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Commons Chamber

Volume 890: debated on Monday 21 April 1975

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House Of Commons

Monday 21st April 1975

The House met at half-past Two o'clock

Prayers

[Mr. SPEAKER in the Chair]

Oral Answers To Questions

Industry

Rolls-Royce Rb211 (Boeing Aircraft Company)

1.

asked the Secretary of State for Industry if he will issue a further invitation to Mr. Boullioun of Boeing Aircraft Company to meet him to discuss the prospects for fitting Rolls-Royce RB211 engines in the Boeing 747.

2.

asked the Secretary of State for Industry what action he has taken to facilitate the offer by Boeing of a version of the 747 aircraft powered by the Rolls-Royce RB211.

21.

asked the Secretary of State for Industry what discussions he has had with the management of Rolls-Royce Ltd. on its negotiations with Boeing.

My right hon. Friend has said that the Government will support the application of the RB211–524 engine to the Boeing 747 on similar terms to that for the Lockheed TriStar application as soon as a second major order is placed in addition to the requirements for British Airways. He has discussed the matter with Mr. Boullioun and Sir Kenneth Keith on several occasions and is well aware of their views. He has no plans for a further meeting with Mr. Boullioun at the moment.

Will the hon. Gentleman confirm that when Mr. Boullioun was invited here to meet the Secretary of State, the Secretary of State failed to meet him and left him, instead, to meet civil servants of the Department? Does the Secretary of State—indeed, does his junior Minister—think that that is the best way in which to conduct business on which the jobs of many men working at Rolls-Royce in Derby and other places now depend?

I much regret that the hon. Gentleman sees fit to raise this issue in that manner. My right hon. Friend the Secretary of State for Industry was engaged in other Cabinet business that he could not avoid. Mr. Boullioun was informed of the reason why he was invited, instead, to meet senior officials and he fully appreciated those reasons.

Have the Government not been told by the director of Rolls-Royce in Derby that the delays by the Government in making the grants available for the further work on the engine are already causing a serious risk that the project will not go ahead?

I fully understand the importance of the deadline which has to be met. At the same time, I hope that the hon. Gentleman will realise that we have to take account of the size of the extra investment, including that required for the growth in thrust, and to take account of it in relation to expected revenue from sales in terms of the appropriate test discount rate. That is why we have not so far been able to give a firm decision on this matter. I assure the hon. Gentleman that we are concerned about this issue and we are awaiting further proposals to be made by Rolls-Royce, if that company so sees fit.

Is the Minister aware that it is vital that the decision should be made fairly quickly? It is quite right that the engine division in Derby is concerned about the development of this uprated version of the RB211. I hope that the Government realise the urgency of getting the deal completed.

I assure my hon. Friend that we are very conscious of the urgency of this matter. Only today have we received the first part of further proposals from Rolls-Royce. I assure my hon. Friend that we shall be looking at these very carefully and urgently. It is obviously crucial that we take full account of any change in the economics of the project as regards the terms, the costs, and the profit returns. This we shall do.

Will the Minister bear in mind that Short Bros. and Harland of Belfast would be in a particularly advantageous position to tender for the podding of these engines in view of the success of its contract with Lockheed?

I am well aware of the importance of the position for the company that the hon. Gentleman has mentioned.

Is it not possible to press the Minister further on this missed meeting? Mr. Boullioun was invited by the Minister to come to the meeting. Was there no other Minister available? The hon. Gentleman must bear in mind that it is his Government which laid down the terms and conditions under which a second order has to be given before that engine will be funded by the Government. There is a grave discourtesy here to Boeing.

I assure the House that Mr. Boullioun, who is the person who matters here, certainly, fully understood the position and recognised that there was no discourtesy.

Aircraft Industry

3.

asked the Secretary of State for Industry what further consultation he has had with management of the British Aircraft Corporation since publishing his proposals to nationalise the British aircraft industry.

My right hon. Friend has studied the comments from the management of the British Aircraft Corporation on his proposals and discussed these with the chairman and board members.

Is the Minister aware—certainly his right hon. Friend the Secretary of State for Industry is aware—that the present position is that his right hon. Friend talks almost exclusively to the trade unions and ignores the management? Although I realise the links between the unions and the Government, is not the Minister aware that the attitude over the past few months has caused concern, not to say demoralisation, amongst middle and senior management of the British Aircraft Corporation? Will he give an assurance that in future he will spend at least as much time talking to management as he does to the trade unions to try to retain what is left of the previously good relationship between management and unions?

The hon. Gentleman is talking nonsense when he suggests that my right hon. Friend has not fully consulted a large number of managerial bodies on this issue. He is also quite wrong when he tries to stir up the idea of discontent. The proposals for public ownership have wide support among the work force, and that includes the distinct elements of middle management, who also strongly backs these proposals.

Has the Secretary of State any plans to meet all sections of the work force at BAC Weybridge? So far, he has studiously avoided coming to that particular BAC location.

My right hon. Friend has not studiously avoided—to use the hon. Gentleman's phrase—meeting the persons whom the hon. Gentleman mentions. I assure him that the organising committee which we hope will be set up shortly after Second Reading, if the House so approves, will take the opportunity to have further meetings with the kind of persons to whom the hon. Gentleman has alluded.

Do the Government still believe that this legislation will be on the statute book in this Session of Parliament? Further, will the hon. Gentleman comment upon the hardship which may be faced, in view of the present compensation terms, if the legislation is not proceeded with and if shareholders, therefore, receive no compensation for the investment they would be expected to continue to make for a period longer than that originally intended?

I am very glad to welcome the hon. Gentleman's strong and warm support for legislation this Session, and I am glad to assure him that I have no reason to believe that he will be disappointed.

Aerospace

4.

asked the Secretary of State for Industry when he next expects to meet his European counterparts to discuss the future of the aerospace industry in the EEC.

I have no plans for such discussions at present.

Will the Minister tell us his view on the question whether or not he ought to acquaint his counterparts with his proposals on nationalisation? Are these people not to be told? Is it not really necessary that he should hear from them that they believe that it should be left to Parliament in this country and not to the EEC to make decisions about the organisation of the industry?

I think it would be a greater courtesy to tell the House of Commons our proposals through the Bill before we consult European Ministers, but I shall certainly bear in mind the hon. Gentleman's view that we should tell European Ministers before we tell Parliament.

In view of the importance of the Concorde project for the EEC aircraft industry, will my right hon. Friend consider going to New York to give evidence at the current inquiry, which, evidently, is assuming a highly political character?

In a private capacity, and with another hon. Member, I did go the last time there was an attempt to stop the Concorde from landing there. But I think that in this particular case the matter had better be handled in the way in which it is being handled, so long as it is clearly understood by the American Government that the British and French Governments have an absolutely basic national interest to see that our investment in this aircraft is not frustrated by arguments which do not stand up to serious examination.

Having said that, I hope that my words will be reflected, without my presence being necessary.

We all know the right hon. Gentleman's views about Europe, but surely he does not really believe that the British aerospace industry can live outside some sort of link with the European aerospace industry. May we have his assurance that his plans for nationalising our aircraft industry at least owe something to the creation of a stronger European aerospace industry?

This is not a question on which one would want to enter into a broader discussion about the Common Market. Concorde was begun many years before any question of British entry was considered. The Society of British Aircraft Constructors has told me that the aircraft industry has 1,000 collaborative projects of one kind or another, one of the most important being the RB211 in an American aircraft. I hope that the hon. Gentleman will not take such a narrow view of the British or world industry as to suppose that "wogs" begin at the frontiers of the Common Market. We must make it world wide.

Shipbuilding Industry

5.

asked the Secretary of State for Industry what proportion of the shipbuilding industries of Sweden, Denmark, Germany, Holland and France are State owned, according to the information available to him from international sources.

According to my information, about 35 per cent. of the merchant shipbuilding industry in Germany and about 20 per cent. in Sweden are State-owned. Naval shipbuilding and outfitting are largely State-owned in all the countries mentioned.

As one of the principal reasons for the Government's proposal to nationalise the whole of the shipbuilding industry in Britain is its alleged poor performance as compared with our overseas competitors, does not the Under-Secretary feel that the European example of State support rather than wholesale ownership should prove exactly the reverse?

Perhaps the hon. Gentleman was not fully listening to my earlier reply. Certainly in the case of Sweden the successful yard at Uddevalla is fully 100 per cent. State-owned, and turned in £5 million of profit in 1974. In Germany, the Howaldtswerke-Deutsche Werft is also 100 per cent. Federal and State-owned. That also turned in a profit, in 1973, of DM 37 million. The hon. Gentleman's conclusion is not proven by the European example.

As inflation is now being generated by wage settlements in the nationalised industries and the public sector, will not the nationalisation of ship-building give a further boost to inflation, imperil exports and, incidentally, add to the cost of the defence programme to the taxpayer?

Certainly to the extent to which it promotes investment, improves production and increases exports, it will not have the effect the hon. Gentleman mentioned.

8.

asked the Secretary of State for Industry what was the total net worth of the companies to be nationalised in the shipbuilding, ship repairing and marine engineering industries at book value according to their latest accounts.

The latest published accounts of these companies are available to the public. For my Department to extract the information required would involve a disproportionate amount of time and effort.

Is it not incredible that we should be about to spend vast sums of public money on taking over this industry, at a time of grave economic crisis, in ignorance of the background? Is the Minister satisfied with the abysmal level of research carried out by his Department before putting forward his proposal?

The proposal was put forward by the Labour Party in two elections. The hon. Gentleman will know that the Department does not prepare policy statements for political parties as such in that sense. He will also know that our compensation provisions are based not upon book value but on share value. Therefore, there is no reason why I should ask my civil servants to spend time gathering published information which is not to be the basis of our compensation arrangements.

Is my right hon. Friend yet in a position to tell the House when we are likely to have the Shipbuilding Industry Bill?

I have nothing to add to what my hon. Friend already knows. The measures intended for the present Session include the public ownership of the ship-building and aircraft industries. I take on board what was said by the hon. Member for Henley (Mr. Heseltine) about being anxious to get the Bill before the House and passed as soon as may be.

Will the right hon. Gentleman explain why the Chief Sec- retary to the Treasury on television was able to give the cost of the nationalisation of the shipbuilding and aerospace industries, a figure which he was quite unwilling and unable to give to this House? Is not that an affront to the principles of the sovereignty of and accountability to Parliament? Will the right hon. Gentleman confirm that the figure of £300 million is correct?

Steel Industry (Investment)

7.

asked the Secretary of State for Industry if he will use the Industry Act 1972, or other means at his disposal, to ensure adequate investment in the special steels industry in Sheffield.

I am prepared to use the powers available to me to help desirable investment in the special steels industry in Sheffield, and I and my Department will study carefully any schemes submitted.

I am not quite certain whether my right hon. Friend qualifies as First Witch, Second Witch or Third Witch in the eyes of the ex-Leader of the Opposition. However, he can console himself with the reflection that all three witches prognosticated exactly what would happen—

Yes, Mr. Speaker. My question is this: is my right hon. Friend aware that Sheffield would welcome an assurance that we shall have adequate investment in the steel industry under the Industry Act or in some other way? Is he also aware that there was considerable resentment at the interference of the European Commission when the Jessel empire collapsed?

I am aware both of the feelings that my hon. Friend has expressed and of the anxieties which exist in Sheffield, and I hope that what I have been able to say will be some reassurance.

Will the right hon. Gentleman take this opportunity of confirming that the private special steel sector in Sheffield has an outstandingly good record, as to profit, employment and its general success in contributing to our economy? Will he confirm that the Government see this as a very important part of the steel industry and that he will, therefore, wish to leave it intact and untouched?

I said nothing critical of the private sector. There are no significant projects being examined from the private sector in Sheffield at present.

May I draw my right hon. Friend's attention to the fact that there are now reports that 10,000 people are to be laid off in the Welsh steel industry? How far is this difficulty related to the vast quantities of steel being imported into Britain from the Continent? Under the Common Market regulations, what, if anything, can my right hon. Friend do about this?

I understand the anxieties that my hon. Friend has expressed, but it really is another question.

How does the Secretary of State think that there will be any major investment projects coming forward in the steel sector when management see his ambiguous statements about the future of the industry? How can this help the present situation when management also sees the thoroughly unsatisfactory terms he has produced for the shipbuilding and aerospace industries? How can it give management in other industries which might be threatened any confidence to invest?

The hon. Gentleman knows that the problem of investment is difficult, and has been so under all Governments. Under his own Conservative Government there was a major collapse in investment. That is one reason, as the hon. Gentleman knows very well, why we are bringing forward proposals, through the NEB and planning agreements, and an amendment to the Industry Act, to increase investment by direct methods, because the private system for stimulating investment has not met the nation's requirements under any Government.

17.

asked the Secretary of State for Industry for what purpose he wishes to control investment in the independent steel sector.

To ensure that future development of the United Kingdom steel industry as a whole is well-balanced and coherent.

Is the hon. Gentleman aware that last year the British Steel Corporation's production was 4 million tons below its rated capacity? We are moving into a period of serious recession in the demand for steel. In this situation, is it not madness to try to inhibit private investment, which will provide employment and help to provide steel which is still required in some sectors of our engineering industry?

We are not inhibiting investment; we are ensuring the proper overall use of scarce resources. In the instance of cosmex of which the hon. Gentleman will be aware, there were great difficulties, which neither the European Commission nor the Government, who viewed the future with concern, were able to unravel. That is why proper control over investment to ensure that scarce scrap is properly used is still necessary.

Will my hon. Friend give an assurance that the limited supplies of scrap will be used in new electric are furnaces in Scotland, and will he further assure us that the direct reduction plant needed to supply existing electric are furnaces in the private sector will also be placed in Scotland?

I should like to be able to give those assurances, but the point remains that under the European Communities Act we lost the power that was vested in the Government under Section 15 of the Iron and Steel Act 1967. That would have enabled me to give the assurance my hon. Friend wants, but I cannot now give it to him.

If the public sector is falling down on the job again, particularly on this vital question of investment, about which the Secretary of State has been saying it has a deplorable record, why should not the private sector be free to get on with the job?

We are not stopping the private sector from geting on with the job. What we are concerned to ensure, if we have the power, is a combination of the operations in the public and private sectors to the maximum national interest.

Manufacturing Investment

9.

asked the Secretary of State for Industry what estimate he has made of the level of investment in manufacturing industry over the next year.

The intentions inquiry carried out by my Department in November/December 1974 indicated that the volume of investment in manufacturing industry in 1975 would be 7 per cent. to 10 per cent. lower than the level then expected for 1974.

Will the Secretary of State tell us whether it is the Government's opinion that the level of investment in manufacturing industry is likely to he enhanced if we remain a member of the Common Market rather than if we leave? If he has difficulty in answering that question, to whom should I address it?

The hon. Gentleman knows that the investment performance of this country has not improved in the last two years and three months. He must also know that our failure to invest on a scale comparable with that achieved by our competitors over 10 years or more is the basis of many of the problems facing Britain, including our current inflation and unemployment levels. The hon. Gentleman should therefore welcome the Government's proposals, through the NEB and planning agreements, to get investment up by direct methods, which is what we intend to do.

When does my right hon. Friend expect to announce the level of investment in British Leyland? If something is not done soon, from what I am told by people at plants in the Midlands, the company and its morale are sinking so fast that we shall have nothing to invest in.

I am aware of that situation. There is another Question on that matter today. Without anticipating that Question, I am hoping to make a statement to the House on that subject as soon as possible.

Will the Secretary of State now answer the question put to him by my hon. Friend the Member for St. Marylebone (Mr. Baker)? Will he at the same time explain why the Chancellor of the Exchequer last week gave figures for investment which had been revised since the last Budget, but which he apparently has not revised since last November? Are the right hon. Gentleman and his Department now able only to provide information about investment intentions taken in a survey dated last November? Is that the latest information that he has? If he has later information, why not make it available to the House when requested to do so by my hon. Friend?

I shall do my best to answer the hon. Gentleman's question. The figures which I gave were for November-December. The next figures are due, I understand, on 9th June, and on 13th May the CBI figures will be available. I have given the House the latest information available to me. However, the hon. Gentleman will be encouraged to know that the rather gloomy forecasts of investment which were made last year were less serious than the outturn, as it transpired.

Must not the level of investment, in the end, always depend on the return which the person who lends the money is likely to receive? Have the Government any plans, either by taxation reduction or at least by removing dividend restraint, to increase that return? If that return is not increased, it will incite people to buy Krugerrands or to put their money into port wine or antiques, instead of industry, where they should get a return.

Lord Barber's experience in attempting to follow the hon. Gentleman's advice was so unsatisfactory that we do not intend to repeat it.

West Stirlingshire

10.

asked the Secretary of State for Industry what steps he is taking to locate industry in West Stirlingshire.

Since I met my hon. Frend in February to discuss the problems arising from textile industry closures in his constituency, my officials have continued their efforts to find new occupants for the factory space which has become available. I am glad to say that a tenant has been found for half of the Kilsyth factory

I thank my hon. Friend for his efforts. Will he continue to give urgent attention to the need to attract industries to West Stirlingshire, particularly to the advance factories which are lying empty in Denny and Kilsyth, because unemployment figures there are abnormally high even by Scotland's standards? Will he also comment on the claim by John Collier Limited that it had to close its Denny factory because it could not afford to keep it going, and yet it has opened up business in West Germany? Is not that a clear case of Common Market membership acting against the best interests of workers in this country?

I know that arrangements are being made for a meeting between officials of my Department and the town clerk of Denny to discuss unemployment in the Denny area. I hope that my hon. Friend will be able to take part in those discussions.

The second part of my hon. Friend's supplementary question is another question altogether.

Does the hon. Gentleman agree that the Budget introduced last week will do nothing to help industrial expansion in West Stirlingshire in particular and in Scotland in general and that the only way that industry can be expanded is by the creation of a Scottish Government which will set in train plans for industrial expansion in Scotland and reduce unemployment to Norwegian levels —that is, to less than 1 per cent.?

I would rather have the present Chancellor of the Exchequer looking after Scotland's affairs than the hon. Gentleman and some of his hon. Friends. During the last year we have doubled regional employment premiums and given specific help by way of controlled IDCs. In my view, the NEB will help throughout the country as a whole, and the Scottish Development Agency will be a great spur to Scottish industry.

Meriden Co-Operative

11.

asked the Secretary of State for Industry whether he will make a further statement on production at the Triumph motor cycle co-operative at Meriden.

As my hon. Friend knows, the Meriden co-operative commenced operations on 10th March. As with any other limited liability company the responsibility for its affairs rests with its management.

Does my right hon. Friend accept that this undertaking is capable of making a substantial contribution to Britain's export performance? Does he also accept that the performance of the undertaking so far shows that workers ought to be given an important part to play in the management of the place where they work?

Obviously I agree with what my hon. Friend said. I have had the opportunity of visiting the factory, both during the period when the workers were campaigning for their establishment and since. Anybody who visits a factory like the one at Meriden where the people concerned are running their own affairs is bound to be struck by the dedication which they show to their work. I notice that tonight in a BBC television programme they will have the opportunity of talking about it themselves. I wish that many hon. Gentlemen opposite who criticise the co-operatives would go and see it for themselves.

The right hon. Gentleman has twice said that £4·95 million represents the ceiling of the Government's financial commitment towards Meriden. Will he undertake that during the present financial year there will be no further call on public funds either from Meriden or Norton Villiers Triumph?

Industry Bill

13.

asked the Secretary of State for Industry how many companies have contacted him regarding the effects of proposed legislation on the Industry Bill.

Can the hon. Gentleman say how many were in favour of the proposed legislation?

The number that I have received represents 0·03 per cent. of companies on the Companies House Register. I should not care to say whether this was a concerted propaganda effort, but many of the letters were identical.

As regards the Industry Bill, does my hon. Friend recall that in Standing Committee an amendment of mine seeking to strengthen the National Enterprise Board by giving it powers to raise stock and therefore increase its financial resources received widespread Labour back bench and, indeed, Liberal support? He assured us then—can he repeat it now?—that the Government will take this seriously, despite the fact that the Tories voted against it on that occasion.

My hon. Friend is right in his record of the proceedings. I said then that the Government. having listened carefully to the debate, would return to this matter on Report, and that is what we propose to do.

Did these companies follow up their hostility by underlining it with the pledge that they would never seek financial assistance from the National Enterprise Board?

Steel Industry

14.

asked the Secretary of State for Industry what views he has received from the British Steel Corporation about the desirability of Great Britain remaining in the European Economic Community.

I understand that the chairman and corporation take the view that it would benefit substantially from continued United Kingdom membership of the ECSC.

I am grateful to the Minister for that reply. Can he say, in the event of Britain's leaving the Community, what would happen to the substantial loans which have been allotted by the Community to the British steel industry, amounting, according to my information, to £94 million at favourable rates of interest? Would they have to be repaid?

That would fall for consideration by the Government after the vote. The amount of the United Kingdom's gross contribution to the Community greatly exceeds receipts.

I appreciate that the Minister's original answer to the Question will then have been approved by the Foreign Office. Can he assure us that the supplementary answer was, too?

I have nothing to add to the speeches made by my right hon. Friend the Member for Bristol, South-East in other parts of the country.

Planning Agreements

15.

asked the Secretary of State for Industry what representations he has received from the Trades Union Congress concerning the planning agreement provisions of the Industry Bill.

I have had a number of valuable exchanges of view with the TUC on many aspects of the Industry Bill, including the question of planning agreements.

Does the right hon. Gentleman agree with the Prime Minister that planning agreements should be voluntary, or does he agree with the element in the TUC and the Tribune Group who think that they should be compulsory?

As I proposed and moved the proposal that planning agreements should be on a voluntary basis, I think that the hon. Gentleman's question does not arise. There has never been any proposal by a Minister of this Government that planning agreements should be compulsory, partly because we do not want to repeat the folly of the Industrial Relations Act and send industrialists to Pentonville.

As the right hon. Gentleman said, in his White Paper, that the compulsory powers would be restricted to information required for planning agreements, will he amend the Bill according to the Prime Minister's commitment so that it and the White Paper are identical?

During the debate on the Industry Bill certain Labour Members said that they would examine the planning agreements and see whether they were satisfactory from the point of view of the unions and workers and perhaps take industrial action against the company concerned if they were not. Does the right hon. Gentleman feel that that would be a satisfactory or an unsatisfactory way of operating these planning agreements?

I think the House knows that we have always taken the view that the extension of collective bargaining to include the future prospects of a company, including its investment, exports, and so on, would be in the interests both of British industry as a whole and of those who invest their lives in industry. Therefore, if it is argued that trade unionists would want to widen the range of collective bargaining to include subjects that would be in planning agreements, the whole nation would gain from it.

asked the Secretary of State for Industry what representations lie has received to make planning agreements with the National Enterprise Board compulsory.

None, Sir. There will be no planning agreement between the Government and the NEB, or between the NEB and companies.

I am grateful to the hon. Gentleman for that answer because there is so little in the Bill about planning agreements, compared with no less than three pages in the White Paper. Will he give the House and myself an assurance that a planning agreement entered into will not necessarily lead to a move by the National Enterprise Board for a State take-over of a company?

We have not reached Clause 14 of the Bill, which concerns planning agreements, but I give the hon. Gentleman an assurance, as I have already done in Committee, that information gleaned by the Government from planning agreements will not be used to give the NEB any commercial privilege advantage.

Can the hon. Gentleman confirm that information gleaned under planning agreements or disclosure will be kept a little more confidentially than it is alleged the Ryder Report has been?

The hon. Gentleman is unwise if he believes everything that he reads in the newspapers. He can form his own conclusions about the leakage of the Ryder Report, but there is no truth in the suggestion that it has been leaked to the Press.

I have already made clear that no planning agreements will be entered into by the NEB. The hon. Gentleman should have listened to my answer to an earlier Question. I assure him that NEB-controlled companies will. if they are chosen, and if they are agreeable, enter into planning agreements with the Government, and Scottish companies will in no way be excluded.

European Community

19.

asked the Secretary of State for Industry if he will list the limitations which will be imposed on the Government's domestic policies for British industry by continued United Kingdom membership of the European Economic Community.

Our industrial policies would continue to be subject to the relevant provisions of the Rome Treaty, in particular the rules relating to competition which apply to undertakings and to State aids to industry. The Treaty of Paris would continue to apply to the coal and steel industries.

There is ample evidence that the public are terrified of the actions taken in respect of Government policies, including that for industry, and the Secretary of State's own extraordinary ideas about the future development of British industry. Should not the right hon. Gentleman keep quiet about this so-called disadvantage, lest millions of additional voters seize this as an additional reason to vote "Yes" in the referendum?

I do not know why the hon. Gentleman is interested in the referendum, since the Deputy Leader of the Conservative Party has made it clear that he and his party do not care a bit what the British public think if they vote to leave the Common Market.

Has my right hon. Friend seen the latest documents from Brussels concerning regional aid, which state that assistance to industries within central areas will be under the Commission's constant review? Does not the use of such a phrase suggest that the Commission would dissuade and eventually prohibit assistance from the State to industry if it went beyond the amount which the Commission agreed was desirable?

I do not think I can add to what the Prime Minister, the Foreign Secretary and other Ministers have said about the reasons for the Government's decision. As for the rest, it is a matter upon which each of us must form his own view.

As the Minister responsible for industry in the House, will the right hon. Gentleman please tell the House how much quantification he can make of the limitations carried out by Brussels, since he has been responsible for British industrial policy?

I have given the best answer I can give. I gave a very full answer to the original Question. The hon. Gentleman will know well that any Government will formulate policies with treaty obligations in mind. Therefore, that does not bear on the question whether the treaty obligations should or should not be continued in operation. The hon. Gentleman had better make clear to the House now whether he is prepared to accept the view of the British people on this matter on 5th June. Until the House of Commons knows whether the hon. Gentleman is going to take any notice of the British people, his questions are an insult to the British electorate.

23.

asked the Secretary of State for Industry what consultations he has had with leading British companies on the effect on their expansion programmes of withdrawal from the Common Market.

I and my Department have received views from many companies and bodies representative of British Indus- try on this and other matters relating to membership of the Common Market.

As the EEC takes 33 per cent. of our exports and we take only about 7 per cent. of it exports, is it not clear that our manufacturers rely far more heavily on EEC markets than they on us? Has the Secretary of State a shred of evidence that if we leave the EEC we will be able to negotiate a free trade agreement on terms anything like as good as those available to us as a member of the EEC?

This country is a very good market indeed for the other member countries of the EEC. I have yet to see a very good customer being kicked in the teeth by suppliers. It is quite fair that this argument should be discussed as part of the referendum campaign, on which the Government's view is quite clear.

Has my right hon. Friend tried to estimate the consequent job loss to areas of high unemployment like my own as a result of a down-turn in investment intentions following withdrawal from the EEC?

I certainly hope that whether we leave the EEC or stay in we shall do better, in investment terms, than we have in our first two years within the Community, and that, whether we come out or stay in, we should do a great deal better in our trade with other Community countries. If only it were possible to get the debate upon these matters set against a background of many years of industrial decline in Britain, some of the rather silly scare tactics that are being used by hon. Members opposite would not be relevant.

Will the Secretary of State now answer a direct question which he has been asked on several occasions this afternoon? Does he or does he not agree with his right hon. Friend the Prime Minister that investment will fall if we withdraw from the EEC?

The hon. Gentleman should not feign surprise or confusion. He knows very well that the Government and the Cabinet have agreed to differ in their assessment of this matter and that we believe that agreeing to differ on arguments, but being willing to accept the verdict of the people, is better than a monolithic unity and an absolute contempt for the opinions of the public.

Does my right hon. Friend agree that before we joined the Common Market we were told that it would be disastrous if we did not join, and that now we are in we are told that it would be disastrous if we left it? The two most disastrous years for British industry have been those while we have been in the Common Market.

Without being drawn into a wider discussion of this matter, I thank God that we have handed this matter to the British people, in whose common sense I have great confidence.

Is the right hon. Gentleman not aware that we fully understand that Ministers have agreed to disagree on the matter of the referendum? Is he further aware that arrangements have been made so that when Questions are put to a Minister and he is unable to give answers in terms of Government policy the Questions are transferred? Does he not agree that he has consistently refused to answer, or has given misleading answers by way of supplementary questions this afternoon, which has consistently frustrated the guidelines of the Prime Minister?

The Cabinet guidelines would not be best interpreted by the hon. Gentleman. He will notice that every one of my answers has faithfully reflected the Government's view that it would be in the interests of this country to remain within the Community as a result of the vote on 5th June. That has been made absolutely clear in all my answers. I would rather have an agreement to disagree on the merits than have a pledge to confront the British public, whatever they think on the Common Market.

Motor Industry

20.

asked the Secretary of State for Industry what information he has as to the effect on overseas investment in the British motor industry if Great Britain withdrew from the EEC.

I am aware that the British motor industry considers Europe to be an important market in any circumstances. The effect of withdrawal on inward invest- ment would depend on the terms of continued access to that market.

Is not the certainty of being able to sell in a large tariff-free market essential for this industry, in view of the enormous and increasing costs that motor manufacturers have to bear before new models go into production? Is not the right hon. Gentleman aware that there is no similar parallel large tariff-free market?

The hon. Gentleman must also appreciate that the British motor industry includes those who work in the industry, as represented by the trade union movement, which, in many important respects in that industry, takes a contrary view. The hon. Gentleman must not argue that the tariff arrangements that may be reached with any country or group of countries are necessarily in-separable from political links as tight as are involved in membership of the EEC. That is a quite different argument, which does not arise under the Question tabled.

I shall try to help the Minister, if he will let me. Is not the greatest threat to further overseas investment in the British motor car industry the prohibition and nationalisation orders which he is proposing in the Industry Bill? That is the real threat to further overseas investment.

I cannot accept that the difficulties experienced by, for example, the Chrysler company in this country are attributable to policies that the Labour Government have adopted. Neither, indeed, would any objective observer think that the problems of Volkswagen, Citrën and other world-wide companies in the motor industry could all be attributed, as the hon. Gentleman would like to attribute them, to the policies of the Labour Government in London. It is a nice thought, but it has no relation to reality.

Postal Charges (Books And Printed Matter)

22.

asked the Secretary of State for Industry how much revenue was received by the Post Office in the past financial year from charges on the postage of books and printed matter to Commonwealth countries.

The information as requested is not available, but for overseas surface printed papers as a whole the revenue for 1974–75 is estimated, on the basis of 10 months' figures, at between £13 million and £14 million.

Is my hon. Friend aware of the damaging effect of the increase in these charges in postal rates for printed matter and for books? Is he aware that the charges have risen by about 167 per cent.? Will he confirm that another increase is in the pipeline? Is he aware that books and periodicals—and, indeed, advertising material—are a means whereby information about this country and the influence of this country can be spread to overseas countries? Therefore, will not this increase have a very damaging effect on Britain's influence world wide and, indeed, affect our future chances for exports in world markets?

I appreciate my hon. Friend's concern in these matters. After considerable discussion of the original proposals submitted by the Post Office, it has been decided that there will be no abatement. The increased charges will not take effect until the early part of next year. I am conscious of the representations made to me by the trade, but there can be no question of subsidy by the Post Office to any other industry.

What views have been collected by the Secretary of State for Trade as to the detrimental effect on exports of this section of the price increases by the Post Office?

I know that the trade consulted my hon. Friend the Under-Secretary of State, as it consulted me, but the overriding consideration must be for the Post Office. The Post Office cannot go out of its way to subsidise any other industry. We have lived for a very long time under the shadow of large deficits. We cannot continue in that way much longer.

What is the hon. Gentleman's estimate of the likely decrease in traffic as a result of the increased charges both in this field and in the more general postal one, particularly bearing in mind the evidence that even local authorities have now adopted hand delivery of their rate demands?

That is quite another matter. I remind the hon. Gentleman, although I should not need to remind him above all other Members in the House, that the Universal Postal Union has made its recommendations, which will apply to all these countries.

Manslaughter

40.

asked the Attorney-General whether, in a case in which a coroner's jury has returned a verdict of manslaughter and magistrates have subsequently been satisfied by the evidence so as to commit a defendant for trial on that charge, he will instruct the Director of Public Prosecutions to cause a full explanation for offering no evidence to be given at the trial.

In any trial in which counsel instructed by the Director of Public Prosecutions proposes to offer no evidence, it is the practice to explain to the court why such a course of action is justified, and the court has full opportunity to probe the matter further. I am not aware of any case in which this practice has not been followed.

Is the right hon. and learned Gentleman aware that a young constituent of mine named Adam Grier died in hospital last year and that two tribunals subsequently decided that it was a case of manslaughter? Yet, at the trial, prosecuting counsel—against whom I make no criticism—bypassing the function of judge and jury, said that he offered no evidence. Does the Attorney-General know that the judge in that case said that the cause of death remained a mystery? In those circumstances, does he not feel that the public requires a fuller explanation of the reasons why no evidence is offered in a case of that kind, where there is so much public mistrust and disquiet—if only to avoid the charge of a cover-up?

I know the case to which the hon. Gentleman refers and I have looked into it very carefully. I have read the opinion of counsel and also the proceedings before the learned judge. It was a case which depended very much on highly technical medical factors, and counsel gave what seemed to me to be a very clear opinion. They certainly put the matter carefully before the learned judge. The learned judge had the opportunity, which he took, to probe the matter and was, as I read the transcript, satisfied with the evidence

Legal Costs

41.

asked the Attorney-General if he will seek to amend existing legislation to enable a successful claimant to be awarded full costs when claiming amounts less than £75.

No, Sir. The provision by county court rule that costs shall not normally be recoverable where the claim does not exceed £75 is necessary in order to enable a litigant in person to bring or defend county court proceedings without fear of incurring high legal costs if he loses. It is an integral part of the new small claims procedure which has been running with considerable success since its introduction in October 1973.

Is the right hon. And learned Gentleman aware that in one case brought to my attention the costs Mr. Steel: Is the right hon. and learned Gentleman aware that in one case brought to my attention the costs of pursuing a claim successfully exceeded the claim that was gained by the pursuer? Surely there is no point in people pressing their claims in court if such claims are going to cost them more than they will get in doing so successfully.

There are, of course, bound to be difficulties about a situation in which no costs are normally allowed. However, the registrar, under the order, has a discretion to award costs in certain cases, particularly when an important question of law or fact arises. In the end we have to decide whether cases of this kind, which involve comparatively small sums, should be available to be litigated at all, inasmuch as they will not he if plaintiffs are afraid that they will be called upon to pay high costs if they lose.

County Courts

43.

asked the Attorney-General if he will make a statement on the progress of the discussions being held by the Lord Chancellor's Department concerning the restructuring of county courts.

My noble Friend has asked his circuit administrators to carry out a review of the number and location of the county courts in each circuit. The circuit administrators are now engaged in consultations with local bodies. On completion of these they will submit their recommendations to my noble Friend.

I thank my right hon. and learned Friend for that answer. W ill he give an assurance that he will use his influence to resist any proposals from the circuit administrators which will make the county courts more remote and access to them more difficult? Does he agree that any action on those lines would tend to destroy the good work done to make access to the county courts easier for most people and, in particular, will he seek the views of local people involved before he agrees to any proposals which will abolish county court districts?

I think I can give my hon. Friend reassurance on those matters. The review is the necessary consequence of changes in local government boundaries brought about by the Local Government Act 1972, and one of the primary factors being considered is—as it must be—convenience to the public. I am sure that all those who are in any way concerned with the matter will be consulted.

I am sure the House will be very glad to have heard the right hon. and learned Gentleman's assurance that the convenience of the public will be a high priority in this consideration. All too often, as he knows, administrative convenience tends to come first. Will the right hon. and learned Gentleman tell the House what area of consultation is proposed? It is important, if the convenience of the public is to be considered, for consultation to be on a very wide basis. Has the right hon. and learned Gentleman any idea when we shall receive a report upon these matters?

I do not think I can go beyond the answer which I have already given—that all those who have a contribution to make towards a decision in this matter are being considered by my noble Friend. That will be, and indeed is, very much on the basis of convenience to the public as a major priority. I am afraid I cannot tell the hon. and learned Gentleman offhand when this review is expected to be completed, but I shall certainly make further inquiries and give the best estimate I can, in letter form.

Legal Aid

44.

asked the Attorney-General when the White Report into the need for an extension of legal aid will be presented; and whether it will be published.

It is expected that before the end of the summer my noble Friend will have received advice from those of his officials who are at present urgently studying the nature and extent of the need for legal services which is not now being met. My noble Friend will study that advice and consider in what form the conclusions he reaches can best be communicated to hon. Members.

I thank the right hon. and learned Gentleman for that reply, but will he indicate whether he is prepared to undertake that review before he gets the White Paper? Is that what he is telling the House?

I think there is some misunderstanding here. In his Question the hon. and learned Gentleman refers to the White Report. Mr. White, is, in fact, now a member of the Department of my noble Friend, and therefore the matters that will come before my noble Friend will be very much influenced by the thinking of Mr. White, but he will in practice be receiving advice, as he does in other matters.

Does the Attorney-General recall that it was in November last year that the Lord Chancellor's Advisory Committee recommended the extension of legal aid to all sorts of tribunals? Will the right hon. and learned Gentleman persuade his Department to get a move on in implementing those recommendations?

I have already said that it is hoped that the advice which is being collated will be available before the end of the summer. As I have said on an earlier occasion in answer to previous Questions on a similar subject, there are a great many priorities for the extension of legal aid or the provision of legal services where there is a need for it. They have all to be looked at together, and that is what my noble Friend will do as soon as he receives his advice.

Will my right hon. and learned Friend assure the House that he will be prepared to undertake an investigation into charges levied by solicitors and barristers on litigants? Is he aware that many people cannot afford to be represented in court appearances and that this is due largely to the excessive charges which the legal Mafia is able to levy?

My hon. Friend is in a much better position to speak about the legal Mafia than I am, because I have not met any members of it. I assure him that the whole purpose of legal aid and of the inquiries now going on into better satisfying the need for legal services, which undoubtedly exists, will be directed to the problem which he has posed.

Is my right hon. and learned Friend aware that many cases coming before the courts are never properly heard, because of the lack of legal aid? Will he give this matter his personal attention?

That is one of the factors—and there are many—which my noble Friend has under constant review and which this special study will deal with in one form or another.

Questions To Ministers

On a point of order, Mr. Speaker. It will be within your recollection that the Prime Minister has said that Answers to Questions on the EEC have to be cleared with the Foreign Office, and if the Minister responsible does not like the Answers, the Questions are to be transferred. Unsatisfactory though that arrangement is, I am sure that the House understands and accepts it.

However, this afternoon we had many supplementary questions arising out of Questions on the EEC, and in one case—Question No. 9—the Minister refused to answer the supplementary question. In four other cases—on Questions Nos. 14, 19, 20 and 23—he gave substantive answers. The difficulty for the House is that we do not know whether those answers have been cleared with the Foreign Office or whether they represent a partisan view on the part of the Minister concerned. I respectfully submit—

Order. I have not yet had any indication of how the Chair comes into this.

I was coming to that, Mr. Speaker. The difficulty is that hon. Members are receiving answers but they do not know whether they would have received those answers if the Questions had been transferred after reference to the Foreign Office. I submit. Sir, that this puts hon. Members in an impossible position. Would it be possible for you to refer the whole matter to the Procedure Committee for study, since there is no point in our asking questions which are not to receive replies expressing the policy of the Government in these matters? The purpose of Question Time is to ask the Government to state or explain their policy, and if we are not sure whether we receive their policy or the policy of the Minister in his individual capacity we are in a hopeless position. I submit that it would be better, Mr. Speaker, if you ruled out of order all supplementary questions of this nature unless the matter can be cleared up to the satisfaction of all.

Further to that point of order, Mr. Speaker. I support my hon. Friend's suggestion that you should rule out of order all supplementary questions on these matters in order that there may be no confusion. On 7th April—this is to be found in Written Answers at col. 351 of Hansard—the Prime Minister said that Ministers "will state the Government's position". On several occasions today, however, the right hon. Gentleman the Secretary of State for Industry refused flatly to state the Government's position. I submit, Mr. Speaker, that it would be far better if you ruled out of order the whole of this farce until the right hon. Gentleman follows the example of his more honourable Friend and gets himself the sack.

Further to that point of order, Mr. Speaker. It was on my Question No. 9 that the Secretary of State declined to answer when I asked for the Government's estimate of the level of manufacturing investment should we leave the Common Market, and later in reply to other supplementary questions the right hon. Gentleman indicated quite openly that he had a split personality, on some occasions replying as the Secretary of State for Industry and on others as the right hon. Member for Bristol, South-East. Our difficulty, Mr. Speaker, is to know where this split personality runs, and which twin has the Toni.

Further to that point of order, Mr. Speaker. Would it be in order, first, for me to establish that I did not clear my supplementary answers with the Foreign Secretary? In fairness to him, I think that I should say that. Second, is it not clear that the whole of this row is designed to cover up the embarrassment of the Deputy Leader of the Opposition because the Conservative Opposition will take no notice of the referendum? That is what the whole thing is about.

Order. By about a whisker, the submission comes within the terms of a point of order, there being a suggestion that I should rule supplementary questions out of order. I shall consider that.

Question Of Privilege

With your permission, Mr. Speaker, and that of the House, I wish to raise with you a matter which, I submit, constitutes a prima facie breach of privilege and an attempt to harass me in and deter me from the execution of my parliamentary duty. Indeed, the complaint I make is that the breach to which I shall refer amounts virtually to blackmail in that it seeks, under the threat of legal action, to cause me to retract certain allegations and comments which it is alleged that I have made. Were I to accede to that threat, I could not then in good faith supply to a Minister information pursuant to a reply on 16th April this year which that Minister has requested.

The history of the matter is this. I asked a number of Questions, and replies thereto have been given, on 5th March, 10th March and 16th April concerning the activities of a body which uses seven different names, these names ranging from God's Light Infantry to the International Federation for Victory over Communism, but which is commonly known under the title of the Unification Church. After tabling the latest of those Questions, I was telephoned by the Press on Sunday 13th April, and numerous newspapers have sought to contact me. Without prejudice to whether or not I made certain of the allegations or comments—some of which are entirely unknown to me and some of which, indeed, pre-date the conversations—I explained to those who had reason to ask why I had tabled the last of my Questions; namely, the one replied to by my hon. Friend the Minister of State at the Department of Health and Social Security, the Question referring to medical remedies and techniques of persuasion, all the evidence about which is available to the Minister and is in my possession in this file, as well as in the possession of the courts. I have today received a letter from a solicitor purporting to act on behalf of this body, which invites me to let him have by Tuesday next—that is, tomorrow —not later than noon,
"a full apology and retraction of all the above mentioned allegations or comments; your agreement to pay our clients' indemnity costs; and your proposals for compensating our clients for the serious damage done to them by your statement.
"If we do not receive a satisfactory reply by noon of Tuesday, we shall institute proceedings against you on Tuesday afternoon, 22nd April."
Although the threat is nominally confined to articles appearing in the Press—one of which, as I say, pre-dated the matters complained of by four days—I submit that there is none the less a clear breach of privilege here and an attempt to restrict my freedom of action in a number of ways in carrying out my duties in Parliament and also outside Parliament in fulfilling my duties which flow from membership of the House of Commons. In respect of Parliamentary Questions, there is absolute privilege, and a retraction in the terms demanded would, in effect, prevent me from pursuing matters already raised or, indeed, future matters such as the conviction of a member of that organisation last week and the threat made by the leader of it to the prosecuting solicitor at proceedings last week.

In respect of comments outside the House and reported in the Press arising from the Parliamentary Questions, I maintain that the threat prevents my explaining my actions in the House and carrying out the activities necessary both to obtain information and to supply information to the Minister who has an interest in this matter and that I have a duty so to do.

I refer to The Times Law Reports of 10th February 1971. in which is reported a case which is well known to you. Mr. Speaker, concerning my hon. Friend the then Member for Willesden, East (Mr. Freeson), in which Mr. Justice Lane said:
"It would be a sad day when a Member of Parliament or where any other member of the public had to look over his shoulder before ventilating to the proper authority criticism about the work of a public servant or of a professional man who was holding himself out in practice for the benefit of the public which he honestly believed to be true."
In my submission, the same is true by analogy in respect of an organisation in this case holding itself out to be an authority and which sells goods—this is admitted in the letter—commercially. It similarly admits the marketing of a certain beverage for which extravagant claims are made in respect of its effect on cancer.

My submission is, therefore, that the letter and the threats contained therein are, first, an attempt to prejudice the out-come of the consideration of a Parliamentary Question requesting an invesigation by the Department of Health and Social Security into this body. Secondly, they are an attempt to prevent my exercising my duties in Parliament in supplying such information; and, thirdly, outside Parliament in obtaining such information. Fourthly, they are an attempt to prevent my speaking to the Press in order to clarify the nature of the allegation in the Parliamentary Question.

The body concerned, which has many millions of pounds—it is run by a multimillionaire—threatens an individual Member of Parliament who has not individual resources to match it. That is a threat to the freedom and integrity of a Member of Parliament and the Press and a gross and flagrant violation of parliamentary privilege.

Copy of letter handed in.

Bill Presented

Hearing Aid Council (Extension)

Mr. Gerard Fitt, supported by Dr. M. S. Miller, Mr. A. W. Stallard, Mr. Jack Ashley, Mr. Kevin McNamara, Mrs. Helen Hayman, Mr. Norman Miscampbell, Mr. Harold McCusker, and Mr. Paul B. Rose, presented a Bill to extend the Hearing Aid Council Act 1968 to Northern Ireland: and the same was read the first time; and ordered to be read a Second time upon Friday next and to be printed [Bill 142].

Orders Of The Day

Ways And Means

Order read for resuming adjourned debate on Question [15th April],

Amendment Of The Law

That it is expedient to amend the Law with respect to the National Debt and the public revenue and to make further provision in connection with finance; but—

  • (a) this Resolution does not extend to the making of amendments with respect to capital transfer tax or estate duty; and
  • (b) without prejudice to any authorization by virtue of any Resolution relating to value added tax, this Resolution does not extend to the making of amendments with respect to that tax so as to provide—
  • (i) for zero-rating or exempting any supply;
  • (ii) for refunding any amount of tax;
  • (iii) for varying any rate of tax otherwise than by varying the standard rate in relation to all supplies and importations on which tax is for the time being chargeable at that rate; or
  • (iv) for any relief other than relief applicable to goods of whatever description or services of whatever description.
  • Question again proposed.

    Budget Resolutions And Economic Situation

    I have selected the amendment in the name of the right hon. Lady the Leader of the Opposition to delete paragraph (a). I gather that it would be convenient for the hon. Gentleman who is winding up for the Opposition to move it at the end of his speech. Of course, the Chancellor of the Exchequer will not be precluded by that from dealing with the whole debate.

    3.45 p.m.

    The House has clearly been greatly concerned in these discussions by the inflationary treadmill on which the nation finds itself, and I hope that the House will allow me to divert a little from the detail to some of the central economic positions which have resulted in this unfortunate circumstance.

    In the whole of the post-war period we have had chronic inflation. I do not want to go too far back because of the limitations of time, but in 1970 inflation started to take off, and in 1972 it got really under way with a fast, sharp increase in commodity prices which was added to in 1974 by the spectacular increase in oil prices. It is difficult to be certain about what caused this sudden take-off from the chronic level of inflation, which at first used to cause great alarm to which we later became reconciled as long as it was kept to what we thought were manageable proportions. One factor which has been greatly underestimated is the failure of the world to evolve a satisfactory new monetary system leading to currency stability after Bretton Woods in its then state had out-lived its effectiveness. Whatever may be the reason, that massive inflation started, and from 1972 to 1974 we witnessed inflation throughout the industrial world at a level not seen before in the post-war period and rarely seen before in the history of the advanced countries of the world.

    The effect of the sharp increases in raw material prices—particularly the effect of the increase in oil prices—was asymmetrical. It produced price inflation but demand deflation. It reduced demand by sending up prices. Not surprisingly, wages responded to the rising prices. Not surprisingly, the Finance Ministers and Chancellors of the Exchequer of various countries found themselves in an insoluble dilemma. The remedies that they had for price inflation were poison to the demand deflation problem, and vice versa. Therefore, we watched a raging inflation in terms of prices but a demand which was by no means adequate to keep all our economies fully employed. So we had rising prices and a fall in employment, and that is why, as the Chancellor pointed out, in 1974 wage rates increased by much more than prices.

    In his Budget speech, the Chancellor said that wage rates, not take-home pay, were increasing much more than prices. Take-home pay in real terms has been stagnant in this country and in many other countries since 1972. So the situation is that wage rates are going up faster than the cost of living, net real earnings are not increasing and demand is inadequate to sustain full employment. That is the national reflection of the world situation in which the price jump acts as a deflator of demand and, on the other hand, increases the cost of living. It is well, however, to bear in mind that, although it would have helped greatly the fight against inflation if we could have kept wage rates below the rise in the cost of living, the demand effect would have been even greater and the real earnings of workers would have fallen quite sharply.

    In the present situation it is clear that the power of the Chancellor is limited, as is the ability of the trade union leaders and workers to accept wage increases lower than the rise in the cost of living, or even to feel enriched by wage increases which are greater than the rise in the cost of living, when demand is slackening throughout. The trouble is that no means exist by which individuals or groups can be faced with the aggregate effects of their demands, and as a result there is incongruity between the general will to share in an orderly way what is available in resources and the actual outcome.

    I do not want to seek to explain why we have managed in the past in some respects, though by no means in every respect, rather better with this problem. We have got on to a treadmill and have been pushed there dramatically by the rise in commodity prices and oil prices. We are now kept there by self-sustaining inflation caused by wage increases. This situation must be dealt with.

    It is difficult to say how we managed in earlier years. It is correct to say that in the past we did not manage in every respect in a better way because sometimes we paid a high price for our ability not to have to worry about inflation. It is as if we have been in a traffic system where the traffic was lighter in the past and when drivers drove more delicately. We have now a heavier weight of traffic with drivers moving at a much higher speed. It is obvious that we must find a solution which involves greater self-discipline, based on a greater awareness of our situation, than was the case in the past.

    We want to maintain full employment, but it is clear that, unless we reduce the rate of inflation, the search for higher money wages will threaten full employment—and indeed is already doing so. The importance of the social contract lies in the change of attitudes which it implies. That change of attitudes will mean that working people will seek voluntarily to make effective the general will which exists but which at the moment is not entirely in line with ultimate individual outcomes—[Interruption.]

    Conservative Members are entitled to have a laugh if they want one, but the Conservative Government were not startingly successful in handling industrial relations. They hardly left this country with a high rate of prosperity and contentment as a result of their various convolutions. They were elected on a pledge not to bring in a statutory incomes policy. They scrapped that pledge without very much advantage to our people. However, I agree that nobody on the Labour benches is entitled to claim that we have the magic answer to all these complex problems.

    There has also been a good deal of confusion about what is involved in the social contract. [HON. MEMBERS: "You can say that again"] What we ask for in that contract is not wage restraint but wage orderliness—that is to say, an attempt to produce a broad division of available resources and reasonable order, to the advantage of all, since we would gain nothing by a disorderly scramble for the limited resources which we have available. Nobody is asking working people to restrain their claims on society in real terms. What the Government are asking is that they sacrifice the shadow of monetary claims for the substance of real earnings which are compatible with the resources we have available.

    I know that Conservative Members enjoy a good laugh at the concept of the social contract. We are told that it is dead, and I shall deal with the matter a little more fully later in my remarks. But no Conservative has come forward with a very convincing alternative—and that applies to the Conservatives when in Government and even now when they have the freedom of comment in Opposition. They have not offered the electors a cogent reason for believing that a Conservative Government would offer solutions to our inflationary problems and the industrial problems that go with them.

    There are a number of cosmetic achievements in this area to which Con- servative Members can lay claim. We are constantly being offered solutions which involve monetarism. We are told that we should cut the MI monetary supply, or the M2 or the M5, which I think goes up to Scotland or Wales. I do not know what relevance these cuts have to the problem before us.

    We are also told to cut the public sector borrowing requirement and the public sector deficit as a solution to our inflationary problems. [HON. MEMBERS: "Hear, hear."] That may be relevant, but it is more relevant to the man in the street to know what the policies entail in terms of employment prospects and our standard of life.

    What, then, are the Tory so-called solutions? We are treated to statistical remedies. Somebody once said that statistics do not bleed. I could also add that statistics do not vote, and, therefore, Conservatives are a little timid in offering their views as to ways out of our problems. [Interruption.] I do not mind divisions of opinion in the Conservative Party on these matters. There have been divisions of opinion in the Labour Party on more difficult and tormenting questions. Even on matters which do not receive the same prominence in constitutional forms, in specialised areas, there can still be differences of opinion in the Labour Party.

    I think it must be said that nobody on the Labour benches is sure about Conservative policy on inflation and on industrial relations. Is a statutory policy still their hope or intention? The answer might be given in this debate by the right hon. Member for Leeds, North-East (Sir K. Joseph). Will the right hon. Gentleman be recounting his views on behalf of the whole of his guilty party on its ineffectual efforts at a statutory policy? On the question of monetarism I hope that he will help simple provincials in the Labour Party, such as myself, by telling us not what will be the statistical effect of monetary controls, but the real effects on the ground in language that employees will understand. I hope that he will tell my constituents what are his estimates of the number of unemployed that will be required, and for what length of time.

    I respect the right hon. Gentleman's integrity and courage. I do not believe that he will shrink from giving an answer. The trouble is that he does not know the answer, any more than I do, about how many unemployed would be involved in the monetary solutions he commends to us.

    Before the right hon. Gentleman proceeds to confuse us any more about monetarism, will he make clear one matter which he began to explore—namely, what the social contract means? He said that it did not mean wage restraint. Will he explain to a simple provincial, such as myself, whether the social contract does or does not involve some form of self-restraint and not use words such as "orderliness"? If he would make the matter clear to this House and to the people of this country, we might make some progress on the road which the Chancellor is seeking and, indeed, which the whole House is seeking.

    What it means—and we must not become engaged in a long semantic argument—is an apparent restraint of monetary demand. It is not an invitation to restraint in real terms. It is an attempt, while we are on our inflationary treadmill, to obtain apparent restraint in terms of the shadow of monetary claims. It is not, and never been, a demand to reduce in real terms. It is a demand to obtain for our working people, our industry and our community the substance and not the shadow.

    When the right hon. Gentleman talks about the concept of "real terms", does he mean that under his "orderly" social contract trade unionists should take into consideration the benefits of the social wage as well as of the real wage and, therefore, reduce their real wage if they are getting increases in their social wage?

    It would take into account the net resources available for wages after all expenditures, including defence, police forces, gaols, and other things which do not necessarily arouse the unqualified enthusiasm of every member of the community. This is one of the difficulties.

    Remarkable efforts have been made by many trade union leaders and by millions of work people on the concept of the social contract. Nevertheless, it has to be stated frankly that it has not worked welt enough to protect us from the rising inflation which we have experienced this year. What is more, it must work a great deal better if inflation is not to rise next year. That means not that we must discard it but that we must improve its effectiveness.

    I do not want to go into great detail on every point.

    We shall improve it by sitting down with the leaders of the working people of this country, the trade unions, and by making an appeal to ordinary people and employees to exercise greater monetary restraint in their claims with a view to enabling them to enjoy a higher standard of real earnings.

    The question I leave with the right hon. Gentleman in unmistakable terms is: what alternatives have we? I shall tell the House the only alternatives of which I know. The first is serious deflation of our economy and large-scale unemployment in an attempt to bring down the price level. The second is a statutory programme. These are alternatives, but neither of them is a permanent solution to our problem. They have both been tried. They were both tried by the Conservatives. They have both met with the same kind of difficulties as we find with the social contract.

    We intend to stick to the social contract because we believe that if we succeed in the principle behind it—broadly a voluntary agreement to bring aggregate monetary wages into broader approximation with the real resources available—we shall achieve a permanent and enduring solution to one of the central problems which beset not only the British economy but the economies of every advanced country. I hope that the House will reflect carefully before thinking of jettisoning or impeding this attempt, because hon. Members should bear in mind the alternatives and down what dangerous roads we may be taken in pursuing them.

    I do not propose to single out just one aspect of our affairs for unbalanced treatment, because one of the weaknesses of past Governments has been that they tended to focus on one aspect of our affairs and then suddenly switched so that all their attention was focused on the balance of payments, and the consideration of industrial and employment problems was sacrificed. Sometimes the balance of payments was ignored in the fight against unemployment. We have gone round in circles chasing our tails.

    We must learn to keep all the factors in mind in a comprehensive way when we deal with the problem. Unless all the factors in the governmental and public equation are kept in mind we cannot succeed. Otherwise we should be like a doctor who on one occasion treats a patient's leg and ignores his heart, head and arm and on another occasion treats his head to the detriment of his heart. We must keep the whole picture in mind, although we must inevitably focus from time to time on particular aspects of it.

    The main features I wish to comment on are public expenditure, private consumption, the balance of payments and the private enterprise sector. I shall try to cover the ground as briefly as possible.

    Public expenditure rightly has grown in real terms in recent years. It should be remembered that in a state of total barbarism there is no public sector. The achievement of no public expenditure is not one at which any of us should aim. Public expenditure has increased in a situation of inflation, for two reasons. First, public expenditure is normally budgeted for in real terms by both parties. Incidentally, it has increased in real and money terms under both parties, because both parties had budgeted for it in real terms. This is a dangerous habit which will have to be looked at again.

    There are two reasons why this is dangerous. First, public expenditure tends to be labour-intensive and, therefore, reflects more rapidly monetary inflation. Secondly, unlike expenditure in manufacturing industry, public expenditure does not have the mitigating factor of increasing productivity at most points to reduce the impact of the rising cost. This large increase in money terms in times of inflation call hardly be matched, unobtrusively, by higher taxes. If it is done obtrusively it tends to raise wages problems.

    Another problem of the constantly rising proportion of public expenditure has been drawn attention to by my right hon. Friend the Secretary of State for Industry. I am sorry that he has left the Chamber. I want to stress his words of wisdom—that we must pay more attention to keeping up the strength and labour force of manufacturing industry. Obviously, if every year there is a large drain of manpower into public service, however desirable, not surprisingly there will be difficulty in maintaining an adequate labour force in the manufacturing sector.

    The Chancellor was absolutely right to reduce at this stage the growth of public expenditure so as to make available the maximum real income to working people during this period of extreme pressure. I very much welcome the principle of public expenditure, but I cannot support a practice of giving it out m money terms beyond the resources available within the country. [HON. MEMBERS: "Hear, Hear"] That is the kind of statement that always arouses immense approbation from the Opposition, of whichever party it may be formed. However, it is the practice of the principle that I have just enunciated which both parties find more difficult when they are in office.

    Let us take a simple illustration. If resources are taken as 100 and if 80 of those resources have been pre-empted, as it were, by other aspects of our social demand before the Government expenditure comes in, and the Government want to finance 30 units of public expenditure, they can do so only if they recognise that they are using the engine of inflation to make room for the satisfaction of that demand. It will be difficult for the Government who make use of the engine of inflation, for however laudable a purpose, to give lectures to the working people which incline them to reduce their monetary claims. There are circumstances in which Governments have to do that. Let us suppose that 100 was claimed by all other sources than Government. The Government cannot abandon the defence of this country, the police force, and so on, because of that. They have to make room for public expenditure. Nevertheless, the public expenditure has to be tailored to our resources.

    The Chancellor of the Exchequer has planned cuts in resources. We can argue about where the cuts could have been or should have been made, but we all agree that they have to be made. The Chancellor is right in setting an example in doing it in an orderly way and in not seeking to do it abruptly. [Interruption.] Hon. Gentlemen opposite find this a source of merriment. We shall be here next year to supervise this. The cuts will be real.

    The Chancellor made it quite clear that, although he has dealt in this Budget with next year, that does not mean that in the year following—as the Chief Secretary made plain in his speech—there will not have to be the same rigorous examination of public expenditure.

    On the question of private consumption, the Chancellor of the Exchequer cannot reflate—and this is the only way in which he could increase private consumption and demand—without adding further to price inflation. Some temporary unemployment is inevitable, but my right hon. Friend has made it clear that his is not a policy of creating unemployment in order to lower inflation rates. He is preparing for what I am sure he is right in anticipating; namely, a very considerable increase in world trade next year. We must be ready for it, because it will offer us a tremendous opportunity of improving our employment prospects and our balance of payments without at the same time increasing the rate of inflation.

    Let me say a few words on the question of the balance of payments, which is one of the other factors which must be borne in mind. Most politicians give me the impression of having missed their vocation, which is of a religious character, especially those who occupy the Front Benches, and we are continually being told, in a statistical sense accurately, that we are living beyond our means. However, I hope that people will realise that that does not imply a sudden lurch to profligacy on the part of the British people. The terms of trade since 1972 have turned against us so sharply that we are now running the biggest deficit in our history, whereas, on the same export-import performance at 1972 prices, we should be running the biggest surplus.

    We cannot run away from this problem, but it has not arisen because of the failure of the working people or the com- petence or otherwise of Governments. It has arisen because of the change in the terms of trade, which was partly aggravated by the inadequate and delayed reform of the monetary system which we undertook internationally. But there have been many other factors, too.

    The difficulty is that this has involved us in getting into very heavy international debt and faces us with the prospect of further debt. There are many solutions to this problem, though it is my experience that creditors are notoriously less avant-garde in their monetary thinking than debtors. It is the latter who more readily and sincerely embrace the more advanced theories for handling large quantities of debt. It follows, therefore, that the Government must have regard to our ability to borrow the large sums which will be needed to cover the changed circumstances of our trade.

    The reason for our deficit gives a clue to the way in which we should tackle its correction. If the deficit had occurred because the nation had taken to excessive drink, did too little work, and so on, I should have thought that the sooner it was put right the better. But it did not arise in that way. It arose because of the sudden sharp increases in the prices of the goods we must import which could not be matched correspondingly by increased export prices.

    I suspect that a good deal of the change in the terms of trade will be long-lasting, although I am always hesitant to predict. In so far as the change will last for the next few years, we must meet it or get into debt. We propose to meet it. One can increase the price of oil five times overnight. One cannot increase five times the production of the goods to meet it, even if the customer is willing to take them, in order to meet the new obligation.

    Therefore, getting into debt does not represent a moral short-fall on our part. It represents a practical inevitability. We must ensure that, steadily and as fast as reasonably possible, we begin to export more to meet the new obligations which the changed circumstances have brought. This is part of the strategy of the Chancellor of the Exchequer.

    Is my right hon. Friend suggesting not that we have been foolish but that successive Governments have been totally inefficient and inept?

    I am prepared to say that almost all Governments which I can recall, except the present Government, have been foolish and inept, but that is not my theme.

    The terms of trade have changed against this country as a result of which a given quantity of exports, instead of paying for imports, leaves us heavily in debt. If the terms of trade had remained as they were in 1972, we should be running an enormous surplus and rejoicing about it, saying what a splendid lot of chaps we were, instead of beating our breasts and announcing our own decadence because the price of copper, sugar and oil had increased in a spectacular way.

    Why does not what the right hon. Gentleman is saying apply to West Germany?

    It does apply to West Germany. The West Germans, as soon as they got on their feet, have out-performed us practically throughout the post-war period, and they continue to do so. That does not startle me. The performance of the British is such that, given the export-import price situation of 1972, we should have an immense surplus instead of a record deficit.

    I mention this matter only as a guide to those who are always anxious to denigrate the British people, particularly the work people. The facts do not justify any such attitude. Incidentally, I have never taken part in the denigration of the business and manufacturing entrepreneurs of this country. They, too, have performed reasonably well in the achievement which I have just mentioned. They will have to perform better to meet the strategy of the Chancellor of the Exchequer in reducing our debt and getting ourselves into balance in the new adverse circumstances.

    Another central part of our affairs is private enterprise and the private sector of our economy. I am ashamed to raise this subject again, because I have spoken on it many times, but once more I make it plain that the Government recognise that only with a healthy and prospering private enterprise sector can we hope to maintain our standard of life, pay our way in the world and in general achieve the objectives, public and private, which we have set ourselves. The Government are firmly committed to a healthy private sector and are firmly opposed to any concept of a dirigiste siege economy which could not deliver the goods our people require.

    The Chancellor has had little recognition of the fact that he has done more than any previous Chancellor to adjust the tax mechanism to deal with the pressing and urgent problems of the private sector in a period of inflation. No Chancellor has ever done as much to assist the creation of a healthy private enterprise sector as my right hon. Friend has done.

    I cannot see how the capital transfer tax is seriously to be related to the massive aid given by the Chancellor in his two Budgets in the form of stock appreciation relief. It is my opinion—and I am not in the habit of expressing encomiums of the Chancellor which I do not sincerely feel—that, whatever criticisms people may direct against other aspects of his policy, this action of my right hon. Friend is the greatest single help, in a period of inflation and at a crucial time, which any Chancellor has given to the private enterprise sector. Moreover, I am not absolutely certain, but I am nearly certain that it exceeds in importance any comparable effort to assist private enterprise made in any advanced country.

    The Chancellor has proved in practice that he is anxious that there should be a healthy private enterprise sector. Dealing with another aspect of the liquidity problems of the private sector in a crucial inflationary period has also occupied his mind. I refer to the FFI, where massive further support for private enterprise liquidity problems occasioned by inflation was given. The Chancellor has recognised that that is important in the private sector. When the public sector is subjected to a liquidity squeeze, the worst it can mean is a bad half hour with Treasury officials. In the private sector a liquidity squeeze can mean ruin. Therefore, the Chancellor is to be congratulated on the attention he has given to the crucial question of the effects on industry of the current inflation.

    As regards the growth performance of industry, I do not think that we should encourage the practice, which has been all too popular with both political parties of late, of denigrating our industry on the basis of international comparisons, the main effect of which is to undermine its morale and its international credit status. No one has satisfactorily identified the reasons for the differential in growth between, for example, Germany and France and ourselves. There are factors which are suggestive of the explanation in terms of the utilisation of surplus agricultural labour in those countries, which achieved higher agricultural productivity much later than we did. Some people like myself may think that the stop-go performance of the financial strategy of successive Governments has hardly helped British industry. None of us must be as naive as the former Leader of the Opposition who, when he produced measures which failed to create industrial investment, thought that that was an occasion not for self-examination but for offensive comment on industry. The Government, rather than industry, must take responsibility when industrial investment fails to respond to Government measures.

    I hope that nobody believes that this country just needs more investment. The country needs more good investment. More bad investment would be a disaster in our present strained situation. Unfortunately, I do not have time in which to enter on the question of the National Enterprise Board. I shall avoid that trap. [Laughter.] Unfortunately, merriment has been occasioned in the wrong parts of my speech. However, it is better to evoke merriment at the wrong time than not at all.

    The National Enterprise Board recognises that it must approach its task with great caution and great humility. Nobody has the right to believe that all that is required for more investment in our country is to present a team, however well intentioned and however experienced, with a vast cheque book. That will not produce the right kind of investment. Certain gentlemen with remarkable experience of industry, and with an immense experience of a wide range of industries, already have large cheque books available for investment. However, they have not felt it appropriate to invest now. I am sure that Sir Don Ryder, with his experience, would feel the same.

    I should proceed with great caution and humility in taking action. People such as Sir Arnold Weinstock and Lord Kearton have considerable unused cash resources for which they have been unable to find a profitable investment outlet.

    However, there is an area for which there is an increasing scope for further public support. Modern technological change constantly throws upon private enterprise burdens which are greater than it can bear. Technological change puts private enterprise into the classical dilemma of taking gambles of a size which will bring ruin if they do not come off but which, if not taken, may result in an even bigger certainty of ruin. The typical case was the Rolls-Royce RB211. Rolls-Royce came to the conclusion that if it did not develop the RB211 with all its attendant risks, it would have to pack in the heavy engines area of aircraft construction.

    The systematised partnership in taking risks with that kind of technological gamble—I can give many other large and small examples—means that there is a rôle for well-directed Government support for some aspects of private enterprise. However, I can deal with that matter at greater length on another occasion.

    In praising the Chancellor's strategy, we must keep in mind all aspects of our economy. I refer to a healthy private sector, public expenditure within our resources, a gradual switch of resources to exports to improve our balance of payments, and at the centre a social contract which finds genuine acceptance, by maintaining a high level of employment, and avoiding the brutality and waste of unemployment on the one hand and the rigidities of a statutory policy on the other, which are the only alternatives of which we know.

    The Government must, therefore, earnestly apply themselves to those problems and, in doing so, seek to harness all the practicality and wisdom of the British people.

    4.26 p.m.

    It is lucky that the House recognises the qualities of the Chancellor of the Duchy of Lancaster—otherwise, there might have been impatience with the speech to which we have just listened. We well understand the right hon. Gentleman's capacity, on most occasions, to give the House a penetrating and constructive analysis on the subject being discussed. Today, the first 33 minutes of his speech were far below his normal level. He showed no evidence of homework or of treating serious arguments, which exist on both sides of the House, with the seriousness they deserve. I suggest to the right hon. Gentleman, for whom I have the greatest respect and fondness, that he should at least have read the Budget speech of the Chancellor of the Exchequer. The argument of the Chancellor of the Duchy of Lancaster differed diametrically in almost every detail from the speech made by the Chancellor of the Exchequer last Tuesday. As for the content of the first part of his speech, if a Tory Minister had made so flimsy and shallow a speech—[HON. MEMBERS: "Oh!"]—the Opposition would have been very impatient. I say that with great respect.

    The right hon. Gentleman emphasised the terms of trade, which have incidentally turned in favour of the Government during the past months. My hon. Friend the Member for Harwich (Mr. Ridsdale) rightly pointed out that other Governments have coped with changing terms of trade and have done so on the whole very much better than this Government.

    Both sides of the House share some aims with the Chancellor of the Exchequer, though with sharply differing emphases. I believe that the Chancellor of the Exchequer seeks to abate inflation, but he does not mind whether the country emerges from that experience more collectivist than it is today. We share his purpose of abating inflation, but we want to come out less collectivist than we are today, and with more decentralised ownership and decision making. In his task, the Chancellor and his colleagues have one great advantage which the Tory Government lacked—they face a responsible' Opposition. Therefore, it gives me no pleasure today to criticise a number of the Chancellor's policies.

    In my view the Budget does not deserve the generally good Press it has received. I have had the advantage of several days to think about what the Chancellor proposed and to study what the experts and analysts have said. The Budget speech certainly gave the impression of toughness and realism. Elements of the Government's policy are tough and realistic. Indeed, they are brave with the bravery of necessity. In some parts—for instance, in its impact on the direct taxpayer, taking into account the effects of inflation—the Budget is too tough. But the overall strategy does not in our view rise to the level of national need. It was a tough speech and a soft Budget.

    True, the Chancellor has been denounced by the Left, and that is a good sign. It is a necessary but not sufficient condition for a sensible policy. True, the Chancellor has changed his own tune from the past, and that is welcome. But he is still the man whose 1974 pre-election bonanza on borrowed money made the plight of this country worse. He is the man whose pre-referendum inertia is now making the country's plight worse still. The Budget, at a time when inflation is the main peril, is itself inflationary. It assumes a greater increase in public spending than in revenue.

    We are in our present mess because as a country we have for so long put off adjusting our spending to our output. That point was emphasised by my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe). We have put off the changes necessary to increase our output. Now, because of our dependence on borrowed money, we are on a collision course with the need to adjust, but the Chancellor has put off the adjustment yet again.

    Subsidies and foreign borrowing have created an unreal and transitory plenty for half the population. We are over-spending, overtaxing, overborrowing and overmanning. We are much worse off than we seem. We have to change gear to phase out the excess. The Chancellor recognised this in his words but did nothing like enough to deal with it in his actions. He has deferred action on the crucial overspending side. No doubt the Chancellor and his colleagues are planning for another Budget. However, the Government's delay in tackling public spending and their over-reliance on the social contract have meant that our recession and our inflation will drag on while other countries have got their own over fast and are now resuming progress on a sounder basis. We therefore criticise strongly the Chancellor's delay in tackling public spending as well as some of his methods in doing what he has done. No one of my right hon. or hon. Friends believes his task is easy, and I shall not say what I have to say in any sense of suggesting that it is all simple. However, we have to penetrate beneath the words to the relevance of what is proposed to the country's needs.

    The right hon. Gentleman said that other countries are now resuming a healthier progress because of their reduction in inflation. We all concede that they have lower inflation rates. Will the right hon. Gentleman name those industrial countries which are now expanding their employment and industrial production in this satisfactory way?

    I said that they are ready to resume progress. I did say resuming progress.

    If the Chancellor is going to repeat again the total fallacy that countries overseas have higher unemployment than we do I think that he is misusing the figures. I have the comments in The Banker on his argument which show that with a couple of exceptions he is misstating, without deliberation, I am sure, the real position. The position is that, while the United States has, on a comparable basis, 5½ per cent. unemployment against our 3½ per cent., Germany has 1·8 per cent., France 3·3 per cent. and Italy 2·7 per cent. The Banker concludes its paragraphs with:

    "So much for Britain's Chancellor".
    The Government have shown by their own White Papers and analyses—[interruption.] The Chancellor should rise above misquoting on the question of unemployment statistics.

    The Banker magazine is a commercial magazine for which I have no responsibility, and presumably the right hon. Gentleman is in the same position. It quoted a footnote in the Bank of England Bulletin which used exactly the same figures as I used. It is perfectly true, as I have often said, that the basis on which unemployment statistics are collected and announced differs from country to country. The National Institute, for example, which I would say has quite the same competence in this area as the Bank of England—which is not expert in employment matters—gives a completely different set of comparisons. The United States at the present time, by its own announcement, has more than 8 million unemployed, and unemployment among black teenagers is over 40 per cent. For the right hon. Gentleman to pretend that there is any comparison between that rate and ourselves is to misrepresent the facts, and the right hon. Gentleman knows it.

    The right hon. Gentleman cannot escape like that. He used the comparison with European countries as well. It is quite wrong of him to denigrate The Banker, which was quoting from the quarterly bulletin of the Bank of England which says in its footnote on page 3 that unemployment on a comparable basis with ours is 1·8 per cent., in Germany, 3·3 per cent. in France, and 2·7 per cent. in Italy.

    If the right hon. Gentlemen's researchers had taken the trouble to look at the Batik of England Bulletin they would have seen that it used exactly the same figures as I did and that in a footnote it said that it was difficult to make comparisons and that at a very rough guess it made its estimate. The guess made out by the Bank of England Bulletin is totally inconsistent with that made by the National Institute and by our own Department of Employment.

    I apologise to the House for causing that particular comparison to be followed. In fact, the point remains that other countries have taken their medicine more promptly than we have —partly because of the election timing, no doubt, and partly because of the referendum timing. As a result, this country will have to endure worse and more prolonged medicine in due course.

    The Government are planning in their proposals for the next quinquennium for far less than 1 per cent. per annum growth in personal consumption. That is on the assumption that everything goes well and that we have a growth rate of at least 2½ per cent. a year. In the first year of that quinquenniuin we have had a nil growth rate. Against this must be taken the treble offset that we need a 5 per cent. cut in our national spending by the Chancellor's admission, and we all agree that we are overspending; secondly, that public spending is out of control; thirdly, that of any small residue left for increased personal private consumption the big battalions of the unions have taken far more than their fair share already.

    The prospect for the future, therefore, even if all goes well, is that unless the Government radically alter their approach to public spending there is bound to be a taxpayers' as well as a ratepayers' revolt in the near future.

    There is, however, some common ground in analysing the country's needs. We are all agreed, as the Chancellor made absolutely clear in his Budget speech, that inflation destroys jobs and creates unemployment. The Chancellor and we are agreed that overspending must be phased out and that the growth of the money supply needs to be kept below the growth of the money gross national product. I am sorry to quote that against the Chancellor of the Duchy of Lancaster, but I am paraphrasing what the Chancellor said several times in his Budget speech. After that, however, the common ground seems to end.

    We have to deal with three different sorts of inflation. There is overt inflation —at over 20 per cent. a year; suppressed inflation—concealed by price controls and subsidies but which will need to emerge; and deferred inflation, which is the repayment of the loans on which we are dependent for 5 per cent. of our current spending. I do not believe that it is enough to control the money supply as the Chancellor prides himself on doing. Whether the slow down in money supply on which he prides himself is deliberate or whether it is a happy accident resulting from the balance of payments deficit and low credit demand from industry we cannot be sure.

    However, it is not just control of the money supply that is needed. There is also domestic credit, as the International Monetary Fund so sharply pointed out in 1968–69.

    The growth of the money supply is the symptom of inflation. Public spending in these days is the great inflator. Strict monetary policy at the expense of the private sector, while State spending roars on, could do almost more harm than good. The fact is that the monetary and budgetary policies of the Chancellor point in diametrically opposite directions. The huge borrowing requirement plus the large tax-take are, themselves, inflationary.

    Moreover, the Chancellor's own analysis of his Budget speech appears to be confused. Of the eight paragraphs devoted to an analysis of the causes of inflation, 3½ claim that inflation is caused by cost-push and 4½ claim that it is caused by demand-pull. One ineffable paragraph contains both interpretations within the same 10 lines. I hope that the Chancellor will achieve a more rational and effective strategy than that which emerges from his own analysis, which appears to have been drafted by two quite different drafts-men in his Department because there is great conflict between the different theories of causation.

    Although demand now appears to be moving closer to supply, we still have excessive demand on the economy in the sense that there is certainly not scope for increased demand without making inflation far worse. I know that hon. Members will say that there are 800,000 unemployed and another 200,000 on short time.

    Incidentally, the Chancellor of the Duchy of Lancaster challenged me to say whether I thought it would mean fewer unemployed if the Conservative Party was in office. I believe it would, because unemployment is worse than it need be on account of the anti-business and anti-profit attitudes of Ministers. Do Ministers honestly think that business men, faced with taking decisions, reaching out into the future, depending on freedom of price according to the market and depending on freedom to take what action they consider necessary with their business, will ignore the threats and the attitudes of members of the Cabinet? I assert to the Chancellor of the Duchy that if the Ministers were Conservative Ministers—I am not making a larger claim than this —there would be that much less unemployment than stems from the anti-profits and anti-business vendetta of the Labour Party.

    The right hon. Gentleman has answered a question I did not ask: namely, would unemployment have been higher under a Tory Government? Will he now answer the question I asked, which is: what level of unemployment does he think will result if we attempt to cure inflation by the methods he proposes?

    The answer is easy. I was about to deal with it, but I shall give it now so as not to break continuity.

    The level of unemployment, under the policies as enunciated by the Chancellor, will depend almost entirely upon the behaviour of trade unions in their wage claims. I am not evading the question in the sense of knowing the answer and hiding it. The answer is unknowable unless we know the conviction the Chancellor carries, that he will stand by the policies he has adduced. The more he carries conviction, the more unions know that he will allow firms to go bankrupt and keep to the money supply programme the more he carries conviction, the less unemployment there will be.

    On money supply, four and a half paragraphs of the Chancellor's speech put the responsibility for inflation on a link, complicated intensely by trade union behaviour, between money supply and output. To that extent we would follow that part of the Chancellor's policy, but we would not intensify and exacerbate it by anti-business attitudes and policies.

    I should be grateful if the right hon. Gentleman would confirm the impression he gave me when I spoke recently at the Mansion House. Would he agree with many of his hon. Friends that a major cause of inflation in Britain is the excessive increase in the money supply which took place in 1973, when he was a Minister?

    If we are to go back, I should have to go back to the excessive reaction in 1968 when the IMF was caused to come in by the right hon. Gentleman's colleague the Foreign Secretary. I have put my views on the record. All Governments since the war, including the three in which I have had the honour to serve, have, in their good intentions to do more for the British people than was practical without causing inflation, overspent. I hope that satisfies the right hon. Gentleman. My words are clearly on the record.

    I wanted to spend time analysing the relationship between the real, available, willing and fit-to-work unemployed in the Keynesian sense and the vacancies available to them. I hope that the House will allow me, because of lack of time, to state that probably about half of the unemployed are available in that Keynesian sense and that there are at the moment about half a million vacancies. I am willing to corroborate this by argument on another occasion. Therefore, we have about 400,000 Keynesian unemployed in the sense that leads in his view to consideration whether there is a demand deficiency, and we have about half a million vacancies. I am multiplying by three the figure in the last monthly Gazette, on the advice of the Department of Employment.

    I grant at once that those half million vacancies are not in the right place, that they do not call for the right skills and that many of them are for women. Matching the unemployed to the vacancies is a problem of overcoming rigidities, of easing the housing movement, of improving the training, and it is a problem of facilitating transferring men and women from jobs that are disappearing to jobs that are available. That is why the active manpower policies introduced by my right hon. Friend the Member for Sidcup (Mr. Heath) in his Manpower Services Agency legislation are so central to the problem of making better use of the resources of this country. It appears that the Secretary of State for Employment is not particularly interested in his manpower policy. The rigidities may get worse under the Government.

    The question is whether we still have demand-pull. I maintain that there is still enough demand-pull to make it highly dangerous, in terms of inflation, for the Chancellor to dream of expanding demand. If the analysis of half the Chancellor's Budget speech is correct—that is, the influence of demand-pull flowing from money supply, on inflation—it is crucial to do as he suggests; namely, to keep the money supply below the growth rate of money gross national product.

    The question the House has to ask —if I have carried some hon. Members so far in my argument—is: who can stop the Chancellor achieving what he set out to do? The answer is: —some of his colleagues and some of the trade unions.

    Wage claims that are passed on in prices do not cause inflation unless the Government increase the money supply to accommodate them, if they are in the private sector, or to finance them, if they are in the public sector.

    Trade unions can do many things. They can cause devastation: they can, by excessive pay increases, cause unemployment. They can bankrupt firms, deprive other workers, rob the Government of the scope to improve the social services, and force the Government to raise taxes, as the Chancellor has done, and/or to cut public spending, as the Chancellor has threatened to do. All this they do, can do and are doing.

    I thought that the Chancellor put it very well to the Parliamentary Labour Party, when he is reported to have said that not even he could make the waters of Niagara run uphill. I should like to put it this way. No Chancellor can prevent trade unions pricing people out of jobs. No Chancellor can do that. It is up to the trade unions. However, I assert to the Chancellor of the Exchequer that his colleagues the Secretary of State for Industry and the Secretary of State for Employment are actually increasing unemployment by half suggesting that, whatever the wage claims, they will with public money rescue a firm that is threatened by bankruptcy. It is they who are encouraging unions—in some cases; not in all, of course—to make excessive pay claims. This removes one restraint on the suicidal pay claims of which one sometimes reads in the private sector.

    To take one recent example, the Burmah Oil Company, will the right hon. Gentleman say what the Conservative Party would have done on that matter, given the dilemma that my right hon. Friends faced?

    I am not trying to avoid a question but, with respect, that has nothing to do with pay claims at all. It is quite a different issue.

    It is in the public sector when it comes to pay claims that the Chancellor's main problem lies. At present he is conducting a dialogue of the deaf with the unions. The question he has to ask himself and the question which we have to ask him is this: will the Government allow excessive pay claims in some sectors to have their effect in reducing jobs? The rail-ways may be a case in point. Are the Government about to consider putting some ceiling on the cost of the services? Surely it is not right to tax the public because the wage earners in a very heavily subsidised service put their wages far beyond the capacity of the traffic to obtain? My right hon. and learned Friend the Member for Surrey, East, the Shadow Chancellor, was surely right to stress that it is not right to punish the whole public when the answer may be that if wage earners choose to do this in a subsidised industry, the industry should be contracted.

    Trade unions, by forcing up unemployment by excessive wage claims, can bring pressure on the Chancellor to expand home demand. But such expansion where there is a going rate of inflation at 15 per cent. to 20 per cent. already would end any hope of an improvement in the balance of payments and would accelerate inflation to South American levels and destroy jobs on a vast scale. The Chancellor knows that if he reflates, if he stokes up home demand again, he will place the pound in grave jeopardy.

    When, therefore, we see the Chancellor with his back to the wall—with perhaps trade union pressure to accommodate excessive wage claims—we must also recognise that the Chancellor has his back to something more than a wall. He has his back to a fall, a precipice, because if he were to expand demand the pound would fall, and jobs and the standard of living would go with it.

    The Chancellor hones for export-led expansion. We hope he is right. However, I think that I speak for my hon. Friends when I say that in his analysis we find a neglect of the probability that if there is a turn-up in world trade there will almost certainly be a simultaneous turn-up in world commodity prices, and in interest rates, perhaps, flowing from a change around in America. If the Chancellor's hopes are to be realised and are not to be merely another Chancellor's chimera, we believe that he must phase out dependence on overseas borrowing and make room—real room—for an improvement in the balance of payments.

    As my right hon. Friends—my right hon. Friend the Leader of the Opposition in particular—pointed out at once, the Chancellor is deferring cuts in public spending until a time, by his own prediction, when unemployment will be rising. We accept that it is not easy to cut public expenditure fast. But when the Government have provided the huge indiscriminate subsidies that at present exist on the housing front as well as on the food front, there is ample scope for very rapid cuts of public expenditure on the indiscriminate subsidies front.

    It is not only myself, a Tory, who is saying this. There are Socialists who are saying it. I should like to refer the Chancellor to the view of John Mills in a recent book called "Redistribution: A Review of Progress" by the Labour Economic Finance and Taxation Association. This is a very good analysis, and it is thoroughly worth while reading. He claims that indiscriminate subsidies are no help in the redistributive purposes of the Labour Party. Therefore, I should have thought that the Chancellor could cut far quicker if he wanted to do so.

    But the more that the Chancellor defers cutting public expenditure—I hope that the Chancellor of the Duchy will listen, because he spoke somewhat slightingly of anyone who was worried by the borrowing requirement—until the balance of payments has improved, the more difficult the financing of the borrowing requirement will be, because it will then be necessary to finance the borrowing requirement without the help of the counterpart of the balance of payments deficit. It would be a far harder job for the Chancellor to finance the borrowing requirement if his hopes came out right in connection with the balance of payments.

    The public spending assumptions on which the Chancellor has predicted a borrowing requirement of about £9 billion—£9,000 million—as the base from which he hopes to make reductions are, we believe, dangerously shaky. I venture to believe that the one Sunday newspaper yesterday speculating that the borrowing requirement might be over £13 billion might be nearer the truth.

    Let me analyse all that this sort of statement is suggesting. As the Chancellor of the Exchequer and the Chancellor of the Duchy both emphasised, the predictions are in "funny" money; that is, constant money, which itself is misleading. Second, the White Paper on public expenditure bases its work on the assumption which seems to us to he ludicrous; that the relative price effect will be negative. That means that those who compiled this White Paper are assuming that public service costs will not rise more that private sector costs. that will deny the experience of all of the last years and it seems to he a very dangerous assumption. Third, the Chancellor spoke of his bitter experience—that is evidence against him— of £5½ billion of creeping upwards in public service expenditure as between his first and his fourth Budgets, not on account of policy decision but sheerly on account of inflation the relative price effect, bad control of public spending and bad and inadequate control of local expenditure.

    Why should that not occur again on top of the £9 billion mark? Successive Chancellors have had this problem. They will have to achieve a much greater restriction of public expenditure—I agree that it is very difficult—if they are to avoid a creeping upwards of this sort. This, too, makes no allowance for the financing of British Leyland, for instance. or policy decisions beyond a very small. skinny contingency reserve. There is a grossly inadequate provision already for unemployment benefit which will nearly double the number allowed for in the total. The £9 billion borrowing requirement is not a realistic estimate of where the Chancellor starts. It could be very much more. As the Chief Secretary has said, we cannot any longer borrow our way out. We have to phase out the 5 per cent. over-spending. Unless we do, we must remain in pawn.

    Given that the right hon. Gentleman would not have increased taxation in the way that the Chancellor has done, will he say precisely by how many billions of pounds he would reduce public expenditure in 1975–76?

    The Chancellor made his own problems worse by the public spending bonanza last year. He first reversed the cuts in public spending introduced by my right hon. Friend the Member for Sidcup when he was Prime Minister. and then he added as much again— probably £2½ billion turnround in public spending last year. We would not have done that.

    The bulk of that is for housing, social security and pension increases, which the Opposition wanted to increase every six months, which would have added another £300 million a year.

    The housing subsidies are indiscriminate and are coinciding with the growth in homelessness because they are anchoring many who could look after themselves to accommodation they do not need. The housing subsidies alone account for £1·billion. That would be a good place to start. I say with full consciousness that it would be humane, in the interest of helping the homeless with the housing that they need more than those who are not paying enough, to start in that area.

    The right hon. Gentleman must recognise that this interesting academic disquisition will appear to the country as a hypocritical sham unless he is prepared to tell us how many billion pounds he would propose to cut from public expenditure and where those cuts would fall. Unless he is prepared to do that, the whole intellectual edifice that he has constructed this afternoon will be flim-flam.

    If we took over at this moment, with the Chancellor's profligacy behind us, it would be hard to do that. But the right hon. Gentleman has caused the situation to be so difficult by his own profligacy. We certainly would not go in for Bennery. We would have more control of public and local authority spending and would cut indiscriminate subsidies. The fact is that the Chancellor can do nothing for the country or for his party unless public spending it cut. No one who has been in Government has any thought that cutting public spending is easy. It is extremely difficult. If I were in such a Government, I would probably resist the Chancellor unless he persuaded me that it was in the public interest.

    There are increases in staff at every level—some of which I caused by my reform of the National Health Service—and ceilings ought to be imposed. There ought to be a total review of local authority salaries in the light of the country's position. There ought to be some ceiling on various forms of public expenditure.[Interruption.] With respect, it is open to us to say that, in the light of the Government's failure to keep to the borrowing requirement of £2½ billion that the Chancellor laid out, he is put on warning that he must do better if he is not to find a £9 billion borrowing requirement turned into a £13½ billion borrowing requirement by this time next year.

    It is only proper to ask whether there are alternative strategies to those adumbrated by the Chancellor. There are grave difficulties and disadvantages in either of the alternatives of an incomes policy or a siege economy.

    A number of right hon. and hon. Members have spoken about an incomes policy. No one should be absolute on any subject, but they should recognise the force of the argument against their case. There is a very good document, which I recommend them to read, "Incomes policy in Phase IV" by Sir Richard Clarke, published by the Manchester Business School, in which he said:
    "there is no great problem in launching the space-ship Incomes Policy or indeed in getting it round the moon, but in every case so far the re-entry has been a total failure, and the space-ship (and its occupants) have been destroyed ".
    In other words, in anything but the short term, an incomes policy does not achieve its objectives, according to Sir Richard Clarke.

    The second alternative is a siege economy. I was glad to hear the Chancellor of the Duchy of Lancaster deny that there was any prospect of a siege economy. The hon. Member for Ashfield (Mr. Marquand) put it very well on Wednesday when he said:
    "I believe that that"—
    the siege economy—
    "would spell the end of personal freedom in this country."—[Official Report, 16th April 1975; Vol. 890, c. 502.]
    The point of substance for the House is that, whether it be the Chancellor's present policy, an incomes policy or a siege economy policy, which particularly some hon. Members below the Gangway on the Government side want, all three crucially depend upon cutting public spending, because excessive demand, when one is trying to run an incomes policy or a siege economy or trying to cope without either, as we are, wrecks any chance of reducing inflation. Excessive demand is the bane.

    The new Cambridge school, which has most eloquently put the case for a siege economy and for import controls, emphasised the importance of cutting over-spending, and cutting it starting in this Budget.

    The Chancellor does not avoid responsibility by teasing us with the responsibility in Opposition of identifying where we would cut so many billion pounds. If he does not cut public spending more sharply than he proposes, I suspect that the brokers will be with us again as they were last time. We would rather the Government did it. The Chancellor is a proud man, and I suspect that he would rather do it. But we shall probably have to wait until July and the end of the referendum before we know whether he intends to do that.

    The export boom to which the Chancellor looks forward depends on the private sector, but the private sector must be encouraged if it is to flourish. It is no good imagining that the private sector can continue as the milch cow of the economy. The fact is that the tax eaters —the nationalised industries and subsidies and public services—are growing faster than the tax producers—industry and the private citizen. It is absurd to expect the shrinking and embattled private sector and most private house-holds to carry not only the unlimited increase in the cost of services provided by monopoly nationalised industries but the cost of keeping services for which there is no longer a demand.

    The private sector, the indispensable base on which all else is built, has been given a financial reprieve, albeit from some of the pressures that the Chancellor himself put upon it. But the private sector is under attack from a score of different fronts. Those who attack it are in danger of sawing off the branch on which all our people and services are sitting. Profits are desperately low in real terms.

    The Industry Bill, far from promising regeneration, promises ossification and degeneration. Industry has to struggle to survive. It has not been given a chance to do the benificent work that it could do for the people of this country. I very much agree with the Chancellor of the Duchy of Lancaster that new investment, which everybody says we need, is not so important as good investment. What is the point of hoping that business men will invest if they see no prospect of profit or the same overmanning being forced on them in new plants as they are suffering now?

    The private sector is the source of our standard of living. Yet we discourage those who make it work. Someone has to create national wealth. I hope that someone will one day be found who will be so free of Ministers that he will be able to make wealth for the nation even in the nationalised industries. That has not yet happened. The worker on his own cannot create wealth. We need the wealth-creating, job-creating entrepreneur and the wealth-creating, job-creating manager. We treat them very badly. Those are the people who, for the usual mixture of motives, give themselves ulcers, but they mobilise and organise men, women, materials and the money to meet demand at home and abroad.

    We reward entrepreneurs and managers working within the law and subject to competition by the highest marginal tax rates in the free world, by abuse, by discouragement, by a stream of legislation and interference. The net income of British managers is a fraction of the net income of equivalent managers abroad. The task of winning co-operation on the shop floor gets harder, but the rewards for increased responsibility of managers get less. In fact, they are derisory. The differentials of managers are squeezed. By "managers" I mean professionals and managers as well. Their net pay is not merely not keeping pace with inflation and the tax bite, but it is actively deteriorating compared with the pay of those whom they supervise. They have insecurity and worry. They are meant to take risks. All these functions are necessary to society's progress. They deserve a chance of reward. These are the ulcer people—talented, job-creating, potentially wealth-creating for the country. If they are not treated reasonably, if they do not feel appreciated, they will quit either by way of the brain drain or by the internal brain drain which might be called switching off. There is a great deal of switching-off in this country not only in the nationalised industries, but principally in them, because of the messing around, the discouragement and the interference to which management is subject.

    It may not be possible—I recognise this—for the Chancellor to reward them properly now but even a gesture would help. What is the gesture in this Budget towards management and professional people? It is a mean-minded attack on private health insurance by taxation. It is a mean-minded gesture in the wrong direction towards people who are under great pressure. It is part of a much larger attack on the freedom of choice. It is part of a vendetta against any private health service. On these people's vitality, their self-confidence and success depends our standard of living.

    Last year I spoke of the twilight of the middle classes. It has been a bad year for them and for management. Damage to management is damage at one remove to the entire population, particularly the vulnerable. It has been a dramatic year for winners and losers. There have been millions of losers—small business men, many professionals, most managers, people retired on savings, less powerful workers, unorganised workers, wage council workers and many groups of the poor.

    The Chancellor has pretended that he has put on direct taxation by a mere £200 million, but nothing could be further from the truth. He has put up the yield of income tax by no less than 40 per cent., by £4 billion a year. That is the result of not indexing, of not giving thresholds to correspond with the movement of the rate of inflation. I do not say that some way of finding that extra money was not necessary, but the way in which it has been done is brutal to many households and it would be far better if more taxes were put on spending rather than on earning.

    The Chancellor faces my successor the Secretary of State for Social Services with many intricate problems in the overlap between new thresholds, family income supplement and school meals, in working on the poverty trap. These are the groups in despair at the receiving end of the social contract. It is not possible to help them by soaking the rich. What they need is an end to inflation, less greed by the big battalions and a prosperous economy.

    That is why there is a need for wealth-creation for the benefit of all—spontaneous wealth-creation, organic wealth-creation, unforced but encouraged. There is no other way to raise standards. If anyone thinks that that is only a Tory point of view, let him read John Mills, to whom I have referred, and Michael Young's annual report on poverty and see how we are inching forward by an attempt to redistribute wealth when the only real way forward is to create more wealth. For further confirmation of what I have said I invite hon. Gentlemen to read Rudolf Klein on the finances of the social services.

    We criticise the Chancellor of the Exchequer and the Government for not rising to the needs of the nation. We are over-spending by living on borrowed money to the tune of £3 per week for each man, woman and child. This has to be phased out. The anti-business atmosphere needs calling off. Profit earned in competition should be allowed to do its work of creating investment, tax revenue and jobs. If the exchange rate is allowed to work and the money supply is held to a sensible growth pattern, regeneration and expanding employment will occur spontaneously, not at once but when confidence recovers from its battering.

    The amount of unemployment will depend to a large extent on wage claims and on the degree to which industry is encouraged to invest and expand for profit. The Chancellor's words have gained notably in realism. That we recognise. If he and the Government survive let us hope that his next Budget after the referendum will not only recognise realities verbally but do more to adapt policies to them.

    5.14 p.m.

    We have just listened to the authentic voice of the Conservative Party and we have heard a speech from a man who is put forward as an intellectual, the right hon. Member for Leeds, North-East (Sir K. Joseph), who has put forward a policy of naked and unashamed Conservatism. The essence of his policy is that we should return to the law of the jungle. That was the essence of his message.

    The right hon. Gentleman was uncharacteristically ungallant to my right hon. Friend the Chancellor of the Duchy of Lancaster when he said that his speech was flimsy and shallow. That was an astonishing statement to make about my right hon. Friend's speech. It was the right hon. Gentleman's speech which was flimsy and shallow when he was challenged about what he would do with regard to cuts in public expenditure. He gave no realistic answer and, after demanding massive cuts, all he could suggest to the House was, first, that we should cut food subsidies, and secondly, that we should cut expenditure on town halls. The right hon. Gentleman is the kind of man who would solve our economic problems by taking bread out of the mouths of babes and gold chains off the shoulders of lord mayors and mayors in town halls, and I suppose one could not be fairer than that.

    The right hon. Gentleman was proved wrong at every point in his analysis. He said that members of the Labour Party are engaged in a vendetta against business. When the word "vendetta" was used I thought that the right hon. Gentleman was speaking of himself, because it is the Conservative Party which has carried out a vendetta against the trade union movement for many years and it was the Conservative Party which, by its vendetta against the trade union movement, brought us to the impasse which has left the country in such an awful state—and led the Chancellor to take the measures that he has in his Budget.

    I believe that we must win this debate tonight. I do not mean just the number of votes in the Lobby, important though they are. We must win votes in the country. We must win the minds and hearts of the people because they are being bombarded by massive propaganda about my right hon. Friend's Budget. This bombardment is absolutely nonsense. Right hon. and hon. Conservative Members who are attacking the Government are not really important in the last analysis. What is important is the attitude of people outside this House and the views of the trade unions. It is their views and those of my hon. Friends on this side of the House with which I am particularly concerned this afternoon.

    I am genuinely disturbed at the reaction of some of my colleagues and of some trade unions, notably the Scottish TUC, to the Budget. The implications of what the Scottish TUC has been saying may be that the policy and strategy outlined by the Chancellor of the Exchequer will end in ruins. So will the economy if the views of the people to whom I have just referred are followed. It would be disastrous if the country were to follow the advice of the Scottish TUC, the McGaheys and those who think as they do.

    I do not believe that the Budget is by any means perfect, and I have some reservations about it. First, I do not believe that the Government have paid due regard to the under-privileged, the disabled, the old, the sick, the poor, and the unemployed. All these people could have had a better deal from the Chancellor.

    Secondly—and I must admit that I was outraged by this—no increase in overseas aid has been provided. The House will have seen the comments of the Secretary-General of the Commonwealth, Mr. Arnold Smith, who only yesterday talked about the plight of overseas countries when he said:
    "For hundreds of millions of citizens of developing countries in the present Commonwealth the present crisis is a matter of life and death, of eating or starving."
    Yet the Chancellor cuts £20 million from our overseas aid budget. I regard this as a shocking and shameful act. I hope that my right hon. Friend will reverse it.

    Nevertheless I realise that my right hon. Friend faces considerable difficulties. He is a man of strength and compassion, as I have found in my dealings with him when I have asked him to help the under-privileged groups I mentioned earlier, and he has helped when he could.

    The fact remains that the country must face the consequences of the reactions to the Budget that I have mentioned. The people in the trade union movement who condemn the Budget claim that the Government have broken the social contract and that as a result of this breaking of the social contract they must feel free to make even bigger wage claims than they have made so far.

    I regard the claim that the Government have broken the social contract as complete nonsense. Anyone who examines the claim carefully will recognise that the Government side of the social contract is a vast ranging commitment. It involves a large number of policy commitments. The trade unionists who condemn the Government should scrutinise those commitments to see precisely what the Government have done. If they do so they will find that the Government have done what they said they would do by repealing the Industrial Relations Act and the Housing Finance Act, in giving massive increases in old-age pensions and linking those pensions to earnings, in increasing family allowances, and in introducing the capital transfer tax and the wealth tax. This is apart from matters like the Employment Protection Bill, the National Enterprise Board, and the planning agreements.

    I do not believe that any trade unionist assessing the Budget can brush aside the Government's record on these issues. Neither do I believe that trade unionists can brush aside the sombre background against which the Budget is presented. We are accelerating our rate of inflation and, by doing so, we are speeding to disaster. With pay increases at 30 per cent. and price increases of 20 per cent. we are seeing the sad symptoms of a sick society, and it is well for all of us, defenders of the Government and critics alike, to realise that. When these symptoms are added to increased borrowing and reduced investment they can spell economic catastrophe.

    How do we respond? I suggest, for a start, that we do not respond as the right hon. Gentleman did by making party political points of the type we have just heard. I enjoy such party political points during an election when they are made by right hon. and hon. Members, especially when their firecrackers turn out to be damp squibs; but they have no place in a serious debate of this kind. So I believe that that response was utterly misconceived.

    I believe that the response of the Scottish Trades Union Congress and of a number of trade union leaders such as Hugh Scanlon is also utterly misconceived; because, if they destroy or disregard the social contract and make even higher wage claims, they will be fanning the very flames of disaster which we are all seeking to extinguish and they will thereby damage the interests of their members in addition to damaging the interests of other trade unionists.

    I want to make a few proposals of my own in the light of the present situation. I emphasise that when I speak of incomes I do not speak solely of wages. I speak of all incomes, especially those in the upper brackets, because, although we hear a great deal about the wages of the miners and the engineers, I believe that they are amateurs in terms of self interest when compared with the judges, the civil servants, the lawyers, the doctors, the dentists, and the consultants.

    The question is, how can the House and the nation regain control of what must be acknowledged to be a deteriorating situation? The first step—I am trying not to be doctrinaire, and I really believe this —is for the Government to ensure that those with very high incomes are hit the hardest. I am not anti-profit, but I believe that in terms of social justice and equity we must do this. The Government must adopt a proper attitude to those people. either by controlling their demands in one way of another or by tougher rates of taxation. Whatever means are adopted they must be taken by this Government, and the Government must not be blackmailed by threats that these people will leave the country. If they want to leave they must be allowed to do so. I do not believe that they will.

    Secondly, we must end the calculated ambiguity of the social contract. The Government were right to adopt the element of flexibility in the social contract to avoid the brittleness which characterised the Conservative policy and which damaged relations for a very long time and created the collisions which occurred. The flexibility in the social contract enabled our Government at the time to deal with special cases like the miners and the nurses, people who faced prejudice from the Conservatives. Now that special cases have been dealt with, this is the time to clarify and to define the social contract more precisely and to insist on its observance, because the social contract is becoming an anti-social contract as the strongest in our society exploit that flexibility at the expense of the weakest.

    The social contract now requires a specific figure written in.