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Commons Chamber

Volume 991: debated on Wednesday 29 October 1980

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House Of Commons

Wednesday 29 October 1980

The House met at half-past Two o'clock

Prayers

[Mr. SPEAKER in the Chair]

Private Business

Tyne And Wear Bill Lords

Order for consideration, as amended, read.

Clause 44

Assistance To Industry, Etc

Amendment made: In page 34, line 3,

leave out clause 44.—[ Mr. Goodlad.]

Schedule 2

Section 29 Of Act Of 1961 As Having Effect In Accordance With Section 20 (Control Of Demolitions) Of This Act

Amendment made: In page 43, leave out lines 10 to 20 and insert:

"(5A) In addition to a notice served under subsection (1) of this section, the local authority may, by a notice served under this subsection, within twenty-eight days after the service of notice under subsection (3)(a) of this section, require part of the demolition to be deferred, but not beyond the expiry of the period for serving notice specified in subsection (4) of this section.
(5B) A person who contravenes a requirement made under subsection (5A) of this section shall be liable to a fine not exceeding £500, but in any proceedings for an offence under this subsection it shall be a defence for the person charged to prove that he took all reasonable precautions and exercised all due diligence to avoid the commission of the offence."—[Mr. Goodlad.]

To be read the Third time.

Oral Answers To Questions

Foreign And Commonwealth Affairs

Middle East

1.

asked the Lord Privy Seal if he will make a statement on the progress made with the European Economic Community initiative aimed at securing the peaceful return of Palestinian land presently occupied by Israeli military forces.

3.

asked the Lord Privy Seal what representations he has received concerning Her Majesty's Government's changes in policy towards the Middle East.

M. Thorn has completed his first round of visits to the area and contacts with the various parties are continuing. Her Majesty's Government's aim is to secure the widest possible support for the balanced principles of the Venice declaration as a step towards a comprehensive settlement. Representations have been received from both critics and supporters of the Venice declaration.

Be it in Afghanistan or Palestine, will my right hon. Friend confirm that it is Her Majesty's Government's policy to uphold the right of the indigenous population to live their lives free from external domination? In the absence of an impartial United States policy, will my right hon. Friend continue to work as closely as he possibly can with his colleagues in the other eight EEC countries?

As my hon. Friend knows, it is the policy of Her Majesty's Government to secure a withdrawal of all Soviet troops in Afghanistan and a withdrawal from the occupied territories by Israel as part of a comprehensive settlement guaranteeing Israel's security. I assure my hon. Friend that we shall continue to work closely with the other members of the Nine.

Does the right hon. Gentleman agree that now we have another war in the Middle East, this time between Iran and Iraq, it would be far better to support the permanent peace agreement, namely, the agreement between Egypt and Israel? Would it not be better for Her Majesty's Government to continue to support the Camp David agreement rather than pussyfoot around with this European initiative?

We support the Camp David agreement. As the hon. Gentleman knows, we are aiming to build on that agreement rather than cut across it. He will also be aware that, although the agreement has been extremely successful between Egypt and Israel, it has been less successful in making progress over the Palestinian problem. That is why the Nine made their Venice declaration, which the hon. Gentleman will remember was warmly welcomed by President Sadat.

Perhaps my right hon. Friend will pay more attention to the excellent advice that has been tendered to him by the hon. Member for Hemsworth (Mr. Woodall). Perhaps M. Thorn is now engaged in self-solving the Iraqi-Iranian dispute. What purpose is he serving? At this stage my right hon. Friend must admit that if it were not for the Camp David agreement there might be a general conflagration in the Middle East.

I do not think that my right hon. Friend could have listened to what I said. I did not say that we were in any way opposed to the Camp David settlement. I said that we were seeking to build upon it. As he must recognise—I think that it is generally recognised—the Camp David agreement has so far made limited progress on the Palestinian problem as opposed to considerable progress between Egypt and Israel. We hope that things will get better.

Will the Government be careful in this and other contexts to repress the tendency of the European Economic Community to behave as if it were a State, since initiatives of this sort incur responsibilities that can only be borne and, therefore, only accepted, by nation States?

I do not think that I will follow the right hon. Gentleman into that form of metaphysical assertion. The fact is that the Nine have considerable interests in the Middle East and they have a considerable interest in trying to gain a comprehensive peaceful settlement in the Middle East. It would be a dereliction of duty if they washed their hands of the matter.

Will my right hon. Friend confirm that if the Israeli Prime Minister physically moves his offices into occupied East Jerusalem the Foreign Secretary will instruct all his representatives not to visit the Prime Minister at those offices?

As my hon. Friend knows, we have made it quite clear that we do not recognise any unilateral actions taken over Jerusalem.

The Lord Privy Seal gave the House a very unrevealing reply to the first question. He also made some grudging comments about the great achievement of Camp David. Will the right hon. Gentleman be more specific? We know that M. Thorn had discussions in Tel Aviv and that he also had discussions with Mr. Arafat in Beirut. Is there any sign that progress has been made towards achieving the two main principles that were set out at the Venice summit? When will some type of formal report be made, or have the European Ministers and M. Thorn come to the conclusion that the timing is not right, that there are other major issues in the Middle East—which may have greater priority—and that they should wait until the American election is over, in order to have proper talks with the American Government as well?

I do not agree that I was grudging about Camp David. What I said would probably receive assent from virtually all the parties to the Camp David agreement. M. Thorn did not make a formal report. Contacts are continuing and we shall consider how best to proceed. As the right hon. Gentleman knows, this is an extremely difficult matter. The idea put forward by my right hon. Friend the Member for Stafford and Stone (Sir Hugh Fraser) and by the right hon. Gentleman to the effect that because there is another crisis in the Middle East it is less urgent to solve this crisis, is entirely erroneous.

Afghanistan

4.

asked the Lord Privy Seal if he will make a statement on the present situation in Afghanistan.

There are still about 85,000 Soviet troops in Afghanistan. They continue to face strong resistance. There is no sign that the Soviet Union is prepared to take account of the wishes of the Afghan people. A settlement will necessitate the complete withdrawal of Soviet troops and freedom for the Afghan people to choose their own Government.

Although I am grateful to my lion. Friend for that reply may I ask whether he agrees that it is vital to maintain international pressure on the Soviet Union to cease its aggression against Afghanistan? To that end, will he mobilise international support for the idea of a conference—perhaps on the lines of last year's Lancaster House talks—so that the people of Afghanistan might be afforded the same rights of self-determination as the people of Zimbabwe now enjoy?

I entirely agree with my hon. Friend about the importance of maintaining pressure on the Soviet Union. In the past 11 months the world has shown admirable recognition of the need to do that. The matter will come up again, within a week or two, at the United Nations General Assembly. A conference could be a useful move at the appropriate time. However, it would be important for all the relevant parties to be represented at such a conference, including representatives of the Afghan resistance. At present, I see no indication that the Soviet Union is prepared for a conference along those lines.

Has the Minister got any up-to-date figures for the number of Afghan refugees in Pakistan and elsewhere?

It is estimated that there are about 1 million Afghan refugees in Pakistan. That is an indication of the feelings of the Afghan people towards the Soviet occupation and the Babrak Karmal regime.

Is it not a scandal that 11 months after the Soviet invasion and occupation of Afghanistan, the gallant resistance fighters of that country have to take on a major slice of the Soviet war machine, including T72 tanks, Hind helicopter gunships, MiGs and Tupolevs, with virtually bare hands? Is it not time for the British Government to state openly that they will supply arms of the required calibre to help those resisting Soviet imperialism?

I agree about the importance of the role that the Afghan resistance plays. The Afghan resistance movement is better equipped than it was at the beginning of the year. However, it would not help the resistance movement if we were to be specific about its sources of assistance. It is clear that Soviet forces have suffered several thousand casualties and we have had reports of substantial losses of helicopter gunships belonging to the Soviet Union.

As regards maintaining pressure on the Karmal Government, which on all the evidence has not increased its internal support, does it occur to the hon. Gentleman and his right hon. Friends that this matter could be raised in the credentials committee of the United Nations? Will the hon. Gentleman also explain why he decided to vote for the Pol Pot Government?

The Pol Pot question is an entirely separate matter. As regards the credentials of the Karmal regime, there was clearly insufficient support for that question to be raised.

Cyprus

5.

asked the Lord Privy Seal what proposals he now has to resolve the difficulties facing Cyprus.

Intercommunal talks under United Nations auspices, the object of which is to resolve the Cyprus problem, resumed in Nicosia on 16 September and are continuing. The Government welcome this, believing such talks to be the best way to secure a just and lasting settlement.

Given that there is now a different Government in Turkey, and that Greece is seeking a closer relationship with NATO, is not the time right for a British initiative? Will the Lord Privy Seal take steps towards meeting the Turkish and Greek Governments with a view to getting meaningful negotiations going at governmental level?

I agree with the prolegomena of the hon. Gentleman's question. United Nations' talks are being held. It is early days, but so far they have gone quite well. It is right for all interested Governments—and we are more interested than almost anybody else—to support the intercommunal talks.

The Lord Privy Seal will know that it is widely and understandably held in Cyprus that part of the problem lies in Ankara. Have the Government had any direct discussions with the Turkish authorities? What response has he had?

Part of the problem certainly lies outside Cyprus. The intercommunal talks have got off to a reasonably good start. No one would want to be too hopeful, but they have got off to a better start than they did before. We want to build on that.

Middle East

6.

asked the Lord Privy Seal if he will make a statement on progress in establishing a Middle East settlement; and if he will ensure that Her Majesty's Government give no formal recognition to the Palestine Liberation Organisation in any negotiations so long as the organisation continues to call for the destruction of the State of Israel.

2.

asked the Lord Privy Seal if he will give an undertaking that no Minister will meet representatives of the Palestine Liberation Organisation until the Palestine Liberation Organisation has agreed unequivocally Israel's right to exist in secure recognised boundaries.

We have consistently called on the the PLO to accept Israel's right to a secure existence, and will continue to do so. That would be an essential element in any settlement, but it would not be helpful to the cause of peace for us to tie our hands by giving any such undertaking. But our policy on recognition of the PLO remains unchanged.

When the right hon. Gentleman and his right hon. Friend consider the criteria to be adopted as regards the granting of statehood, will he make clear that no people can expect to become a State if they try, or threaten, to obliterate another nation?

The hon. Gentleman knows our policy, because it is embodied in the Venice declaration. That means recognition by the PLO of Israel's right to exist, and recognition by Israel of the Palestinians' right. That is our policy, and will remain our policy.

Does my right hon. Friend agree that this might be an opportune moment, given the European initiative, for the EEC Governments to point out forcibly to the Government of Israel that the best solution would be for the PLO to recognise Israel's right to existence behind secure and guaranteed borders at precisely the same time as Israel recognises the rights of the Palestinians to self-determination and to a State of their own within 25 per cent. of Palestine?

That solution has been put forward for many years by Dr. Nahum Goldmann, who, as the House knows, is an extremely distinguished—if not the most distinguished—Zionist. That is one way forward. At present it is not the way that is most likely to prevail.

Has there been any indication from Israeli sources that the State of Israel would give any recognition whatsoever to the rights of the Palestinians to live in their own independent State?

I understand that Israel is still strongly opposed to any independent Palestinian State.

South Africa

7.

asked the Lord Privy Seal when he next expects to meet the South African Ambassador to discuss Anglo-South African relations.

The Under-Secretary of State for Foreign and Commonwealth Affairs
(Mr. Richard Luce)

My right hon. Friend has no plans to meet the South African Ambassador in the immediate future.

Is the hon. Gentleman aware that the 17-year imprisonment of Mr. Nelson Mandela is in itself a great crime on the part of the South African authorities? Should not the British Government proclaim loudly and clearly that Nelson Mandela should be released?

The hon. Member may be aware that the British Government voted for resolution No. 473 at the United Nations Security Council on 13 June this year. That resolution called for the release of all those who had been imprisoned on political grounds, and that includes Mandela. The South African Government are well aware of the British Government's view on this matter.

Will my hon. Friend welcome the new South African Ambassador to this country; and, as the most important issue between our two countries now is the future of Namibia, will he say how the United Nations can be recognised as an impartial umpire when it takes the view that SWAPO is the sole and authentic voice of the Namibian people? I feel that that is totally untrue.

Of course we welcome the new ambassador. We believe in a policy of contract and dialogue between our two Governments as the most constructive approach. On the Namibian question, as my hon. Friend knows, we do not recognise, and never have recognised SWAPO as the sole and authentic representative of the Namibian people. We take the view very strongly that it is up to the people of Namibia to determine who their representative should be. The United Nations team has recently been in South Africa, and it will report shortly to the Secretary-General.

Is it not clear that the latest United Nations mission to South Africa has once again been met by a blank denial by the South African Government that there will be any implementation of the UN plan? Since few of the Minister's colleagues deny the legitimacy of SWAPO and South Africa also denies it, why will they not put it to the test as quickly as possible? What will the British Government do to stop the South Africans' total prevarication on this issue?

I am not aware where the hon. Member gets his evidence. We are still awaiting the report which Dr. Wald- heim will make to the Security Council on the outcome of those extremely important talks last week in South Africa. We are not in a position to judge what progress has been made until we have that report.

Does my hon. Friend not agree that it is very important for this country to have good relations with the Government of South Africa, not only because of the strategic importance of South Africa but because that country has raw materials that are vital to the industries of the Western world? Will he not also make some statement from the Dispatch Box that we will make representations to the United Nations to ensure that not only SWAPO (E) is recognised as a negotiating body by the United Nations but that the Democratic Tumhalle Alliance, which is a multi-racial group doing wonderful work in Namibia and which has abolished all apartheid in that country, should also be recognised as a negotiating body within the UN?

I have been in South Africa recently and have had discussions on these problems prior to the visit of the UN team. During the course of the visit of the UN team last week, led by Mr. Brian Urquhart, discussions were held with the South African Government and leaders of several of the internal parties, including the DTA.

The Minister seems to be the only person who does not know that those talks last week broke down and that there was a stalemate. Is he not aware that continuing prevarication by the South African Government over the settlement in Namibia will only mean that more and more people will turn to the gun rather than the ballot box in order to find a solution?

I am very surprised that the hon. Member should make an assumption that last week's discussions led to a break-down. There is no basis upon which he can make that assumption. I hope that he will reconsider what he has said.

Iraq

8.

asked the Lord Privy Seal what representations he has made to the French Government about the supply of weapons-grade uranium to Iraq.

Iraq is a party to the nonproliferation treaty. The supply of this material for a civil research reactor is under international safeguards. We are not satisfied that there are grounds to press the French to break their contracts.

Is the Minister aware that Iraq, in addition to being a signatory of the non-proliferation treaty, is also bound by treaties not to invade a neighbouring country? Since that country has manifestly violated that undertaking, is it not doubtful whether it can be held to its signature to the non-proliferation treaty? Is it not the height of folly to give a country which has shown such aggressive attitudes as Iraq has done recently the ability to make war with nuclear weapons which could begin a world confrontation? Since the Lord Privy Seal attaches so much importance to a combined policy by the EEC should he not say to the French gently that any hope of such a combined policy is being sacrificed on the altar of what the French believe to be their own national interest?

I agree that it would be a serious and unprecedented development if a party to the non-proliferation treaty were to break its obligations that it had solemnly entered into. But of course, the supply by France, which has been discussed by the Government with the French, was part of the normal provision for nuclear power which is allowed under the treaty, and it took place before the recent war.

Will my hon. Friend bear in mind that what the hon. Member for Bethnal Green and Bow (Mr. Mikardo) said about Iraq must apply to Israel with equal force? That country dishonestly obtained large quantities of nuclear material, widely believed to be for military purposes. Is he also aware that Israeli aircraft are daily attacking another independent country—the Lebanon—without being in a state of declared war? Should not this cause us equal apprehension?

One can have apprehension about nuclear proliferation where-ever it occurs. Of course, Israel is not a signatory of the non-proliferation treaty.

Since it is now generally acknowledged that Israel has nuclear weapons, with the assistance of South Africa, what information do the Government have about Israeli involvement in the air-raid on the nuclear centre in Iraq?

Polisario Front

9.

asked the Lord Privy Seal if he will make a statement on the British attitude towards recognition of the Polisario Front.

We have not given official recognition to the Polisario Front. It is not the practice of Her Majesty's Government to accord recognition to such movements. In any event, to do so in this case would be inconsistent with our policy of neutrality on the Western Sahara dispute.

Is the Minister aware that 26 of the member States of the Organisation for African Unity have now recognised the Polisario Front as the representatives of the Saharan people? In the light of that, will he reconsider the British Government's position? Can he tell us whether the position of the British Government has in any way changed as a result of the visit of Her Majesty The Queen to Morocco this week?

On the latter part of that question, there is no reason why our policy should change following the visit of Her Majesty to Morocco, a country with which we have long-standing and close relations. Our attitude to Western Sahara is one of neutrality. That is the same view as is held by all our friends in the EEC and it is up to the OAU which is seeking to mediate—and there is no unanimity within the OAU on this—to do its best to find a settlement. We will support whatever agreement is reached between the parties.

Even if our policy towards Morocco has not changed, would it not be right for the Government to issue a strong protest about the discourtesy shown to Her Majesty The Queen in the past few days?

I take this opportunity to say that there has been no question of any insult being shown to Her Majesty. On the contrary, I am informed that she enjoyed herself during her visit to Morocco.

Angola

10.

asked the Lord Privy Seal if he will raise at the United Nations as a threat to peace in Africa the repeated incursions into Angola by South African forces.

No, Sir. The United Nations Security Council has already debated the matter, and paragraph 6 of resolution 475 states that the Council remains seized of the matter.

Do the attacks on Angola derive directly from the continued illegal occupation of Namibia by South Africa? Will the Minister confirm that there is an agreed United Nations plan for peaceful transition to independence, which has the full support of the five negotiating powers but which is being obstructed only by South Africa? What pressure will be put on South Africa to cease that obstruction?

I reaffirm strongly that the British Government, together with the Group of Five, support as strongly as possible the proposal that the UN should supervise the elections in Namibia. As I said earlier, we are awaiting the report of the team that has been in South Africa for discussions. We hope that progress will shortly be made.

Does my hon. Friend agree that free and fair elections cannot be conducted in Namibia under United Nations auspices as long as the General Assembly regards only one party—SWAPO—as the sole representative of the people, when the United Nations organisation finances SWAPO and the Finnish Commissioner declares himself whole heartedly on the side of SWAPO? Does he accept that it cannot be a fair match when the referee has declared himself to be on one side?

During the discussions in South Africa last week between the UN team and the South African Government, the anxiety of the South African Government about the impartiality of the United Nations was discussed. I am sure that every effort was made to reassure them. With his experience, my right hon. Friend will know that there is a considerable distinction between resolutions passed by the General Assembly—and I have expressed the British Government's view about that resolution—and those passed by the Security Council, which has called on the United Nations to carry out free and fair elections, impartially, among all the parties in Namibia.

If the Minister did not like the term "broken down", which I used earlier, does he agree that the talks have at least reached a stalemate or have been baulked by the South African Government? What further action do the Government intend to take to end the stalemate?

Surprisingly, the hon. Gentleman seems to misunderstand the situation. We are awaiting the report to the Security Council from the United Nations team that has just been to South Africa. The hon. Gentleman makes repeated assumptions that the talks have broken down. He has no evidence for that. There is every prospect of progress in the near future.

Does my hon. Friend agree that it would reflect well on the United Nations if occasionally it condemned the incursions into Namibia from Angola by SWAPO guerrillas, directed not against the South African security forces but against the Ovambo people, who are being killed and maimed on an increasingly large scale?

I agree that it is singularly important to make clear, as we and the Group of Five have done, that our condemnation of violence is not one-sided. Violence from any source hinders the prospect of a peacefully negotiated settlement.

Chile

11.

asked the Lord Privy Seal what representations he has received about the reinstatement of the British Ambassador and the resumption of arms sales to Chile.

Since the announcements to the House of the restoration of Ambassadors in January and of the lifting of the arms embargo in July, both matters have been the subject of lively political debate. No arguments have been advanced, however, which lead us to conclude that either decision was unjustified.

As Claire Wilson's detention was reported by her sister to British consular officials in Chile on 18 July, will the Minister now admit that he knew of her detention and torture before he announced the ending of the arms embargo on 22 July and that he deliberately concealed that information in order to curry favour with his fascist friends? As he has failed to stand up for the basic human rights of a British subject, will he do the honourable and decent thing and resign?

The hon. Gentleman will be disappointed to know that, on hearing of Miss Wilson's detention, the British Ambassador in Santiago managed to get her released on 18 July. It was not until 22 July that she made any complaint of maltreatment. That information was not received in London until 23 July, after the lifting of the arms embargo was announced.

Bearing in mind the concern on both sides of the House about unemployment, does my hon. Friend agree that, if we do not supply Chile with military equipment, the French certainly will, which will only transfer British jobs to French workers? Will he refute the attacks on the British Ambassador and thank him for his intervention, which went beyond his call of duty, on behalf of Miss Wilson, who has the most tenuous connections with the United Kingdom?

I believe that the presence of the British Ambassador was instrumental in securing the early release of Miss Wilson. I also believe that nations should trade in all commodities, save those arms that can be used for internal repression. We pursue the same policy as our predecessors, only not selectively.

May I remind the Minister of the reply given in the other place by one of his colleagues on 10 March, when he said that the Government would not export arms to a country that was guilty of torture? Does the Minister accept that he has sought to justify such action on the grounds that it was only one little case of torture, but we know very well that civil rights in Chile have not improved? They have deteriorated. Furthermore, is he aware that the present regime, through a plebiscite, has taken powers to maintain itself for the next decade? Should he not reconsider the matter? Would it not be very much in the interests of this country and its good name for the Government to say that we will not supply arms to such a regime? If the Minister is worried about the arms being supplied by another European country, why does he not get his right hon. Friend to raise the matter at the so-called Council of Foreign Ministers?

My noble Friend made it clear that he was speaking of arms that could be used for internal repression, as the right hon. Gentleman will see if he checks the record. We do not approve of either the human rights record or, more still, the nature of the democracy or lack of democracy of a large number of countries. Some do not even have a terminal date for the autocratic power of the regime, yet 'such considerations never worried the right hon. Gentleman's Government.

Gibraltar

12.

asked the Lord Privy Seal what response he has received from the Spanish Government on the situation regarding the free movement of persons between Spain and Gibraltar.

The Spanish Government have recently assured us that their commitment to the Lisbon agreement remains firm. The Goverment continue to work for its early implementation.

Does my right hon. Friend accept that the situation is deteriorating and is not assisting the Gibraltarians? My right hon. Friend is aware of the recent visit I made to the mayors in El Campo, who are keen to have a settlement. Does he agree that there should be detente between the people of Gibraltar and the people of El Campo, with a view to arriving at a settlement? Does he further agree that it would be helpful to have the settlement before Christmas to avoid disappointment similar to that experienced by the people of Gibraltar on 3 June, when the gates remained closed?

I agree that the situation is deteriorating in the sense that the agreement that we hoped would come into force shortly after 1 June still has not come into effect. We greatly regret the delay. I agree with what my hon. Friend says about detente. I very much hope that the agreement will come into force well before Christmas.

Anglo-Soviet Relationships

14.

asked the Lord Privy Seal if he will initiate bilateral talks with the Soviet Government aimed at improving Ango-Soviet relationships and reducing world tension.

The Government are ready to work with the Soviet Union to reduce the causes of world tension and to develop bilaterial relations on a businesslike and constructive basis. We are looking for some sign, especially in relation to Afghanistan, that the Soviet Union is prepared to do likewise.

Does the hon. Gentleman agree that approaches made from time to time by the West German and French Governments have proved helpful and that any initiative taken by countries on either side of the East-West power blocs to remove misunderstanding and distrust makes a contribution?

The simplest way of removing distrust and improving confidence would be for the Soviet Union to remove its forces from Afghanistan and to cease to breach the Helsinki agreement by tyrannising its own people.

European Community

United Kingdom Membership

31.

asked the Lord Privy Seal whether he will now seek to renegotiate the United Kingdom's membership of the European Economic Community.

I rather thought that my right hon. Friend would give that answer, but time will prove a marvellous tutor. Can he bring to the attention of the House any industrialised country the currency of which has had a sudden and massive increase, boosted by the surging value of its raw materials and natural resources, and which, at the same time, had no control over its own trading policy? Could he say what happened to the industrial and manufacturing base of that country?

I am not sure that most people would entirely agree with my hon. Friend's diagnosis of the situation and, unless he is suggesting import controls, I am not certain of the relevance of his question. He must realise that import controls are not the policy of the Government side of the House and are the policy of only part of the Labour side.

Is the right hon. Gentleman aware that many of us who strongly support our continued membership of the Community feel that the criticism that it receives is due more to what has not been done or attempted than to existing policies? Will he give an assurance that the Government will seek to give a lead in these matters by, for example, tackling employment policies, possibly through an increase in the size of the regional fund?

I agree with the first part of the hon. Gentleman's question. There is a lot in that. He will be aware that as a result of the 30 May agreement the Community is committed to restructuring the budget, during which many of the matters that the hon. Gentleman has raised will inevitably come up.

Does my right hon. Friend agree that when hon. Members use the word "renegotiate" in this sense it is a euphemism for "withdraw", though they are afraid to say so, particularly after the resounding support for our continued membership expressed at, for example, the Conservative Party conference? Is not the psychology of public opinion that, while people grumble about various detailed aspects of policy, which is natural, they nevertheless wish to remain in the EEC and to develop it institutionally through the strength of all the members?

I agree with my hon. Friend, though I do not think that it is fair to suggest that my hon. Friend the Member for Northampton, North (Mr. Marlow) is afraid to advocate withdrawal. Certainly, the contrast between the Conservative Party conference and the Labour Party conference on the question of Europe has been widely noted.

It will come as no surprise to the House that the Government have neither the will nor the wish to alter the unequal and shameful treaty of accession which a previous Conservative Government signed. As the right hon. Gentleman reminded us, there is in the unsatisfactory agreement reached on 30 May, a timetable for further discussions about the future of the CAP and the budget. Those are important matters and I wish to put a serious proposal to the Lord Privy Seal. On these vital matters will he circulate to hon. Members and to the country a Green Paper setting out what the Government wish to see changed in the budget and the CAP? They should not leave the whole thing to the initiative of the Commission in Brussels.

We understand that the right hon. Gentleman has to parade round the paddock on this matter, and he has done that fairly satisfactorily. He knows that he is wrong to say that the 30 May agreement was unsatisfactory. That comes extremely badly from someone who was in the previous Government, because they achieved nothing on this matter. Our agreement was a good one and the right hon. Gentleman is rightly envious of it.

I shall consider what the right lion. Gentleman said about a Green Paper, but I think that he will agree, on reflection, that that is not necessarily the best way of setting about negotiations. Whether or not we have a Green Paper, there will be no question of our leaving everything to the Commission or to any of the other people who figure in the right hon. Gentleman's demonology. Of course we shall be in contact with all our partners and with the Commission and we shall be discussing the matters in the House. I do not believe that the best way of achieving our negotiating ends would be to put them forward in a Green Paper.

Japan

32.

asked the Lord Privy Seal what progress has been made in developing a European Economic Community policy towards Japan.

The Foreign Affairs Council on 22 July took the view that Commission proposals for a common commercial policy required further study. The subject is on the agenda for the next Foreign Affairs Council meeting on 24 and 25 November.

Is my right hon. Friend aware that there is widespread support, certainly in the motor industry in this country, for the views reported today to be held by Mr. Haferkamp, that there is a need at the meeting next month for the EEC to arrive at a common trade policy towards Japan, for fear that otherwise there will be individual national initiatives which could lead to an outbreak of protectionism?

I see my hon. Friend's point. If there were a satisfactory Community agreement it would have greater strength than member States acting individually could have. I am sure that my hon. Friend will agree that, in order to be acceptable to the United Kingdom, a common Community position on trade with Japan would have to safeguard our interests at least as effectively as do existing industry arrangements.

Is not the truth of the matter that the Lord Privy Seal does not have a satisfactory agreement at either industry or EEC level and that if an agreement is to be negotiated he will need new machinery which does not exist within the Community? Is not the reality that the Japanese are flooding our car market and that by the time the Government get round to doing something about it we shall not have a lorry or a car market left?

The hon. Lady is indulging in her customary exaggeration. It is not happening; so far the Japanese have abided by their agreements. There is not a satisfactory Community agreement at the moment. That was the whole point of the question of my hon. Friend the Member for Bromsgrove and Red-ditch (Mr. Miller). He was suggesting that there should be an agreement.

My right hon. Friend will be aware that our right hon. and learned Friend the Chancellor of the Exchequer recently circulated to all members of the National Economic Development Council a remarkable paper on Japan by our former ambassador there, Sir Michael Wilford. Since that paper would help to concentrate wonderfully the minds of those seeking to establish an effective European response to the Japanese challenge, will my right hon. Friend arrange for the paper to be given an even wider circulation?

Is it not a fact that the problems of the motor car industry and import penetration are not related solely to Japan, but also to our alleged Community partners? Should not the real purpose behind the question be not just to single out Japan, but to have a proper policy that will protect this country against exports from other countries?

I do not accept what the hon. Gentleman says. It has nothing to do with the question, which is concerned with Japan.

Treaty Of Rome

33.

asked the Lord Privy Seal if he will now make proposals to amend the Treaty of Rome.

Does the right hon. Gentleman agree that there is now widespread disenchantment with our membership of the EEC, and that the basic problem is related to the iron corset of the Treaty of Rome—in particular, some of us think, more from a political than an economic point of view? Is it not now clear that such a treaty, drawn up so many years ago, must be ready for fundamental change?

I do not agree that there is great disenchantment. One of the interesting things that happened after the goings-on at Blackpool was that people who had not previously been all that keen on membership suddenly realised how disastrous withdrawal would be. There may well be improvements that could and should be made to the Treaty, but I do not think that that is the fundamental question at present. The fundamental matter is to get on with the restructuring to which the Community was committed by the agreement of 30 May last year.

Is my right hon. Friend aware that the decision of the Labour Party at its conference to seek withdrawal from the EEC has caused great difficulty for the Conservatives in the European Parliament in forwarding British interests there? It is very difficult to convince our European partners of the essential levity of the Labour Party, which in opposition invariably preaches that it will withdraw and in government is forced to recognise the realities of the situation.

I agree with my hon. Friend, but in speaking to our partners in Europe I have found no great difficulty in convincing them about the levity of the Labour Party.

If the Government are opposed to import controls, why do they operate the common agricultural policy?

Because, as the right hon. Gentleman knows, we have protected our agriculture in one way or another for many years. That was done very successfully after the war by the Labour Government of whom the right hon. Gentleman was a member and to whom he continually looks back. The CAP is just one other way of protecting our agriculture.

My right hon. Friend makes rather terse denials to hon. Members on both sides of the House, but surely he cannot maintain that the terms of our membership are set in concrete for all time. Reciprocal advantages and obligations evolve with the passage of time, do they not?

I think that the sentiments expressed by my hon. Friend are absolutely impeccable.

Council Of Ministers

34.

asked the Lord Privy Seal if he will make a statement concerning meetings of the Council of the European Economic Community held since the end of July.

35.

asked the Lord Privy Seal if he will make a statement concerning meetings of the Council of the European Economic Community held since the end of July.

I refer the hon. Member to the replies I gave to my hon. Friend the Member for Lincoln (Mr. Carlisle) on 27 October.

I thank the right hon. Gentleman for that reply. Can he confirm that on 7 October the Council of Ministers agreed the pattern of supplementary measures that would be part of the British repayments? Will he also confirm that they will last for only three years, that only 70 per cent. of the expenditure will fall on the EEC, with 30 per cent. falling on Her Majesty's Government, and that these payments are primarily controlled by the Council of the EEC? When shall we have a list of the regional measures that the Government propose? How much additional United Kingdom expenditure will that involve?

I think that the hon. Gentleman will receive a list fairly soon after the measures have been submitted to the Commission. The hon. Gentleman was misleading when he talked about "only 70 per cent." Each project will be financed to the tune of only 70 per cent. by the Community, but the figures that I gave the House after the 30 May settlement still apply. There has been no question of reducing our budget refund by 30 per cent.

Is the right hon. Gentleman aware that while the British Government have let the British textile industry bleed almost to death the Dutch Government in August and the French Government yesterday announced substantial packages of aid to their textile industries? Was any objection to these schemes taken in the Council of Ministers? If not, do the British Government intend to ensure that they secure similar schemes of assistance?

The hon. Gentleman will appreciate that this matter did not come up in the Council of Ministers, and that detailed questions on the textile industry should go to my right hon. Friend the Secretary of State for Trade.

As our net contribution to the EEC so far this financial year has been about £3 million a day, can my right hon. Friend explain a little more why he and his colleagues agreed to our receiving only 80 per cent. of what we were promised a short time ago?

I have already tried to explain, I thought clearly, in a written answer to my hon. Friend. The point is that we agreed that not less than 80 per cent. should be paid by the end of the financial year. The rest will be paid after that. There is no question of our agreeing to 80 per cent; it is simply that not less than 80 per cent. will be paid by the end of the financial year.

Would the right hon. Gentleman care to tell the House a little more about the initiatives that the Government pursued at the meetings in regard to looking after the interests of the British steel industry, both the public and private sector? How would the right hon. Gentleman describe the response to those initiatives?

There has been general unity of view between the British Government, the steel Commission and the steel unions. We have agreed that action under article 58 is desirable. The Germans have found this difficult, and there is to be another meeting of the Council tomorrow.

Will my right hon. Friend acknowledge that a number of us on the Conservative Benches were opposed to entering the European Community, and that therefore it is right that today we should draw attention to such matters as the French cheating over the milk co-responsibility levy?

I do not know whether that is right. My hon. Friend is at liberty to ask what questions he likes, but, without further elaboration, which I do not wish to press my hon. Friend to give, I am not certain what he is asking about.

The Lord Privy Seal does not seem to have taken account of the point that is being made, that both the timing of the repayments and the amount of the budget refunds are of great importance. Presumably, on the timing, if we do not receive substantial repayments in this financial year that will make the cuts all the more severe than those so far announced.

How can the right hon. Gentleman give such a categorical commitment about the 80 per cent. repayment before the end of the financial year, when each project must be approved by the Commission and be subject to the possibility of challenge on the need, against a weighted majority vote in the Council of Ministers?

It is because that is an agreement that was reached by the Council—a unanimous agreement—and I have no reason to believe that it will be broken. There is plenty of time for ample projects to be agreed and the moneys paid over before the end of the financial year. The right hon. Gentleman, with his experience of how the Community works, will know that a negative qualified majority is not very difficult to achieve.

Community Policy

36.

asked the Lord Privy Seal when he expects to meet other European Economic Community Ministers to discuss future planning of the Community.

37.

asked the Lord Privy Seal when he expects to meet his European Economic Community counterparts to discuss the future development of the Community.

38.

asked the Lord Privy Seal when he plans to meet his European Economic Community counterparts to discuss the enlargement of the Community.

The next meeting of the Foreign Affairs Council will be on 24 and 25 November, which my right hon. and noble Friend will attend. I hope to meet Community colleagues on that occasion. I expect also to attend the meeting on 16 December. The agendas for these meetings have not yet been agreed.

When the Minister goes to the meetings, can he cast off his blinkered attitude towards the Community and accept that there are some faults? Will he accept that many thousands of jobs are being lost in many manufacturing industries, at least in part because of cheap imports, paticularly in the textile industry? What sort of safeguards will the textile industry have against the accession of Portugal, which is currently the second largest low-cost importer into this country? Jobs are at stake. There are faults in the Community, but the right hon. Gentleman appears to go on completely oblivious of everything.

That is quite untrue. Of course there are faults in the Community. No serious person has ever denied that. The hon. Gentleman will know, or should know, that in the agreement bringing Greece into the Community there is a general safeguards clause. As I have told the House before, we shall ensure that a similar safeguards clause applies to Portugal.

Will my right hon. Friend confirm that it is the intention of the Government to press for a substantial increase in the regional and social funds at these meetings?

That is in general our ambition. Obviously, in any restructuring we must take account of the fact that the proportion of the budget fund that goes to agriculture is too much, particularly on the disposal of agricultural surpluses. My hon. Friend will be aware that there is a particular problem this year because of the prospect of the Community running out of own resources. There is, therefore, a limit to how much we can press in the direction he wishes.

Is it not the case that Her Majesty's Goverment have suggested that the regional fund and the social fund should be lower and that they would agree with price rises in the common agricultural fund? Does that not make nonsense of all the things that the right hon. Gentleman has said?

The hon. Lady is misinformed. My hon. Friend the Financial Secretary to the Treasury pressed for an increase in the social and regional funds but when that was not possible, he rightly did not wish to hold up the adoption by the Council of the budget.

Business Of The House

Resolved,

That, at this day's sitting, this House shall not adjourn until Mr. Speaker shall have reported the Royal Assent to any Acts which have been agreed upon by both Houses.—[ Mr. Waddington.]

Unemployment

Motion made, and Question proposed, That this House do now adjourn.—[ Mr. Waddington.]

3.30 pm

Parliament is approaching the end of its first Session under the Government of the right hon. Lady. In just 18 months she has broken every promise on which she won the last election. Her economic policy is in ruins and the price of her failure is an increase in unemployment of over 600,000 in the last 12 months while British industry, already reeling under the heaviest battering that it has suffered since the 1930s, has just published what it describes as its blackest survey ever, saying that we have not touched bottom yet, that there is a lot more bad news to come, and that it is going to get considerably worse the way things are going.

The fall in employment in Britain over the first six months of this year was over 500,000, after three years in which employment rose by 250,000. Unemployment breached the 2 million mark in August, and is increasing faster every month. The latest increase in unemployment is the highest ever recorded at 106,000. Vacancies are the lowest for 20 years. There are 250,000 men and women on short-time working or waiting for the sack. As the right hon. Gentleman the Secretary of State for Employment knows, the temporary short-time working scheme is now beginning to run out for many of those at present covered by it.

In addition, large numbers of people who have lost their jobs are not registered on the unemployment register. I gather that the Government's own assumption—I hope that the right hon. Gentleman will confirm this—is that unemployment will reach 2,800,000 next year, which is more than can be handled by the Government computers. If that prospect gives delight to some Conservative Members it does not do so to their constituents.

These figures reveal a human tragedy of a dimension that we have not known since the great slump of the 1930s. Nearly half of those out of work are under 24 years of age. A whole generation of youngsters is being condemned to drop out of normal society, and 350,000 men and women have been out of work for over a year. There are still some Conservative Members who talk of unemployment as if it were a comfortable rest cure, but the average couple on benefit are expected to live on under £30 a week. The Government are cutting nearly £3 off the increase in unemployment benefit due next month in order to make sure that it does not match the increase in the cost of living that the Government themselves have produced over the past 12 months.

People with as little as £2,000 of redundancy pay or £2,000 in a building society will lose their right to supplementary benefit, and next year the Government are planning to abolish the earnings-related supplement. This is an appalling tally of humiliation and indignity inflicted on the British people by this Government.

The effect on our economy and, indeed, on Government financing, is equally disastrous. The present level of unemployment represents a loss to the economy of £10,000 million, which is 5 per cent. of our gross domestic product. It is equivalent to an average cut of £400 in the income of every man or woman at work today. If the economy were growing at 3 per cent., as it was in the last full year when the Labour Party was in power, instead of falling by 3 per cent., as it is falling this year, the public sector borrowing requirement to which the Conservative Party attaches so much importance, would be lower by £6,000 million.

At this time entire industries and entire regions are being smashed into ruins. Unemployment is already over 10 per cent. in Northern Ireland, in Scotland, in Northern England and in Wales. In Wales, authorities locally have estimated that it will reach 15 per cent. in two years' time and 30 per cent. in many areas of the Principality.

Firms are now collapsing all over the country. The last quarter's increase in company failures in manufacturing industry was an all-time record. The problem is not confined to the areas of traditional unemployment. The London Chamber of Commerce said last week that unless there is an immediate change in Government policy, London will face a tidal wave of bankruptcies in the coming winter. This is not, as the Government used to claim, a shake-out of the inefficient firms. Some of the most efficient firms in the country are deeply affected.

ICI reported a loss for the first time in its history last week and is sacking 4,200 exceptionally able and dedicated men and women in its fibres division. Other efficient firms with world-wide reputations are going under. Fodens is already in the hands of the receiver, Bowaters is closing down, GKN, Lucas and Courtaulds are reporting heavy losses. The problem is not confined to manufacturing industry. The construction companies are being hit worst of all, mainly by cuts in Government spending. Distribution is equally hard hit. The profits of the big chain stores, Woolworths, Marks and Spencers and British Home Stores, have fallen heavily and 30,000 jobs have already been lost in retailing. I also remind the Prime Minister that small firms and small shopkeepers are being hit worst of all.

I wonder whether the Prime Minister has recently looked at the situation in Finchley High Street. Opposite the job-centre, which is now doing a booming trade because unemployment in Finchley has risen 70 per cent. in the last 12 months, one shop has already closed, a second closes on Saturday, and a third as soon as its closing sale is over. I expect that the owners of all these shops voted for the Prime Minister in the last election. I know that many of the firms that 1 have mentioned and many of the firms now in trouble were large contributors to the Conservative Party's funds.

We were all relieved to hear from the Prime Minister yesterday that she has now withdrawn the letter that attempted to blackmail the companies receiving Government aid into subscribing to the Tory Party. I ask her whether she will now complete the good work by returning the money subscribed to her at the last general election by Bowaters, Lucas, GKN, Fodens, Wimpeys, Taylor Woodrow, and the hundreds of other firms of which I shall be glad to give her a list under sealed cover after the debate.

The plain fact is that British industry is now facing the most daunting prospect since the early 'thirties. Why does it face that prospect? It is not because of the world slump—exports are only just beginning to fall. It is not because of excessive wage increases. The Financial Secretary published in the Treasury's economic report in August the view that unemployment would increase if wage increases were higher than the increase in the money supply. They have not been so in the last 12 months, have they, Mr. Speaker?—or is it unfair to ask you that question? The Financial Secretary will be able to tell you, Mr. Speaker, that in the last 12 months the increase in earnings was about the same as the increase in the growth of money supply. It was much lower in the manufacturing industry, which has been hit by the closures that I have mentioned.

British industry is facing that daunting prospect not because of the increase in oil prices. Among industrial countries Britain is deriving great benefit from the increase in oil prices, because Britain is now self-sufficient in oil. It is adding about 5 per cent. to our gross domestic product. It is giving us the benefit of about £4 billion in public revenue. It means that Britain is the only industrial country in the world, apart from Norway, that can look forward to a surplus on its current account in the present year.

No, Mr. Speaker, the industrial reality and the outlook that I have described are direct consequences of Government policy. First, we are experiencing the most savage deflation of demand since the war. The Government decided at the beginning of this year, contrary to their election promises, to increase the burden of taxation by £3,650 million. They decided to cut public expenditure by £5,000 million. On top of that, the collapse in public confidence in the country's economic future has led to the savings ratio rising to 15 per cent. of income. Every 1 per cent. increase in the savings ratio is equal to a fiscal deflation of £2,000 million. In other words, as a direct consequence of Government actions there has been a reduction of about £15 billion in demand in the current year.

On top of that savage fiscal deflation the situation has been made infinitely worse by a monetary policy that is far too strict. It sets a target that is only half as high as the increase in inflation engendered by the Government. It is a monetary policy that has been pursued with an incompetence unparalled in the world.

The Chancellor of the Exchequer has tried to control the money supply through interest rates alone. However, excessive interest rates have not reduced company borrowing, which was the Government's intention according to the Chancellor when he introduced the rates nearly 12 months ago. On the contrary, company borrowing is still at an all-time high. The only effect of the excessive interest rates is that companies have had to borrow more to finance their existing debt. We have offered foreign speculators a bonanza at the expense of the British taxpayer. About £4,000 million of hot money flowed into Britain in the past 12 months. That has been the main factor in pushing up the value of the pound. It has risen by 30 per cent. compared with the average of other currencies over the past 12 months.

I have been pointing that out to the Government all year. The Bank of England points it out in its latest edition of the Bulletin. The CBI has followed suit. In its survey published today the CBI states:
"The relative unit cost competitiveness of British industry is 60 per cent. worse now than it was in 1975."
As a result, Sir Terry Beckett said yesterday that industry was going right down the nick. Sir Maurice Hodgson, the head of ICI, last week said that he believed in a bracing monetary climate but that British industry was now "freezing to death".

The Government claim that all this is just the painful price that inevitably must be paid for bringing inflation down by controlling the growth of money. The Government have pointed to the recent fall in inflation as evidence that their policy is working, but if the Government's arguments are right and there is an 18-month to 24-month gap between a change in the growth of money and a consequence on prices, the fall in inflation this summer is due to the last Government's monetary policy and not to this Government's monetary policy.

More than that, this Government have made a total shambles of their monetary policy. The Chancellor finally admitted to the Select Committee on Monday that sterling M3 has been growing at 19 per cent. since February—over twice the target of 9 per cent. set by the Financial Secretary when he addressed the House some months ago. If the Government are right in their arguments, we must face an immense increase in inflation some time next year as a consequence of their monetary incompetence this year.

I read in the newspapers that the Prime Minister is "very, very sorry" about all this. In fact, I gather that she has been in quite a bate. Her personal style as Prime Minister, as we all know, has been distinguished by a remarkable disloyalty to her colleagues, as the right hon. Member for Lowestoft (Mr. Prior) will be the first to testify. I am glad to see that many of her Cabinet colleagues are now flattering her by imitating her disloyalty. There was a lovely example of that by the hon. Member for Cambridge (Mr. Rhodes James) in a speech yesterday. I can see why the Leader of the House is looking so nervous he thought that I was about to refer to him.

The Prime Minister has been putting it about that the collapse of her monetary policy is all the fault of the Governor of the Bank of England. Apparently, everybody is to blame but she. However, it was she who authorised the 8 per cent. increase in the retail price index—for which the Government are directly responsible—over the last 12 months, which has been reflected in the biggest increase in earnings for six years. It was she who abolished the exchange control, although the Bank of England must have warned her that that would mean saying "goodbye" to control of the money supply, because British banks have been lending furiously to British firms through their subsidiaries abroad.

It was the Prime Minister who abolished the corset and therefore freed for the banks a new way of avoiding monetary control by round-tripping, thus pushing up the money supply and attracting even more foreign inflows, which are pushing up sterling still further. I suspect that the Bank of England warned her against all these steps but with her usual self-confident pigheadedness she preferred to rely on the stumble-bums in the Treasury. She ignored all the advice that she received from the Bank. If the Bank of England is at fault in this lament- able story, it is in relying on the last Conservative Government's introduction of the ill-famed competition and credit control policy instead of taking direct control of bank lending, as happens in all the countries that successfully control the supply of money.

The Prime Minister herself was responsible for the public expenditure cuts, which relied largely on cutting the orders to private industry for capital equipment or increases in nationalised industry prices. Mr. Harvey Jones, of ICI, told us last week:
"Every single one of our costs"—
he was referring to his firm—
"that can be affected by Government is higher than in continental Europe."
To take just one example, British industry is having to pay more for its industrial gas than industry anywhere else in the world-18 per cent. more than Germany, 47 per cent. more than France and 108 per cent. more than the United States. That is the main reason why Bowaters is bust.

Surprisingly, the Conservative Party has been standing market economics on its head. It has been using cash limits in the nationalised industries to ensure that they raise the prices of their products when the demand for them is falling. That is why we shall suffer a 14p first-class letter post in a month or so and why British Rail fares will go up by 19 per cent. by the end of the year.

Everything that I have so far described, which is responsible for what has happened so far, is nothing compared to what is to come next year, as Sir Terry Beckett pointed out in his introduction of the last CBI survey. Next year we face the collapse in exports that has been so slow to come. Next year we shall face a 10 per cent. collapse in investment, after three years in which investment, particularly in private manufacturing industry, has been rising at unprecedented levels. Next year, also, we shall face a collapse in retail sales that will be all the more severe if the Government are successful in the compulsory pay policy that they are introducing in the public sector.

Two questions have been asked in the past week or two, and they have not been answered. I hope that we shall get answers from the Government this evening. First, Sir Terry Beckett, the head of the CBI—the employers' organisation—asked yesterday whether we have to go through the next three or four years destroying great tracts of British industry. We want a reply to that question, too. The other question was asked by the head of the trade union movement, Mr. Len Murray, of the Prime Minister personally in Downing Street the other day: is there any level of unemployment that the Government would consider too high? We want an answer to that question, particularly from the Secretary of State for Employment.

The biggest problem that the country risks facing unless there is an immediate reversal of policy is that when recovery comes—and we may have to wait for the next Labour Government before it does—those parts of our manufacturing industry that have survived the Prime Minister's holocaust will have carried out no investment and no industrial training for five years. We shall therefore face the possibility of recovery with an industry that has clamed-out machinery and lacks the skills that will be essential then to respond to demand. That is why it is essential that the Government should reverse their policy now. Every week's delay is pushing British industry further towards terminal decline.

Order. It is quite clear that the right hon. Gentleman is not giving way.

There is no answer to our economic problems today that does not involve a U-turn by the Government. The Prime Minister is so far off course that she will have to do a U-turn even to get herself back on the course that she set herself earlier in the year. I shall tell the right hon. Lady what is needed, and I think that there will be wide agreement between both sides of the House on what I have to say.

First, at least £400 million is needed to alleviate the immediate impact of unemployment. The TUC and the Labour Party have both put forward specific proposals for short-term alleviating measures in this area. I isolate two of them as being by far the most important. I hope that the Secretary of State for Employment will be able to tell us tonight that he has persuaded his colleagues to give him enough money to do two things. The first is to fulfil the promise that was carried out by the last Labour Government to offer every school leaver a job or job training by the Easter after leaving school. Secondly—this has now become equally important—there must be a similar offer of a job or job training to every man or woman who has been out of work for more than 12 months.

Further—there is wide agreement on this—there must be an immediate cut in interest rates of at least 4 per cent. Most City advisers whom the Prime Minister may have drawn to her attention are now agreeing that that is likely to have no effect on increasing the money supply, but it may have a healthy effect in producing a fall in the value of sterling.

Next, we must have reflation. The savage deflation from which Britain is now suffering is only made worse by every aspect of the Government's present policy. We must make good the shortfall in demand, especially when the saving ratio is now as high as 15 per cent. The Government must borrow from that money and feed it back in industrial aid, in cuts in indirect taxes, and in assistance to the under-privileged.

This will not upset the money supply. The London Business School pointed that out earlier this year, and it provided the Chancellor, I think, with his first economic adviser. I must, with respect, tell the Prime Minister that such a move will not prevent the institutions from lending to industry. The appalling thing about the abolition of exchange control, as revealed in the figures this week, is that the financial institutions have been buying more equities abroad than they have been buying in Britain in the past 12 months.

The next thing that the Government must do is to channel North Sea oil revenues—£4 billion this year—into industrial investment, infrastructure and industrial training instead of allowing them all to pour down the drain in financing unemployment.

Order. There is no advantage to be gained in the hon. Gentleman's remaining standing when it is clear that the right hon. Gentleman is not giving way.

I put my final point urgently to the Government, and I know that the Secretary of State may have some sympathy for what I shall say. They must start serious talks—negotiations—with the CBI and the TUC about actions that will help to reduce costs through higher productivity and will produce a more sensible approach to the problems of pay and prices. The right hon. Lady has met the TUC, but only to abuse and insult it.

The sort of approach that I have suggested is one that any previous Conservative Government facing these problems would have adopted, as Mr. Macmillan made clear on television the other day, and as the right hon. Member for Sidcup (Mr. Heath) would no doubt confirm. However, the Government are planning to do exactly the opposite. We understand that there is a great crunch meeting of the Cabinet tomorrow morning. The Prime Minister appears determined to stick to the policies that have collapsed around her. She seems determined to try to make something of the ruins of that ridiculous medium-term financial strategy that the Chancellor of the Exchequer unveiled to the House, to such derision, in his speech on the Budget. She seems determined to try to make good the increase in the public sector borrowing requirement, which is due entirely to the fall in output and the increase in unemployment.

There is no way of cutting public expenditure by the £2 billion that is talked of which will not hurt industry even more and drive up unemployment even higher. The reduction in demand will do that, however it is achieved. If it is done through capital cuts, as has happened so often in the past, it will fall very heavily on private industry, particularly in construction. If the Prime Minister does it through nationalised industry price increases it will directly add again to industrial costs. If she follows the advice of the ineffable right hon. Member for Daventry (Mr. Prentice) and goes for the social services she will be inflicting needless suffering on those who are not able to help themselves.

I read in The Daily Telegraph this week that one of the Prime Minister's Cabinet colleagues described her present policy as the economics of the madhouse. It also represents the social morality of the Victorian poorhouse. I hope that there are enough hon. Members on both sides of the House who take seriously the future of Britain's industry and economy, and who will join the Opposition tonight when we vote against the Adjournment motion.

4 pm

The House has listened to the speech of the right hon. Member for Leeds, East (Mr. Healey) without overwhelming enthusiasm from either side. We should regard it as the opening step in his campaign for the leadership of the Labour Party. Those of us who naturally take an interest in that position find it difficult to determine the terms and conditions on which the local, acting, temporary leadership of the Labour Party will be available. On present form the occupant of that position seems likely to have about as much authority as the doorkeeper of Congress House, and as much job security as the chairman of Westward Television.

The right hon. Gentleman has some qualifications for the job. Like his immediate predecessor, he is the owner of an ample mansion in Sussex—[Interruption.]

Like his immediate predecessor, the right hon. Gentleman spent a great deal of his time in office helping the International Monetary Fund with its inquiries. As we know, he is a man of sufficient intelligence to disagree with almost every decision of his party conference and with every decision of its national executive, but he is very reluctant to admit that in public. His speech today was in line with that character.

The debate proceeds on the common grounds of deep concern on both sides of the House about unemployment and the recognition of the real difficulties that face much of industry, with the knowledge of the problems that are especially intractable for businesses that face foreign competition at home or abroad. There is common ground also in our concern about individuals and communities that suffer from those problems.

If we are together to improve the prospect, it is of the utmost importance not to overlook two matters. First, the problems are in no way unique to Britain. Secondly, responsibility for these conditions cannot be laid exclusively at the door of Governments of either party. [Interruption.] Opposition Members may choose to disregard that, but throughout the industrial world recession is marching ahead. The average rate of inflation in the main industrial countries, excluding Britain, has doubled since 1978. In the seven major countries, again excluding Britain, unemployment has risen by 2·3 million during the past 18 months. For the same industrial countries in the year towards which we are now moving there is the prospect of no more than 1 per cent. growth at best. In the United States—still a major part of the world market—output last year was down by 11 per cent. Even in Germany, the major industrial partner in Europe, output is expected to decline by about 1 per cent. in the first half of next year. All those things are symptomatic and symbolic of the troubles afflicting not only Britain, but the whole of the industrial world.

Whatever the right hon. Gentleman may say, I do not argue that those problems are all the fault of the Opposition. Anyone who takes an objective view knows that much of industry in Britain has been failing to match the improvements in productivity that have been achieved elsewhere. Over the years industry has become less and less competitive. For example, during the three years to 1979, when the overseas markets for motor cars was buoyant, registrations for new cars in Britain rose by one-third, but the output of cars in the United Kingdom dropped by one-fifth. The Labour Party came into office in 1974 with unemployment standing at 575,000. By the time it left office, unemployment stood at 1·3 million—well over double the figure of 1974. The Opposition have very little cause for complacency and no cause whatsoever for conceit. I have illustrated two causes of Britain's present difficulties—each of great importance and far from easy to remedy, except over a significant period.

The right hon. Gentleman argued that the Government could determine one cause of our difficulties, namely, the exchange rate. I know that a number of my hon. Friends are concerned about that. There are three things to be said about that matter. First, although the problems posed for some businesses by the high exchange rate are real, we should not overlook the fact that it is not all bad. The present level of the £ sterling keeps down the price of many raw materials. It is worth remembering that our problems were not made significantly easier when the right hon. Gentleman found himself treating our problems by means of opposite prescription—massive depreciation. Even so, the present level of the £ sterling is not an objective of policy. The right hon. Gentleman may well laugh. As he should know, the reasons underlying the present level of the exchange rate are more complex than might be thought. Of course, the level of interest rates attracts inflows to some extent. But I am not aware——

Will my right hon. and learned Friend at least agree that the record level of the minimum lending rate has a significant effect on the exchange rate? Will he indicate how high the money supply must rise before he will consider reducing the minimum lending rate?

I have already acknowledged that the level of interest rates has the effect of attracting inflows to some extent. But if we look more widely than that, it is difficult to find any commentator who can explain the high sterling as being predominantly due to that influence. As my right hon. and learned Friend must have witnessed, the upward climb of the £ sterling during the past 18 months has pretty consistently exceeded the forecasts and expectations of most commentators.

Experience surely suggests that, however much we may like to think the opposite, it is self-sufficiency in oil, the rising real price of oil and conditions in the Middle East which are undoubtedly the most potent real influences on the present level of the pound sterling. However much one would like to conclude in the opposite sense, there are no grounds for confident belief that the Government can exercise great influence on the exchange rate, still less on all the other factors which make up the word "competitiveness". It is prudent not to assume that lower interest rates, which are certainly the objects of our strategy, will make a dramatic difference in that respect.

Perhaps I may be allowed to deal further with this point.

It is also prudent to be very careful about international parallels which may well be drawn in the debate—for example, with Germany and Switzerland when their currencies were under upward pressure. It is by no means clear that measures to control inflows in those countries were more than marginally effective, and then only for a short period. Nor should we ignore the price paid in higher inflation, for example, by the Swiss when controls had not achieved their objects and they abandoned monetary targets for a time. The right hon. Member for Leeds, East should know this from his own experience, because in 1977 interest rates were dramatically reduced and there was massive intervention to hold down the sterling exchange rate. However, in the end, none of that worked and he was forced to let the rate rise. In due course, interest rates rose as well.

Of course I appreciate the concern of my right hon. and learned Friend the Member for Hexham (Mr. Rippon) about the possible effect not only on exchange rate but in other directions, of higher interest rates, which are a real burden. The level is a function of past inflation and of the policies that must be followed to reduce it. In an economy of any complexity, the price of money—the interest rate payable—is inevitably a fundamental instrument of monetary control, and direct controls, as we have seen from experience of the corset introduced by the right hon. Gentleman, distort but do not control. All this should be familiar to the right hon. Gentleman because he has long recognised

While no one has ever suggested that the level of interest rates is the sole determinant of an exchange rate, does not my right hon. and learned Friend agree that, if MLR in this country was 2 per cent. below the prime rate of the United States rather than 2 per cent. above it, it would have a most helpful effect on the exchange rate? Most people in the City of London do not think that that would have a damaging effect on the money supply. It might positively help him in his problem of reducing bank lending.

I can see the force of my hon. Friend's point as a proposition. However, our experience is that even when the American prime rate was ahead of us the £ sterling continued to appreciate. The other feature that one must remember is that one must compare the prime rate, or the equivalent rate in any country, with the level of inflation in that country, anticipated, actual or that which has just taken place. If one compares the interest rate in this country with the level of inflation, it is still barely positive, and, if one looks at the United States, one finds that their interest rate at a shade under 13 per cent. is comparable with ours in exactly the same sense. If one compares lower interest rates in other countries with the level of inflation in those countries, one finds that the interest rate is comparable with the level of inflation.

The truth is, as the right hon. Member for Leeds, East said, that the need for monetary control is inescapable. As he said in the House three years ago,
"we cannot master inflation unless we have control of the money supply"—
I am quoting not from any doctrinaire author but from the speech of the right hon. Gentleman—
"… no responsible Government could shirk their duty for maintaining firm control over the supply of money and using the necessary fiscal and monetary instruments for that purpose."—[Official Report, 20 July 1977: Vol. 935, c. 1726–31.]
From the right hon. Gentleman's speech, one is not clear whether he thinks that our monetary policy is. or has been, too lax or too tight. In the Budget debate earlier this year, he argued that the monetary policy which we were pursuing was too tight. But as the summer went on he began to argue in precisely the opposite sense. Today he argued in both senses at the same time.

Perhaps I can repeat what I said when the right hon. and learned Gentleman raised this matter last time. 1 said that the policy was far too strict and that it had been pursued with unparalleled incompetence. The result is that the Chancellor has come out at double his target rate. That is a simple point to make, and everyone in the City knows it.

The right hon. Gentleman still declines to address himself to the question. Is he or is he not arguing that the rate of monetary growth is too tight or too slack? When he thought, as did all commentators, in the earlier part of the year that the monetary growth rate was running at the predicted level, he argued that our monetary policies were too tight. But when he now finds, as a result of the removal of the corset which he put in place and which created the distortions, that the monetary growth rate is faster than that, he argues that it is too slack. Yet he reserves the right at the same time to continue to argue that it is too tight. It is a characteristic attempt to present the case in both ways.

I have no doubt that we have created the conditions that are necessary for slowing the rate of monetary growth. We shall be deciding on the rolling forward of the monetary targets in due course when more information is to hand. We shall be making announcements in due course on the prospect of monetary base control. As I have told Committees of the House already, we expect public sector borrowing and bank lending to abate in the second half of this financial year, and we are looking at further ways of securing more finance directly from the personal sector. It is for that reason that we shall have a substantial new issue of so-called "granny bonds" available on 17 November.

I reaffirm our commitment to the principles of our financial strategy as a means of conquering inflation and permitting sustainable growth. The object of that policy is the defeat of inflation, and it would be total folly to abandon that policy when it was beginning to produce results.

When we came into office, inflation was on a rising trend. The price index had been showing increases in annual rate month after month from October 1978 onwards, and it was rising sharply at the time of the election in May 1979. Now it is back to a falling trend. If the right hon. Gentleman, again characteristically, seeks to take credit for that, he must take the blame for the rise that intervened. In fact, the September RPI figures showed a fall in the annual rate for the fourth month running—six points lower than in May. Wholesale input prices are scarcely growing. House prices are flat, and the increase in retail prices has been well below 1 per cent. in each of the last five months.

Of course, it is clear that this sustenance of the battle against inflation involves substantial and painful adjustments. It is important to spread the burden of adjustment as fairly as we can. I agree with all those, notably the CBI, which has so often been quoted by the right hon. Gentleman, that it is of crucial importance to restrain central and local government spending in order to ease the burden that that spending represents on industry.

Has the right hon. and learned Gentleman noticed that the Scottish Council for the Care of Spastics has had to sell its investments in order to pay for the Government's incompetent policy? Does he consider that to be spreading the burden fairly?

We are all concerned about the Scottish Council for the Care of Spastics, but I cannot comment on a particular disposal of shareholdings by a particular organisation.

The reality is that industry, and the private sector in particular, is finding the burden imposed upon it sharply increased by the costs of central and local government, not least by the costs of industrial rates on industry, which is one aspect of the costs of local government. The achievement of sufficient and effective control of public borrowing will permit lower interest rates while meeting the necessary monetary objectives.

When in power, the Labour Party recognised as part of the policy to achieve these things the importance of restraining public expenditure. But today the right hon. Gentleman has argued simultaneously the case for lower interest rates and a substantially higher public sector borrowing requirement. That combination is quite unattainable. As the right hon. Gentleman said in December 1976, under the surveillance of the International Monetary Fund,
"failure to take measures to reduce our public sector borrowing requirement to the extent to which we have reduced it would have had effects on inflation and employment far more severe than anything"
attributable
"to the measures that I have announced this afternoon."—[Official Report, 15 December 1976; Vol. 922, c. 1555.]

Will the right hon. and learned Gentleman give way?

No, I am sorry. I have already given way more times than the right hon. Member for Leeds, East.

It is that policy—the containment and control of public spending—that industry in this country also wants. The CBI, which the right hon. Gentleman quoted so often, is certainly not urging us towards the abandonment of our policies to defeat inflation. The director-general of the CBI said last month:
"They cannot bring down interest rates until they control public expenditure."
He was right, and it is to that that we are committed.

For those reasons, we have set out the path for the reduction of public spending, in real terms and as a share of the GDP. We shall maintain that overall strategy. As is usual at this time of the year, we are reviewing the pattern of public spending, and inevitably there are some shifts to reflect changing circumstances. But when that has been undertaken the fact remains——

On a point of order, Mr. Speaker. When will the right hon. and learned Gentleman, who is boring his colleagues into somnolence, turn to the subject of the debate—unemployment?

The fact is that one of the features that is most relevant to the containment of unemployment is the burden of the pattern of public expenditure. All public expenditure must be paid for by taxation and borrowing, and we must take account of that when we consider the shape of it. For us all, that arithmetic is inescapable. For that reason, we have agreed to and will take action to keep the public sector borrowing requirement under control, next year as well as this year.

Regarding the question of arithmetic and the public sector borrowing requirement, which is very much in the Government's mind, as the right hon. and learned Gentleman constantly tells us, how does he reconcile the fact that the Minister of Agriculture said, a few months ago, that it cost £7 billion a year to finance the dole queue when there were F6 million people out of work—it is suggested that the figure, when updated, could be about El 0 billion a year, probably as much as the public sector borrowing requirement—with the Government's inability to tell us how much further they are prepared to allow unemployment to rise and so swallow up more thousands of millions of pounds of the taxpayers' money?

The growth of the public sector borrowing requirement is being curtailed by present policies. The experience of the previous Labour Government shows that clearly. Under that Government, unemployment rose steadily and remorselessly until the moment came when they achieved control of public sector borrowing. It was only when control was taken—from 1977 onwards, when public sector borrowing came under the control prescribed by the International Monetary Fund—that unemployment under the previous Labour Government began to fall. The point made by the hon. Member for Bolsover (Mr. Skinner) is sometimes advanced as a reason for failing to control public spending. It was that very argument that misled his Government for so long.

As I said, following the IMF measures announced in 1976, in 1977–78 public expenditure was 8·6 per cent. below the level that had been planned in February 1976. If we compare spending after the application of the IMF prescription with spending in 1976–77, we find that there was a reduction of more than £4 billion. It was at that time, for the first time in the Labour Government's term of office, that unemployment began to fall. That is the reason for the directness of the link between the control of public expenditure and the problem of unemployment.

There are other things that industry wants. Industry wants, and we have given it, the removal of unnecessary controls and restriction of opportunities. The House will recall that, when the Prime Minister announced the location of the first seven enterprise zones, she said that further sites would be announced in the North and in the Midlands. A decision on the site in the North will be taken shortly. Meanwhile, I am able to announce today that, following a recommendation by my right hon. Friend the Secretary of State for the Environment, we have chosen two possible new sites in Dudley and Corby. Both sites are in areas where their value will be considerable. By reducing the burdens on business. their creation will help to bring much-needed jobs and investment to those towns.

There is one other factor that is of importance in relation to the present unemployment—the level of pay that has been and still is being paid in some places. We are still paying today the price, in the level of unemployment, for pay increases far in excess of the growth in productivity over a number of years. In the last pay round, earnings were up by 22 per cent. while output was down by 2 per cent. At the same time, in most of our major competitor countries earnings were rising in single figures. It is that growth in earnings on an excessive scale that has had an unfavourable impact on profits and profitability and has helped to destroy investment. competitiveness and jobs. In that sense, as we were told by NEDC recently, pay and the growth of pay can have a greater impact on jobs than interest rates. CBI economists said that in the economy as a whole 1 per cent. less in pay increases had three times as large an effect on profits, and so on jobs, as a 1 per cent. cut in interest rates.

The continued growth in pay ahead of productivity is an important aspect of the long-term decline in competitiveness, which we must reverse. The same discussion at NEDC offered a comparison of unit labour cost in manufacturing with most of our main competitors in world markets. The right hon. Member for Leeds, East also quoted those figures in his speech. The suggested average level in the second quarter of this year, compared with the level of 1976, was 70 per cent. higher in this country than in our competitor countries. The CBI document said:
"Although the appreciation of sterling has exacerbated the problem, the major cause of our loss of competitiveness has been our very poor pay and productivity performance."
That is the reality with which people in this country must come to terms, and of which we must remind them constantly. It is up to the pay bargainers on both sides of industry to take account of the employment consequences of the bargains that they strike. There is every reason to welcome the growing mood of realism in that respect and move towards lower pay settlements and a substantial reduction in strikes—fewer in the last three months than in any three-month period during the last 30 years. All those factors can contribute enormously to the prospect of reducing unemployment and restoring prosperity in this country.

We cannot control public spending unless the Government control public sector pay, and that we must do. There is no question of victimising those in public services who give loyal and valuable service to the community. But when much of the private sector is accepting very modest pay rises, that should and must be reflected elsewhere in the labour market. Pay rises in the public services must be sharply lower than in the past year. In August the Lord President of the Council told the trade unions in the public sector that cash limits would be the main determinant of settlements in the year ahead. Hence the decision this week to suspend the Civil Service pay agreement, and with it the operation of pay research. That decision reflects our determination that cash limits should be the ruling factor in settling pay in the public services.

Nationalised industries must also play their part. The steel industry already demonstrates that the public sector is no exception to the rule that high pay awards cost jobs. That is the crucial importance of the link between the policies that I have outlined and the problem of unemployment with which this debate is concerned.

Of course, it is natural that there should be deep concern in the House and throughout the country at a time of rising unemployment and the severe pressures on industry to which I have referred. But the Government will be adhering to their policies, not out of any sense of obstinacy or unawareness of the problems but because we have no doubt that those policies are right. The temptation, when the going becomes more difficult to do something new for the sake of doing something new, however inappropriate, to demonstrate concern is one to which one ought not to succumb. It is precisely because we care about the problem touched on in this debate that we shall stand by the policies and offer the only way for this country to make its way back to economic prosperity.

4.29 pm

I think that the kindest thing that I can say to the Chancellor is that, whatever the merits of his policy, he found it difficult to put them into words. If I were a supporter of the Government, I would be deeply anxious to think that the best justification for what is happening is to be found in a study of today's Hansard; for, frankly, the Chancellor bombarded the House with jargon, like a lawyer who had read a late brief, and did not convince the House, nor, I suspect, his own colleagues, that what he said justified what was happening.

This is an almost unprecedented economic debate in the House. In 30 years in Parliament next month, I do not recall an occasion on which a Government have not only lost, at one and the same time, the support of the TUC—and one would not expect the TUC to support this Government—but have also forfeited the confidence of the Confederation of British Industry. The right hon. and learned Gentleman's supporters must know, even though he does not want to admit it, that a divergence as wide as there now is between the Front Bench and the CBI, coupled with a very deep anxiety among the people of this country, makes this debate unique in the post-war annals of the House of Commons.

The reason for this is that we are discussing an unfolding tragedy of enormous human significance. Maybe London Mem- bers are not aware of what is happening in South Wales, where the whole economy is being threatened, or in Merseyside, in Clydeside, in the North-East, or even in parts of London, where unemployment is now over 10 per cent. It is that tragedy that the House requires the Government to consider. It is quite clear that they do not intend to change their policies.

I must take seriously what the Prime Minister said at the Conservative Party conference. She said that she would not change her policy, and I believe that the whole House must take that seriously. I do not believe that hers is an economic strategy; I believe that it is a political strategy to break the power of organised labour, to permit the reconstruction of a society in which employees are reduced to the sort of serfdom that is now appearing. [Interruption.] Oh, yes, it is. Anyone who thinks that when those ICI workers are laid off, without any consultation, they are not being reduced from people full of the skill and pride that goes with working in a successful firm into a form of serfdom under which they have to accept the sack, anyone who misunderstands that, does not understand what is happening.

It is a political strategy that is being followed. Therefore, we should not devote too much time to the possibility of a U-turn, because the real problem facing the House and the country today is that a U-turn, even if it were made, would not help. If there were a change of Prime Minister from the present Prime Minister to the present Secretary of State for Employment or to the Home Secretary, it would not help. If the right hon. Member for Sidcup (Mr. Heath) were brought back into the Government—as many of his party wish he were—to introduce his experience, it would not help. If the Liberal Party were brought into a Lib-Conservative alliance, it would not help. I go further and say that if—[Interruption]. I might add that the experience of the previous Labour Government, who did their best, would not help. No one can deny that they did their best to protect people from the impact of the world slump, but they fell foul of the International Monetary Fund, which the Chancellor lauded, but which, by its imposed prescription upon the Labour Government, contributed something to the problems that he has inherited.

Perhaps I may be allowed to develop the argument a little further.

Therefore, I suggest that we shall waste some time in the House this afternoon if we devote ourselves to the sort of party argument that has often characterised these debates. I believe that what we must do now, and what the country would expect, particularly after reading the Chancellor's speech, is to look beyond the life of the present Government to the broken-backed economy that will await an incoming fresh Labour Government. There is no doubt whatever that that economy will be broken-backed. If pay is held down, that will worsen the situation and not improve it. I turn my mind to an old phrase and reformulate it: "One firm's pay settlement is another firm's order book". If one cuts wages, one is cutting the demand for other firms. When the engineering workers are asked to take 8 per cent. when inflation is at 16 per cent., those engineering workers will not be able to afford to buy the new Mini-Metro, or artificial fibres from ICI. So let us look at the matter in a different and more serious way.

There will be factories that are closed by this Government. Their equipment is now being sold off by liquidators to our foreign competitors—fine new equipment as well as the old stuff which should have been replaced years ago. Workers now have to watch the equipment that they have built by the work which they have done, made out of the profits that they have created for their employers, while that equipment is sold to their foreign competitors to manufacture goods which will come back into this country in the form of imports.

I believe—and I do not think that I am exaggerating—that an incoming Labour Government will find a situation graver than that in 1945. Hitler bombed the factories, and we kept them going with day-to-day repairs. When the Secretary of State for Industry closes the factories, they will be scrap metal. There will not be 3 million Service men waiting as then to be demobilised, but 3 million demoralised unemployed who will not have worked for years and will find that the places of work which they left are no longer available to allow them, or the nation, to earn a living. Regions and localities will be destroyed. Industries will be undermined. We shall have to face a problem of recovery which will be much longer and much harder than most people yet appreciate.

I want to turn my mind to what we should now be doing as a House of Commons. I speak mainly to those who share this analysis of how we should try to resolve this situation. First of all, Parliament should support those who are resisting the closure of their factories. When I see steel workers or engineering workers fighting to prevent their employers closing their factories, in my eyes they are defending our industrial heritage and our future in this country, and the House should give them sustained support.

Secondly, there will have to be an enormous public investment in industry in order to deal with the backlog of investment neglect and the present vacuum of investment created by Government policy. If anyone thinks that we are ever going back to the old bribery by the taxpayer to make it work, I ask him to take one example alone. I looked this up the other day. In 1968, as Minister of Technology, I brought before Parliament, and it was approved, a Bill to provide public money to finish the QE2. Now Lord Matthews, who owns it, threatens to sell that ship which he does not really own—because it was bought with public money—as a way of threatening the National Union of Seamen, whose only offence is to try to keep the British merchant fleet under the British flag.

I do not believe that the British people will ever go back to the attempt to bribe and bully business men to invest in the public interest. That is why I do not believe that the U-turn would be relevant.

Next, we must plan our trade. It does not make sense, for even this Government, to put in money for the Mini-Metro, through British Leyland under the National Enterprise Board, and then allow the British motor car industry to be destroyed by imports, as it will be if action is not taken. Once British Leyland goes, why should Ford and General Motors, or Talbot, stay in this country? They are here because British Leyland is here, and if British Leyland goes they will go. That will create another 1 million unemployed in our country.

We must control capital movements so that profits made in Britain, by British workers, are not exported to countries where trade unions are illegal to produce goods at lower cost to come back to Britain to undercut the living standards of those who created the wealth. We must expand the public services with money from oil revenues and from reductions in defence spending to ensure that Britain has something to defend by way of an industrial base. When I went round the world for over four years as an energy Minister I found that there was not an oil-producing country that did not tell me that it was using oil revenues to build an industrial base so that when the oil ran out it would have something on which to live. We are the only country that is using oil wealth to destroy our industrial base by bringing a flood of imports into Britain.

We want a shorter working week so that new technology shares its benefits among the community instead of having half on overtime and half unemployed. We want earlier retirement and expanded training and retraining. If we are to do that, we must get back to the House of Commons the powers that we ceded to the Common Market, which would make the policy that I have described illegal in the eyes of Community law. The preparatory work must be set in hand at once.

I believe—I hope that my trade union friends—

The right hon. Gentleman is very generous in giving way. He has appealed to the House of Commons, rightly, for it is the only legal source of finance in this country, to provide money in large quantities for a series of purposes that he has set out. Is that money to be raised by taxation, is it to be borrowed, or is it to be printed?

The right hon. Gentleman is the grandfather of the disaster that now confronts Britain. In the 1930s in similar circumstances massive public expenditure on rearmament brought the capitalist world to full employment. The challenge to this generation is how to do it without rearmament and war. That pre-war full employment, even created by rearmament, was self-financing. The £10 billion that we now lose in lost production and the £7 billion that we pay in public expenditure in the form of benefits would both be recovered. Both those weights upon our economy would be removed by a return to full employment which should be funded, I believe, by investment in industry and the expansion of our public services.

A great deal of industrial planning has now to be undertaken by the trade unions in industry. It is no use saying to the trade union movement that it should continue pleading over tea at No. 10 Downing Street with a victorious Prime Minister that her policy is causing hardship. It is intended to cause hardship. The trade union movement at national level, regional level and plant level would be better advised to work out the plans now for the recovery of their industries. That is true of regional and local planning. Labour local authorities with the trade unions and local business men would be better employed now in planning the development of their own immediate economies to deal with the tragedy of a Consett, a Corby, a Llanwern or a Port Talbot, which cannot be dealt with by an incoming Government with only the help of the Civil Service in Whitehall.

It is the role and purpose of my hon. Friends to develop ways of implementing these policies. We cannot wait until the moment comes when there is a change of Government and responsibility rests upon us. We must develop the machinery of government and the policies for implementation that will breathe life into an alternative future for Britain so that we do not campaign only against the Government—which is right and proper—but for something that makes more sense for our people.

I do not believe that the Government can succeed. Their philosophy and their values do not accord with those that we in Britain have developed over centuries. The Government's only real constituency is sitting in the Press Gallery. If it were not for Fleet Street the unintelligibility of the Chancellor, or the amorality of the Government's policy, would become apparent within days to the British people. It is not possible to govern this country with only the constituency of Fleet Street to act as a support. When the British people realise that they are being invited to destroy their own economy, their society and the values in which they believe, including their responsibilities to their fellow men and women, they will turn to us. When they do that—may it be soon—I plead with my hon. Friends to ensure that we are ready with real, relevant and fundamental reforms to meet the needs of the British people, who will turn to us.

4.47 pm

The right hon. Member for Bristol, South-East (Mr. Benn) never fails to astonish the House. When he talks about the amorality of the Government, I find it astonishing that he remained a member of the Cabinet of the previous Labour Government, he being strongly opposed, apparently, to the measures imposed on that Government by the IMF. When he says that our policy should be to increase the wages of the worker, what was he doing supporting the previous Labour Government, as a member of the Cabinet, with their 5 per cent. incomes policy?

The right hon. Gentleman has given us, as in the past, a great deal of evidence of the inconsistency of his policies. He is in no position to accuse my right hon. and learned Friend the Chancellor of the Exchequer of amorality or of anything else.

The right hon. Member for Leeds, East (Mr. Healey) was harsh and critical about the Government's measures, especially those of my right hon. and learned Friend. During the Summer Recess, while in a bookshop I happened to come across a book written by the right hon. Gentleman about his photographs. It contained photographs of almost every conceivable activity. There was one shot in particular that was missing, though, namely, one of the right hon. Gentleman being hauled out of Heathrow airport when there was a run on sterling. He had to be hauled out of the airport to return to London instead of attending a Commonwealth Finance Ministers' conference in Hong Kong. Some of us remember that occasion very well. The right hon. Gentleman is in no position to criticise the Government.

It seems to me that the mood of the House and the problems of unemployment are particularly serious. I, for one, have a good deal of sympathy, although not agreement, with my right hon. and learned Friend the Member for Hexham (Mr. Rippon) in his recent letter to The Times, in which he complains about the level of interest rates. But the high level of interest rates should be regarded for what it is. It is a sympton of something that is a great deal more serious than the level itself. For the fact is that the demands upon the capital market by the public sector have been consistently too heavy for far too long. I am talking not of the technical size of the public sector borrowing requirement but of the weight on the private sector imposed by the public sector for very many years past. This weight must be reduced by some means.

Everyone must be aware, too, of the effect on industry of the level of the exchange rate. Four years ago there were $1·57 to the pound. Since then the sterling exchange rate has appreciated by more than 50 per cent. In that time wages in industry have increased by about 70 per cent. In my judgment there is no way in which an industry producing conventional manufactured goods can withstand an appreciation of about 50 per cent. in the value of the exchange rate having paid out a 70 per cent. increase in wages.

In many parts of the North-East, the North-West, Scotland and Wales, many of our traditional industries are facing great difficulties. We see the Alfred Herbert machine tool company and ICI running into losses, but they are not alone. Complete sectors of the West Midlands, and engineering firms generally, are now falling out of business. I dare say the increase in the exchange rate over the past four years is without precedent in the whole of our industrial history. Perhaps it occurred in the 1920s, when we returned to the gold standard at the wrong price. But industry cannot deal with such a burden, nor can the post-industry revolution be financed by short-term money bought on the money markets at substantial interest rates. If one is averse—as I am—to printing money, what is the alternative? Should we just wait for industry to borrow less, so that interest rates can eventually fall? Industry is borrowing not to invest but to exist. It has no alternative. Our only solution, then, is to look at the public sector once again.

The Government have made some sharp reductions in Government capital expenditure, just as the previous Labour Government did. The proposals to cut public expenditure largely affect the Department of Industry. Fewer people will be covered by the regional aid scheme. The Department of Industry's funds cannot be greatly reduced. I should be very surprised if the demands of British Steel, British Leyland, and so on, were to decline. So 1 should also be surprised if the funds given to the Department of Industry were to be greatly reduced.

What other options exist? Perhaps savings should be made in the nationalised industries. Yet savings would mean higher prices for the nationalised industries, and those prices would have to be borne by industry. There is not much comfort to be had from that. We should look at the movement between the private sector and public sector over a period of 15 to 20 years. We should consider the movement of people between those two sectors. Fifteen years ago 1 million people moved out of the private sector and, at the same time, there was an increase of 1·3 million in the public sector. We must bear in mind that the numbers employed in the National Health Service doubled over a period of 22 years—from under 600,000 to 1·3 million. Such a phenomenon is not known by any of our industrial competitors in the Western world.

Britain employs one in five employed people in the public sector. Other countries, notably West Germany and France, employ one in seven. Perhaps the largest increase of all has occurred in local authority employment. Over the past 12 years alone, employment in local authorities has increased by 1·3 million. I accept that local authorities are the first to blame us for that state of affairs. I do not reject that criticism. The House of Commons did not know what it was doing during the past 12 to 15 years.

Neither the country nor our industry can sustain the enormous weight imposed by the very size of the public sector. The situation must be rectified. How is it to be done? I turn to the Priestley Commission, which was The first commission to recommend comparability between the public and private sectors. It stated:
"The primary principle of civil service pay should be fair comparison with the current remuneration of outside staffs employed on broadly comparable work, taking account of differences in other conditions of service."
Those other conditions of service apply today. There is growing and massive unemployment in the private sector, but very little unemployment in the public sector. There is job security in the public sector, but none in the private sector. There are index-linked pensions in the public sector, but no such assurances in the private sector. Such comparisons must be made.

I make no apology for saying that the Government can no longer sustain the basis of "broad, fair comparability" unless they return to the original conditions applied by the Priestley Commission. If one accepts that basis, and if one accepts the cash limits system—which is the only way in which the Government can properly achieve their aim of controlling the public sector—it is impossible to see how the public sector can be awarded salary increases of more than 5 per cent. or 6 per cent. Although the step is harsh, it is necessary.

What is the alternative? If that step is not accepted, further weight will be imposed on the private sector. There will be a diminution of our manufacturing base and a falling-off of industrial activity. We shall not be able to recover our industrial base, or achieve the prosperity that we all seek. There must be a better balance between the public and private sectors. Britain cannot afford to allow the economy to run down in order to preserve the size of the public sector.

4.55 pm

Unemployment debates are particularly important, because the unemployed—unlike most people in Britain—are not an organised or integrated pressure group. Members of Parliament form the pressure group for the unemployed. Thorough debate is therefore particularly important, although one might not have guessed that from the state of the Opposition Benches.

Perhaps the hon. Gentleman can tell us where all his Liberal colleagues are. It is worth recording that he is the only Liberal Member in the Chamber.

I ask the hon. Gentleman to be patient and to wait a little while.

The unemployed can scarcely repose any confidence in the remarks the right hon. Member for Leeds, East (Mr. Healey). The right hon. Gentleman did not share with the House his personal familiarity with rising unemployment. As Chancellor, he must have learnt some valuable lessons about unemployment, but he was singularly silent about them. The unemployed will remember that the previous Chancellor of the Exchequer made brave remarks about a tax policy that he intended to introduce. They will remember that he said he would make the rich howl with pain. They will also recall that that policy was followed by four years in which he managed to extract only £215 from the growing Vestey millions that were pouring untaxed into Britain.

Hon. Members' opinions about the Government's declared economic policy are governed largely by what they hope and believe will be the result at the end of the day. In the Liberal view, the corrosive medicine that the Government are giving the country—and with which they seem determined to persist—cannot produce a lasting economic cure. It will result in a massive economic hangover. We do not believe that the Government's policies will result in any major structural change in our economic system, and we therefore look at the present, appalling results in a particularly jaundiced way.

I have made it my business, as other hon. Members have, to question members of the Government and others in high places who implement Government policy. I have asked them how they can believe that what we are going through can result in some permanent control of inflation, or any proper readjustment of our economic system. I have not received any replies worth two pence. The Governor of the Bank of England says that the Government's policy will result in massive public education as regards the effect of wage claims on inflation. The Chancellor of the Exchequer speaks of altering public psychology. Other Ministers speak of people changing their attitudes once they have seen a reduction in the rate of inflation. There is nothing solid behind those remarks. It suggests that the Government do not know the outcome of their policies. In the meantime, as has already been pointed out, this is particularly germane in the area that I represent. It is not simply the overmanned industries or the areas in which there have been massive and possibly over-greedy pay claims, nor areas which abound in restrictive practices, which have suffered the most rapid rise in unemployment in the last 12 months.

I represent an area of West Yorkshire and Greater Manchester which traditionally has had unemployment levels far below the national average. Business men elsewhere cannot imagine that there is any spare skill or labour in Huddersfield or Oldham. But in fact we are now well above the national rate of unemployment, so hon. Members can picture a diagram of unemployment in my area is quite appalling. This cannot be attributed to bad industrial habits in recent years.

The same is true of small businesses. Not only are people discouraged from using their redundancy money to establish new small businesses, as one hoped they might, because conditions and lack of demand, of which the right hon. Member for Bristol, South-East (Mr. Benn) spoke, make it impossible to launch any new product from a small business at present, but even those businesses which were bravely established in the glowing aftermath of the Prime Minister's election victory are finding life difficult and many are going to the wall. As everyone knows. we now have a record toll of bankruptcies and compulsory liquidations.

It is becoming fashionable—and it is all too often accepted by Fleet Street—to say that much of this misery is due to a world recession which cannot be controlled any more than the weather. Indeed, the Chancellor of the Exchequer himself was guilty this afternoon of misleading the House by suggesting that we were simply sharing—no more and no less—in a common affliction among the developed countries of the world. This is not so. Our plight, especially when one considers that we alone among the developed countries have the priceless possession of a domestic oil source, is far worse than that of our competitors. In so far as there is some world recession and probably much worse to come, this has produced in the Government a kind of paralysis when it should have produced resilience.

The proper response to a world recession is to use the opportunity and the temporarily spare labour to re-equip and be ready for the upturn in world trade so that we shall lead the industrial would at that time instead of lagging far in the rear. This has not been done.

The Government are rather fond of homely similes and images. I offer them the very homely image of the small business man, storekeeper or craftsman, who finds that his trade is slack. When no one comes to his counter or to his repair shop, he does not sit idly by and say that twiddling one's thumbs is very good for one's character. On the contrary, he takes the opportunity to refurbish his place of work, to repair his plant and generally to prepare himself for the upturn in his trade. The Government are doing nothing of the kind, and that is why there is increasing demoralisation in the country.

I still hope that tonight—I have not given up hope for the Secretary of State for Employment—we shall hear of some massive and imaginative scheme for training the young and for retraining. I hope that the Government will bring in a scheme to give young people much more pertinent and relevant training than they are getting at present, and for offering retraining to older workers. Above all, the Government should help our great modern industries to continue those very expensive apprenticeships which, not unnaturally, they are tending to shut down. If we do not hear something about massive Government expenditure on training and retraining tonight. the demoralisation will be complete.

I should like to be a great deal more precise about the main economic remedy than the Shadow Chancellor was this afternoon. He spoke of devoting some £400 million of public money to a new training venture, but he was virtually silent about the problem of a much greater injection of public money into the economy as a whole.

It is my view and that of my colleagues that, rather than sticking to this appalling totem, this out-of-date idea of bringing the public sector borrowing requirement down to 3 per cent. of gross domestic product, which is part of the Government's financial strategy at present, the PSBR should be increased deliberately, as a response to the world recession and to our national problems, to about 5 per cent. of gross domestic product. The additional amount should be used first to help the unemployed to get cracking on some of the worse defects in our national infrastructure.

Take as an example the way in which our telecommunications are rapidly falling behind those of the rest of the developed world. Here we should take a leaf out of France's book for once and get on quickly with the application of microprocessors to telecommunications. There is the appalling slavery of commuting which is the lot of so many millions of people in this country. That could be relieved by the development of telecommunications to the home. When one considers these aspects, one gets some idea of the contribution that the unemployed could make to the quality of life if the Government had the imagination to set them on this task.

Then there is the conservation of energy, which needs no arguing for in the House but which is neglected by the Government. We are told that there are 2,5000,000 council houses completely uninsulated by modern techniques. In the private sector there were said to be 3.3 million houses with accessible lofts which were uninsulated when the right hon. Member for Bristol, South-East was responsible for these matters. I am told that fewer than million householders have taken advantage of the grants that were made available. That is an unfinished task which could absorb temporarily a great number of unemployed people. I am told that there are 4 million private houses for which insulation would be more difficult but which urgently need tackling. That field is being almost entirely neglected today.

I mention the railways, where the admirable development of some of the main inter-city lines. all leading to London, needs copying on the lines across the country—the lines which connect the North-East, for example, with Liverpool, Manchester and the North-West, where we are still treated as cattle, not be- cause of any ill will by British Rail, but because the railways are starved of capital by the Government.

The inevitable concomitant of any injection of that size into our economy in the interests of stopping this appalling national waste of chronic and massive unemployment is the danger that such sums could go very largely directly into pay packets rather than into the objectives that I have illustrated. That underlines the compelling need for an outspoken, explicit and, if necessary, enforced pay policy by the Government towards which the Chancellor of the Exchequer is edging very timorously every time he makes a public speech.

The Chancellor must recognise now, even though he did not recognise it before, the need for such a firm and sustained pay policy. His alternative, to which in the past months he attached so much importance, has broken apart in his hands. In the past, when pay policy has been argued from this Bench, the Chancellor has replied that the publicly announced targets for the growth of money supply were his policy. When the pay bargainers, being reasonable and well-informed men and women, met around the table to settle the year's pay round, they would be aware that the Government were absolutely insistent on there not being more than 10 per cent., next year 6 per cent. and the year after 4 per cent. growth in the money supply.

That argument, if it was worth anything, collapsed with the explosion of the money supply growth. The Chancellor did not deny that in any way when he appeared before the Treasury and Civil Service Committee on Monday of this week. If the Chancellor agrees, as he does, that his main weapon has broken on him, at least for a time to come—and it will take a long time to restore credibility in any Government targets for money supply growth—surely, as a practical man, he must turn to some other weapon of policy. As he is about to move to some kind of norm for pay in the public sector, he must extend that to the rest of the economy. Otherwise, I readily agree that to reflate on the scale that I have mentioned would obviously have its dangers.

It is commonly agreed that, as part of a closely integrated industrial world, we are suffering more than others. If it were not for North Sea oil being used as a sticking plaster to cover some of the deficiencies in policy, we would be in an even more appalling situation. Surely the Government are not prepared to go on relying on a bandage provided by North Sea oil when policies are clearly available which would set this country on the right course.

5.11 pm

I am pleased to follow the hon. Member for Colne Valley (Mr. Wainwright) as I find myself in agreement with some, if not all, of his remarks. However, I should make it clear that his expected level of reflation would be very damaging to our economic recovery. Likewise, I believe that his advocacy of an incomes policy would create in the long term more problems than it solved in the short term.

I think that Conservative Members are as one that the Government's priorities to reduce inflation and to cut borrowing are right, but a growing number of Government supporters feel that the policies being followed are too insensitive, that the manufacturing sector of our economy is taking the brunt of the effect of the Government's policies and that the public sector is remaining relatively unscathed. We all know that we are in a world recession, and in that situation unemployment will undoubtedly increase. But tens of thousands of people in this country are being put out of work unnecessarily because of the insensitive and inflexible monetarist policies of the Government.

I have often wondered how many Government Front Bench Members, as bosses of manufacturing concerns, have had to meet the wages bill at the end of the week. I went through the list and could count them on only one hand. That did not give me much confidence in the judgment of the Government in implementing economic policies.

Will the hon. Gentleman give way?

I shall not give way, because I promised to be brief.

It is all right to take advice from people such as Mr. Milton Friedman and others, as academics can be very helpful., but seldom, if ever, have they run businesses. I have been involved in and am deeply concerned about the plight of small businesses. As I said to my right hon. Friend the Prime Minister yesterday at Question Time, while her objectives are correct, there will be too few manufacturing concerns left in this country at the end of the day to take advantage of the success of her policies. That will mean higher unemployment and we shall suck more imports in further to undermine the manufacturing base that remains.

I commend to the House the speech made by my hon. Friend the Member for Horsham and Crawley (Mr. Hordern). What he said about the value of the pound and the level of the exchange rate was absolutely right. Those factors place our manufacturing industry in an impossible position to compete in the world.

Our textile industry has done everything asked of it by successive Governments. It has modernised and rationalised and shed hundreds of thousands of workers to meet the greater competition that has developed in the world. But what has happened? Because of the value of the pound, among other things, the Government are forcing the textile industry to face what can only be described as damaging unfair competition.

I shall not give way.

What other country has such high interest rates as this country? This is another decision by the Government which is placing our manufacturing industry in an unfair competitive position.

I shall not give way. My hon. Friend can make his own speech in his own time and in his own words if he catches Mr. Speaker's eye. My hon. Friend and I disagree fundamentally on this matter. He is a lawyer and I am a business man. Perhaps that explains it.

The Government—my Government—are responsible for placing burdens upon industry which it cannot carry if it is to remain in business and if unemployment is not to reach 3 million.

Much has been said about the textile industry. I come from an area where the textile industry is perhaps the largest employer. As I said, it has done everything that successive Governments have asked of it. Yet the plight of that industry today is absolutely disastrous. Mills are closing not by the week but by the day. Tens of thousands of good, solid citizens who have never been on strike in their lives and have never put in for inflationary wage awards are being put out of work. As a Conservative, I care for people. The Disraeli Government cared for people. I believe that that was why Disraeli was such a successful Prime Minister. I hope that our present Prime Minister will take some lessons out of the Disraeli book and practise pragmatic Tory policies and stand up for our national interest.

I have had letters from my right hon. Friend the Prime Minister indicating that she is deeply concerned about the plight of the textile industry. She indicated that a booklet published last month by the Minister of State, Department of Trade, clearly showed what had been done and the issues underlying our commitment to renegotiate a tough successor to the multi-fibre arrangement. I say to my right hon. Friend and to my right hon. Friend the Secretary of State for Trade that there will be no confounded textile industry left by the time we come to renegotiate a new multi-fibre arrangement unless the Government make their policies more flexible.

I should like to deal with two areas of dire concern. First, why should interest rates remain at their current level?

No. That is only part of the answer. Other European countries, including the Federal Republic of Germany, which is a member of the EEC, assist industry with subsidies when interest rates rise over a certain level. Is my hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen) aware of the cost to public funds of every 100,000 people put out of work in this country? It is far in excess of what it would cost to aid industry to maintain people in work and to guarantee a good manufacturing base.

The right hon. Member for Bristol, South-East (Mr. Benn) and the hon. Member for Colne Valley dealt with energy. Why do we not use our vital North Sea raw material for the advantage of British industry? Why have the Government forced the electricity industry to put up prices by 27·3 per cent. in the last year and why have they forced the gas industry to put up prices by 32·6 per cent.? Why have rates to industry gone up by about 30 per cent.? Water rates have also gone through the roof.

The Government are hectoring and encouraging private industry to do this, that and the other, but what of the additional costs that the Government are imposing upon private business? I am not surprised that the CBI is concerned about the plight of private business.

I appreciated the speech of my right hon. and learned Friend the Chancellor of the Exchequer. However, unfortunately, tens of thousands of people in the North-West, which is the part of the country I come from, will scarcely understand a word of the monetary jingoism that he used from the Dispatch Box today. I say to my right hon. Friends on the Front Bench that there is grave concern north of London about unemployment. It may not have hit the South and South-East very much as yet, but it has hit the North. I cannot be proud that under this Government unemployment in my constituency has doubled. I am concerned for the constituency of my hon. Friend the Member for Bebington and Ellesmere Port (Mr. Porter) over the closure of the Bowater mill. It is a highly efficient mill. The Government offered money to tide it over where energy costs were concerned but energy costs will continue to rise year after year.

The hon. Gentleman is falling into the same trap as my right hon. Friend the Member for Bristol, South-East (Mr. Bern) in suggesting that London is not suffering from unemployment. Our inner city areas are suffering greatly.

I accept that, but I do not believe that even inner London is suffering as much as the North-East, North-West, Scotland and South Wales.

The Conservative Government came to power saying that they would help the small business man, but we have driven him out of business. We encouraged smaller business men to invest their profits. They now have no liquidity to pay the high interest rates that they owe to the banks. They are having to borrow to pay them. My right hon. Friend the Secretary of State for Employment is sympathetic to the case that I advance. Only one group is doing well—the big business man. I could name certain people who have capitalised their assets and who have pound notes pouring out of their pockets and out of the banks. They can get a far greater return from investing in banks than in manufacturing industry.

The situation is difficult for the textile and paper board industry, as it is for the new high technology industries, especially small businesses which have invested all their profits. They are in trouble. With the co-operation of the Government, I have managed to save one or two companies in my constituency. I hope that another will be helped before it goes out of business through the problems created by the Government. The Government must wake up before it is too late. People matter to the Conservative Party. We are placing out of work tens of thousands of good people who have served their country, employers who have excellent industrial relations with their work force. Once such businesses go, they will never be re-established. A few Whitehall mandarins see our future in the service and tourist industries. That will never be. We must have a flourishing manufacturing base.

I came up through small business, and I am sick to death of the bureaucratic replies that I have had to my representations over the past six to nine months. I may get no higher than the Back Benches, but at least I speak for part of the British economy that produces the wealth that enables the public sector to exist. How right Mr. Harold Macmillan was when, years ago on that excellent programme he told Mr. McKenzie that the system was a pyramid and all the workers helped to pay for the king or tribal chief. It is now an inverted pyramid. The manufacturing base is the tiny bit at the bottom, and it has to sustain the huge administrative bureaucracy and public sector on top.

The Prime Minister carries a great deal of authority and has my deep respect. I say to her that, if we expect private industry to continue to carry the burden of the remainder of the State so that we can make provision for those in the country who need help and provide the services that we should provide, we must preserve our manufacturing base and make it grow. For heaven's sake, do not kill it, as we are doing at present.

5.24 pm

In the old days the only hon. Members who participated in unemployment debates came from certain areas in Scotland, the North-East, North-West and Wales. In the South-East and London unemployment was well below the national average and certainly below that which we were experiencing. Even today, when we are returning to the situation of the hungry 1930s, unemployment in the South-East is only 6 per cent. In Scotland it is double that.

In my constituency, in the Saltcoats, Kilwinning and Irvine area, unemployment stands at 17·5 per cent. In the Garnock, which suffered the closure of the open hearth and melting shop of Glengarnock steelworks, unemployment stands at 26·2 per cent. Every fourth person is unemployed in the Garnock valley. In the district of Cunninghame, unemployment is between 18 and 19 per cent. As more redundancies are announced, those figures are increasing. There is a catalogue of closures and disasters, through Massey Harris, SKF, Monsanto, Essex International and Ryeside Mill. We believed that, no matter what the economic climate, those international and national firms would remain.

In the past fortnight there have been other disasters. Just over a year ago I opened the Newage transmission factory, which makes axles for the dumper industry and is associated with the construction industry. It has just announced that it is closing. We had great expectations for the factory, with a move from Coventry to this special development area.

Another major crisis in the past fortnight has been the decision by ICI to close the plant at Ardeer, producing nylon socks. It is the most modern plant in Europe, with a labour force and productivity second to none. About 750 people will be made redundant immediately, with an eventual loss of over 1,100 job opportunities.

In that area unemployment already stands at 18 per cent. If the trend continues, we shall have an unemployment rate of between 30 and 35 per cent. Hon. Members representing London constituencies have seen nothing yet. I should consider that we had full employment if our unemployment rate were the same as that of the South. Even during good conditions we have never been so lucky.

The Government must take action to prevent this slow death of our manufacturing industry. The decision to close the plant at Ardeer was taken by ICI without prior consultation. I have always had a good relationship with the directors and managers of ICI. We have always had consultations and they have prided themselves on the fact that they took their workers with them in what they did. This time, we had a bolt from the blue. There have been redundancies and part closures in the past, but the firm has never closed a modern plant in which it has invested hundreds of millions of pounds. The Government must take action.

ICI has been in my constituency for more than 100 years. After the war, it asked local authorities and Ministers to prevent other companies from coming into the area, because it could use all the available labour. When American firms started to move into Scotland, they were prevented from coming to my area because of pressure from ICI. Local people and authorities co-operated with the company, because it was employing 14,500 people in the area and was prepared to invest more money in keeping the plant up to date. After we have given the firm a lifetime of service and co-operation and have prevented other firms from moving into the area to compete, the company has taken a unilateral decision, without consultation, to close its works.

When we were debating Britain's entry to the Common Market, ICI told me to vote for entry because it would be good for ICE and for my electorate. I did not take that advice, but, unfortunately, the people of England and Scotland did. We now find that ICI is considering withdrawing from the United Kingdom, but last year it invested £600 million in Europe. The firm told me that I, as a politician, was to blame and that it was the politicians' fault that the German chemical industry could get its raw materials more cheaply than firms in Britain could buy their materials. German firms get natural gas for 50 per cent. of what we pay in Britain. I accept part of the blame, but Ministers of successive Governments must accept the major responsibility.

Why must our manufacturing industry compete with the American and European chemical industries on unfair terms? Other countries subsidise their industries, but, because of our empire tradition and our belief that we can beat everyone in international trade, our companies have to compete on unfair terms. The Government must take action. North Sea oil and gas are transported to America and after refining in the man-made fibre industry come back as nylon products and fabrics that are cheaper than we can make them. The hon. Member for Macclesfield (Mr. Winterton) and I are interested in the textile industry. At one time it was a major employer in my constituency. There are now few firms and they are all holding on by the skin of their teeth. We have short-time working and threatened closures.

Why do we not use North Sea oil and gas to protect our industries? At present, we use those resources to solve our financial problems. That is all right for bankers, financiers and dealers in the international money exchanges, but Britain will not succeed on a financial base alone. We are a manufacturing country and we must support our manufacturing industry. Instead of using the wealth from the North Sea to build up our financial base, the Government should be using it to build up a manufacturing base. That would give our manufacturing industry an opportunity to compete on equal terms with the chemical and other manufacturing industries of North America and Europe.

Does the hon. Gentleman agree that the artifici- ally low price of oil for the petrochemical industry in the United States—$24 a barrel compared with $38 for North Sea oil—is causing the distortion? Does he suggest that North Sea oil should be available to British industry at an artificially low price of $24 a barrel?

I agree with the first part of the hon. Gentleman's intervention. We have oil and gas and we can use them to build up a financial base or supply it to our manufacturing and chemical industries at a subsidised price and get the return in taxation from those industries when they begin to sell their products. The ordinary man in the street understands that, but it is difficult to get the message across to Ministers. I am not blaming only present Ministers. We had the same problem with Ministers in the Labour Government. They all seem to be tied to the view that we must have a strong financial base.

We are in a world-wide recession, but we should be able to ride it better than most other countries because we have North Sea oil and gas on which to base our success. If the Government continue with their policy of strengthening our financial base before looking at our manufacturing base, we shall be heading back to the hungry 1930s and disaster.

I have come to the debate from a meeting with Mr. Ian MacGregor, the chairman of the British Steel Corporation. I led a deputation of Scottish Members with steel interests. I was encouraged, as I always am after meetings with Mr. MacGregor, because he said that he would adopt an aggressive marketing policy in relation to North Sea oil and would try to get the BSC a share of the orders that must come from pipeline projects.

The BSC is to compete for the first time with the Japanese in making high quality steel pipes. We must encourage that. The Scottish Members with steel interests appreciate that Mr. MacGregor is drawing up a corporate plan, which lie will submit to the Government at the end of the year and which will decide the future role of the BSC. We told him that Scotland has had 12 years of rundowns, redundancies and closures. We now have a slimmed-down steel industry. In the past five years we have had massive investment at Ravenscraig and Hunterston and the BSC must continue that investment in order to get a return.

I was at the meeting to which my hon. Friend has referred. Mr. MacGregor's attitude on the gas-gathering pipeline is to get the orders first and look after the costs later. If the Government took that view throughout manfacturing industry, as my hon. Friend has recommended, we should not be in the difficulties that we are in today.

My hon. Friend has reinforced my point, that it is up to the Government to decide to help BSC. Scottish hon. Members with steel interests made the case that in its corporate plan BSC must keep the Scottish steel industry as it is, that we should suffer no further redundancies and closures, that we now had some of the most modern plant in Europe and that it had to be kept working in order to keep the Scottish steel industry going and give us a base for future steel-using industries.

I ask that whenever BSC's corporate plan is presented to the Government they should take the political decision to keep the corporation going. It must be given orders and encouragement to obtain orders, so that Mr. MacGregor and BSC may be given the opportunity to make it among the most viable and active steel industries in the world. At present people are saying "We can do nothing about it." The Government are in difficulty, because there is an economic recession, not only in the capitalist world but in the Communist world, but they can do what we ask.

Some of our colleagues from the Midlands and the South-East of England are demanding more and more Government aid. Such aid certainly has a place, but it is not the solution. My constituency has all the aids that any constituency in Britain can obtain. We are a special development area, receiving the maximum grants. I have within my area Irvine new town, a so-called growth area with an unemployment rate of 17·5 per cent. In addition, because the area suffered redundancies from the closure of the open hearth and smelting shop at Glengarnock steel works, the area has aid from BSC Industries. Therefore, any firm coming to my area can have a financial package second to none within the United Kingdom. At least, it is necessary to go to Northern Ireland to obtain a better package, but the people in Northern Ireland are in a worse position, with the same ICI closures as I have.

Simply to paper over the cracks, to plaster up the hole, is no solution. One can put all the aids into one financial package, but that will not solve the problem. We need a fundamental change in Government policy. First—even some Tories are now demanding this—we must bring the rate of interest down. A rate of 16 per cent. cannot last, or, if it does, we shall see the end of manufacturing industry. The manufacturers, those who run industry, the small business men, all vote Tory. They are the solid base of Tory support. Unfortunately, they are the people who have been hardest hit by this Government. I am surprised that they are not in revolt. They are always looking for a revolution of the unemployed. We want a revolt and a revolution by the industrialists and the manufacturers. They are the people who are suffering most and are the people who should be putting pressure on the faceless men on the Government Front Bench.

I am glad to see that the Under-Secretary of State for Scotland with responsibility for industry is present. I tried to contact him yesterday, but was told that he was sick. I told his private secretary "There are a hell of a lot of people in Scotland who are sick, not because of illness, but because their two representatives—the Secretary of State for Scotland and the Minister responsible for industry—who are supposed to be standing up for the rights of Scotland, are not doing so." With friends like those, God help the people!

The Government must get the rate of interest down, to get away from the idea of salvation through solving our financial problem, thinking that then all the other problems will be solved. Secondly, the Government must give some help to manufacturing industry by using North Sea oil and gas to subsidise its raw materials.

The Government must also consider leaving the European Economic Community. If ever the people of Britain were conned, it was when they were conned into the EEC. It has certainly been good for the directors of ICI. Eleven hundred people in my constituency are being sacked by ICI. I wanted to know what was happening to the chairman. I discovered that Sir Maurice Hodgson receives £124,380 a year—nearly £125,000 for closing part of the most successful industry that this country has built up. The gang who have hold of it at present have taken their whack. They are taking their pound of flesh. The blood is coming out, and all my constituents are going to the wall.

Moreover, all the chairmen of ICI retire early. I take, for example, Sir Rowland Wright, last year's chairman, a gentleman whom I have often met. When he retired he became the chairman of Blue Circle Industries Ltd. From what we have read lately, he is not making a good job of that industry either, because there are redundancies there as well. He receives £24,813, in addition to his pension from ICI.

I tried to find out what pensions and other benefits these gentlemen receive after their retirement from ICI. It is difficult, and I could not obtain information for individuals, but I have a collective figure. Last year, nearly £2 million was paid in pensions and gratuities in respect of the executive service of former directors. There is only a handful of directors of ICI to share that £2 million—£2 million in pension plus all the other jobs, the running of banks and industries once those people have retired from ICI. I want them sacked before they sack my people. It is they who have caused the trouble.

Therefore, I ask that the Government do something. We need a change of policy. If we cannot have a change of policy with the present Prime Minister, let us get rid of her. If we do not, we shall get rid of Britain's industries.

5.46 pm

I am grateful for the opportunity to take part in this important debate. It is important to the Opposition, to the Government and to the nation, but most of all it should be important to all the unemployed. However, it will be important to those without jobs only if it seems to them to be relevant to a solution of their individual and deeply disturbing personal problems. Or is the debate only an opportunity for sterile "yaboo" politics, or an opportunity for a warm-up over the course in the Opposition leadership stakes?

I shall not rehearse the reasons for the low level of productivity, low profit levels, lack of international competitiveness and thus a contraction of our manufacturing base, or go over again the economic arguments behind the Government's strategy. I want to deal with the future rather than the present. An upturn in economic activity will come—[Horn. MEMBERS: "When?"]—and when it does two problems will recur. If the Opposition do not wish to consider these practical problems that our industry will continue to face, they do a disservice to the very cause that they advocate. The two problems are, in spite of the present situation, a shortage of skilled manpower and a shortage of capacity. These have been suffered in every upturn in the past 25 years. They result in excessive imports and lost export orders.

I should like the House to consider the following. Britain's training system for producing the skilled manpower required for a modern and competitive manufacturing base is still the worst in the West. The Industrial Training Act 1964 and the revisions of 1973 have in no way solved the problem. We now have a sizeable training bureaucracy, and we have considerable effort devoted to training by employers, trade unions and Government officials. But there continue to be serious complaints about skill shortages and the failure of the training system to respond adequately to industry's changing needs. Much of the argument in terms of industry's problems is the fact that we have not been responsive to the changing needs of consumers both in this country and abroad.

The consumer, Britain, industry as a whole, and Governments of both parties.

Fundamental reforms of training have not been achieved. The reform of the apprenticeship system is one necessity. Better vocational preparation is another. The setting of standards to ensure that training programmes are appropriate in content and length is a third. Our competitors in all parts of the world often achieve better results. I should like to deal specifically with Germany and the United States. Those two countries provide clear and frightening examples of how far Britain still has to go in overcoming these self-made problems.

It is crucial that we move away from time-served qualifications which all too often are limited only to young people. Instead, we need to establish a sensible pattern of step-by-step qualifications available to candidates of any age which will provide a qualification acceptable to employers, recognised by trade unions and relevant to making British manufacturing industry effective in the world league. In Germany, there is a system of testing to produce, for example, toolmakers at any age and to the highest standards. Apart from Ireland, Britain has the highest proportion among Western countries of school leavers receiving neither an apprenticeship nor any full-time vocational education. As many as 44 per cent. of young people go into the labour market in this country straight from school with no training at all. Fourteen per cent. win a time-served apprenticeship, 10 per cent. go into full-time vocational education and 32 per cent. into full-time higher education. Training in Britain is mainly left for individual employers to decide.

In West Germany, by contrast, training is based on collective employer needs viewed in national rather than individual company or industrial terms. As many as 50 per cent. of young school leavers in West Germany go into apprenticeship and only 6 per cent., compared with Britain's 44 per cent., go straight into a job without any training.

If this country is to become effective and competitive as a manufacturing base—I agree with the strong pleas of Opposition Members that we have to remain so—we have to tackle this fundamental problem and difficulty. With three times as many apprentices as in Britain, the West Germany economy benefits from having two out of every three men and one out of every two women in the labour market with vocational qualifications. A similar pattern applies in France.

I can quote an interesting example in the United States of a company in the state of New York where the Teamsters Union is as positive as management in ensuring that the upgrading of unskilled workers continues to turn them into skilled workers to meet the needs of modern and changing industry. A subsidy is provided by the local authority organisation in the form of unemployment pay which provides an incentive for the company to carry out upgrading training at limited cost to itself. This costs the state overall no more than keeping the individual on unemployment pay alone.

This is an area that we need to consider with care and with a view to possible implementation. Those individuals who go on courses of upgrading in their skill are required to complete it and to reach specific standards, for which there are tests, and to do so, not on the basis of time-serving, but on the far more relevant criteria of standards reached. The fast worker can achieve his qualification more quickly, and increase his earnings as a result.

In Britain our system remains far too inflexible. In a company I know operating in Barnsley the machine shop making high precision tools for the aircraft industry still has a permanent shortage of highly skilled men. Yet, even in the climate of unemployment that exists in Britain, the chances of achieving the kind of flexibility in turning less skilled men into highly skilled men is described as hopeless by individuals in key positions in industry and in training.

There are two reasons. Employers in this country fear the expense of paying full-time rates to qualify individuals at an earlier age and the unions continuously oppose the switch to standard testing rather than time-serving. I put with genuine feeling to Opposition Members, who have influence with their trade union colleagues, the question, "Why are they not making a stronger plea for a change in this attitude?" It needs to be made to management. I hope that the Government Front Bench will campaign, but Opposition Members also have an important role to play in being realistic in achieving the changes that we need.

My second specific point concerns a shortage of capacity. It is strange perhaps to talk of such a shortage now, but it will come when the change occurs. Lack of investment is often blamed for Britain's inability to be industrially competitive. I suggest that this is not the only problem. It is not even perhaps the fundamental problem. The real problem is using our existing. investment better. That means an acceptance throughout British manufacturing industry of double shift working—shifts from 6 am to 2 pm and 2 pm to 10 pm.

I am not advocating increased night shift working. Experience generally suggests that it is not particularly effective. There is the difficulty of lack of management involvement. Often there is poor supervision, relatively low quality of workmanship and even, indeed, the appalling examples that come to light from time to time of sleeping on the job. The double day shift system is another matter. We should consider the effect of such a system not only on the greater utilisation of capital investment but on the balance that it can produce in changing the numbers of direct producers of wealth against the indirect back-up staff. There could be 100 workers on a normal eight-hour day, backed by another 100 indirect workers. By going on to a two-shift system, the likelihood is that it will be necessary to increase the indirect backup staff by perhaps only 25 instead of 100. There are profit possibilities in such a system. It produces more directly productive jobs and doubles the use of existing investment.

Often multinationals come under intense criticism from the Opposition, although the management value of having worked in the broader spectrum and having compared work practices in various countries can be invaluable. By utilising its management knowledge gained internationally a multinational company was able to reduce its export prices by 40 per cent. as a result of moving to the double shift system.

I accept that that system is not popular in Britain, partly because of tradition and partly because of our social practice. Let us consider Rochester in the United States, which is similar in size to Bristol. There it is possible for workers who come off the late day shift at 10 pm to buy a drink and go for a meal or to a cinema. The leisure services are geared to cope with a double shift system. One could follow the other. Services will develop to provide for the leisure require- ments of workers as we move over to the new system.

However, it is difficult and tough to change. Management is not always enthusiastic at the prospect of the hassle involved in achieving a change and, unfortunately, union representatives are not always prepared to negotiate realistic wage levels for a double shift system. The system cannot work if a company has to pay time and a half or time and a third. There should be a premium for a double shift system but it must be realistic.

What action are the Government taking to achieve rapid improvement in our training systems and a change of attitude to the double shift system? These are practical changes. They are two examples of activities which are essential for the future of Britain. Governments have a role as catalysts. They should campaign to stimulate and help to achieve such a change.

6.2 pm

The hon. Member for Sevenoaks (Mr. Wolfson) points to one of the difficulties. He was talking of the need for double shifts. The trouble is that many of our industries can barely manage a single shift, because they are going to the wall.

The hon. Member for Macclesfield (Mr. Winterton) delivered a forceful, direct and effective speech criticising the Government's policies. Obviously, he feels strongly and sincerely about what is happening in his area and to the textile trade in particular.

Scotland faces an economic blizzard, the like of which I have never experienced. Almost every day factories are closing and jobs are lost. At one time we used to talk about redundancies. Now factories are being closed and no one knows whether they will be reopened. Will it be possible, in the changing technological world, to reopen the factories? If not, many areas face perpetual unemployment. We cannot see the gleam of light through the darkness.

The Government must reappraise their policies. Earlier in this Session I said that the Government had been elected by the South for the South. The Financial Times of 30 June 1980 stated:
"consequently many people working outside manufacturing and living in the southern half of Britain may hardly feel the pinch of recession."
That might be true of those who live in the South of the United Kingdom but hon. Members who have wristled with a declining manufacturing base in Scotland for the last 20 years are not easily convinced that the upturn will take place in the manner suggested by Government. The gloomier the prospects, the less likely it is that an area will burst into expansion. Areas that are bright, aggressive and attractive find it easier to create additional jobs. Firms looking for locations often prefer the new towns, where there is effervescence. Success breeds success.

As we move into winter the Fraser of Allander Institute has updated the estimate that it made in July 1979 of 199,000 unemployed in Scotland. Now we are heading for 250,000 unemployed and the expectation is 300,000—the equivalent of 3 million in the United Kingdom as a whole.

The Government must examine their overall economic policies. Hon. Members have referred to the sticking-plaster approach. Some argue that oil is the solution to the problem. The hon. Member for Central Ayrshire (Mr. Lambie) referred to the failure of regional policies. He said that even areas with the maximum advantage of special development area status still found it difficult to attract new industry. The key must surely be the way in which the economy is managed.

Dr. Kay Carmichael, in a message to the Scottish Pre-School Play Group Association, recently stated:
"The next time you hear about 200 men being laid off—just think of their families and children."
Already one in four Scottish people lives in poverty, and this number will grow, particularly when the changes in social security and supplementary benefits make their impact in November. Severe social strains will be placed on the community. There may be social unrest as the new generation leaving school discovers that there is no employment. In September 1,343 young people in Dundee were seeking employment. Only three vacancies were available. That is the horrific picture of the suffering in an area such as Dundee.

As the older industrial bases slip and the heavier textile, engineering and shipbuilding industries decline, it is more difficult to attract new industries. Hitherto more prosperous areas such as the Midlands and the South-East of England are beginning to experience the tensions, strains and cultural shock of unemployment. Such areas will put greater pressure on the Government for a share of the resources. The level of aid to the other industrial areas, which have suffered longer and deeper, will be cut. The spread of assistance will be thinner.

Having heard the Chancellor of the Exchequer and the former Chancellor of the Exchequer, the right hon. Member for Leeds, East (Mr. Healey) exchanging words earlier, I find it difficult to choose between the respective policies of the IMF man of the last Government and the Mogadon man of the present Government. The debate between them has lasted three or four years and has become a joust, in which the real essentials and the human economic problems have been lost. All four contenders for the Labour leadership are tarred with the IMF brush. They accepted the IMF policies imposed upon the Labour Government, since they did riot dissent sufficiently to resign. If that was the case in the previous Government, would it not he so with a future Government who failed to look for changes in overall strategy?

Certainly not the people of Scotland. They were elected by the Midlands and the South of England. The Scottish people certainly did not vote for a Conservative Government.

I certainly voted against the last Government, which in its five years in power doubled unemployment in Scotland and doubled prices as well. We put the Labour Government out because they were a lousy Government—I hope that that is not an unparliamentary expression. The very fact that this Government have proved to be less satisfactory than their predecessors is no advertisement for the Wilson-Callaghan Administration. Labour Members must surely admit to the deficiencies of their Government. If that were not so, the debate that they are having now over the Labour leadership must surely be one of the most phoney of all time. There are certainly tensions in the Labour Party, because many people in it recognise that when it was in office it singularly failed to tackle many of the United Kingdom's economic and social problems.

My standpoint, as a member of the Scottish National Party, is that the Labour Government grievously failed Scotland. They were put out of power because they refused to deliver the Scottish Assembly in accordance with the pledge upon which they had been elected in October 1974. Between 70 and 100 Labour Members refused to promise to support their Government if it came to driving the proposal through after the "Yes" vote in the referendum.

I therefore have no hesitation in condemning the previous Government for their record. We had hopes that the party that is now in opposition and seeking election would come forward with the policies that would deal with the economic blizzard.