early election and that she is determined to complete her full term. All that I can say is that if he had brought the news earlier in the afternoon, the debate would have taken a different course. It would have given the Chancellor the opportunity of enlightening us as to how he sees the world economic situation rather than exchanging reminiscences with the Opposition on what things were like in 1979. It would have given the Opposition the opportunity of examining the autumn statement on its merits instead of referring to some other idiocies in their policy declarations. It would have given the right hon. Member for Plymouth, Devonport (Dr. Owen) the opportunity of addressing the long-term point of view economically rather than fighting an election that he thinks may come before Christmas, or certainly by Easter.
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    But it was not to be. We have had a debate that has been largely an exchange of pleasantries about what has been said in the past and what has happened at party conferences. There was a time in the House when nobody on either side ever mentioned party conferences, for the simple reason that we all knew that they were completely irrelevant. Now our debates are taken up entirely with quotations of one sort or another as to what was said by somebody or other at some party conference somewhere or other.
    I should like to start by looking at the Chancellor's autumn statement in the light of the fact that now we shall probably not have a general election for 18 months. Of course I am delighted that unemployment has fallen. The Chancellor himself has said that it has fallen by the largest amount for 13 years. From 1986 that brings us back to 1973. That is a very interesting statement by the Chancellor. Perhaps that may change the tone of his future remarks about what happened in 1973 as he is so proud of what is happening 13 years later in 1986.
    The Chancellor remarked that for the Opposition to talk about a boom and at the same time to say that the economy is running down is not tenable. The tragedy of this country is that part of it is suffering from a boom and the rest is running down. One can talk to innumerable employers in the south who say that they have jobs but cannot get the skilled personnel. They cannot get the right people to fill the jobs. One can talk to innumerable employers in Scotland, the north and Wales who say that they do not have the jobs, and are losing the jobs. Morale is becoming lower. Those two things are compatible, and they are the tragedy of this country today. It has happened in the past, but today it is happening to a deeper extent than ever before.
    When one looks at the basic solutions, it is difficult to tell those in the north that they just have to come down to the south, particularly those who followed our policy of buying their own homes. In the present economic conditions, there is nobody to whom they can sell their home or hand over their mortgage. We watched with interest a television programme the other night in which six enterprising young people from Yorkshire drove down on Mondays, stayed in a hotel and went back after lunch on Fridays. They are enterprising, but how many young people in the north, Scotland or Wales can travel down in their own coach to London, stay in a hotel and go back again on Friday after lunch? Those are the hard facts. It is that aspect of long-term unemployment with which we have to deal.
    I welcome the expansion in expenditure that the Chancellor announced in the autumn statement. Some of us have urged that for a long time. I hope that, now that he has done it, the derision aimed at others who wanted an expansion of expenditure will cease. Before, if one wanted that expansion, the easy phrase to use was, "You are throwing good money after bad." On that basis, whatever the Government decided was good, good money and good investment. If anybody suggested another billion, however, that was throwing good money after bad. Let us get away from all that and consider what is possible, on the merits of the economic situation.
    I believe that the Chancellor is able to do what he proposes. It will not have as much effect as many of us would like but it is welcome that he should have decided to do it. In the Budget, the Chancellor will also have to decide what else he shall do if he has the resources to do

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    it. I notice that he was cautious in answering a question. He said that if he spent £1 on extending resources for one of the services, he could not use it for taxation. That is absolutely right. I accept that. But my right hon. Friend will still have to make a decision whether he should go for reducing taxation or for better expenditure on other things, particularly construction in areas of high unemployment. As I have said before, I hope that he will not go for taxation.
    There was an interesting leading article in the Herald Tribune three days ago, which discussed that matter. It said that the American experience showed that reducing taxation does not work, and doing it now does not persuade people to work harder or give them more jobs. What it has done is to increaae consumer demand at the worst possible moment. We are already facing that problem with the increase in imports. The deficit in the balance of trade will follow. So there is no need for us slavishly to try to follow what is happening in the United States.
    Another experience is relevant—the form of the new jobs. We have heard that they are largely in banking. The same is true in the United States. Excellent. I am sure that bankers are all worthy people—good fathers who look after their families. But banks look after wealth and the wealth has to be created before it goes into the banks. That is what we are in all too great a danger of overlooking at the moment.
    Mr. Gow: My right hon. Friend said that in his next Budget the Chancellor of the Exchequer ought to eschew reductions in the burden of taxation. May I remind my right hon. Friend of what he said in his election address, to the electors of Old Bexley and Sidcup:
    "a reduced burden of taxation, must be fairly distributed between our fellow citizens".
    Mr. Heath: I am greatly honoured and extraordinarily fascinated. I never realised that my hon. Friend walked around carrying my election address. Nobody has ever paid me that compliment before. I am deeply indebted to him. I stand by everything that I say. Of course any reduction in taxation must be evenly distributed. That it has not been equally distributed is one of the criticisms which is frequently brought against the Government. But that does not alter the fact that it would go into increased consumer demand, which at the moment is undesirable.
    Now let me deal with the changes that my right hon. Friend the Chancellor has made. I welcome the changes that have been made in the area of health. But I must say again, in emphasis, that it is doing enormous harm to my right hon. Friend the Chancellor and the Secretary of State and the Conservative party to have constantly thrown at us, "Look at the amount of money which is being spent," when we know the inadequacies in our constituencies.
    Mr. William Cash: Nonsense. That is not true in my constituency.
    Mr. Heath: Indeed, that is the case in my constituency. Perhaps I may be allowed to know about my own constituency, if nothing else.
    Mr. Cash: Will my right hon. Friend give way?
    Mr. Heath: No, not for the moment. I want to describe what is happening.
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    Queen Mary's is a modern hospital, only 10 years old, which has proven efficiency greater than that of almost any other hospital in the country. Yet it is not being allowed to look after my constituents for the simple reason that it has had to close wards, it does not have enough people to look after the maternity ward and it does not have the staff to allow it to be used fully. It makes no sense on the formula operated—invented by the Labour party but continued by us—to say that we are building new hospitals somewhere else and not to use the new hospitals that we have.
    I have two specific cases—
    Mr. Cash: Will my right hon. Friend give way?
    Mr. Heath: No, I am going to quote the cases, because my hon. Friend wants them to be quoted.
    The first is from the chairman of the West Lambeth health authority. Why does he write to me? Because I wrote to St. Thomas's saying, "I understand that you cannot look after my constituents because you are taking in people from the north." What sense does that make? I get a letter back saying, "Yes, you are quite correct." South Lincolnshire district is paying for patients to go to St. Thomas's and keeping out my constituents. The chairman of the health authority says, "Without it, it would not be possible to fund a number of beds currently allocated to the orthopaedic department and closures would then result." It makes no sense for my constituents not to be looked after and for honourable people from south Lincolnshire to be brought down here.
    The second case, which I had only a week ago, is that of a lady who badly needs an operation on her foot, which is extremely painful. She went to the hospital and was told that it would take at least 18 months and perhaps longer before she could have the operation. She was told that if she would like to go outside the Health Service and pay for the operation she could have it in a week. That is unsatisfactory. However, as that lady has joint nationality — British and German — she went to Germany, and there, on the Health Service, had the operation within three days. Of course, the money has to be refunded to the German system.
    That is why I say that to talk of more and more money without dealing with the problems of the existing hospitals makes no sense at all. I hope that my right hon. Friend the Chancellor, if he has any influence over my right hon. Friend the Secretary of State, as he provides the money, will ensure that at least where we have modern hospitals they can function fully before we start spending on other things.
    Mr. Cash: My right hon. Friend of course knows his constituency. I was not suggesting for a moment that he would not be able to give us an example of what happens there. But with regard to my constituency, I take exception to what he said, because it is not applicable in that case. Moreover, I do not believe that it is generally applicable, which is the real point that he was making.
    Mr. Heath: I accept that what I say does not apply to my hon. Friend's constituency, but he can go to a large number of constituencies in London and find that exactly the same thing occurs. He can go next door to me in Bromley, a rich constituency, but the same situation exists there.
    Mr. Harris: As a rule.
    Mr. Heath: Yes. That is why I say that the system must be changed. It is only creating immense trouble for us, looking at it from a purely party point of view, if my right hon. Friends the Chancellor and the Secretary of State go on with that attitude about their expenditure.
    Let me deal now with education. Whatever system we have tried in the past, we have never met the need for skilled occupational training in Britain. The present system is not meeting it. To go on adding little bits of training under one system or another will not solve the problem. I agree with the right hon. Member for Devonport that we can have no future unless we get on top of the problem of occupational training.
    It is not worth putting 1 per cent. on employers. We were brought up on the system that the large firms trained more people than they needed and those whom they did not want went to the smaller firms. That worked through the 19th century and the first part of this century, but it has not worked since the second world war. We have tried various training schemes. Some were successful and some were not. We must face up to the fact that Britain's educational system—the state system—must look after the skill training for the workers who will be required in Britain. The expenditure must be worked out as part of our educational expenditure. Of that I am convinced. I shall say a word about general expenditure later. For education, skill training is more important.
    Now let me deal with housing. Housing is the key to labour mobility. It always has been. At the moment, housing is in more of a rut than ever before. Of course it is right to encourage people to have private houses, but there are some who will always require local authority housing. That is where the Government are not providing the answer to labour mobility, on which they rightly put emphasis.
    Let me now come to some rather wider questions. The world economy, on which my right hon. Friend the Chancellor really had nothing to say today, is important from the point of view of the long-term view and what has been said today. One must accept, first, that the American Administration cannot go on with their present position, with an enormous budget deficit and an enormous trade deficit. They will have to face up to that. With a Democrat-controlled Congress, they may well he made to do so. That Congress may force the Administration, against their will, to become protectionist. That is bound to affect our trading position in the world.
    The second factor is that in 1985, for the first time, the flow of capital and cash out of the developed countries into the developing ones was reversed. In 1985 and 1986, the flow has been from the developing countries into the developed countries. Last year, it is estimated, it was £22 million. This year it will be much greater. That means that our trade with the developing countries has been affected and will be affected even more year by year unless that is rectified. The answer is for Her Majesty's Government to take the lead internationally to change the flow back again. It can be done through international organisations. It can be done by Governments and it is not inflationary. Therefore, I urge the Government to recognise that that is one of the major reasons why world trade is not recovering in the way in which we want it to do. It is an important factor in the situation.
    The Americans, too, are suffering—have suffered in the north, but are now suffering elsewhere— from the
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    undermining of their industrial base. The present Administration are creating new jobs, but they are service occupations. They are not productive of wealth.
    Three weeks ago, a report came out in California—I was there at the time—showing that California, always so far looked on as the epitome of modern America because everything was moving there, is now losing its industrial base. Therefore, the United States will find itself more and more in an exposed position from the point of view of producing its own requirements or importing them. That is a bad situation for the United States and it will not help us unless we are competitive in the outside world.
    Now I come to consider the situation in Japan. There, we find that inflation is a minus figure — if one can determine inflation as a minus—minus 0·2 per cent. But its unemployment is down to 2·9 per cent. It has a trade surplus of $80 billion a year, but, to counter that, its capital investment overseas is to a small extent one or other side of the $80 billion. Therefore, to blame the Japan trade surplus for all the troubles in the world makes no sense. Japan is investing the proceeds of the surplus elsewhere in the world. There is no solution in blaming the Japanese and by being protectionist against Japan.
    The Japanese have ingenuity and the entrepreneurial spirit and they are a great success. We should remember that just over 40 years ago the first atom bombs were dropped on Japan and it was defeated in war. Only 20 years ago it was the largest borrower from the World Bank for Development. Japan is now the largest contributor to the World Bank for Development. It announced a fortnight ago that its per capita income is greater than that of the United States. That is the change which has come about. Japan has seen rapid growth and it is surrounded by countries which have even higher rates of growth. That we must recognise.
    Britain may be well towards the bottom of the list in Europe, but there are no European countries within range of the Japanese performance. The best European country in these terms is West Germany, and it is not within range. The same can be said of Switzerland and Sweden. The United States will be affected in exactly the same way. There is only one answer for us overall, and that is to deal with the European Community.
    We are faced with the question of joining the European monetary system. When the issue of EMS was raised, the Leader of the Opposition laughed his head off. I did not understand why he reacted in that way. He was aided and abetted by the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley), who opened the debate on behalf of the Opposition. The Labour party changed its policy after the 1983 election and said that Britain would remain a member of the Community. If we remain a member of the Community, we should be a full member, and that means being a full member of the EMS.
    We are told that everyone in a responsible position, including the Chancellor of the Exchequer, the Governor of the Bank of England, the leaders of the Confederation of British Industry and the Institute of Directors and members of the Cabinet, wants to join the EMS. The exception is the Prime Minister, who is preventing the country from doing so. To say the least, that is an interesting constitutional position. It seems that the Prime Minister alone can prevent our national interests being pursued in Europe. We are being given no explanation of why this should be so. Instead, we were told yesterday that

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    our joining the EMS will happen after the next general election. We know now that the election is a long way away. Why do we have to wait before joining the EMS?
    The right hon. Member for Sparkbrook said that we must not use the EMS as a bolthole. I am not suggesting that we should. The fact is that sterling is 1.42 to the dollar, and much lower than it was against the mark. We should be able to hold this position provided that we are not subject to speculation. If we are, and we are a member of the EMS, we shall be supported. The speculators would know that and would not try it. That has always been the lesson of support.
    Mr. Nellist: Will the right hon. Gentleman give way?
    Mr. Heath: No, I will not. I am sorry.
    The Prime Minister is reported as saying in an interview, a report of which appears in today's edition of the Financial Times, that everyone knows that the market is 95 per cent. speculation and only 5 per cent. trade. What an astonishing admission for someone who believes that the market is the solution to all our problems. If the market is as my right hon. Friend suggests, there is a situation which cannot continue.
    The market is tied up with another factor which is basic to our future, which is whether we take a short-term or long-term view. We are taking a shorter and shorter view — so they are in the United States—of the economy, industry, monetary affairs and all aspects of economic life. It is now no longer than a three-month view. If a firm's three months' results are not good, it is thought that the answer is, "Away with the management. Change the management and change everything else and see what the three months' results are like then." That is the explanation of what is going on in the United States, where there has been an incredible number of management changes, mergers and amalgamations. This is quite apart from the "benefits" of insider dealing.
    A short-term view is being taken, and this is one of the disadvantages of the British banking system. I hear about this in my constituency. I hear it from business men who have projects and are unable to get anyone to support them. They are asked what they will produce in the first three months and, of course, they cannot answer that question. In the Japanese economy there is a 10-year lead time on many projects that involve up-to-date technology. The Japanese take a long-term view. Japanese bankers take a long-term view because that is the view that is taken by their Government, and because all parties work together. That is consensus.
    Until the Treasury takes a long-term view of the economy and imposes it by example on the rest of the financial community, we shall not be able to solve our industrial problems. That applies also to the Government's interest in nationalised concerns. A longer-term view must be taken. It must be recognised that we cannot turn over a firm or industry overnight. Time is necessary, especially where capital investment has been lacking for so long. How right we were to fight General Motors' proposed takeover of Austin-Rover. We were absolutely right to do so, and that has been proved to the hilt. General Motors put no investment into its plants in the south and it is now closing seven plants across the United States simultaneously. It wanted to take over Austin-Rover and Leyland Trucks so that it could use
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    their products if they were found to be better. If it had not come to that view, it would have closed the whole lot down. That shows that we were right to prevent the takeover of British firms by a great American concern.
    Mr. John Carlisle rose—
    Mr. Heath: As America gets into more and more difficulties with its economy, so we shall see more of its great firms following the course of General Motors.
    Mr. John Carlisle: I remind my right hon. Friend that General Motors has made substantial investment in and around my constituency. The week after next, the Minister of State, Department of Trade and Industry is opening a new paint plant, which represents an investment of about £80 million over the past 12 months. I think that my right hon. Friend's remarks about General Motors and his attitude to GM and the BL merger is most unfair, and has resulted in the loss of about 1,400 jobs in and around the Luton area.
    Mr. Heath: I was talking about investment in trucks. If I am wrong, I shall withdraw, but it was said at the time—this has never been denied—that heavy investment to produce new truck models would not take place. In this context I am talking about Luton and Bedford. We were told that investment was one of the reasons why we should allow the takeover to take place. It is said that General Motors would look after the two systems together.
    In dealing with the future of industry and Europe, I wish to deal with support for technology. It was stated that the aim of the Milan summit was
    "to strengthen the scientific and technological base of European industry and encourage it to be more competitive at international level."
    That is a firm undertaking by our Prime Minister. We are now in the chair in Europe, and what are we doing? We are trying to prevent the Community spending more on the next five-year programme than it spent on the previous one instead of trying to allow the Community to make further progress. We are seeking to limit what it shall do. It seems that we are dealing only with words. We put words into a communiqué, but when it comes to practice and to implementing them, we do not support those words. That is why Europe is falling further and further behind the Pacific.
    European countries are not operating together. There is enormous duplication in all technology in European firms. During our presidency we should have taken the lead in ensuring that resources are made available, but we have not done so. The final meeting is still to come, and I hope that my right hon. Friend the Chancellor of the Exchequer will change his position and that of our representative and allow the necessary resources to be made available. If that is not done, we shall never make progress in Europe.
    We are more than two thirds of the way through our presidency and what have we achieved. The answer is nothing. Can anyone point to anything in the economic sphere where we have achieved anything? The answer is nothing. Not one single thing has been achieved.
    Mr. Cash rose—
    Mr. Heath: We have said that we want improvement and that we want a completely free market by 1992. We have said also that we want to compete with the rest of the world, but we are doing nothing about it. How can we expect the rest of the Community to co-operate with us

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    when we give no lead and when we do not join the EMS? It is not human to expect them to co-operate with us. Those are the great issues.
    Finally, I wish to mention arms talks and expenditure on arms. As I have said, neither east nor west can afford the present expenditure. Therefore, there must be a drive to reduce armaments. Every time I hear the phrase, "with proper supervision", I know that nothing will happen. It is inevitably the excuse for not reaching agreement. We had all this back in 1960, 1961 and 1962. Mr. Macmillan, as he then was, took risks on supervision and coverage. One will always take a risk on that, but the risk is worth taking, provided that it can be defined, as we could then. The risk of not knowing that atom bomb testing is going on has been removed by modern technology.
    It is essential that the summit gets down to the business of arms reductions. However, I have never accepted the zero-zero formula because it exposes us entirely to nuclear weapons on the eastern side and, what is more, will require even greater expenditure on conventional forces in any attempt to try to equal the east. That is where the argument of Labour Members collapses, because the extent of the expenditure required in those circumstances would be enormous. But we cannot accept the position as it is after Reykjavik.
    On Iran, we as a nation and a Government must say frankly that this was a very discreditable operation. There is no point in saying all the time that the President was right in doing this and right in doing that. In fact, it was hypocrisy to tell the rest of us to counter terrorism and not to make arrangements with terrorists in any circumstances when, for the past 18 months, the President has been doing that in Iran. It is said that it was done to help the moderates in Iran where are they? There are no moderates in Iran. If one wishes to help them, one helps them in other ways in Paris, preferably not with tanks or weapons. That was a completely bogus story and it is unjustifiable for the Government to connive at it or accept that it has any validity. If we are to maintain credibility among our colleagues in Europe, above all, and elsewhere, it is much better for us to acknowledge the real position.
    "Therefore, I hope that we can get down to the basic business of controlling and reducing armaments and reducing the burden of expenditure. The strategic defence initiative is not justified. It means enormous expenditure and, comparatively, we are getting very few contracts out of it. It is completely unrealistic to say that it will go up only to the feasibility stage, as that takes no account of the power of the military in the United States. We have seen their operations before. They get their own way. Once the feasibility stage is reached, who can stop them from saying, "Now we shall put it into operation. Break the anti-ballistic missile agreement and put this into operation."? That is unlikely to happen because, after this Administration, the entire thing will be abandoned. But we must be aware of the problems of SDI and how it affects Europe. It would unbalance the entire question of deterrence. If it was fully implemented, it would leave Europe entirely under the spell of the Soviet Union. Both those effects would be absolutely undesirable.
    I hope that, in this economic debate, the Chancellor will take account of those world forces which are not acting altogether to our advantage — the playback in developing countries, the United States going protectionist and the supreme rise in the Pacific basin countries of Japan, South Korea, Hong Kong and Taiwan. That is
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    where the life is today. They are looking to the future, and they know it. They say that Europe has a great civilisation and has contributed much of its time to culture, art and music. But that is the past. They are not interested in our past, they are interested in their future. We must create in our young people the spirit of the future. That means that we must give them hope and opportunity and show them how we will deal with those immense problems, especially the problem of unemployment.
    6.4 pm
    Mr. James Callaghan: It would be embarrassing for the right hon. Member for Old Bexley and Sidcup (Mr. Heath) if I said that Labour Members agreed with much of what he said, were it not for the fact that, on this occasion, the right hon. Gentleman's remarks also found an answering echo among many Conservative Back-Bench Members who, by their attention, silence and failure to heckle him—as they have done in the past — seemed to show some acquiescence with his remarks. There is a growing apprehension among Conservative Members that much of what the right hon. Gentleman said has a serious stratum of truth.
    This afternoon, as always, we listened to the Chancellor of the Exchequer with great respect. He is a clever man. We know it, and he knows it. He knows what he is doing. But, listening to his speech this afternoon— admittedly before the hon. Member for Stamford and Spalding (Sir K. Lewis) brought the news from Aix to Ghent or from the tape to the Chamber — I thought that he should have left that sort of speech to the Chancellor of the Duchy of Lancaster, who does it so much better. Even with the beetle-browed cynicism which the right hon. Gentleman assumes, he cannot emulate the Chancellor of the Duchy of Lancaster in the exaggeration and stupidity with which he talks. I beg the right hon. Gentleman to act as a Chancellor of the Exchequer, not as he did this afternoon.
    In recent weeks, the right hon. Gentleman has failed to act as a Chancellor. He has been swept aside by electoral considerations. Of course, I am in favour of what he has done to increase public expenditure, but it is at least cynical to say that what he has done now could and should have been done much earlier and is now being done purely for electoral reasons. It reminded me of an old friend who had made some money and whose motto was, "Live rich, die poor." He said that the trouble is that his wife wakes him up in the middle of the night, digs him in the ribs and says, "Are you sure you have got your timing right?" When the right hon. Gentleman heard the news brought by the hon. Member for Stamford and Spalding, he must have been apprehensive and wondered whether he had got his timing right for the next election.
    I must not be too harsh, because the right hon. Gentleman has recently been paying me handsome compliments, although he does not avow them. For some time, he has been saying that inflation is at its lowest for 20 years. He is quite right. Under a Labour Government, it was 2.6 per cent., and I remind the House that I was Chancellor of the Exchequer then. I hope that the right hon. Gentleman will continue to repeat that, but he might add another relevant statistic when discussing those matters. I promise that I shall not weary the House with all the statistics that have been bandied about this afternoon. When the Labour Government left office in 1979, the rate of inflation was lower than when Labour

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    took over from the Conservative Government in 1974. I congratulate the Chancellor on reducing inflation even further—some of the things the Government have done are good—but their achievements do not match up to the magnitude of their task or, indeed, of their promises.
    Nevertheless, it is true that the right hon. Gentleman has had the good advantage and good luck—he is right to say that Chancellor should have some good luck—of a fall in the cost of raw materials and produce during the past 12 months. That is a once-for-all gain; he will not get it again. As he knows, those prices are beginning to increase. Nevertheless, inflation is down and we must try to keep it down to the present level. I support the Chancellor in that, and I am glad that he has managed to achieve it. But I hope that he will recall that he was not alone in reducing inflation. The Labour Government did their share, too.
    As the right hon. Member for Plymouth, Devonport (Dr. Owen) said, for the Chancellor history seems to start in 1982. Nothing that happened before 1982 has any special relevance. It reminds me of the photographs published from time to time in the Soviet press in which the figures of Mr. Trotsky or Mr. Molotov or whoever it may be has been painted out. We shall find that in future photographs of the Conservative Cabinet the miserable figure of the Foreign Secretary when he was Chancellor of the Exchequer will have disappeared, because he will have been blotted out of all the calculations.
    We intend to go on reminding the Chancellor that the history of the Governnent started in 1979 and not in 1982. He should be a little more accurate in using some of his selective statistics. For example, the economic progress report is prepared not only with his authority but, I am told, under his hand. It would be a little more accurate and fair if the statistics in that started at 1979 rather than 1982. As he knows, all the figures on the back of that document and all the tables of the day start at 1982. The Government want to blot out the memory of the earlier years. I do not blame them, but the Chancellor should not be astonished when we remind him that the Government's term of office started in 1979.
    I agree with the burden of the speech by the right hon. Member for Old Bexley and Sidcup. The Chancellor spoke about manufacturing output declining under a Labour Government. Yes, it did decline, but does he not remember that he was elected to reverse that trend? Instead manufacturing industry has continued to decline, and today we have a smaller manufacturing base than we had when the Labour Government left office. The indictment of the Government is not that they have had only minor successes, or in the case of inflation a substantial success and in productivity a good success. Measured against the magnitude of the task that had to be done—this applies to every hon. Member in the House—the Government have failed, and no one, if he is honest, can pretend otherwise. We have failed as a nation, and Government policies have failed to reverse the long decline in British productivity, standards and capacity, and in our position relative to the rest of the world. Does the Chancellor deny that?
    Only recently we were told that Italy has surpassed us in GNP per head. The steady decline that we have seen for years will continue. Perhaps it will be put off now, but I assume that over the next 12 months we shall see a large
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    exchange of statistics and comparisons. They will not remove the fatal situation in which the Government exist. For the sake of the country, and whether or not it affects their electoral chances, the Government must admit that. The country and the Government have not reversed the decline that they were elected to reverse and which they said they could reverse.
    This is almost certainly the last debate on the reply in which I shall have the honour to address the House. That decline is a problem that the Chancellor in his electoral address today failed to meet and discuss, yet it is the only problem that matters. I shall cut short what I have to say because I should have liked to say much of what the right hon. Member for Old Bexley and Sidcup said about unemployment and about other matters. Whichever party wins power, what problems will it face? There will be the one which has been spoken about many times, the unacceptable level of unemployment. Whether the Conservative party wins or loses the election on unemployment, it is intolerable that a civilised society should allow 3 million people to be out of work for year after year. We should make the necessary changes to reduce the level of unemployment.
    The difference between my party and the Government party is that the Government seem to assume that things can go on at that level. My party seems to be putting forward some remedies. Some of them will work, but I daresay that others of them will fail—that is the habit and fate of all Governments. However, I would sooner vote for a party that will try to make an effort to reduce the level of unemployment by implementing drastic and immediate plans than for a party that allows unemployment to continue on the basis of the complacency expressed by Conservative Members.
    Unemployment is the first problem that the next Government will face. The second problem is that there will be a decline in oil output with all that that entails. Thirdly, as the Chancellor knows, there will be a serious deficit on our financial accounts with overseas countries. We shall be making a loss and he knows that that cannot continue and that the next Government, from whichever side it comes, will have to handle that situation. Fourthly, the new Government will start out with the knowledge that our manufacturing industry has a smaller base than when this Government came to power seven years ago. Fifthly, inflation will be increasing. That is not much of an inheritance from a Conservative Government of seven years who when elected said they would reverse all the tendencies of the previous years.
    We are losing ground against the rest of the world. I have not been here for the whole of this debate, but I have read the speeches. They were interesting and yesterday's debate was interesting. What struck me was the thread from all parts of the House expressed in different ways and with a threefold basis. First, there was the plea: what do we do about certain long-established industries that are in difficulties or seem likely to be in difficulties? Secondly, several comparisons with Japan were made yesterday by hon. Members and some were made today by the right hon. Member for Old Bexley and Sidcup. Thirdly, there has been a call for more training and for higher standards of management.
    Those are certainly the three main topics that I take from the debate over the last five or six days and I should like to speak about each. Undoubtedly, we are living in a period of great industrial change. Some people talk about

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    some of our older established industries almost with contempt, calling them the smokestack industries. The smokestacks may go, but there is great value in maintaining some of those industries, because they are what I call the core industries.
    Many companies are divesting themselves of things which cannot make a profit and asking themselves what is the core of their industry and what must be kept. There are certain industries that we must maintain, and because no one measure applies to them all, we must take different measures to ensure their maintenance. I should like to see the Government carry out a study and create a coherent list of basic industries which they believe should be encouraged and protected—with a small "p"—in one way or another to enable them to survive.
    One such industry is shipping, but I shall not go over the arguments that I have advanced so many times in the House about the vital importance of shipping and shipbuilding. The others are coal and other energy resources. I could take the House through a debate about the development of Margam in south Wales. That is a coal industry development that is being prevented. Why is that being prevented, because it is admitted by British Coal that there is a good case for developing the coal industry in Margam? It is held up because coal is priced in dollars and because of that and the exchange value, British Coal cannot make a short-term profit from the development of Margam. That is the kind of wrong approach about which the right hon. Member for Old Bexley and Sidcup spoke and which we cannot afford.
    There are other industries for which measures are required, such as the railways, aircraft and agriculture. We are entering a new industrial era and it would be sensible for the Government to select a certain number of industries which they intend shall remain. That is what some other countries do and nobody can claim that our record is so perfect that we can afford to ignore that.
    Mr. Robert Jackson: The right hon. Gentleman is making a strong and positive speech about energy resources. Will he give us his view about the future of the nuclear industry?
    Mr. Callaghan: I think the hon. Gentleman wants to get me into trouble with my party. I do not want to follow the line that he has suggested. All energy sources must be developed, hut I was speaking especially about the coal industry. At the moment our industrial structure is like a pyramid with a small group of managers at the top, a broader band of engineers at the centre and a large number of production workers at the base. That is not the industry of the future. In most of the advanced industries and companies in Japan, the pyramid is becoming more diamond-shaped. There is the same small group of managers at the top but there is a much broader band of engineers in the middle. That then tapers off, with even fewer production workers.
    If we attempted to follow that course, it would have profound social consequences. The Japanese will undoubtedly capture even more markets. My hon. Friend the Member for Wolverhampton, North-East (Mrs. Short) said yesterday that Japan is training four times as many engineers per head of population as Britain is today. In some Japanese factories—admittedly, in only a handful —I understand that today there are three times as many engineers as production workers, and it will have profound social consequences.
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    That is a source of very great pessimism, but it could also be a source of a very great hope. The new Japanese system of flexible, automated mechanism means that, instead of having to choose large-scale mass production, short runs are possible which enable customer demand to be met very much more easily than in Britain. 'This country is not very good at mass production hut we are good at stimulating — and the Government have helped to stimulate it — small manufacturing production. That provides a message of hope for this country, provided that we can adapt quickly enough and copy what is being done in Japan. We should not be too proud to take lessons from Japan. It has found the secret of success. If new industrial developments enable us to provide satisfaction for individual customers, the prospects for this country will be very much better than they have been until now.
    The training of managers, and consequently their competence and knowledge, is not sufficiently high. Reference has been made to the number of graduates who are working in industry, compared with the United States. We are not doing sufficient to attract graduates into industry. Although the Government say that they are handling this problem, their efforts are not commensurate with the size of the problem. The Government are doing a little, but they are not tackling the problem sufficiently fast. Furthermore, our technically literate work force is insufficient for our needs.
    I agree about the need for Britain to associate itself more closely with European developments. I have two proposals to make, which hon. Members may think represent one step forward and one step hack. I shall sum them up in a sentence; it is not often that a good policy can be summed up in one sentence. We should repatriate the common agricultural policy and join the European monetary system. The CAP has become a hindrance to European development, and it is high time that it went. I am told that it would be difficult to unravel, in which case we ought to set ourselves a target. We should say that the CAP must be unravelled within the space of, say, four years, that we should reduce by 25 per cent. a year the amount that is spent on the CAP by each country and that the 25 per cent. reduction must be made up, if at all, by individual national Governments, as they think fit, to meet their agricultural requirements.
    It was ridiculous that two months ago when lambs were sent to market they should have drawn £20 each from the market when they were sold and £14 in subsidy. Nobody can defend such a system. The only alternative is to repatriate the CAP, despite all the difficulties that are involved, and to provide national Governments with the responsibility, because so much that is connected with agriculture has a social and strategic impact. Initially, this great amorphous mass seemed to he the only common bond that united Europe, but the European Community has grown beyond that point now. It could afford to get rid of this weakness that is dragging it back and to move ahead in other directions.
    Some reasons have already been advanced for joining the European monetary system. I was not always in favour of joining it. There was a time when I thought—and it is still possibly true—that the value of sterling was too high. Now it is near to the point at which the Chancellor of the Exchequer could join the EMS without too many qualms. Ten days ago the Chancellor told us on television that in order to maintain the value of sterling he would increase interest rates. He has not done so yet. On that day,

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    the value of sterling against the deutschmark was 2·94. Now it is down to 2·87 or 2·86. Sterling is very near to the point at which I would not use interest rates to prop up sterling. Sterling should be allowed to fall to about 2.80. I do not expect the Chancellor to comment on that suggestion. However, at that rate he could join the EMS without any of the ill effects that have been talked about. Even the Prime Minister might see some advantage in that, if it meant that interest rates did not rise.
    The case for the EMS is that it would provide greater stability for industry and for those who are responsible for taking decisions. There cannot be a high level of investment if there is such a rapid rise and fall in the rates against which sterling has to compete. I am a great believer in greater exchange rate stability, and my long-term hope is that in some way the EMS will be expanded so as to embrace a loose relationship with the dollar and the yen. That would benefit both the industrialised and the developing areas of the world.
    If I were asked to choose between action and inaction, I should choose action. We cannot allow the present complacency to continue. It is tempting to describe this country as falling over an abyss or steering onto the rocks. It is not doing either. However, a continuation of the present policies would result in a slow, inexorable continuation of the decline that we have witnessed over so many years. The present policies have failed to remedy that decline and I see no prospect of their doing so in future.
    6.27 pm
    Sir Peter Hordern: It is a real pleasure to follow the right hon. Member for Cardiff, South and Penarth (Mr. Callaghan) and my right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath). They are both ex-Prime Ministers. I have been in the House for a number of years but for not nearly so long as the right hon. Member for Cardiff, South and Penarth and my right hon. Friend the Member for Old Bexley and Sidcup. I draw one lesson from their speeches: that political parties should be very chary about making unemployment forecasts or about giving advice on how to spur on manufacturing success. All political parties have been unable since the war to reverse the decline in manufacturing industry, and I share many of the sentiments that have been expressed by the right hon. Member for Cardiff, South and Penarth.
    The ability of any Government, on account of the rapid shifts in economic circumstances and the rapidity with which messages can be transferred from one market to another, to influence events is much less than it used to be some years ago. I know that my right hon. Friend the Chancellor of the Exchequer shares my distaste for all economic forecasts. He is quite right to do so. I wish him luck with his forecast for this year—it all looks rather good.
    It is unfair of both my right hon. Friend the Member for Old Bexley and Sidcup and the right hon. Member for Cardiff, South and Penarth to refer always to unemployment in the absolute number of figures without recognising the extraordinary social changes that have taken place over the past 10 years, and continue to take place. I refer to the rapidly growing number of people at work, a figure which has been rising since the middle of 1983. Not to take into account the rapid growth in the
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    number of school leavers and the great social change that has come about by the number of women who are anxious to work is not to do justice to a rapidly changing situation.
    The right hon. Member for Cardiff, South and Penarth was right to draw attention, as have other speakers, to the particular concern of high unemployment in the regions, because while it is true that the number of people in work has continued to rise, the problem of the regions continues to grow because this is where our declining industries are based and there is not so much capacity for women to take men's jobs.
    Whether or not the forecasts made by my right hon. Friend the Chancellor are correct, it is important to assess the balance between expenditure and revenue and check whether present policies are likely to prove effective at home and carry confidence abroad. Given our open market system, it is impossible to ignore overseas opinion without making our position very much worse. One cannot dictate to other countries and other lenders the terms upon which they should lend one money, and it is a mistake that Socialist Governments throughout the world have always made. Not least, the right hon. Member for Cardiff, South and Penarth would admit that this is the case.
    Nor can any Government be surprised at the care, one might almost say religious fervour, with which bankers regard such apparently esoteric matters as the PSBR and the money supply. They do so not because they are perverse and doctrinaire but because it is their customers' money that they are lending, which they do not wish to lose. They have a wide choice. Why, then, with all the achievements that my right hon. Friend the Chancellor can rightly claim, are interest rates so obstinately high? Our real rate of interest, allowing for the rate of inflation, is higher than that in any other industrial country.
    It is true that our inflation rate is low, but it has to be said that it is even lower in other countries. What matters —it is on this that market forecasters differ somewhat—is whether it will remain low. There is no question but that interest rates would be substantially lower if there were real confidence that inflation was permanently under control, and if it were not for the threat of a Labour Government. This adds considerable strain on both the level of interest rates and the uncertainty that exists in markets. It is impossible to ignore that. This is not the sort of test that has to be applied in West Germany, where all are agreed that the market system must be adopted. In our country, the choice is still between a form of Socialism and a market economy. This possibility of a Labour Government is very expensive in terms of interest rates and future forecasts of what that rate of inflation might mean.
    I have to confess that I felt greater confidence in my right hon. Friend the Chancellor's unreconstructed monetary stage, when he used to trumpet the virtues of M3. He did so in his capacity as Financial Secretary, but he has been rightly regarded as the author of that policy. I preferred him in that role to his new revisionist phase, preaching the virtues of M0. M0 may be a good measure of something or other but whatever the faults in M3—I accept there are some—it gives a pretty good indication of the level of demand in the economy.
    I can give a statistic. The level of new hire purchase credit—which has been extended as recently as 1981—was £7·8 billion. In 1985, it was £13·5 billion and in the first six months of this year, that figure was 50 per cent. up. The same is true of bank lending. The quantity of bank

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    lending for the first six months of this year almost equals the whole amount of 1985. There cannot be any question that there is a consumer boom in progress, and what else can one expect of the plastic card revolution and the open competition between banks, building societies and every form of financial institution?
    My right hon. Friend the Chancellor says that we have only to look at the ratio of debt to GNP to recognise that our rate is not as high as that in the United States, and I have no doubt that that is true. However, what really matters is the pace of advance of the increase in that debt, the strain that it in turn places on our resources at home, and the pressure that it brings to bear. It is bound to lead to capacity constraints at home and a continuing bonanza for our overseas suppliers, as well as, as we have seen and recognised, a considerable demand for higher wages, which has so far been met.
    It is impracticable to return to hire purchase control. I remember when the right hon. Member for Cardiff, South and Penarth was Chancellor, and had that weapon at his disposal. There was a thing called the regulator, which he could put up and down with purchase tax. We do not have that now and we rely entirely on the markets and the interest rate.
    Perhaps we should never have abandoned the monetary policy— I do not think that we should have done so. West Germany controls its monetary policy by controlling its central hank money stock and so keen is it to do so that it has announced a reduction in public expenditure and an increase in interest rates, although those rates are still low.
    Everything in our economy depends on interest rates, and they are high. Although the PSBR is not high, the contingency fund looks to me to be on the low side. I do not think that there is much margin for error. Considering the uncertainty that the prospect of the election must bring, far too much weight is borne by interest rates in our economy. One way in which this could be eased is by our joining the EMS. I was originally sceptical about our joining the EMS because I could not see any distinct advantages, at least not as long as we were pursuing a proper monetary policy. Now, it appears to me that the arguments are in favour of our joining.
    Despite what the right hon. Member for Cardiff, South and Penarth said, it seems that the choice between higher interest rates and a lower pound is illusory because, with a lower pound, and sterling sinking more, there is no alternative policy to pursue. The advantage of joining the EMS is that we shall be more closely tied to the deutschmark, and Germany follows a proper monetary policy. It would be likely to have a greater congruence with interest rates. In Germany, three-month money is at a rate of 4·7 per cent., in France at 7·5 per cent., while we have the highest short-term interest rate in Western Europe save Italy. I never thought I would see the day when the yield on Government long-dated bonds was lower in Italy than in our country.
    Another reason is the instability caused by the United States deficit, which is fed by Japanese savings. Sterling should not be left awash in the tides of currencies that are flowing between Japan and the United States and which keep us in a rather isolationist position. The currency movements and speculation should not be borne by our country outside the EMS. We should enter the EMS.
    There is no shortage of demand in our economy nor within western Europe as a whole, but there is evidence that the supply side is far too rigid. We have a long way
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    to go further to break down the barriers in Britain, for these include barriers caused by what I conceive to be a vertically organised public expenditure array Each Ministry looks at its own programme and there is scarcely any overall review of the total spending by Departments or any assessment as to whether money could be spent better in other directions. Nor, despite the marked improvements in our tax system, has there been any fundamental reform of the tax system as there has been in the United States.
    In 1961, 21·5 million people were not liable to pay the standard rate of tax. Now only 10·7 million people are not so liable. Yet the number receiving housing benefit increased to 6·7 million last year compared with 2·9 million receiving rate rebates 10 years ago. The same people who are receiving housing benefit are paying the standard rate of tax at 29 per cent.
    We need a lateral look at public expenditure, together with a thorough reform and simplification of our personal tax system. We need a substantial reduction in personal taxation, but only as part of a fundamental reform, carefully worked out and explained to the people much as it was in the United States. We may see a revenue windfall in North sea oil, for example, but without fundamental tax reform the combination of high real interest rates with low taxes is not one which it is easy or right to accept. That goes right outside any discussion whether there should he more public spending or lower taxes. There may be a good case for lower income tax in the Budget, providing the revenue is unexpectedly buoyant, but it is perverse to reduce revenue and increase interest rates at the same time.
    More to the point, how would it look in those areas where unemployment is high and a large proportion of jobs are lost, perhaps for ever, to see the engines of the consumer boom still further charged, leaving them completely untouched? It is right to emphasise the increasing number of people at work, hut we must also recognise the new social and industrial revolution which has taken place, the benefits of which are obvious in the south but which hardly exist in the north.
    I do not believe that there is not more that we can do to assist industry and business in the north, especially by renewing the inner cities and by removing employers' national insurance contributions in those areas altogether. There may be other better ways, but it is certainly riot against the tenets of the Tory party to act in that way and it never has been.
    I remind the House of a speech made many years ago by a former Tory Prime Minister, Sir Robert Peel, when he had the nerve to increase income tax. In 1842 he said:
    "You may bear in mind that this is no casual and occasional dificulty. You will hear in mind that there are indications amongst all the upper classes of society of increased comfort and enjoyment, of increased prosperity and wealth, and that concurrently with these indications there exists a mighty evil which has been growing up for the last seven years, and which you are now called upon to meet. If you have, as I believe you have, the fortitude and constancy of which you have been set the example, you will not consent with folded arms to view the annual growth of this mighty evil. You will not reconcile it to your consciences to hope for relief from diminished taxation."
    No, Sir and I do not think that we should either, in the face of the difficulties, and yet opportunities which we may seize if we will. I fancy that national unity, which we may gain by helping those who need it most, is the greatest prize of all.
    6.43 pm
    Mr. Dave Nellist: Millions of people, men and women, youth and unemployed, are looking forward to a Labour Government to deal with the enormous social consequences and problems, which the Government have exacerbated, of 4·5 million people unemployed, low wages, cuts in social services and pensions, and deteriorating housing and health services. Nothing in the Government's programme in the Queen's Speech will fundamentally alter the record of the past seven years of despair and insecurity that they have created.
    Perhaps that despair is most graphically illustrated in a short item in Today in its coverage of the Knowsley by-election. It states:
    "schoolkids aged ten wearily speaking of the pointlessness of taking exams just to increase the intellectual level of dole-queue chat."
    That 10-year-olds can be driven to such despair is an indictment of the Government's seven years of office. Perhaps that point is made even more sharply by subway graffiti in my constituency which says:
    "Vote Tory—retire at 16."
    That is the image that many young people have of the Government's effectiveness.
    It is interesting that we have heard little today and yesterday from Tory Members, with the possible exception of the more astute representatives of the bourgeoisie, such as the right hon. Members for Chesham and Amersham (Sir I. Gilmour) and for Henley (Mr. Heseltine), who at least recognise the organic crisis within the capitalist economic system. The Chancellor of the Exchequer and the Prime Minister have shown a ludicrous economic optimism. They have stated that we are in the sixth successive year of successful economic growth and have spoken about the underlying strength of the British economy.
    In reality, Britain is now a third-rate power, economically, politically and diplomatically. British manufacturing output was overtaken by Italy in the late 1970s and today it is on a par with Brazil. That analysis was made, not by some fanciful Socialist newspaper, but by the Midland bank, which can hardly be accused of Left-wing leanings.
    The Government have about as much feeling for manufacturing industry as Lucrezia Borgia had for catering. This Tory economy, presided over by the Chancellor and his right hon. and hon. Friends, is heading for deep trouble. Next year both the balance of payments and the balance of trade will be in huge deficit. I hear talk that that will put severe pressure on sterling. Certainly, if there is any further fall in the value of the pound, prices will increase and pressure will be exerted for higher interest rates. It seems that next year we shall return to "stagflation" — a word invented by the financial newspapers in the 1970s — which means stagnant production, rising unemployment and rising inflation. Yet all we get from the Chancellor are fairyland economics and talk about the underlying strength of the British economy.
    In the five years since the last world recession in 1981 British capitalism has not recovered the levels of manufacturing output of 1979. They are now 10 per cent. below the levels of 1973. There is probably less being produced in 1986 than during the three-day week in 1974.
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    Unemployment is three times as high as in 1979 and employment in manufacturing industry has been cut by the loss of 2 million jobs.
    What has that meant to Coventry? It has meant the complete disappearance of Alfred Herbert—apparently the largest, most effective manufacturer of machine tools in Europe—the disappearance of Triumph with its 8,000 jobs, drastic slimmingdown in Leyland, Alvis, Talbot, GEC and Rolls-Royce. Only the £41,000 million of oil revenue together with the huge trade and budget deficits of the United States of America have partially masked the condition of our national accounts during the past five years.
    Those bubbles are bursting. The first one, the oil bubble, has already started to burst and the American economy, the second bubble, has not many months to go, as the right hon. Member for Old Bexley and Sidcup (Mr. Heath) recognised. At least he retains some elementary economic understanding, even if nowadays he tries to move away from his record of 1970–74 and to cloak his iron fist of those days with the velvet glove of his words today.
    The only good news in the economy we are offered is that the rate of profits has risen and is the highest for the past 10 years. Setting aside the human misery caused by the mass unemployment that has largely made that possible, what is the function of profits in a capitalist economy? Profits are to be reinvested and used to modernise and re-equip factories and industry so that more goods can be produced more quickly and more cheaply.
    A recent National Economic Development Office report was suppressed by the Chancellor, who has obviously been having words with the Tory party chairman on gagging. That report shows that manufacturing investment in 1985 was 17 per cent. lower than in 1979. It was even lower than in 1970.
    According to the National Westminster bank — I cannot be accused of using partisan sources for my statistics—there is now a gap of the order of £200,000 million in the level of investment that British factories would need to catch up with Japan, Germany, France and America, yet this year only £5,000 million will go towards manufacturing investment. Even on a simply quid pro quo basis, that means a 40-year gap between the level of investment that is required and what is actually taking place.
    According to the NEDO report, net investment to replace worn-out machinery has been negative since 1980, which roughly means that for every pound's worth of worn-out machinery, only 80p is put back. The only good news from the report is that last year net investment almost rose to zero, but even then was not quite sufficient to replace worn-out machinery.
    Those are the real factors that have an influence on the decision of the Tories to go for an early election. That is the real reason why the Chancellor came forward last week with his autumn statement, with its apparent £10,000 million increase in public expenditure. Given the Government's record over the last seven years of cutting expenditure, giving back £10,000 million is akin to a mugger who steals an old lady's pension book and offers to give her the bus fare home. Yet we are expected to feel a sense of charity for that £10,000 million increase.
    That pre-election spending, like this pre-election Queen's Speech, is totally inadequate to meet the social

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    needs of working people. Over the past seven to 10 years, the rising Right of the Tory party has said that manufacturing does not matter, that we have a surplus in invisible earnings and that the City will save us. I happen to believe that the pimps and sharks of the City's square mile are not interested in anything but a fast buck—or 15,000 fast bucks in the case of Mr. Collier of Morgan Grenfell. 'I'he casino economy in the City will not be the saviour of British capitalism. It will be one of its pall bearers and one of the contributors to the heightening of the internal contradictions within the capitalist system.
    Every day about $150,000 million change hands across the world exchanges. As actual daily world trade is worth only $7,000 million, that means that for every $1 that pays for goods, $20 change hands in currency deals and speculation that bear no relation to reality. These totally fictitious deals are conducted by brokers and jobbers who are the highest paid bookies' runners in the country. Some of them earn as much as £1 million a year—£500 an hour—for not producing anything that is useful. They are literally 20th century parasites living off the blood and sweat of working people who are the real wealth creators within the economy.
    Tonight there is news that the Financial Times index fell by 18 points this afternoon, which has wiped £4,000 million off the value of the Stock Exchange. But that is not real wealth — it is the paper value of the companies belonging to the stock exchange, and it is high-class gambling.
    Some hon. Members may say that the Stock Exchange raises money for investment, yet only 6 per cent. of its turnover has anything to do with industrial and commercial investment in this country. Earlier the Chancellor had the gall to say that workers overpay themselves, and called for the reductions in unit wage costs. That is rich coming from the right hon. Gentleman. He is on £1,000 a week and does not have to worry about whether he can afford to feed and clothe his family.
    In fact, wages have been reduced. The West Midlands Engineering Employers Association reports that in the last 12 months, 46 per cent. of all wage deals in engineering were under 4 per cent. and that 80 per cent. were below 5 per cent. That has not stemmed the rising tide of industrial unemployment in that area. In Coventry alone, 4,500 engineering and manufacturing jobs have been lost during the same 12-month period.
    The CBI says that there should be a zero increase in wages, but it does not apply the same rules and regulations to its own members. The 40 members of the president's council of the CBI awarded themselves an average 19 per cent. wage rise last year, and one of them had the gall to give himself a 207 per cent. wage rise. Yet they still ask workers to shoulder the burden of the crisis in the economic system. When I put that point to the Chancellor several hours ago, he did not even have the courtesy to try to answer it.
    Why do Conservative Members continue to call for lower wages? Late last night one Conservative Member talked about consumers buying goods, but how can they if they have less and less money in their pockets? Wage cuts and mass unemployment may well help particular firms to undercut competition in a particular industrial sector, but when applied across the economy as a whole such action merely reduces the market. That is one reason why overcapacity has accelerated in recent years.
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    Another reason is that British capitalism cannot sell the goods that it makes because overseas competitors can produce the same goods more quickly and more cheaply. Factories in this country on average operate at 70 per cent. to 80 per cent. capacity, and in some sectors it is 50 per cent. or lower. Employers and industrialists openly ask why they should bother to invest when they cannot even sell the goods they make at present. Instead they pour their money overseas to the cheap labour economies of South Africa, Korea, Argentina and Brazil. Since the Government lifted exchange controls six or seven years ago, £100,000 million has left this country.
    This Government do not care about manufacturing industry. They do not understand that it is the bedrock of wealth creation. Their only aim is profit, and they do not care whether or not it is fictitious, as it certainly is in relation to the casino economics of the stock exchange. This Cabinet represents finance capital. It has won the battle within the Tory party over members such as the right hon. Member for Old Bexley and Sidcup who represents manufacturing industry.
    Before the Government came to power and throughout the period of their office—rapidly hastening since 1979 — we have seen the withering of Britain's industrial base. Britain, which was once known as the "workshop of the world" is now laughingly called "the warehouse of the world", given that we are now experiencing rising import penetration in many major industrial and manufacturing sectors. The Government are responsible for turning a £3 billion surplus in manufactured trade in 1980 into a £6 billion deficit in 1985. For the first time since the days of Queen Elizabeth I, more factory-made goods are imported than are exported.
    The consequence of that sea change which has led to the devastation of manufacturing industry has been partiularly noted in Coventry over the last 12 months. There have been massive redundancies in the engineering sector. GEC has lost more than 1,000 jobs, and jobs halve also gone in Alvis and Self Changing Gears. We have seen the total collapse of Coventry Climax, and Bretts Stamping, and job losses at Massey Ferguson, Sterling Metals, and Talbot. The knock-on effect of all those redundancies means that in the last 12 months 4,500 jobs have been lost. I have mentioned only the engineering companies, and have said nothing about the service sector companies such as Storers, British Home Stores, Tesco and others, most of which are located in Coventry, South-East.
    All we get from the Government is yet another fiddle in the dole statistics. The official Department of Employment dole figure for Coventry, South-East in September this year was 7,154 or 21.7 per cent. of the working population, but an analysis carried out by the Unemployment Unit, which included those who were not counted by the Government, showed the unemployment level to be 8,345 or 25·3 per cent. More than one in four people who wish to work are denied the right to do so.
    Even based on the official rigged figures, unemployment in the four wards that I represent ranges from 15 per cent.—itself above the national average—to 39·5 per cent. The highest level of male unemployment in Coventry is in St. Michael's in Coventry, South-East, and stands at 44·7 per cent. If we add the over-60s and people on schemes, more than halt' of the men in that area are without a chance of work.
    The official figures say that 7,500 people are unemployed in Coventry, South-East. That costs the

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    Treasury £46 million a year in benefits, lost tax and lost national insurance contributions. That is equivalent to £36 a week for everybody who has a job in the constituency. Is that not insanity? We are paying people to stay at home and not produce goods that working people need.
    We have more than 1,000 houses in Coventry which are unfit for human habitation and another 14,000 which need major repairs, modernisation or renovation and yet hundreds, if not thousands, of building workers are paid to stay at home and not repair, renovate or modernise those homes. That is a clear illustration of the archaic and anarchic capitalist economic system, especially under the present Tory Government.
    Mr. David Winniek: Is my hon. Friend aware that the statistics show that, on average, 25 per cent. of people involved in the building and construction trade are unemployed and have been for some time? Is he further aware that, in my borough, which is not too far from his, no council dwellings have been built since 1979, largely as a result of Government economic policy? Is he aware that, throughout the country, there are hundreds of thousands of people who desperately need accommodation who could not possibly afford a mortgage but who are denied accommodation because of the Government's housing policies?
    Mr. Nellist: My hon. Friend is entirely right. Throughout the country, some 6 million people are living in damp houses and 400,000 building workers are unemployed. London Brick is storing enough bricks behind its Bedford factory to build a town the size of Derby. Capitalism under the Tory Government says, "Keep those things separate." Socialism and planning say, "Bring them together so that the needs of working people can be met by people who have the skills and the materials." There is, however, no hope of that happening under the present Government.
    What hope do we get in the Queen's Speech? One of the things on offer is privatisation of state assets which, we are told, will "improve economic efficiency". Privatisation is so much of a dogma for the Government and the Prime Minister that if General Galtieri had offered to buy the Falklands the Prime Minister would undoubtedly have sold them.
    The Chancellor spoke earlier of extending democracy by share issues. I have a little equation for him to work out when he gets home tonight. In a general election, some 40 million people are on the electoral register and roughly 75 per cent. vote, so 30 million people cast a vote. If you, Mr. Deputy Speaker, or I want to go out and vote in a general election, our votes are worth one in 30 million. If we want to cast our vote regarding how nationalised industries are run, our vote is worth one in 30 million. If you or I—I will not, and I doubt whether you will either, Mr. Deputy Speaker — bought the 100 minimum shares in British Gas, bearing in mind the fact that the Government will sell 4,025,000,000 of those shares, casting our vote in a general meeting of British Gas shareholders would be one vote in more than 40 million. In other words, we would have one third less influence in British Gas after privatisation than in a general election.
    Privatisation should be renamed what it really is — piratisation. It is legalised theft. It is stealing assets that are owned by people as a whole. They are being sold below
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    their real value so that, in the main, the Government's rich friends can make a killing. Last week, I took part in a lobby of the House on conductive education, when £500,000 of Government money was being asked for to set up an assessment in Britain of a Hungarian system for teaching brain-damaged children to walk.
    In Hungary, the system enables 70 per cent. of kids with Parkinson's disease, spina bifida or other forms of spinal or brain damage to walk and receive a normal state education. We were asking for £500,000 last week, but we have had stone-walling from the Department of Education and Science for the past year of asking. During that same year, the Departments responsible have spent £32 million on television, radio and press advertisements for British Gas alone. If the Financial Secretary to the Treasury sees Sid, he can tell him something from me. I have kids in Coventry who are more deserving of £500,000 of Government largesse than is Sid of the £32 million that has been spent so far on advertising his future.
    The Government are so proud of their record on privatisation that they intend to extend it to local government, which was the subject of one day's debate. They also intend to extend it to the Post Office and industrial firms such as Rolls-Royce and Unipart. I warn the Government that, on 26 November, the enormous resentment of Rolls-Royce workers and their families at that action will be felt in a lobby. That company failed in 1971 and the right hon. Member for Old Bexley and Sidcup nationalised it in 24 hours of parliamentary time. There has been hundreds of millions of pounds of public investment, the benefits of which are now to go to the rich parasites on the stock exchange.
    When privatisation goes wrong, do we hear the same Tory Members discussing the matter? Certainly not. We did not in the case of Coventry Climax, which was privatised by the Tories in 1981. Not one penny has been paid by the consortium headed by Sir Emmanuel Kaye. When the firm collapsed at the beginning of last month, the Government disclaimed all responsibility. Before privatisation in 1981, there were 3,000 jobs there; 80 per cent. of them have gone in the past five years. There is a haemorrhage of jobs and only 600 or so are left.
    Plants have closed. Only the Coventry site is left. Did the Government monitor what was happening so that they could at least say, "Look. Privatisation is working."? No. They disclaimed all responsibility. Even now that the firm has collapsed we have asked the simple question in public at the Dispatch Box and in private in the Secretary of State's conference room: "Why have the Government not monitored privatised firms'? Will they monitor privatisation in future?" "Not interested," was the right hon. Gentleman's reply. If the Government had monitored what was going on, they would have seen the asset-stripping that took place. They might well have wondered, as workers most certainly did, why all of the important drawings of the most successful Coventry Climax models suddenly disappeared two days before the receiver was called in and sent to Coventry Climax's most important competitor — Lansing Bagnall — and returned two or three days later. The workers now face uncertainty and the possibility of the company being split into three or being bought by a competitor to eliminate the competition.
    The Government still refuse to consider any realistic solution. Indeed, the only realistic solution for Coventry Climax would have been for the Government to honour the debt that they owe the workers and their families. They

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    said in 1981 that privatisation would work. It has been a conspicuous failure. As with the right hon. Member for Old Bexley and Sidcup and Rolls-Royce in 1971, the Government should renationalise Coventry Climax, compensate the workers who lost their jobs and their families and restore manning levels to the 1981 level. When I raised this issue with the Secretary of State in his conference room on 17 October, all he had to say was that "there appears to be a political gulf between us on this question."
    I sat through most of yesterday's debate and I have sat through all of today's. Among the Conservative Members who impressed me most was the right hon. Member for Henley. He was the only one who recognised, at column 481, that
    "the decline of Britain's industrial base is not measured in the lifetime of this Government or of the previous one. Britain's industrial base has been declining relatively for most of this century. If one considers the statistics that matter — the share of the world's manufactured trade which Britain enjoys — they show that relentlessly, regardless of which Government are in power and regardless of policies and economic regimes, there has been a persistent decline in our share of world trade in manufactures." —[Official Report, 18 November 1986; Vol. 105, c. 481.]
    That is most certainly true.
    In 1913, Britain had 30 per cent. of world trade. In 1950, it had 25 per cent. of world trade. In the 14 years of so-called economic boom from 1950 to 1964, it had 14·2 per cent. of world trade. In the next 20 years to 1984, it had 7·6 per cent. of world trade. That was the result of a lack of competitiveness due mainly to lack of investment in manufacturing. There was a failure to modernise and reequip.
    What has been done with the money instead? In 1979, £43 billion was invested overseas. Some £122 billion is now invested overseas. So what is the truth? Lord Kearton, in the Lords report on manufacturing industry, said:
    "It is rather like hearing the broadcast on the death of King George V: 'British industry is moving peacefully towards its close'. There are flickers of life now and again, but by and large the slow relentless decline is going on."
    What are the implications of comments such as that? The right hon. Member for Chesham and Amersham gave them last night when he said:
    "The decline in oil production and the trends in trade in manufactures will ensure, by one route or another, that we enter a nev, era of economic decline possibly combined with renewed inflation … There will he a nasty crisis in the next Parliament and the opposition parties can count themselves lucky that not they but my right hon. Friends will be dealing with it. It will be a difficult and unpleasant task."—[Official Report, 18 November 1986; Vol. 105, c. 500.]
    I have read one or two of the right hon. Gentleman's books, which have some funny passages in them, but I do not know what he thinks has been pleasant about the past seven years. He may think that the tasks facing whoever takes over will he unpleasant. I happen to have a bit of an idea of what the next five or 10 years will bring. This is why the Queen's Speech and the debate have been so unrealistic and so irrelevant to the real situation facing the British economy. In the next five or 10 years the right hon. Gentleman will see increasing protectionism in the world economy, and increasing trade wars as each state tries to export the surplus that it cannot sell on its domestic market, with everybody trying to protect their own domestic markets from invasion.
    In Britain, having abandoned investment, abandoned re-investment in factories of the profits that have been made by working people, the employers and industrialists
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    will be left with only further and further cuts in wages and conditions if they are to enhance their profit levels. To do that, they require, in the words of the chairman of the Tory party, the neutering of the trade union movement— the emasculation of the rights of working people to defend themselves against such attacks. That is why the Government have passed three anti-trade union laws in the past six years. That is why firms such as BTR have sacked 300 workers in Hangers, as has Tom Clarke the boss of Silentnight. It also accounts for the actions taken against the workers at Wapping and in the pits. I do not believe that massive unemployment and poverty can be resolved by the Chancellor's elastoplast policies for manufacturing industry, particularly given the enormous economic chasm that will open in the next 12 or 18 months. That will require a genuine and thorough transformation of society on Socialist lines. Central to that transformation will be putting the control of the economy into the hands of working people, not rich speculators, and for that, we shall need a Socialist Labour Government.
    Several Don. Members rose—
    Mr. Deputy Speaker (Sir Paul Dean): Order. I repeat Mr. Speaker's appeal for brevity. Many right hon. and hon. Members wish to speak, and unless speeches are much shorter, some hon. Members will be disappointed.
    7.11 pm
    Mr. Francis Pym: With due respect, Mr. Deputy Speaker, I do not think that Mr. Speaker made such an appeal. I may be wrong about that, but I naturally appreciate the point that you made.
    The speculation that we have suffered lately about the likelihood of an early election was certainly fanned by the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley), who led the debate for the Opposition. It was continued by the right hon. Member for Plymouth, Devonport (Dr. Owen), and my right hon. Friend the Chancellor himself, to some extent, contributed to it. If the hon. Member for Coventry, South-East (Mr. Nellist) thought that he fanned the speculation, I have to tell him that I do not think that he succeeded. It would be quite unnecessary and most unwise to hold an early election. I do not believe that my right hon. Friend the Prime Minister would take any such decision, as my right hon. Friend the Member for Stamford and Spalding (Sir K. Lewis) confirmed. It is better to assume that this Parliament will continue into 1988. Meanwhile, we must get on with the work that needs to be done.
    In recent months, the Government have taken some very welcome policy decisions.. Their self-designed straitjacket of monetarism has been abandoned. The excessive rigidities of public expenditure have been eased. The need to spend more on some programmes has been recognised, and the Government's fiscal stance is now less deflationary. The description of these sensible changes is a matter of taste or vocabulary. The point is that they have happened and they represent a welcome change.
    For a few years, education has been a source of worry to the nation. Now, a new initiative, for which some of us have been calling for some time, is being taken. Obviously, there is a long way to go and there are many problems, some of which were mentioned by the former Prime Ministers who spoke in this debate. A start has been made. That is what I welcome. It is the same story with health

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    matters and, to some extent, with housing and criminal justice. The electorate has been anxious about them, and new initiatives are now in place.
    I am one of those who would have liked to see the changes much earlier. In future, they will have to be taken much further than they have been already, but at least we have them now. Meanwhile, and throughout this Parliament, we have seen the continuing success of privatisation and the spread of ownership and capitalism, with all the benefits that they will bring to individuals. We have seen the curtailing of excessive union power and the reduction of inflation. In all these ways, and in other ways, the Government have vanquished many of the ogres of the 1970s. They have done what they were elected to do, and they certainly deserve the support of the nation. For the future, that support will depend quite heavily on how we address the problems that face our country today.
    Those problems are formidable. Whatever view we take of the gloomiest forecasts referred to in the debate, or of the analysis by the former Prime Minister, the right hon. Member for Cardiff, South (Mr. Callaghan), some of those problems, such as how to reduce unemployment and improve industrial competitiveness, are familiar ones for which solutions have not been found. Other problems are newer and have yet to emerge fully. They include coping with technological change—which is, of course, a huge social change — and healing social divisions. I find Opposition Members remarkably devoid of constructive thought on these issues. The right hon. Member for Sparkbrook made no positive contribution towards solving the problems.
    If we strip away all the arguments about the past, stop debating whether monetarism has relieved or exacerbated our problems, and stand further from the trees to look at the wood, we might see more clearly how things stand. We see a startling contrast. On the one hand, there have been five years of economic growth and, recently, a return to growth in manufacturing industry, although it has still not reached previous levels. The majority of the population have seen their living standards rise year by year, and most people are better off than ever before. On the other hand, well over 3 million are out of work. Unemployment, although marginally down in recent months—which is obviously extremely welcome — is still high and could rise again. The number of long-term unemployed is huge, and their living standards have fallen. Many exist at barely subsistence levels. Large areas of the country have experienced no growth whatever during the recent recovery. Individual responses to this situation differ vastly. We all suffer from inflation, and everyone responds to it in the same way, but unemployment provokes an unequal response. If one is amongst the 3.25 million unemployed, the rosy part of the picture is a mirage. If one is not among that number, and especially if one lives in the south-east, there is nothing to complain about.
    Looking objectively at unemployment, there are two comments to make on this overall situation. The first is that it is unacceptable, and the second is that it will not change easily or be made to change easily. Anyone who thinks that a major reduction in unemployment is just around the corner should pause to consider some of the facts. First, they should consider the regions. The regions in which unemployment is highest have not witnessed any
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    recovery — rather the reverse. Manufacturing employment is still falling. The scope for employment in new service industries barely exists.
    I have urged my right hon. Friends to take a much more regionally oriented approach to the future, and I do so again today. There will always be an imbalance between the regions. The circumstances and needs of each are different and need different treatment. The mismatch of resources between regions, especially between north and south, is huge, yet there is no policy in place to correct it. Cambridgeshire, my constituency, is at one end of the scale and is the fastest-growing county. There is, as there has been for many years, enormous pressure for development there. As a nation, we must take advantage of the opportunities and consider what the pressures imply.
    The possibility of development in Cambridgeshire is part of our prosperity in the 21st century, but to take full advantage of it effectively, we must look at development for the whole of the East Anglian region. At present, each county—Cambridgeshire, Essex, Suffolk—is looking at its development in isolation, but there needs to be regional context that fits into a national context. That is the sort of context which this Government completely resist. However, they are mistaken. If developing the possibilities for the future prosperity of the next generation matters, which it does, we must take full advantage of this.
    At the other end of the scale, in areas such as Teesside or Liverpool, there are massive unused resources, and some of them will probably not be capable of use again. But many will be, especially the people. We need a regional approach that will start to bring those huge divergencies more into balance. I am here concerned with the mobility of labour, the price of property and the availability of housing. None of them is receiving adequate—or, as far as I know, any— attention at present. It will be a long process, and I want to see a start being made on it. It would certainly contribute to bringing hope to the declining regions.
    The second fact to consider involves the implications of rising productivity. For example, British Steel now produces more steel than in 1979 with half the work force, and British Leyland now produces three times as many cars per employee as in 1979. Both of those examples show how deep-seated the British malaise has been. Such improvements in productivity are imperative for the future prosperity of the country. Without them, our industrial position will deteriorate. Yet those same improvements are bound to lead to job losses. There is no escaping that conclusion. Only growth can create job replacements.
    We must face the fact that, at least in the short term, the very steps needed to make our economy stronger will at the same time make unemployment worse. My approach to that dichotomy is based on two convictions. First, if jobs have to be lost in order for the country to prosper, those who lose them have as much right to share in the resulting prosperity as those who continue to work. Their contribution has been just as great, and from some points of view, greater. Secondly, nobody will prosper if, in a desire to be fair, we end up confusing economic and social aims. The Labour party, for all its genuine concern about unemployment — it certainly is genuine — has consistently confused those two aims, and still does so.
    The previous Labour Government introduced a national insurance surcharge when our competitiveness was already crippled by inflation. That was utterly unhelpful to our economy. The Labour party has fought

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    almost every redundancy caused by improved efficiency or new technology, and now advocates a levy on turnover — or does it? — and a national minimum wage which would take no account of economic conditions or of companies' circumstances. Its motives are honourable, but the means chosen have been quite inappropriate.
    The Labour party has pursued social objectives by methods that are detrimental to economic objectives. Increased employment and rising living standards cannot be achieved by adding to industrial costs, by rejecting new technology, or by prescribing low productivity. Consequently, we must recognise that the social and economic objectives are separate. They should be pursued separately, but equally. The principal economic objective is to assist the constant expansion of industry. The principle social objective, of course, is to ensure a free, united and harmonious nation. However, in this debate I shall not dwell on that.
    On the economic side, the main requirements are the reduction of industrial costs, the control of inflation, an increase in long-term investment, especially in new technology, and a stable political environment. I put the reduction of costs first, because competitiveness is crucial. When my right hon. Friend the Chancellor considers his Budget. I hope that he will abolish altogether employers' national insurance contributions. He made a start last year. Those insurance contributions are a social tax on industry, and bear directly on industrial costs. My right hon. Friend has abolished the surcharge, which should never have been put in place, and exactly the same arguments apply to the basic contributions.
    The most difficult area from the costs point of view involves incomes. My right hon. Friend the Chancellor of the Exchequer constantly complains about excessive pay increases, which implies that he recognises the need for some form of effective incomes control. Incidentally, that was one of the functions that monetarism was supposed to perform, hut, as we know, it has not done so. We also know that all previous incomes policies have been unsatisfactory. The absence of any policy — which is what we have today—is no better. The Government prefer no policy in that area, but that is not producing results. As a consequence, our competitiveness is deteriorating. Yet the Government are not addressing that problem.
    We should be searching hard for solutions to the incomes problem, just as we are searching hard for solutions to the rates problem. They should be widely debated by the nation. We should also be seeking to reduce interest rates and to stabilise the international value of sterling. Its present level is somewhere near right, but the enormous fluctuations of recent years have damaged our overseas trade. There is no doubt about that. Some deals facing businesses have almost been a gamble because of the uncertainties over the exchange rate. Anything that damages our overseas trade must be tackled most vigorously.
    The real need is for much better international coordination for the benefit of the world economy and world trade. I acknowledge, of course, that that is' extremely difficult to achieve. However, our efforts should be unremitting and unrelenting. In so far as it would make a contribution—and I believe that it would—the case for joining the European monetary system is now overwhelming.
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    Once again, I urge my right hon. Friend the Chancellor to pursue the integration of social security benefits and tax. That is the way to end the poverty trap and to restore incentives to work. I do not know of any other way of doing that, other than integration and the basic incomes proposal. However, I shall not detain the House with that tonight. I am convinced that a major change is essential, and I should like to think that it will be a central feature of the next Parliament. In this area, I should say that the Government like to think that they are radical, but they are nothing like radical enough.
    I shall conclude by mentioning two words that have acquired an absurd significance for the Government, consequently limiting their scope for action: intervention and consensus. The Government have given both those words definitions that reflect our worst experiences since the war, which nobody would want to see repeated. As a result of their definitions, they have set their faces against any or all intervention, and against the civilised process of trying to secure the widest possible measure of public consent for their actions. I do not want the Government to be intrusive or to interfere in business or with the market, let alone operate businesses. The Government are rightly getting rid of the businesses that they inherited in 1979 as quickly as possible. But I want them to take a positively supportive role, especially in relation to overseas trade.
    The governments of other countries are closely involved with their industries, and often subsidise them. The world market is not a free market. Our Government must enable our producers and industries to compete on equal terms. There is an essential role for them which they are reluctant to play in case they are accused of intervention. What nonsense! If they had acted in that way, in a proper partnership with industry, we might, for example, have secured the £1 billion order from the Pentagon, which in the end went to France. So I hope that my right hon. Friends will cast aside their self-imposed prejudices — their own Humpty-Dumpty-like definition of these words, and think again about their role in support of industry.
    As many hon. Members want to speak in the debate, I have simply outlined this afternoon a few of the ideas which I think should inform our approach to the challenges that we face in future. There are many others to which I should have liked to refer if there had been more time. In conclusion, I wish the Government every success in this enormous task and the enormous responsibilities that they face.
    7.30 pm
    Mr. A. E. P. Duffy: I wish to echo the call of the right hon. Member for Cambridgeshire, South-East (Mr. Pym) to the Chancellor for a regional approach to his economic management. However, before I do that, I cannot resist the observation that, in the debate so far, there has been little comfort for the Chancellor. Indeed, the impression has come across strongly in most of the speeches, that for all the Chancellor's repeated proclamations of his attachment to the medium-term financial strategy, he will still need a lot of luck in its fulfilment.
    The Chancellor's forecast of 3 per cent. growth with inflation staying under 4 per cent. is similar to that of the London Business School. However, the LBS has pointed out that that outcome depends on a rapid response from manufacturing industry to the recent fall in the exchange

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    rate. In his powerful speech, my right hon. Friend the Member for Cardiff, South and Penarth (Mr. Callaghan) stressed how serious is the shrunken industrial base of our economy. Given what has happened to manufacturing over just the past six years—as my right hon. Friend explained—can British producers fairly be expected to cope? Manufacturing investment has risen fast in recent years in countries—again as we heard from my right hon. Friend and from the right hon. Member for Old Bexley and Sidcup (Mr. Heath)—such as West Germany and Japan, but not in this country. That is reflected in the import-export balance of the economy. We note that the volume of exports of manufactures has been running recently at about 13 per cent. above the 1980 levels, whereas the volume of imports is no less than 51 per cent. higher.
    The longer view of manufacturing reveals that output as a whole has recently been running at no more than 3 per cent. above the 1980 level. We find the reasons for that in the catastrophic change in all the great and traditionally important manufacturing areas of south Wales, the north of England and Scotland. I hope that the House will bear with me if I confine my attention to one of these traditionally important manufacturing centres—Sheffield and the county of south Yorkshire.
    Like my right hon. Friend the Member for Cardiff, South and Penarth, I will make my assessment on the basis of what has happened during the past six years, during the tenure of this Government. That is where I would like to place the burden of my speech. It is necessary to remind the House that the British economy has experienced substantial change over the past two decades. In particular. 2.5 million manufacturing jobs have gone while there has been an increase of 2.25 million service jobs. The increase in the labour force over the same period has therefore meant a tenfold rise in unemployment levels.
    Unemployment within Yorkshire and Humberside has risen faster than the national average in almost every sector. Indeed, right across the Yorkshire and Humberside region, growth prospects are bleak. In 1981 there were approximately 26,000 jobs in the Sheffield travel-to-work area. More than half now come from producer or consumer service industries. By contrast, the manufacturing and extraction industries—once the major source of employment in Sheffield — have declined to no more than one third of all jobs. Sheffield's decline in manufacturing employment has so far outstripped the decline in manufacturing employment nationally. Sheffield lost more jobs in the 1970s than the rest of Britain. The unemployment rate in Sheffield overtook the national rate in 1981 and since 1982, unemployment rates in Sheffield have continued to remain well above the national rate.
    Over the past two years, many companies in Sheffield have reported improved turnover and profit and, to some extent, have recovered from the recession. Many have recently invested in new plant and equipment but very few have significantly increased employment levels. By contrast, there has been the major closure of the British Steel Corporation Tinsley Park works in my constituency just a year ago with the loss of 1,100 jobs. There has been a massive rationalisation at Sheffield Forgemasters next
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    door to my constituency with the loss of 1,000 jobs over the past two years. These losses have overshadowed the improved performance of some of the smaller companies.
    Nationally, very few manufacturing sectors have shown employment growth in recent years. The most notable has been electronics. More generally there have been significant developments in the technology industries. Set against these however, must be such forecasts as that produced by the university of Warwick institute for employment research, which predicts a fall in manufacturing employment of 400,000 over the next five years.
    Sheffield's east end remains an important location in manufacturing employment, but the future of many jobs in the lower Don valley is tied into the decisons of industries using domestic products such as motor vehicles and power generation. Government policy and, in particular, public expenditure decisions are crucial. It is apparent that the resources required for any meaningful development of the Don valley are beyond the capacity of Sheffield city council or any of the neighbouring authorities such as Barnsley, Doncaster or Rotherham. That is why these local authorities are coming together in an integrated operations programme which is focused on the county of south Yorkshire, which is still one of Britain's most important industrial areas. More than 1·25 million people live in the county, largely in the urban centres of Barnsley, Doncaster, Rotherham, Sheffield and the Dearne towns around Mexborough. South Yorkshire as a whole, and not merely Sheffield, has been especially hard-hit by the recession due to its dependence on such industrial sectors as coal, steel and heavy engineering. As recently as 1981, mining accounted for 53,400 jobs or 10·6 per cent. of employment in south Yorkshire; metal manufacture and metal goods accounted for 67,600 jobs or 13·4 per cent. of employment and engineering, and vehicles for 37,200 jobs or 7·5 per cent. of employment. Widespread plant closures and other rationalisation measures under this Government have led to dramatic and continuing rises in unemployment. Many of the larger companies are now on a firmer financial footing and are showing signs of recovery but this has had no impact on the overall level of unemployment.
    Unemployment problems have been compounded by the increased levels of coalmining closures and redundancies over the past 18 months. As a matter of fact, the decline of the coal, steel and engineering industries has caused major unemployment problems in south Yorkshire. In July this year, 107,310 persons were registered for unemployment benefit at an unemployment rate of 19 per cent. That compared with a regional rate of 13·8 per cent. and a United Kingdom rate of 11·9 per cent. That entirely bears out what the right hon. Member for Cambridgeshire, South-East said in his regional comparisons.
    Before the decline of metal manufacturing, metal goods and engineering sectors in the early 1980s, unemployment in Sheffield was below the national average. The subsequent sharp increase in unemployment has pushed the unemployment rate well above the national and regional averages and by July this year 16·9 per cent. of the work force, or 48,423 people, were unemployed.
    For many people in south Yorkshire unemployment is no longer a short-term experience. In July this year 45,684 or 42·6 per cent. of those unemployed had been out of work for more than a year. Even more worrying, 29,154 or 27·2 per cent. of those unemployed in the country had

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    been out of work for more than two years. Today, for the third year out of four, the Chancellor forecast a decline in unemployment, but a growth of 3 per cent. or so in GDP after an average of only 1·25 per cent. per year since 1979 is unlikely to do more than arrest the upward trend. The Chancellor's mini-Budget has brought us no nearer a policy for employment in south Yorkshire, as opposed to employment figures, than we were before.
    Where recruitment has picked up following the recession, many south Yorkshire firms are reporting skill shortages due to the lack of apprentice training during the recession. Here my comments bear out those of the right hon. Member for Old Bexley and Sidcup. In a recent survey by the Engineering Employers Sheffield Association, 15 per cent. of companies forecast shortages in basic trades such as milling, turning and grinding.
    How can the Chancellor assist? He can make a start by providing for Treasury approval of customs clearance to allow the location of an international freight transshipment terminal in south Yorkshire following completion of the Channel tunnel. In the view of Sheffield city council and the Sheffield chamber of commerce, the rail marshalling yard at Tinsley in my constituency would be a choice location.
    The Chancellor is also the key to successful implementation of the south Yorkshire integrated operation programme, a remarkable demonstration of self-help and Yorkshire grit intended to pull together a series of private and public actions and investments in south Yorkshire for economic recovery. The programme will seek to expand the number and range of job opportunities, to increase skills in the work force, to develop community enterprise, to mitigate the effects of unemployment, to improve the environment and to lay the foundations for the renewal of growth in the local economy and thus to reduce the disparity between south Yorkshire and more prosperous areas in the south of England. Where appropriate, the programme will draw on financial interventions from the European Community. It will also look to Whitehall for assistance, for example, through the urban programme and urban aid, the derelict land grant, enterprise zones and general and sectoral assistance available from the Department of Trade and Industry. It will also look to the resources of local authorities and public bodies, the private and the voluntary sector.
    I think that the House will follow my final plea when I say that only a sympathetic Chancellor who is really interested and who monitors the progress of this exercise in self help up there in Yorkshire can assure a sustained programme, integrated by the combined use of financial instruments and focusing on key problems and opportunities throughout south Yorkshire. My challenge to the Chancellor, therefore, is to join those public and private bodies in south Yorkshire to help regain confidence in an area which has been traumatised through structural economic change. In so doing, the Chancellor will also be helping himself by restoring the manufacturing base of our economy and paving the way for a breakout from seven years' stagnation in the volume of manufacturing output in this country.
    7.44 pm
    Sir Brandon Rhys Williams: I welcome the Queens Speech and especially the promise to implement the recommendations of the Nugee report,
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    which is so important for Kensington and all the constituencies in which large numbers of people live in flats in private ownership. For us, legislation cannot come too soon.
    The Opposition amendment today returns to the same theme as yesterday in reference to employment and the functioning of the economy; but again it suggests no practical remedies. It is easy to describe the problems, but the electorate is now entitled to ask for concrete solutions. The Opposition have again produced no realistic recommendations. I shall make some specific recommendations of my own.
    I hope to have time to consider three aspects of the economy—the size of the effective domestic market, the efficiency of operation of our institutions and the incentives to work and to save. I think that we all agree that free enterprise in Britain is not yet doing as well as we should like; and we should ask ourselves why.
    With regard to the effective domestic market, we have allowed the sterling area to disintegrate but we have not attached ourselves to the dollar and I do not think that it would be possible to go into the yen area. We have been in the Common Market since 1973, but we are still not fully exploiting the opportunities that it offers. The Government have shown courage and foresight in accepting the European Single Act and supporting the programme for the completion of the internal market. The target year of 1992 set by Jacques Delors for the completion of the internal market is not impossibly soon. We owe a great deal to the enthusiasm of Lord Cockfield in Brussels and Basil de Ferranti in Strasbourg for making it a realisable possibility.
    When I was in Strasbourg in 1981, I was appointed rapporteur for the integration of the European market for capital, which was then regarded as a hopelessly remote and virtually unattainable objective. Indeed, people told me that it was quixotic and unrealistic of me to take on the rapporteurship. However, in Brussels this week my right hon. Friend the Chancellor has won the support of the Council of Ministers for measures to make the integration of the European market for capital a reality well before the Commission's target date.
    We are thus making some progress in giving British businessmen and manufacturers an effective domestic market large enough for free enterprise to function efficiently; but the currency frontiers still remain. Europe is still repeating the mistakes of the 1930s. It is unrealistic to hope that over time we shall be able to compete with businesses and industries which are able to operate in the enormous single currency zones associated with Tokyo and New York, while the European Community has no monetary centre and the Common Market operates as a multi-currency area.
    This leads me into the controversy about the possible inclusion of sterling in the exchange rate mechanism of the European monetary system. I hope that I shall not shock my colleagues if I do not share their enthusiasm for joining the mechanism immediately. No one could be keener than I am to achieve monetary integration in Europe as quickly as possible; but I have never recommended joining the EMS as it stands. As I have said in the House before, we would run the risk of creating a monetary solar system with two suns moving eccentrically. London and Frankfurt are not yet sufficiently closely integrated for us

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    to make a success of joining the EMS as it stands. My right hon. Friend the Prime Minister is therefore right to be cautious.
    We should join the exchange rate system only when we have recognised what it will mean and have made a conscious decision to accept the substantial consequences. To announce that exchange rates will be stabilised first and to grapple with the consequences afterwards might well be disastrous and I am not convinced that it would achieve the results that British business and industry yearn for. It might well lead to higher rather than lower interest rates and a return to the overvaluation of the pound, which has been the main inhibiting factor holding our economy back from the achievement of really profitable participation in the Common Market ever since we joined.
    Lasting currency stability means much closer cooperation. Indeed, it means the full integration of policy between the central banks in regard to capital market conditions, between Finance and Trade Ministers in the national Governments and between the stock exchanges and financial institutions in all the main business centres. I am sure that we must prepare to accept all those things, but we are still very far from doing so.
    A single currency zone in Europe might be achieved by an act of political will as it was in Switzerland, Germany, Italy and indeed in Britain in the past; or it might be done simply by the pressure of events. I hope that the British Government will rely on both. As more and more people take advantage of the options which are opening up in the newly liberated European capital markets, they may prefer not to use their national currencies but to carry on their transactions in an alternative currency in the same way as they were able to do before 1914. I believe that that would be a fruitful development for western Europe.
    Before the first world war, the gold standard was generally accepted as the foundation of the national credit and currency systems. The British Government should now be working to restore the benefits of the gold standard to Europe without its disadvantages. We need a single European currency as a measure and store of value universally accepted throughout the community. To achieve that result we have to contemplate the amalgamation of the reserves of the central banks, a single real rate of interest underlying the currencies throughout the system and the close integration of the national systems of taxation. I believe that we know in our hearts what has to be done to make private enterprise a real success. The question is, have we the will?
    I should like to deal now with the efficiency of British business and administrative institutions. I have said many times in the House that minor changes in company law could strengthen the supervision and functioning of many of our public companies and improve the quality of management. The Government should also now commit themselves to a policy of extreme simplification of public administration —for its own sake, and to provide a better service, especially in the various stages of the redistribution of income. We have to admit that large areas of British public administration are grossly overmanned and crassly inefficient. That is because Parliament is not giving the necessary leads towards reform.
    On the tax side we need armies of collectors because our tax systems are so antiquated and complex. Tens of thousands of people are needed in the Inland Revenue and
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    hundreds of thousands of man-hours are wasted by employers, professional advisers and private citizens to meet their obligations as part-time tax collectors and to lighten their own tax burdens. All their efforts produce nothing of any value.
    To operate our various antiquated and inadequate systems of income support, huge efforts are expended in unnecessary personal casework. We have learnt from parliamentary answers that the staff of the Department of Health and Social Security are required to make more than 90 million manual entries every week in the administration of national insurance and supplementary benefit. We have also learnt that there are now 14 million people relying wholly or partly on means-tested benefits.
    The free enterprise economy functions because the citizens have confidence that it is worth while to work and save. However, the reliance of successive Governments on the means test to support family incomes—now politely called selectivity — is producing an unhealthy phenomenon. This is the emergence of a sub-culture of millions of people who are coming to rely on means-tested benefits rather than their own energies, skills and initiative. There is ample room for drastic savings of effort to lighten the dead weight we are imposing on our own economy by our obsolete methods.
    That brings me to the question of incentives to work and save. It is recognised that many British citizens have little motive, if any, for working or saving. That is the result of relying on the means test as the measure of eligibility for benefit. How do we tackle these well-known problems? I should like to make four specific recommendations.
    First, we should look at the effective marginal rates of tax at the different levels of the income ranges. I welcome the Government's commitment to lower taxation. Obviously, that is a long-term policy which has to be right for free enterprise and the running of the economy. For the health of the economy, we should now be looking to relieve the pressures at the top and the bottom of the scale, rather than in the middle. In the middle ranges, the marginal tax on earned income is now 38 per cent. and on investment income it is 29 per cent. For the benefit of incentives as well as the enormous administrative advantages, I recommend, as I have done before, that we should now proceed to end higher rate tax altogether. At least it should be no higher than the generally applicable rate for earned income, that is about 40 per cent. I was a little dismayed that my right hon. Friend the Prime Minister, in her interview given to the Financial Times, was not quite as ambitious and courageous as I would like in regard to the reduction of higher rate tax.
    Secondly, for hundreds of thousands of people with families, the most cost-effective way to restore incentives to work is to raise child benefit. To increase the allowance for every child requires a big movement of purchasing power. Therefore, I suggest that we should start with children under five; after five, families begin to get the support of the school system. If revenue is buoyant at Budget time, I suggest that we should raise child benefit for the under-fives to £12 a week. The cost would not be as large as it might at first appear, because so many of the children are already receiving substantial support because their families are obliged to apply for supplementary benefit.
    Thirdly, we should put income tax on a strictly personal, unisex basis. It is wrong that women and men

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    should be treated differently under our income tax system. Women who are widows, divorced, co-habitees, single women or mothers in single-parent families should all be treated the same, and treated the same as men. It is not sufficient to tinker with ideas of transferable allowances. We must go forward at once to a single unisex income tax system.
    Fourthly, we should now start the first phase of the full integration of the tax and benefit systems. I welcome the support which my long-standing campaign is now receiving from both sides of the House. A tax credit scheme, or a basic income guarantee, need not be prohibitively expensive. It could be introduced on a revenue-neutral basis. I am perfectly willing to recommend that it should. Suppose we ended tax allowances and instead introduced a basic income system at about half the present rate of supplementary benefit: we would give millions of people the choice to apply either for the balance of their entitlement on present terms, or go out into the economy and make the best of their opportunities with the full benefit of their tax credits, even on low wages. I cannot estimate how many people would seek to take advantage of the option to remain free of the means test on those terms, but I think that it might amount to a large number. Every one of them would represent a saving to the Exchequer and a gain to the economy.
    If the free enterprise system is to work as fruitfully in Britain in the future as it did in the past, we must throw off the burdens we have imposed on ourselves through prejudice, inefficiency and our obsolete conventions.
    7.59 pm
    Mr. Stan Thorne: Looking round the Chamber. I wonder whether the fact that only two Labour Members are in attendance reflects the fact that our contribution to the debate is almost worthless because, when a vote takes place, we will lost whatever contribution we have made. There are nine Conservative Members present. No doubt that is dictated by a complacency born of the fact that they are undoubtedly going to win the vote. It makes me look at what I have to say and wonder whether it is worth while.
    The hon. Member for Kensington (Sir B. Rhys Williams) referred to motive. Any Queen's Speech should contain the motivations that should exist in our society. Inevitably, an economic debate, and a debate on employment and industry such as we had yesterday, provide the basis for considerable overlap. I am concerned to put a point of view that our motivation in society should be simply to meet people's needs. I represent a constituency with a major housing shortage, which is not unusual. Many people there live in houses that are in need of radical repair. Many are short of housing accommodation. Meeting such need seems to me to be an absolute priority.
    The needs that most people have are in education, the need for a reasonable standard of living, in health and social services, freedom from want and so on. Manufacturing is vital—it may be said that I am stating the obvious—to meet those needs. Since 1979, as has been said by previous speakers, manufacturing has fallen markedly. We have had a 30 per cent. increase in manufactured imports. Capital is flowing out of Britain. From 1980 to 1986, £97,000 million has flowed out of Britain, at a time when there has been a 59 per cent. fall in the construction of houses, to take the example of
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    housing. How can we talk about morality in our society when we are prepared to allow such an outflow of capital while people are desperately in need of housing, to mention only one example?
    We have had a 30 per cent. increase in defence expenditure. In education, there has been a fall in expenditure, in real terms. The figures show that there have been major increases in health and social security expenditure, but massive poverty has been created over the past seven years. The oil revenues have been largely frittered away on unemployment and supplementary benefits. One is forced to ask how and why there is that continuous economic crisis. The basic, fundamental reason is that the motivation, the causation, is production for profit, not production for use. That determines the nature of the decisions that are made and who makes them— the multinationals, the corporations, the conglomerates, those who determine what profit margins are acceptable, or unacceptable, and what needs to be done in that regard. Those decisions are not about people's needs and how to meet them.
    The investment criterion—private money, of course—is what is profitable for shareholders, not what needs must be met for our people and those in less fortunate parts of the world. Inevitably, the question emerges: who owns? This is where power resides. On both sides of the House, the debate has mostly been about the management of capitalism. Perhaps that is inevitable, given the present circumstances. Social ownership has a major contribution to make, and the sooner the better. I recall the words of John Ball in 1348, who paid with his life in consequence. He said that things in Britain will not be right until all things are held common.
    The Government will never work towards that end, but the next Labour Government must begin that process if the next century is to see the real social change and h man progress that we need.
    8.6 pm
    Mr. Terence Higgins: There have been some unusual contributions to the debate, I think because it started in a phoney pre-election fever, which seemed to permeate several contributions. It may also be because very recently we had another economic debate. Perhaps this one follows too closely upon that one's heels.
    None the less, there have been several comments on the autumn statement. I hope that we can comment on a later occasion. When the Select Committee on the Treasury and Civil Service has had an opportunity to analyse the statement and take evidence from the Chancellor, as we hope to do tomorrow, we shall have a better basis for a more thorough analysis of what is in the statement.
    I do not want to discuss the statement, but I should like to pick up certain aspects of the Queen's Speech that I welcome enthusiastically, and comment on them. One passage reads:
    "My Government will make vigorous efforts to combat international terrorism and trafficking in drugs."
    The problem of drug abuse is the most important and dangerous social problem that we shall face in the coming decade. Therefore, I welcome what is said in the Queen's Speech but I stress to my right hon. Friend the Chancellor the need to increase resources. The machinery for ministerial co-operation on the issue, covering as it must the Home Office, the Treasury, the Department of Health and Social Security, the Department of Education and

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    Science and other Departments such as Customs and Excise, has been well organised, but the fact is that the tremendous profits that are being made out of the human misery that results from drug trafficking are giving those engaged in it resources that are enormous —so enormous that they may well be much greater than those that the Government themselves are putting in to combat it. That being so, we must bear that in mind when considering the operation that we have to mount if we are to win the battle, which will do more to reduce human misery than anything else I can think of.
    Therefore, I commend that passage of the speech to my right hon. Friend the Chancellor. We also need to monitor carefully how successful we are being in eliminating the importation of drugs. It is difficult to estimate. Constantly, the Customs and Excise or the police manage to stop the importation of drugs, but we do not know how much that is, in relation to the total amount that is being imported or produced. In that context, it is important to monitor what is happening to the street price of the various narcotics as a sign, as demand for the drugs is not going down, whether we are really succeeding in the battle.
    Another passage in the Queen's Speech reads:
    "My Government's firm monetary and fiscal policies will continue to restrain inflation and foster the conditions necessary for further sustained economic growth."
    That immediately raises the question of precisely what the Government's monetary and fiscal policies are. We must all recognise that there have been substantial changes in those policies since 1979. Reference has already been made to the various monetary indicators which have been emphasised, or not emphasised, in the course of the evolution of Government policy.
    Indeed, some years ago now, the Treasury and Civil Service Select Committee pointed out that there had been no true monetarist experiment. That is still the case. We have not had the kind of monetarist experiment envisaged by Professor Milton Friedman. But, clearly, my right hon. Friend the Chancellor is now adopting a far more pragmatic approach than was previously the case. I wonder whether the time has come for us to reappraise the basis of economic policy, because we need an analytical basis for what the Government are doing. At the moment, that is far from clear.
    Lord Keynes, an unfashionable author nowadays, in the most famous economic quotation of all in the closing passages of "The General Theory", pointed out the extent to which the views of what he described as "defunct economists" had an influence on policy. He went on to say that he did not think that anyone was able to absorb those ideas after 25 or 30 years of age. That was a rather depressing attitude to take. However, we need to look at the analytical framework.
    This autumn my right hon. Friend has, for the first time, published a view of what the PSBR should be in the spring—something which he has not previously done. However, I have increasing doubts about whether the PSBR, which is perhaps the only constant in the various variables which the Chancellor and his predecessor have discussed, is the right indicator for us to take into account. Clearly, although it has the advantage of familiarity, and there is a clear link before it and the monetary indicator, sterling M3, none the less it is seriously distorted by asset sales, although one can make adjustment for that, and it
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    does not distinguish between the extent to which changes in Government borrowing have been due to deliberate action on the Government's part on the one hand or to non-discretionary changes on the other. Nor does it take into account the effect of inflation on the Government's real liabilities.
    I come more and more to the view that there is a strong case for looking at the real net financial debt rather than the PSBR as an indicator of fiscal stance, and, indeed, to extend beyond that so that we pay more attention to what is happening to the Government's balance sheet. Strangely enough, while ever since the war we have had figures for national income and expenditure, we have not had a satisfactory series of balance sheets. I believe seriously that my right hon. Friend the Chancellor should consider producing those on an annual basis.
    It is strange that we treat economic growth as the equivalent of a company's turnover, whereas what is happening to the company's net worth is a much better indication of the overall position. At the moment we have no regular series of economic indicators showing what is happening to the Government or the country's net worth. Therefore, I hope that we can make some developments there. I suspect that that could provide a better framework for the operation of economic policy than we have at present.
    I want to refer to two other passages in the Gracious Speech. The first relates to the exchange rate, and so on. I followed with interest the exchange between the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) and my right hon. Friend the Chancellor. I believe that we will go through a difficult period financially because, as the general election approaches—it may come soon or it may come later—there will be growing downward pressure on the sterling exchange rate because of fear of the consequences of a possible Labour victory, or, indeed, even more so, the consequences of a hung Parliament. I do not believe for one moment that either of those things will come to pass, but, none the less, there may well be those who do. Faced with the prospect of the kind of economic policies which are held up to us by those on the Opposition Benches, that is bound to have a serious effect on confidence and, in turn, on the sterling exchange rate.
    My right hon. Friend the Chancellor has said that he would not wish to see the exchange rate any lower. We shall need to consider tomorrow exactly what that interesting statement means. But at all events, the possibility to which I have referred, or the concern about the possibility to which I have referred, against the background of my right hon. Friend's statement, will increasingly put pressure on interest rates in an upward direction.
    Therefore, I come, like many of those who have spoken today, to believe that this may well be the appropriate time for us to join the exchange rate mechanism of the European monetary system. That would provide a framework within which the pressures that I have just mentioned could perhaps be more easily resisted.
    We have seen a substantial alterations in relative parities. In simple terms, if one believes that one basically buys imports in terms of dollars and sells exports in terms of deutschmarks, the change which we have seen since the Treasury and Civil Service Select Committee last took a rather balanced view as to whether we should or should not join the exchange rate mechanism, has radically

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    changed. We have seen a substantial depreciation in relation to the deutschmark, which now makes us much more competitive.
    That raises another point which is worth considering. A number of commentators have considered that problems are coming on the balance of payments side. They may well under-estimate the extent to which the depreciation that we have seen against the deutschmark will, given the well-known J-curve effect, result in some improvement in our export performance—although, for reasons I have mentioned, because we have not changed significantly in relation to the dollar, it may not significantly alter the situation with regard to imports.
    Finally, I want to refer to the passage in the Gracious Speech relating to work within the European Community:
    "My Government will … work to promote enterprise and employment; to remove barriers to internal trade; … and for continuing reform of the Common Agricultural Policy."
    That is an area in which the Government must take a much tougher line than they have taken so far.
    The right hon. Member for Cardiff, South and Penarth (Mr. Callaghan), the former Labour Prime Minister, referred to the need to repatriate the common agricultural policy. I think that he really meant repatriate agricultural policy. But at all events, I am not as optimistic as The Economist was this week, in an article headed "Dairy, prairie", saying that the system is now so absurd that it is bound to break down and lead to improvements soon. I am afraid that that is grossly optimistic. The article lists the distortions which take place in that area in Japan, in the United States—where they have taken a much tougher line on the farm problem—and, most of all—
    Mr. Nicholas Budgen: That article was very good and it set out the extent to which subsidies are now being increased in America. If my right hon. Friend looks at that article, he will see that the increase in dollars is enormous. Perhaps he would favour the House by reading that paragraph out.
    Mr. Higgins: My hon. Friend refers to that, but it covers a lengthy period and I was referring to the more recent position, which he and I have both examined at close quarters in Washington.
    But given the importance of the matter, there is a strong case for a major international conference concentrating not on trade in general, or this or that horse trade, but specifically on the agricultural problem. The CAP is not capable of reform and the "continuing reform" of the CAP referred to in the Gracious Speech is not possible. It is fundamentally flawed in the way in which it operates.
    My right hon. Friend the Chancellor of the Exchequer was rather selective in the figures which he quoted in respect of the EEC because he picked out only one of the two lines on it that appeared in the autumn statement, and that was the one which suited his argument. The CAP is becoming a very heavy burden upon us. I hope that, as it will be a repeat, if we are not careful, of a previous saga —my hon. Friend the Economic Secretary to the Treasury knows well what I am referring to—we shall not increase the resources that are available to the Community until such time as we have had the substitution of a better system for the present system of support for agriculture.
    I believe that the Queen's Speech in general is greatly to be welcomed. It contains a number of proposals, not
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    least for law and order, which I welcome, and it is right that we should support it when the Division takes place this evening.
    8.21 pm
    Mr. David Penhaligon: I begin by seeking some guidance, Mr. Deputy Speaker. When my right hon. Friend the Member for Plymouth, Devonport (Dr. Owen) sought to move the amendment that stands in his name and the names of others of my right hon. and hon. Friends, he was told that he must do so later this evening. As the alliance has about only one Division a year that it can succeed in calling, I am rather anxious to ensure that whatever the procedure is for moving the amendment is followed and fulfilled. I ask you, Mr. Deputy Speaker, whether I have formally to move the amendment now, or whether my right hon. Friend the Member for Devonport has already done so.
    Mr. Deputy Speaker: The hon. Gentleman does not have now to move formally the amendment to which he has referred. When we reach the end of the debate, the House will come to a decision first on the official Opposition's amendment. Secondly, it will come to a decision on the amendment that is in the names of the hon. Gentleman and his right hon. and hon. Friends.
    Mr. Penhaligon: Thank you, Mr. Deputy Speaker. I would not like to be blamed as the one who did not do whatever was necessary.
    The section of the speech of the right hon. Member for Worthing (Mr. Higgins) which interested me most was that dealing with drugs. I concur with everything that he said on the subject, but I believe that we are underestimating the significance of the problem in our society.
    I take issue with those who say that the fashionable methods will succeed in driving drugs out of the country. If I were to be involved in the obscene trade of drugs, the last thing that I would consider would be to bring drugs through the prescribed entry points. I would become involved in the enormous yachting business that I see active off the southern coast of my county during the summer season. Some yachts are large and have an enormous capacity, and I would use one of those to bring whatever it was I wished to bring into a Cornish creek at a quarter to four in the morning.
    I do not believe that we shall ever be able to afford to employ enough customs officials to guard every creek in my county, let alone the rest of the country. I understand that the coastline of Cornwall extends for about 250 miles. I see that the hon. Member for Teignbridge (Mr. Nicholls) is in his place; the same can be said for Devon.
    We should at least consider the possibility of bribing for information. We should consider giving substantial sums to those who are willing to give information that leads to the arrest and imprisonment of those who bring drugs into the country. I accept that we would be using one part of the drugs fraternity against another, but I believe that the Government will have to consider this approach at some stage. It is an historic fact that smuggling in Cornwall was not stopped by legislation enacted in London or by inspectors being planted on the cliffs. It was stopped by offering bribes for information from Cornishmen so that it would be known when the running would take place. Cornishmen, being as greedy as anyone else, saw an opportunity to make money legally, and they used it. The result was the end of the trade.

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    The drugs business is a serious matter and some of the methods that have been put forward for combating it will cost a great deal of money. I am one of those who are willing to argue for expenditure in this area, but it must be seen to produce results. I am not sure whether the conventional methods are likely to have that effect.
    It has been said by some that there was a fair amount of electionmongering in the earlier contributions to the debate. It seems that the impression created by those who spoke earlier in the debate was such that nearly every other hon. Member decided to leave this place for his constituency to fight the next general election. We have not really been pushed for Bench space ever since the early stages of the debate.
    There are some important issues to be raised, and many of them have already been covered for the alliance by my right hon. Friend the Member for Devonport. The Government's policy which concerns me most is that on interest rates. I do not wish to say on behalf of the alliance that if I were in control of the economy I would never have recourse to high interest rates, because one learns in politics that never is a very long time. To say that one would never use the weapon that Chancellors of the Exchequer have used over the years would be clearly irresponsible.
    The interest rate that we are running is high and has been high in relation to the rates of our competitors for a long time. It is not the economic bedrock on which we can hope to see a recovery of the economy. Over three months, the figures are as follows: the United Kingdom 11 per cent.; Canada, 8·5 per cent.; France, just over 7.5 per cent.; Germany, 4–75 per cent.; Japan 4·3 per cent.; Switzerland under 4 per cent.; the United States 5·5 per cent.; and Italy 11·5 per cent. These days we have regularly to compare ourselves with Italy if we wish to find another country that is in our league of economic "success".
    I challenge the Minister who is to reply to name any country in modern economic history—to be generous, let us allow him to go back to the beginning of the century—which has managed to rebuild its economic base on the real interest rates that exist now. If the Civil Service can help the Minister to find an example, I shall have to confess that it has discovered something that I could not find. I do not know of a country which has run the interest rate regime that now prevails here for any sustained period and succeeded in rebuilding its economy during that period.
    I attend Treasury questions, as do many of the right hon. and hon. Members who are now in the Chamber. We ask questions of the Chancellor of the Exchequer and we are rather shocked when occasionally we receive answers. In brief moments of great honesty the Chancellor of the Exchequer has made it clear that our high interest rates have nothing to do with the public sector borrowing requirement. If there were that relationship, we would have to argue that the Chancellor of the Exchequer increased interest rates a couple of weeks ago because he knew that he would increase spending in a couple of weeks time, and would need more money as a result.
    We all know that that is not the position and that interest rates have nothing to do with the PSBR. I should not like that observation to be stretched to infinity, but within the area that we are discussing there is no relationship between the two. The Chancellor of the
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    Exchequer has made it clear that he is maintaining the current interest rate regime to defend the exchange rate of our currency. The policy has not been noticeably successful as the weeks and months have passed and considerable depreciations have taken place. It is often forgotten in economic debates that if the Chancellor of the Exchequer's policy is successful, Britain's exports will be more expensive than they would otherwise have been. It means that imports into Britain are cheaper than they would otherise have been. Therefore, the sector of British industry that relies for its survival on successful exporting finds it more difficult than it would otherwise have done. It also means that the sector of British industry which competes for its survival against imports into the country is in a more difficult position than it would otherwise have been.
    If one wished to concoct a policy to reduce our manufacturing capacity over a sustained period, one would pursue the policy that has been followed for the past few years. Many of our international businesses have already gone. I do not mean that they are half the size that they were; I mean that they have gone. That has led to the horrifying figures which have been given several times during the debate regarding our manufacturing balance of payments and our loss of value added in that sector.
    I do not offer the House simple solutions. I say bluntly to whoever is willing to listen that pay rises in Britain are too high. That has been true for several years. The fact that the well-off are even greedier at present than some others is a second, obscene, aspect of my general point. I am saying, for the benefit of Britain, that pay rises are too high. The alliance believes that, unless we can reduce the pay increases which have dominated the economy for the past few years, our industrial capacity will have no future.
    The only substantial argument against joining the European monetary system is a fatalistic belief that under no circumstances can we control our pay demands. But those who understand the disciplines of the monetary system must recognise that if in the future Britain's pay rises arc twice as high as those in other countries in the EMS, we might look back on these high interest rates and say that these were the good days. I do not accept that argument. Several Conservative Members have said that British pay policies have never worked and never will. We have never introduced a pay policy as a point of strategy or as the result of a mandate given to one party by the British people. We have never made such a policy part of our economic life. I remember three or four policies, every one of which was introduced as a last minute panic button pushed by whoever was occupying the Chancellor's chair at that moment because he was so desperate that he had to do something.
    Even in such emergencies, some of the pay policies worked, at least for a while. But the British people may determine that pay increases cannot continue as they are if we wish to do anything about our industrial base. The British people may respond in such a way that a pay policy would be possible. I am confident that, if we cannot reduce pay settlements from their present level, Britain's economic health will decline.
    On the autumn statement, the Government are in the most fragile position. They are heavily dependent upon the consumer boom in the high streets. I wonder how much a smartly dressed person with a half-decent job could succeed in borrowing within 24 hours—not in one week or a lifetime—if he walked from one end of Oxford

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    street to the other, taking advantage of each shop's plastic cards and going into banks. We can all see that consumer boom happening, but Conservative Members are afraid to say anything about it because it is crucial to the Government's handling of the economy. The consumer boom is happening on borrowed money. It cannot be maintained for long. It has become the entire fabric of future Government strategy, because they rely on their tax break when that borrowed money is spent to balance their books. When the Chancellor says that he received £2 billion more in revenues than he expected, he is saying that the tax break from the borrowing boom has given him that £2 billion.
    Not only the Chancellor's unexpected income, but the moderate release from ever-escalating unemployment, have occurred on the hack of the borrowing boom. It is the engine of the small growth in jobs and the Government's increased income. If the Chancellor maintains that strategy, the election had better come sooner rather than later. It might just be possible to blame someone else after one term of office, but after a couple of terms of office, it is clear that the chickens are coming home to roost. It is certain that there will be no rebuilding of our industrial base on the back of the borrowing boom. There will be no training of high technology skills. We shall not obtain the degrees and PhDs that we need if we are to succeed in rebuilding that base part of our economy on which we have relied for years to provide our basic living standards, and on which many of us believe we shall have to rely again.
    All those long-term visions of reconstruction and of rebuilding Britain's economy are being put at risk on the back of a borrowing boom. It is one of the most disgraceful policies to have come from a Chancellor in a long time. It is short-sighted and narrow-minded. It is not good news for Britain, and the sooner there is an election and we can return to doing something to rebuild the economy—preferably with a great movement of places in the House—the better it will be for Britain.
    8.36 pm
    Mr. Tim Yeo: The expressions of regret from the hon. Member for Truro (Mr. Penhaligon) about the decline of the British economy would have commanded more respect if they had been accompanied by some remorse, since he was one of the hon. Members who propped up the Labour Government for two years and delayed the recovery of the economy for that period.
    No doubt the hon. Gentleman and the right hon. Member for Plymouth, Devonport (Dr. Owen) have been anxious to urge on the Chancellor the need for an early election, because they are beginning to fear that if the unemployment trend, which for the past two years most people have agreed is the most important indicator, starts to come down, who knows where it may have reached by March 1988, with another year of 3 per cent. growth?
    I am sorry that the right hon. Member for Devonport is leaving the Chamber. He would not allow me to intervene during his speech, but I wish to say one thing to him. He made it clear that he favours an incomes policy, which must, sooner or later, mean a statutory incomes policy, and that he favours a tighter monetary policy, but he did not say much about the tax policy of the SDP. Earlier this year, we read much about the controversy in the SDP over the paper which advocated a substantial increase in the taxation of middle-income groups. That
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    would be much more redistributive than anything that the Labour party has dared to mention. Does his reluctance to mention that herald an announcement soon that the SDP will dump that policy paper? Will the right hon. Gentleman clarify the SDP position on that?
    I strongly support the measures in the Queen's Speech and I commend them especially if they will mean that the House will have a shorter Sessions. It would be popular on both sides of the House to rise at the beginning of July rather than at the end.
    As the amendments today relate to the economy, I shall speak primarily on economic and financial issues. The debate has been far-reaching. I strongly supported the references made by my right hon. Friend the Member for Worthing (Mr. Higgins) and by the former Labour Prime Minister, the right hon. Member for Cardiff, South and Penarth (Mr. Callaghan) to ending the lunacies of the common agricultural policy. I also admired the way in which my right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath) managed to bring into the debate the American shipment of arms to Iran. I, too, deplore that involvement.
    I strongly welcome the autumn statement and the spending increases that it disclosed. In many ways, those were in line with calls made by many of my hon. Friends, and I hope that we will not be punished for having been a little in advance of the Chancellor in suggesting that additional expenditure would not only do a lot of good, but would also be in tune with popular requests.
    We now have a properly balanced approach to the use of the resources being generated by our economic growth. We see real increases in spending, but we are still achieving a reduction in the percentage of gross domestic product taken by the public sector. That is the right path and is in line with true Conservative philosophy—neither wet nor dry. I appreciate that the spending is not high enough to satisfy the Opposition, and it was not quite clear how much more spending the Alliance would like to see. It seems to be in need of a rethink on that, as on so many other things in its policy.
    The economic future looks good. Prospects for growth seem satisfactory, trending just below 3 per cent., but that is acceptable by the standards of the last 15 years. Even on unemployment, we at last see some positive signs. Obviously, it may still be early days and I do not wish to count chickens before they are hatched, but if through the period of the next Parliament we can continue to achieve economic growth of around 3 per cent. a year, and given that the huge increase in the labour force with which we have had to cope for most of this decade will no longer be a factor, those two things—a static labour force arid 3 per cent. growth—could significantly reduce unemployment by the end of the next Parliament.
    There are a number of worries in the background. I was glad to hear my right hon. Friend the Member for Old Bexley and Sidcup speak about the United States. Insufficient attention is being paid to America's failure to tackle its massive budget deficit and its relative failure to overcome its massive balance of payments deficit. Those two things are storing up immense trouble for the world. and more attention needs to be paid to them in Britain and elsewhere. I would have been comforted if I had known that, during the important discussions about arms control that my right hon. Friend the Prime Minister had with the

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    President last weekend, at least 50 per cent. of their attention could have been directed towards economic and financial problems.
    For the last 60 years, the United States has been the most important and powerful economy in the world and it is a fearsome prospect that it is now becoming a debtor at a massive pace. It will amass over 1 trillion dollars of debt within five years unless urgent action is taken. In the United States, not enough political priority is being attached to tackling the budget deficit and the measures so far taken to deal with the trade deficit have to date been unsuccessful.
    If action is not taken on those fronts, the only solutions remaining for the United States are, first, a really massive recession—the classic response to a balance of payments problem. Alternatively, the United States can invoke protectionism on a scale that will eliminate America as a market for other countries. Thirdly, and related mainly to the problem of the budget deficit, there will be runaway inflation. That would have the effect of devaluing the dollar and, to a great extent, it would overcome America's debt problem.
    Any one of those three developments has appalling implications for the rest of the world, certainly the rest of the Western world and Latin America. They would probably not have an effect on economic policy in Britain between now and the next general election, but they hold considerable anxieties for Britain. There is the danger of losing an important export market and the consequences of the kind of financial instability that would result from the possibilities I have outlined. We might see much higher interest rates and fluctuations and possibly a weaker pound.
    On inflation, there are anxieties looming in the background. I readily acknowledge that my right hon. Friend the Chancellor has a good record for forecasting inflation. It is much better than the record of some of the independent commentators spoken about with such respect, and indeed awe, by the right hon. Member for Devonport. The 3·75 per cent. forecast for inflation in 1987 seems to be a trifle optimistic. I hope that the Chancellor is right, but I should not be surprised if for once his record rather fell down. This year, we have enjoyed a considerable, but I am afraid a one-off, reduction in industry's costs. That will certainly not be repeated in 1987. Indeed, to some extent the trend will be reversed. Many hon. Members have spoken about the alarming increase in unit labour costs. That is bad from all points of view, not least because it goes a long way towards undermining the considerable productivity gains that we have made over the past three or four years.
    A third risk area is the balance of payments. Here again the forecast, if perhaps not optimistic, shows some danger of overshoot in 1987 and if the market starts to fear that there will be significant overshoot, we will face the prospect of a weaker pound and possibly a hike in interest rates to defend sterling.
    My hon. Friend the Member for Horsham (Sir P. Hordern) rightly spoke about the money supply. Targets appear to have been juggled a bit and those of us who were already confused are more confused than we were. Common sense suggests that the rate of increase in bank lending and lending by other financial institutions is likely not just to fuel the consumer boom but to lead to a number
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    of people and households becoming over-extended. There is no doubt that in their rush to compete for lending business, some financial institutions are lending in a rather imprudent manner, I suspect that in due course that will have a damaging effect on the economy.
    Against the background of all those potential anxieties, I regret, as do other hon. Members, the affirmation by my right hon. Friend the Prime Minister in a Financial Times interview that there is no prospect of our entering the exchange mechanism of the European monetary system. The arguments quoted in that interview are flimsy in the extreme. The EMS is not a panacea, but whatever the absence of any short-term benefit, it is almost beyond dispute that if we were in the EMS, in the medium term we would be able to run our economy with lower real interest rates.
    If we were inside the system, we would probably have a greater and more consistent discipline applied to our monetary policy and both those things would be considerable gains. I fear that if we remain outside the EMS there is a risk that if during the pre-election period our lead in the opinion polls was to dip for any reason —which I am sure is most unlikely—it could lead to a run on sterling of exactly the kind which the Prime Minister says she fears if we were inside the EMS. The consequences will be at least as bad if we are outside and it would be just as necessary to have a painful and perhaps extremely ill-timed rise in interest rates if we faced a run on the pound a month or two before an election.
    I was pleased to see the Prime Minister issue what looked like a stern warning that the higher spending that we have now agreed has reduced the scope for tax cuts. Of course it has, and most of us who have advocated increases in spending always recognised that it would. The one thing that does not need stimulating at the moment is consumer demand. We do not need cuts in income tax to boost that. It cannot be said that the reduction in income tax has stopped extremely inflationary wage claims. One of the hopes expressed at the time of the reduction was that it would. There does not seem to be any urgent economic reason why we should now go for cuts in income tax.
    It might be as well to say openly to the country that if we award teachers a substantial increase in pay—for which there is much popular support—that will have to be done instead of tax cuts. It is a form of tax cut and a proper use of resources. The interest of alliance Members who have spoken is demonstrated by the fact that not one of them is present in the Chamber. It would be politically honest if we presented the alternatives to the electorate in that way. Nevertheless, the buoyancy of revenues from income tax, corporation tax, national insurance contributions and VAT may be sufficient for tax cuts to be considered in the next Budget.
    If we reach that point, I hope that we shall consider alternatives to a cut in the basic rate of income tax. In the Financial Times interview, the Prime Minister made it clear that her overriding wish is to help the lower paid. Statistically, everybody earning up to £15,000 a year—the vast majority of workers—would gain more from a cut in employee national insurance contributions than from a cut in the basic rate of income tax.
    National insurance contributions are effectively part of the basic rate of tax. Income tax stands at 29 per cent. and employees' national insurance contributions stand at 9 per cent., amounting to a 38 per cent. deduction from all earnings up to £15,000 a year. In 1979, the basic rate of

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    income tax was 33 per cent., while employee national insurance contributions amounted to 6·5 per cent. The basic rate, therefore, was effectively 39·5 per cent. Although the basic rate of income tax has been reduced from 33 per cent. to 29 per cent., we have negated it by more than half through raising employee national insurance contributions from 6·5 per cent. to 9 per cent. Priority ought to be given, therefore, to reducing employee national insurance contributions to 6·5 per cent. That would be the best way to use resources to help the low paid.
    Those receiving investment income would not benefit from lower national insurance contributions, but a fair amount has already been done for them. It is not the most needy group. The other group that might be affected if all the resources were used for cuts in national insurance would be the pensioners. However, they could be helped by means of the age allowance. I hope that my colleagues on the Treasury Bench will consider that in their pre-Budget discussions how our resources may be used to reduce the burden of taxation.
    My right hon. Friend the Member for Cambridgeshire, South-East (Mr. Pym) said that there should also be a cut in employers' national insurance contributions. I agree with him. It would have a direct effect on business costs. Long before 1985, we abolished the surcharge. In 1985 we made further cuts in employers' national insurance contributions, which were directed especially at the lower paid. I hope that we shall be able to go further down that road.
    This year I wholeheartedly support the Queen's Speech and the autumn statement. I am delighted that the official Opposition and the alliance were able to put down irrelevant amendments. It is gratifying to feel, for once, that we on these Benches seem to be more than usually united.
    8.53 pm
    Mr. Patrick Nicholls: I trust that my hon. Friend the Member for Suffolk, South (Mr. Yeo) will not mind if I do not take up the points that he has made.
    The debate was opened by the right hon. Gentleman the Leader of the Opposition, who referred at length to poverty. What he said about poverty has to be taken in the context of the general debate about public expenditure. I had assumed that the attack upon Government policy would be that there had been insufficient public expenditure. Therefore, I was confused by his intervention today. He criticised the Government for having indulged in too much public expenditure. That seemed to me to be somewhat strange.
    Despite the curtailments and discipline that this Government have imposed upon themselves, they can reasonably claim, nevertheless, that they are a Government of high public expenditure. To that extent they are just the same as the Labour party. What separates the two parties is that on this side of the House there is a fairly clear recognition that the only way to provide the money that needs to be spent on a whole range of social issues is to encourage further growth in the economy and, if necessary, to use the proceeds of the sale of enterprises that have been privatised. Those are enterprises in which for the most part the Government should never have been involved anyway.
    That has to be contrasted with one particular theme of Labour party policy: that wealth is a fixed commodity
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    which unjustifiably is in the hands of the rich and that all that one needs to do in order to benefit the poor is to take money away from the rich and spend it on the poor. It is the old cry that we have heard before, that one can help the poor by the fiscal pillaging of the rich.
    For example, the right hon. Member for Leeds, East (Mr. Healey) referred to squeezing the rich until the pips squeaked. We have heard it more recently from the right hon. Member for Sparkbrook. He plans to finance a truly massive amount of social spending by the penal taxation of those earning more than £30,000 a year. His figures have been thoroughly discredited. The right hon. Gentleman knows that, if he were to confiscate all income in excess of £30,000 a year, it would raise only a fraction of the money that would be necessary to fund his spending programme. To that extent, therefore, that particular fox has been shot. People realise that it would be impossible to fund such a spending programme.
    Even if the right hon. Gentleman's figures were false, it is obvious that his argument has some attractions. However, it is slightly strange to see Labour Front Bench spokesmen, with reputed incomes well into six figures, calling for increased taxes on the rich. However, they know that even if they had to pay a little more tax, they would still have far more left than the rest of us.
    This Government have abolished the investment income surcharge, which has reduced the higher rates of tax. The Government are also committed to the abolition of capital transfer tax. The Conservative party is prepared to say that "wealth" is not a dirty word. Even members of the Conservative party who do not possess wealth are happy to say that. If the argument went no further than that, the idea that one could soak the rich to help the poor would have some attraction, but if we want to turn the rhetoric of compassion into the reality of care we have to ask ourselves whether that system can produce the money that will turn that rhetoric into reality. On precisely that point, what we have heard from the Labour party, despite its undoubted sincerity, does not being to hold water.
    Until May 1986, such a statement could have been made without anything substantial to back it up, but the debate has changed radically since May, when the lion. Member for Birkenhead (Mr. Field) asked the Government to say what proportion of the total tax take was contributed by the highest earners in the country. He put down that question thinking that, because this Government had apparently reduced the burden of taxation on the rich, the answer would be that the rich were paying less tax. He found precisely the opposite. Between the last year that Labour was in office and the year 1985–1986, the top 5 per cent. of earners have paid an increased amount of total tax take.
    If that information seemed startling, it was no more than we had already seen in the United States. There, when the tax rate on the highest earners was reduced from 70 per cent. to 50 per cent., the top earners paid not $34 billion into the tax kitty but $42 billion.
    There is other evidence. Perhaps the most dramatic example was given to me in a reply by my right hon. Friend the Financial Secretary to the Treasury on 6 November.
    He said:
    "In 1978–79 … 3·5 per cent. of taxpayers … paid tax at higher rates. They contributed 20 per cent. of the total income tax yield … In 1986–87, about 5 per cent. of taxpayers pay at higher rates and they contribute 27 per cent. of the yield."—[Official Report, 6 November 1986; Vol. 103, c. 519.]

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    Those figures speak for themselves. We all suspected that they would be the case. Now it is not theory but irrefutable evidence, which comes from the Inland Revenue, and would presumably be accepted on both sides of the House as accurate.
    In the light of that evidence, to call for an increase in taxation as a direct way to help the poor is a calculated deceit. It does not work that way, not because of some quirk of arithmetic but because no policy that has as its avowed intent the pillaging of one section of society by another can be right. One does not have to quote well-known excerpts from John Donne to understand that. However, it furthers the language of the class war. What possible relevance have the ravings of class warriors to the good of society?
    I can welcome the measures set out in the Gracious Speech because in all respects, and certainly with regard to the economy, those policies benefit not just one section of society at the expense of another but society as a whole. That is the business that the Conservative party is in. The pity of it is that the rhetoric from the Labour party in the country promotes the idea that one strengthens the weak by weakening the rich. These policies are designed not to benefit society as a whole but to resurrect and inflame class war. That cannot be right, in the interests of society as a whole.
    9.1 pm
    Mr. Nicholas Budgen: A consensus has emerged on the Conservative Benches about tax cuts. We came to that consensus from different positions. It is not particularly useful to be like the Irishman and say, "I would not have started from there." I regret that public expenditure has once again risen in a way that was not anticipated and I regard that increase in public expenditure of about £10 billion over two years as no small matter. I have always preferred to see the funds of the nation fructify in the pockets of the citizen rather than be spent by the bureaucrats. However, anything I have to say about that will not be of any importance, so I might as well face the fact that that money will be spent. However, certain consequences flow from it.
    The Government are giving a dangerous impression to many people, in the belief that extra expenditure upon both education and health will solve the fundamental problems of those two services. It is obvious that substantial expenditure over a couple of years will not solve the fundamental problem of health, which is that we have a constantly expanding and sophisticated system of health care, meeting an unlimited demand in no way disciplined by price. Unless the Government say at some stage between now and the next general election that there will have to be some different system of financing the Health Service, if we attempt a different system, the Government will come up against a great deal of public opposition on the basis that the public have never anticipated a change in the way in which the Health Service has been financed and that they should have been told before the election, and that they have been conned.
    It will not be enough to give 25 per cent. over 18 months to the teachers and think that that will solve all the problems of education. I hope that the Government, having taken this decision to be generous with the taxpayers' money—they are not giving away their own
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    money, as they sometimes put it—that we shall see from now on that the fundamental problems of those two services are satisfactorily and truthfully discussed.
    I supported the Government between 1979 and 1983 and thought that I understood the arguments about monetary aggregates. I did not think that they were flawed. In just the same way I recollect supporting the arguments advanced between 1968 and 1971 when again monetary aggregates were thought to be important indicators of future inflation. Now we are taught that all that is wrong and we have returned to the Tory party's attitude towards monetary aggregates between 1971 and 1974. I regret that, but I must face the fact that once again that policy has been abandoned for a period.
    We must note some of the consequences of that abandonment. First, the Government will, obviously, find that they borrow money at higher interest rates than if the lenders were satisfied that the Government were constrained by an iron discipline. Secondly, the Government are in considerable difficulty, because, obviously, the Chancellor of the Exchequer wants some form of discipline. He wants the discipline of the European monetary system. I do not want the Government to take the United Kingdom into the EMS because it would be a major denial of our national sovereignty. It is not in any sense a minor or technical matter. I was disappointed when the Prime Minister in her recent interview with the Financial Times said that when we go into the EMS is merely a matter of technicality and timing. It is no such thing. If we join the EMS, we will surrender much of our control over economic policy to the so-called collective wisdom of the European Economic Community.
    The consensus that emerged during the debate among Conservative Members was, "All right, so once again we have given way on public expenditure." However, there are consequences and the principal one is that it will be no longer possible to hold out financial hopes of reductions in the standard rate of income tax. I hope that the Chancellor makes that clear. If he does not, he will unsettle the financial markets and he will find it more difficult and expensive to borrow money.
    If the Chancellor puts more strain on the interest rate mechanism as he approaches the general election, he will have a disagreeable dilemma ahead of him. Either he uses the interest rate weapon, which is politically disadvantageous, has an immediate effect on the retail price index and makes those who buy their houses fed up with him, or he does nothing about the interest rate weapon and stores up higher future rates of inflation for the country. I hope that he will say, "You, the nation, wanted your extra expenditure, particularly on education and health. We have given it to you, but there are consequences that flow from it. One of the consequences is, sadly, that we shall not be able to reduce the standard rate of income tax, as we had hoped." I was much encouraged by the observations of my right hon. Friend the Prime Minister to the Financial Times recently when she said that most of all she wished to see a reduction in taxation on the low paid.
    I expect that you, Mr. Speaker, and many other hon. Members received a document in the post today from the Federation of Master Builders. It points to the ever-present problem of the black economy. One way in which we can reduce its size is to reduce the burden of taxation on the low paid. I hope that we will tell people—particularly the caring classes of the SDP and the alliance,

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    who are so anxious to see increases in public expenditure in the belief that often it is other people's money being spent on their health and their children—that they have partly won but that they cannot have their tax cuts as well. We must now try to reduce the tax burden on the lower paid.
    9.10 pm
    Mr. Peter Shore: We are now approaching the end of our six-day debate on the Gracious Speech. Our debates this year have been given a special edge and flavour because of the almost universal sense that this is the last Queen's Speech of this Parliament, and that its contents could easily be discarded when the Prime Minister decides to cut and run before the end of the Session.
    The hon. Member for Stamford and Spalding (Sir K. Lewis) cast some doubt on this when he relayed to the House a report on the statement made by the Prime Minister in an interview earlier today. I, too, have seen the Press Association report of the Prime Minister's interview with ITN's "News at One", and in the midst of an extravagant polemic against the Labour party, she said:
    "I do not believe in dashing into an early election. We have a majority and people expect us to carry out the main part of our programme".
    That is entirely compatible with going to the country in March, May or June and not later than October. I think that has been very much in the Prime Minister's mind and in the minds of most hon. Members who have taken part in the debates this week.
    Indeed, even before the Queen's Speech was read there were unmistakable signs of battle preparations. The Chancellor of the Duchy launched his highly prejudiced and threatening assault on the independence of the BBC; the CBI at its Bournemouth conference silenced all its usual criticisms of Government industrial and economic policies and swung behind the Government with all the discipline of a Guards regiment; and the Chancellor in his autumn statement stunned the City and outraged Mr. Ferdinand Mount of The Spectator, by his sudden conversion to the doctrine of increasing public expenditure —at least for 1987–88 and 1988–89. As we heard a few moments ago, he did not exactly please his hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen).
    In the Queen's Speech itself the whiff of the hustings has seldom been absent from Ministers' speeches. The Prime Minister set the tone in her highly combative speech last Wednesday, and the Secretary of State for Education and Science followed with a deliberately provocative speech where he described the complex negotiations over the renumeration, duties and pay structure of the nation's teachers as a "fiasco". On Monday the Secretary of State for the Environment was so keen to attack Labour councils in particular and local government in general that he barely left himself space even to outline the legislative proposals in the Queen's Speech affecting local government.
    This afternoon the Chancellor of the Exchequer gave a third-rate party political which embarrassed and bored even the hon. Members who sit behind him. As my right hon. Friend the Member for Cardiff, South and Penarth (Mr. Callaghan) advised him, he should leave that sort of stuff to the Chancellor of the Duchy of Lancaster, who
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    does it much better and to whom it comes much more naturally, and he should remember that he is still the Chancellor of the Exchequer.
    Nevertheless, it is not only traditional but specially fitting that the Chancellor of the Exchequer should speak on the final day of this six-day debate, because the right hon. Gentleman was there at the beginning as Financial Secretary to the Treasury in 1979— the architect of the economic policies that we are now debating. It was the 1980 Red Book, which carried the right hon. Gentleman's name, that enunciated the Government's central economic doctrines—progressive reduction of the money supply as measured by sterling M3, a reduction of taxation as a proportion of gross national product, and
    "as a key element in this strategy, a reduction in public expenditure."
    The chapter on the medium-term financial strategy ended thus:
    "there would be no question of departing from the money supply policy, which is essential for the success of any anti-inflation strategy."
    What has happened? Money supply was supposed to fall as long ago as 1983–84 to a range between 4 and 8 per cent. In the event, in the last complete year£1985–86—il was recorded that the outturn of sterling M3 was no less than 16·4 per cent., and all the signs are that it will be higher still in the current year.
    The Chancellor now tells us that it was all a great mistake and that M3 money supply does not control or reflect the rate of inflation. Nevertheless, tight money policy, as represented by high interest rates, remains, and the minimum lending rate stands at 12 per cent.
    What of tax reductions? Some people have certainly benefited but, in 1978–79, tax receipts took 33·7 per cent. of gross domestic product whereas this year they will take 38 per cent. What makes this failure to reduce taxation all the more astonishing is the fact that the Chancellor, thanks to North sea oil, has received an additional £57 billion in revenue and a further £10 billion from the sale of public assets.
    What of public expenditure, the last of the pillars which would sustain the new economy? In 1978–79, public expenditure took 42·3 per cent. of gross domestic product. This year, the estimated outcome is 42·8 per cent. of GDP. Unhappily for Britain, the past seven years were not just a story of an intellectually arrogant Chancellor who got both the theory and the practice of macro-economics wrong and who has had to eat his own words and swallow his own Red Books; it is also the story of seven years of havoc, destruction and misery for thousands of firms and millions of people.
    As hon. Member after hon. Member today and yesterday have observed, there is, alas, nothing in the Queen's Speech which deals with the three crucial problems of the British economy — the level of unemployment, the decline in manufacturing industry and the growing crisis in our balance of payments. In spite of the much trumpeted fall in last month's figures—oh yes, we welcome that—in October 1986, for the seventh year running, the seasonally adjusted level of unemployment is higher than it was one year ago. It was 47,000 higher in October 1986 than it was in October last year.
    Even with the Government's heavily doctored figures, unemployment now stands at 3.168,000 — or 11·5 per cent. of the working population. That is a far higher figure than in any comparable industrial nation. Nor is there any

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    sign of real improvement other than the reduction in figures that may result from the redefinitions—they occur month after month—of the number of people who are unemployed.
    The autumn statement postulates, for national insurance purposes, 3,100,000 unemployed for 1986–87 and 3,050.000 unemployed for 1987–88. In the regional development submissions to the EEC this year, as my right hon. and hon. Friends have said, the Government's estimate of unemployment is still above 3 million in 1990.
    We must consider the sorry plight of Britain's manufacturing industry. We heard the Prime Minister's defence last Wednesday. She claimed that manufacturing output had risen since the 1983 election and that manufacturing investment had increased last year. Listening to the Prime Minister, as I have listened to other Ministers during the past few days, I was reminded of a slim volume that appeared some years ago, entitled "How to Lie with Statistics". One of the crucial things is carefully to select the base year. The Prime Minister knows perfectly well that she came to power not in 1983 but in 1979. The plain fact is that manufacturing output is still eight points lower this year than it was when her party came to power. Further, investment in manufacturing industry is over 17 per cent. down on what it was in 1979.
    As for investment in manufacturing industry being up last year, the Prime Minister omitted to tell us that the figures for this year show that it has fallen again below the 1985 level. As for manufacturing export volumes being at record levels, the right hon. Lady knows full well that manufacturing imports are at still higher levels. Indeed, the contrast is shown very clearly in a written answer of 6 May 1986. Taking 1980 as a base at 100, our volume of exports went up in the first quarter of 1986 to 102·6, whereas the figure in the import column had risen to 142·4. There have been some minor changes since then, but the broad orders of magnitude remain.
    As for the past four years, as the House knows, for the first time since we recorded trade flows in this country, Britain has become a net importer of manufactured goods. Indeed, in exactly six years, we have moved from a surplus of £5 billion in manufacturing trade to a deficit of £5 billion this year. The Secretary of State for Trade and Industry boasted yesterday, as did the Chancellor today, about the productivity gains that manufacturing industry has made. But the plain fact is that our competitors have also had productivity gains, and, in their case, backed up with far larger capital investment than British firms have been able to undertake. What matters is our relative strength—our international competitiveness. Here, the story is dismal indeed.
    In the first quarter of 1986—according to the last available IMF figures —as compared with the first quarter of 1979, we were 30 per cent. less competitive. Of course, there has been some improvement since the first quarter of 1986 simply because we have devalued by some 10 per cent. against the international basket of currencies. But, allowing for this, we are still some 20 per cent. less competitive today than we were in the spring of 1979. It is no wonder that our trade deficit in manufactured goods has grown and will continue to grow.
    The enthusiasts in favour of joining the EMS had better think very carefully about the full implications for a country which has not yet succeeded in establishing
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    competitiveness and sustained growth, of being locked into an exchange rate mechanism which would inflict German disciplines and German competitiveness upon the British economy.
    The third point I wish to make relates to the balance of payments. This year, 1986–87, despite our total self-sufficiency in oil and our net exports of some £6 billion of oil, we shall, according to the Government's autumn statement, be in balance of payments current account deficit to the tune of £1·5 billion. The Government carefully do not look beyond 1987, but the House will recall the IMF's world economic outlook report, which was published at the end of September this year. It looked to 1991, and said:
    "The position of the UK is projected to shift from a small surplus in 1986 to a sizeable deficit."
    The House will recall the report of last year's Select Committee in the other place on Britain's overseas trade. It, too, looked to 1990. On the assumption that we shall still be in balance on our oil trade by that date, it predicted that on present trends there would be a current account deficit that would amount to no less than £13 billion.
    For sheer, breathtaking optimism I do not think that I have ever read a statement that quite compares with what the Secretary for Trade and Industry told us yesterday:
    "My right hon. Friend the Chancellor set out the effect of that extremely clearly in his autumn statement. I have every confidence that we shall soon move back into surplus when the exchange rate and everything else has adapted to deal with the new circumstances. I have no qualms about the future course of the balance of payments."—[Official Report, 18 November 1986; Vol. 105, c. 469.]
    It is amazing that any responsible, senior economic Minister should dare to say that in the House in this autumn of 1986. It was an extraordinary statement.
    It is not just national economic failure for which we indict the Government. The Queen's Speech is bereft of proposals for dealing with the great divisions that have opened up in British society. The Government have been remarkably coy about publishing the figures relating to the increase in poverty in the United Kingdom. Nevertheless, thanks to the industry and persistence of my hon. Friend the Member for Birkenhead (Mr. Field), the DHSS slipped the figures for 1983 into the summer recess. They show that the number of people living on, or below, the supplementary benefit level has increased from 5·9 million in 1979 to 8·8 million in 1983. On very conservative estimates, the 1983 total will have reached the 10 million mark this year. That is an appalling figure, and means nearly one in five of our total population.
    What a contrast can be made with those at the other end of the scale. According to the Inland Revenue's statistics, there were roughly 1,000 individuals in the United Kingdom in 1978 with personal assets of more than £1 million. In 1983, there were 7,000 people with such assets, and there were no fewer than 11,000 people with assets of over fl million in 1984. That was all before the big bang opened up the prospect of very major gains in personal wealth.
    Mr. Nicholls rose—
    Mr. Shore: I listened to the hon. Gentleman. I understood his point, but I do not accept that analysis. When he looks more carefully into the matter, I think that he will find that the figures do not bear that out.
    The ever-growing gulf between north and south is the second major problem that I wish to touch on. I am glad

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    that the right hon. Member for Cambridgeshire, South-East (Mr. Pym) and my hon. Friend the Member for Sheffield. Attercliffe (Mr. Duffy) stressed the importance of regional imbalance. Of course, 11·5 per cent. is the national average for unemployment. But in the west midlands, Yorkshire, Humberside, the north-west, Scotland and Wales, unemployment stands at between 13 and 14 per cent. In the northern region, it stands at 16 per cent. For the south-east and East Anglia the figures are 8·4 per cent. and 8·7 per cent. respectively.
    Regional policy has in the past seven years virtually collapsed. The industrial development certificates have been abolished, assisted areas greatly reduced in size and the value of grants and tax allowances greatly reduced. In so far as we have a regional policy, it is no longer to bring work to unemployed workers but that workers have to migrate to wherever the jobs are. That is the "get on your bike" philosophy so vividly prescribed by the Chancellor of the Duchy of Lancaster.
    However, that retrograde policy is up against three major obstacles. First, the structure plans of the county councils in the south-east and south-west simply do not permit the necessary land for housebuilding to be made available. Secondly, even where the land is available, massive reduction in house building ensures a chronic housing shortage, particularly of housing to let in the greater part of southern England. Thirdly, as a consequence of the shortage of land and houses, the price of houses in the London area and the commuter districts has soared. A semi-detached house of similar quality costs two to three times more in London and the commuter areas around our capital city than in the midlands, the north, the north-west, Wales or Scotland.
    As people must have homes in order to work, we now have the absurd position of actual labour shortages in parts of the south-east. People are able and willing to do the work, but as they are unable to find accommodation they are forced to stay put in the north. The third of our social divisions which has been vastly accentuated is the concentration of poverty and unemployment in the inner cities of our major conurbations. The Government have never challenged the special partnership status that the previous Labour Government accorded to the seven most deprived inner-city areas of Britain. Yet they have taken away from precisely those areas through cuts in the housing investment programme and rate support grant cuts to the tune of £900 million a year. The final irony is that following this year's rate support grant order, no fewer than nine of the 14 district councils that are acknowledged to have the greatest need, have been rate-capped for alleged overspending.
    The prospect for our society after seven years of unrestrained Thatcherism is grim indeed. It is against that background of social crisis and economic failure that we have to judge this year's Queen's Speech. What have the Government to say about all these economic and social problems? They say just two things. First:
    "My Government's firm monetary and fiscal policies will continue to restrain inflation and foster the conditions necessary for further sustained economic growth."
    Secondly, they say:
    "My Government will maintain firm control of public expenditure, so that it may continue to fall as a proportion of the Nation's income and permit further reductions in the burden of taxation."
    That is hardly a clarion call.
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    A week last Monday at the Lord Mayor's banquet, the Prime Minister noted the city's memorial to William Pitt the Younger, and quoted the following lines:
    "He repaired the exhausted revenue; he revived and "invigorated the commerce and prosperity of the country; he re-established the public credit on deep and sure foundations."
    The Prime Minister went on to say:
    "I would like to think that the same will be said of this Government."
    It will not be said of this Government. Rather, it will be said that the Prime Minister and her Cabinet squandered the greatest opportunity—the vast output of North sea oil—that any British Government have had this century; that they have piled taxes and burdens upon the people and squandered the great public assets that successive Governments have built up since the war; that they have brought poverty and unemployment to millions of our fellow countrymen; and that they have divided the country afresh, rich and poor, north and south. They are, in sum, a Government unworthy of the people whom they claim to represent.
    9.34 pm
    The Lord Privy Seal and Leader of the House of Commons (Mr. John Biffen): This debate began one week ago with distinguished speeches from my right hon. and learned Friend the Member for Hexham (Mr. Rippon) and my hon. Friend the Member for Oxford, East (Mr. Norris). Both contributions had a lightness of touch which launched the debate in a happy manner. The House will be the poorer without my right hon. and learned Friend the Member for Hexham after the next election.
    Mr. Kinnock: He is leaving the sinking ship.
    Mr. Biffen: The Leader of the Opposition should not start prattling about sinking ships.
    Mr. Kinnock: I was simply pointing out, in the same felicitous tone as the Leader of the House, that the departure of the right hon. and learned Member for Hexham (Mr. Rippon) and of the Conservative Government will be one of the few instances in history in which the ship sank because it got lighter.
    Mr. Biffen: The House will have the rest of the Session to work out that convoluted humour. It will also console itself with the continuing membership of my hon. Friend the Member for Oxford, East as he converts that area into a bastion of Toryism.
    The debate on the Address has frequently been the occasion for the House to welcome maiden speeches. On this occasion there have been no maiden speeches, but we were in the unusual position of seeing a new Member introduced during the course of the debate. I am sure that the House will wish to join me in welcoming the new Member for Knowsley, North (Mr. Howarth). It is not for me to intrude into the local difficulties of the Labour party on Merseyside, but I believe that the hon. Gentleman is the standard bearer of authentic Socialism—I can think of no more wounding comment than that.
    The Queen's Speech and the debate on the Humble Address are essentially traditional occasions. Although the subjects chosen for each day's debate vary from year to year, it is customary for the Leader of the House to wind up the whole debate. On this occasion, although speaking traditionally, I propose to introduce an innovation by giving the House some modest but early guidance about

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    the expected dates of the Easter recess. [Interruption.] There seems to be greater alertness about this than about the size of the public sector borrowing requirement. The innovation arises because of the late timing of Easter and I appreciate that for political and other reasons Members would like to know the Government's intentions. I can tell the House that it is our intention that the Easter recess should largely precede rather than, as is customary, follow Easter day. The exact dates will, of course, be subject to the progress of business.
    In the present climate of speculation about the date of the general election, the announcement of any date, however anodyne, causes acute fever among election spotters. Nor is it merely the announcement of dates which serves to fuel the speculation — on this occasion the contents of the Queen's Speech itself have been seen by some as raising the temperature of election fever. As a business manager, I strongly contest the view of those who see the programme outlined in the Queen's Speech as "disposable" and "throwaway". I believe that serious consideration of the measures contained in it show it to be a programme which will properly engage the parliamentary resources of the Session. In that context, I was delighted at the wholly unrehearsed intervention of my hon. Friend the Member for Stamford and Spalding (Sir K. Lewis) earlier today when he arrived, like one bringing the good news from Ghent or wherever in more poetic circumstances, to assure the House that there would not be an early election.
    I have noticed a particular nervousness on the Opposition Benches. All the talk, frenzied chatter, neurosis and advice, especially from the right hon. Member for Plymouth, Devonport (Dr. Owen) who said we should cut and get the beastly business over, as if the prisoner found himself in the condemned cell without even a packet of razor blades, is to be contrasted with the quiet confidence of the Conservative Members, who know that we are here to carry out a task for the Session.
    The Queen's Speech refers to 19 measures but the full programme, of course, is more extensive than those measures mentioned specifically. Last Session we introduced 34 Bills, and I do not expect this Session's programme to fall far short of that total.
    As I suggested earlier, there has been comment that this Session's programme is lacking in substance and contentiousness. To rebut that, I need do no more than draw the House's attention to a few of the Bills which will be before us in the forthcoming months. They underline the priorities of the Government.
    Among the most important must be the Criminal Justice Bill. Its provisions support our determination to uphold the protective role of law, without which no social order can survive. In particular, the Bill contains wide powers for the confiscation of the proceeds of profitable crime, measures for tackling fraud and provisions to improve the position of the victims of crime.
    Secondly, I refer to the Consumer Protection Bill which we introduced yesterday in another place. That represents a major gain for consumers, especially in terms of safety. In particular it will ensure that consumers can more readily secure compensation for personal injuries caused by defective products, and will require suppliers to ensure the safety of all consumer goods, not just those covered by specific safety regulations. It will also give consumers
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    greater protection from misleading price indications such as bogus "bargain offers". Furthermore, it should ease trade within the European Community through similar national product liability laws. I believe that it will be widely welcomed.
    Finally, I draw the House's attention to the Bill which is designed to replace rates with a community charge as the basis for local authority finance in Scotland. My right hon. and learned Friend the Secretary of State for Scotland has said that that Bill will soon be presented to the House, and furthermore its general contents have been widely anticipated. I accept at once that that is a contentious matter, but at long last the acute problems of local authority finance are being converted from academic and armchair analysis to the testing house of political debate and decision.
    I shall now refer to some of the more general issues that have featured in the debate, not only this afternoon but through the several days that have preceded it. There are two topics on which I think the House would wish to reflect, if Opposition Members are so benign as to reflect at this stage of the debate. The first is defence and the second is the economy.
    As ever, my right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath) had some harsh things to say about party conferences, with which I wholly concur. From time to time it is difficult to avoid them and it is even possible that they do have some significance. Therefore, I feel that I have to pay some regard to the party conference of the Labour party at Blackpool this year when decisions were taken to decommission Polaris, for the immediate cancellation of Trident and for the removal of United States nuclear bases from Britain. [HoN. MEMBERS: "Hear, hear. It is so nice to know that the party conference decisions are now being echoed to the rafters in this Chamber.
    The first and most charitable thing that one can say about those decisions is that they set out the long-standing hostility of some Labour Members to nuclear weapons in any case. [HON. MEMBERS: "Hear, hear."] I am grateful for the confirmation. Secondly, they demonstrate the significance and influence of neutralists within the Labour party. What we are now seeing, not in any crisp or concise evolution, is the drift towards a sort of undefended fortress Britain.
    The right hon. Member for Bethnal Green and Stepney (Mr. Shore) was kind enough to refer to the younger Pitt in his speech. He had not acquainted me with his intention of doing so. I do not object, but I am rather pleased because I also have a quotation from the younger Pitt, which is apposite. At this stage of the 20th century, this country exercises, in the world at large, only a modest amount of direct authority. It exercises influence through the network of alliances to which it assigns itself. What is now proposed has to be tested against Pitt's observation:
    "England has saved herself by her exertions, and will, as I trust, save Europe by her example."
    What do we suppose will be the influence of that conference defence decision on the other countries with whom we are neighbours and close allies? What will be the impact? What will be the influence on the Federal Republic of Germany? Is it not just the type of decision that will sustain the strong anti-nuclear sentiments of the SPD—the Social Democratic party—in Germany, which

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    is committed to the withdrawal of all nuclear weapons from German soil? Is not that just the sort of boost that it would wish from a major partner in NATO?
    What will he the impact in France, which for decades has had merely an arm's-length relationship with many of its NATO commitments? Is not that the sort of decision that will reinforce that French ambiguity about its membership of NATO? Finally, what will be the influence exerted in the United States? Is it not precisely the decision that will confirm the views of isolationists and others in the United States, who would rather deal direct with the Soviet Union than have any regard for the European aspect of the NATO partnership? Make no mistake, what was decided at Blackpool was a dangerous leap into the dark. It is much more about neutralism than about recasting the NATO Alliance. The electorate will have their opportunity to make their judgment. [HON. MEMBERS. "Hear, hear."I Once again, we are delighted to know from the applause of Opposition Members that they want this matter to be at the forefront as and when the popular decision comes.
    I now come to economic affairs. [Laughter.] I can understand the nervousness of those on Opposition Benches, but it is clear that that is a major matter for the House as it surveys the Session ahead. I suspect that there will be an amplitude of economic debate, even outside the situations specifically provided for in the Queen's Speech. Today's debate will take forward the broad strategy of the Treasury Bench and the Conservative party to promote a social market economy, the key feature of which is monetary stability, a spread of ownership and institutional reform. As those factors will detain us during the coming Session, I shall say a quick word about each.
    The central feature of the Government's economic policy must be the tremendous success in bringing down the rate of inflation to where it now stands at 3 per cent. That remains the continuing objective, and this afternoon my right hon. Friend the Chancellor has made it more than abundantly clear that in no sense does the autumn statement and the public spending proposals therein contained infringe or undermine that objective. My right hon. Friend the Chancellor said:
    "The Government's fiscal stance has been clearly set out in the medium-term financial strategy published at the time of this year's Budget. There will he no relaxation of that stance."—[Official Report, 6 November 1986; Vol. 103, c. 1084.]
    Those who care to read this afternoon's debate will know that it is accepted that inflation has a consequence for tax policy. The Government are determined to place the integrity of an inflation policy ahead of any other short-term considerations that might have attracted others—such as in the 1974 Budget, I recollect, when the right hon. Member for Leeds, East (Mr. Healey) had the most contrived reduction of value added tax — the most cynical piece of statistical dressing that this country has ever suffered.
    The other point which is also clear is that the policy of stable prices, and the evident success that is represented by today's inflation figure of around 3 per cent., is now being partnered by a growing record of sustained economic growth. For those who disparage the figure because it is but 3 per cent., the truth is that that is very much a good performance given the historical standards of Britain—a point which was made well by my hon. Friend the Member for Suffolk, South (Mr. Yeo).
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    The other desperately miserable and demoralising news for the Opposition Benches is that now there appears to be the likelihood of a new trend in the employment figures. For the past three months the average fall has been 19,000. The unfilled vacancies, a figure that cannot conceivably have been affected by the changes in the count, now stand at 213,000—the highest figure for seven years. We shall look forward to continuing debates about this and related subjects in the months that lie ahead.
    Let me deal with the second aspect of the social market economy as it is now being developed by the Conservative party and the Government. I refer to the spread in ownership which was referred to as — we shall never know the context, but those in the Chamber, as I was, will have heard the description — immoral when describing the policies of privatisation and the wider spread of possession that goes with it. That is not just a question of shares that have hitherto been in state-owned activities; there are 2 million more home owners now than there were in 1979, 1 million of whom are accounted for by the switch from local authority ownership to home ownership.
    We have had an ambitious privatisation programme which has been highly successful. There has been awakened a public interest in the concept of share owning which is immensely disagreeable for the Opposition Benches because they know that at the end of the day popular ownership in Britain's assets lies uneasily with their concepts of Socialism and centralism.
    Twelve per cent. of the adult population are now share owners and after the next Parliament — I speak in anticipation of a future Queen's Speech—there will be every intention to take that ahead with further privatisation and an increase in the imaginative tax plans that my right hon. Friend the Chancellor has developed to encourage a popular basis of ownership in Britain.
    My third point relates to the reform of institutions. Reference was made to that this afternoon. In this Parliament there has been major trade union reforin—a measure which has received wide acclamation on the Conservative Benches. There have been few hesitations about the primacy of that programme.
    Leaving aside the libertarian arguments, which are substantial and meritorious, we see strikes at their lowest level for about 50 years. The message that the House must convey to the wider public has to do with whether that institutional reform is to stand or whether it will be challenged in any effective sense by the Opposition Benches.
    Mr. Nicholls: My right hon. Friend will accept that we already know the threat posed to that legislation by the Labour party. Is he able to understand at all the different strands on it in the alliance, and from his readings of alliance policies, can he say how much the alliance threatens that legislation?
    Mr. Biffen: That shows the great merit of having a Queen's Speech and a parliamentary Session in which such matters can be further canvassed because they cannot be canvassed during the interstices of my peroration this evening. But I agree with my hon. Friend.
    There remains also the question of other areas of major institutional reform, and here I echo the remarks of my right hon. Friend the Member for Cambridgeshire, South-East (Mr. Pym) when he said that education is an area in which there could now be a major development. I am

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    certain that my right hon. Friend the Secretary of State for Education and Science will be anxious to build upon the Education Act 1986, which has given a sign already of the importance that we attach to strengthening the school as a major point of decision in the education process. I think that there will be great encouragement from the development of the city technology colleges, which is an attempt to bring innovation and a return of the sense of excellence to our education system. When it comes to further reforms, my right hon. Friend will be looking round and about to gain inspiration. Perhaps I could do no better than to quote the spokesman of the Council of Local Education Authorities in the February 1985 edition of "Education". He said:
    "We now have irrefutable evidence of the Burnham Committee's inadequacy in resolving the current problems of pay and conditions of service."
    These are all areas that will be available for the House to debate in the Session that will unroll and reflect the Queen's Speech. The Queen's Speech outlines policies that will sustain and extend the social market economy that was initiated in 1979. That approach to our national afairs will be subject to sustained debate in this place and in another place over the coming months, and that debate will not be only for the self-appointed elitists of Westminster and Whitehall and the quality end of Fleet street. The debate is intended for popular judgment and endorsement, and that is what causes anxieties on the Opposition Benches.
    The two sides of the House are divided by much more than a carpeted strip. Labour Members, no less than Liberals and Social Democrats, have a series of common beliefs in the conduct of economic policies. They believe in substantially higher public spending, that would be partly matched by higher taxes and partly by greater borrowing. They believe in greater Whitehall regulation and control of the economy. The scope is considerable, ranging from the political direction of pension funds to a tentative revival of price and incomes policies. The right hon. Member for Devonport, the leader of the Social Democratic party, helpfully reminded the House of how significant all that could be if his party were to have some decisive say.
    This is a rehabilitation of the policies of Labour Governments of the mid-1960s and late 1970s. Those were the policies that were cheerfully and jointly undertaken by the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) and by Mrs. Shirley Williams, the dream ticket of yesteryear. I have no doubt that there is, even now, a Lib-Lab common sympathy that could sustain these policies should the parliamentary situation require it. It is the determination of the Government side of the House, however, that the Leader of the Opposition should not be elected to this Treasury Bench, whether or not he receives the support of the Liberals and Social Democrats.
    The present economic policies of the Opposition look back to the 1970s, back to the inflation of those years and the imposed advice of the International Monetary Fund. That is the most unproductive form of nostalgia. The Opposition's defence policies are a gamble and no more than the uncertain wisdoms of a Labour party conference. A nation's security deserves more than that.
    The Queen's Speech—[Interruption.] I am sorry that it is so wounding for Opposition Members as the field is
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    drawn out across which we shall debate the content of the Queen's Speech during the coming Session, but I want them to be under no misapprehension. We intend to carry this programme through to its conclusion. It is a constructive Queen's Speech and it happens to serve the admirable task of enabling the House in its debates, arguments and postures to show to the world outside, and in advance, just what is at stake at the next general election. Whether that is in terms of defence or an effective economic policy, we shall look forward to the test, will relish the challenge, and will respect the verdict.
    Question put, That the amendment be made:—
    The House divided: Ayes 206, Noes 354.

    Division No. 2]

    [10.00 pm

    AYES

    Abse, Leo

    Dunwoody, Hon Mrs G.

    Adams, Allen (Paisley N)

    Eadie, Alex

    Alton, David

    Eastham, Ken

    Anderson, Donald

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

    Archer, Rt Hon Peter

    Evans, John (St. Helens N)

    Ashley, Rt Hon Jack

    Fatchett, Derek

    Ashton, Joe

    Faulds, Andrew

    Atkinson, N. (Tottenham)

    Field, Frank (Birkenhead)

    Bagier, Gordon A. T.

    Fields, T. (L'pool Broad Gn)

    Banks, Tony (Newham NW)

    Fisher, Mark

    Barnett, Guy

    Flannery, Martin

    Barron, Kevin

    Foot, Rt Hon Michael

    Beckett, Mrs Margaret

    Foster, Derek

    Beith, A. J.

    Fraser, J. (Norwood)

    Bell, Stuart

    Freeson, Rt Hon Reginald

    Benn, Rt Hon Tony

    Freud, Clement

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

    Garrett, W. E.

    Bermingham, Gerald

    George, Bruce

    Bidwell, Sydney

    Gilbert, Rt Hon Dr John

    Blair, Anthony

    Godman, Dr Norman

    Boothroyd, Miss Betty

    Golding, Mrs Llin

    Bray, Dr Jeremy

    Gould, Bryan

    Brown, Gordon (D'f'mline E)

    Gourlay, Harry

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

    Hamilton, James (M'well N)

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

    Hamilton, W. W. (File Central)

    Brown, Ron (E'burgh, Leith)

    Hancock, Michael

    Bruce, Malcolm

    Hardy, Peter

    Buchan, Norman

    Harrison, Rt Hon Walter

    Callaghan, Rt Hon J.

    Hart, Rt Hon Dame Judith

    Callaghan, Jim (Heyw'd & M)

    Hattersley, Rt Hon Roy

    Campbell, Ian

    Healey, Rt Hon Denis

    Campbell-Savours, Dale

    Heffer, Eric S.

    Canavan, Dennis

    Hogg, N. (C'nauld & Kilsyth)

    Carlile, Alexander (Montg'y)

    Home Robertson, John

    Carter-Jones, Lewis

    Howells, Geraint

    Cartwright, John

    Hughes, Dr Mark (Durham)

    Clark, Dr David (S Shields)

    Hughes, Roy (Newport East)

    Clarke, Thomas

    Hughes, Simon (Southwark)

    Clay, Robert

    Hume, John

    Clelland, David Gordon

    Janner, Hon Greville

    Cohen, Harry

    Jenkins, Rt Hon Roy (Hillh'd)

    Coleman, Donald

    Johnston, Sir Russell

    Conlan, Bernard

    Jones, Barry (Alyn & Deeside)

    Cook, Frank (Stockton North)

    Kaufman, Rt Hon Gerald

    Cook, Robin F. (Livingston)

    Kilfedder, James A.

    Corbett, Robin

    Kinnock, Rt Hon Neil

    Corbyn, Jeremy

    Kirkwood, Archy

    Craigen, J. M.

    Lambie, David

    Cunliffe, Lawrence

    Lamond, James

    Cunningham, Dr John

    Leadbitter, Ted

    Dalyell, Tarn

    Leighton, Ronald

    Davies, Rt Hon Denzil (L'lli)

    Lewis, Ron (Carlisle)

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

    Lewis, Terence (Worsley)

    Deakins, Eric

    Livsey, Richard

    Dewar, Donald

    Lloyd, Tony (Stretford)

    Dixon, Donald

    Lofthouse, Geoffrey

    Dobson, Frank

    Loyden, Edward

    Dormand, Jack

    McCartney, Hugh

    Douglas, Dick

    McDonald, Dr Oonagh

    Dubs, Alfred

    McGuire, Michael

    Duffy, A. E. P.

    McKay, Allen (Penistone)

    657

    McKelvey, William

    Rogers, Allan

    MacKenzie, Rt Hon Gregor

    Rooker, J. W.

    Maclennan, Robert

    Ross, Ernest (Dundee W)

    McNamara, Kevin

    Ross, Stephen (Isle of Wight)

    McTaggart, Robert

    Rowlands, Ted

    McWilliam, John

    Sheerman, Barry

    Madden, Max

    Sheldon, Rt Hon R.

    Mallon. Seamus

    Shields, Mrs Elizabeth

    Marek, Dr John

    Shore, Rt Hon Peter

    Marshall, David (Shettleston)

    Short, Ms Clare (Ladywood)

    Martin, Michael

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

    Mason, Rt Hon Roy

    Silkin, Rt Hon J.

    Maxton, John

    Skinner, Dennis

    Maynard, Miss Joan

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

    Meacher, Michael

    Smith, Cyril (Rochdale)

    Meadowcroft, Michael

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

    Michie, William

    Soley, Clive

    Mikardo, Ian

    Steel, Rt Hon David

    Millan, Rt Hon Bruce

    Stewart, Rt Hon D. (W Isles)

    Morris, Rt Hon A. (W'shawe)

    Stott, Roger

    Morris, Rt Hon J. (Aberavon)

    Strang, Gavin

    Nellist, David

    Straw, Jack

    Oakes, Rt Hon Gordon

    Thomas, Dafydd (Merioneth)

    O'Brien, William

    Thomas, Dr R. (Carmarthen)

    O'Neill, Martin

    Thorne, Stan (Preston)

    Orme. Rt Hon Stanley

    Tinn, James

    Owen, Rt Hon Dr David

    Torney, Tom

    Park, George

    Wainwright, R.

    Parry, Robert

    Wallace, James

    Patchett, Terry

    Warden, Gareth (Gower)

    Pavitt, Laurie

    Wareing, Robert

    Pendry, Tom

    Weetch, Ken

    Penhaligon, David

    Welsh, Michael

    Pike, Peter

    White. James

    Powell, Raymond (Ogmore)

    Wigley, Dafydd

    Radice, Giles

    Williams, Rt Hon A.

    Randall, Stuart

    Wilson, Gordon

    Raynsford, Nick

    Winnick, David

    Redmond, Martin

    Woodall, Alec

    Rees, Rt Hon M. (Leeds S)

    Wrigglesworth, Ian

    Richardson, Ms Jo

    Roberts, Ernest (Hackney N)

    Tellers for the Ayes:

    Robertson, George

    Mr. Ron Davies and

    Robinson, G. (Coventry NW)

    Mr. Sean Hughes.

    NOES

    Adley, Robert

    Brandon-Bravo, Martin

    Aitken, Jonathan

    Bright, Graham

    Alexander, Richard

    Brinton, Tim

    Alison, Rt Hon Michael

    Brittan, Rt Hon Leon

    Amess, David

    Brooke, Hon Peter

    Ancram, Michael

    Brown, M. (Brigg & Cl'thpes)

    Arnold, Tom

    Browne, John

    Ashby, David

    Bruinvels, Peter

    Aspinwall, Jack

    Bryan, Sir Paul

    Atkins, Rt Hon Sir H.

    Buchanan-Smith, Rt Hon A.

    Atkins, Robert (South Ribble)

    Buck, Sir Antony

    Atkinson, David (B'm'th E)

    Budgen, Nick

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

    Burt, Alistair

    Baker, Nicholas (Dorset N)

    Butcher, John

    Baldry, Tony

    Butler, Rt Hon Sir Adam

    Banks, Robert (Harrogate)

    Butterfill, John

    Batiste, Spencer

    Carlisle, John (Luton N)

    Beaumont-Dark, Anthony

    Carlisle, Kenneth (Lincoln)

    Bellingham, Henry

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

    Bendall, Vivian

    Carttiss, Michael

    Benyon, William

    Cash, William

    Bevan, David Gilroy

    Chalker, Mrs Lynda

    Biffen, Rt Hon John

    Channon, Rt Hon Paul

    Biggs-Davison, Sir John

    Chapman, Sydney

    Blackburn, John

    Chope, Christopher

    Blaker, Rt Hon Sir Peter

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

    Body, Sir Richard

    Clark, Dr Michael (Rochford)

    Bonsor, Sir Nicholas

    Clark, Sir W. (Croydon S)

    Bottomley, Peter

    Clarke, Rt Hon K. (Rushcliffe)

    Bottomley, Mrs Virginia

    Clegg, Sir Walter

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

    Cockeram, Eric

    Bowden, Gerald (Dulwich)

    Colvin, Michael

    Boyson, Dr Rhodes

    Conway, Derek

    Braine, Rt Hon Sir Bernard

    Coombs, Simon

    658

    Cope, John

    Howard, Michael

    Cormack, Patrick

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

    Corrie, John

    Howarth, Gerald (Cannock)

    Cranborne, Viscount

    Howell, Rt Hon D. (G'ldford)

    Critchley, Julian

    Howell, Ralph (Norfolk, N)

    Crouch, David

    Hubbard-Miles, Peter

    Currie, Mrs Edwina

    Hunt, David (Wirral W)

    Dickens, Geoffrey

    Hunt, John (Ravensbourne)

    Dorrell, Stephen

    Hunter, Andrew

    Douglas-Hamilton, Lord J.

    Hurd, Rt Hon Douglas

    Dover, Den

    Irving, Charles

    du Cann, Rt Hon Sir Edward

    Jackson, Robert

    Dunn, Robert

    Jenkin, Rt Hon Patrick

    Durant, Tony

    Jessel, Toby

    Edwards, Rt Hon N. (P'broke)

    Johnson Smith, Sir Geoffrey

    Emery, Sir Peter

    Jones, Gwilym (Cardiff N)

    Evennett, David

    Jones, Robert (Herts W)

    Fairbairn, Nicholas

    Jopling, Rt Hon Michael

    Fallon, Michael

    Joseph, Rt Hon Sir Keith

    Farr, Sir John

    Kellett-Bowman, Mrs Elaine

    Favell, Anthony

    Kershaw, Sir Anthony

    Fenner, Dame Peggy

    Key, Robert

    Finsberg, Sir Geoffrey

    King, Roger (B'ham N'field)

    Fletcher, Alexander

    King, Rt Hon Tom

    Fookes, Miss Janet

    Knight, Greg (Derby N)

    Forman, Nigel

    Knight, Dame Jill (Edgbaston)

    Forsyth, Michael (Stirling)

    Knowles, Michael

    Forth, Eric

    Knox, David

    Fowler, Rt Hon Norman

    Lamont, Rt Hon Norman

    Fox, Sir Marcus

    Lang, Ian

    Franks, Cecil

    Latham, Michael

    Fraser, Peter (Angus East)

    Lawler, Geoffrey

    Freeman, Roger

    Lawrence, Ivan

    Fry, Peter

    Lawson, Rt Hon Nigel

    Gale, Roger

    Lee, John (Pendle)

    Galley, Roy

    Leigh, Edward (Gainsbor'gh)

    Gardiner, George (Reigate)

    Lennox-Boyd, Hon Mark

    Gardner, Sir Edward (Fylde)

    Lester, Jim

    Gilmour, Rt Hon Sir Ian

    Lewis, Sir Kenneth (Stamf'd)

    Glyn, Dr Alan

    Lightbown, David

    Goodhart, Sir Philip

    Lilley, Peter

    Goodlad, Alastair

    Lloyd, Sir Ian (Havant)

    Gorst, John

    Lloyd, Peter (Fareham)

    Gow, Ian

    Lord, Michael

    Gower, Sir Raymond

    Luce, Rt Hon Richard

    Grant, Sir Anthony

    Lyell, Nicholas

    Greenway, Harry

    McCrindle, Robert

    Gregory, Conal

    McCurley, Mrs Anna

    Griffiths, Sir Eldon

    Macfarlane, Neil

    Griffiths, Peter (Portsm'th N)

    MacGregor, Rt Hon John

    Grist, Ian

    MacKay, Andrew (Berkshire)

    Ground, Patrick

    MacKay, John (Argyll & Bute)

    Grylls, Michael

    Maclean, David John

    Gummer, Rt Hon John S

    McLoughlin, Patrick

    Hamilton, Neil (Tatton)

    McNair-Wilson, M. (N'bury)

    Hanley, Jeremy

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

    Hannam, John

    McQuarrie, Albert

    Hargreaves, Kenneth

    Major, John

    Harris, David

    Malins, Humfrey

    Harvey, Robert

    Malone, Gerald

    Havers, Rt Hon Sir Michael

    Maples, John

    Hawkins, Sir Paul (N'folk SW)

    Marland, Paul

    Hawksley, Warren

    Marshall, Michael (Arundel)

    Hayes, J.

    Mates, Michael

    Hayhoe, Rt Hon Barney

    Mather, Carol

    Hayward, Robert

    Maude, Hon Francis

    Heath, Rt Hon Edward

    Mawhinney, Dr Brian

    Heathcoat-Amory, David

    Mayhew, Sir Patrick

    Heddle, John

    Mellor, David

    Henderson, Barry

    Merchant, Piers

    Heseltine, Rt Hon Michael

    Meyer, Sir Anthony

    Hickmet, Richard

    Miller, Hal (B'grove)

    Higgins, Rt Hon Terence L.

    Mills, Iain (Meriden)

    Hill, James

    Mills, Sir Peter (West Devon)

    Hind, Kenneth

    Miscampbell, Norman

    Hirst, Michael

    Mitchell, David (Hants NW)

    Hogg, Hon Douglas (Gr'th'm)

    Moate, Roger

    Holland, Sir Philip (Gedling)

    Monro, Sir Hector

    Holt, Richard

    Montgomery, Sir Fergus

    Hordern, Sir Peter

    Moore, Rt Hon John

    659

    Morrison, Hon C. (Devizes)

    Smith, Sir Dudley (Warwick)

    Morrison, Hon P. (Chester)

    Smith, Tim (Beaconsfield)

    Moynihan, Hon C.

    Soames, Hon Nicholas

    Mudd, David

    Speed, Keith

    Murphy, Christopher

    Speller, Tony

    Neale, Gerrard

    Spencer, Derek

    Needham, Richard

    Spicer, Jim (Dorset W)

    Nelson, Anthony

    Spicer, Michael (S Worcs)

    Neubert, Michael

    Stanbrook, Ivor

    Nicholls, Patrick

    Steen, Anthony

    Normanton, Tom

    Stern, Michael

    Norris, Steven

    Stewart, Allan (Eastwood)

    Onslow, Cranley

    Stewart, Andrew (Sherwood)

    Oppenheim, Phillip

    Stewart, Ian (Hertf'dshire N)

    Oppenheim, Rt Hon Mrs S.

    Sumberg, David

    Ottaway, Richard

    Tapsell, Sir Peter

    Page, Richard (Herts SW)

    Taylor, John (Solihull)

    Parkinson, Rt Hon Cecil

    Taylor, Teddy (S'end E)

    Patten, J. (Oxf W & Abgdn)

    Tebbit, Rt Hon Norman

    Pattie, Geoffrey

    Temple-Morris, Peter

    Pawsey, James

    Thatcher, Rt Hon Mrs M.

    Peacock, Mrs Elizabeth

    Thompson, Donald (Calder V)

    Percival, Rt Hon Sir Ian

    Thompson, Patrick (N'ich N)

    Pollock, Alexander

    Thorne, Neil (Ilford S)

    Portillo, Michael

    Thornton, Malcolm

    Powell, William (Corby)

    Thurnham, Peter

    Powley, John

    Townend, John (Bridlington)

    Prentice, Rt Hon Reg

    Townsend, Cyril D. (B'heath)

    Price, Sir David

    Tracey, Richard

    Prior, Rt Hon James

    Trippier, David

    Proctor, K. Harvey

    Trotter, Neville

    Pym, Rt Hon Francis

    Twinn, Dr Ian

    Raffan, Keith

    van Straubenzee, Sir W.

    Raison, Rt Hon Timothy

    Vaughan, Sir Gerard

    Rathbone, Tim

    Viggers, Peter

    Rees, Rt Hon Peter (Dover)

    Waddington, David

    Renton, Tim

    Wakeham, Rt Hon John

    Rhodes James, Robert

    Waldegrave, Hon William

    Rhys Williams, Sir Brandon

    Walden, George

    Ridley, Rt Hon Nicholas

    Walker, Rt Hon P. (W'cester)

    Ridsdale, Sir Julian

    Wall, Sir Patrick

    Rifkind, Rt Hon Malcolm

    Waller, Gary

    Rippon, Rt Hon Geoffrey

    Walters, Dennis

    Roberts, Wyn (Conwy)

    Ward, John

    Robinson, Mark (N'port W)

    Wardle, C. (Bexhill)

    Roe, Mrs Marion

    Watson, John

    Rossi, Sir Hugh

    Watts, John

    Rost, Peter

    Wells, Sir John (Maidstone)

    Rowe, Andrew

    Wheeler, John

    Rumbold, Mrs Angela

    Whitfield, John

    Ryder, Richard

    Whitney, Raymond

    Sackville, Hon Thomas

    Wiggin, Jerry

    Sainsbury, Hon Timothy

    Wilkinson, John

    St. John-Stevas, Rt Hon N.

    Winterton, Mrs Ann

    Sayeed, Jonathan

    Winterton, Nicholas

    Scott, Nicholas

    Wolfson, Mark

    Shaw, Giles (Pudsey)

    Wood, Timothy

    Shaw, Sir Michael (Scarb')

    Yeo, Tim

    Shelton, William (Streatham)

    Young, Sir George (Acton)

    Shepherd, Colin (Hereford)

    Younger, Rt Hon George

    Shepherd, Richard (Aldridge)

    Shersby, Michael

    Tellers for the Noes:

    Silvester, Fred

    Mr. Robert Boscawen and

    Sims, Roger

    Mr. Tristan Garel-Jones.

    Skeet, Sir Trevor

    Question accordingly negatived.
    Amendment proposed, pursuant to Standing Order No. 32 (Calling of amendments at end of debate), at the end of the Question to add:
    But humbly regret that the Gracious Speech is irrelevant to the country's most pressing problems: unemployment, poverty, falling standards in the health and social services, and the serious decline in British manufacturing industry; believe that present Government policies have generated a short-term pre-election consumer boom, and that record levels of real interest rates and rising unit costs are undermining Britain's competitiveness; call on the Government to enter the exchange rate mechanism of the
    660
    European Monetary System, to adopt a more vigorous competition policy, and substantially to increase investment in skill training; further regret the inclusion in the Speech of a measure to replace domestic rates in Scotland with a regressive poll tax rather than a more equitable local income tax; and finally regret that, in what is likely to be the last Gracious Speech before the general election, there is no proposal to reform the electoral system for local, Westminster and European elections despite the deficiencies in the current system, which distorts the wishes of the people and produces divisive governments supported by only a minority of the electorate.—[Dr. Owen]
    Question put, That the amendment be made:
    The House divided: Ayes 26, Noes 352.

    Division No. 3]

    [10.14 pm

    AYES

    Beith, A. J.

    Owen, Rt Hon Dr David

    Bruce, Malcolm

    Penhaligon, David

    Carlile, Alexander (Montg'y)

    Ross, Stephen (Isle of Wight)

    Freud, Clement

    Shields, Mrs Elizabeth

    Hancock, Michael

    Smith, Cyril (Rochdale)

    Howells, Geraint

    Steel, Rt Hon David

    Hughes, Simon (Southwark)

    Thomas, Dafydd (Merioneth)

    Hume, John

    Wainwright, R.

    Jenkins, Rt Hon Roy (Hillh'd)

    Wallace, James

    Johnston, Sir Russell

    Wigley, Dafydd

    Kirkwood, Archy

    Wrigglesworth, Ian

    Livsey, Richard

    Maclennan, Robert

    Tellers for the Ayes:

    Mallon, Seamus

    Mr. John Cartwright and

    Meadowcroft, Michael

    Mr. David Alton.

    NOES

    Adley, Robert

    Budgen, Nick

    Aitken, Jonathan

    Burt, Alistair

    Alexander, Richard

    Butcher, John

    Alison, Rt Hon Michael

    Butler, Rt Hon Sir Adam

    Amess, David

    Butterfill, John

    Ancram, Michael

    Carlisle, John (Luton N)

    Arnold, Tom

    Carlisle, Kenneth (Lincoln)

    Ashby, David

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

    Aspinwall, Jack

    Carttiss, Michael

    Atkins, Rt Hon Sir H.

    Cash, William

    Atkins, Robert (South Ribble)

    Chalker, Mrs Lynda

    Atkinson, David (B'm'th E)

    Channon, Rt Hon Paul

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

    Chapman, Sydney

    Baker, Nicholas (Dorset N)

    Chope, Christopher

    Baldry, Tony

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

    Banks, Robert (Harrogate)

    Clark, Dr Michael (Rochford)

    Batiste, Spencer

    Clark, Sir W. (Croydon S)

    Beaumont-Dark, Anthony

    Clarke, Rt Hon K. (Rushcliffe)

    Bellingham, Henry

    Clegg, Sir Walter

    Bendall, Vivian

    Cockeram, Eric

    Benyon, William

    Colvin, Michael

    Bevan, David Gilroy

    Conway, Derek

    Biffen, Rt Hon John

    Coombs, Simon

    Biggs-Davison, Sir John

    Cope, John

    Blackburn, John

    Cormack, Patrick

    Blaker, Rt Hon Sir Peter

    Corrie, John

    Body, Sir Richard

    Cranborne, Viscount

    Bonsor, Sir Nicholas

    Critchley, Julian

    Bottomley, Peter

    Crouch, David

    Bottomley, Mrs Virginia

    Currie, Mrs Edwina

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

    Dickens, Geoffrey

    Bowden, Gerald (Dulwich)

    Dorrell, Stephen

    Boyson, Dr Rhodes

    Douglas-Hamilton, Lord J.

    Braine, Rt Hon Sir Bernard

    Dover, Den

    Brandon-Bravo, Martin

    du Cann, Rt Hon Sir Edward

    Bright, Graham

    Dunn, Robert

    Brinton, Tim

    Durant, Tony

    Brittan, Rt Hon Leon

    Edwards, Rt Hon N. (P'broke)

    Brooke, Hon Peter

    Emery, Sir Peter

    Brown, M. (Brigg & Cl'thpes)

    Evennett, David

    Browne, John

    Fairbairn, Nicholas

    Bruinvels, Peter

    Fallon, Michael

    Bryan, Sir Paul

    Farr, Sir John

    Buchanan-Smith, Rt Hon A.

    Favell, Anthony

    Buck, Sir Antony

    Fenner, Dame Peggy

    661

    Finsberg, Sir Geoffrey

    King, Roger (B'ham N'field)

    Fletcher, Alexander

    King, Rt Hon Tom

    Fookes, Miss Janet

    Knight, Greg (Derby N)

    Forman, Nigel

    Knight, Dame Jill (Edgbaston)

    Forsyth, Michael (Stirling)

    Knowles, Michael

    Forth, Eric

    Knox, David

    Fowler, Rt Hon Norman

    Lamont, Rt Hon Norman

    Fox, Sir Marcus

    Lang, Ian

    Franks, Cecil

    Latham, Michael

    Fraser, Peter (Angus East)

    Lawler, Geoffrey

    Freeman, Roger

    Lawrence, Ivan

    Fry, Peter

    Lawson, Rt Hon Nigel

    Gale, Roger

    Lee, John (Pendle)

    Galley, Roy

    Leigh, Edward (Gainsbor'gh)

    Gardiner, George (Reigate)

    Lennox-Boyd, Hon Mark

    Gardner, Sir Edward (Fylde)

    Lester, Jim

    Gilmour, Rt Hon Sir Ian

    Lewis, Sir Kenneth (Stamf'd)

    Glyn, Dr Alan

    Lightbown, David

    Goodhart, Sir Philip

    Lilley, Peter

    Goodlad, Alastair

    Lloyd, Sir Ian (Havant)

    Gorst, John

    Lloyd, Peter (Fareham)

    Gow, Ian

    Lord, Michael

    Gower, Sir Raymond

    Luce, Rt Hon Richard

    Grant, Sir Anthony

    Lyell, Nicholas

    Greenway, Harry

    McCrindle, Robert

    Gregory, Conal

    McCurley, Mrs Anna

    Griffiths, Sir Eldon

    Macfarlane, Neil

    Griffiths, Peter (Portsm'th N)

    MacGregor, Rt Hon John

    Grist, Ian

    MacKay, Andrew (Berkshire)

    Ground, Patrick

    MacKay, John (Argyll & Bute)

    Grylls, Michael

    Maclean, David John

    Gummer, Rt Hon John S

    McLoughlin, Patrick

    Hamilton, Neil (Tatton)

    McNair-Wilson, M. (N'bury)

    Hanley, Jeremy

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

    Hannam, John

    McQuarrie, Albert

    Hargreaves, Kenneth

    Major, John

    Harris, David

    Malins, Humfrey

    Harvey, Robert

    Malone, Gerald

    Havers, Rt Hon Sir Michael

    Maples, John

    Hawkins, Sir Paul (N'folk SW)

    Marland, Paul

    Hawksley, Warren

    Marshall, Michael (Arundel)

    Hayes, J.

    Mates, Michael

    Hayhoe, Rt Hon Barney

    Mather, Carol

    Hayward, Robert

    Maude, Hon Francis

    Heath, Rt Hon Edward

    Mawhinney, Dr Brian

    Heathcoat-Amory, David

    Mayhew, Sir Patrick

    Heddle, John

    Mellor, David

    Henderson, Barry

    Merchant, Piers

    Heseltine, Rt Hon Michael

    Meyer, Sir Anthony

    Hickmet, Richard

    Miller, Hal (B'grove)

    Higgins, Rt Hon Terence L.

    Mills, Iain (Meriden)

    Hill, James

    Mills, Sir Peter (West Devon)

    Hind, Kenneth

    Miscampbell, Norman

    Hirst, Michael

    Mitchell, David (Hants NW)

    Hogg, Hon Douglas (Gr'th'm)

    Moate, Roger

    Holland, Sir Philip (Gedling)

    Monro, Sir Hector

    Holt, Richard

    Montgomery, Sir Fergus

    Hordern, Sir Peter

    Moore, Rt Hon John

    Howard, Michael

    Morrison, Hon C. (Devizes)

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

    Morrison, Hon P. (Chester)

    Howarth, Gerald (Cannock)

    Moynihan, Hon C.

    Howell, Rt Hon D. (G'ldford)

    Mudd, David

    Howell, Ralph (Norfolk, N)

    Murphy, Christopher

    Hubbard-Miles, Peter

    Neale, Gerrard

    Hunt, David (Wirral W)

    Needham, Richard

    Hunt, John (Ravensbourne)

    Nelson, Anthony

    Hunter, Andrew

    Neubert, Michael

    Hurd, Rt Hon Douglas

    Nicholls, Patrick

    Irving, Charles

    Normanton, Tom

    Jackson, Robert

    Norris, Steven

    Jenkin, Rt Hon Patrick

    Onslow, Cranley

    Jessel, Toby

    Oppenheim, Phillip

    Johnson Smith, Sir Geoffrey

    Oppenheim, Rt Hon Mrs S.

    Jones, Gwilym (Cardiff N)

    Ottaway, Richard

    Jones, Robert (Herts W)

    Page, Richard (Herts SW)

    Jopling, Rt Hon Michael

    Parkinson, Rt Hon Cecil

    Joseph, Rt Hon Sir Keith

    Patten, J. (Oxf W & Abgdn)

    Kellett-Bowman, Mrs Elaine

    Pattie, Geoffrey

    Kershaw, Sir Anthony

    Pawsey, James

    Key, Robert

    Peacock, Mrs Elizabeth

    662

    Percival, Rt Hon Sir Ian

    Stewart, Allan (Eastwood)

    Pollock, Alexander

    Stewart, Andrew (Sherwood)

    Portillo, Michael

    Stewart, Ian (Hertf'dshire N)

    Powell, William (Corby)

    Sumberg, David

    Powley, John

    Tapsell, Sir Peter

    Prentice, Rt Hon Reg

    Taylor, John (Solihull)

    Price, Sir David

    Taylor, Teddy (S'end E)

    Proctor, K. Harvey

    Tebbit, Rt Hon Norman

    Pym, Rt Hon Francis

    Temple-Morris, Peter

    Raffan, Keith

    Thatcher, Rt Hon Mrs M.

    Raison, Rt Hon Timothy

    Thompson, Donald (Calder V)

    Rathbone, Tim

    Thompson, Patrick (N'ich N)

    Rees, Rt Hon Peter (Dover)

    Thorne, Neil (Ilford S)

    Renton, Tim

    Thornton, Malcolm

    Rhodes James, Robert

    Thurnham, Peter

    Rhys Williams, Sir Brandon

    Townend, John (Bridlington)

    Ridley, Rt Hon Nicholas

    Townsend, Cyril D. (B'heath)

    Ridsdale, Sir Julian

    Tracey, Richard

    Rifkind, Rt Hon Malcolm

    Trippier, David

    Rippon, Rt Hon Geoffrey

    Trotter, Neville

    Roberts, Wyn (Conwy)

    Twinn, Dr Ian

    Robinson, Mark (N'port W)

    van Straubenzee, Sir W.

    Roe, Mrs Marion

    Vaughan, Sir Gerard

    Rossi, Sir Hugh

    Viggers, Peter

    Rost, Peter

    Waddington, David

    Rowe, Andrew

    Wakeham, Rt Hon John

    Rumbold, Mrs Angela

    Waldegrave, Hon William

    Ryder, Richard

    Walden, George

    Sackville, Hon Thomas

    Walker, Rt Hon P. (W'cester)

    Sainsbury, Hon Timothy

    Wall, Sir Patrick

    St. John-Stevas, Rt Hon N.

    Waller, Gary

    Sayeed, Jonathan

    Walters, Dennis

    Scott, Nicholas

    Ward, John

    Shaw, Giles (Pudsey)

    Wardle, C. (Bexhill)

    Shaw, Sir Michael (Scarb')

    Watson, John

    Shelton, William (Streatham)

    Watts, John

    Shepherd, Colin (Hereford)

    Wells, Sir John (Maidstone)

    Shepherd, Richard (Aldridge)

    Wheeler, John

    Shersby, Michael

    Whitfield, John

    Silvester, Fred

    Whitney, Raymond

    Sims, Roger

    Wiggin, Jerry

    Skeet, Sir Trevor

    Wilkinson, John

    Smith, Sir Dudley (Warwick)

    Winterton, Mrs Ann

    Smith, Tim (Beaconsfield)

    Winterton, Nicholas

    Soames, Hon Nicholas

    Wolfson, Mark

    Speed, Keith

    Wood, Timothy

    Speller, Tony

    Yeo, Tim

    Spencer, Derek

    Young, Sir George (Acton)

    Spicer, Jim (Dorset W)

    Younger, Rt Hon George

    Spicer, Michael (S Worcs)

    Stanbrook, Ivor

    Tellers for the Noes:

    Steen, Anthony

    Mr. Robert Boscawen and

    Stern, Michael

    Mr.Tristan Garel-Jones

    Question accordingly negatived.
    Main Question put:
    The House divided: Ayes 350, Noes 205.

    Division No. 4]

    [10.28 pm

    AYES

    Adley, Robert

    Bendall, Vivian

    Aitken, Jonathan

    Benyon, William

    Alexander, Richard

    Bevan, David Gilroy

    Alison, Rt Hon Michael

    Biffen, Rt Hon John

    Amess, David

    Biggs-Davison, Sir John

    Ancram, Michael

    Blackburn, John

    Arnold, Tom

    Blaker, Rt Hon Sir Peter

    Ashby, David

    Body, Sir Richard

    Aspinwall, Jack

    Bonsor, Sir Nicholas

    Atkins, Rt Hon Sir H.

    Bottomley, Peter

    Atkins, Robert (South Ribble)

    Bottomley, Mrs Virginia

    Atkinson, David (B'm'th E)

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

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

    Bowden, Gerald (Dulwich)

    Baker, Nicholas (Dorset N)

    Boyson, Dr Rhodes

    Baldry, Tony

    Braine, Rt Hon Sir Bernard

    Banks, Robert (Harrogate)

    Brandon-Bravo, Martin

    Batiste, Spencer

    Bright, Graham

    Beaumont-Dark, Anthony

    Brinton, Tim

    Bellingham, Henry

    Brittan, Rt Hon Leon

    663

    Brooke, Hon Peter

    Grist, Ian

    Brown, M. (Brigg & Cl'thpes)

    Ground, Patrick

    Browne, John

    Grylls, Michael

    Bruinvels, Peter

    Gummer, Rt Hon John S

    Bryan, Sir Paul

    Hamilton, Neil (Tatton)

    Buchanan-Smith, Rt Hon A.

    Hanley, Jeremy

    Buck, Sir Antony

    Hannam, John

    Budgen, Nick

    Hargreaves, Kenneth

    Burt, Alistair

    Harris, David

    Butcher, John

    Harvey, Robert

    Butler, Rt Hon Sir Adam

    Havers, Rt Hon Sir Michael

    Butterfill, John

    Hawkins, Sir Paul (N'folk SW)

    Carlisle, John (Luton N)

    Hawksley, Warren

    Carlisle, Kenneth (Lincoln)

    Hayes, J.

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

    Hayhoe, Rt Hon Barney

    Carttiss, Michael

    Hayward, Robert

    Cash, William

    Heath, Rt Hon Edward

    Chalker, Mrs Lynda

    Heathcoat-Amory, David

    Channon, Rt Hon Paul

    Heddle, John

    Chapman, Sydney

    Henderson, Barry

    Chope, Christopher

    Heseltine, Rt Hon Michael

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

    Hickmet, Richard

    Clark, Dr Michael (Rochford)

    Higgins, Rt Hon Terence L.

    Clark, Sir W. (Croydon S)

    Hill, James

    Clarke, Rt Hon K. (Rushclifie)

    Hind, Kenneth

    Clegg, Sir Walter

    Hirst, Michael

    Cockeram, Eric

    Hogg, Hon Douglas (Gr'th'm)

    Colvin, Michael

    Holland, Sir Philip (Gedling)

    Conway, Derek

    Holt, Richard

    Coombs, Simon

    Hordern, Sir Peter

    Cope, John

    Howard, Michael

    Cormack, Patrick

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

    Corrie, John

    Howarth, Gerald (Cannock)

    Cranborne, Viscount

    Howell, Rt Hon D. (G'ldford)

    Critchley, Julian

    Howell, Ralph (Norfolk, N)

    Crouch, David

    Hubbard-Miles, Peter

    Currie, Mrs Edwina

    Hunt, David (Wirral W)

    Dickens, Geoffrey

    Hunt, John (Ravensbourne)

    Dorrell, Stephen

    Hunter, Andrew

    Douglas-Hamilton, Lord J.

    Hurd, Rt Hon Douglas

    Dover, Den

    Irving, Charles

    du Cann, Rt Hon Sir Edward

    Jackson, Robert

    Dunn, Robert

    Jenkin, Rt Hon Patrick

    Durant, Tony

    Jessel, Toby

    Edwards, Rt Hon N. (P'broke)

    Johnson Smith, Sir Geoffrey

    Emery, Sir Peter

    Jones, Gwilym (Cardiff N)

    Evennett, David

    Jones, Robert (Herts W)

    Fairbairn, Nicholas

    Jopling, Rt Hon Michael

    Fallon, Michael

    Joseph, Rt Hon Sir Keith

    Farr, Sir John

    Kellett-Bowman, Mrs Elaine

    Favell, Anthony

    Kershaw, Sir Anthony

    Fenner, Dame Peggy

    Key, Robert

    Finsberg, Sir Geoffrey

    King, Roger (B'ham N'field)

    Fletcher, Alexander

    King, Rt Hon Tom

    Fookes, Miss Janet

    Knight, Greg (Derby N)

    Forman, Nigel

    Knight, Dame Jill (Edgbaston)

    Forsyth, Michael (Stirling)

    Knowles, Michael

    Forth, Eric

    Knox, David

    Fowler, Rt Hon Norman

    Lamont, Rt Hon Norman

    Fox, Sir Marcus

    Lang, Ian

    Franks, Cecil

    Latham, Michael

    Fraser, Peter (Angus East)

    Lawler, Geoffrey

    Freeman, Roger

    Lawrence, Ivan

    Fry, Peter

    Lawson, Rt Hon Nigel

    Gale, Roger

    Lee, John (Pendle)

    Galley, Roy

    Leigh, Edward (Gainsbor'gh)

    Gardiner, George (Reigate)

    Lennox-Boyd, Hon Mark

    Gardner, Sir Edward (Fylde)

    Lester, Jim

    Gilmour, Rt Hon Sir Ian

    Lewis, Sir Kenneth (Stamf'd)

    Glyn, Dr Alan

    Lightbown, David

    Goodhart, Sir Philip

    Lilley, Peter

    Goodlad, Alastair

    Lloyd, Sir Ian (Havant)

    Gorst, John

    Lloyd, Peter (Fareham)

    Gow, Ian

    Lord, Michael

    Gower, Sir Raymond

    Luce, Rt Hon Richard

    Grant, Sir Anthony

    Lyell, Nicholas

    Greenway, Harry

    McCrindle, Robert

    Gregory, Conal

    McCurley, Mrs Anna

    Griffiths, Sir Eldon

    Macfarlane, Neil

    Griffiths, Peter (Portsm'th N)

    MacGregor, Rt Hon John

    664

    MacKay, Andrew (Berkshire)

    Ryder, Richard

    MacKay, John (Argyll & Bute)

    Sackville, Hon Thomas

    Maclean, David John

    Sainsbury, Hon Timothy

    McLoughlin, Patrick

    St. John-Stevas, Rt Hon N.

    McNair-Wilson, M. (N'bury)

    Sayeed, Jonathan

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

    Scott, Nicholas

    McQuarrie, Albert

    Shaw, Giles (Pudsey)

    Major, John

    Shaw, Sir Michael (Scarb')

    Malins, Humfrey

    Shelton, William (Streatham)

    Malone, Gerald

    Shepherd, Colin (Hereford)

    Maples, John

    Shepherd, Richard (Aldridge)

    Marshall, Michael (Arundel)

    Shersby, Michael

    Mates, Michael

    Silvester, Fred

    Mather, Carol

    Sims, Roger

    Maude, Hon Francis

    Skeet, Sir Trevor

    Mawhinney, Dr Brian

    Smith, Sir Dudley (Warwick)

    Mayhew, Sir Patrick

    Smith, Tim (Beaconsfield)

    Mellor, David

    Soames, Hon Nicholas

    Merchant, Piers

    Speed, Keith

    Meyer, Sir Anthony

    Speller, Tony

    Miller, Hal (B'grove)

    Spencer, Derek

    Mills, Iain (Meriden)

    Spicer, Jim (Dorset W)

    Mills, Sir Peter (West Devon)

    Spicer, Michael (S Worcs)

    Miscampbell, Norman

    Stanbrook, Ivor

    Mitchell, David (Hants NW)

    Steen, Anthony

    Moate, Roger

    Stern, Michael

    Monro, Sir Hector

    Stewart, Allan (Eastwood)

    Montgomery, Sir Fergus

    Stewart, Andrew (Sherwood)

    Moore, Rt Hon John

    Stewart, Ian (Hertf'dshire N)

    Morrison, Hon C. (Devizes)

    Sumberg, David

    Morrison, Hon P. (Chester)

    Tapsell, Sir Peter

    Moynihan, Hon C.

    Taylor, John (Solihull)

    Mudd, David

    Taylor, Teddy (S'end E)

    Murphy, Christopher

    Tebbit, Rt Hon Norman

    Neale, Gerrard

    Temple-Morris, Peter

    Needham, Richard

    Thatcher, Rt Hon Mrs M.

    Nelson, Anthony

    Thompson, Donald (Calder V)

    Neubert, Michael

    Thompson, Patrick (N'ich N)

    Nicholls, Patrick

    Thorne, Neil (llford S)

    Normanton, Tom

    Thornton, Malcolm

    Norris, Steven

    Thurnham, Peter

    Onslow, Cranley

    Townend, John (Bridlington)

    Oppenheim, Phillip

    Townsend, Cyril D. (B'heath)

    Oppenheim, Rt Hon Mrs S.

    Tracey, Richard

    Ottaway, Richard

    Trippier, David

    Page, Richard (Herts SW)

    Trotter, Neville

    Parkinson, Rt Hon Cecil

    Twinn, Dr Ian

    Patten, J. (Oxf W & Abgdn)

    van Straubenzee, Sir W.

    Pattie, Geoffrey

    Vaughan, Sir Gerard

    Pawsey, James

    Viggers, Peter

    Peacock, Mrs Elizabeth

    Waddington, David

    Percival, Rt Hon Sir Ian

    Wakeham, Rt Hon John

    Pollock, Alexander

    Waldegrave, Hon William

    Portillo, Michael

    Walden, George

    Powell, William (Corby)

    Wall, Sir Patrick

    Powley, John

    Waller, Gary

    Prentice, Rt Hon Reg

    Walters, Dennis

    Price, Sir David

    Ward, John

    Proctor, K. Harvey

    Wardle, C. (Bexhill)

    Pym, Rt Hon Francis

    Watson, John

    Raffan, Keith

    Watts, John

    Raison, Rt Hon Timothy

    Wells, Sir John (Maidstone)

    Rathbone, Tim

    Wheeler, John

    Rees, Rt Hon Peter (Dover)

    Whitfield, John

    Renton, Tim

    Whitney, Raymond

    Rhodes James, Robert

    Wiggin, Jerry

    Rhys Williams, Sir Brandon

    Wilkinson, John

    Ridley, Rt Hon Nicholas

    Winterton, Mrs Ann

    Ridsdale, Sir Julian

    Winterton, Nicholas

    Rifkind, Rt Hon Malcolm

    Wolfson, Mark

    Rippon, Rt Hon Geoffrey

    Wood, Timothy

    Roberts, Wyn (Conwy)

    Yeo, Tim

    Robinson, Mark (N'port W)

    Young, Sir George (Acton)

    Roe, Mrs Marion

    Younger, Rt Hon George

    Rossi, Sir Hugh

    Rost, Peter

    Tellers for the Ayes:

    Rowe, Andrew

    Mr. Tristan Garel-Jones and

    Rumbold, Mrs Angela

    Mr. Robert Boscawen.

    665

    NOES

    Adams, Allen (Paisley N)

    Eadie, Alex

    Anderson, Donald

    Eastham, Ken

    Archer, Rt Hon Peter

    Evans, John (St. Helens N)

    Ashley. Rt Hon Jack

    Fatchett, Derek

    Ashton, Joe

    Faulds, Andrew

    Atkinson, N. (Tottenham)

    Field, Frank (Birkenhead)

    Bagier, Gordon A. T.

    Fields, T. (L 'pool Broad Gn)

    Banks, Tony (Newham NW)

    Fisher, Mark

    Barnett, Guy

    Flannery, Martin

    Barron, Kevin

    Foot, Rt Hon Michael

    Beckett, Mrs Margaret

    Forsythe, Clifford (Antrim S)

    Beggs, Roy

    Foster, Derek

    Beith, A. J.

    Fraser, J. (Norwood)

    Bell, Stuart

    Freeson, Rt Hon Reginald

    Benn, Rt Hon Tony

    Freud, Clement

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

    Garrett, W. E.

    Bermingham, Gerald

    George, Bruce

    Blair, Anthony

    Gilbert, Rt Hon Dr John

    Boothroyd, Miss Betty

    Godman, Dr Norman

    Bray, Dr Jeremy

    Golding, Mrs Llin

    Brown, Gordon (D'f'mline E)

    Gould, Bryan

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

    Gourlay, Harry

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

    Hamilton, James (M'well N)

    Brown, Ron (E'burgh, Leith)

    Hamilton, W. W. (Fife Central)

    Bruce, Malcolm

    Hancock, Michael

    Buchan, Norman

    Hardy, Peter

    Callaghan, Rt Hon J.

    Harrison, Rt Hon Walter

    Callaghan, Jim (Heyw'd & M)

    Hart, Rt Hon Dame Judith

    Campbell, Ian

    Hattersley, Rt Hon Roy

    Campbell-Savours, Dale

    Healey, Rt Hon Denis

    Canavan, Dennis

    Heffer, Eric S.

    Carlile, Alexander (Montg'y)

    Hogg, N. (C'nauld & Kilsyth)

    Carter-Jones, Lewis

    Home Robertson, John

    Cartwright, John

    Howells, Geraint

    Clark, Dr David (S Shields)

    Hughes, Dr Mark (Durham)

    Clarke, Thomas

    Hughes, Roy (Newport East)

    Clay, Robert

    Hughes, Simon (Southwark)

    Clelland, David Gordon

    Janner, Hon Greville

    Cohen, Harry

    Jones, Barry (Alyn & Deeside)

    Coleman, Donald

    Kaufman, Rt Hon Gerald

    Conlan, Bernard

    Kilfedder, James A.

    Cook, Frank (Stockton North)

    Kinnock, Rt Hon Neil

    Cook, Robin F. (Livingston)

    Kirkwood, Archy

    Corbett, Robin

    Lambie, David

    Corbyn, Jeremy

    Lamond, James

    Craigen, J. M.

    Leadbitter, Ted

    Cunliffe, Lawrence

    Leighton, Ronald

    Cunningham, Dr John

    Lewis, Ron (Carlisle)

    Dalyell, Tam

    Lewis, Terence (Worsley)

    Davies, Rt Hon Denzil (L'lli)

    Livsey, Richard

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

    Lloyd, Tony (Stretford)

    Deakins, Eric

    Lofthouse, Geoffrey

    Dewar, Donald

    Loyden, Edward

    Dixon, Donald

    McCrea, Rev William

    Dobson, Frank

    McCusker, Harold

    Dormand, Jack

    McDonald, Dr Oonagh

    Douglas, Dick

    McGuire, Michael

    Dubs, Alfred

    McKay, Allen (Penistone)

    Duffy, A, E. P.

    McKelvey, William

    Dunwoody, Hon Mrs G.

    MacKenzie, Rt Hon Gregor

    666

    McNamara, Kevin

    Ross, Ernest (Dundee W)

    McTaggart, Robert

    Ross, Wm. (Londonderry E)

    McWilliam, John

    Rowlands, Ted

    Madden, Max

    Sheerman, Barry

    Maginnis, Ken

    Sheldon, Rt Hon R.

    Marek, Dr John

    Shields, Mrs Elizabeth

    Marshall, David (Shettleston)

    Shore, Rt Hon Peter

    Martin, Michael

    Short, Ms Clare (Ladywood)

    Mason, Rt Hon Roy

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

    Maxton, John

    Silkin, Rt Hon J.

    Maynard, Miss Joan

    Skinner, Dennis

    Meacher, Michael

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

    Meadowcroft, Michael

    Smith, Cyril (Rochdale)

    Michie, William

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

    Mikardo, Ian

    Smyth, Rev W. M. (Belfast S)

    Millan, Rt Hon Bruce

    Soley, Clive

    Molyneaux, Rt Hon James

    Steel, Rt Hon David

    Morris, Rt Hon A. (W'shawe)

    Stewart, Rt Hon D (W Isles)

    Morris, Rt Hon J. (Aberavon)

    Stott, Roger

    Nellist, David

    Strang, Gavin

    Oakes, Rt Hon Gordon

    Straw, Jack

    O'Brien, William

    Taylor, Rt Hon John David

    O'Neill, Martin

    Thomas, Dafydd (Merioneth)

    Orme, Rt Hon Stanley

    Thomas, Dr R. (Carmarthen)

    Owen, Rt Hon Dr David

    Thorne, Stan (Preston)

    Park, George

    Tinn, James

    Parry, Robert

    Torney, Tom

    Patchett, Terry

    Wainwright, R.

    Pavitt, Laurie

    Walker, Cecil (Belfast N)

    Pendry, Tom

    Wallace, James

    Penhaligon, David

    Warden, Gareth (Gower)

    Pike, Peter

    Wareing, Robert

    Powell, Rt Hon J. E.

    Weetch, Ken

    Powell, Raymond (Ogmore)

    Welsh, Michael

    Radice, Giles

    Wigley, Dafydd

    Randall, Stuart

    Williams, Rt Hon A.

    Raynsford, Nick

    Wilson, Gordon

    Redmond, Martin

    Winnick, David

    Rees, Rt Hon M. (Leeds S)

    Woodall, Alec

    Richardson, Ms Jo

    Wrigglesworth, Ian

    Roberts, Ernest (Hackney N)

    Robertson, George

    Tellers for the Noes:

    Robinson, G. (Coventry NW)

    Mr. Ron Davies and

    Rogers, Allan

    Mr. Sean Hughes.

    Rooker, J.W.

    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.

Disabled People (Employment)
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Ryder.]
10.41 pm
Mr. Robert N. Wareing: I want to raise a matter that has been a subject for debate for some time—namely, the need for anti-discrimination legislation to cover the needs of disabled people. Attempts have been made by my right hon. Friend the Member for Stoke-on-Trent, South (Mr. Ashley) and the right hon. Member for Western Isles (Mr. Stewart) to introduce such legislation.
On 18 November 1983 I introduced a private Member's Bill. That date will go down as a day of shame for the House of Commons, because of the way in which that Bill was defeated by the manoeuverings of the Government, who undoubtedly imposed an unofficial Whip. I remind the House that Ministers cancelled their engagements to rush to the House to defeat a Bill that was intended to assist disabled people. As an aside, as this debate affects the disabled I must put on record that it is appalling that the Minister with responsibility for the disabled is not here to reply to the debate.
During the debate on my Bill, I referred to many examples of discrimination in employment against disabled people. For example, I mentioned mentally handicapped people who went to a local jobcentre looking for work, only to be told by the manager that they should not even be in the jobcentre. I also cited the case of an engineer who made 40 applications for jobs, in which he mentioned that he was confined to a wheelchair. He did not receive a single offer of a job interview.
I referred to many other cases of discrimination, many of them in employment. For example, a well qualified paraplegic submitted 50 applications for jobs in which he mentioned his disability, and received only one interview. When he made a further 35 applications, not mentioning his disability, he received 12 invitations for interview. There are many such cases.
All the cases that have been cited in the House from time to time have been anecdotal evidence, but that has now been supplemented by a statistical report by The Spastics Society entitled "An Equal Chance for Disabled People? A Study of Discrimination in Employment". It shows that, without doubt, there is wholesale discrimination against disabled people seeking employment.
Those who carried out the survey upon which the report was based answered 152 advertisements for secretarial jobs. They submitted two applications by similarly qualified people for each job, except that in one case the applicant mentioned having a disability. In 59 cases, both the able-bodied and the disabled applicants received a negative response. The remaining 93 cases proved to be a valid testimony to discrimination against the disabled. In 38 instances, only the disabled applicant received a negative response — 41 per cent. of applications. That compares with only three instances of able-bodied applicants being refused—about 3 per cent. of applications.
The disabled who received a negative reply normally received no reply. In those that they did receive, all manner of excuses were offered. For example, one reply stated that the applicant's qualifications and experience were not what was required—yet the able-bodied applicant with
668
similar qualifications was offered an interview. Another excuse was that the post had already been filled — yet again the able-bodied applicant was offered an interview. In one case the disabled applicant received a letter saying that the temporary secretary had decided to become permanent—yet the able-bodied applicant was offered an interview. Even in one of the positive responses to a disabled applicant there were words of discouragement —"Don't forget, if you work for us you will be working in premises akin to a lighthouse."
Since 1944, legislation has been on the statute book entitling the disabled to special consideration in employment—a quota of 3 per cent. However, about 70 per cent. of firms do not adhere to that. Indeed, not a single Government Department adheres to the quota that Parliament decided way back in 1944 was advisable.
Far from encouraging the employment of disabled people, the Government have tended to do the reverse. In 1984, the Manpower Services Commission issued 18,700 permits exempting employers from the quota obligations. I remind the House that the quota in this country is small in comparison with other countries. West Germany, for example, has a quota of 6 per cent., and if employers do not adhere to it they are levied and the funds used for the rehabilitation of handicapped people. In this country, after 40 years, the total fines imposed for contravention of the 1944 Act in this respect amount to less than £1,000 and there have been only 10 prosecutions. That must bring a wry smile to the faces of councillors in my home town of Liverpool who are prosecuted by the unelected district auditor merely for trying to carry out their election promises.
In the spring of 1985 a labour force survey showed that 412,000 or 23·4 per cent. of economically active disabled people in this country were unemployed. That is twice the national average for unemployment generally.
Mr. Alfred Morris: Is my hon. Friend aware of the letter sent to the Paymaster General on 7 November by the Royal Association for Disability and Rehabilitation about the trap in which the association believes that disabled people would be ensnared by the new availability-for-work test announced by the Government? RADAR expresses the fear that under the new guidelines many unemployed disabled people would qualify neither for unemployment benefit nor for invalidity benefit and would be dumped in the queue for supplementary benefit, which would pile handicap upon handicap for those concerned.
Mr. Wareing: I am obliged to my right hon. Friend. I have received a copy of that letter from RADAR, which clearly shows that under the new work test many people will fall between two stools and end up without invalidity benefit or unemployment benefit. This debate gives the Minister the opportunity to answer RADAR on that point.
Some employers, however, have been doing their best to provide work for disabled people. The much abused Labour-controlled Lambeth borough council has done a great deal for disabled people. In May this year out of a work force of 10,000 the council employed only about 90 disabled people or 0·9 per cent. of the work force. Five months later, the 3 per cent. quota had been reached and by November the council was employing about 400 disabled people or 4 per cent. of the total work force.

669
Lambeth has shown what can be done, given the political will, but every discussion in this Parliament since 1983 about legislation, benefits and employment for disabled people has shown that the Government lack that political will. When my hon. Friend the Member for Monklands, West (Mr. Clarke) introduced his Bill it was clear that although the Government might have let the Bill through they would seek every possible means of ensuring that the funding was not available for local authorities.
The problems of employment for disabled people go far wider than merely finding jobs and, indeed, wider than the ambit of the Minister. There is the question of education and training for handicapped people in our society. The Bill that I introduced was aimed at abolishing discrimination and enabling disabled people, be they blind, deaf or in a wheelchair, to go into colleges of further education and training establishments. All of those features are essential if disabled people are not to be further disadvantaged than their disability. They are able to take up the possibility of jobs. The survey of The Spastics Society has shown us just the tip of the iceberg of discrimination in one area; employment. However, it has shown that the widening of horizons can be there for disabled people if the Government are willing to act on the report, which is firmly in favour of anti-discrimination legislation.
During the debate on my Bill the hon. Member for Braintree (Mr. Newton) said:
"For the hon. Gentleman to prove his case, he would have to show that there was discrimination, and not merely ignorance, lack of understanding or insensitivity, which we all agree exists in abundance and is directed towards people in all categories. The hon. Gentleman would also have to show that such discrimination existed on a scale that justified the very complex machinery that he proposes." — [Official Report, 18 November 1983; Vol. 48, c. 126.]
I suggest that that evidence is there now and it requires careful reading by the Under-Secretary of State and by other Ministers. If they were honest, they would say to the House that the Bill I proposed three years ago almost to this very day, on 18 November 1983, is very much required and that they will make haste to see that it reaches the statute book.
10.56 pm
The Parliamentary Under-Secretary of State for Employment (Mr. John Lee): First, let me congratulate the hon. Member for Liverpool, West Derby (Mr. Wareing) on having secured this Adjournment debate. We all know of his genuine, deep and long-standing commitment to the interests of disabled people. I am also pleased to see some other right hon. and hon. Members in their places, including my ministerial colleague, the hon. Member for Rossendale and Darwen (Mr. Trippier), who is also interested in this area.
May I say to the right hon. Member for Manchester, Wythenshawe (Mr. Norris) that I am sure that my right hon. and learned Friend the Paymaster General will be responding to the letter from the Royal Association for Disability and Rehabilitation and I will see that he gets a copy of the letter.
Mr. Alfred Morris: RADAR's letter was dated 7 November. I had a parliamentary answer on 17 November from the Paymaster General in which he said:
"I have received no representations on the effect of the new guidelines on disabled people." — [Official Report, 17 November 1986; Vol. 105, c. 66.]
670
That is palpably untrue. It was 10 days after strong representations had been made to him. Will the Minister apologise for his right hon. and learned Friend's parliamentary reply to me and now respond to RADAR's letter?
Mr. Lee: With the greatest respect, this has just been sprung on me. The right hon. Gentleman knows the traditions of Adjournment debates. I did give way. I certainly cannot apologise, because I do not know the circumstances. However, I will look into the case and we will respond.
The disabled in the community are a group to whose concerns the Government pay particular regard and for whom we have a very wide range of special provisions. Theirs is a cause which attracts, I am sure, the genuine and united concern of everyone in the House. I am grateful, therefore, for the opportunity to debate this extremely important issue, and want to stress at the outset our resolve to maintain, and where possible improve, that support.
The Government follow earlier Administrations in continuing to base their provision very firmly on the principles set out by George Tomlinson when he was the Parliamentary Secretary to the Ministry of Labour over 40 years ago, and which form the basis of the Disabled Persons (Employment) Act 1944. We are all indebted to his Committee, which had the vision to realise that society not only had a moral duty to help the disabled but that we should harness to the full the abilities and commitment of disabled people. That model has served this nation well. Times have changed, and the employment situation has changed, but the basis of Government policy remains unchanged. The disabled have a full and valuable role to play in the work force.
That belief continues to be relevant for the future. The back-breaking toil on which our first industrial revolution was built is being replaced by the new technology revolution. This demands other skills — use of intelligence, flexibility, the ability to find new ways around unforeseen problems. Who can have demonstrated these skills better than people who have overcome their own handicaps? Employers wondering how to find employees who can cope with the future would do well to remember that many people with disabilities have already shoe, n that they can cope with the worst that nature can throw at them.
Mr. Lewis Carter-Jones: Will the Minister give way on that point?
Mr. Lee: I am sorry, but I must plough on.
New technology is also opening up opportunities for employment. More people who might have been considered unemployable can now work. More disabled people currently in menial jobs can now realise their full potential. Let us also not forget the special benefits which people who are disabled have always brought employers. Who can measure the benefits of such things as the unique loyalty that they show an employer who has given them a chance?
Indeed, there is surprisingly little that people with disabilities cannot do, given the chance. I am sure that the hon. Member for West Derby and I are at one on that. Giving them that chance is the theme that runs through Government policy. Our symbol of the gateway to the labour market is the half-open "action for jobs" doorway.

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People with disabilities may need a little extra help to push that door open. Government policy is rather like the wedge which prevents the door from being shut in the face of the disabled population, but to push the door wide open, we work with the full efforts and co-operation of the community at large — local authorities, employers, organisations for, and of, people with disabilities. I should like, if I may, to take a few moments to expand on that.
This Adjournment debate comes at a time when more opportunities than ever before are being given to the disabled to work on their merits in ordinary employment. As part of the growth in the youth training scheme, the Manpower Services Commission has introduced a wide range of special help to encourage eligible young people with disabilities to enter the scheme. This includes delayed entry, extension of stay, assessment courses and special help such as adaptation to premises and communication aids for deaf people.
On adult training, our aim is that people with disabilities should obtain a fair share of training provision. Where possible, they should participate fully in mainstream training programmes and there are relaxed eligibility criteria to enable them to do this. Besides mainstream provision, the MSC offers an extensive range of special training provision for people with disabilities including individually tailored training programmes with an employer, residential training, and the professional training scheme.
Some conditions also are waived to allow the disabled to take part fully in the community programme. At jobcentres, disablement resettlement officers continue to show the commitment which is the cornerstone of our success in this area—and it is a success. Last year, over 77,000 disabled people were placed into employment through MSC services—more than ever before. A cause for optimism, yes—but this year we intend to do even better than that.
Last year was also a record year for levels of take-up and expenditure on special programmes. At employment rehabilitation centres, for instance, over 13,000 people were assessed and given counselling and guidance towards the type of work or further training most likely to lead to a permanent job. Employment rehabilitation centres and the three new pilot ASSET centres are beginning to turn from the traditional emphasis on manual work to assessment and training for service industries and new technology. I welcome that development, as, I believe, do disabled people themselves.
Mr. Carter-Jones: Will the Minister give way on this point?
Mr. Lee: I am under some pressure.
Mr. Carter-Jones: I am grateful to the Minister for giving way. We talked about 1944 and 1986. Will the Minister undertake now, or at a future meeting with me and my colleagues, to discuss the application of advanced technology to enable severely handicapped people to play a role in our society? That has been left out of the reckoning so far.
Mr. Lee: Yes, I take the point. I shall be more than happy to see the hon. Gentleman at a mutually convenient time. I know of his genuinely sincere conviction and commitment to this area.
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Over £1 million was spent providing specialist equipment to meet the varying needs of individual disabled employees. This is not merely accommodating desks and chairs but a harnessing of new technology to serve the disabled — to enable the deaf to use the ordinary telephone network through a visual display of the message transmitted, or to enable the blind to use computers by replacing the visual display with a speech output facility. Expenditure continues to rise also for adaptation to premises, our job introduction scheme, assistance with fares to work and the personal reader service for the blind. In all, last year there were nearly 5,000 beneficiaries—that is nearly 5,000 more disabled people who were able to keep their jobs thanks to the individual benefits of these schemes.
This year is also something of a milestone —in two separate ways — for the help given to those disabled people who are just not able to compete on the open labour market. First, Remploy is celebrating 40 years of meeting the sheltered employment needs of the disabled. When Remploy was formed as the then Disabled Persons Employment Corporation Ltd, it led the rest of Europe as the first of its kind. The Government are still proud to be part of that venture. Remploy's work has increasingly been not just a boon to its employees but a commercial achievement, marketing and selling its wide range of quality goods and services. Through Remploy, and the rest of the sheltered employment programme, some 16,400 people with severe disabilities enjoy the independence, self-esteem and social standing which securing a job means. A fortnight ago I saw for myself at the SELMEC local authority workshop in Old Trafford the energy and enthusiasm of the work force which this measure brings.
Our continuing aim is to broaden the range of work opportunities available for disabled people. Flexibility of provision is vital in such a policy. The Government recognise that, while some severely disabled people find that sheltered workshops best meet their employment needs, those that are able want to work in a normal working environment alongside their able-bodied colleagues. What is more, they want to get the rate for the job, not because of some statute that requires employers to take them on but because society recognises their abilities and does not just consider their disability.
Everyone in this House must therefore welcome the fact that the ideal of fuller integration of the disabled within the working community is being met through the sheltered placement scheme. This is the message I received when I saw it in action recently in Scunthorpe.
That the sheltered placement scheme has commanded widespread support is clear from the scale of its recent development. Last year, 1985–86, the number of people employed under the scheme almost doubled — from around 1,050 to over 1,800. The planned expansion this year, with over 1,000 new places, will mean that nearly 3,000 severely disabled people will soon be employed under the scheme, and we intend a further substantial expansion. One factor perhaps stands out here. The sheltered placement scheme is an initiative which recognises explicitly that a severely disabled person cannot contribute to the productivity of the firm on level terms with fully fit colleagues. We therefore say to the employer, "You pay for the person's ability and we will pay for the disability." That is a simple enough concept, perhaps, but it seems to work.

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I trust that these examples demonstrate that there is much Government help available for people with disabilities. This year we aim to spend some £130 million, which is more than ever before. But we cannot be expected to do all this alone. The Government always value the contribution of the disabled lobby. Representatives from voluntary organisations, the CBI and TUC meet on the National Advisory Council on Employment of Disabled People to give advice—indeed, this council is at present reviewing some of the Tomlinson principles. I understand that it has produced a paper for wider consultation, and I look forward to receiving its views in due course.
I spoke earlier about the importance of working as a team to push wide open the doorway to jobs. The way to win the real benefits of integration is to secure the good will and co-operation of employers and not to impose an ever greater burden of legislation upon them. Indeed, it was in this spirit of partnership that the Prime Minister launched the code of good practice on the employment of disabled people in November 1984. Once again I am proud to say that we led the way in Europe on this, providing guidelines. Drawn up with the help and wholehearted support of the CBI TUC and disabled organisations, on how the disabled can take their place in normal employment.
I am delighted that 72,000 copies of the code are now held by employers, helping them to help all of us. The MSC's disablement advisory service teams—themselves a fairly recent, and successful, innovation—continue to promote it enthusiastically. I was able to share the message of the code of good practice and the excellent complementary video "It Worked Fine" with 120 local employers at a seminar at Reading earlier this month. The theme of that day was giving the disabled the chance to show what they can do. We are helping to make this a reality with imagination and vigour, and I am determined to continue to do so.
Encouragement of the code will continue to complement the existing statutory provision, but it is not intended as a replacement for it. Of course, there are problems in the existing system of registration and application of the statutory quota. As is well known, numbers of registered disabled have fallen since the war to the point where it is impossible for all employers subject to quota to take on their 3 per cent. It was an acknowledgement of this problem—following a thorough review by the MSC and
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involving interest parties — that led us to ask the commission to conduct a major, comprehensive research exercise into the numbers and characteristics of disabled people in the work force, and their attitudes and those of their employers to the quota. The results, in just over a year's time, of this exercise should enable all of us to consider the proper need for quota provision, and protect us from wild and uninformed claims.
The European Community has recognised our lead in provision for disabled people. In its recent recommendation of measures to promote fair employment and training opportunities based on eliminating negative discrimination, it explicitly endorsed our code of good practice. The Government, of course, welcome this Communitywide commitment and will continue to work in full co-operation with other member states to secure employment and training for our disabled people.
The code is voluntary and its success is based on the partnership of interests. That partnership would be threatened if we were to go down the road which the hon. Gentleman suggests. A web of restriction prevents the growth of jobs, and therefore denies opportunities to the disabled while trying to protect them. I have even this afternoon been to see how a firm—Albert Marston in Wolverhampton — is successfully promoting active participation of disabled employees in its work force.
The Government are not convinced that there is adequate evidence of widespread discrimination on grounds of disability alone to justify any attempt at antidiscrimination legislation. They are convinced that legislation is a practical way to overcome discrimination on grounds of race and gender, but that is based on the principle that there is nothing in a person's race or sex which makes that person unsuitable for a job. However, being disabled may do just that. We must recognise this and act responsibly.
I hope that one thing stands out from this account—that the Government remain unshakeable in their commitment. Let no one in this House or elsewhere be under any illusion that we do not care. We do —passionately—and I will continue to make sure that disabled people are given the help to live up to their full potential.
Question put and agreed to.
Adjourned accordingly at eleven minutes past Eleven o'clock.

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Preamble
The House met at a quarter past two of the clock: The CHAIRMAN OF COMMITTEES On the Woolsack.
Prayers—Read by the Lord Bishop of Newcastle.

The Lord Bishop of Salisbury
John Austin, Lord Bishop of Salisbury—Was (in the usual manner) introduced between the Lord Bishop of Bath and Wells and the Lord Bishop of Newcastle.
The Lord Bishop of Blackburn
David Stewart, Lord Bishop of Blackburn—Was (in the usual manner) introduced between the Lord Bishop of Carlisle and the Lord Bishop of Southwark.

AIDS: Government Action
2.27 p.m.
Baroness Sharpies: 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 plans they have to combat the spread of AIDS.
Lord Hesketh: My Lords, as my noble friend told the House on 14th October, the Government have taken urgent action on a number of fronts. These include a public information campaign, additional resources for treatment, training of National Health Service staff, research, testing of all blood donations, funding for voluntary organisations and the issue of advice to professionals.
My right honourable friend the Secretary of State for Social Services has recently announced that there will be further press advertising starting next weekend, followed by a poster campaign, and there will be a campaign aimed at young people starting before Christmas. Then a leaflet about avoiding infection with the AIDS virus will be distributed to all homes in the United Kingdom, supported by television advertising. The Government are also supporting research on AIDS. The Medical Research Council is spending 1÷5 million. The pharmaceutical industry, both here and abroad, is undertaking a massive programme of research.
Baroness Sharpies: My Lords, I thank my noble friend for that reply. Does he agree that the right reverend Prelate the Bishop of Birmingham made a significant contribution to yesterday's debate in respect of this very painful subject? Can my noble friend say whether there is any hope that all the organisations involved in fighting this scourge can be brought together so that we do not see such diverse opinions expressed in the press? On a specific point,
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can he say whether there is any proposal to provide disposable surgical gloves for both dentists and doctors to prevent people catching this disease?
Lord Hesketh: My Lords, it is right to say that the wise words of the right reverend Prelate the Bishop of Birmingham yesterday are as true an answer as any to preventing the fast spread of this disease. There exists already interdepartmental machinery to co-ordinate action on AIDS. Our concern is that the campaign is conducted as efficiently and as effectively as possible, and it needs to be sustained for some years. We are currently considering how best it can be run in the future.
Lord Mellish: My Lords, is the Minister aware that many of us think that the Government's intentions in this matter are very good indeed, and that they are to be commended for taking this matter as seriously as they obviously are? There were reports, however, that the possible intention was that there would be compulsory testing of blood of all adults in this country. Is that still in the mind of the Government?
Lord Hesketh: My Lords, I thank the noble Lord, Lord Mellish, for his question. I was unaware that there was going to be compulsory testing of blood. The Government's current policy is that public education is the most effective way of combating the spread of the disease. Other possibilities that might be of value have already been examined. We have already made provision for the testing of individuals, but there are certainly no plans at the moment to introduce mass compulsory testing and screening which would involve formidable problems both of principle and practice, not the least being the question of what should be done with those who prove positive.
Lord Winstanley: My Lords, while warmly welcoming the very necessary steps that the Government are now taking, may I ask the noble Lord whether he will agree that the most urgent matter is the pioneering and development of a protective vaccine and of a specific therapeutic agent? Can the noble Lord tell the House whether he is satisfied that funds are adequate for that very necessary purpose, and that international work in that regard is being properly integrated and harmonised?
Lord Hesketh: My Lords, I thank the noble Lord for the question. One of the great problems about this disease is that the prospects for a cure look extremely bleak. The prospects for a vaccine are possibly somewhat better. However, the fact of the matter is that at the moment the department is providing funding for all worthy programmes that have been put before it to date.
Lord Campbell of Croy: My Lords, is my noble friend aware that there is one decision that could be taken without delay? That relates to the spread of AIDS by drug addicts. While it is repugnant to appear to be giving any encouragement to the use of drugs, will the Government now enable needles to be made available free because the need to curb the spread of AIDS at this stage is of overriding importance?
Lord Hesketh:My Lords, I thank the noble Lord, Lord Campbell, for his very good question. The situation at the moment is that the department is in receipt of the Scottish report concerning this particular problem. It is studying the report very closely and will shortly be deciding.
Lord Ennals:My Lords, is the noble Lord aware that, certainly from these Benches, we very much welcome the comprehensive initiative that is now being taken by the Government for a disease which I suppose most of us accept is probably the greatest challenge to health in this century? In connection with the services and screening, will the noble Lord agree that, while this is no time for compulsion, there would be great advantage for young people to be tested to make certain where they stand? Can the noble Lord assure me that the facilities will be found and that financial restraints will not stand in the way of such screening as is thought to be necessary?
Lord Hesketh:My Lords, facilities are available for those who wish to be tested because they feel they may be at risk. We see no need at present for people who are not in the high risk groups to come forward for testing. At the moment the facilities are there to be taken advantage of.
Lady Saltoun of Abernethy:My Lords, will the Government consider compulsory testing for people employed in the catering trade?
Lord Hesketh:My Lords, I am sure that all noble Lords are well aware of the extremely comprehensive regulations laid down already, before the outbreak of this disease, concerning all who work in the food and catering industry. The HIV positive food handlers do not pose a particular risk provided standard hygiene precautions are taken. As noble Lords are aware, stringent regulations already apply to people working in the food industry and in restaurants.
Lord Glenamara:My Lords, in the past, say, five years a very large number of people have had operations involving blood transfusions, most of them before the screening of donors started. Is there not a case for inviting all those people who have had operations, say, from five years ago up to the point where screening of donors started, to submit themselves for testing?
Lord Hesketh:My Lords, I feel that I do not have an answer to that at this moment. I should be more than happy to write to the noble Lord on the subject.
Lord Shepherd:My Lords, will the noble Lord agree that this is a disease having no national boundaries? To what extent is there international co-operation, particularly in the field of research? To what extent is there co-operation within the Community in regard to research into this disease?
Lord Hesketh:My Lords, there is considerable joint action taking place, as I am sure all noble Lords are aware. However, today I am in receipt of information only of the specific nature of what is happening in this country. From what I have read, and no doubt the
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noble Lord has read, there is co-ordination taking place. I am sure that we not only hope, but know, that it will improve as time goes by.
Lord Gisborough:My Lords, can my noble friend say whether there is any danger of infection via insects such as mosquitoes?
Lord Hesketh:My Lords, to the best of the department's knowledge, no, there is not.
Baroness Sharpies:My Lords, perhaps my noble friend did not understand my question about disposable gloves for dentists and doctors. That is my fault. I understand that even if one buys 10,000 pairs at a time they are still 10p each pair. I should be grateful if the noble Lord can say whether there is any prospect of them being given to doctors and dentists.
Lord Hesketh:My Lords, at the moment rubber gloves are available on the basis that I suppose is described as "pre-AIDS". I shall inquire on behalf of the noble Baroness and write to her in answer on the subject.
Lord Kilmarnock:My Lords, have the Government taken note of the suggestion of the chairman of the Pharmaceutical Services Negotiating Committee that free condoms should be made available in all high street chemist shops? If the Government are aware of that suggestion, are they considering it?
Lord Hesketh:My Lords, at present condoms are available for purchase generally in the United Kingdom. They are also available free, subject to certain conditions, in family planning clinics.

Share Ownership Percentages
2.38 p.m.
Lord Campbell of Croy: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 were the approximate percentages of the population of the United Kingdom who owned shares in companies in 1979 and 1985 and what is their estimate of the percentage in 1988.
The Parliamentary Under-Secretary, Department of Transport (Lord Brabazon of Tara):My Lords, estimates vary, but recent survey evidence suggests that up to 17 per cent. of the adult population now own shares. It is generally accepted that the number of shareholders has doubled since 1979. The Government expect further substantial increases by 1988.
Lord Campbell of Croy:My Lords, I am grateful to my noble friend for that reply, which shows a remarkable trend. Is he able to confirm the impression that many of the new investors in companies take a personal interest in both the good management and the success of the companies concerned? Does he agree that this is a healthy development for the British economy?
Lord Brabazon of Tara: My Lords, I most certainly agree with my noble friend. It is a very good thing if investors take a close interest in the companies in which they have bought shares. They should read the annual reports and do their best to encourage those companies to act efficiently.
Lord Taylor of Blackburn: My Lords, is the Minister aware that this is not a new idea? Even up to 1979 over 10 million people in this country had shares in the Co-operative Movement, took an interest in their societies and played an active part in the running of these societies.
Lord Brabazon of Tara: My Lords, that may well be the case, but I think my noble friend's Question refers to shares in quoted UK companies.
Lord Bruce of Donington: My Lords, is the noble Lord aware that we on this side of the House fully support the freedom of small investors to remove their savings from building societies and other savings accounts and, if they wish, to put them into equities? However, in view of the fact that the financial columnists and the financial press are not subject to the provisions of the Financial Services Act, will the noble Lord consider giving a public warning to the effect that shares can go down as well as up, and that gambling can be dangerous to your financial health?
Lord Brabazon of Tara: My Lords, I am sure that the public do not need telling by me or by the noble Lord, but I am very happy to give the warning that share prices can go down as well as up.
The Lord President of the Council (ViscountWhitelaw): My Lords, most things can!
Lord Murray of Epping Forest: My Lords, is the noble Lord aware that whatever the merits of wider share ownership, it is not necessarily desirable that employees in companies should be encouraged to invest their savings in those companies? In the event of a company getting into difficulties, that employee is then in double jeopardy both as regards his savings and also his job.
Lord Brabazon of Tara: My Lords, the noble Lord makes a good point. Nevertheless, we encourage the formation of employee share ownership schemes, and we have in fact been very successful in that. In 1979 there were only 30 such schemes; there are now over 1,100.
Baroness Seear: My Lords, will the noble Lord agree that, in view of the growing burden of debt, which is becoming a very great problem in many areas, people should not be encouraged to borrow in order to invest?
Lord Brabazon of Tara: My Lords, I think that the opportunities for borrowing against share purchase are not particularly widespread in any case. However, obviously one must put one's priorities in the right order and invest in shares only when one can afford to do so.
Lord Harmar-Nicholls: My Lords, will my noble friend bear in mind that to some extent it is
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undesirable for the Government to give guidance on these matters? It is for people to make up their own minds on the evidence which is before them. To intervene under the guise of calling it guidance would interfere with free expression and people's desires in such matters.
Lord Brabazon of Tara: My Lords, my noble friend is quite right—I am not attempting to give guidance to people as to whether they should or should not purchase shares. I was asked to give the number of people who have done so, and I gave the Answer to that Question.
Lord Mackie of Benshie: My Lords, will the noble Lord define a small shareholder; and as he has the figures, can he give us a figure for the number of small shareholders, and then tell us what proportion of the total number of shares they own and whether that proportion has risen since 1979?
Lord Brabazon of Tara: My Lords, I am not quite sure that there is such a thing as a specific definition of a small shareholder. As regards private shareholders as opposed to institutional shareholders, I gave that figure in my original Answer.
Lord Taylor of Gryfe: My Lords, will the noble Lord the Minister assure us that in the prospectus for any new issue in privatisation schemes some reference will be made to the Labour Party's plans for renationalisation in the event of its electoral victory?
Lord Brabazon of Tara: My Lords, I believe that that is the case in Government share offers. I think that that is particularly the case at present with British Gas.
Lord Mellish: My Lords, is not the definition of a small shareholder one who holds a small number of shares?
Lord Brabazon of Tara: My Lords, the noble Lord has put his finger on it; but the question would then be: what is the definition of a small number of shares?

Early Warning Systems: Evaluation
2.43 p.m.
Viscount Hanworth: 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 if, in deciding whether to accept the Nimrod early warning system, they will have regard to the fact that this acceptance will encourage GEC's plans for selling similar systems overseas.
The Minister of State for Defence Procurement (Lord Trefgarne): My Lords, the overseas sales potential of airborne early warning systems based on the Nimrod mission system avionics will certainly be a factor in the decision. But the major considerations in our evaluation of the two surviving candidates in our airborne early warning competition remain the ability of each to meet the Royal Air Force's pressing operational requirement and the comparative costs.
Viscount Hanworth: My Lords, I thank the noble Lord for that reply. Will the noble Lord agree that there is little chance of selling our products overseas unless we buy them ourselves? Will he further bear in mind that GEC has put up £25 million and that already its answer and its development seem as though it will meet the requirements? Finally, will the noble Lord say when a decision is due on this issue?
Lord Trefgarne: My Lords, I hope that the noble Viscount will not mind if I do not say anything that would anticipate the outcome of the competition which is now in its final stages. However, I can say that we hope to announce the outcome of this competition by the end of the year.
Lord Irving of Dartford: My Lords, will the noble Lord bear in mind when he makes the decision that the Government have spent £1 billion of taxpayers' money developing the system, and that it will supply jobs for about 2,500 people, with additional activities for a great many more over a long period of time? However, will the noble Lord acknowledge that, now that the difficulties have been ironed out, this aircraft system has not only considerable export potential but offers a system performance comparable with AWACS at a lower cost? Finally, as the noble Viscount, Lord Hanworth, has said, will he bear in mind that the purchase of AWACS will severely affect the competitiveness of British industry in many related areas and make the United Kingdom more dependent on imports for the future and less capable of bidding for exports?
Lord Trefgarne: My Lords, again I am afraid that I am inhibited in answering the noble Lord's questions in any substantive way, as I was when answering the questions of the noble Viscount, Lord Hanworth. However, I can assure the noble Lord that all the relevant considerations will be taken into account.
Lord Gisborough: My Lords, will my noble friend also bear in mind that the technology of the British system is up-to-date at this moment, whereas the AWACS system is some nine years out of date?
Lord Trefgarne: My Lords, I can only repeat that we shall take into account all relevant considerations.
Lord Avebury: My Lords, bearing in mind the urgency of the operational need mentioned by the Minister, can the noble Lord give the date of entry into service of the two systems remaining in the competition?
Lord Trefgarne: My Lords, we anticipate that the system upon which we eventually decide will come into service in the early 1990s.
Viscount Mersey: My Lords, is my noble friend aware that, should we choose its system, Boeing has promised 40,000 extra jobs in this country? Perhaps I may probe my noble friend a little as to the nature of those jobs. Will they be genuine new jobs or will they be jobs which would already have occurred in this country with companies such as Racal and Ferranti,
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which might be withdrawn if we do not buy the American system? In short, are the Americans making us an offer or are they making us a threat?
Lord Trefgarne: My Lords, I am aware of the information which has been published by Boeing, to which my noble friend refers, but I would suggest that he should address detailed questions about that information to Boeing.
Lord Avebury: My Lords, I asked the Minister whether the two systems would come into operation on the same date. Is it possible that if one of them is chosen, it would be in squadron service earlier than the other?
Lord Trefgarne: My Lords, I am sorry to be slightly evasive, but we are in the final stages of the competition. The sort of points which the noble Lord is putting to me are points which we shall have to consider and reach a view on during the final stages of this competition. Therefore, I hope that the noble Lord will forgive me if I do not go further.

Gibraltar-Spain Frontier Guard
2.48 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 the Spanish military guard at the frontier between Gibraltar and Spain has yet been withdrawn.
Lord Trefgarne: My Lords, no. However, we shall continue to urge the Spanish Government to follow our lead by removing their guard.
Lord Boyd-Carpenter: My Lords, perhaps I may thank my noble friend for that somewhat elliptical reply. Would he remind your Lordships of the date when the British guard was withdrawn and also tell your Lordships whether the Spanish Government have given any explanation of their failure so far to follow suit?
Lord Trefgarne: My Lords, I am sorry to say that I have temporarily forgotten the date upon which we removed our guard.
Lord Boyd-Carpenter: My Lords, it was so long ago!
Lord Trefgarne: My Lords, I shall very happily ascertain that date and let my noble friend know. We do not know why the Spaniards have not yet removed their guard, but my right honourable and learned friend the Foreign Secretary will be seeing his Spanish counterpart just after Christmas and will certainly be taking up this matter with him then.
Lord Cledwyn of Penrhos: My Lords, is the noble Lord aware that it has been reported in the press that the Spanish Government have indicated that they would remove their guard if the frontier gates are dismantled, and that it was further reported that Her Majesty's Government then said that this would be

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premature? Is that the case? What would the attitude of Her Majesty's Government be to the removal of the frontier gates?
Secondly, I understand that the noble Lord's right honourable and learned friend the Foreign Secretary is visiting the Spanish Foreign Secretary in January. Will this matter be on the agenda?
Lord Trefgarne: Yes, my Lords. As I indicated to my noble friend Lord Boyd-Carpenter a moment ago, this matter will most certainly be on the agenda when my right honourable and learned friend the Foreign Secretary meets his Spanish counterpart after Christmas. As for removing the gates, the gates are, I understand, now permanently open. I am not certain therefore whether removing them would serve any further useful purpose. If I could revert to the question put to me by my noble friend Lord Boyd-Carpenter a moment ago. I understand that our guard was removed on 31st July last.

Business of the House
2.50 p.m.
Viscount Whitelaw: My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That the debates on the Motions in the names of the Lord Donoughue and the Lord Prys-Davies set down for 26th November shall each be limited to 2½ hours and that Standing Order 35 and paragraphs 10 to 13 of the Rules for the Conduct of Short Debates shall apply to each debate.—(Viscount Whitelaw.)
On Question, Motion agreed to.

Consumer Protection Bill [H.L.]
Lord Beaverbrook: My Lords, on behalf of my noble friend Lord Lucas of Chilworth I beg to introduce a Bill to make provision with respect to the liability of persons for damage caused by defective products; to consolidate with amendments the Consumer Safety Act 1978 and the Consumer Safety (Amendment) Act 1986; to make provision with respect to the giving of price indications; to amend Part I of the Health and Safety at Work etc. Act 1974 and Sections 31 and 80 of the Explosives Act 1875; to repeal the Trade Descriptions Act 1972 and the Fabrics (Misdescription) Act 1913; and for connected purposes.
I beg to move that this Bill be now read a first time.
Moved, That the Bill be now read a first time.—(Lord Beaverbrook.)
On Question, Bill read a first time, and to be printed.

Ministry of Defence Police Bill [H.L.]
Lord Trefgarne: My Lords, I beg to introduce a Bill to make fresh provision for the Ministry of Defence Police. I beg to move that this Bill be now read a first time.
Moved, That the Bill be now read a first time.—(Lord Trefgarne.)
On Question, Bill read a first time, and to be printed.

Broadcasting Bill [H.L.]
Lord Beaverbrook: My Lords, on behalf of my noble friend Lord Caithness I beg to introduce a Bill to alter the maximum period for which programmes may be provided under contracts with the Independent Broadcasting Authority. I beg to move that this Bill be now read a first time.
Moved, That the Bill be now read a first time.—(Lord Beaverbrook.)
On Question, Bill read a first time, and to be printed.

Address in Reply to Her Majesty's Most Gracious Speech
Debate resumed on the Motion moved on Wednesday last by Lord Mowbray and Stourton—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".
2.53 p.m.
The Secretary of State for Employment (Lord Young of Graffham): My Lords, before I begin my speech on the main Motion it may be helpful to the House if I explain how it is intended to handle the debate this afternoon. At the conclusion of my speech the noble Lord, Lord Bruce of Donington, will move his amendment and a debate will follow which, although technically on the first amendment, will cover both. I understand that the noble Lord, Lord Diamond, will speak to his amendment during the debate. When the noble Lord, Lord Bruce, has replied to this debate his amendment will be disposed of, and the noble Lord, Lord Diamond, is expected to move his amendment formally as it will already have been debated.
I should like to support my noble friends Lord Mowbray and Stourton and Lord Arran on their Motion for a humble Address and to congratulate them on the speeches with which they opened these debates last week. I am looking forward to the maiden speech of my noble friend Lord Derwent during the debate.
This debate gives us a chance to review the broad sweep of change in our economy and the strategy of the Government, for consistency of purpose has been the hallmark of this Government's strategy and economic success has been the reward. But what a contrast to the past. In the debate on the Address 10 years ago the government of the day were unable to give this House a clear picture of their strategy. Why? It was simply because they had not yet agreed their policy with the International Monetary Fund.
How our world has changed in just 10 short years. Live for today, change tomorrow, was the hallmark of that previous Labour Government. They lost sight of the fact that social progress can only be built on economic success. The contrast with the strategy of

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this Government and the economic success we have achieved could not be more marked, for today we have an economy in its sixth successive year of sustained growth producing more than at any time in our long history.
We have an economy with low inflation, at levels not seen for nearly 20 years; we have an economy with high investment up by 4½per cent. a year since 1983 and once again at an all time high; and we have an economy with the basic ingredients for economic success—balanced growth, a healthy rate of profit, good productivity growth, lower company taxation and fewer strikes than at any time for the last 50 years.
Now let us compare our economic record with that of the last Labour Government. It is true that they were better at raising inflation and worse at investment. They were far better at creating strikes and far worse at productivity growth; and the pay-off in living standards was considerable. Between 1974 and 1979 the real take-home pay of a married man with two children on average earnings increased by only one half of 1 per cent, and since 1979 the real take-home pay for the same married man with two children has increased by over 17 per cent., nearly 35 times the growth.
Let us not just make comparisons with the past but let us consider other countries. Let us take inflation. Over the whole period since 1979 inflation has moved in line with the average for the European Community, but recently it has been lower. From 1974 to 1979 inflation in the United Kingdom was much higher than the European Community average—15½per cent. compared to 11 per cent. Let us take growth, since 1980 output has risen faster in the United Kingdom than in France and Germany. Between 1973 and 1979 once again it was growing far more slowly.
Finally, let us take productivity. The latest figures available show once again that between 1979 and 1985 productivity in manufacturing in the United Kingdom rose by 24 per cent., while it went up by 17 per cent. in both France and Germany. Yet if we look back again between 1973 and 1979, during those six glorious years productivity went up by 4 per cent. in the United Kingdom, by 20 per cent. in Germany and by 26 per cent. in France. Those figures alone are, I believe, a sufficient answer to the amendment put down by the noble Lord, Lord Diamond, this afternoon.
All these statistics show how the economy of this country has been immeasurably better under the economic strategy of this Government. But when we look at the whole picture, the brightness of this economic success has been obscured by the shadow of unemployment. It is a shadow which blights the lives of those who have been unemployed for a long period of time. When we look at the simple—and complex at the same time—problem of unemployment we must recognise that the underlying level of unemployment in our country has been rising for decades. It doubled in the 1970s and has doubled again in the 1980s.
But unemployment is not a peculiar scourge of the United Kingdom; it is a European disease rising substantially in all the major countries in recent years, and the United Kingdom economy started from a base
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which was far weaker than that of our European rivals and more vulnerable to the onset of the world recession which had occurred in the end of the 1970s.
Even so, unemployment is still far too high, and remains our most important challenge ahead. Yet there are signs of improvement. Unemployment has stopped rising. We have had the largest three-month fall in unemployment since 1973. At the same time vacancies have been rising for month after month for the last nine months in a row and are now at their highest level this decade. The upward trend in long-term unemployment will reverse. Unemployment among young people is falling and now unemployment among those under 25 is lower in the United Kingdom than the average in the European Community. As two-year YTS gets fully into its stride the situation will get better still.
But we have to look at all this in perspective. What recipe do noble Lords opposite and their party offer to tackle unemployment? What are the "adequate measures" that the noble Lord, Lord Bruce of Donington, refers to in his amendment? They offer higher demand, ignoring the fact that in the 1970s money GDP quadrupled but real GDP rose by no more than 25 per cent. The real task is to improve the efficiency of the engines of the economy, not simply to pour in more fuel to stoke the fires of inflation. They offer much higher public spending, ignoring the effect on either taxation or interest rates. The figures have been rehearsed sufficient times and all I can say is that if their promises of spending were brought into effect they would have to raise the basic rate of income tax to 53p in the pound; alternatively, and no better, a rate of VAT at 43 per cent. But finally, and with much more difficulty, they promise to cut unemployment by 1 million over two years.
Total employment has been rising for 13 consecutive quarters and has provided 1 million extra jobs and given us the longest period of continuous growth in jobs for almost 30 years. Yet during these 13 successive quarters there has been rising unemployment. During that period when we have seen 1 million new jobs come into being, unemployment has increased by 300,000. So in order to reduce the level of unemployment by 1 million, since the spring of 1983 we would have needed to create 2÷.3 million new jobs. I ask the noble Lord, Lord Bruce of Donington: is that what Labour is promising and, if it is, how do they intend to do it? They intend to create jobs through higher spending on infrastructure, social services, on encouraging employers to give jobs to the long-term unemployed; and indeed I believe they have already written to local councils so that they can set up their plans for spending more.
Within our overall spending strategy we are already prepared to increase spending on individual projects if the rate of return is good, but that is an entirely different matter from creating non jobs by indiscriminate recruitment to the public sector. Creating such non jobs will simply reduce the efficiency of the public sector and once again harm the economy.
Let us take construction. Labour plans to increase spending still further on construction to soak up the pool of unemployed skilled construction workers: I hear talk about 500,000 of those in the construction industry who are unemployed. But from where I sit I

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hear tell of a shortage of skilled workers. The Federation of Master Builders report difficulties in recruiting skilled craftsmen and so does the Institute of Maintenance and Building Management. We have no trouble at skillcentres in placing those trained in construction skills. Indeed, in the year to August 1986 100 per cent. of those trained at St. Helens went out of the skillcentre into employment. Any large Government-inspired increase in construction projects would simply worsen skill shortages, with little or no effects on jobs.
Let us take nationalised industries. At the end of the 1970s they were inefficient because they were following the same sorts of policies that the Labour party advocates today. Inefficiency was not contained within them. It infected the rest of the economy. All the nationalised industries that have been privatised are doing better today than ever before. Those still in the public sector have cut their losses considerably. At the beginning of the 1980s the nationalised industries cost £3½ billion of public spending. Today, they cost just over half a billion pounds. I look forward to the day when they will not cost us anything at all.
Just the same is true of local authorities. Labour's plans to increase employment quickly ignore the fact that many jobs require a significant period of training. Jobs are not just a tap to be switched on and off. More importantly, if people are employed by local authorities that cost goes on the rates. What we have seen time and time again is that higher rates produce fewer jobs I do not think I should go this afternoon into the plan that Southwark Council has produced to create 6,000 jobs within the local authority at a cost of some £9,000 each, but it is being relied on by those opposite. Following those guidelines, so they claim, 1 million jobs could be created at a massive cost of £20 billion over the next two years. Mr. Prescott, the Labour spokesman in another place, has said that under Labour local authorities will be the engines of growth in our economy. With those sort of plans they will be stuck on the commanding heights with a stalled engine, because such schemes simply resurrect the inefficiencies and overmanning which has bedevilled our economy over the past 20 years and created the problem we have today of unemployment. Some of their plans will just go to create unemployment directly.
Let us examine Labour's plans for a national minimum wage. I believe that this will risk more than half a million jobs. The national minimum wage was set at £80 a week. They say very clearly that that is only the start. If employees earning over £80 a week sought additional pay rises to compensate for only half the loss of differential—the resolution says that differentials will be maintained in the full, but let us assume it is only half—that would cost, according to my department's estimates, 600,000 jobs. The losses would be greater if the differentials were more fully maintained, if the £80 were raised as they planned or if the scope was widened to cover young people.
I am sure that this House would reject the notion that the Government could cure unemployment either by controlling the whole economy or by providing jobs directly. But that does not mean that the Government can do anything. We can, and we have, for we have set ourselves two priorities: the first is to get the climate of
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enterprise right. Lower inflation and lower taxation have always been the ultimate goals of our macro-economic policy. Secondly, we must encourage enterprise in employment.
We are talking about Action for Jobs. The action we are taking is detailed, specific and wide-ranging. We seek to raise the level of skill and qualifications of our people. Helping young people to prepare for work and helping to bring the worlds of industry and education closer together are vital and are the key aims of the technical and vocational education initiative and the new city technical colleges. The two-year YTS gives initial skill training which will provide a foundation for a working life. We have developed open learning, the Open College. We have extended the opportunities for training through the adult training programme. We are finally giving a structure to the previous jungle of qualifications through the work of the National Council for Vocational Qualifications. All these are substantial initiatives which we brought about in a very short period of time. They are aimed at tackling one of the most fundamental weaknesses which have harmed the British economy since the war. We are seeking to encourage people to start new businesses, to develop small firms, for they are the job generators of the future.
Between 1982 and 1984, the latest year for which information is available, an estimated quarter of a million extra jobs were created in the private sector. That is good. But when we look into those figures we find that self-employment and firms with fewer than 20 employees created 1 million new jobs during those two years and firms employing more than 20 lost three-quarters of a million jobs. That is why we have a small firms policy, because we are concerned about real jobs, and not just those in employment. We are helping the unemployed to start up in business as self-employed through the enterprise allowance scheme. A total of 175,000 people have started a business that way.
We are helping small businesses with the small firms service. We are encouraging the development of local enterprise agencies and well over 300 have been set up. We are helping finance for small businesses through the loan guarantee scheme. The business expansion scheme is the most generous fiscal scheme in the world for helping the expansion of new companies. We dramatically expanded our many schemes of enterprise training for would-be and existing entrepreneurs, not out of any political dogma but because we know it is for the jobs of tomorrow.
We are seeking to involve people more closely in the success of the company for which they work. Many more employees have a direct stake in their own companies. The encouragement we are giving to share ownership schemes is to bring greater involvement of employees, and we are exploring the possibilities of encouraging profit-related pay. In the year in which we celebrate the 80th anniversary of the Trades Disputes Act, we should recognise that for too many decades British industry has been bedevilled by conflict. We are working towards the end of "them" and "us". The very concept of two sides of industry is outmoded and outdated. There is only one side—people working together in an enterprise for the common good.

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All these objectives, more skills, the new businesses and greater employee involvement, add up to a strategy which encourages individuals to take responsibility and to support their initiative and enterprise. We give particular help to those who have been out of work for a long time, the long-term unemployed, so that they can get back into work. The restart programme is alone in the industrialised world in offering positive help to each and every person who has been out of work for a year or more. It is a major initiative concentrating on those few in our community who are hardest hit by unemployment to encourage them back into work. I say again what I have said in your Lordships' House on many occasions. When the figures for December come out we shall see that we have reversed the continuing rise in long-term unemployment and that it is thankfully going down.
This amounts to a major strategy to encourage enterprise and employment and to help those worst affected by unemployment. The amendment proposed by the noble Lord, Lord Bruce of Donington, can be unhesitatingly rejected. The job of government is to encourage and support the individual, not to take over and direct people into government jobs irrespective of their effect on the efficiency of the economy or whether they meet the needs of the people.
Of course, it is more satisfying for politicians to announce an intention to create a large number of jobs, even if they are non-jobs created by bureaucracy and unrelated to the needs of people when they can exercise their own choice. Credit for the quiet, anonymous growth of new firms—small firms—which have been creating jobs over the past few years, cannot be claimed by any individual politician, but it is happening and it is creating jobs. As I go round the country I see many examples of firms which not only started up recently but which are now providing employment for our people—and not just in the South-East. P and P Micro Distributors of Rossendale were set up by a husband-and-wife team in 1980. I know because I was a customer in that year. Today, it employs just over 150 people in Rossendale. Take Nimbus Records in Monmouthshire, Wales, in 1983, it had 40 employees; today it employs over 400. It is the first manufacturer of compact discs in the United Kingdom, and it is doing that by inventing its own technology.
Let us take Lilliput Lane, which is producing toys in Cumbria. It started in 1982 with seven employees, now employs 350 and is planning on further expansion still. Let us take the Dobwalls Theme Park in Cornwall and Gwent. It started in 1982 with one employee; today, it employs 75 people. These are just a few examples of companies which started from nothing only a few years ago and are providing employment today for large numbers of people—successful companies, meeting the needs of consumers at home and abroad, creating wealth and creating jobs. If only the party opposite had created this sort of climate in the 1960s and 1970s to encourage new firms, small firms and enterprise, we should not have the problems we have today.
It is to the new businesses such as these that we must look to create growth and new employment. At a time
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when many larger firms are still expecting to reduce their labour forces to become more competitive, we must look towards the small firms to provide employment for the many. Even large manufacturing developments do not nowadays create large numbers of jobs. Nissan's new plant in the North-East, in Washington, is welcome. It has created about 400 new jobs but more than twice as many people as work for Nissan started to work for themselves under the enterprise allowance scheme in the borough of Sunderland. If their experience follows the experience of other people round the country, in three years' time we shall find for each 100 that started about 120 in employment.
We need large firms, of course we do. But we need the steady growth of new firms to provide the large firms and the employment of the future. The prosperity of this country depends upon the ability of its people to compete in tough, international markets. I returned yesterday from leading my third trade mission to China. There we lived in the real world. We compete against the best in the world: against Japan, the United States. Germany, France, Italy. But I can tell you this. Today for the first time I feel confident that we can compete; today we are winning business, today we are competitive, today we concentrate on quality, today we concentrate on delivery and that did not happen in the past. That is the way in which we create the manufacturing base to which the amendment of the noble Lord, Lord Diamond, refers. We do not do so by giving government subsidy or by looking at other ways. It is by individual small and large firms up and down the land looking at the needs of customers and consumers at home and overseas.
The Government's strategy shows how we have taken on the task of developing that skill and ability for a wide variety of actions, Action for Jobs. Our programmes to develop skills and enterprise are massive. With an employment strategy costing over £3,000 million each year, our commitment to tackling unemployment, to encouraging the skills and abilities of our people, is massive, too. We seek to help people to provide the real jobs which this country needs.
This is the third year I have been privileged to participate in our debate on economic and industrial affairs. Last year and the year before I spoke of growth and investment; that growth continues. Last year and the year before, I spoke of the growth in jobs; that growth continues. Last year and the year before, I spoke of sustained economic recovery; that recovery continues over its sixth year. Our policies have achieved economic success. Our employment strategy will develop the skills and abilities of our people, and I am confident that our people will make use of those skills in creating jobs—jobs that will last, jobs that will last into the future.
3.19 p.m.
Lord Bruce of Donington Lord Bruce of Donington rose to move, as an amendment to the above Motion, at the end of the Address to insert "but regret the absence of adequate measures to deal with the present high level of unemployment and the problems created by it".
The noble Lord said: My Lords, I beg to move the amendment standing in my name on the Order Paper.
I noted with interest that towards the beginning of his penultimate peroration the noble Lord referred in moving terms to the reality of life that he had experienced in China. That, I must say, contrasts rather markedly with the unreal atmosphere in which he appears to be living here.
The noble Lord has claimed unqualified success. He must be getting exceptionally euphoric in his description—or should I say re-description, having had the privilege of listening to many of his speeches in the past?—of the new heaven and the new earth which the Government have apparently created. I am bound to say initially—and I do not propose to bandy figures with the noble Lord this afternoon, particularly in the presence of the noble Lord, Lord Boyd-Carpenter, who does not care very much for figures or their manipulation
Lord Boyd-Carpenter: Hear, hear!
Lord Bruce of Donington: My Lords, I observed growing disapproval as the noble Lord was speaking. I am bound to draw the attention of the House to the remarks made by my noble friend Lord Kaldor, whose absence from this debate we all deplore. He was one of the most brilliant economists in Europe over the last half century and we on this side miss him sorely. I am quite sure that his presence at this debate will be missed in all quarters of the House. Speaking here on 14th November 1985, after one of the noble Lord's orations, I think, my noble friend Lord Kaldor said this:
"ministers such as Mr. Lawson can point with pride, as previous speakers on the other side of the House have done today, to the steady growth of output under this Government for four or five consecutive years. But that means that we start as if the world and Mrs. Thatcher began in 1981. They did not. She came to power in 1979 and what has happened since 1981 has not yet made up the loss caused in the first two years of Mrs. Thatcher's Government. Those early years are now expunged from memory. They simply ignore the fact that, despite all those years of steady improvement, manufacturing output has still not regained by a long chalk the level at which it stood when Mrs. Thatcher came to power".—[Official Repori, 14/11/85; col. 427]
Lord Young of Graffham: My Lords, the noble Lord will forgive me: the figures I gave were from 1979. I have heard words from the late Lord Kaldor in the past. The figures I gave are from that date.
Lord Bruce of Donington: My Lords, I shall return to the figures where they are appropriate as compared with 1979 in due course. I think I am just as able to quote my sources as the noble Lord is and I do not think he will be able to dissent from them.
The noble Lord's speech comes on top of the Autumn Statement in which the Government announced certain increases in public expenditure. They were announced very delicately. In cash terms, they were announced for the benefit of the public so that it would form a useful backdrop to the election which the noble Lord, by his speech today, evidently anticipates. But when they were addressed to the City the increases were expressed in real terms, and so both were reassured. In any event, the increases were marginal.
It is when we come to the noble Lord's observations on decreased unemployment that we begin to fall on to
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rather more difficult ground. He claims a modest improvement in the latest figures for unemployment. It depends what one is dealing with. We on this side of the House consider unemployment at present to be one of the gravest of the key issues before the nation.
When we come to figures, we find they may differ from numbers. Numbers are not always quite the same as figures. We have a suspicion that the numbers differ somewhat from the figure configuration—the latest of a revised series—which the noble Lord was able to publish. Indeed, that did not escape the notice of the Financial Times, which observed as follows:
"The first difficulty … is to know how far the figures are due to various special relief schemes, and how far to a change in the economic environment. A simple calculation shows that the fall in unemployment over the last six months, unadjusted …almost exactly matches the rise in the number of adults involved in special employment schemes".
It concludes:
"Ministers may regard this tentative verdict as ungenerous; hut, they must get used to the fact that while the groundsmen keep moving the goalposts, the crowd will never be quite sure when to cheer".
I think what we can do about the existing figures for unemployment—and we want to be encouraged as much as possible—is to say that perhaps it would be better to leave the matter a little open until events over the next few months have deployed.
One characteristic of all governments prior to this Government—every other government since the war—was that their principal objective was the maintenance of full employment. That was in honourable implementation of pledges given to those who fought in the war, in order that their morale and purpose should be sustained. They were told, and told authoritatively, that the world they were coming back to would not be the world of mass unemployment, as it was in the 1930s, but that every endeavour would be made to maintain full employment. That was the whole objective, and it was central to the policy of every government, including Conservative Governments, that that should be sought.
What this Government have done is to eliminate full employment from their objective. Of course they did so with considerable adroitness. They were able to show, or tried to show, that it was the conduct of previous governments, including Conservative Governments, that was responsible for the quite large inflation that took place in the mid-1970s. What was ignored was the quadrupling of the price of oil in 1973 and 1974, which made inflation shoot up in this country. It was no fault of either the Conservative Government or indeed of the succeeding Labour Administration. Indeed, in spite of the massive inflation that arose, together with all the consequences of the massive rise in oil prices towards the end of the Labour Government in 1979, the inflation rate had been brought down to 10÷3 per cent. and unemployment was still declining. The figure was just over a million when the Government of the noble Lord took office in May 1979.
However, the noble Lord's party would sweep all that away and ignore that fact altogether, although I observed that in an unguarded moment the noble Lord referred to the depression of the late 1970s before his Government came to office. Where then is his allegation now, that all governments, whether they be

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Labour or whether they be Tory, up to the magic days of Mrs. Thatcher, were responsible in some way for all the ills that have fallen upon us?
The noble Lord inherited an inflation rate of 10÷3 per cent. The Government, by their own actions in their first Budget, in their directives over increases in fuel prices, put up the rate of inflation within seven months to 21 per cent. on an annualised basis, and it is from that figure of 21 per cent. that the noble Lord's Government have brought it down. Therefore what has happened is this. The noble Lord's Government—
Lord Young of Graffham: My Lords, I hope that the noble Lord will forgive me for intervening once again. The noble Lord may well have forgotten—in which case I should jog his memory—that oil prices went up again in 1979.
Lord Bruce of Donington: My Lords, it was nothing like quadrupling—perhaps the noble Lord's arithmetic has deserted him temporarily—and nothing like the increase that took place at that time, when this country had no North Sea oil resources, because it was this Government that inherited all the advantages of the exploitation of North Sea oil. Indeed, one of the indictments that we make is that, in spite of having billions of extra revenue from North Sea oil which no previous government ever had, they have made such a miserable mess of the economy today.
The difficulties of the Tory Government in the early '70s and of the succeeding Labour Government in regard to the quadrupling, and more, of oil prices were used by this Government as an excuse to sweep away the whole basis of the mixed economy on which previous Labour and Conservative Governments had operated. There were, of course, disputations between the parties as to the relative pace at which progress should be made. There was no agreement between the Conservative and Labour Parties in those days over quite a number of questions, particularly the pace at which development should take place and on the redistribution of wealth.
But aside from that, there was agreement that the state should retain one instrument of enormous use to it, in order to ensure the maintenance of full employment. That was to retain the strategic and tactical control of the nationalised industries, most of which were operating very profitably before they were taken over, in order that some central direction could be given to the economy in addition to the fiscal measures that were taken. All that the Government did as a deliberate act of policy, the results of which will now confront us, and will confront us increasingly as this year passes, was to cast away any influence over the direction of the economy, particularly in regard to the maintenance of full employment. That was all cast away.
Lord Harmar-Nicholls: My Lords, will the noble Lord give way?
Lord Bruce of Donington: My Lords, I have now given way twice. I do not want to be too long.
Lord Harmar-Nicholls: My Lords, I intervene only because I want to follow the noble Lord. Can he give a list of the great profits that came from nationalised industries? My recollection is that steel was losing £1 million a day and that there were great losses in coal. May we have a list of the supposed profitable periods which the noble Lord has just extolled?
Lord Bruce of Donington: My Lords, I shall give one example straight off. British Telecom was making profits three years before it was privatised and the profits were revised upwards by some creative accounting before the shares were offered to the public. There are plenty of other examples, but if the noble Lord will forgive me I shall not be deflected from the case that I desire to make.
What has been the result of this freeing of the entire economy to market forces? Unemployment has gone up by 2 million. That is a start. The noble Lord cannot dispute that. Manufacturing production is still 7÷5 per cent. below that in 1979 and manufacturing investment is still 17 per cent. below its 1979 level. Perhaps the noble Lord would care to refresh himself from the Box, in order that the figures can be verified.
If the noble Lord will refer to the report of the Select Committee on Overseas Trade of this House, under the chairmanship of his noble friend Lord Aldington, he will find that some of the most grievous damage that has been wrought over these years by an insanely high interest rate policy, and also by the setting of an artificially high rate of exchange, has been the decimation of a large section of British manufacturing industry, particularly the medium and small firms to which the noble Lord has referred. The idea of automaticity, that somehow the oil industry and its expansion will make up for the continued deficiency in quantity and in value of the manufacturing industry, is completely wrong, because only 2 per cent. of the value added in the oil industry comprises payments in wages and salaries, whereas in manufacturing industry the figure is nearly 70 per cent.
But the most extraordinary thing about the Government's policy is that they now believe that 3 million is the foreseeable level of unemployment in the United Kingdom. The noble Lord should refer to the document submitted by his own Government to the EC, or is it to be said that that has only an element of truth in it? I believe that another term is being used in Australia at the present time concerning truth. Exactly the same conclusion was arrived at by the Bide Report in June, as the noble Lord knows. The noble Lord knows perfectly well that the Government have legislated for, and indeed depend upon, unemployment being maintained at 3 million in this country. The noble Lord knows that, because he needs it for other purposes. Among other things, he needs it in an endeavour to hold down wage levels in this country, because of the fear of unemployment that is generated and that is still maintained by the utterances of the Government in this matter.
May I refer the noble Lord to a speech that was made by his right honourable friend the Prime Minister, not in the United Kingdom but in the heady climate of Kuala Lumpur, when she warned British trade unionists. She said that workers were being given the message that if they wanted to hang on to their jobs

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labour costs would have to come down. That was the message that she gave them from that part of the world where, in accordance with her doctrine of free competition, the wage levels were 30 per cent. of what they are in Europe. It is from that that we knew what she meant by competition.
The consequences of this policy, where unemployment has not shifted and will not shift substantially below 3 million, are very clear: there are certain fiscal and financial consequences. The first—this is within the constrictions of what the Government euphemistically refer to as their strict financial policy—is the extra £21 billion per annum that they now have to spend in terms of benefits combined with reduced taxation yields, the extra £21 billion that they have to pay out or are liable for exactly because of the high level of unemployment. That imposes certain constraints upon them.
What has happened in order that that figure, operating within their own constrictions, can be contained is that the social wage has had to be reduced; and the social wage for a large number of people in the United Kingdom is of considerable importance as an addition to the ordinary wages that they earn. Therefore, there has had to be a progressive reduction in the quality and, in some cases, the quantity, of the social services available which the ordinary individual takes into account in determining what wage claims are made in order to try to improve the standards of life.
What has happened as a result of that? There has been a downward pressure once again upon the real wage that the ordinary worker in the United Kingdom receives. Concurrently—I observe that the noble Lord did not mention it among his string of successes—because money has had to be pressed down, the infrastructure of the country is now in a state of decay. The Audit Commission—the noble Lord can check this if he likes—put a figure of £21 billion on the amount of house repairs now seriously getting into arrears. That has had an enormous significance in the country as a whole.
The final result of these policies of deliberate inflation of unemployment has been the raising of interest rates to quite astronomic heights compared with the rest of Europe and, indeed, compared with the rest of the world, bar one or two countries. This had made it difficult for the development of business and, indeed, accounts for the astonishing number of bankruptcies and liquidations that have taken place in the last seven years. The noble Lord did not mention that in his fit of euphoria. The same consequential effect has occurred because of the substitution of principally German manufactures subsidised into this country by the artificially high rates of exchange. They have thrown a strain on our own balance of payments.
The noble Lord may sit there in complete happiness assuming that his deficit this year will be only £1÷5 billion. Most City commentators think that there will be a deficit of £2 billion on our balance of payments this year, and worse is to come when the oil production of the United Kingdom begins to decline, as it is bound to do. It will certainly not be compensated for by the hoped for increase in invisible exports.
There has been also the structural effect of the Government's policies. It is quite clear—noble Lords
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on the Government Benches will not bother to argue, I should imagine—that it is the City that now rules, not the Government. The Government no longer follow policies in the interests of the nation as a whole; they do what the City tells them to do. In fact, the Bank of England subsidised Johnson Matthey to the tune of £100 million without even bothering to tell the Chancellor of the Exchequer, and the City rules.
The Government have parted with every effective means of making up the deficiency in manufacturing industry or the incentives available to it. The noble Lord has been busily enjoining ordinary working people that they should operate wage constraints and that they are receiving too high wages because, of course, to the Government they are a cost. But in the City salaries, remunerations, benefits in kind, have been allowed to go sky high, not only without any objection from the noble Lord but even with his support, because it is the people in the City, from his point of view, who are the creators of wealth whereas in fact all they do is to create the claims of wealth, which is what money is. I have no doubt that he will continue to support them. I have no doubt that he will back the new breed of what I call Young's yuppies, who at present are operating in the square mile at salaries of £ 100,000 a year or more. From his point of view, they are creators of wealth.
The social consequencies of this policy of maintaining unemployment at the present level of 3 million—which both the Government and, indeed, most other forecasters foresee will continue at the level of 3 million—is to make the top people more greedy, to make those immediately below in the higher reaches of management more envious, to make the ordinary workers of the country with the ever-present threat of unemployment kept dangling before them more fearful and to cause despair among the unemployed and the poverty-stricken in the country. Moreover, there has been a flaunting of the freedom of opulence and power and, I am bound to say, some of the permissiveness—yes, I use the term, not Mr. Tebbit—that goes with it, and that in front of the prisoners of poverty.
The Government have in fact been responsible for the virtual dissolution of national unity, and they are making progress inevitably towards the repressive state. I observe that the Prime Minister this morning delivered herself of the view, pace the Financial Times, of the one party state. She wants to eliminate the Socialist opposition from this country within two or three years.
Baroness Seear: My Lords, I think that the noble Lord will agree that the elimination of the Labour Party does not automatically bring about the one party state.
Lord Bruce of Donington: My Lords, I am in complete agreement. If the noble Baroness had been present at the recent debate on the EC, she would have seen that I was a fervent defender of her right to challenge the obviously positive decision arrived at by the electorate some time ago. I am a warm supporter of the noble Baroness in the matter of her identity.

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In view of the progress—or lack of it—that has been made by this Government, we are bound to say that we are in profound disagreement with the divisiveness which they have actively encouraged and in which they persist. We alone, and the policies that we propose which are in broad continuation of those that have gone before, can give the nation a sense of purpose and a sense of unity once again. The time is not far off when the country will give us that opportunity. My Lords, I beg to move.
Moved as an amendment to the above Motion, at the end of the Address to insert "but regret the absence of adequate measures to deal with the present high level of unemployment and the problems created by it."—(Lord Bruce of Donington.)
3.45 p.m.
Lord Diamond: My Lords, we on these Benches also look forward to the maiden speech which is to follow mine and I hope that the noble Lord will not have to wait more than another half hour before he has an opportunity to address us! I also hope I am not too late to congratulate my friend and ally Lord Bonham-Carter on a maiden speech which was both stimulating and balanced.
Perhaps I may first thank the noble Viscount the Leader of the House for the statement he made in introducing the reply to the gracious Speech telling us that we are to have the trial of sending one of our Bills to a public committee as an experiment. I think that is a very wise response to the dilemma we all find ourselves in of having insufficient time to carry out our jobs to the standard we would wish. We on these Benches are especially grateful to him because we have pressed for this for a number of years.
I acknowledge that my enthusiasm for this experiment is not shared by every Member of your Lordships' House and I accept that there may be good reasons for that. However, perhaps I may add that it has come to my notice that on occasion some noble Lords do not appreciate their full rights in connection with such a Public Bill Committee. It is not always fully understood that all noble Lords, whether sitting on that committee or not, are free to attend the committee, to address the committee and indeed to move amendments in that committee. The only restriction is on their right to vote in that committee, but of course they are not restricted in that way in the three further stages which a Bill must undergo. It is certainly a modest self-denying ordinance that your Lordships would be expected to accept, and one of a kind which I believe adds to our major liberties.
I believe that the noble Viscount the Leader of the House was right in describing it as an important decision and I have no hesitation in describing it as yet a further example of improvement in our affairs due to the wise leadership which he has given us since he became Leader of the House.
Our amendment, which I hope to have the privilege of moving formally at a later stage, adds:
"but whilst recognising the contribution made by services to the economy, regret the lack of adequate provisions to revive the manufacturing base of British industry".
That amendment has been so worded for two obvious
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purposes. The first is to draw attention to the benefit to the economy of all services, including financial services. The second purpose is to controvert in part the Government's suggestion that somehow or other failure in manufacturing output and exports are the corollary of growth in services, which we wholly reject.
As to the benefits of services generally, I must mention employment. There were over 14 million persons employed in 1985 in those services. Going against the normal trend, that is half a million more—not less—than were so employed in 1979. By comparison, approximately half that number were employed in production industries, where some 2 million jobs were lost over that same period. As to the balance of payments, this country increasingly relies on the export of services. In 1985 in the private sector we had a surplus of £7 billion on services, compared with a £2 billion deficit on visible trade. That shows how much we rely on services, both as to employment and as to balance of payments.
I now turn to financial services, the figures for which are of course included in what I have already said. There were nearly 2 million people employed in 1985 in financial services alone. That again represents an increase of a third of a million since 1979. There again we have a most welcome contribution to the economy made by what we call the City. That contribution is based on its financial skills and on its worldwide reputation for integrity. I can speak from personal experience in this area. I was privileged to lead two top-level delegations from the City—one of them to Indonesia and the other to South Korea—in the early 1970s. I well remember the high regard in both countries for British financial services and especially for Lloyd's. It is very important that that high reputation for integrity should be maintained and it is for that reason that I welcome the steps already taken and those envisaged in the gracious Speech which are designed to that end.
I also welcome the latest decision in connection with insider dealing, as it is called, although I very much regret that the question should have arisen which prompted that decision. Insider dealing has always been a very difficult issue and the recent creation of conglomerates on the Stock Exchange has made it even more difficult. To the extent that the recent incident can be regarded as arising under the new system, I am glad that the response has been both open and immediate. That promises well for the future. Much as I welcome these positive and constructive steps taken to maintain confidence in the City's financial services, I must add that I deprecate the tendency in some quarters continually to criticise, insinuate and disparage the efforts of the City's institutions. That is playing into the hands of its many competitors.
Nevertheless, however successful we are in promoting services generally (and we must remember that here too the United Kingdom's share of the world market has declined), it is quite unrealistic to suppose that services could make up the loss in industrial employment and exports if import penetration continues to grow and manufacturing continues to contract, especially with the fall in oil production which confronts us.

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Nor is it sensible, as the Government in self-defence seem to suggest, to regard the contraction of manufacturing industry as a necessary corollary to the expansion of services. We have enough unemployed, and to spare, to cover any conceivable expansion in both, although it may involve a certain amount of retraining. I do not ask noble Lords to accept that conclusion purely on my suggestion. I want to quote from the latest annual report of the British Invisibles Export Council, which reached me only last night. Its chairman is none other than the former government Minister, the noble Earl, Lord Limerick, who is much concerned to promote our exports of services.
This is what the noble Earl had to say:
"Thus any debate which seeks to put manufacturing industry and services in opposition to one another and does not address the main issues identified in the Aldington Report is wide of the mark. No foreseeable growth in the services sector can compensate for the eventual loss of our oil supplies. Nor can any foreseeable rate of growth in employment in services, where extra jobs will be numbered in tens of thousands rather than in millions, compensate for the jobs which have been lost in manufacturing industry. We remain convinced that the way forward for the economy is to maximise our trade in both visibles and invisibles".
I could not have put it better myself.
Unemployment as has been said, undoubtedly continues to be far and away our most important social problem and the contraction of our manufacturing base our most important industrial problem. The gracious Speech pays scant attention to either. The growing number of part-time jobs for women is welcome so far as it goes but it still leaves more than 1 million women looking for full-time jobs; and it does nothing to abate the misery of well over 2 million unemployed men. To help them in any permanent sense we need to revive the manufacturing base. We need to be able to sell British-made goods at home and abroad at competitive prices. The noble Lord, Lord Young, nods his head. We are on common ground on this issue. Competitiveness holds the key to the amelioration of both problems and is unfortunately the very area where we have to recognise failure.
The noble Lord quoted some figures to try to disprove this thesis. I do not know where he obtained them. I shall read, if I may, a document which ought to have some credibility on the other side of the House. It is called the Autumn Statement 1986 and was presented by the Chancellor of the Exchequer earlier this month. Assuming we still have acceptance of the view of joint Cabinet responsibility, presumably the Secretary of State accepts the contents of that document.
If noble Lords will be good enough to look at page 17 they will see that unit labour costs in manufacturing are set out with the greatest clarity. The chart compares the rise in unit labour costs in the United Kingdom with the rise in the average of other major industrial countries. Starting with 1979 and including the 1987 forecast, the chart shows that in two of those years we in the United Kingdom had to a very small extent smaller rises in the unit costs of manufacturing than the average of other countries, whereas in all the other years, and overall, the rise in our unit labour costs far exceeded the average of other major industrial countries.
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I am glad that the Secretary of State accepts those figures. They show that we have failed unfortunately in the main task of improving competitiveness; and on that, improvement in employment, in our capacity to pay for social services and in growth, all depend. Nobody was more forthright in making that clear a few years ago than the Prime Minister herself. There is a greater silence from no one else on the matter today.
Both sides of industry, as well as the Government, should give much greater priority to reversing that trend. It is still true that one man's wage rise may mean a fellow worker's job loss where that rise is in excess of inflation, in excess of increased productivity and greatly in excess of the rise in wages of the foreign competitor. Potential sales, because they may no longer be competitive, are lost and redundancies follow. It is certainly not easy for a labour leader to explain to his members that they should lower their sights because, for example, their German counterparts, who earn higher wages and enjoy a higher standard of living, are prepared to accept a much smaller rise to enable their factory to remain competitive and so retain their export orders. But the truth is that it is partly because of past self-restraint that those workers now enjoy a higher standard of living.
But disproportionate stress is laid on this one aspect of wage restraint and nothing like enough importance is attached to the responsibilities of management and of government in increasing competitiveness. Whereas with wage restraint we are talking about variations in the price of the final product of well below 5 per cent., improvements in management, (which result in modern plant and better layout, in better working conditions, in smoother flow of supplies, in better labour relations and in more participation by an informed workforce), can result in improvements in output which reduce unit labour costs by easily five times that figure. Add to that a phased reduction in the employer's contribution to national insurance, a reduction in the highest ever real interest rates and a stable pound, and we could be back in business.
Joining the EMS now would greatly improve the chance of achieving that stability. but, alas, I have lost all hope of the Government listening to our pleas on that score any more than our pleas that they should invest far more in the decaying infrastructure of the country both as a major contribution to reducing unemployment and as a counterpart to their rake's progress in selling the family silver.
The truth is that apart from their determination to sell the nation's birthright the Government have no discernible economic policy. They claim to be firm monetarists, but they have no measuring rod. They seem to delight in a domestic spending spree which is financed by massive individual borrowing and which sucks in imports from abroad; and their proclaimed firm control of public expenditure is evidenced by the Chancellor saying last year, in November 1985, that certain figures would be "held to" for two future years and then this year, in November 1986, that far from being held to they will be increased in those self-same years by no less a total than 10÷25 billion.
Certainly the Government have no policy for dealing with unemployment in any fundamental way.

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Nor should we be surprised, for they continue to refuse to recognise it as being of the first priority. The Government's first priority is the control of inflation. They think it more important that the 500,000 unemployed in the North-West region, for example, should be able to earn record real rates of interest on their massive savings than that they should have a job.
The Alliance has a policy for dealing with unemployment which we have spelt out year after year. The Labour Party has a policy for dealing with unemployment. Both policies have this in common: they state a time by which unemployment will have been reduced by a specified number. That is what having a policy entails. One takes certain actions so that certain results should follow after a certain time; and as one believes sincerely in the policy one declares those targets openly. When the Secretary of State for Employment is prepared to tell the House the date by which unemployment will have fallen by 1 million then, and only then, will I believe that he is really intent on reducing the figures rather than massaging them.
4.12 p.m.
Lord Derwent: My Lords, I am grateful to noble Lords who have welcomed me with such friendly words. I hesitated to address your Lordships on a day when so many more distinguished Members of the House have signified their intention of speaking.
My noble friend the Secretary of State referred to his recent visit to China. I understand that in the days of the Chinese Empire there were two ways in which the Emperor rid himself of hereditary peers who were supernumerary to his requirements. In the first place, each time a title passed to the next generation the family dropped one rank in the nobility until they eventually reverted to being commoners. Fortunately, that is a system which has not yet commended itself to your Lordships. Secondly—and here the Emperor had powers which I am sure are the envy of my noble friend the Chief Whip—immediate demotion was the penalty for any nobleman who, in the opinion of the Emperor, spoke too long in the Imperial Council. Mindful of that historical precedent, I shall not tempt fate by detaining your Lordships for more than a very few minutes.
My excuse for intervening at all in this debate is that, while many noble Lords who will be speaking today with far more expertise than I, speak with the authority of those who observe and, indeed, manage the United Kingdom economy from the inside, I have over the past year had the opportunity to view it through the more objective eye of the foreigner looking from the outside. After over 30 years in which I, too, was an observer from the inside—first from the Diplomatic Service and Whitehall and then from the City—I more recently have worked with a Far Eastern group for whom the United Kingdom is but one possible area for investment and trade, competing for attention with other countries.
It is amazing how one's perspective changes from a different vantage point. As any policeman will confirm, what a witness sees and the importance he attaches to it depend almost entirely on where he is standing. Indeed, I understand it is common for three
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totally honest witnesses to give wildly differing accounts of the same situation or the same events. In particular, features which appear large and even overwhelming to those near at hand fade into insignificance or invisibility when viewed from afar.
Today your Lordships are debating the economic policies and measures set out in the gracious Speech and will, above all, be looking at them from the point of view of the domestic scene. Social, industrial, fiscal and even (dare I say it?) electoral considerations may be paramount. What I hope your Lordships will also do is to consider how such policies or alternative policies will be viewed from overseas. Each time we change the policies or the laws here, to give employment, to divide the cake regionally, or in pursuit of what may be very worthy domestic aims, this country becomes either more or less attractive as a target for investment or as a potential trading partner. Yet it seems to me that such considerations are often ignored when important decisions are taken.
Foreign businessmen are not too interested in our woes, our problems, the historical reasons for our policies or even the current reasons for them. They must merely view the nation as it is and as they find it. Of course, they know that, as in their own countries, policies will change from time to time. They accept that. But they have to judge any country against certain basic criteria. Is there a stable political background, and is it likely to continue? Is there a sound legal system which is easily understood, free from red tape and honestly administered? Is the language one they can speak and understand? Is the labour force skilled, motivated and enthusiastic? Will there be sudden, unexpected and unexplained changes in the ground rules? Uncertaintly is the one thing with which business cannot cope. Is there a fiscal system which is, if I may use the jargon of today, "user friendly"? Is the private sector made to feel welcome? Is there the necessary infrastructure of services and skills for their particular business?
I shall not attempt to analyse where the United Kingdom stands in relation to each of those questions and as compared with our competitors. Each Member of your Lordships' House will have his or her own opinion. I would only make a plea that when advocating, or opposing, specific measures we should all, in all parts of the House, consider how the foreign perception of the United Kingdom, judged against those criteria, will be affected.
Finally, I hope that we will always be prepared to reconsider our most precious beliefs—I almost said our most treasured prejudices—in the light of what is happening elsewhere. There is one striking current development which provides a good example of what I mean. It is an event overseas which in my view must have a profound effect on the policies of future British and, indeed, other European governments, and which makes much received wisdom dangerously out of date. I refer to the new United States tax laws. As your Lordships know, the highest marginal rate of income tax in the United States, is—with one limited exception—to be reduced to 28 per cent. Most higher paid, even the most highly paid, manual workers will enjoy a marginal rate of 15 per cent. Six million people now paying tax will be taken out of the tax net altogether. Noble Lords may think this policy right or

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wrong for the United States, but our views, alas, are irrelevant. From 1st July 1987, that will be a fact of life in America.
Different Members of your Lordships' House may believe that the top rate of tax should be 50 per cent., 60 per cent., 83 per cent. or even more in a perfect world; but I think that we should ignore doctrinal views on whether or not policies based on high income taxes are in themselves desirable. Instead, we should consider whether a policy of high income taxes is even an option which is open to us now that we are faced with the opposite policy in the world's most economically powerful nation. Can we attract or keep the best brains, the best companies or the most desirable investment if our lowest rate of income tax is higher than the American highest rate?
I cite tax rates only by way of illustration. The point I seek to make is that the world is now so interdependent and changes so quickly that any one of us who automatically repeats arguments that we last used one year ago may be guilty of trying to solve the problems of the past rather than the problems of the present or the future. My Lords, I thank the House for its indulgence.
4.22 p.m.
Lord Harris of High Cross: My Lords, the privilege falls to me on behalf of noble Lords in all parts of the House to offer our congratulations to the noble Lord, Lord Derwent, and express our pleasure in his eloquent and thoughtful contribution to our debate. Older Members will confirm that his father will be sorely missed. However, we rejoice in a hereditary system that yields younger Members who can enliven our debates from their recent experience, and we look forward to further contributions as often as the noble Lord can neglect his affairs to be with us on other occasions.
The title for today's debate invites us to judge the gracious Speech by its contribution to long-term economic progress and employment. On the other hand, the two rather nostalgic amendments prompt me to begin by looking backwards over the chequered history of what the noble Lord, Lord Bruce of Donington held up to our admiration as the vanished "consensus" and which I call the consensus of collective Keynesian economic management and planning. That seemed to start quite well. It is within the memory of most of us perhaps how in 1945 a Chancellor came forth who was a trained economist from the London School of Economics, and who often said. as your Lordships will remember, that he had a song in his heart. It did not last long. He was soon succeeded by Sir Stafford Cripps and a real taste of austerity, which still did not fend off the first post-war devaluation of our currency.
From the Cross-Benches I must be impartial. I can all in the 1950s successive Tory Chancellors who from time to time ran foul of what came to be called "balance of payments crises", which were massaged by a succession of credit squeezes, but that did not prevent a repetition of them. In the 1960s under both parties we had Stop-Go, followed by Go-Go, egged on by a National Plan, which swiftly gave way to a second unplanned devaluation under a Labour Administration. Finally, in the 1970s Mr. Healey set a record
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for a series of mini-budgets which notably failed to prevent high inflation and mounting unemployment that not only made a mockery of central planning but disrupted employment and investment throughout the manufacturing sector.
I believe that the most conspicuous achievement of Mrs. Thatcher's leadership has been the success of her two Chancellors for seven years in managing with one Budget each year to maintain steady progress, at least since 1980, in bringing inflation down from above 20 per cent. to its present 3 per cent. Despite the dramatic eruption and collapse of oil prices, a world recession, a full-scale war in the South Atlantic, a year-long coal strike and many, almost unprecedented international shocks, the anchor of the medium term financial strategy has kept us steady. It is true that the monetary aggregate, namely £M3—which I believe was chosen originally by Mr. Healey with a certain amount of help from the IMF—has been rendered a somewhat fickle guide to the inflationary trend, for reasons that were explained to any who have the stomach to persevere in reading the lecture of the Governor of the Bank of England at Loughborough last month.
But for all the scoffing from the ranks of the unbelievers—and notably the noble Lord, Lord Bruce of Donington—the Treasury's success since 1979 in my view stands in the sharpest contrast to the oscillation, the instability and the accelerating trend of inflation under previous Labour and Conservative Administrations. Indeed, it is that record which today leads me, at least for the moment, to give the Chancellor the benefit of the doubt which is expressed by some monetarists that policy may now already be set on too expansionist a path. In place of the discipline of pre-announced monetary rules we have only Mr. Lawson's judgment based on monitoring all financial aggregates together with the underlying movements of the exchange rate. I admit that he has kept a firm grip on government borrowing, which was frequently a source of inflationary printing in the past, but the Chancellor knows that he is on trial. He has said that the course of prices must be his judge and jury and he knows that the time lags will not delay beyond next year at least a preliminary verdict.
As the noble Lord, Lord Young, argued, the Government can claim many other successes in productivity, investment and growth. But despite all his energetic efforts, which I admire enormously, I fear that a sustained or significant reduction in measured unemployment still seems likely to elude us. Even allowing that the headline figure above 3 million overstates the true number of people anxious to take a job, present policies are not sufficiently directed at reducing the smaller but still large number who are genuinely seeking work.
In Europe and across the world to Australia and New Zealand, governments of quite differing political philosophies have turned against monetary expansion as a discredited panacea for unemployment. Instead they are discovering that deep-seated structural changes in production and in foreign trade require increased flexibility through the liberalisation of labour and other markets, accompanied by lower taxes, as mentioned by the noble Lord, Lord Derwent.
The most surprising convert that I bring you today is perhaps the International Labour Organisation,

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which since 1919 has done so much to bolster trade unions and to hobble the efficient deployment of labour. In its recent report the director general acknowledges, for example, that the growth of social security is a burden on production and is "causing deep concern". Like a reborn Thatcherite, he talks of the "serious consequences" of deficit financing for high interest rates, reduced investment and the loss of productivity. He goes on to call for correcting the balance between the protection of workers and
"the flexibility vital for the economic viability of enterprises".
Looking at the amendments, I ask what help did the Government get from the noble Lords, Lord Bruce of Donington and Lord Diamond, when they set themselves the difficult task of deregulating shops and buses, reducing trade union privileges, ending the nonsense of the Truck Acts and reducing the impediments of wages councils. The trouble is that the Government now need to go further in tackling what Keynes himself classified as "voluntary unemployment" caused by the effect of social security on work incentives. It was Keynes who back in 1930 acknowledged that even the pre-war dole prolonged and increased unemployment.
I go back to my favourite reading for the time being, the International Labour Organisation and its splendid reborn director general. He writes:
"If unemployment benefits are high in relation to take home pay, the pecuniary incentive to work is clearly marginal. There are undoubtedly some abuses of benefits such as technically unemployed people engaging in clandestine work".
If we do not wish to see benefits reduced or stopped altogether after six months or a year, as in countries as different as the United States or Sweden, there seems to be no alternative to a massive reduction in taxes on low incomes. By increasing net take home pay, we would also reduce pressure for unearned wage increases, which are still pricing hundreds of thousands of people out of work.
My disappointment with the gracious Speech is that it holds no promise of a major reduction in central and local government spending, which still amounts to well over one half of our national income. I have no doubt that lower taxes on earnings hold the key to a more efficient, enterprising and expanding economy that would offer lasting employment to more of our people. However, since both amendments rest on policies that would increase rather than reduce government spending and taxation, I am left with no option but to support Her Majesty's Government against such reactionary tendencies.
4.35 p.m.
Lord Soper: My Lords, may I begin by offering my congratulations to the noble Lord, Lord Derwent, for a maiden speech which I found most cogent and enterprising. If the noble Lord will allow me to pay him a compliment, I begin with the claim that he made. It is important to look upon this affair in our Chamber today from the outside. As is my wont, I have been talking in the open air today. It was a bit damp but I found there a reaction in great contrast to the general temper and spirit of the debate hitherto in your Lordships' House. The main difference, it seems to me, from contact with the outsider, is that for him
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it is a moral issue. Only in the sense that "economics" is a derivation of the word "stewardship" does it become a matter of expertise.
To quote Mark Twain about the Bible, it will be remembered that he said that the bits in the Bible that he did not understand caused him some bother; but what caused him much more bother were the bits that he did understand. That is a not inappropriate comment upon the nature of the economic situation to which your Lordships have given your attention hitherto this afternoon. With 9 million below the poverty line in 1983 according to Government estimates—the figure must be about 10 million now—with more than 3 million unemployed persons, to say nothing of their entourage and family background, and with the obscene kind of opulence enjoyed by a favoured few, particularly those who seem to be experts in the manipulation of finance, the present situation, as seen by the outsider, so far as I come across him, is a moral collapse. Although he may have personal and selfish reasons for such an estimation of what is going on, I would nevertheless concur with him that, ultimately, what we are discussing this afternoon is the machinery of government in the economic field as that machinery is governed by predominant and background ideas and principles.
I shall devote what I have to say to an examination, however brief and however imperfect, of one or two of those preconceptions. One is the attitude that can generally be regarded as privatisation. The other day the noble Lord was engaged in debate in the Oxford Union. The motion was that the ultimate good of the community would best he secured by the pursuit of private gain. That, to me, is morally intolerable. It seems a direct contradiction of everything—quite apart from a Christian background—being incorporated in the idea that you can only produce good by good. You cannot produce good by evil, except on the basis of a total depravity concept that I would repudiate, as I am sure would your Lordships.
I do not believe that you can unite a community to face the problems that undoubtedly obsess a great many of the minds of those who seek to provide the answers, by claiming that an enlargement of the area of selfishness will contribute to the public good. You cannot baptise selfishness, even with that kind of hosepipe, without creating an intolerable moral dilemma. I would rather face the dangers and difficulties of believing that corporate action is preferable to private gain than go on maintaining the proposition that we shall somehow come out of the problem that we now face by the exercise of the very thing that in large measure has produced it.
I further find that the privatisation idea lends itself to another monstrous misrepresentation of even basic morality. I do not believe that possession, particularly of this world's goods, can ever be a freehold. In all circumstances, it must be something of a leasehold. For people to imagine that they can do exactly what they want with money that they have acquired by good or bad means seems to me a fissiparous attitude that divides any community that could be united, and produces the kind of separation that anyone who lives north of the Tweed can find, by the simple experience

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of looking at the faces, let alone the circumstances, of those who live in areas of vast and high unemployment.
I hope that your Lordships will not think I am either sentimental or sanctimonious in believing that we have a basic moral crisis here. That moral crisis arises as the result of the very action of privatisation, and the accompanying ways in which it is expressed, so that we have no adequate concept of a united people. We cannot therefore appeal to those who have the opportunity of service because they do not feel any urgency or sense of responsibility for their fellows. It is that elementary sense of responsibility which I would urge upon your Lordships today. I believe that such responsibility can be undertaken only when it is firmly established in a communal effort to face those problems which now afflict us all, either directly or indirectly.
Therefore, in conclusion, in order to be a little constructive, I believe that there is a vast opportunity for the infusion of public money into all kinds of institutions which are now impoverished because of a lack of it. The assumption that that money is not there seems to me to contradict this basic proposition. If we were prepared to put that money into the creative opportunities which could increase the services which could be used to reduce unemployment, we should find that money in the one area which—if you will allow me (I shall say it anyhow)—is a bugbear to many people. I am a pacifist. I believe that the unilateral reduction of the enormous amount of money that we are prostituting to the intentions of armed violence, or the so-called prevention of them, is a source which could be used, and would unite a great many more people than we are accustomed to think would respond to such a plea.
There is no doubt in my mind that what is, above all, required today is a new spark of public enthusiasm for a community which at the moment does not exist. It can begin to exist only when there is a parity of sacrifice to which we ask all to subscribe, and a prospect of a peaceful world in which creative leisure will in large measure take the place of what is now called unemployment. That is a belief. That is a vision. I believe that it forms at least a part of the contribution that should be made to this debate in your Lordships' House.
4.43 p.m.
Lord Boyd-Carpenter: My Lords, I too, from these Benches, should like to express with great sincerity my congratulations, and those of all noble Lords on this side of the House, to my noble friend Lord Derwent on a clear, forceful and extremely interesting maiden speech. It is obvious that he is a powerful reinforcement to these Benches. I express with wholehearted sincerity the hope that he will frequently bring his powerful aid to our help in these debates. As one who was an enormous admirer—and I am glad to say can claim to have been a friend—of his father I shall only add how proud and glad his father would be if by some means he could know what a splendid initial impact his son has made on your Lordships' House this afternoon.
The noble Lord, Lord Soper, has tempted me, I am afraid, from my prepared speech. In that respect I am
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like Oscar Wilde: I can resist anything except temptation. However, when the noble Lord, Lord Soper—whose sincerity I am sure all noble Lords wholly recognise—held forth to the effect that corporate action is better than individual action, and that it is corporate action which should be applied to our affairs rather than individual action, he did not deal with the question as to which was the more efficient, and more likely to provide the wealth which we need for the maintenance of all the immensely important services which we wish to maintain and to expand in our community.
The noble Lord for that reason denounced privatisation. However, it has been our experience of the nationalised industries that what belongs to everybody belongs to no one. It has also been our experience that those industries that have been denationalised—I prefer that work to privatised, which I think is a clumsy and rather crude expression —have, without exception, done conspicuously better than under nationalisation. In that way they have therefore contributed to the creation of more wealth to be used for the innumerable good purposes for which we in this country want to use it.
The noble Lord, Lord Soper, also sought to find funds for other purposes by running down—indeed, as I understand him, eliminating—the armed forces of the Crown. I can say only that I have lived through two wars, both of which we nearly lost, and our freedom with them because the governments before those two wars did not provide adequately for our defence. If those of my generation, and that of the noble Lord, Lord Soper, cannot learn from that lesson, then I can only say, in words which will appeal to him "Heaven help us".
I come now to the noble Lord, Lord Bruce of Donington. Those of us who have in us a touch of sadism must have derived very particular pleasure from listening to his speech, because the noble Lord is in a terribly difficult position. Will the noble Lord say that the Autumn Statement is a lavish, crude attempt to bribe the electorate by lavish and profuse expenditure; or will he say that it is an example of a hard-faced, brutal Tory oppression denying every good service adequate support? Even the noble Lord with his admitted affection for the manipulation of figures cannot ride both horses. At the end of his speech—which I would not criticise on the grounds of undue brevity—he did not clearly come down either way, which, although a tribute to his adroitness, does not help the conduct of this debate.
I shall say to the noble Lord, in words that I hope he will not think offensive, that if he is taking the electioneering option—as I rather think on balance he was tending to do—there is a good quotation:
"Belial, in much uneven scale,
Thou weighest all others like unto thyself".
Given what his right honourable friend Mr. Hattersley is recommending to the public—the vast expenditures in every vote-attracting direction, and the enormous increase in public expenditure—it would be a little odd if the noble Lord or his colleague beside him were to suggest that an Autumn Statement which still keeps public expenditure within the same proportion of the gross domestic product was anything of that kind.

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The most startling of all the observations of the noble Lord, Lord Bruce, was when he solemnly—I could hardly believe it as I listened—charged the Government and my noble friend on the Front Bench with wishing to keep an unemployment figure of three million. One can accept, I suppose that he thinks the Government are wholly lacking in humanity, and that we are happy at the idea of three million, or anything like that, of our fellow countrymen going through the humiliation of unemployment. It is perhaps the humiliation of not being wanted which is worse than the economic privation. He is entitled to think that. But does the noble Lord also think that this Government are happy at the vast expenditure in billions of pounds on unemployment benefit which could, if unemployment were much lower, be used in other very useful directions? Finally, does the noble Lord feel that a Government—which must face a general election at some time in the next 18 months or so—would welcome figures of unemployment of this measure? The noble Lord is entitled to think us hardhearted: he is not entitled to think us insane.
The central issue of this debate is the question of public expenditure and the taxation needed to maintain it. That is the central issue, and it is the case that the machine is very much tilted in favour of expenditure. I think that the noble Lord, Lord Diamond, a former Chief Secretary to the Treasury, will agree with me that all the cards are stacked that way.
Doctors in hospitals genuinely feel that if they had more money they could cure more people by all the new, elaborate and expensive processes that they are developing. Ministers in social security departments—and I know this because I had 6½ years as Minister of Pensions and National Insurance—know the popularity they would receive if they could expand those payments, and how much good they could achieve in the process. The Department of Education and Science and the Department of Transport all know of expenditures which would be extremely helpful, and, in human terms, they also know that a Minister who spends a great deal is popular and well-liked by the public whereas a Minister who restrains expenditure finds it less easy to put his views across.
However, there is a point at which the taxation needed to finance these public expenditures becomes counter-productive, damaging to the economy and restrictive of the creation of wealth. I thought my noble friend Lord Derwent in his splendid maiden speech made that point superbly well. If we in this country are to be asked to keep our lowest rate of income tax at a level higher than the highest rate in the great United States, we must be putting ourselves at an economic disadvantage and at a disadvantage in the creation of wealth. I believe that, at the higher rate, our system now taxes at 59 per cent. those with large incomes—a percentage which some people might well regard as confiscatory. Therefore high taxation must discourage incentive and saving, and, worse still, must encourage emigration. A brilliant young man, whether in science, technology or finance, who knows that if he goes abroad he can earn a very high salary with less, perhaps no, taxation upon it, will be tempted to transfer himself and his abilities from a country that
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will take 59 per cent. of the top chunk of his earnings. That must be an economic loss to this country, not only because his abilities are lost, but because we also lose the opportunity of taxing him at all, and obtain no revenue at all from his income.
If we discourage initiative and enterprise in this way we shall handicap ourselves very severely in the highly competitive world in which we have to live. This is not our experience alone; we have seen what these kind of policies have done in other countries. We saw it in France under the previous French Government, and the French, being a quick thinking and quick moving people, hastily reversed it.
The best example of all is that of Australia. I suppose that Australia is basically the richest and most fortunate country in the world, having every natural resource that one's imagination can contemplate: oil, coal, gas, food, cattle, sheep, grain, every mineral that is wanted—every natural resource—and a population modest in relation to the great areas of that great country. Yet in two or three years the kind of policies that the noble Lord, Lord Bruce of Donington, and his colleagues are advocating have reduced that country to a state of crisis, have driven the Australian dollar down on the markets of the world and have even forced the Labour Government there to take restrictive and repressive measures. If these kind of policies can do that to as robust and powerful a community as Australia, it is a little alarming to contemplate what they would do if applied in this country, with our infinitely weaker resources and in our infinitely more precarious position.
If your Lordships want another comparison, let us compare these kind of policies with what happened in this country some years ago. It is a particular pleasure to all of us that my noble friend Lord Stockton is here this afternoon, looking well recovered from his recent illness, and I am particularly glad of that because I want to recall the Macmillan era. In that era taxation was steadily and progressively reduced.
However, the economic growth which that helped to produce increased the yield of that taxation at lower poundage rates, and, as a result, in my noble friend's own famous words, which have passed into history, "You've never had it so good". That is true. My noble friend was attacked for those words, but it is true. We had a period of growth, of very low unemployment, of hardly any inflation for year after year, because a policy of restraint in expenditure and of increasing benefits of one kind or another only as and when they could be paid for, enabled a process to be carried through of increasing them year after year without check and without setbacks.
If we cannot learn from the examples of other countries, let us at least learn from the example of our own. As the right reverend Prelate the Bishop of Manchester said the other day in this House in connection with surgery—and I have given the right reverend Prelate notice that I should be referring to this—"People should pay more taxes in order to improve the National Health Service". That sounds, of course, very appealing. However, if, for that good reason, you are going to push up the levels of taxation beyond the point at which they diminish the efficacy of the national economic effort, you will do no good

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either for the National Health Service or for any other services in this country. I say with great respect to the right reverend Prelate, that I wish that particularly those who hold high position in this country would not encourage the simpliste view that all you have to do is to put up taxes and pay for all these good things which you want to see done. The only way in which you will achieve these good things is, first, to build the wealth creation which can finance them and, then, to use that wealth as you generate it to expand these services again and again. That is the true way by which, as I said to your Lordships, experience has shown this country to have prospered and succeeded.
There is only one other point that I wish to make to your Lordships. I was distressed that the Autumn Statement contained the statement that in the current year local authority expenditure had increased by 9 per cent. That goes wholly contrary to all the policies of' the government of the day on the management of the economy, and must have a particularly damaging effect on the areas of the local authorities to which this applies, particularly in respect of unemployment.
There is gross extravagance in some local authorities. I will take only one example, that of the Borough of Ealing, which in the current year has increased its office staff at the borough headquarters by 780 people. There can he no justification for that. Of course it is all part of the expansive attitude—expansive and expensive—of so many local authorities under Labour control. Though they have nothing whatever to do with the police, they set up a police committee. They set up committees to support every sort of eccentricity, and may I say every sort of perversion. They support every crankish or fanatical organisation at the cost of the ratepayers.
I hope that another 9 per cent. increase in local government expenditure is not going to be permitted by my noble friend and his colleagues. I know how difficult it is to tackle elected local authorities, but rate-capping has had some success. If one reads the Autumn Statement the one really rather damaging hole ill the whole concept is this growth in local government expenditure, and I hope that when my noble friend replies he will say something reassuring about that.
We have at the moment a clear conflict on financial and economic matters with the Labour Party. Under the present Government our society and its economy have been changed beyond all recognition. We have lived in an era in which the boundaries of the state have been pushed back—although that will annoy the noble Lord, Lord Soper, I think that most other people appreciate that particularly—and in which enormous changes have been made with increasing freedom, increasing deregulation, and therefore increasing creation of wealth.
I think that when the people of this country come to realise the immensity of the change effected by a radical Conservative Government they will be deeply impressed, and indeed contrast it with the most static organisation in the world, which is by paradox called the Labour movement.
5.2 p.m.
Lord Hatch of Lusby: My Lords, I should like to begin by adding my own personal tribute to that
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already given by the noble Lord, Lord Bruce of Donington, to the late Lord Kaldor. We miss him particularly in a debate of this kind. Those of us who were privileged to work with him and to be inspired by him, and to play upon his patience particularly in our work in the third world, miss him deeply.
My second desire this afternoon is to add also my tribute to the maiden speech of the noble Lord, Lord Derwent. I am tempted to take up the essential point he made about the necessity for regarding our economic affairs from the outside, from the viewpoint of the rest of the world, and, as the House will know, I have often done so, but I am going to resist that temptation this afternoon and postpone it to the future. However, I am pleased that the noble Lord brought this to our attention.
I am also tempted to take up the speech of the previous speaker, the noble Lord, Lord Boyd-Carpenter. All I would say about that is that I believe that he totally failed to understand the basic argument of my noble friend Lord Soper in the contrast between the community interest and private greed, but that is a matter that can be taken up at another time. What I would suggest is that when the noble Lord, Lord Boyd-Carpenter, says that the most important issue in this debate on economic policy is the degree of public expenditure, I would disagree with him.
What I should like to do this afternoon is to make one point only: that beneath all the political arguments regarding our economy there is a deep malaise, a deep canker, in our national economy which affects people of all ideological beliefs, and essentially influences the present of this country and its future, and the future prospects of our children. I refer to the state of manufacturing industry and its prospects in the future.
Last year there was a deficit in manufactunng trade of £3½billion. This year it is forecast that that deficit will be £4½billion, and yet the exports of this country still rely upon manufacturing for more than half—51 per cent. to be exact—of their volume and price. Those who argue that services can take their place should note that only 23 per cent. of our exports come from services. This is quite natural, because if you look at the character of manufactures and services, whereas 80 per cent. of manufacturing output is tradeable—can be sold outside the country—only 18 per cent. of service activity is so tradeable.
As a result of this tragic decline in our manufacturing industry we see what has already been referred to several times this afternoon, the steep rise in unemployment. I would just remind the noble Lord, Lord Young, if he were here—perhaps someone will draw it to his attention—that when he is talking about unemployment being a European problem and an international problem, I challenged him on this not very long ago. He courteously sent me the figures, and those figures show that in the OECD countries only Eire and Spain have a higher percentage unemployment rate than this country. We are top of the league outside Eire and Spain.
Of course this particularly affects manufacturing employment. In a year like last year, which showed a certain new form of growth, the unemployment figures in manufacturing industry rose by only—and I

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emphasise "only"—5,000 a month. This year those figures for unemployment in manufacturing are rising by 15,000 a month.
As has already been pointed out by my noble friend Lord Bruce of Donington, manufacturing output is lower today than it was in 1979. But I would just refer to the fact that it is also lower than it was in 1973, so that it is not simply a party issue. Manufacturing output has been declining. It rose towards the end of the 1970s, but it is still lower today than it was 15 years ago.
Investment, on which manufacturing industry depends, is lower than at any time since 1963—at any time since shortly after the noble Earl, Lord Stockton, was Prime Minister of this country—with the one exception of the trough of 1981 to 1983, when this Government were also in office.
I should like to quote to the noble Lord, Lord Young, the findings of his own Manpower Services Commission along with the CBI, who have found that one in seven of manufacturing firms in this country find their work curtailed today by a shortage of skilled labour, a shortage of skilled workers, at a time when unemployment is, even by massaged figures, three and a quarter million and by real figures something in the nature of 4 million. Yet despite this clear collapse of manufacturing industry, the department of government which should be responsible for the promotion and the assistance of manufacturing industry, the Department of Trade and Industry, had a budget of £1.5 billion in 1980—a budget which today has fallen to just over £600 million.
What is the effect on the standard of living of people in this country and the prospects for the people of this country of what has happened to manufacturing industry? I am not talking here in a party sense, because I believe that this collapse of manufacturing industry is recognised on all sides: it is certainly recognised by management, by workers, by unions and I hope it is recognised by the Government. I should like to quote—the House knows I prefer to quote from my opponent's words rather than from the words of members of my own party. This is a quotation from the Association of British Chambers of Commerce in a booklet produced in conjuction with the Young Conservatives.
"It says 1.7 million industrial jobs have been lost in eight years; that British industry's decline has been 'more rapid and absolute' than any of our main competitors (output falling while it is rising sharply in Italy and the Netherlands, as well as Japan)…equally alarmingly that import penetration is soaring".
It continues in a direct quote:
"Our shrinking manufacturing base and deteriorationg trade performance raise a fundamental question about the future of the British economy: how do we pay our way in the world when the oil trade supplus—at present a huge £11.5 million—begins to disappear in the late 1980s".
I suggest that those remarks from the Association of British Chambers of Commerce and the Conservative Party amounted to a fair estimate of the most basic threat both to the economy and to the standard of living of the people of this country. So far as I can gather, that was never even approached in the opening speech of the noble Lord, Lord Young, a speech which
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appeared to be much more geared towards an election that a constructive contribution to the debate in this House.
I am not trying to make a party point, because this is an issue which has faced the country throughout this century, whatever government have been in office and all governments have some responsibility for it. We can go back to the end of last century. It was in the 1880s that the United States first surpassed the steel production of this country; it was in the 1890s that the Germans overtook us in the production of steel—an essential indicator of industrial health. At the beginning of the century this country exported 33÷.2 per cent. of total world exports; the figure today is something under 7 per cent.
Even when we were faced by that clear competition and threat to our position in the world at the end of the last century what did we do? One could mention one or two things. We still were much more concerned with the classics than with technology. While we were still basing our education system on the foundation of the public school classical education, the Germans and the Americans were building technological and engineering colleges. Has the position changed? Today the Germans have over 600,000 apprentices: in this country there are 40,000. In Japan 34 per cent. of 17 year-olds are in full-time education; here there are 30 per cent.
In the countries of our main competitors prestige and remuneration for industiral management are considered to be at the top of the scale. In this country what happens? Young men and women in their mid-20s are getting £50,000 a year and upwards for manipulating figures in the City. How does that compare with the rates that are paid for the same age group in industrial management? I suggest that the story—which I do not think will be challenged in any part of the House—of the imminent danger to the standard of living of the people of this country leads us to ask questions which we cannot answer. We do not know and nobody knows. Many suggestions are put forward, many analyses are offered to us, but we do not know. I do not believe that any single Member of this House can answer that question. What is causing the collapse of our manufacturing industry and the threat to our industrial and economic future?
We know that there is need for an industrial strategy, which we do not have. We know that in other countries there is co-operation among government, unions and management which does not exist here. We now that industry is valued in our competitor countries, irrespective of the character of their governments. We know that the governments of our major competitor countries give a great deal more active, practical support to the industrial firms that produce the wealth than there is in this country. I believe that whether we have a Labour or a Conservative Government, from now until the end of this century we must have a radical, constitutional and structural set of reforms. It is necessary just as much for Labour's industrial policies as it is for any continuation of Conservative policy.
I beg the noble Viscount who is to wind up this debate to take on board this issue of the threat—the collapse, indeed—of our manufacturing industry and tell us what is the view of the Government. I have one

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specific suggestion to make, and I ask him to respond to it. I know he cannot answer yes or no tonight, but I ask him to respond and to take it seriously, because I do not believe that this comes simply from one part of the House. I ask him to consider whether it is not the case that the essential data we need to face this issue can be extracted only by a Select Committee of this House; that this is the only institution in the country which has the expertise and experience and which can investigate every aspect of training, wages and management—the gamut of issues which affect our manufacturing industry. Will he seriously consider whether it would not be in the national interest for him to give a lead by setting up from this House a Select Committee to investigate the history of the decline of manufacturing industry and the effect of that decline today and to look for proposals for our revival in the future? The future of the standard of life of the people in this country depends upon that.
5.20 p.m.
Lord Alport: My Lords, the debate so far, I think, has been in pretty general terms and included the admirable maiden speech from Lord Derwent, whose father we remember here with great affection. However, I hope that your Lordships will bear with me if, by contrast, I give a case study of unemployment in one great English city. In the last Session, I initiated a debate on the problems of the North suggesting the appointment of a Secretary of State on a par with the Secretaries of State for Scotland and Wales. The idea did not commend itself to your Lordships. Indeed, my noble friend Lord Elliott of Morpeth indicated that I had a totally false impression of the seriousness of the problems in that part of England.
So, this summer, I went to try to see for myself. Although I paid a short visit to the North-East and saw the carefully landscaped graveyard of the great steelworks at Consett, my main aim was to see something of the situation in Liverpool. From the Tory point of view, Liverpool and Merseyside generally have become politically a sort of "no-go" area. This was well demonstrated by last week's by-election—yet it seemed to me that it represented a compelling example of inner city decline, of the social and moral consequences of high unemployment and the failure of central and local government to get to grips with problems of the "second industrial revolution".
My visit was purely private, organised for me by one of the clergy of the Anglican cathedral. I talked to various groups, senior probation officers, senior police, the manpower services organisation, leading business-men, the chief executive of the city, drug-addict counsellors, old-age pensioners and clergy engaged in pastoral work in some of the most deprived areas. Let me record at this point, if I may, the impression (which was apparently shared by at least one of the reporters at the Knowsley by-election) that, at a time when the Christian Churches in general and the Church of England in particular are the subject of so much criticism, it is the clergy who seem often to provide the most effective and even the only resources of leadership and social cohesion among communities, black and white, where the normal pattern of local responsibility has disintegrated under the pressures of the environment and deprivation.
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The aim that I set myself on my visit was to try to find the answers to three questions. First, why has a great city with a strong tradition of responsible local government become within the last three or four years a by-word for political extremism? Secondly, what, if any, is the connection between high levels of unemployment and crime? Thirdly, what can be done nationally or through local authorities to tackle the problems which face large communities which the changing tidal flow of modern industry and communications has tended to leave high and dry?
It seems to me that the real success of the policies of governments of any party will be measured by future historians by the manner in which they deal with special situations such as Liverpool and Merseyside represent at the present time. There is, of course, a general reference to unemployment in the gracious Speech. Like others of your Lordships, I am glad to hear that there has been some reduction in overall unemployment during recent weeks. This is certainly true of my own town of Colchester; but overall figures, the statistical bases of which have been the subject of frequent changes, do not necessarily represent what is happening in Liverpool or, for instance, in the North-East, in Sutherland. It may even be that they record the fact that the South is becoming more prosperous and that the disparity between North and South is becoming even greater.
I noted a recent speech by the Chancellor of the Duchy of Lancaster in which he seemed to indicate that the North had brought its troubles upon its own head by its record of bad industrial relations, trades union intransigence and failure to meet the demands of modern technology. If it is the policy of the Government to leave Liverpool, for instance, to stew in its own juice, let me recall something said by the right honourable Member for Henley, Mr. Heseltine, during his first visit to Liverpool. "If we have a revolution", he is reported to have said, "it is here in Liverpool that it will start".
I, myself, was warned five or six years ago, by a leading lawyer in the city, that there was going to be trouble in Liverpool and I was warned again during my summer visit that Toxteth was only a start. This brings me to the answer to my first question. Political extremism, whether to the Left or the Right, has always been the resort of communities and nations driven by a feeling of hopelessness and injustice. In Croxteth, 94 per cent. of those between 16 and 21, and 60 per cent, of those between 21 and 65, are unemployed. Unemployment in the city as a whole was, in 1978, 37,000 or 14.6 per cent. In 1984, it was 59,000 or 26 per cent. The manpower services are trying to help, but when the employment that they give ceases after one or two years there is little chance of finding work until, after another year, the individual becomes eligible for another of the services' dead-end jobs. The city corporation is the biggest employer. Under the prospective level of grant, it is likely to have to discharge a further 2,000 to 3,000 workers. In June of 1985, 32,000 men and women had been out of work for over a year. There are very responsible and informed people who believe that no elected authority of any party can face a situation of this sort.
I hope that the Government can assure the House that they fully understand the inevitable consequences

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if Liverpool is left to stew in its own juice. With unemployment at 26 per cent. and, in some cases in the city among young people, at over 90,000, the answer to my second question becomes pretty clear. In Croxteth, I noted that on the houses there were as many burglar alarms as television aerials. There was one practically on every home, council or owner-occupied alike—and a reporter at the by-election noted the same at Knowlsey. With unlimited time on their hands, with no chance of increasing their money by work, constantly seeing on television the image of the southern affluent society, as they conceive it, and particularly among the young at Croxteth the demands of the drug pushers, it is not perhaps really surprising that crimes against property are endemic. I am told that addicts no longer always pay in money; they load stolen videos and TV sets into the boots of cars and exchange them for their value in drugs from the drug peddlers in the locality.
I believe it is the Government's view that there is no direct relation between unemployment and crime. I should be the last person to equate unemployment with criminality, but I have not the slightest doubt that where there is a high level of unemployment, particularly among young people, crimes against property and drug-taking inevitably result. The answer is not to provide millions more for the police or to increase the penalties in the courts. It is not good enough to hector or lecture people, or to subject communities to administrative and financial penalties or political ostracism. What really matters is that they should feel that, with all the temptations and pressures of the present, the future offers hope and the promise of better times to come.
And what hope is there in Liverpool of better times ahead? Liverpool has always been a proud, turbulent, cosmopolitan city, regarding itself, with its splendid buildings, its port and its industrial strength, as superior to all other cities in the North—and particularly of course, to Manchester. There is still plenty of resilience and enterprise there but there is also a danger that, with so many skilled and educated young people leaving the city to find jobs in the South, its problems with a shrinking, ageing population will be compounded.
The development agency has refurbished the docks. The Garden Festival last year was a great success. Hopes have been centred in the tourist industry. Some efforts have been made to provide leisure facilities for the deprived suburbs and some towards remedying the ghastly planning mistakes of 30 years ago. The Manpower Services Commission do their best to mitigate the consequences of high unemployment and industrial decline; but none of this gets to the root of the matter. Around the splendid evidence of 19th century prosperity—the civic buildings, the art galleries, the two great cathedrals—fester areas of hopelessness, poverty and fear.
For a Conservative government, there are probably few electoral rewards for tackling the special problems of a city like Liverpool. It may be said that making Liverpool a special case by restoring some of the £250 million of grant-aid which it has lost since 1978 would be simply "throwing money at the problem". It may well be that during that period of devastating
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economic change and decline the normal apparatus of local government cannot cope with the social and administrative consequences. But that ways can be found of tackling the administrative problem and that additional financial support must be forthcoming, I have no doubt; because the urgent needs of a city like Liverpool cannot be met without it.
The real question, it seems to me, is this: how can the resources of central government and the great tradition of local responsibility and civic pride of a city like Liverpool be combined into an administrative pattern, not perhaps capable of solving all its problems, but at least of changing the whole atmosphere from one of neglect and depression into one of responsible optimism and confidence? There is evidence that when Mr. Heseltine was for a few weeks the Minister for Merseyside all this was possible. That evidence has been borne out as a result of his recent visit to the by-election of Knowsley.
I suggest to your Lordships that the test of a national party, which I have always believed the Conservative Party to be, is not whether it can successfully juggle with the statistics of national employment or please the City or the CBI, but can give to hard-pressed classes and communities, beyond the narrow limits of party advantage, the help and understanding which they so urgently need. In the whole of the United Kingdom, I believe there is nowhere that needs that help from Her Majesty's Government more urgently than the City of Liverpool.
5.34 p.m.
Earl Ferrers: My Lords, at the outset I crave your Lordships' indulgence because I have a long-standing engagement this evening which will, I fear, make me leave before the end of the debate. I apologise in advance for having to do so. I also take the opportunity to congratulate my noble friend Lord Derwent on what I thought was a quite outstanding maiden speech. He provided not only experience but intellectual originality in what he said; and I congratulate him on that.
My remarks today will relate entirely to exports. I was glad to see in the gracious Speech that the Government intend to work to promote enterprise and employment. It is encouraging that the unemployment figures have dropped for three successive months running. But in the long term employment can be created only by providing—I know this may seem a well worn phrase—the right goods, at the right price and of the right quality for those who are able and willing to purchase. A large proportion of this extra production and extra employment will come only if we can export effectively overseas—and we ought to be doing better.
Very often it is when companies find themselves in difficult conditions and the home market has been restricted that they turn to exporting; and often it can be exporting which saves them. I was told only last week of one company with a capital of £1,250,000 which was losing £300,000 a year, and drastic action had to be taken. Among other things, it turned to exporting and two years later it turned its loss of £300,000 into profits of over £500,000. It can be done.
My concern is that when the product is right and the delivery and the price are right it is so often on the

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financial package as a whole that the deal is lost. I should declare an interest in that I am chairman of the British Agricultural Export Council, which seeks to encourage the exports of all goods which are supplied into agriculture, such as equipment, chemicals, pharmaceuticals, livestock, irrigation consultancy, and so forth. As the home market is becoming more restrictive, so the export market becomes more vital. Around the world there is a substantial demand for these commodities, and also substantial competition.
My noble friend Lord Young referred to the tough international markets of the world. If I may say so, he is right. But developing countries, for example, seek to improve their agriculture and horticulture in order to make themselves more self-sufficient and export their products to help their balance of payments. As those agricultures improve, so the increased outputs which the agricultures will produce have to be dealt with. The opportunities around the world for what are described as the "post-harvest technologies"—the grading, the canning, the packaging and the freezing sectors—are immense.
When I was privileged to be a Minister I used to take businessmen around the world, trying to encourage exports. I found a common view, which was: "We want to trade with the British. Why aren't you here?". I do not believe that to be a sentiment; I found it to be a fact. We have a head start over many other countries, which all too often is lost. I was privileged to accompany the right honourable gentleman the Minister of Agriculture last month to the Far East, and I found that self-same sentiment expressed. In Singapore, for example, which despite its problems is a hive of activity, I was told that the Australians are there, the Americans are there, the New Zealanders and the Japanese are there but not nearly enough British.
There are two common wails that I have heard among businessmen. They are frustrated by two things: finance and banking. Why is it that we so often are unable to compete over finance, when all the other criteria—the price, the quality and the goods—are right? I give your Lordships an example. After months of negotiation one company was on the verge of securing a livestock contract to the Far East worth £8 million over three years and £20 million over eight years. So far as I am aware, that would be the largest single British livestock contract ever to any country in the world. The best financial terms the United Kingdom could offer was an interest rate of 7.4 per cent. and a three-year grace period (where you do not have to pay anything back), with a seven-year-pay-back period. Italy and Saudi Arabia offer an interest rate not of 7.4 per cent. but of 3.5 per cent.; not a three-year grace period but a seven-year grace period; and not a pay-back in seven years but a pay-back in 25 years. We just cannot match this. But the point is that those terms are therefore being demanded by that country for the contract from Britain, which Britain cannot meet. Yet both the recipient country and the supplying country want the contract.
Unfortunately, I am not a banker. All I know is that the United Kingdom is about to lose its largest export deal ever in this sphere because we cannot or do not compete financially, and that is a tragedy. This is not an isolated case, but it is typical of the problem which
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businessmen seem to encounter everywhere. Yet wherever the problem is discussed the blame or the cause—certainly the solution—are propelled like a billiard ball around the table and bounced off all the cushions but are never actually pocketed. I think that they should be.
If the interest rates which other countries can offer are lower than ours, our businessmen will lose out. If governments subsidise the interest rates of their exporters, maybe we should do the same. That is not as heretical as it may sound. The Government are spending so much, and rightly so, on youth training and helping the unemployed, but maybe they should consider spending some of that money helping businessmen to compete against unfair competition which prevents British business from creating the employment and British business from alleviating unemployment, which we all want to see happen.
It does not end with finance. One small company tendered for a canning factory in the Far East against the Dutch. The contract was about to be awarded to the British firm because it was the better and the more competitive. Then the Dutch authorities waded in and said that they would lay a cable from the power supply to the canning factory, which happened on the way conveniently to light up two kampongs which had never had electricity before. What happened? The contract was awarded to the Dutch and the British lost out in frustration. If that is the nature of the competition, do we not have an obligation to meet it? I know that the Government like—and in my view rightly—to disengage from business, but if they wish to see exports, from which employment will be created, succeed, I urge my noble friend to ensure that more tangible support is given to exporters to overcome odds against which they cannot hope to compete on their own.
It is not only the Government who may be asked to do more. I question whether British banks and merchant banks are doing enough to help our exporters. Of course they have their own financial guidelines within which to operate and they have to make their own commercial judgments. But I believe that there is a place for private enterprise to be more of a risk taker and supporter in this sphere. Why is it that so often exporters say, "There is no point in going to the high street banks, to the Big Five, for help over exporting. They are just not interested". I find that a fearful indictment, but I have been told that on many occasions. Exporters, in a curious chorus, tell me that if you want help with finance in exporting you should go to overseas banks; to the Hong Kong and Shanghai Bank, to Standard Chartered, even to American banks. American banks frequently provide the most competitive finance for British exports.
There must be something wrong for that to be the case. If our interest rates are the cause of British banks being so uncompetitive, my right honourable friend the Chancellor of the Exchequer might well address himself to that point. If British banks are not exerting themselves enough in the common cause of exporting, perhaps they might do more in that direction. Their substantial funds rightly come from successful business, but successful business in the export field needs helpful banking. I do not profess to know the answer, but the simple fact remains that if other

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countries are providing more competitive finance and more competitive banking, we ought to do so and if we do not we lose out. My fear is that we do not compete and we are losing out. In my humble opinion, if we wish to see exports succeed, as we all do, there is a case for the Government to do more to help exporters and there is room for the British banking system to do more for exporters, too.
5.45 p.m.
Lord Ezra: My Lords, I was very pleased to have been privileged to hear the remarkable maiden speech of the noble Lord, Lord Derwent, as I had the pleasure of meeting him on a number of occasions in one of his previous incarnations, and I look forward to hearing him many more times in this House. I am also pleased to be following the important speech just made by the noble Earl, Lord Ferrers, on the export problems that we face, because I should like to begin my brief remarks by turning to the balance of payments.
If one were to try to see in as encapsulated a form as possible the economic problems which this country faces, I think one could do no better than to study with some care the regular document issued by the DTI—the last one being on 23rd October—on the current account of the United Kingdom's balance of payments. I should just like to remind your Lordships of what is contained in the last issue of that series of reports.
What it shows is that, unfortunately, we are now heading for an overall deficiency on the current account of this country. This was indeed forecast in the statement made by the Chancellor of the Exchequer recently, when he said that the estimate was for a balance this year and a deficiency of £1½ billion next year. Unfortunately, the figures suggest that that might be rather an optimistic view, because the position so far overall for the first nine months of the year is that we are showing a net deficiency of over £200 million compared with, at the same time last year, a net surplus of £3 billion; and we ended up the year with just over £3 billion. So unless we show a remarkable recovery in the last quarter—and let us hope that we will—we are heading, I am afraid, for an overall deficiency this year. However, what is more important than looking at the overall figures is to analyse what lies behind them, and this is what shows the problem that this country faces.
The first thing that springs to mind in looking at these figures is the dramatic change in the oil revenues. Whereas last year we earned £8 billion net on overseas account on oil, we are now running on a comparable level at something like half that figure. At the same time, regrettably, our non-oil visible account is also slowing down compared with last year. If you just take our non-oil visible account, apart from oil, it is showing a rather lesser amount of earning than in the first nine months of last year. At the same time, however, the imports are continuing to grow and so it is not surprising, in spite of a very important contribution from invisibles, that we should be showing on our visible account a substantially greater deficiency than last year.
So this is the essence of the problem. We have benefited in terms of overseas trading from our oil
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account for a number of years. But as was foreshadowed in the report of the Select Committee which was presided over by the noble Lord, Lord Aldington, who I am very glad is to speak later on, the oil benefit is of limited duration. What we were unable to forecast then was the collapse in oil prices which took place after our report. We were merely basing this on the assumption that in due course the oil resources in the North Sea would diminish. Thus, the events that we forecast coming later have come earlier. So the question that we raised then, and the question which we must surely raise now with even greater emphasis, is: how are we going to overcome that problem? I am sure that everybody in this House would accept that there is a problem. We may differ on solutions, but what we cannot mask is the problem which is now glaring at us; namely, the problem of how we correct the balance in our economic affairs and in our trade with the rest of the world.
There is nothing much we can do about the oil. The oil revenues will depend essentially on what the oil price is likely to be. It is unlikely that the price will rise very much over the next few years, so the experts say. It may rise later, but at that stage we may be producing less, so there is nothing much more on which we can count on the oil account.
The invisibles, to which my noble friend Lord Diamond has paid testimony, have done very well, and are continuing to rise. However, in evidence given to the Select Committee on Overseas Trade by the Committee on Invisibles they made very clear that they did not think that invisibles on their own could close the gap. Thus we fall back on the manufacturing element; that is, the third element in our balance of payments. We have to look very seriously at that aspect of our affairs. If we can get manufacturing to rise again, if we can change the trend in our manufacturing exports, this is surely the way to close the gap.
The question must then be: how do we effectively set about that? The Government, although their policy is one of non-intervention, do intervene in a large number of ways. I do not blame them for that. Every Government must intervene from time to time. What worries me about the interventions is that they appear to be spasmodic and appear not to relate back to a coherent strategy. It is this that I should like to query.
What we need, I suggest, is to analyse once again the factors that have led to our manufacturing difficulties, which are in fact greater than those of our competitors. While all other major developed countries have suffered in their manufacturing, we seem to have suffered more. We have certainly suffered more in absolute terms. I note that the noble Lord, Lord Young, is shaking his head. In the evidence to the Aldington Committee, it was certainly made clear that, while there had been a reduction in the proportion of manufacturing in other countries with economies similar to ours, nevertheless we were the only country to show an absolute fall at the time at which we were considering the matter. Therefore, while this has been a general phenomenon, we seem to have suffered rather more.
As regards the closest competitors to ourselves with similar economies, we found that in France and Germany particularly there was a coherent and

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positive policy. In the case of Germany, which at present has a government of a political nature similar to the government in Britain, nevertheless it was quite clear that the economics ministry orchestrated a coherent policy, one that was dedicated to making sure that interest charges were kept low and were advantageous, in particular low interest charges for smaller enterprises. Secondly, we found that the currency was kept on a level basis and that Germany has even managed to survive the increase in the value of their currency. Thirdly, we found that very substantial support was given to industrial investment, to research and development and to trade. These were regarded as the key factors. When we went to France, exactly those points were identified as being those to which government in their policy were going to commit themselves.
All that I can say, to turn back to Germany, is that the proof of the pudding is in the eating, or, if you like, in the balance of payments; and the balance of payments on current account in Germany by the end of the year is likely to show a positive 30 billion dollars or £20 billion, and Germany had no advantage from North Sea oil. This was based entirely on the manufacture of goods that the Germans have produced themselves in a political economic climate similar to our own.
It looks, therefore, as though there are solutions to this problem, but the solutions must lie in a coherent policy, a policy that takes account of interest charges, of currency fluctuations and of the policy that we adopt to deal with the North-South problem. A lot of spasmodic things are being done. An article in today's issue of the Financial Times queried whether that was the right way to proceed on this fundamental problem, and whether the action being taken to deal with this disequilibrium within our own country should not be a broad defined policy within which the individual measures could then relate more coherently. Here then is a suggestion.
Without going through all that I believe should be done, I must say that I support the proposition made by the noble Lord, Lord Hatch of Lusby. I think that this is now a crucial issue facing the country—how to regenerate effectively our manufacturing industry over the years ahead. It is not a new problem, but it is new in its importance because of the decline in the oil revenues. In view of the great success that the Select Committee led by the noble Lord, Lord Aldington, had, I believe that it would be of value to the House—I commend this suggestion to your Lordships—that a Select Committee be appointed to have a look at the whole manufacturing scene, taking into account the North-South problem and the urban problem. I believe that we have the expertise in this House. I believe that that could be an extremely useful contribution to pointing the way to the solution to this important problem.
5.56 p.m.
Viscount Watkinson: My Lords, I should like to add my congratulations to the noble Lord, Lord Derwent, for his most effective maiden speech, and, if I may be permitted to say so, I do it in very affectionate memory of his father.
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With regard to the noble Lord, Lord Ezra, the main point of my speech rests exactly on the challenge to our country that I think he has quite fairly set out. He also said that we may well differ on the means of facing it, but I hope that my noble friend who will wind up tonight will not try to pretend that we are now on a happy, successful course with no problems. That could not be in our country, and we should be mad if we expected it.
Some of your Lordships may remember that Sir Winston Churchill used to talk sometimes about the symmetry of party recrimination. All that I would venture to say about the noble Lord, Lord Bruce's speech is that he certainly made a very symmetrical speech. I do not want to stand in the way of that sort of thing.
I want to make what I think are two rather important points, and then sit down. First, we must be fair and, even allowing for the symmetry of party discrimination, I think that we must accept that the last few years have seen many of the foundations laid for long-term industrial progress. Inflation is under control, trade union relations have been reformed and overmanning has been faced up to with painful results but totally necessary ones. Much more progress has been made in manager-worker relationships than I have seen for many years. Taxation has been reduced, and the last Budget did what the CBI has been pressing the Government to do for a long time. It gave a little justifiable stimulus to the whole economy. The Government can justifiably take credit for all that.
If one looks back to the condition in which the last Labour Government left the country, the progress has been dramatic, and it is only fair to say so. However—here I come to the noble Lord, Lord Ezra, and to other noble Lords—measured against the progress made by our foreign competitors, it is not nearly enough to guarantee our long-term industrial success; hence the problem of how we build on what we have achieved—I am the last person to deny that achievement—and how we somehow manage to win those uplands that Winston Churchill saw as our goal in the darkest days of the war.
First, we need continuity of policy. We simply cannot go on standing this country on its head every time we change a government or even a minister. Above all, we must not go backwards and go through the terrible reversal—and I am not making a party political point; it lies in the actual programme as set out—that would result if we changed to a Labour Government in this country at the next general election.
As regards what the noble Lord, Lord Ezra, said, but concerning means rather than what I hope are accepted facts, the most important industrial task ahead of our country at this time is to stop the erosion of our competitive power in export markets. The all-party committee did a very good job. My noble friend, who I believe was also a member of that committee, will speak later and will cover this ground, and so I shall not do so now. However, I was very surprised at the rather bad press that it had. Perhaps the reason was that the country never likes to be told unpalatable truths. It warned a year and a half ago that the competitiveness of British industry is still declining.

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I spent a lot of time and trouble on a recent book of mine in which I ventured to make the same case. That may not mean very much, but what means a great deal more is that the CBI at its successful national conference a week ago repeated that warning. Perhaps I may quote from a special feature of the conference, which was the pay presentation that sought to set out to employers why they should talk toughly to their employees and why they should not give large pay increases which were not related to anything. It said:
"UK costs remain substantially out of line with those of our major competitors".
That is not very surprising. Despite what my noble friend Lord Young has said about productivity, if one takes a long-term view, United Kingdom earnings are increasing at double the rate of those of most of our competitors, while UK productivity, although it is increasing, is increasing at something less than half the rate of our main competitors. I am speaking of the United States, West Germany, France and Japan.
If we wish to achieve what noble Lords opposite say they want to achieve with regard to less unemployment, more manufacturing industry and all the rest, I do not think that that ball is in the Government's court. We must work harder; we have to be more productive. By "we" I mean "me" and not some other chap in the great British democratic tradition. We must not go back to the bad old days of high inflation, more nationalisation and trade union militancy. That way lies total failure.
Coming back to the remarks of the noble Lord, Lord Ezra, I do not think that we can plan ourselves out of this. Eight Prime Ministers before Margaret Thatcher have sincerely tried to put this country on its feet. They all failed. I was in one or perhaps two of the governments that failed, despite the great leadership given by my old Prime Minister who sits almost next to me and the struggle that we made. We must not think that it is an easy job. In my view the Government cannot do much more than set the frame, as they already have. I must say again that what we must do is to match the Germans, the Americans and the Japanese in productivity and in unit labour costs.
That is something that industry must do. It is something with which the Government must help when they can. I agree with that, but I do not agree with the noble Lord, Lord Ezra, that that means—and he will correct me if I read him wrong—that we can in some magical way make a great plan and get ourselves out of this. I think we must all do something about it. For example, I listened with great interest to the speech of my noble friend Lord Ferrers. He is right when he says that the City should be giving less emphasis to short-term paper profits and candy-floss and a great deal more emphasis to long-term investment in industry. I hope that the governor of the Bank of England and others—
Lord Ezra: My Lords, may I answer the question of the noble Lord? I was certainly not suggesting anything like a plan. I was talking about a greater coherence of policy. One of the things that my colleagues and I on the committee of the noble Lord, Lord Aldington, were struck by was the greater coherence of policy in Germany and France than there appeared to be here. That was the only point I was making.
Viscount Watkinson: Fair enough, my Lords. We do not disagree about the basic cause but I think we may have a slight disagreement about remedies. I should like to underline what my noble friend said. I hope that British bankers will read what he said and try to do something about it. At the moment I think that is one of our biggest disabilities in getting more overseas trade.
There must also be closer co-operation between management and unions. We must get production up and costs down. Again I do not think that that is a job for my noble friend Lord Young. It is a job for industry. He can perhaps help a bit but on the whole we have to do it ourselves. We have the Japanese model in our midst. I think it is perhaps the most depressing thing that I have seen in my long industrial life to watch the Japanese come over here, set up a factory in a depressed area, have one union for the whole factory, have a non-strike agreement and put right all the things that have bedevilled British industry for 50 years. It is a pity we cannot match them in that.
I wanted to make a short intervention on a particular point and perhaps I may summarise that by saying that I hope the present Government and my noble friend when he winds up tonight will say that based on success to date—and it is success—there is a long, hard slog ahead if we are to get ourselves totally right, prosperous and secure. Otherwise, I think industrialists, politicians and trade union leaders have a very difficult leadership job to do. I hope they will accept it and not get too involved in recriminations, particularly in a period leading up to an election. I hope they will try to do two things. The first task is to set out the facts. The second task is to make it plain that the answer is not always "Let some government do it"—even a government that is as free with their promises, as the Opposition are at the moment. We have to do it for ourselves. I believe that the task is "do-able", and I think the price of failure in a non-oil or a failing oil economy will be very painful and perhaps irreversible.
Lord Young of Graffham: My Lords, before the noble Viscount sits down, may I point out that I said that in manufacturing industry between 1979 and 1985 productivity in the United Kingdom has gone up at a far higher rate than that of France and Germany?
Viscount Watkinson: My Lords, I hear what my noble friend says. I shall send him a copy of the CBI paying document which he perhaps has not seen and which will give him a rather different picture. I admit that it is a document intended for use on the shop floor, but what it says is that we are paying ourselves an 8 per cent. per annum increase in earnings and we are not justifying that by a sufficiently increased level of productivity.
6.9 p.m.
Lord Dean of Beswick: My Lords, may I join with Peers speaking before me in congratulating the noble Lord, Lord Derwent, on an excellent maiden speech. Along with other Peers, I look forward to listening to further contributions from him.
I want to turn my attention to the question that concerns us all which is probably the foremost

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question before the nation today—that of unemployment. I think I must take the noble Viscount, Lord Watkinson, to task for his assessment of what he terms "success". He said that eight previous Prime Ministers of this country, Labour Prime Ministers and Conservative Prime Ministers, had failed the nation during their terms of office. I do not accept the implied criticism of the noble Viscount's colleague further along the Conservative Bench, the noble Earl, Lord Stockton, when he was Prime Minister. During his period of office unemployment was well under half a million. Under the next Conservative Prime Minister, the right honourable Edward Heath, unemployment was under half a million. I compare that record with the record of the present Conservative Prime Minister. Under her stewardship we have more than 3 million unemployed. Perhaps I may suggest that, in terms of running the nation, the eight previous Prime Ministers who the noble Viscount, Lord Watkinson, dubbed as failures were, by comparison, outstanding successes. Some of the social problems we have today have their roots in the fact that there are so many people unemployed who despair day by day and as weeks go by.
We shall never succeed as a nation unless we revert to our previous role as a major manufacturing nation. One has only to look back to see the enormity of the disaster that has overtaken us in manufacturing. For instance, in June 1979 7,113,000 people were employed in manufacturing industry in this country. In June of this year the figure was down to 5,349,000 people, a loss of 1,750,000 jobs in the manufacturing sector alone. Because there was a glimmer of hope in last week's figures we have lately been led to believe that things are on the way up and are getting better. Since 1979 in order to present an image of limited success on a rising scale the Government have changed 17 times the formula for calculating people as unemployed.
What is meant by saying that the Government have changed the formula for calculation? It means that they have arrived at an arithmetical assessment in a different way in order to suit their own political philosophy. It is grossly misleading. The fact that the calculation for unemployment is in real terms half a million higher than the figure the Government present does not mean that the Government have found half a million jobs. The fact that they have changed the criteria does not mean that a man who was unemployed under last week's criteria is not unemployed under this week's criteria. If he has not been found a job, it does not matter to him what the statistics say. He is still unemployed. I think that something of a con trick has been attempted.
I worked in engineering for 40 years until I became a Member of another place. I should like for one moment to quote some figures from the general engineering industry which is and traditionally has been the largest single employer of labour in this country. In June 1979 3,079,000 people were employed in engineering, mostly skilled men. In June 1986 that figure is down to 2,458,000, a fall of 621,000 in our largest manufacturing workforce. Surely that is a disaster by any criteria.
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I should like to give some other statistics which I think are extremely damaging and dangerous. In 1975–76 there were 24,149 first-year craft and technical apprentice trainees, the seed corn for our industry without which it would have no future. In 1985–86 the figure for apprentice trainees is down to 9,300. Nearly 2,000 of those were on youth training schemes. I do not criticise youth training schemes. I think they are necessary and I welcome them, but they do not provide the same training as apprentices used to receive in the engineering industry. Certainly, they are not as productive at the end of the two years as was training on the real job.
I have heard it said by members of the Government —and it was said today by the noble Viscount, Lord Watkinson—that as a nation we pay ourselves too much. I do not know about that. I worked in engineering, first of all as a locomotive engineer, and then, at 40 years of age, when steam was on its way out because of cheap oil, I had to transfer my skills into the turbine manufacturing section. I had to go right across Manchester to start a new life virtually in another type of engineering. I did that, and I do not ever recall being paid high wages. I do not ever remember the Engineering Employers Federation willingly giving increases to engineers in a general sense. I refer to the time before the noble Lord, Lord Scanlon, was president of the engineering union, to the time when Bob Openshire and Bill Curran were presidents. On occasions, they had to fight for a matter of two or three shillings. I recall that during the war engineers were given as an increase the princely sum of three shillings a week. To get a shilling ratio as an increase the apprentices had literally to go out on strike.
It is nonsense for anybody to stand up in your Lordships' House and say about engineering that historically it is an overpaid industry. It is not. One of the odd things is that some of the most skilled men in engineering have traditionally been among the lowest paid. Take, for example, the manufacture of machine tools. Manchester was full of machine tool factories such as Cravens of Reddish and Kendle and Gents. Those have all gone now. Skilled men there were paid far less than their compatriots in the Midlands and in the South. Incidentally, their industrial record was absolutely first-class. So I will not have it levelled at them that they are responsible for their jobs going out of existence.
In a speech from the Front Bench my noble friend Lord Bruce referred to North Sea oil revenues. I do not think the figure has been quoted, but from 1979 this Government had £59.5 billion as a bonus from North Sea oil revenues. It is obvious that we are now reaching the stage when that will not be available for very much longer. My charge against this Government (and the charge is made by people in the Government's own party) is that that money has been wasted almost beyond belief. I do not think for one moment that the engineering jobs that have gone out of existence could have been saved by an infusion of that money into engineering. That would be a nonsensical claim, and I do not wish to make it. I should not have wanted that money to keep in being jobs that were really going out anyway. However, I am sure that with a little good will and effort much of that money could have been transferred into the sunrise industries to develop them at a faster rate.

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During my time as a Member in another place the part of Yorkshire I represented was very heavily populated with clothing workers. They were in the cloth producing and tailored manufactured garments in bulk industries. Those industries have almost disappeared without trace. If anyone were to tell a wool weaver from Yorkshire or a cotton weaver from Lancashire that their jobs have gone out of existence because of the high wages they had been receiving he would be laughed out of court. It is absolutely nonsensical to make that suggestion. In fact, nothing has been brought into the area to replace those traditional industries.
I heard the noble Viscount, Lord Watkinson, and other noble Lords, refer to our need to compete. The Japanese were held up as an example. I am all for competition because I do not believe that anybody owes anyone a living; but are we competing on fair terms? About eight years ago I was in Japan when we had just lost a large engineering contract to Nippon. I was by no means satisfied with the answer I received to my suggestion that the Japanese Government were in some way funding some parts of the contracts, in order to obtain them, by carrying interim values or, for some periods, the loan charges. I suspect that sometimes our home industries are not able to compete on level terms.
America has also been mentioned. It is a fact that American industry is heavily subsidised in energy costs. In some industries the energy costs are a high proportion of the total costs. That is another area where our industries suffer a bias against them. So we must be careful when considering the situation. We must not blame it on high wages. We must not just take the view "keep wages down and have no strikes". I am all for some of the proposals that some noble Lords have spoken about, but there are times when people need to go on strike.
One aspect which worries me and, I am sure, the Government—and it must worry the Secretary of State who, unfortunately, has had to leave the Chamber—is the exacerbation of the difference beween the North and the South. It is growing week by week and there is no sign of it slowing down. I should have thought, being a north countryman—I have a foot in both camps; Lancashire and Yorkshire—that the North would want some hope and a message from the Government as to what can be expected in trying to get the area out of the terrible situation which has swept right across the North and now is even affecting Birmingham.
But what has happened? A Cabinet Minister visited Manchester last week. The chairman of the Conservative Party, who I believe also holds the post of Chancellor of the Duchy of Lancaster, laid the blame for the economic decline in the North totally on the workers in that area. I have never before heard a more calculated and gratuitous insult to people who are ready to work and always have worked. I do not know whether that politician went up on his bike, but to carry a message of that kind to the North of England, traditionally a hard working area with people who have never pitched their sights too high, is an insult that the people will not forget in a hurry. I hope that some of Mr. Tebbitt's colleagues in the Cabinet
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will tell him that he would do better without his "bovver boots" and might get people to listen if he were for once to wear carpet slippers. He should listen to other people and find out the facts.
I take my title, Lord Dean of Beswick, from a traditional working class area of Manchester which was the most heavily populated area in Europe. It survived and existed on a variety of industries including engineering, mills, chemical works, and local pits which, like many pits, have gone. The people of that area were industrious. They did not ask for anything unreasonable. They were on moderate wages but in regular work. They enjoyed that sort of situation. I was glad to see that during a recent debate in another place the Member for Manchester, Central, took the Chancellor of the Duchy of Lancaster to task for the nonsensical claims that he made.
I should like to close by asking the Minister whether he can give us some further information in this respect. I believe that the last time a figure was given for new jobs created by the Government was during Question Time. The figure, which I accept is correct, was upwards of 600,000. That was less than 12 months ago. In his reply the noble Lord, Lord Trefgarne, gave a breakdown which showed that most of those jobs were in the service sector. I make no disparaging remarks about the service sector; it is necessary but we cannot live off it. If the Government could have said that the 600,000 jobs were in the manufacturing industries they would have received applause from all sides. It is no good depressing wages in the service sector in order to try to lower the number of people, on paper, who are unemployed. In my opinion, that is a recipe for disaster.
I, too, have read the report of the Select Committee under the noble Lord, Lord Aldington. It is a first-class document. However, like most first-class documents which contain a hint of criticism for this Government it was rubbished by Cabinet Ministers before they even found time to read it. It is time that sort of behaviour is left to one side and that the Government should start listening.
This is a very interesting debate, but I want the Government to understand that if they keep telling people who are out of work, and who have never been on high wages, that it is their own fault, the Government must not be too surprised at some of the consequences that might occur in the not-too-distant future. A very dangerous situation could develop north of the Border. I was one of the Labour Back-Benchers in another place who was violently opposed to devolution. I was sacked from my position as a very junior PPS for voting against those proposals. However, I must tell the Government that if the situation continues in Scotland, and if the opinion polls are right, there will be an almost complete wipe-out of Conservative Members north of the Border. If Mr. Tebbitt speaks north of the Border as he did in Manchester, by God, there will be trouble, and I hope the Government are prepared to meet it when it comes.
6.28 p.m.
Lord Simon of Glaisdale: My Lords, it is over a quarter of a century since I was a Treasury Minister and there is not a speaker in your Lordships' debate

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who has not had more recent and thorough experience of commerce, industry and finance. Nevertheless, I do, with trepidation, address your Lordships today because I want to draw attention to what I believe is a typical area—one which I represented in another place. I am glad to see that the noble Lord, Lord Bottomley, is in the Chamber because he shared representation of that area with me. I want also to ask one or two questions about the Autumn Statement which I think come more easily from the Cross-Benches than from either of the opposing Benches.
At the beginning of the last century Middlesbrough was a small and most unimportant town. In the middle of the century it rose to an unexampled prosperity, owing to the exploitation of iron ore in the Cleveland Hills and coking coal in the Durham coalfield, Middlesbrough being placed in an appropriate position to enjoy both exploitations. A number of extremely able ironmasters took advantage of that situation; and ensuing upon the iron and steel industry's success came development first in engineering and then in chemicals. I venture to draw attention to that cumulator, multiplier effect in the economy of a district. However, just as one can multiply upwards, as happened then, so one can multiply downwards all too easily. At present the unemployment on Teesside has risen as high as 30 per cent. The waste in human resources and other material, the hopelessness and the waste of human spirit are potent factors in the downward movement.
I thought that the noble Lord, Lord Young, put it with great exactitude when he described human life being "blighted" by that sort of unemployment; and of course as an area goes down in that way—and it was largely because it was industrialised early that the capacity became uneconomic—so the secondary industries and commerce become caught up in the downward spiral. Young, enterprising people move out of the area to the more prosperous and expanding areas in the South of England. If I may say so, I have greatly admired the Government's conduct of the economy, as I have the way in which the noble Lord, Lord Young of Graffham, has handled his particular problem, but I do not think that enough attention has been devoted to the matter that I have just mentioned; namely, the multiplier factor. In other words, if there is one criticism to be made, it is that there is lack of a proper regional policy.
I can give your Lordships two examples, one negative and the other positive—or perhaps it ought to be the other way round. I have a feeling that the noble Lord, Lord Young, wants to ease planning permissions in the South of England—I see him nodding his head (I think it was a nod and not a shake)—and that of course means that it will be very much easier to set up business in the South of England. That is understandable, because on the whole economic growth has been marked by mobility of labour. Our own industrial revolution was a prime example of this, and the great industrial expansion of America in the last century and at the beginning of this one was fuelled by the immigration of a vast number of indigent but ambitious people from Europe. This is one example where I venture to think that the noble Lord is pursuing a wrong aim. Rather than draw
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people down to new industries it will often be more expedient to move people up to rehabilitated areas where the material background can be improved.
The other example that I said was negative concerns the decision about the universities in the North-East. I do not know whether that was justified on educational grounds but it was quite disastrous from the point of view of industry in the North of England. In my time one of the difficulties in recruiting able managers to Teesside was the absence of cultural facilities. The noble Lord, Lord Glenamara, dealt with this very matter when the announcement was made. I know that the noble Lord is an unreconstructed Jacobite, who thinks nothing of the Bill of Rights or the Act of Settlement, but he knows a great deal about the North-East of England and its employment problems and a great deal about education. It was the sort of decision that on the ground of a rational regional policy—which seems to me to be the only defect in the Government's policy toward this problem—appears to me to run counter to what is really desirable.
I should like now to come to the main problem of unemployment. When your Lordships debated this matter last year I ventured to remark that really we know very little about the causes of unemployment. We do know that it is by no means limited to this country; on the contrary, it is shared by practically all the developed world. That suggests that if one intends to adopt a policy of expansion it can only be done safely in an international milieu, otherwise it will run straight into our own balance of payments difficulty. I should be most grateful if the noble Viscount, when he comes to reply, will indicate his thinking on an international cognisance of expansion.
We know that there is some demographic cause for the unemployment. On the whole the number of those entering the employment market has increased, but on the other hand that increase has not been as marked as is sometimes indicated. Between 1979 and 1984 an extra 1 million entered the employment market. I obtained that figure from a Written Answer by the noble Baroness, Lady Trumpington, last February. That is the extra number of people who have been brought into employment during the last years. The figure for 1979 to 1984 cannot be the latest one. I wonder whether the noble Viscount can give us something more up to date. It looks, however, as if the demographic trend has not been a major cause of our present unemployment. I believe, on the other hand, that the demographic downturn over the next decade will substantially ease the problem, although it will undoubtedly have to be offset by the new technologies that will lead to economies in employment.
I have mentioned premature industrialisation of this country, which I consider as a cause. I should have thought, however, that the main cause was the overmanning in British industry prior to this decade. One can see this easily by looking at the newspapers. Even liberal newspapers like the Mirror and the Guardian have shed up to a third of their workforce. That picture is by no means rare. Then there is the over-pricing of labour. One can see this on going to any garage that is now self-service but that was once manned. Those workers have been dispensed with because they have been priced out of the market.

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This brings me to what I consider the most important point to come out of the debate. It was mentioned by the noble Lord, Lord Diamond, the noble Viscount, Lord Watkinson, and many others. I refer to unit labour costs and the fact that labour costs, wages and salaries have increased far in advance of inflation, far in advance of productivity, and, most seriously of all, far in advance of those of our competitors. I ask therefore what is to be done about that situation. I thought, if I may say so, that the Labour Government were quite right in trying first to solve the problem by agreement through the social contract. As we know, however, that approach came undone in the winter of discontent. The Government were, I believe, right next to try weakening the bargaining power of the unions. But that has not worked. Our unit labour costs are still in the condition I have described.
I understand that the Alliance has a policy which I suggest is well worth trying. It is, I believe, twofold. First, it is fiscal. In other words, one makes fiscal control of excessive labour cost rises and, equally, one penalises fiscally the employer who grants them. That seems to me well worth trying. The other limb, I understand—I shall perhaps be corrected later if I am wrong—is arbitration. This has been tried quite successfully in a number of countries, including Commonwealth countries. My only criticism of the Alliance scheme is that it finally concedes the right to strike. That seems to me to be illogical. The right to strike was conceded to equalise more accurately the bargaining and staying power of labour against employers. If there was a system of arbitration and adjudication weighing all the factors, one should not have what is so damaging—a strike in consequence.
What, in the end, we want to hear from the Government is their regional policy to deal with unemployment. It seems to me primarily to be a regional matter. The noble Lord, Lord Alport, made that point, as did the noble Lord, Lord Dean. I ventured to draw attention to Teesside as another example. I am sure that the Midlands can equally provide an example.
I should like finally to refer to the Autumn Statement. Any criticism, I suggest, must come more easily from these Benches than from the Opposition Benches, which have been urging the Government to spend extra money precisely on matters for which the Autumn Statement makes additional allocations. Speaking for myself, I should have thought that the Government were running a considerable risk. I know that, initially, the statement seems to have been fairly soberly received in the financial markets. That is, I believe, purely because the Government are at the moment ahead in the opinion polls. But the surge towards the Government in the polls is due to a collapse in support for the Alliance. It is possible that the Alliance parties will get their act together in the near future, and that this will produce a very different picture. The increased expenditure means increased borrowing. That means that interest rates have to stay up. The lowering of interest rates is postponed to the great detriment of industry—one of the themes of this debate.
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I find particularly alarming what may face us as the election comes closer. I should like to ask the noble Viscount one or two questions in the meantime about the statement. Is he satisfied that there will be no overrun as has happened in each of the last two years? What steps are being taken to ensure that this will not happen? It requires only a small overrun to throw out entirely the Chancellor's claim that this expenditure is within present borrowing limits. Are not the Government in the Autumn Statement relying on pay increases in the public sector of no more than 3.5 per cent? Do the Government really think that they can hold public sector pay at 3.5 per cent., if I am right in thinking that this is the basis of the calculation?
The third point is that made by the noble Lord, Lord Boyd-Carpenter. What is being done to control local authority spending? In the run-up to an election, it seems to me that the financial markets may well get jitters again, with the result that there may be a balance of payments crisis and a run on the pound. I do not expect the noble Viscount to say exactly what would be done. The natural measure would of course be an increase in VAT to control a consumer-led boom and equally a rise in interest rates. However, that seems to me to be a very unlikely course for any Government to want to take up before an election. I hope that the noble Viscount will say that there are plans made to meet that contingency and that he is confident they are adequate.
It is not only until the election during which period the Government are responsible, but even after, should there be a hung Parliament. There may well then be negotiations going on for some time while the present Government are still responsible, whether they continue to govern as sole party, or in coalition. That seems to me to be a situation of danger. I should like to think that all parties could agree on a policy in that situation. However, that seems to me to be unlikely. I therefore presume to conclude that the Government have taken a very great risk, in spite of their previous record, in the measures that they have taken and the Autumn Statement.
6.52 p.m.
Lord Vinson: My Lords, it is a great privilege to follow so many learned contributions to today's debate on Her most gracious Majesty's Speech, and it is through such debates that economic policy develops. I think it was the famous German General von Molke who made the remark that no battle plan survives contact with the enemy. It is probably equally true to say that no economic policy survives without adaptation and that whatever the undoubted success of the Government's policies—and undoubted success they have had in reducing inflation—I am sure that they would be the first to admit that there is always room for improvement. My desire is to make good policies better.
We are all monetarists today in the sense that it is universally agreed that money should not be printed and that credit should be controlled. However, the problem is that money and credit are virtually impossible to measure, and comparing this year's figure of money supply with last year's is like using one rubber rule to measure yet another rubber ruler. We used to laugh at the thought of our ancient forebears

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examining chicken entrails before they took decisions. I think it is now widely accepted that many of the monetary indicators used today are of little better value. We too should beware of being misled by them.
The Chancellor is quite right to question their validity and to reject M3. But whatever the inadequacy of the monetary yardsticks, they are all we have and they undoubtedly still influence many opinion formers both nationally and internationally. Steering the economic ship of state using inadequate instrumentation is a tricky job at the best of times. However, there is little doubt that some of the noises coming from the engine room are beginning to indicate a degree of overheating.
One of the principal causes of this overheating is the massive growth in personal credit. The Government's immediate response has been to tighten control of the money supply by the use of one mechanism—interest rates—giving us in effect a general credit squeeze. For a number of reasons this country now has the highest real interest rates in the Western World and I should have thought that the time had come to examine whether there are mechanisms available to control credit other than the use of this rather blunt instrument.
I am sure that the Government are well aware that the continuous very high real interest rate saps the economy and prevents much worthwhile enterprise from blossoming. That is enterprise which will produce new jobs. Can there be a better way to control excess credit than through the use of the interest rate mechanism alone?
While I fully appreciate that high interest rates are currently necessary to hold up the pound and to see us through the choppy period of pre-election nervousness, in the long run controlling inflation in this way is counterproductive. Indeed, the remedy exacerbates the very malady that it is meant to cure. However, there is a view propounded by some in Great George Street that maintains that interest rates do not matter, and that if businesses would look after their wage rates they could effectively forget about the cost of borrowing. This is a view that I wish to try to correct. I believe that it is altogether too sanguine and too simple an answer to what is a much more complex subject. In practice the whole economy works on the basis of making a return on borrowed money and high borrowing costs prevent much sensible marginal investment from taking place.
There was a massive book published about 10 years ago by Harvard University, as I recall it, which attempted to analyse why Japan was so successful. The book ran to some thousand pages but two words were the ultimate answer: cheap money. Interest rates in Japan were low due to a high saving ratio and the control of personal credit. Perhaps this is a trick that we too should try to learn. I accept that our conditions are different and that we are not where they were in terms of a low inflationary base. But I so agree with the noble Earl, Lord Ferrers, and the noble Lord, Lord Ezra; I should like to see more consideration given to try to achieve lower interest rates as a matter of national policy. The levels do matter, and they are most damaging.
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Perhaps I could quote some examples. It is so much easier to open up an overseas market if one is borrowing money at 3 per cent. than if one is borrowing it at 12 per cent. With one method, three years' losses cost about 10 per cent. and with the other nearly 40 per cent. on one's investment. Is it therefore surprising that the Japanese can buy their way into our market and into other overseas markets?
Likewise, it is so much easier to give six months' export credit if it costs 1½ per cent. for six months, whereas a UK manufacturer attempting to give six months' export credit has to put either 6 per cent. on the price and lose the contract or take it off his profit margin to the detriment of investment and jobs. It is also so much easier to carry stocks and spares if the annual on-cost for an item which stays on the shelf for a year is 3 per cent., whereas to a UK manufacturer it is 12 per cent. before he begins to add his normal costs. I could quote a thousand examples, from housebuilding to factory construction to finance, that would show that high interest rates help raise prices and are grit in the wheels of the proper working of the economy. They make for so much inefficiency. Your Lordships will be aware that the high cost of borrowing makes it virtually impossible to mature wine, which adds greatly to the gastronomic discomfort of many of us in this House.
On the small emergent business—and, thanks to this Government are we not all much more conscious of the importance of enterprise and entrepreneuralism? —these businesses, inevitably having heavily borrowed, spin their wheels in a time of real high interest rates while they attempt to service their heavy borrowings. They service their borrowings to the detriment of their expansion plans and of jobs. Can there be a better way therefore to control credit than through the use of the interest rate mechanism alone?
There is universal concern about the high level of personal borrowing and the ease with which individuals can borrow well beyond their means on a multiplicity of credit providers. It is, too, a moral issue. The reports from the Citizens' Advice Bureaux indicate clearly that something here is getting well out of hand. Such is the profit, due to high real interest rates, that lenders are tripping over themselves in their anxiety to throw money at the improvident. As a consequence, this country is awash with credit and even the cracked monetary alarm bells are beginning to clang. The immediate reaction of any government today is to increase interest rates, which in practice exacerbates inflation by putting up again the cost of mortgages and of borrowing both to the personal and the corporate sector, and so the inflationary merry-go-round is given yet another twist.
It could be said that excessive personal credit is working to the detriment of the industrial borrower, as interest rates are arguably higher than they would be if personal credit were better controlled. I can hear a voice in the Chamber saying, "Lord Vinson, do you want quantitative controls on credit? Do you not believe in the free market?". I can see that rising from some noble Lord's mind. I would satisfy it only by saying that I am a passionate believer in the free market, but I think that the one thing you need to control fairly sensibly is credit. In practice, there are many quantitative controls already in position: hire

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purchase controls, banks' lending ratios, the repayment period on credit cards and, not least, the Bank of England's continuous control of the money market. Of course distortions are made to the market the other way, by tax concessions given.on mortgage borrowing.
Credit has never been uncontrolled, but I believe that the present quantitative controls are inadequate and that excess personal credit is beginning to damage our economy. Not only does much of this go straight into imports, but, more seriously, British business has to fight for its market on the world scene with one hand tied behind its back due to excessively high interest rates. They are high partly in order to curb excessive personal credit and to correct the effect that that is perceived to have on the pound.
The object of this peroration is to help make better still the Government's successful record in controlling inflation and to help the development of their economic policies; to suggest that there may now be better ways of controlling inflation than through the blunt instrument of interest rates alone; and to suggest that excessive personal credit, which has shown itself not to be interest-rate sensitive, is ripping away due to inadequate controls and is doing so to the detriment of the interest-rate sensitive sectors of the economy—not least manufacturing and construction, sectors which are the basis of our strength as a trading nation and a fundamental source of our national prosperity.
If a lowering of real interest rates was the advantage to be gained from the tightening of existing quantative controls on personal credit, then this is the lesser of two evils and must be the right priority. It would be a sensible development of existing government policies.
7.2 p.m.
Lord Aldington: My Lords, we have just listened to a most thoughtful and interesting speech on a subject to which I propose to return later in my remarks. However, I am most grateful to my noble friend for stimulating all our thoughts on this very difficult question. I, too, should like to pay my tribute to the maiden speech of my noble friend Lord Derwent. I also remember his father. I was greatly impressed by what he said to us and the firm manner in which he said it. Since it accords with my theme, I hope he will think that he has a friend at least here.
I want to confine my remarks today to the subject of the competitiveness of British manufacturing industry in the world, about which the Select Committee on Overseas Trade of this House reported some 13 months' ago. For it is the improvement of our manufacturing competitiveness in world terms, about which my noble friend Lord Derwent was talking, that will best ensure the further sustained economic growth and the growth of employment to which the gracious Speech so rightly referred.
If, in some of my remarks, but not by any means all, I appear to be kicking at some Government doors, the door at which I am kicking is already beginning to open. In recent days a number of Government statements have shown the importance which the Government attach to manufacturing. I was struck by
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a statement made by Mr. John Butcher in August, in which he referred to manufacturing as:
"The core of the process of wealth creation".
I should like to say at once that I applaud the words in the gracious Speech about the economy, as about other matters, and I see no reason at all for any words of "regret", as is suggested from the opposite side of the House.
In particular, I applaud the actions of my noble friend the Secretary of State for Employment which seem to me, in their emphasis on training, to give occupation and hope to the unhappy unemployed, as they provide the base for a much more competitive industry in the future. They combine care for the individual with care for the future of the British economy. I am very glad that my noble friend is here among us to hear the tributes which he has been receiving today from all quarters of the House.
The Recommendations chapter in our much discussed report begins with a sentence which is often forgotten:
"There has been a steady trend of deterioration in Britain's manufacturing performance taken as a whole over many years".
I welcome support given to the report right across the political spectrum, which is just what we asked for. However, I have to say to some of your Lordships' that I do not welcome the use of the report to attack any particular government—and it seemed to me that the noble Lord, Lord Hatch of Lusby, was joining with me in that—as if they, and they alone, were responsible for the whole deterioration of competitiveness. A glance at the figures given in the report, and a little regard for 20th century political history will prove what rubbish that is. In particular, I have to remind the noble Lord, Lord Bruce of Donington—to whom I always enjoy listening, partly because of his combativeness and partly because of his good humour—that the sharp deterioration in competitiveness in relative unit labour costs in manufacturing shown in national currencies (and the noble Lord can check this at Table 33 on page 29 of the Report) took place between 1973 and 1979. That had absolutely nothing to do with the present Government's policies, and was a major cause of the reduction of the manufacturing base that took place in the first three years' of this Government's term of office.
The national challenge today is to reverse the long-term trend of that deterioration in competitiveness. It is all the greater challenge because the trend is long-term. We have to accept the challenge now in the conditions of today, many of which, despite the reduction in the size of the manufacturing base, are more favourable than they have been in most recent years for the regeneration that is required. As my noble friend Lord Watkinson said earlier in his speech, the task is a very large one. We also have to accept that the urgency is all the greater because our competitors have gained so much on us. Moreover, we have to accept that we cannot shuffle off all responsibility on to governments. Each one of us has a large part to play, and all that is clearly set out in our report.
Therefore, the task is a large one; and, as has already been said, since our report was published the situation to which we drew attention has, indeed, worsened. The deficit on the balance of trade in manufactures, which

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was the main reason for our being set-up is, according to the Autumn Statement figure, in process of increasing this year from £3 billion to £5½ billion, and next year it will go up to £7½billion. It will more than double in two years. Manufacturing output in Britain has not been increasing this year, but the Autumn Statement shows (and I am very happy to see this) that it is expected to grow by 4 per cent. in 1987. I very much hope that this will be so, but I have to make the point that it can only be so if the pound's exchange rate falls in relation to our competitors to compensate for the increase in our unit labour costs which, as the same Autumn Statement shows on page 21, are still rising. I should make clear that unit labour costs are the product of pay rates and productivity. We must find some way of linking pay to the world competitiveness of the product, and in all humility I do not think that I can agree with everything that the noble and learned Lord, Lord Simon of Glaisdale, said on that subject.
We also have to find a way of growing our productivity faster. It has been 3 per cent. a year since 1980, and the Government are entitled to take credit for that. But I have to tell my noble friend the Leader of the House that when he was Secretary of State for Employment the going rate was 3¾per cent. a year for increases in productivity, and that too is shown in the Autumn Statement. I think it will be found on page 20.
The difference of opinion between my noble friend Lord Watkinson and the noble Lord, Lord Young of Graffham, about the figures of the increase in productivity compared with the increase in productivity of our competitors overseas lies in the fact that he used percentage figures, and the base from which our competitors start is considerably higher than the base from which we start. It is the actual figures that matter in relation to our competitiveness.
I have spoken about and debated this matter in many parts of the country in the past year. I hope none of your Lordships underestimates the attention given in the country to reports of your Select Committees. Invariably I have found a warm response and an understanding of the importance of the manufacturing problem, and invariably I have found a puzzlement as to what in practical terms has to be done. The broad principles for change over the longer term, and for shorter term improvements too, were set out in our report. But on how, in practical terms, to regenerate manufacturing so that we recapture a substantial part of our home market and win more of overseas markets no one has yet clearly articulated. Even in the year-long inquiry we made that was not possible. Does it need to be done? I would ask my noble friend to consider whether it does. If it needs to be done, it ought to be done in the kind of open way, with the kind of public involvement, that Select Committees have.
What are the conditions which will encourage old and young industries, in large and small businesses too, to start the right new ventures and expand some proven ones? Some of these conditions have been assured by the present Government. Our report included this sentence which I think some of our critics have never read:
"The Committee entirely agree with the importance that is attached to controlling inflation, easing the burdens on enterprise, and encouraging new businesses."
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That is absolutely vital, and any political leader who thinks he can have a successful industrial policy without them is deluding more than himself.
The basis of success must lie in the quality of management available to manufacturing. Here the Government's education policies are important, and I believe helpful. The allocation of more resources at all levels of schooling and universities is a welcome step forward, as is the insistence on rewarding and educating for high quality. Egalitarian education policies will not regenerate industry. We need to level up, and not down.
But you will not, my Lords, attract enough good people into manufacturing industry either if you make it difficult for them to manage by having the balance between trade union power and managerial responsibility wrong, or if you threaten the successful managers and engineers with penal tax rates and so encourage them to drain off overseas. This is a point that I think my noble friend Lord Boyd-Carpenter made. On both these points the Government have chosen the right course, and anyone who proposes to reverse them cannot succeed in bettering the competitiveness of manufacturing, whatever his intentions may be.
How to encourage investment in innovation and in the development of new products is the question to be asked, and it has not yet been fully answered. I stress development. Development is far more costly than research, and in many things the launching of a new product is far more costly than development. Technological advance increases all these costs, and they are very high.
The low level of investment in manufacturing in Britain compared with other countries has a longish history. Recently manufacturing investment has been picking up; but not enough, so we found and so I have found since, in innovation and in new product areas.
I do not think that there has been, or is, any shortage of funds. There were other factors that we mentioned: lack of confidence in the future; the consistency of government policies, and all that; lower profitability in Britain; the cost of capital; and in the past, but not now, the high level of taxation. I would add to that now the short-term attitudes to be found in some financial quarters, bred by some financial experts' obsessions with quarterly or half-yearly reports unsupported by a full understanding or explanation of company plans. Let me acquit the banks and major institutions of this. The recent CBI conference discussion on this, as reported to me—and my noble friend who sits on my left heard it all—shows how much still has to be done to get a better understanding between industry and the city.
Our report, I have to remind the House, saw no need for, and did not advocate, a national investment or industrial bank. We saw a case for helping new and small businesses—the importance of which the noble Lord, Lord Young of Graffham, emphasised to us today—with a system of getting lower rates of interest just for them. This is still important when borrowing rates of interest in Britain are so high. Twelve per cent., (which is 9 per cent. in real terms) is so much higher than in competing countries. Your Lordships may not

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all be aware of what those interest rates are. They are 7 per cent. in Germany; 9½per cent. in France; 4 per cent. in Japan; and 7½per cent. in the United States.
That brings me inevitably to join with my noble friend Lord Vinson in a plea for lower rates of interest. We can all understand the absolute need to get money sound and keep it so; but to have a normal level of interest, as we have had in the best days, at something like 6 per cent. real, and then to have to up it to 9 per cent. real which is what 12 per cent. is, just because some monetary measure is exceeded really needs further consideration. I must add that I shudder to think of the gigantic interest rate that might follow the adoption of the full Labour Party programme, but perhaps nobody thinks that that will ever happen.
Then there is the question of the difference of interest rates in the export credit world, to which my noble friend Lord Ferrers drew our attention. I agreed with everything he said, and I welcome his loud voice. We have to match what other countries do, however contrary to our theology that may be.
Finally, there is the national attitude towards manufacturing. I have seen many signs of change for the better both in public opinion and inside industry itself, but I remain of the belief that there is still too little understanding of what "world competitiveness" means and of what Britain has to do. I hope that the Government will more frequently compare our actual performance with the performance of world competition. I am glad that my noble friend did that in the opening speech this afternoon. However justified the Government are in drawing comparisons with the more recent past in Britain, it is comparisons with what is happening today in the world which really matter. I hope, too, that the Government will explain to the country what is their national manufacturing industry strategy, for most certainly they have one. We know it; we hear bits of it and we can piece it together. Nothing but good can come of the explanation of their manufacturing strategy, as good came from their explanation of their medium term financial strategy.
The understanding of that strategy seems to me to be an important condition for fostering sustained economic growth. I say to my noble friend the Leader of the House that the Government have a much better story to tell than their economic theorists allow them to tell.
7.21 p.m.
Baroness Turner of Camden: My Lords, I welcome the opportunity of contributing to this important debate. I do not want this afternoon to deal with the macro-economic situation because other noble Lords have done this and will, I am sure, continue to do so in this debate. I should like to concentrate on some matters that concern me and that to some extent come within my own experience as a union official and as a present member of the TUC General Council.
We are all concerned with the problems and the evil of unemployment. We all know it to be an evil. It brings with it feelings of alienation and rejection as well as loss of income and the penury that comes with that. There is some evidence that it has an appalling effect upon the general health of the people who suffer
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in that way. It plays a role in inner city disturbances. If young people feel rejected by the society in which they are growing to maturity, they feel that there is nothing to lose by seeking a confrontation with what they regard as authority, and many of them may drift into crime in just that way. Although it is far too simplistic, as the noble Lord, Lord Alport, has said, to put the blame for breakdowns in law and order at the door of unemployment and social deprivation, it is obvious that they play a role.
It is true of course that there is unemployment in other countries, including our nearest neighbours in Europe. At an international trade union conference I was at in Geneva recently, the delegates from Western Europe were all concerned about unemployment, although the figures they were quoting were in no way so severe as our own. As the noble Lord, Lord Hatch of Lusby, has pointed out, we are pretty near the top of the league when it comes to unemployment figures. Moreover, we seem to be passing through a period of major social upheaval, exacerbated by the impact of new technologies upon an economy ill-prepared. politically or socially, to deal with them. These are major problems for us all. However, I believe that the Government's approach is based upon an ideological concept which makes things worse rather than better and fails to confront the problems in a realistic way.
First, so far as the employment figures themselves are concerned, the point has been made that they do not show the full extent of the number unemployed. Many of the new jobs to which the Government have been referring are part-time jobs. The underlying figures are very much greater than they would appear to be. Moreover, there is the problem of the long-term unemployed. About 40 per cent. of the total unemployed have been out of work for more than a year. Some 25 per cent. have been unemployed for more than two years. The prospects of finding employment become far worse the longer a person has been unemployed, and prospects are much worse in some regions than in others.
Incidentally, the new availability rules in relation to entitlement to unemployment benefit are already causing creat concern. They are seen by many as intimidatory—particularly women who are being asked questions about their domesic responsibilities as carers of others. One cannot help feeling that this may be another attempt to remove people from the unemployed records on the grounds that they are not available for work.
Yes, the Government are concerned about the problems of unemployment. I do not disagree with that, but the way in which they are seeking to remedy it gives rise to other problems. A recurrent theme—we have heard it again this afternoon from the noble Viscount, Lord Watkinson—is that wages are too high. We heard this argument extensively from the Government during the passage through your Lordships' House of the Wages Bill. The contention was that having to pay a basic and very minimum rate was a burden on business.
Relieve small businesses of the necessity to pay the barest minimum to individuals working for them—and usually in areas of high unemployment—and, we were told, small businesses

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would start prospering and offering greater job opportunities. However, this does not accord with general experience. In the regions of the United Kingdom where wages are low unemployment figures are at their worst. As we have heard this afternoon, in certain sectors, such as the finance sector in particular, some salaries arc exceptionally high. The low wage rates in the North, however, are not encouraging firms to move their operations there.
I understand that at a recent meeting with the Secretary of State for Employment, representatives of the TUC General Council challenged the Government to state that if, contrary to their assertions, the Wages Act failed to lead to higher employment levels in wages council sectors, the Government would reverse the provisions of the Act. The Government have not been willing to pick up this challenge, but it seems a fair one to me. If driving low wages down even lower does not produce a rise in employment, should not the policy be reversed?
Moreover, the general erosion of employment protection legislation and other measures to lift the burden from small firms does not seem to have made much impact on the employment situation. The real burden faced by small firms is not protective legislation but a lack of resources and the expertise which needs to be provided if they are to play the role the Government clearly envisages for them in the stimulation of the economy and the provision of jobs. Even so, the impact of small businesses on the problem of unemployment is likely to be marginal. Indeed, this is a point on which the CBI would appear to be in agreement.
The second point I should like to deal with is that of labour mobility. That has already touched upon to sonic extent by the noble and learned Lord, Lord Simon of Glaisdale. It is frequently contended that we in Britain have an extremely static workforce and that this is one of the reasons why there is very high unemployment in some areas, while the position is not so bad in some others. Among reasons recently advanced for this, sometimes by Government spokesmen and quite recently by the Chancellor of the Exchequer, is that it is national wage bargaining that produces a situation in which people are paid the same irrespective of the area in which they live. Greater variation, it is claimed, would encourage workers to move to areas where there is more demand for labour.
I believe that this is based upon a misunderstanding of industrial relations practice in this country. There are many enterprises where—since they exist as an entity with a workforce covered by the same grading or job evaluation scheme—a centralised wage or salary structure is the most appropriate and deemed to be the fairest. Large financial institutions such as banks come into this category, but even here there are large town allowances and, of course, substantial London allowances. So the picture is not one of uniform rates irrespective of local conditions.
Secondly, many national agreements exist to provide a "floor"—a basis upon which negotiation takes place over and above the minimum. In these negotiations attention is paid, among other things, to local conditions and the local labour market, as well as to the profitability of the local enterprise concerned. In
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some instances—the chemical industry is a case in point—there are national rates set at joint industrial council level for skilled and unskilled workers, but the average weekly wage can be very much higher than that, depending on local wage bargaining. The same is true of the engineering industry, where average weekly rates for unskilled workers turned out as a result of a recent survey to be 34 per cent. higher than those agreed at national level which had always been regarded as a minimum. I do not think that it can be established to any degree that the existence of national wage bargaining is a factor when dealing with mobility and attraction of labour into areas where labour opportunities exist.
Another factor that inhibits mobility is housing. However, the vast majority of house moves have nothing to do with employment changes and few employment changes require a change of house. On the margins, housing and its availability can be a factor. The shortage and high cost of accommodation in the private-rented sector is an obstacle to greater mobility. For owner-occupiers in the high unemployment regions, the fact that house prices in the South-East are 50 per cent. to 60 per cent. higher than in the rest of the country is an obstacle to mobility. The relative change in house prices between regions makes it more difficult for owner-occupiers in higher unemployment regions to move to the lower unemployment regions, and also discourages people in the South-East from relinquishing appreciating capital assets.
However, this again is a relatively small issue when it comes to looking at employment as a whole and employment prospects. I agree with the noble and learned Lord, Lord Simon of Glaisdale. Although mobility is a factor, nevertheless we cannot all move to the South-East. What we have to do, it seems to me—and the noble and learned Lord clearly made a very important and valid point here—is to develop an effective regional policy. I question whether anyone in your Lordships' House would want to see standards of living—standards in terms of wages, health and safety, and other standards for which many have campaigned over the years—undermined and brought down to the levels existing in some of the countries now competing with the Western world. I have seen the safety standards applying in some factories in Japan when I was there several years ago. I can say that those standards would not be tolerated for one moment in similar enterprises in Western Europe. Undermining the living standards of a large part of the workforce, our fellow citizens, is no way to tackle unemployment.
We on this side of the House believe in a far more radical approach. We believe—and it has been stated on all sides of the House this afternoon—that there must be support for the UK's manufacturing base. We believe that there has to be investment in our basic industries. We believe in an interventionist policy of the kind that so far this Government have opposed. We believe in a massive programme aimed at industrial regeneration which, of itself, would provide job creation on a substantial scale. Without such a programme, the problems we are facing will remain intractable, and we shall still be facing vast problems of unemployment in several years' time.
7.33 p.m.
Lord Wolfson: My Lords, first, may I join your Lordships' in congratulating the noble Lord, Lord Derwent, on a notable maiden speech. Not only was the content excellent, but he has such a fine speaking voice that I hope he will exercise if often in this Chamber.
I welcome the Government's policies for increased investment in housing, hospitals, roads and education and it seems to me that these represent a wise reinvestment of the capital receipts arising from privatisation. This programme, coupled with a commitment to reduce income tax rates in the years ahead and further to protect the environment, comprises a well-balanced package for the economy.
The economy continues to grow. As a businessman, I can see a significant improvement in management techniques in industry and commerce. They have increasingly adapted to technological change, competition and market requirements. Productivity, profitability and human relations are much better. There has been extensive modernisation and the creation of a wide range of new trades and industries. We are producing many high-quality products of world fame. Industry is exporting some £6 billion-worth of manufactured goods per month and supplying much more to the home market. Surely, this could not happen if we were an industrial desert.
At the same time, substantial expansion has taken place in the service industries to cater for new and innovative consumer products. There has been a large increase of investment, both at home and in overseas holdings, making a vital contribution to our balance of trade. Of course, as my noble friend Lord Young of Graffham has pointed out, the main problem—indeed, it is a world problem—has been the effect on employment caused by structural changes in the basic industries, and these have been especially serious in the regions where those industries operated on a large scale. The Government have used a variety of measures at their disposal to facilitate new investment in these areas, Nissan being the best known. I hope and feel sure that they will be added to and reinforced wherever it would bring about long-term benefits. Many regional cities are showing considerable enterprise. Indeed, it gives me particular pleasure to know that my father's home town of Glasgow has been named by the EC as "European City of Culture, 1990". I do not think that he would have anticipated that at the turn of the century.
Business will invest in every part of the country, in industries and services which produce and market the goods that are capable of being sold profitably at home and overseas. In a democracy, it is the consumer who is king. In order to add to the 24 million in employment, we shall need to develop further the policies of encouraging self-employment and small businesses and promoting the growth of those manufacturing and service industries which will help to provide the jobs of the future. In the longer term, modern technology will enable the Western world to move gradually towards a shorter working week and a review of the age of retirement. To equip us fully for the second industrial revolution, we shall need enhanced vocational training and language-teaching programmes.
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The anachronistic view held in some quarters (not, I am glad to say, by the noble Lord, Lord Diamond) that service industries are somehow inferior to manufacturing—and I believe a similar view was held about manufacturing by the agricultural industry in the early part of the last century—underestimates the fact that services are going to make a growing contribution to employment in the years ahead. The imposition of Selective Employment Tax on service industries in the 1960s showed just how out of touch with future market demand was policy. The noble Lord, Lord Harris of High Cross, has pointed out in his witty way the failure of the macroeconomic policies of the 1950s and 1960s, when I experienced the microeconomic upheavals to business that they caused.
What of the future? Many experienced views have been expressed by a variety of individuals and by professional bodies and organisations seeking to promote a balanced programme of growth in the economy. I should like to take some of these ideas together with some thoughts of my own and briefly highlight them as follows. I should like to see, particularly for lower and middle incomes, a personal income tax system that follows the lines of the corporation tax changes in this country and the recent restructuring of the United States system, where (as the noble Lord, Lord Derwent pointed out) the highest rate of tax will be less than our lowest rate. Wealth can only be created through providing incentives, as even the Communist states are coming to understand, and we are in fierce competition with Europe and other English-speaking communities to retain and regain talent in all walks of life. A revival of the taxation policies of yesterday will diminish the yield, lose talent and thereby set back the very aim it purports to achieve—the sustainable improvement of standards for the old, the young and the less fortunate in society.
To get down interest rates, we need a stable currency, or at least a more stable currency. That is why entry into the European Monetary System at the appropriate time has its attractions. No one would claim that the European Monetary System is a panacea but certainly those involved in it appear to have enjoyed more stable conditions as a result of membership. A cheaper pound may temporarily be good for exports but at the same time there is the danger of building up inflationary pressures and allowing holders of stronger currencies to buy our assets at very favourable prices.
We should ensure that genuine reciprocal free trade arrangements are obtained. The noble Earl, Lord Ferrers, touched on this point. The United Kingdom is facing rising imports from the Far East, Eastern Europe and other parts of the world when in many cases our own exports of goods and services to them are restricted. This is an untenable situation and will inevitably lead to demands for protectionist measures unless it is corrected.
To further the realisation of a rapidly-growing property-owning and share-owning democracy, there needs to be closer and regular consultation on the part of the investment institutions with their shareholders and pension beneficiaries. The latter might very often be willing to authorise trustees and managers to take a longer-term view on research programmes and

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investment decisions. There is a real need for investors to have more published information regarding their trustees' investment policies, including those relating to take-over bids and high leverage transactions, which in any event need careful monitoring. Indeed, we have to be constantly on guard against speculative excesses and unsound lending practices to corporations and consumers. We know from experience the cumulative harm that arises from any loss of confidence.
While there are a growing number of excellent schemes, even more private partnership with urban development corporations is needed for inner city regeneration, in particular for new homes and for the earlier release of empty houses and derelict land. There is an urgent desire to reconstruct, on a more human scale, the concrete housing blocks which have blighted and made more unsafe so many of our cities. Improved road communications are a vital ingredient if the inner city programme is to succeed. It is the improved road system in this country that has done much to attract many new industries, homes and jobs.
As a final thought, I should like to see more matching funds made available to encourage grants from private sources for university scientific and technological research programmes—the seed corn of the future—and for arts projects. It would also be beneficial for education and health authorities' buying programmes to be more closely integrated so as to obtain the best value for the purchase of supplies and services, thus making more valuable the funds provided for the purpose.
There is no real shortage of capital for viable ventures, as the Wilson Committee revealed in 1976. To sell a large part of our portfolio of overseas investments, and with it the important income contribution such investments make to our balance of payments, begs the question as to where the tangible replacement is coming from. Inward investment is welcome on all sides, but I have never understood why the outward variety is regarded in a less favourable light.
Past experience does not suggest that the pensioner and investor will benefit from political second-guessing of business decisions. We need a flexible approach and we should concentrate on what we are good at in services and manufacturing, in medicine, scientific research, the arts and the humanities. These will provide the lasting employment prospects that we are seeking. The world of yesterday cannot be resurrected in that form, and the bandying of statistics from the past will not make this happen. The world of tomorrow must be our concern; and the creative way forward is to encourage talent in every phase of national life. This in turn will benefit the expansion of the social programmes that we all wish to see: a real combination of public and private enterprise. My Lords, we need a positive approach, not a punishing one, if we are to secure the overall success we are undoubtedly capable of achieving.
7.44 p.m.
Lord Mellish: My Lords, I first of all join with others who have spoken and congratulate the noble Lord, Lord Derwent, on his maiden speech. I thought in many ways that it was a model. It was contained
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within the time usually allotted, and it said a great deal. One particular thing he said intrigued me, and it must have interested everybody in the House. That was the fact that the American system of taxation has now been changed to such an extent that their highest rate of taxation is not as high as our lowest rate. If what he says is correct, what I am frightened of is that once again there could be another brain-drain from this country, with people going to America to work because their taxation rates are so much more favourable. I certainly think that the noble Lord's maiden speech was well worth listening to.
Those who have spoken in this debate are very highly qualified indeed, many of them, and I am very much aware of the fact that I am but a novice in the economy and other matters of that kind. However, I hope that my speech will be a practical one: it will be one that is directed by personal experience. I want to ask the Government, frankly, what their policy is for the future. I think the biggest problem for the Government—indeed, any government—is the divide between the North and the South. The appalling conditions at the moment in the North are known to every one of us, yet in the South (and I speak as a southerner) things are very much better. I propose to put to the Government the point that they have, by their own endeavours, learned a great deal of what can be done in the South. I would ask the simple question: why cannot it be done in the North? The noble Lord, Lord Alport, referred to the problems and heartaches of Merseyside. We cannot just walk away from such things: we have to face them. That then is the biggest problem that we face between the North and the South.
Before I go on to give examples of where we have been successful in the South, I say at once that I am one who recognises private enterprise as the main bulwark of our economy. Whether we like it or not it happens to be a fact, and anyone who produces ideas that reduce or restrict private enterprise is doing this country a great disservice. It is from private enterprise (hoping that they make profits) that the Chancellor collects most of his taxes. It is from private enterprise that most of our people get employment. It is madness to produce legislation, take actions or adopt attitudes that destroy private enterprise, unless you have the courage to say, "We will get rid of private enterprise entirely and run everything through the state". With great respect, that would be about the daftest thing possible, because the state on its own could not run a fish and chip shop.
We know that within the private enterprise sector there are many who are a disgrace. We know about the spiv, about the character who avoids tax and about the unfair competitor; but by and large the majority of those in private enterprise are crying out today for incentives and help. This is where they have demonstrated it down South when the Government have shown enough initiative to make sure that private enterprise can succeed. I would ask for that to be repeated in the North. Although, as I said, I am not a northerner but a southerner, born and bred in London, and they are not my kith and kin up North, they are my fellow countrymen, and it can be of no satisfaction to me, living in the South, to learn of the conditions

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under which some people are living in the North, as was described by the noble Lord, Lord Alport, in respect of those living in Liverpool, for example.
Your Lordships will be intrigued to know that one of the examples that I intend to quote of success through collaboration among private enterprise, local authorities and higher education is in Dorset. When you talk of Dorset you immediately think in terms of Bournemouth and places of that ilk with a very genteel way of life and not very much to bother about. I have to tell your Lordships that in the last 10 years there has been an industrial revolution in Dorset. It has gone unnoticed, without any razzamatazz. But I should like to give your Lordships some figures; they are incredible. For example, the total number of people in employment has increased from 177,000 to 198,000 in the last decade, an increase of 11.9 per cent. That contrasts with Great Britain as a whole, where there was a minus figure of 1.5 per cent. Dorset did all right in employing its increased population, did it not? Employment in manufacturing industry, about which we have heard a lot today, remained virtually static. It went up by 02 per cent. but that contrasts sharply with the Great Britain experience as a whole where there was a decline in manufacturing industry of 23.7 per cent. over the same period.
Dorset held its own. Employment in the miscellaneous services—cinemas, sports, hotels, restaurants and the rest—has gone up by 33 per cent. in that area of the country, while employment in other services, such as transport and communications, has gone up by 29 per cent. Why? How is it possible that this should happen in Dorset, when in other parts of the country we hear of nothing else but disaster and gloom?
I have to tell the House why I think this has happened. Instead of passing resolutions and wasting time by getting involved in all these silly matters in which some local authorities get involved, the authorities there have gone in for a job of collaboration, using the Manpower Services Commission. With the Institute of Higher Education and the chamber of commerce, they have collaborated to ensure that they train people to do the job for which they are required. Higher education does not just consist of getting a degree in Latin or something like that. What they get is a degree to meet the demands of employers.
I have figures for some of the extraordinary things that have happened in education. There are 2,000 full-time students at the college and over 1,500 part-time. What are they being taught? They are being taught every possible form of new technological advance. Every month the employers, the chamber of commerce, the unions and the Institute of Higher Education sit down to talk about students, what they are doing, what are their needs and how many are required for the new techniques.
Industry has been attracted into the area. What sort of people have come into the area? There are Plessey, Membrain, EIC, Penny and Giles and Hamworthy. Those are some of the great manufacturing firms that have gone in. In the industrial/commercial base there are the multi-nationals, such as the National Mutual
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Life Association of Australasia, Barclays Bank, Chase Manhattan and Abbey Life. They have all moved to Dorset. Why did they not go up North! There is no attraction there, no incentive, no understanding of what is required and no training facilities. The Dorset story is worth telling.
Your Lordships will expect me to mention London docklands, but I shall not talk about that for very long. When we took over 1981, only five years ago, it was derelict. The noble Lord, Lord Aldington, who has remained in the House, was chairman of the PLA and he will know exactly what I mean when I say that the entire area was derelict and defunct. I remember in July 1981 feeling sick at heart, but the government of the day—and do not let us deny this—had the courage to set up a corporation and give it money to buy the land, because we believe not in confiscation but in compensation. We compensated the PLA and others and took their land from them. Of course, we always had the threat of the CPO if they did not sell it, but they rightly did.
I shall not go over the whole story, but for every £1 million that the Government have invested in dockland, private enterprise is spending £8 million of its money. In fact, the Government are getting back a lot of their money. Again I ask the simple question, being a simple-minded chap: why do we not implement up North what we have done down South? Why can we not put vast areas of the North into the same position as our dockland? Why can we not follow the measures that have been followed in Dorset?
Why can we not ensure that there is liaison among the institutes of higher education, the employers and the unions about the vast areas up North and encourage private enterprise to go there? Do not talk about state industry going there. Talk about incentives to private enterprise to go there, to make profits on which it pays tax and, of course, to employ lots of people. Until we have that industrial strategy we shall get nowhere, but it is a problem for any government that is in power. You cannot leave the situation as it is now.
I know very well the Leader of the House who is to reply. I know that he is a person who is deeply concerned with the heartaches up North. But it is not enough to be concerned. You must have something to do and have some idea of where to go. If what we have heard about Liverpool is correct, and I know that it is—the noble Lord, Lord Alport, has given us some idea—we cannot let the situation stay like that. You cannot come up with theories in this House. You must come up with practical ideas. The only way to get private enterprise to do a job is to give it incentives.
For example, why did we have to apply a rate levy? Why do we not encourage people to go up there? Why do we not say: "If you open a business up here in the North, you will get the incentives that you deserve"? Why do we not ensure that there is education and training of the people required? We suffer a problem down South and do not let us think we can get away with it. The northerner is coming down South, becoming homeless and creating heartaches of the worst kind. Look at London tonight, with thousands and thousands of northerners who have no homes and

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who are sleeping under the arches. Everybody knows it is going on. I ask this House to consider the problems that have arisen from the great divide.
I am not prepared to believe that there is an easy solution. If there were, the Government would have found it. The noble Lord, Lord Young of Graffham, is no fool by any means, and so he would have found an easy solution. It is no good anyone on either side of this House thinking that there is a simple solution but there has to be a strategy and a lead in to the great incentive so as to enable private enterprise to function in areas which it will not touch with a barge pole. When I talk about the North, I include our friends in Wales and in Scotland. It is a dangerous signal for all governments. I plead with the Leader when he replies to say that the Government are not only concerned about the North but they intend to do something about it.
7.57 p.m.
Lord Butterworth: My Lords, I should like to speak tonight about the contribution which universities can make, in collaboration with industry, to the industrial base of this country. But, first, I should like to congratulate my noble friend Lord Derwent upon his speech, which seemed to me to achieve the almost impossible twin virtues of being non-controversial and extremely penetrating at the same time. I should like to take a leaf out of his book in a few moments and look at the American experience.
A few weeks ago, a committee of your Lordships' House was told that until a few years ago universities had been ivory towers and should be more welcoming to businessmen than they are. My right honourable friend the Secretary of State for Education in giving evidence explained that his officials had informed him that in 1984–85 universities had received no less than £47 million from industry for research, and this figure was 78 per cent. more than they had received in 1981–82. The Secretary of State pointed out, quite reasonably, that £47 million represents only just over 2 per cent. of the universities' total income.
I am sure he would recognise that those figures are very far from encapsulating the whole of the relationship between universities and industry, and indeed in last week's Economist the figures were brought up to date as follows:
"The 1985–86 figure looks like turning out around £70 million and the current year is expected to see another 50 per cent. rise to about £100 million."
So the amount of the grants which come to universities from industry for research in which they are jointly engaged is rapidly increasing.
Of course, for generations universities have produced recruits for the Civil Service and for the professions and, indeed, have not known how to speak to industry. Only a small minority in industry were graduates. The total picture today is changing, and changing rapidly. The change began, I suppose, about 10 years ago. It was led in large measure by the Science and Engineering Research Council, which produced a series of schemes to encourage collaboration between industry and academic institutions.
I do not want to spend time on those schemes today except to mention one because I think it is pertinent to
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how industry and universities get together. This is the teaching company scheme, which was set up in 1974. It is really misnamed because it is not primarily concerned with teaching, and it has not led to the institution of a single new company. "Teaching company scheme" was really the name of a new form of grant to improve industrial performance by the use of academic resources. Academic staff participate in a company plan intended to achieve substantial change in the industry, in its techniques and in its procedures. The academic staff work in industry and recruit high calibre special graduates, who are known as teaching company associates, to work with them. I must stress again that they work in industry. Indeed, many of the teaching company associates get posts in industry with substantial responsibility and rewards.
The benefit of this is that the academics and industry work together, and they frequently reach solutions of which the industrial partner alone would not be capable. May I give a brief example? A teaching company starts on a problem and at first it is thought to be a problem in mechanical engineering but, as the work develops, it becomes clear that assistance and advice are needed either from a computer specialist or from an electronics specialist. Immediately one is brought in from the relevant dapartment of the university concerned and therefore a wider and a better solution is provided.
This year there are 250 teaching companies, and the scheme is still expanding. I think that the finance of the scheme is quite interesting. It will cost £10 million this year, one-third being produced by the council, about one-third by the Department of Trade and Industry and, most importantly, one-third from industry itself. The Economic and Social Research Council has recently joined the scheme because it has become clear that with many of the problems the real question is one of management. The Department of Economic Development for Northern Ireland has also joined with a contribution of about £150,000.
I could give many other examples to show how universities and industry are getting together—science parks, special companies founded to create relationships between universities and industry, industrial liaison officers, and so on. One thing to which I should like to draw attention tonight is the enormous spread of consultancies among academic staff—academic staff increasingly accepting consultancies in industry and commerce and therefore bringing the skills and the knowledge of the campus to industry, to commerce and to the community.
This is very relevant when we come to look at the experience in the States. There the collaboration between university research and industrial experience has developed very considerably. Indeed, research is frequently conducted wholly outside the industry concerned because it is discovered that, if the research is wholly within the industry, there is a danger that it will be confined too much to the existing products and in defence of existing capital investment. Research undertaken by the makers of carbon paper may result in the carbon paper being made cheaper. It may result in reducing the likelihood of the carbon paper to smudge. It may result in different coloured carbon paper. But what happens to the company when the xerox machine is invented?

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Universities are often told that they must make their research relevant. Too often this means conforming to the predilection of the boss and to his bias. It is no good following the advice of the hard-headed businessman who says: give the customer what he wants, ask the marketing director. If one gives the customer what he wants, if that is the brief for one's research, it will merely result in a red stripe being added to the toothpaste.
The truth is that technology and science are now developing at such a rate that interdisciplinary research is leading to such a synergistic explosion of technology that industrial success is rapidly coming to depend on what is now known as the management of discontinuity—successful management when one product takes over from another: discontinuity when one technology replaces another and the management of that discontinuity. If we in Britain are to maintain a developed world income, we have to succeed in the more intellectual higher value added products. The capital of the future will be information-based intellectual property, not expensive plant and not land.
The greatest concentration and most powerful breeding ground of intellectual capability is to be found in the universities. Intellectual property will increasingly drive successful business. The United States recognises the value of its universities. Incidentally, it frequently recognises the value of ours as well. The United States knows that industry is technology driven, not market driven, not customer driven. In the States, science is regarded as the keystone of national progress, and the contribution of universities is recognised and accepted.
It is interesting that in the States successful larger companies wishing to research in some wholly new area tend not to mount that new research in the restricting and inhibiting atmosphere of their main plant. They send a promising young group to pursue the research in some remote corner of, say, Florida in what I am told are known as skunk works, or they fund a special operation in an appropriate university. Recent studies by United States consultant groups find that research funds spent on mature technology are only 20 per cent. as effective as those spent on emerging technology.
Universities tend to concentrate on multidisciplinary research and emerging technologies and are therefore much more likely to reward research investment. In California at least half a dozen leading microelectronic companies with sales of $1 billion and a workforce of comparable size have all grown from nothing in the last decade. Many of them have been formed by professors.
It is to be hoped that when funds are provided to succeed the Alvey scheme in this country, the contribution of academic institutions in collaboration with industry in the Alvey field will be fully recognised. If instead of expanding our industrial base our objective is to ensure that come what may all our leading companies shall for ever maintain their positions at the top of the heap we will bury all research in existing companies and fail to support the universities.
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Finally, perhaps I may briefly refer to training. In 1984–85 there were a total of about 40,000 graduates who went into home employment. Of those, 7,600, or approximately 19 per cent., took jobs in scientific and engineering research and development and their support services. If we are to increase our research expenditure, as so many people now think is necessary for our survival into the next generation of technology, we may not have the workforce to mount it. Unless we invest more in education and training of high-tech people, our industrial base will continue its irresponsible decline and the standard of living which the British public have a right to expect will not be achieved. Successful innovation, the management of discontinuity and information engineering must be our present base for future prosperity.
8.12 p.m.
Lord Bauer: My Lords, I join the noble Lord, Lord Bruce of Donington, in regretting the recent death of the noble Lord, Lord Kaldor, whose contributions enlivened our economic debates. It was not necessary to agree with him to recognise his talents. He will be much missed.
I believe that this is the first time that employment has been added to the title of the economic debate on the gracious Speech—perhaps not surprisingly at this stage in the electoral cycle with a recorded unemployment at over 3 million. More surprising is the persistent belief in the efficacy of more government spending for reducing it. It may help if I bring up to date some statistics which I have presented on previous occasions. From the second quarter of 1979 to the second quarter of 1986, total spending in the United Kingdom almost doubled; yet recorded unemployment much more than doubled. Part of the explanation is that retail prices rose by 78 per cent. Retail sales hit record levels practically every month. Why should further increase in monetary spending substantially reduce unemployment? As the noble Lord, Lord Harris of High Cross, asked earlier this afternoon, why do governments hesitate to embark on further financial expansion which is not only popular with much of the electorate but also technically very easy? Is it not that they not only recognise the inflationary perils, but also that these would emerge soon?
All this was recognised by Mr. Callaghan in September 1977 when he said, in an oft quoted speech, that spending our way out of unemployment was no longer an available option, if indeed it ever was in recent years. But even if more spending would increase employment, why should the spending be by the state? It could be achieved also by lower taxes which allow people to choose what to buy—or indeed by sending everyone, say, £10 a month through the post.
Higher spending is also urged to reduce mass poverty. Mr. Kinnock said last week in another place that in recent years there has been unparalleled growth in poverty to some 9 million people at or below supplementary benefit level. His assessment was supported this afternoon by the noble Lord, Lord Soper. On this reasoning, poverty increases whenever

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benefits are raised, or administered more lightly, or when the uptake increases. These allegations divert attention and resources from helping the very many genuinely needy people, especially the old and including the victims of inflation or of social, economic and technical change—change to which the noble Lord, Lord Dean of Beswick, referred this afternoon.
The thrust of the amendment moved by the noble Lord, Lord Diamond, is also for more spending—especially state spending—to revive what the noble Lord, in common with others, calls the manufacturing base. With respect to the noble Lord, manufacturing is no more basic than transport or distribution, or indeed than agriculture which used also to be termed basic. Nor does spending become productive simply by calling it investment.
The distinction between manufacturing on the one hand and transport and distribution on the other is quite arbitrary. If a manufacturer uses his own transport, the employment is in manufacturing; if he uses a contractor it is in transport; if he invests in his own equipment this is manufacturing investment; if he leases the equipment, it is financial investment. Is it wise to try to base a policy on such an arbitrary distinction?
The maintenance and growth of manufacturing relative to other countries provides no index for present or prospective living standards. The noble Lord, Lord Hatch of Lusby, referred to the relative decline of the British steel industry. He regarded that as a key component of manufacturing and of prosperity. Switzerland, which is the most prosperous country in Europe, has no steel industry.
My noble friend Lord Derwent, in his exceptional maiden speech, which was memorable for its penetration and conciseness, referred to the effects of direct taxation abroad in diverting talent and productive investment from this country. My noble friend Lord Wolfson has also taken up this theme. This is far more pertinent to prosperity and prospective living standards than the size of manufacturing industries.
We should welcome the Government's past success in reducing inflation. Ministers may now be a trifle complacent. The Treasury estimate for inflation next year is 31¾per cent. This may be rather optimistic. The yield on index-linked stocks reflects expectations of 5 per cent. or more over the next few years. Yet even with inflation at 3¾per cent., £1 becomes 7.6p in a lifespan of 70 years. It is now easier than it was in 1979 for some people to protect themselves from the ravages of inflation by index-linked pensions and financial instruments. However, millions of people are still grievously harmed by its injustices. The protection of some must throw a heavier burden on others. Those most harmed are neither vocal nor organised, and are thus of little interest to politicians or the media.
Ministers may be too hopeful of the effects on unemployment of some policies and developments which may be welcome on other grounds. I have in mind upgrading of skills, job creation schemes, lower interest rates, greater international competitiveness and demographic change. Some of these have been mentioned earlier today.
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We may welcome a labour force with more valuable skills, but will this do much for unemployment when there are already many jobs available for the unskilled unemployed? There are no porters at main line railway stations, as I saw for myself repeatedly at Victoria Station. Longstanding notices in London department stores advertise vacancies at all levels. Some time ago an advertisement by an employment agency said: "If you can walk, talk, write or type we have a job for you". All this mocks the statistics of recorded unemployment. Such anomalies will persist, and indeed increase, as people become more accustomed to taking up their social security benefits and less reluctant to claim them.
Special job creation schemes can be beneficial for various social reasons, but they are unlikely to reduce unemployment much. Since they are financed from taxes, taxpayers have less to spend on other goods and services. They are attractive because their benefits are concentrated and visible, while their costs are diffused and concealed. Lower interest rates may increase activity in the short period. But given the rigidities of the labour market, may they not create more unemployment by encouraging capital intensive methods at the expense of labour intensive methods in production and consumption?
Higher growth rates would undoubtedly help with unemployment but an increase by a few per cent., which is all that is practicable, could not reduce it significantly. Similar doubts arise about the effects of higher productivity or increased international competitiveness. Fewer school leavers, through demographic change, reduce the absolute number of the unemployed but increase the percentage of the labour force unemployed. Slower population growth reduces the incentive for productive investment and the adaptability of the labour force. This was recognised in the 1930s when a decrease in population was widely feared.
Unemployment will not fall greatly without major reforms in the labour and housing markets, in the social security system and in the level and incidence of taxation. This has often been emphasised in your Lordships' House, notably by the noble Lord, Lord Harris of High Cross, and by my noble friend —
Lord Bruce of Donington: My Lords, I am obliged to the noble Lord for giving way. He referred to the level of taxation. I take it he is aware of the widely held professional and publicised view that the United Kingdom is already a tax haven.
Lord Bauer: My Lords, I am surprised to hear that. I think this applies only because, at least until recently, companies were so taxed that they could arrange their affairs to pay little tax. But this did not apply and does not apply to the direct taxation of United Kingdom individuals and partnerships. I thank the noble Lord, Lord Bruce of Donington, for drawing my attention to this point and I shall try to word my remarks more carefully in the future.
Such reforms could promote more labour intensive methods of production and consumption and also

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freer mobility between places and jobs. But to think that more state spending, lower interest rates, faster growth and the like would solve unemployment is akin to hoping that population growth or change in food consumption would reduce the agricultural surpluses of the EC. The required reforms are of course unthinkable for the Labour Party. If Ministers rule them out as politically impossible, than large scale recorded unemployment will persist.
Lord Hatch of Lusby: My Lords, before the noble Lord sits down, will he note as a matter of record that I did not talk about the decline of the British steel industry? What I was speaking about was the overtaking, first by the United States and then by Germany, of the British steel industry, largely through better productivity. I related that to the fall in the British percentage of world exports, from 33 per cent, at the beginning of the century to less than 7 per cent. today.
8.26 p.m.
Baroness Carnegy of Lour: My Lords, I want to speak about a subject that has been touched upon by one or two noble Lords. It is very important in the context of this debate but has not really been explored at all. I refer to the subject of schools and how we can get the changes that are needed there if this country is to continue to improve on its success in the world economy and if each young person is to have a chance in future years of earning a good living in the modern world.
I want to suggest that in this matter we now have no time to lose. The world of education likes to proceed slowly and to wait until everybody has agreed before moving forward. But to my certain knowledge we have been talking for at least 20 years about the need for improved schools-industry liaison and the need to relate school more closely to real life and to working life. Some schools have made considerable progress. Many, quite frankly, are still just talking about it. The need for change is now so urgent that young people, their parents and the nation as a whole simply cannot wait.
I should like to suggest to the Government that what is required now is that Big Bang in the Stock Exchange be matched by a Big Bang in schools; that a change be made in the framework within which schools operate which makes it possible for everybody concerned to get together locally out of their own experience to make the changes in schools that their young people need. This is the right time for a major new initiative. We hope that soon schools will be putting behind them many months of damaging non-progress. They will be seeking a new sense of direction and ways in which parents, teachers and the local community can do for their children what is so desperately needed by them.
The general thrust of what is required in schools is now widely recognised. The changes of which your Lordships have been speaking so eruditely in this debate in terms of the way the world economy, the
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European economy and our own economy work, the way we conduct our business in commercial life, the effect of this on the nature of jobs, the scope there is for finding ways to earn a living and the fact that these changes will not be once-and-for-all but a continuous process through a young person's working life, all mean that what a young person needs from school now is very different from even 10 years ago.
Recent opinion polls have indicated that young people, their parents and employers now know pretty clearly what it is they want from schools, and they seem to agree about it. Whatever the aptitude or ability of a young person, whatever the subjects studied, what is wanted is that the young person should come out of school competent, capable, motivated and able to turn what he has learned into practical ability in life. What is wanted is that young people should be able to find their way with competence and with persistence through the rapidly changing labour market, to find new ways to earn when old ones cease to exist; not to be put off by people saying that it is no use looking for a job because none exists; not to be put off by people saying that it is no use entering energetically into your work because someone will take advantage of you. What is wanted is people who are able to cope with relationships and to arrive at a happy home life; people who can cope with the new form of housing market and the new forms of conducting one's financial affairs, and be good shoppers, informed voters and good users of leisure. These things all matter to employment and to the economy.
If young people are to learn this there have to he huge changes in the teaching approach in schools. Teachers must somehow find ways of relating every subject to the real life of every pupil. They must involve young people far more than they have up to now in what they are learning. They must involve parents, employers and the community, because those are the people who know what real life is about in the community.
I suggest that the matter would be greatly helped if there could be a big change built on the experiment which has been going on in Cambridgeshire in seven schools, where the budget of the schools was handed over to the schools themselves. I suggest that that should be done over the whole country for schools that want to run themselves. They should be given the responsibility for administering that budget. It should be done through the governors and the heads of the schools. In Scotland, it would need to be done through strengthened school councils. The budget would be based on the role of the school, with some weighting according to the area where the school is situated and the problems it has to meet.
The schools would be able to use their budgets in the way they wanted and to use savings made on one subject for another. Central government would continue to have a monitoring role through the inspectorate, and it would be for consideration whether the balance of advantage would be for the budget to go through the local authority, and the authority to continue to have some role in its administration, or whether that would be better done direct to

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the school, with the local authority freed of that responsibility.
Under such a system schools would be freed to bring together the teachers, local people, parents and local employers to help create the relevance for young people in their schools which is so desperately needed. The motivation and involvement of the customers would be enormously increased. The job satisfaction of teachers would likewise be enhanced. A by-product, and not an undesirable one, would be much less politics by far in schools—less politics with a capital "P" and with a small "p". I believe few of the customers would regret that.
I hope the Government will think hard about a strategy of that kind. It is very radical but some radical things have been said in this debate. Radical events have been happening in the world, in the economy and in employment and radical solutions are called for. I hope that your Lordships, too, will look at those suggestions with some approval.
8.33 p.m.
Lord Elibank: My Lords, one industry that has suffered more than its fair share of drama in the past 12 months since last year's debate is the oil industry, and as I have spent a large part of my adult life in that industry I view the drama with perhaps more interest than most. Moreover, what has happened in the oil industry, both to the economy and to employment, fits quite neatly within the confines of this debate.
It might be helpful to briefly review the events of the past 12 months in the industry. The barometer of the industry, as your Lordships know, is the price of crude oil. It is not the only barometer but it is a very public and obvious one, and most of the world knows it. This time last year the price per barrel stood at 28 dollars. In the past few months it has oscillated between 10 dollars and 15 dollars per barrel, but in fact it has descended into single figures for weeks at a time. Therefore, the main product of the oil industry is approximately half the value that it was 12 months ago.
As your Lordships know, the price is largely influenced by the conduct of OPEC—a cartel which operates like most cartels in striving to reduce the amount of its product available to the public in order to keep up the price. Currently OPEC produces rather less than 50 per cent. of the total world production, but in the past it has produced more and it is in a high degree probable that in the next decade it will return to its old position of pre-eminence largely because the main oil reserves of the world are in the Middle East.
This dominance of OPEC rather conceals the prominence of one country in it—Saudi Arabia. The Saudis produce from about 3 million to 4 million barrels a day at present, but literally almost overnight they could increase that threefold and swamp the market. That is a power which has resided in their hands for some time and it is only fair to say that it is a power that they have exercised, by and large, wisely
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and well, and with a proper sense of their responsibility to the world economy. However, it is perhaps a unique power in the hands of a small group of men who dominate the entire industry which, in a way, I doubt any other group of individuals can do in any other industry; and that is something of which we should all be conscious.
At about this time last year OPEC decided that the non-OPEC countries were taking an undue share of the market and as a result they resolved to increase production fairly sharply. The direct result of that of course was the fall in the price of oil, to which I referred.
Apart from the obvious and dramatic effect on the Treasury, this affects the viability of the different fields in the North Sea. Each field has a price, or a narrow band of prices, below which it is not economic to develop it. This price varies of course from field to field. In broad terms, it is fair to say that if the price of oil per barrel in dollars falls into single figures, only the largest and best established of the fields in the North Sea are viable. If the price falls to between 10 dollars and 15 dollars a barrel, the position of many fields is extremely uncertain. At the moment, when the price falls below that marker level for a particular field, the instinct of any oil company is to cut production, or certainly to cut development.
It has been said, rightly so, that cheaper oil is not an unmitigated evil. Cheaper oil, and its products, feed into British industry in various ways and no doubt that influence of cheaper oil is entirely benign. The problem is that although the harmful effects of this cheaper oil are easy to see and measure, and have their most immediate impact on the Treasury, the benign effects are much more dispersed and diffused and much more difficult to measure.
I should like now to turn to the effects on employment of this fall in the oil price. Many of the companies with large investments in the North Sea have cut their exploration and construction budgets by as much as 40 per cent. and this immediately has a dramatic effect on their payrolls. Various figures have been produced by a range of respectable bodies—some historic, some forecast, and I shall quote one or two of them—but they perhaps give a flavour of what is happening in the totality. The Scottish Development Agency has calculated that if oil remains at 15 dollars a barrel something like 5,000 off-shore jobs and perhaps 6,000 on-shore related jobs will go. The National Economic Development Office in a recent report on the engineering construction industry, regarding particularly its mechanical and electrical manpower requirements, has given a figure of 32,000 in 1986—that is, this year—dropping to 20,000 in two years' time, which is a drop of 39 per cent. in two years. The equivalent figure for on-shore work for 1981—five years back—was 14,000 mechanical and electrical manpower jobs; by the end of 1988 it is estimated that there will be only 2,200. A more global figure produced by the Bank of Scotland estimates that 32,000 oil-related jobs could go in the next year or two.

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Obviously this hits the country fairly unevenly; but one of the first areas to be hit most dramatically is the Shetlands with the big terminal at Sullom Voe where throughput is declining. Requirements for jobs are diminishing fast and the effect on the economy of the Shetlands is likely to be dramatic. The probability is that in the next few years they will be forced back to the basic economy which they had before the oil boom.
One of the sad things about the development of North Sea oil—and it is a point about which the Minister of State for energy has frequently spoken—is the failure to take up export opportunities from the expertise which we have built up in the North Sea. For several decades now the North Sea has been at the forefront of oil technology, and opportunities have been there to build up a service supply and construction industry which, when our own production has diminished, could look to export orders to fill the gap. Unfortunately, apart from a few shining exceptions, that has not taken place and sadly I fear that the opportunity has largely passed.
The effect of this decline in work is that substantial numbers of highly skilled men—geologists, geophysicists, petroleum engineers, reservoir engineers, in fact engineers of all kinds of expertise, and drilling crews—will be and indeed are being thrown on the labour market. They have skills which in time of fuller employment would be readily available to other industries in the country but at the present levels of unemployment I think that most of them will have the greatest difficulty in finding other work.
One pauses now to consider what action should be taken by interested parties. The major oil companies tend to take a long view of their planning—five to 10 years is normal; 20 years is not in any way abnormal—and it is in a high degree likely that they will plan to ride through this probably temporary recession. That they are shedding some of their workforce is undoubted, but not for the most part in large numbers. For the smaller companies the position is much more parlous especially those with only upstream interests, because for the most part they are dependent on bank loans and of course the bankers are looking with an increasingly worried eye on the state of the industry today. I think it is to be feared that many of these smaller companies will either go into liquidation in the next year or two or will be taken over by some of their larger competitors, which is unlikely to have a benign effect on the employment prospects of their workforces.
Lastly, there is the Government. In this context the important point about government policy is taxation. I submit that it is not a situation that calls for any panic measures, but it does demand a sensitive government finger on the taxation side of the business. It demands a willingness to forgo taxation now in order to help some aspects of the oil companies' business and in order to recoup much more substantial sums in the not too distant future. It is no more than prudent administration to recommend such a course.
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The situation in the oil industry is not one of great gravity. The industry is going through a short-term recession. I think that there is every prospect that in the next year or two the oil price will pick up and that employment will stabilise at least. The prospects of the oil industry returning to the high level of both employment and development of the early 1980s is remote. I think that it is not in doubt that this very worthwhile industry making very substantial contributions to the Treasury will continue into the 21st century.
8.45 p.m.
Baroness Seear: My Lords, the gracious Speech this year was somewhat shorter than usual. The result is that nearly everyone, led of course by the media, is assuming that we are on the verge of a general election. I am not totally convinced that this is so; I speak for myself. I believe that the Prime Minister, who, whatever else she is not, is an acute politician, will want to reduce interest rates and mortgage rates before she goes to the country and will certainly want people to have the benefit of any tax cuts in their pockets so that they can spend the money before she tries to reap the benefit of those tax cuts—if that is what she will do—at the ballot box. However, when I listened to the two opening speeches I began to think I was at the hustings rather than in your Lordships' House. Whether the election comes soon or whether this Government run their full length (which in my view is not impossible), it will be the greatest possible pity if your Lordships' House, with its increased reputation for dealing sagely and impartially with urgent political issues, and indeed with long-term political issues, were to start indulging in electioneering.
We are debating not only the gracious Speech but also the two amendments which have been tabled for today. The first comes from the Labour Benches and predictably emphasises unemployment. There is nobody in your Lordships' House—and this obviously includes the Government Front Bench—who does not deplore the present level of unemployment. Even the Government Front Bench, with the hard-faced men that some people would have us believe they are (and maybe they are, I do not know) would be the most foolish politicians if they wanted to go to the country with the present level of unemployment if they could avoid it. There can be no question but that unemployment is a deep and serious social and economic problem in this country and that it requires both urgent and immediate first-aid action and long-term policies which will relieve us at any rate of some of the burden of unemployment.
On these Benches we have always believed that modest expenditure of a capital kind on infrastructure could well be undertaken straight away—I am talking now of those things which could be done straight away—to improve the employment position, such as improvement and repairs to the housing stock and repairs to the infrastructure. We have said it often. No doubt it is boring to your Lordships to hear it again. We should not say it again if more action had been taken but things have to be repeated when no notice,

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or very little, is taken of them. Let us say once again that these are expenditures of the kind that, if one does not make them sooner, they are made at much greater expense later. They cannot be indefinitely postponed. There is a very real difference between expenditure on either the development or the maintenance of capital goods and expenditure on current consumption, though for some extraordinary reason the Government do not seem to recognise that very important distinction. That is one of the things that could be done staight away.
We are fully aware of the success that the Government have had in controlling inflation and of the importance of that success. It is easy to forget the horror that all experienced over rising inflation rates. We are glad that they are down. They must not be allowed to go up again. But modest expenditure could relieve unemployment without the risk of returning inflation. There could be modest expenditure on certain aspects of the social services. That would not make an enormous difference to the unemployment position but it would make some difference.
So there are things that could immediately be done. I join with the noble Baroness, Lady Turner, and with the noble and learned Lord, Lord Simon of Glaisdale, in urging an intelligent regional policy. We in the Alliance have been carrying out over the last year what we call a work search campaign. This has consisted of studies all over the country into what is going on in local job creation. We have found a great deal that is encouraging. We have also found, however, that it would be much better if there was some sensible regional co-ordination and regional support. I am not talking simply of administrative regional activity but the development of regional agencies with real money to spend on real development. This could be done quite quickly. It could be done to very good effect in improving what is already going on thanks to a good deal of local initiative, local imagination and local risk taking in order to increase jobs, particularly in the areas of highest unemployment. We have evidence that it is happening. We know that it could be done more effectively and more intensively. We are therefore asking for direct action to deal with an urgent problem and to bring quick relief on a small but still worthwhile scale.
The real long-term requirement—here we come to the second amendment, moved from these Benches—is, as practically every speaker, with I think the exception of the noble Lord, Lord Bauer, who is no longer in his place, agrees, is the need to revive manufacturing industry. The noble Lord the Secretary of State would have us believe that all is for the best in the best of all possible worlds. I admire his optimism. But it denies the facts staring us in the face. We believe that the position of manufacturing industry is extremely serious and that there is a need to take action to reverse long-term trends, not trends that are the result peculiarly of what this Government have done. The late Lord Kaldor used to tell us repeatedly—it was well worthwhile having it repeated—that the relative decline in British industry started in the last quarter of the nineteenth century. It
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has accelerated. At the turn of the century, we had 33 per cent. of world markets. By 1964, it was down to 14 per cent. In 1984, it was down to 7 per cent. I should like to know from the noble Viscount the Leader of the House what percentage of world trade this country now has. It has to be something higher than 7 per cent. if the optimism shown by the Secretary of State is to be justified.
The Secretary of State told us that our productivity was going up relative to other countries. As already pointed out, it is all a matter of how you present the statistics. If you do it on a percentage basis, starting from a very low base, you can produce very good figures. I would refer, however, to page 33 of the Aldington report that shows beyond peradventure that from 1962 to 1984 our improvement did not compare favourably with the improvement in other countries. That is not the sole responsibility of the present Government. It started long before their time. What is not justified, however, is complacency about what is going on at present and the need to revive manufacturing industry. This is not only urgent; it is also very difficult.
The real way ahead is surely for us to make a determined effort to get into high tech industries effectively. We are a long way behind. Indeed, Europe as a whole is a long way behind America and Japan when it comes to command of high tech industries. It is not only high tech industries for their own sake; it is high tech industries as they are applied to older industries in an attempt to revive them. That attempt has not been totally unsuccessful. We have already seen signs, for example, in the textile industry, that application of high tech to old established industries, especially if they are prepared to adjust their markets, means that those industries can have a future and need not be abandoned, as in the past so many have assumed that they had to be abandoned.
When we say from these Benches that all is by no means well in manufacturing industry and that it is urgent that something should be done, we have the support of no less an authority than the Prime Minister herself who, as reported in today's Financial Times, said that the reason that we could not go fully into the EMS at the present time was that the economy was not in a good enough state to do so. If everything is going as well as the Secretary of State would have us believe, why does the Prime Minister feel that it is the parlous state of the economy that prevents our entering the EMS? I should be grateful if the noble Viscount the Leader of the House could reconcile the steady optimism of the Secretary of State with the pessimism of the Prime Minister, with whom he normally so sings in tune.
It is always more difficult to catch up than it is to get ahead after starting even in the race. A move into high tech industries, retaining and expanding a position in competition with other countries already doing much better than we are doing, requires a change in industry and a change on the education front of mammoth proportions. Mr. Kenneth Baker is attempting to bring about improvements in education. I know that

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technically the discussion on education took place yesterday. But we are talking (are we not?) about the gracious Speech. I want to say how much I agreed with what the noble Viscount, Lord Eccles, said yesterday in talking about education. No longer can we think about manufacturing industry or indeed the whole of the economy and not at the same time think about education. They are two sides of the same issue.
Unless we make marked advances not only in our schools, as the noble Baroness, Lady Carnegy, said, but also in further and higher education in the polytechnics and the universities, we shall not catch up in respect of high tech industries. We shall not have recovery in manufacturing industry. If we do not have recovery in manufacturing industry, we can whistle for improvements in the standard of living and in relationships in industry for which we are all looking. What is required in education is not just a mild change here and there, not just 20 technical colleges, but a quantum leap so that we get the best people possible into education and pay them to stay there. Then we should turn out men and women at the top in research, and that includes the basic research side, but also at the lower levels, using the new technology to change, to adapt, to learn and to learn again. That requires a real investment in education. Education is an investment and not a consumer of goods. We need investment on a much larger scale than the Government contemplate at present. I know that the English do not really like education. The Scots and the Welsh are quite different in this matter, I am told. But if the Government want economic recovery, they have to foot the bill, and the bill is in education.
9 p.m.
Lord Williams of Elvel: My Lords, first, it is a particular pleasure for me to add my congratulations to those of other noble Lords on the maiden speech of the noble Lord, Lord Derwent. I say "particular pleasure" because the noble Lord, although not a friend in the political sense, is a personal friend. Indeed, he is the godfather to my stepson. It is, if I may say so without offence to the right reverend Prelate, as a godstepbrother that I welcome his full participation in the proceedings of your Lordships' House. We look forward to many speeches of the eloquence that he has given us today.
The noble Lord addressed himself to some of the problems of our social and economic policies, and the taxation policy in particular. That was taken up by the noble Lord, Lord Boyd-Carpenter, and other noble Lords, who emphasised that we should not create disincentives for those managers whom we desperately need—and we all agree that we desperately need—to run the economy of the future. I have to remind the noble Lord, Lord Boyd-Carpenter—because I always try to deal in the facts—that if one looks at taxes as a proportion of the gross national product the figures are as follows. From 1960 to 1975 the average was 31.3. In 1979 the average was 32.4. In 1985 the average was 36.3. We are therefore more heavily taxed as a proportion of the gross national product—the noble
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Lord frowns but I am quoting from the national accounts—than we were in the period 1960 to 1975 and in 1979. One can argue about the distribution of that tax, and whether it is more properly in indirect tax or direct tax. However, I think that the total burden of taxation is proved to be up rather than down. That is the first fact that I wish to establish.
The noble Lord, Lord Young of Graffham, also addressed himself to these problems He gave, as I think the noble Baroness, Lady Seear, pointed out, his usual glowing account of the economic state of the nation. I am not one of those people who believes that the noble Lord has no heart. I am not one of those people who believes that where a heart should beat there is nothing but a black stone—a grey stone perhaps, but not a black stone. Since we are approaching the season of good will I shall go even further than that and congratulate the noble Lord—and I mean this sincerely—on the Restart scheme which I believe has been, and I hope will continue to be, a programme of good sense, imagination and humanity. Anybody who is serious in wishing a reduction in long-term unemployment must welcome that.
By now I have probably exhausted my stock of good will. I shall turn to some of the serious points that the noble Lord made in his speech, and indeed to some of the other points that other noble Lords have made. The noble Lord raised a lot of "Aunt Sallys". It was, as the noble Baroness, Lady Seear, said, a slightly politically orientated speech. It is an obvious and old-fashioned political trick to raise Aunt Sallys and knock them down. Among other things I happen to be an adviser to my right honourable friend Mr. Roy Hattersley, the Shadow Chancellor. I can assure him that nothing that the noble Lord, Lord Young, has said about our policy bears the faintest resemblance to what we are trying to do, except in one important measure. We believe, as my noble friend Lady Turner pointed out, that government have to take much more direct action in trying to make the conversion from an oil-based economy, or a relatively oil-supported economy, to the manufacturing-based economy that I think all noble Lords this afternoon have asked for, with the exception that the noble Baroness pointed out.
However, I must reply to the noble Lord in putting the economic performance of the United Kingdom in some kind of long-run perspective. I have criticised the noble Lord before for the selectivity of his statistics. I have no doubt that I shall criticise him again for the selectivity of his statistics. But there is one statistic that nobody can deny: the arrival in power of the Conservative Party in May 1979. That is undoubted. It is in the perspective of the seven and a half years since then that I wish to place both the successes and the failures. Equally I think it right, following the noble Lord, to put those successes and failures into international perspective. It was after all the Prime Minister herself who used to urge us to look at international comparisons when we complained about the dramatic rise in unemployment in the early years of her administration. What was sauce for Mother Goose then is sauce for Master Gander now.

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Clearly the greatest success has been in inflation—one must accept this—where we have performed only slightly worse than the OECD average. In the first half of 1979 our inflation was 8·1 per cent. against an OECD average of 8·4 per cent. In September 1986 our inflation rate was 3 per cent. compared with the OECD average of 2·4 per cent.—a very reasonable performance, but not all that much better than reasonable.
On growth we have done somewhat less well. Since 1979 the figure is 1·5 per cent. per annum compared with the OECD average of 2·2 per cent. The noble Lord wants the OECD figures. I am quoting figures published by OECD. Investment performance has been slightly weaker. with a 1 per cent. per annum increase against the OECD average of 1·7 per cent. In import penetration we have done, as I think the noble Lord, Lord Ezra, pointed out, rather worse than the generality of OECD countries. All in all the picture is a reasonable one, but not one to get very ecstatic about.
Lord Young of Graffham: My Lords, may I congratulate the noble Lord who has succeeded in being even more selective than I was in his choice of statistics.
Lord Williams of Elvel: My Lords, I am very grateful to the noble Lord. I like to rely on internationally published statistics. I do not like to select which countries I choose, or which economies, or which numbers or which years. I have stuck very strictly to 1979 to 1985, and I have used the OECD statistics. If the noble Lord is criticising the OECD statistics I can only say that he must address himself to the Treasury because they supply the statistics to the OECD.
The unhappiness that some of us have about this picture pales into insignificance when we look at the unemployment comparison, because in 1979 the average OECD unemployment rate was 5 per cent. compared with 5·1 per cent. in the UK; in May 1986, which is the last month for which figures on the standardised cross-country basis are available, the OECD average was 8·1 per cent., and the UK was at 13·3 per cent. That is the dimension of the problem; that is the record set out in black and white.
Let me remind your Lordships that that record is against the background of the receipt by government since 1979 of, in my view—and here I quarrel with my noble friend Lord Dean of Beswick on the figures—no less than £65 billion from North Sea revenues. There was nothing before 1979, but there has been £65 billion since: £1,150 for every man, woman and child in the country.
Lord Dean of Beswick: My Lords, I stand to be corrected by my colleague on the Front Bench, but my figures were supplied in a Written Answer by the Government.
Lord Williams of Elvel: My Lords, I am most grateful to my noble friend. It makes me even more suspicious of some of the Government's statistics that are produced. However, all that is in the past. Noble Lords will ask me what will happen in the future. The gracious Speech gives us very little clue. It says, "firm monetary and fiscal policies". I think the noble Lord, Lord Harris of High Cross, dealt with that. He reduced the expression, "firm monetary and fiscal policies" to the expression "Mr. Lawson's judgment", and I certainly would not quarrel with that. Indeed, the Autumn Statement passes over it, saying that for the past six years high rates of growth of broad money have been "consistent with appropriately tight monetary conditions". In other words, you can write the script in whatever way you want.
Does the expression "firm fiscal policies" mean no tax cuts? Does it mean that the receipts from VAT due to a consumer boom, which, as the noble Lord, Lord Vinson, said, is financed by consumer credit and which is running right out hand, will be so strong that income tax reductions are on the agenda? Is that what is meant by "firm fiscal policies"?
I turn to the phrase "firm control of public expenditure". The noble Viscount the Leader of the House knows much more about the public expenditure programme of the Government than I do, but I simply note that there is a £7 billion rise in the planning total for 1987–88, £5½ billion of which is due to failure to control current expenditure. One noble Lord pointed out that local authority expenditure had run above estimates.
All we have to go on about unemployment is a little sentence in the Chancellor's Autumn Statement in which he said:
"the prospects for some fall in unemployment are nom, more promising. But this promise could still be frustrated by excessive pay settlements".
That is thin gruel indeed. There was a time when the Conservative Party had a stronger message. Indeed I am bound to say, as I quote it, that it is a message with which I tend to agree.
Mrs. Margaret Thatcher, speaking to an election rally in Birmingham on 19th April 1979, when unemployment was round about 1·5 million (we shall not argue, I hope, about the statistics), told us quite clearly how a Conservative Government would reduce unemployment:
"We are going to do it by creating the conditions for real jobs, so that once again the products stream from our factories and workshops while the customers of the world scramble over each other to buy them".
I notice somewhat irreverent laughter from the Benches behind me. I happen, in fact, to agree with the sentiments that the Prime Minister was then expressing. The problem is that the performance has been lamentable. She was dealing with an unemployment figure of 1.5 million; and here we are hearing what I gather is the same message, when the unemployment figure, on any calculation, is above 3 million. I hope

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that the noble Lord will at least agree with the figure of above 3 million.
The Prime Minister referred to "real jobs" not to 360,000 on the youth training scheme or 5,000-odd a month in the community programme, which are today's figures. She referred to "products from our factories and workshops"; in other words, manufacturing industry. She spoke about the customers of the world who were scrambling over themselves to buy our products; not the salesmen of the world scrambling over themselves to sell their products to us.
There is a clear political divide between this side of the House and that side of the House, and we have to recognise this. But although I believe that Mrs. Thatcher's prescription was right, I do not believe that the way the Government are setting about fulfilling that prescription is right. We need—and this is what my party feels and is what I believe I sense from the Alliance Benches—much more direct intervention by government in all spheres. The noble Lord, Lord Ezra, called it a coherent policy, to make sure that the transition to an economy which was not dependent on oil, to a manufacturing based economy, was achieved satisfactorily.
I noticed that the noble Lord, Lord Aldington, adopted a slightly different line from the line he adopted when he was presenting his report. If I may say so with the greatest respect, and I stand ready to be corrected, I think he was intent on making sure that there was not too much support from these Benches for his conclusions because he felt himself—and I think rightly—rather exposed when the report came out and, frankly, it was rubbished by the Government before they had even had a chance to read it.
However, I think that the conclusions of the Aldington Committee—if I may refer to it as such to your Lordships—stand by themselves as such and have not been seriously challenged. The noble Lord, Lord Butterworth, gave us examples of the way universities co-operate with industry in the United States; the noble Lord, Lord Mellish, told us about Dorset and the experiments. All these things have to come together and have to be promoted by government in order to promote the sort of change, and the revival of manufacturing industry, that most of your Lordships this afternoon have wished to see.
Our amendment does not talk only about,
"adequate measures to deal with the present high level of unemployment".
it also talks about,
"the problems created by it".
Economic policy is not an end in itself. It is no good getting the money supply right, or growth in the gross national product; it is part of the social environment. If we can get economic policy right and social policy right—and I think that the noble Lord, Lord Vinson, made this point—we shall have more money to spend on the desirable social amenities for which we all wish.
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The true tragedy of unemployment is economic, social, and psychological. It is economic in the sense that the money spent on paying unemployment and social security benefits—and the noble Lord, Lord Boyd-Carpenter, made this point—would much better be spent on something else.
Lord Boyd-Carpenter: My Lords, would the noble Lord allow me? I made the point in response to the extraordinary statement of his noble friend Lord Bruce of Donington—which I hope the noble Lord, Lord Williams, will deal with—that the Government liked to have 3 million unemployed and wanted to continue that situation.
Lord Williams of Elvel: My Lords, I am grateful to the noble Lord. I have no insight into the mind of the Government. I am simply taking the noble Lord, Lord Boyd-Carpenter, at his word when he said early on in this debate that he would like to see those revenues at present used to pay the dole, if I may use an old-fashioned expression, used for more desirable social purposes. It is a terrible waste of the money we receive from North Sea oil production that most of it has gone to pay—and I use the expression again—the dole. The problem is social in that the impact of unemployment is different between different groups and different regions, as the noble Baroness, Lady Seear, and my noble friend Lady Turner of Camden, pointed out.
I was impressed with the contribution of the noble Lord who is now on the Woolsack, Lord Alport, when he talked about Merseyside. That was an interesting and significant contribution to the problems that we face when dealing with the effects of unemployment. The signs of this tragedy are all around us. Without trespassing on the province of yesterday's debate, do we really need His Royal Highness the Prince of Wales to remind us that our inner cities are festering? Does it need Her Royal Highness the Princess Anne to tell us, when speaking as patron of the Butler Trust—a trust set up in memory of Rab Butler, who was a great one-nation Conservative—that conditions in many of Britain's prisons make it well nigh impossible for even the most determined and dedicated prison officers to achieve any form of genuine rehabilitation? Do we need reminding yet again that the National Health Service is consistently underfunded, and that our education system lacks books, teaching aids, proper premises, let alone properly paid teachers?
Lastly, was not my noble and learned friend Lord Elwyn-Jones right when he referred yesterday to the link between unemployment, especially youth unemployment, and civil disorder, quoting in support, as he did, not only President Johnson and the noble and learned Lord, Lord Scarman, but no less an authority than the noble Viscount the Leader of the House himself?
The problem of unemployment is also alienating different regions of our country from one another. The gap between rich and poor areas has widened since 1979, as the regional gross domestic product figures

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show. The South-East has forged ahead while the North and Midlands have dropped behind. In a report by the European Commission, the Second Periodic Report, it was shown how badly our regions are faring compared with the rest of Europe. More than one-third of the poorer regions of Europe are to be found in the United Kingdom.
I cannot speak for Scotland, but it comes as no surprise at all to learn that 13 per cent. of Scots, only one in eight, are in favour of the present relationship with the United Kingdom. It would appear that the consensus that the noble Lord, Lord Home of the Hirsel—who I am glad to see in his place—said in 1979 was essential for a successful devolution of political authority to Scotland, is there. The time has come perhaps finally to have the Speaker's Conference, to which the noble Lord said in 1979 that the Conservative Party was pledged.
I am very sorry that my noble friend Lord Blease was not here to speak on the problem of Northern Ireland because it is clearly a region of the United Kingdom where unemployment and the effects of unemployment are dramatic.
We have come nearly to the end of our debate We have to consider the contents of the gracious Speech in the round. We have to try to assess the message that the Government are sending to Parliament and to the country. I should be less than frank if I did not say that I find that message deeply disappointing. What is the message to the people of this country? What do I say to my neighbours in mid-Wales who tell me that their
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children are coming out of the youth training scheme and finding that there are 40 applicants for every job on offer? Am I to tell them not to despair because,
"Measures will be proposed to reform the administration of marine pilotage",
and that the conservation and management of the Norfolk and Suffolk Broads will be facilitated? Is that really all the Government have to say to them?
When I was living in Paris, some 20 years ago, towards the end of the réegime of President de Gaulle, the newspaper Le Monde came out one day with one single banner headline:
"La France est morose"—
France is morose. I believe today that Britain is morose, I, my noble friends and, I believe, the country, were looking for a message in the gracious Speech which was a message of hope; a message that the Government will be looking beyond the narrow electoral horizon to a vision of the future which accepted as a fundamental belief that it was the responsibity of government not to stand back and let things happen, but actively to intervene and care for those of Her Majesty's subjects who are disadvantaged, whether through unemployment, poverty, old age, sickness or our own racial prejudice. That message has not come. I have to say to the noble Viscount who is to follow me, and whom we all admire and respect, that unless he and his Government can deliver such a message of hope and vision, they will go down in defeat in the next election, and they will deserve to.
9.25 p.m.
Viscount Whitelaw: My Lords, over the three days of this debate, it has been clear that we begin this Session in the spirit in which I hope and expect we shall go on: one of constructive and courteous exchange of the differing views prevailing in your Lordships' House. I am bound to say that I have time tonight to reply to some very thoughtful speeches on the general subject of employment and economic affairs. That I will do. I should dearly like to take on the noble Lord, Lord Williams, on the broader matters of hope and political matters of a much more general nature. That is perhaps rather more to my taste, so he is fortunate that tonight I am kept firmly in the economic straitjacket, where I shall remain.
If I may say so, the debate started with a significant contribution from my noble friend Lord Young of Graffham. Many of your Lordships who have spoken do so from positions of great authority and experience. As always, there are some whose views do not accord with my own or with those of the Government. That is inevitable in the nature of political debate. I hope to be able to deal with many of the points that have been raised. I trust, however, that I shall be forgiven if I fail through lack of time to deal with them all, although I think I have heard all, or at least some part, of every speech that has been made in the debate. I will, of course, write in answer to any noble Lord where that may prove to be necessary.
First, I should like to join in a spirit of comradeship—if that is the right word—with the noble Lord, Lord Bruce of Donington. I should like to associate this side of the House with the regret at the death of the noble Lord, Lord Kaldor. I hope that that expression can be communicated to his relations and, indeed, to noble Lords opposite.
I turn from that to something rather more controversial. The problem of unemployment, about which we on this side of the House also care passionately, cannot be regarded in isolation from the rest of our economic position or from the world situation generally. The noble Baroness, Lady Seear, was generous when she said that of course she knew that the Government cared about this very serious problem affecting our country, and I am grateful to her. I have to say to the noble Lord, Lord Williams, that he was somewhat less than generous. To say that he does not know what is in the heads or minds of the Government could only lead me to the conclusion, having indeed had to deal with him when I was in another place, that the noble Lord has had too long an association with Mr. Hattersley.
We have said repeatedly that there are no instant or easy solutions. As my noble friend Lord Boyd-Carpenter has said, if there were, does anyone doubt that they would have been seized upon here and in many other countries where the problems are very much the same? Again, my noble friend made very clear, my goodness! what the Government could do with the money which they would have if they only did not have to pay it out in unemployment benefits. Some people have referred to my period of time—I might say almost of imprisonment—in the "Star Chamber", as it is called, this year. I can only say that
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if we had been able to look at the figures without the amount of unemployment benefits that we had to pay, a very different situation would have been seen. So let no one suggest that on grounds of politics, on grounds of the economy, on grounds of feeling for people and everything else, this Government do not care about unemployment. Of course, they do. And the plain fact is that unemployment is not a problem confined to one country. To tackle it we must get the general economic and industrial climate right, as the noble and learned Lord, Lord Simon of Glaisdale, very fairly said. That is what our policies are designed to do.
I shall return shortly to the particular points made by the noble Lords, Lord Bruce of Donington and Lord Diamond, both in their speeches and in the Motions in their names. But before I do so, I should like to answer some of the other points which noble Lords have made in the debate. I start, of course, with the very distinguished maiden speech made by my noble friend Lord Derwent. It has been widely praised throughout your Lordships' House—so widely praised that any further words from me are hardly necessary. He has also been reminded of the great affection in which his father was held in this House. I can only say that, if there are any hereditary Peers who might with profit be downgraded, he is certainly not one of them. I am sure we are delighted to have him in this House and shall look forward to his contributions in the future. Nor do I imagine, from the way he spoke and the way he marshalled his thoughts, that he would ever be a candidate for that immediate demotion from my noble friend the Chief Whip, about which he also spoke. I hope very much that we shall hear him a great deal, and I should like to thank him for a most outstanding contribution to the debate today.
I should now like to turn to one particular point, rather away from many of the others. That concerns the whole problem of manufacturing industry and the position of the Select Committee that was set up to look into overseas trade. Of course it also concerns the speeches of my noble friends, Lord Aldington and Lord Watkinson, the noble Lords, Lord Ezra and Lord Hatch of Lusby, and indeed the noble Lord, Lord Vinson, who, in a most important speech, came into the same area.
Much has been said about the work of the Select Committee on Overseas Trade. Sometimes it is thought or suggested that the Government were in some way unhappy about this Select Committee; that they did not want it or did not like what it said, and the rest. I can only say that, as the House knows, I was responsible in the first instance for setting it up. I took counsel with the House and decided that it would be a good Select Committee to have. I am not in the habit of doing something which I then subsequently regret. If I do regret it, I never admit it! And I certainly did not regret it on this particular occasion: in no way, my Lords.
In the response that I shall give to what was said by my noble friend Lord Aldington today I think it is fair to say, as the Government made clear at the time of the report, that many of the committee's recommendations were in fact accepted by the Government. Yes, there were others where my right honourable friends

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disagreed with some of the committee's recommendations. I think it was felt that in some ways the committee was somewhat too gloomy. But, on the other hand, there is something of great importance which came out of it, which is that the importance and significance of manufacturing industry to our whole economy today was very firmly underlined by that Select Committee. They gave that message to this country, and I believe that all of us in this House are considerably in their debt for the job which they did on that occasion. I should like to thank them all for what indeed happened.
I agreed very much with many of the things that my noble friend Lord Aldington said today about the need for competitiveness in our manufacturing industry. He also made the point that the Government should set out an explanation of their manufacturing strategy, and I shall certainly pass on that important suggestion to my right honourable friends who are concerned and point out to them the support that certainly received in your Lordships' House. I also think that what he said about the need for investment and innovation was very important. I should like to thank him not only for his chairmanship but for what he has said today.
The noble Lord, Lord Ezra, made the point about the balance of payments moving into deficit with the ending of the oil revenues and the reduction of the oil revenues. He referred to the need to follow some of the recommendations of the Select Committee. And again I think I can say that the Government, while not accepting them all and finding some of the comments too gloomy, nevertheless accept many others.
I thought that the noble Lord, Lord Hatch of Lusby, was rather like the curate's egg in his attitude to the whole thing. At one moment he was full of praise; he was very keen on no political feelings—there must be no political feelings between us. But then there were other moments when I noticed that the political feelings did just come a little bit into the matter. There was, for example, reference to a shortage of skilled labour, with no recognition of the great efforts that have been made by the Government in industrial training, of the considerable schemes sponsored by my noble friend Lord Young of Graffham and of what has been done for training in this country. Nothing was said about that.
However, on a more friendly note I could not agree with him more about the need to make sure that throughout our education system—and other noble Lords have come back on to this point—we should pay more attention to technology. Having been educated —I hasten to add not in the classics, because nobody would expect that—at a school which specialised in the classics, I hope that today it is paying more attention to technology. I am sure that is right.
I think also that, where the noble Lord was somewhat critical of management-shop floor relations, industrial relations, he was a little bit unfair—rather more than a little bit. Considerable improvement, as many noble Lords have said in this debate, has been shown in our industrial relations.
Here I come to my noble friend Lord Watkinson. After all, he is somebody who should know about
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improvements in industrial relations, because, if I remember rightly, he was one of my predecessors as Parliamentary Secretary at the old Ministry of Labour. He was there even before I was there and that was long enough ago. He and I have considerable experience of this matter behind us. I feel that amazing progress has been made in our industrial relations and in human relations on the shop floor, as the noble Lord, Lord Wolfson, also stressed to us. Therefore, while he certainly was right in saying that we should all get together in promoting our manufacturing industry, I hope that getting together means that I shall move to him and he will move to me, but he seemed to be moving a little bit away from me from time to time.
I doubt whether at this stage it would be wise to set up another Select Committee. I rather think that the Select Committee set out a great many things which a lot of other people in the country ought now to he doing, and it is up to them—to management generally throughout the country—to learn some of the lessons put forward by the Select Committee and to apply them in practice. That is what I hope will be done. I should equally like to stress what my noble friend Lord Watkinson said about our competitive power in export markets, of which he has considerable experience, which I am sure is crucial.
The noble Lord, Lord Vinson, raised the question of personal credit control and the danger of high interest rates. I thought that he made a most important contribution and I shall be only too pleased to point it out to my right honourable friend the Chancellor of the Exchequer as I think there is a great deal in it and it is extremely valuable for all of us to consider it carefully.
If I may turn from the Select Committee to some of the other points that were raised, the noble Lord, Lord Harris of High Cross, praised the Government for the steady course which they had been able to pursue with the two of my right honourable friends as Chancellors of the Exchequer through a great many difficult occasions; and it is sometimes forgotten what difficult occasions they were. I was interested to hear the noble Lord praising some things that were said by the ILO. It is a very long time ago since I was sent to the ILO, but when I was there I should have found it remarkable if the noble Lord, of all people, was loud in its praise, as he appeared to be at some stages today. However, it gave valuable information for him on this occasion.
I accept what the noble Lord said, that the need for the steady course to continue is very important; and he was quite right to say that the Government are on trial. I think that my right honourable friends concerned would accept that point of view. He stressed, as indeed did my noble friend Lord Boyd-Carpenter, the whole problem of central and local government expenditure. I am bound to say again, if I may quote from experience in looking at public expenditure in the Star Chamber, that there is nothing more difficult than seeking to deal with expenditure of this size and this quantity which, in any event, is largely out of the control of central government. That makes it an extremely difficult matter to handle. I believe it is inevitable as a result that a new and simpler system of

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financing local government should be introduced. It is to be introduced in Scotland, of course, in a Bill this year. I believe that that will be a much better way of making sure that this expenditure, which is so vital in the whole of the nation's finances and in its public expenditure, is more clearly under some form of control.
As to the speech of the noble Lord, Lord Soper, I certainly respect his sincerity; but that, I am bound to say, is so far as I can go because I totally disagree with him in everything that he said.
The noble Lord, Lord Alport, made an important speech from his researches into Liverpool and Merseyside. I accept that this is a very great problem for the country and for the Government. If I may say so to the noble Lord, I rather wish that he had not introduced the question of fiddling with figures at the same time because it makes it more difficult for me. But I shall overcome that and say yes I think that we should pay great attention to some of the things that he said.
At the same time, I must point out to him that, when it comes to a question of civic pride and the need for a civic authority in Liverpool, I believe that the Government have a responsibility, one which we do not shirk. But I think that all those concerned with Liverpool in the civic sense also have a major responsibility. Until that council and that area can produce some cohesion and some determination on behalf of its citizens, and perhaps shed some of its more unhappy practices, I believe that it will never be possible to get the improvements in Liverpool that are so greatly needed.
The noble Earl, Lord Ferrers, as chairman of the Agricultural Export Council, has considerable experience in this field. He made some important points about the need for greater help from merchant banks and banks for tangible support for our exporters. I am grateful to him for making them.
The noble Lord, Lord Dean of Beswick, made a speech which, if I may say so to him, had two parts, one of which I somewhat agreed with and the other of which he will expect me to have disagreed with. Regarding the part on which I agree with him, he was a Member in another place for the north of England; so—as may sometimes be forgotten by some of the people who express this—was I for nearly 30 years. Therefore, when people try to lecture me about the north of England, I tend to get a trifle irritable, but I try not to show it. The noble Lord did not lecture me in any way. He came in to the cooking of the books country at one moment and made some other party political points, which he is perfectly entitled to make, but he would not expect me to reply to them.
On the other hand, I agree with him that it is very important that we pursue a regional policy—and we do, actually. I should remind the noble Lord and a good many other noble Lords who have spoken that our policy of regional aid amounts to some £465 million a year which, after all, in terms of a regional diversion of resources, is fairly considerable.
It is on that basis that I turn to the noble and learned Lord, Lord Simon of Glaisdale. His considerable knowledge of Treasury matters led him to ask me a
328
number of important and detailed questions. I hope that he will excuse me. I have all the answers written down in front of me. Some of them I understand and some of them I do not. I think therefore that it would be much wiser if I were to write to the noble Lord. When I have read what I have written, I hope that I shall understand it, and I hope that it will benefit him the better.
On the noble Lord's remark about regional policy in Teesside—which was the main point of his speech—I agree with him very much. I hope that he will take account of what I was saying in regard to regional aid.
The noble Baroness, Lady Turner of Camden, spoke of her experience in the trade union field. If I may humbly say so to her, it is of great value that someone with such experience in trade unions should enter the debate. She raised the question of the availability for employment rules and suggested that there was a fear that they might be in some way intimidatory. I may be wrong but I seem to remember—again in the dim, distant past, when I was Parliamentary Secretary to the then Ministry of Labour between 1962 and 1964—that those who were unemployed had to register very much more frequently than they do today and that the rules of availability were a great deal stricter. I never noticed then, or subsequently when the party opposite operated those rules, anyone suggesting they were intimidatory. I do not think they are in any way now, but it is important that the availability rules, which have operated all the time so far as unemployment is concerned, should be properly looked at and enforced in view of the sums of money involved.
My noble friend Lord Wolfson welcomed much in the Government's policies. He welcomed the figures of investment, he welcomed the improvements in human relations in industry to which I have already referred, and he then made a comment concerning Glasgow having secured the designation of the Council of Ministers as European City of Culture for 1990. I agree with my noble friend who said that his father who came from Glasgow would never have believed that that was likely to happen. I myself lived 10 miles from Glasgow for seven years of my life and nor would I have believed it, but I am delighted to think that it has happened at this time. I am sure the noble Lord, Lord Ross of Kilmarnock, also thinks this is good. There has been a remarkable regeneration of the city of Glasgow. That is not to the credit of any one government or group of politicians; it is an important point to make to those who are speaking of other cities in our country. I think that Glasgow's contribution has been considerable.
The noble Lord, Lord Mellish, again referred to the question of the North. I again answer with the point I made regarding £465 million of regional aid. The noble Lord then gave the example of the success of London docklands and indeed the considerable success in Dorset. Those successes are important and they show again that when people get together such successes can be achieved.
My noble friend Lord Butterworth spoke about higher education and the importance of higher education and industry coming closer together. He gave the example of the teaching company scheme in which academics work in industry. I think that is a very important point. He made valuable suggestions

329
about the need for the intellectual property which is found in universities to be used in industry to greater effect. We shall take notice of the views he expressed.
My noble friend Lord Bauer pointed out the value of the reduction in inflation, and I am also grateful to him for other remarks which he made. My noble friend Lady Carnegy of Lour referred to the need for change in education and made an important point about the budget of schools being handed on to the schools themselves. I shall certainly pass that comment on to my right honourable friend the Secretary of State for Education.
Lastly, the noble Lord, Lord Elibank, referred to the problems of employment and the oil price fall, particularly in Scotland. I should point out to him that the Chancellor of the Exchequer announced in the Autumn Statement that repayments of advance petroleum revenue tax were to be made and that a Bill would be introduced to that effect.
The noble Baroness, Lady Seear, to whom I have already referred, also mentioned education and stressed how important it was. She has considerable knowledge of that subject and great expertise. I am grateful to her for what she has said.
I turn in conclusion to the points made by the noble Lord, Lord Bruce of Donington, and the noble Lord, Lord Diamond, the one concentrating on unemployment and the other on manufacturing industry. I think the two matters have to be looked at together. No sensible person would advocate measures to tackle unemployment without considering their impact on industry generally, including manufacturing industry. The Government would be the first to admit that many firms have recently been through a hard time as recession deepens. Overmanning in particular has taught this country some very stern lessons which I believe we shall take on board for the future. I was glad to notice that the noble Lord, Lord Diamond, recognised the value of service industries, which are incidentally greatly encouraged by this Government.
The noble Lord also praised the work of the City and of our financial services generally, which I think are extremely important for our invisible exports and also for the success of our country. There are those who seek to run down the City. Certainly there are troubles which have to be sorted out (and I believe that this House did a great deal to sort them out through the Financial Services Act) yet we have to ensure that this part of our economy flourishes and flourishes properly.
It is here that I should like a little help from the noble Lord, Lord Diamond. I wonder whether he will take the noble Lord, Lord Bruce of Donington, on one side. If he took him on one side he might tell him that the City is a valuable place, is doing rather well in many ways, contributes greatly to our economy and is not, as the noble Lord, Lord Bruce of Donington, said—and I took down his words—a collection of "Young's yuppies". I do not think that they could properly be described as such even if I knew what they were. I discovered what they were the other day when someone described as "young yuppies" three of my newly appointed colleagues on the Front Bench who I greatly value and who I think the House will find are
330
a great success. I asked the Chief Whip what on earth that meant. He was able to tell me, as always. So I do not think it is fair that the noble Lord should refer to the City in those terms, and I hope that he will recognise that fact.
Then we come to the Motion in the name of the noble Lord, Lord Bruce of Donington. This too is a little difficult to reconcile with the facts as they are. He seemed to charge the Government with inaction. There cannot be a better riposte than the highly effective speech made by my noble friend Lord Young of Graffham, who described a whole raft of measures to train young people, to give them work experience and to help the long-term unemployed find jobs. I do not believe, as many noble Lords have said during the debate, that these measures are worthy of condemnation.
I am grateful that the noble Lord, Lord Williams, should have complimented my noble friend on the Restart programme. Sometimes when I hear comments from noble Lords opposite about YTS, the community programme and the Restart programme, I wonder whether they really want them. I believe that they are very valuable, that they do a great deal to prepare people for work and to alleviate the despair and apathy that unemployment brings. They are concrete evidence of a compassionate response to unemployment on behalf of the Government, and I hope that they will be recognised as such.
The other element of our response is building the right environment for the creation of jobs. Here I should like to deal for a moment with the statistics. The noble Lord, Lord Bruce, is an accountant. My own reputation for facility with numbers, as your Lordships may know, is not of the highest. I do not think that it is as high as it probably deserves to be, but I am not sure. On the other hand, I was somewhat startled out of a rather peaceful reverie when I heard the noble Lord, Lord Bruce of Donington, say in a firm voice that numbers are not the same as figures. All right, if that is the case. One has to recognise these statements when they come. There we are, very good. But I think we might just look at whether they are numbers or figures. One million new jobs have been created since the 1983 general election. The party to which the noble Lord, Lord Bruce, belongs promises to reduce unemployment by 1 million. Even I can appreciate that to fulfil that promise would require the creation of at least 1 million more jobs in addition to the 1 million that have been created. I for one remain to be convinced that that would be achievable either on the timescale or, indeed, with the policies proposed by noble Lords opposite.
I noticed that the noble Baroness, Lady Seear, referred to a "modest" increase in expenditure. I do not think that modest increase would achieve such a result. I do not think that she suggested it. The noble Lord, Lord Williams, was more expansive, again, I suspect, under the influence of the right honourable gentleman Mr. Hatterslev. He said "much more". So we have the slight division of "much more" and "modest". Well it is all very interesting, but I do not think it would work on the standard that has been put forward. I believe that it would again put us at risk of having to call in the IMF. Indeed, as my noble friend Lord Watkinson so wisely stated, it would put at risk

331
many of the improvements of recent years. I believe that would be a disaster.
On the basis of what I and my noble friends have said to the House, I should have thought that the Government have a very effective answer to both amendments of the noble Lords. I trust that the House will express its view on them accordingly and reject them out of hand.
Lord Bruce of Donington: My Lords, I should like to add my own tribute to the noble Lord, Lord Derwent, not only for the elegance of his speech and his diction but also for what I, at any rate, regard as welcome—a cutting edge to what he said, all of which makes for good debate. I personally hope that he will take part in many of our debates.
In replying to the noble Viscount, Lord Whitelaw, he has such an emollient and pleasant manner that time almost stands still. He is always very disarming. He might almost have been, in another context altogether, a political bomb disposal officer; because he always treats these matters with a great deal of urbanity.
I have only two comments to offer. The first is to the noble Lord, Lord Aldington. I observed this evening that he has apparently forgiven the Marxist denunciations that were hurled at him at one time, when the first copy of his report was released. I observe that his confidence in Her Majesty's Government is now so great that he wishes to know from them what, after seven years, their industrial strategy now really is.
In so far as this amendment is concerned, I want to add this. I have in front of me copies of every Queen's Speech that has been made since this Government took office. They make rather depressing reading. Listening to the noble Lord today one would imagine that seven years had not passed at all. But seven long years have passed and for the last three years—for the last three Queen's Speeches—unemployment in the United Kingdom has been running at or around 3 million under the new calculations and possibly 3.5 million on the old basis. Unemployment at this level and for so long, and after all the intitial promises made by this Government, is not acceptable. As the Prime Minister herself said in an interview with the Financial Times today, people must be intended to presume the consequences of their own actions. That is the position of the Government in regard to the 3 million unemployed.
9.59 p.m.
On Question, Whether the amendment (moved by the Lord Bruce of Donington) shall be agreed to?
Their Lordships divided: Contents, 85; Not-Contents, 133.

DIVISION NO. 1

CONTENTS

Airedale, L.

Cledwyn of Penrhos, L.

Banks, L.

David, B.

Barnett, L.

Dean of Beswick, L.

Beswick, L.

Dean of Beswick L.

Birk, B.

Diamond, L.

Bottomley, L.

Elwyn-Jones, L.

Brockway, L.

Ennals, L.

Bruce of Donington, L.

Ewart-Biggs, B.

Carmichael of Kelvingrove, L.

Ezra, L.

332

Falkender, B.

Pitt of Hampstead, L.

Foot, L.

Ponsonby of Shulbrede, L. [Teller.]

Gallacher, L.

Galpern, L.

Prys-Davies, L.

Glenamara, L.

Robson of Kiddington, B.

Graham of Edmonton, L. [Teller.]

Rochester, L.

Ross of Marnock, L.

Grey, E.

Seear, B.

Grimond, L.

Sefton of Garston, L.

Hampton, L.

Shackleton, L.

Hanworth, V.

Shepherd, L.

Harris of Greenwich, L.

Silkin of Dulwich, L.

Hatch of Lusby, L.

Simon, V.

Hirshfield, L.

Stallard, L.

Houghton of Sowerby, L.

Stedman, B.

Jenkins of Putney, L.

Stewart of Fulham, L.

John-Mackie, L.

Stoddart of Swindon, L.

Kennet, L.

Taylor of Blackburn, L.

Kilmarnock, L.

Taylor of Gryfe, L.

Kirkhill, L.

Tordoff, L.

Llewelyn-Davies of Hastoe, B.

Turner of Camden, B.

Lockwood, B.

Underhill, L.

Mclntosh of Haringey, L.

Vernon, L.

Mackie of Benshie, L.

Walston, L.

McNair, L.

Wedderburn of Charlton, L.

Mar, C.

Whaddon, L.

Mayhew, L.

White, B.

Mellish, L.

Wigoder, L.

Monkswell, L.

Williams of Elvel, L.

Morton of Shuna, L.

Wilson of Rievaulx, L.

Mulley, L.

Winchilsea and Nottingham, E.

Nicol, B.

Ogmore, L.

Winstanley, L.

Oram, L.

Young of Darlington, L.

Perry of Walton, L.

Ypres, E.

NOT-CONTENTS

Abercorn, D.

Glanusk, L.

Abinger, L.

Glenarthur. L.

Aldington, L.

Gray. L.

Arran, E.

Gray of Contin, L.

Barber, L.

Greenway, L.

Bauer, L.

Gridley, L.

Beaverbrook, L.

Grimston of Westbury, L.

Belhaven and Stenton, L.

Grimthorpe, L.

Beloff, L.

Hailsham of Saint Marylebone, L.

Belstead. L.

Bessborough, E.

Hardinge of Penshurst, L.

Boardman, L.

Harmar-Nicholls, L.

Boyd-Carpenter, L.

Harris of High Cross, L.

Brabazon of Tara, L.

Harvington, L.

Brougham and Vaux, L.

Hemphill, L.

Bruce-Gardyne, L.

Hesketh, L.

Butterworth, L.

Hives, L.

Caithness, E.

Holderness, L.

Cameron of Lochbroom, L.

Home of the Hirsel, L.

Campbell of Alloway, L.

Hood, V.

Campbell of Croy, L.

Hooper, B.

Carnegy of Lour, B.

Hylton-Foster, B.

Carnock, L.

Inglewood, L.

Chelwood, L.

Kaberry of Adel, L.

Coleraine, L.

Kimball, L.

Cork and Orrery, E.

Kinloss, Ly.

Cowley, E.

Kitchener, E.

Craigavon, V.

Lane-Fox, B.

Craigmyle, L.

Lawrence, L.

Craigton, L.

Layton, L.

Crathorne, L.

Long, V.

Davidson, V. [Teller.]

Lucas of Chilworth, L.

Denham, L. [Teller.]

Lurgan, L.

Derwent, L.

McFazdean, L.

Dormer, L.

Macleod of Borve, B.

Dundee, E.

Mancroft, L.

Eccles, V.

Margadale, L.

Elibank, L.

Marley, L.

Elles, B.

Marshall of Leeds, L.

Elliott of Morpeth, L.

Massereene and Ferrard, V.

Faithfull, B.

Merrivale, L.

Fanshawe of Richmond, L.

Mersey, V.

Fortescue, E.

Montagu of Beaulieu. L.

333

Morris, L.

Simon of Glaisdale, L.

Mowbray and Stourton, L.

Skelmersdale, L.

Moyne, L.

Stodart of Leaston, L.

Munster, E.

Strathclyde, L.

Murton of Lindisfarne, L.

Suffield, L.

Newall, L.

Swinfen, L.

Newcastle, Bp.

Teviot, L.

Pender, L.

Thorneycroft, L.

Penrhyn, L.

Thurlow, L.

Peyton of Yeovil, L.

Tranmire, L.

Portland, D.

Trefgarne, L.

Rankeillour, L.

Trenchard, V.

Reay, L.

Trumpington, B.

Redesdale, L.

Vaux of Harrowden, L.

Renwick, L.

Vickers, B.

Romney, E.

Vinson, L.

St. John of Bletso, L.

Vivian, L.

Sanderson of Bowden, L.

Ward of Witley, V.

Sandford, L.

Watkinson, V.

Savile, L.

Whitelaw, V.

Selborne, E.

Wise, L.

Selkirk, E.

Wolfson, L.

Shannon, E.

Young of Graffham, L.

Resolved in the negative, and amendment disagreed to accordingly.
10.9 p.m.
Lord Diamond: My Lords, I beg to move, as an amendment to the Motion, at the end of the Address to insert: "but whilst recognising the contribution made by services to the economy, regret the lack of adequate provisions to revive the manufacturing base of British industry."
On Question, Whether the amendment (moved by the Lord Diamond) shall be agreed to?
Their Lordships divided: Contents, 82, Not-Contents, 126.

DIVISION NO. 2

CONTENTS

Airedale, L.

Kirkhill, L.

Banks, L.

Lawrence, L.

Barnett, L.

Llewelyn-Davies of Hastoe, B.

Beswick. L.

Lockwood, B.

Birk, B.

McIntosh of Haringey, L.

Bottomley, L.

Mackie of Benshie, L.

Brockway, L.

McNair, L.

Bruce of Donington, L.

Mar, C.

Carmichael of Kelvingrove, L.

Mayhew, L.

Cledwyn of Penrhos, L.

Monkswell, L.

David, B.

Morton of Shuna, L.

Dean of Beswick, L.

Mulley, L.

Denington, B.

Nicol, B.

Diamond, L.

Ogmore, L.

Elwyn-Jones, L.

Oram, L.

Ennals, L.

Perry of Walton, L.

Ewart-Biggs, B.

Pitt of Hampstead, L.

Ezra, L.

Ponsonby of Shulbrede, L.

Falkender, B.

Prys-Davies, L.

Foot, L.

Robson of Kiddington, B.

Gallacher, L.

Rochester, L.

Galpern, L.

Ross of Marnock, L.

Graham of Edmonton, L.

Seear, B.

Grey, E.

Sefton of Garston, L.

Grimond, L.

Shackleton, L.

Hampton, L.

Shepherd, L.

Hanworth, V.

Silkin of Dulwich, L.

Harris of Greenwich, L.

Simon, V.

Hatch of Lusby, L.

Stallard, L.

Hirshfield, L.

Stedman, B. [Teller.]

John-Mackie, L.

Stewart of Fulham, L.

Kennet, L.

Stoddart of Swindon, L.

Kilmarnock, L.

Taylor of Blackburn, L.

334

Taylor of Gryfe, L.

Wigoder, L.

Tordoff, L. [Teller.]

Williams of Elvel, L.

Turner of Camden, B.

Wilson of Rievaulx, L.

Underhill, L.

Winchilsea and Nottingham, E.

Vernon, L.

Walston, L.

Winstanley, L.

Wedderburn of Charlton, L.

Young of Dartington, L.

Whaddon, L.

Ypres, E.

White, B.

NOT-CONTENTS

Abinger, L.

Hylton-Foster, B.

Aldington, L.

Inglewood, L.

Arran, E.

Kaberry of Adel, L.

Barber, L.

Kimball, L.

Bauer, L.

Kinloss, Ly,

Beaverbrook, L.

Kitchener, E.

Belhaven and Stenton, L.

Lane-Fox, B.

Beloff, L.

Layton, L.

Belstead L.

Long, V.

Bessborough, E.

Lucas of Chilworth, L.

Boardman, L.

Lurgan, L.

Boyd-Carpenter, L.

McFadzean, L.

Brabazon of Tara, L.

Macleod of Borve, B.

Brougham and Vaux, L.

Mancroft, L.

Bruce-Gardyne, L.

Margadale, L.

Butterworth, L.

Marley, L.

Caithness, E.

Marshall of Leeds, L.

Cameron of Lochbroom, L.

Merrivale, L.

Campbell of Alloway, L.

Mersey, V.

Campbell of Croy, L.

Morris, L.

Carnegy of Lour, B.

Mowbray and Stourton, L.

Carnock, L.

Moyne, L.

Chelwood, L.

Munster, E.

Coleraine, L.

Murton of Lindisfarne, L.

Cork and Orrery, E.

Newall, L.

Cowley, E.

Newcastle, Bp.

Craigavon, V.

Pender, L.

Craigmyle, L.

Penrhyn, L.

Craigton, L.

Peyton of Yeovil, L.

Crathorne, L.

Portland, D.

Davidson, V. [Teller.]

Rankeillour, L.

Denham, L. [Teller]

Reay, L.

Derwent, L.

Redesdale, L.

Dormer, L.

Renwick, L.

Dundee, E.

Romney, E.

Eccles, V.

St. John of Bletso, L.

Elibank, L.

Sanderson of Bowden, L.

Elles, B.

Sandford, L.

Elliott of Morpeth, L.

Savile, L.

Faithfull, B.

Selborne, E.

Fortescue, E.

Selkirk, E.

Gibson-Watt, L.

Shannon, E.

Gisborough, L.

Simon of Glaisdale, L.

Glanusk, L.

Skelmersdale, L.

Glenarthur, L.

Stodart of Leaston, L.

Gray, L.

Strathclyde, L.

Gray of Contin, L.

Suffield, L.

Greenway, L.

Swinfen, L.

Gridley, L.

Teviot, L.

Grimston of Westbury, L.

Thorneycroft, L.

Grimthorpe, L.

Tranmire, L.

Hailsham of Saint Marylebone, L.

Trefgarne, L.

Trenchard, V.

Hardinge of Penshurst, L.

Trumpington, B.

Harmar-Nicholls, L.

Vaux of Harrowden, L.

Harris of High Cross, L.

Vickers, B.

Harvington, L.

Vinson, L.

Hemphill, L.

Vivian, L.

Hesketh, L.

Ward of Witley, V.

Hives, L.

Watkinson, V.

Holderness, L.

Whitelaw, V.

Home of the Hirsel, L.

Wolfson, L.

Hood, V.

Young of Graffham, L.

Hooper, B.

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

AberystwythHarbour Bill Pontypridd Markets Fairs and Town Hall Bill
Presented; read a first time; read a second time pro forma, and committed to Select Committees.
British Railways (No. 2) Bill
Presented; read a first time; read a second time pro forma, and committed to an Unopposed Bill Committee.

London Docklands Railway (City Extension) Bill
Presented; read a first time; read a second time pro forma, and reported from the Committees with a Special Report; recommitted to an Unopposed Bill Committee.
House adjourned at nineteen minutes past ten o'clock.

  EC DEVELOPMENT COUNCIL MEETING
  EC DEVELOPMENT COUNCIL MEETING