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Commons Chamber

Volume 13: debated on Thursday 19 November 1981

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House Of Commons

Thursday 19 November 1981

The House met at half-past Two o'clock

Prayers

[MR. SPEAKER in the Chair]

Oral Answers To Questions

National Finance

I appeal to hon. Members asking supplementary questions to make sure that they are asking questions and not making statements.

Medium-Term Financial Strategy

1.

asked the Chancellor of the Exchequer what progress is being made towards achieving the current year's targets in his medium-term financial strategy.

17.

asked the Chancellor of the Exchequer whether the medium-term financial strategy is still in operation.

The medium-term financial strategy sets out our broad fiscal and monetary strategy. It remains our policy to maintain downward pressure on the growth of the monetary aggregates. The public sector borrowing requirement in the current year remains on the course forecast in my last Budget.

In view of the massive transfer of resources that has already taken place from the private sector to the public sector in the continuing attempt to exert the downward pressure to which my right hon. and learned Friend has referred, will he assure us that his further attempts to meet his targets will not result in any further transfer of resources and further burden being placed on private industry?

I well understand my hon. Friend's concern about that subject. Indeed, a large part of my last Budget speech was devoted to it. It remains important to curtail the growth of the public sector to ensure that it does not place too heavy a burden on the private sector. That is why it is important to contain public sector costs and, in particular, to control public sector pay.

The objective for unemployment is to reverse the rising trend as quickly as possible. The rate of increase now is one-half as great as it was 12 months ago.

Will my right hon. and learned Friend confirm that it would be the height of financial irresponsibility for the Government to plan to spend more in real terms next year than they will spend this year?

When the objective is to reduce the percentage of national resources taken by the public sector, clearly we shall be striving to achieve the opposite effect.

As the right hon. Gentleman knows, the size of the borrowing requirement next year will be disclosed at the right time, not today.

The targets that are normally referred to within the medium-term financial strategy are the money supply and the PSBR. As the Chancellor knows, we do not attach a great deal of importance to these particular hair shirts with which he has so willingly clad himself. However, I must ask him about another specifically stated target for this year. The central piece of his Budget was to keep interest rates at 12 per cent. Today, I understand that the interest rate is 15 per cent. What does the right hon. and learned Gentleman have to say about that, and what does he intend to do about it?

There is another question about interest rates later on the Order Paper. Interest rates remained significantly below the international level from the time of my Budget in the spring until the end of the summer, specifically because of the nature of that Budget, which was introduced in the teeth of the right hon. Gentleman's opposition.

Car And Petrol Benefits

2.

asked the Chancellor of the Exchequer what representations he has received about his intention to apply pay-as-you-earn tax to car and petrol benefits.

As announced in the reply of 17 November to my hon. Friend the Member for Hertfordshire, South-West (Mr. Page), I have decided, in the light of representations received, to postpone the application of PAYE to car and petrol benefits for one year.

Does my hon. Friend accept that private industry will very much welcome that proposal because it will help it enormously at this difficult time?

Existing taxation arrangements will persist for the year in question. We hope to use the year in question to find a more suitable as well as administratively acceptable way of bringing about the intentions in the Finance Act.

European Community Budget

3.

asked the Chancellor of the Exchequer what is the expected British net contribution to the budget of the European Economic Community for the six months ended 30 June 1981.

During the first six months of this year net payments to the Community budget by the United Kingdom amounted to £96 million. This net figure allows for gross refunds of £547 million paid under the agreement of 30 May 1980.

In view of this dramatic reduction in the size of the British contribution to the European budget, would not a period of seemly reticence be appropriate by those who have been bellyaching so loudly about the cost of belonging to the Community? As we are now in a position in a disinterested way to press more strongly our claim for a reform of the system of budgetary contributions, is it not possible to press simultaneously for a system based on ability to pay while recognising that there must be some element of Community financing and a common external tariff?

In all things economic, things go up and things go down. What we really need is a long-term, stable and fair solution to the problem of our contribution which will stand the test of time. In seeking that objective, it would not be right to base our plans on the unusual circumstances of the last few months when world prices have risen considerably towards Community prices in food markets.

The present arrangements run for 1980 and 1981. If the mandate discussions do not yield a solution to the long-term problem, the arrangements that apply to 1981 will be invoked for 1982.

Does my hon. Friend agree that it is time that we had a better six months bearing in mind that, since we joined the Common Market, our net payments have amounted to more than £3,000 million—more than £1 million a day? Does he also agree that the lower figure for the first six months includes rebates for last year when our net payment was £700 million—more than £2 million a day?

I cannot be held responsible for the years under a Labour Administration when the bulk of the £3 billion was incurred. They negotiated a financial mechanism with their Common Markets partners under which not one penny has so far been paid.

I welcome the hon. Gentleman to the Front Bench for the first time to answer questions. We hope that he will have an agreeable stay until he is dismissed by the people at the next general election. Does he not think that this curious question put down by his hon. Friend the Member for Flint, West (Sir A. Meyer) is not exactly well timed or helpful considering the negotiations at the Euro summit in London in a week's time?

Will the hon. Gentleman also enlarge on a matter of some seriousness? His right hon. and learned Friend, replying to me on 30 July, stated that his estimate of the United Kingdom's net contribution for this year was £571 million. Admittedly, the first half of the year is substantially below that level. Will the hon. Gentleman elaborate on what was hinted to be the reasons for the short-term change in expectations for the 1981 outturn?

I thank the right hon. Gentleman for his good wishes and reciprocate equally to him that he may have a long and fruitful stay where he now sits.

I consider the timing of my hon. Friend the Member for Flint, West (Sir A. Meyer) impeccable. These matters should be aired and discussed, and we welcome the opportunity.

It is impossible to forecast the results of the second half of 1981, because we have not yet reached the end of that year. It is impossible to make a comparison with earlier estimates, because there has been an unexpected change in the difference between world and Community prices. But it is likely that this year we shall have a much lower net contribution than was expected some time ago.

Manufacturing Industry

4.

asked the Chancellor of the Exchequer to what extent his policies are assisting the recovery of manufacturing industry.

Figures now available for the third quarter of the current year show that manufacturing output rose by 1½ per cent., output in chemicals and allied industries by 6 per cent., and output in engineering and allied industries by 2 per cent., compared with the second quarter. This evidence confirms my earlier judgment that the worst of the recession is probably behind us.

How can the Chancellor justify that answer when Manchester city planning department has recently issued a report which predicts the horrific figure of 40 per cent. unemployment in the city by 1985? There is an annual loss of 3,600 jobs in the manufacturing sector, while only 900 are being created. Even in the service sector jobs show a decline. The council has dismissed about 4,000 of its staff. Is this the brighter picture to which the Prime Minister referred in her Guildhall speech, or is it another effort to delude the workers?

I am not responsible for the forecasts of any organisation, even in Greater Manchester. I understand the hon. Gentleman's concern about the present level of unemployment. All are concerned about measures to get that figure to come down rather than to go up. The facts to which I have drawn attention indicate, as my right hon. Friend the Prime Minister stated, that movement is now taking place in the right direction. In order to encourage and accelerate that movement we need to go on achieving moderation and restraint in pay settlements and ensuring that local authorities do not establish an opposite trend by imposing rates that are too high for the survival of manufacturing industry.

Is my right hon. and learned Friend aware that the information that he has given is very welcome? Is he further aware that most industrialists are looking for extra demand? Where will that demand come from?

I am aware that industrialists, not only in this country but in the countries of the European Community, are, to use my hon. Friend's words, looking for further demand. The present prospect for the United Kingdom is that output is moving in the right direction, whereas in many Community countries it is still moving in the wrong direction. That is happening, not because of anything that we are doing to demand in any broad sense, but because industry is recovering its competitiveness and improving its ability to win world markets. That is the right place to win demand.

The Chancellor of the Exchequer is not coming clean with the House about the real facts. Is he aware that industrial output is still 13½ per cent. below the level that the Government inherited at the time of the general election? Even output per employee is well below the figure for 1979. When does the right hon. and learned Gentleman expect unemployment to start to fall? Does he still hold the opinion that he expressed on 30 July, that the recession is now at an end?

I have already stated that the evidence that I have cited, which the hon. Gentleman chooses to disregard, confirms my earlier judgment that the worst of the recession is probably behind us. I should be grateful for the hon. Gentleman's modest welcome for the fact that output is now moving upwards, and not downwards.

Does my right hon. and learned Friend recall that at no time during the life of the Labour Government was it possible for industry to raise money in the market at fixed rates that were commercially attractive? Will he continue to seek to hold down public expenditure until this situation can be turned round?

I am grateful for my hon. Friend's support. The objective of Government policy is to maintain effective control of public expenditure to improve prospects for the private sector.

Is the Chancellor aware that Governments can create demand? Demand is needed in a whole range of areas, including the public sector. Does he agree that 70 per cent. of increased spending on house building and assistance for schools and hospitals would result in more jobs being created in the private sector? Is it not high time that, with more than 4 million out of work, the Chancellor turned his attention to creating more jobs and demand to help people spend more money and thereby get even more people back to work?

The hon. Gentleman will no doubt take longer than others to learn the lessons of the history of the last 10 years. Of course, it is possible, as he said, for the Government to create demand. But experience that teaches us the right lesson is that of each £1 of extra demand created in the last 10 years only 5p went in extra output, while the remaining 95p served only to finance higher imports and higher inflation. The effective way to create demand is for manufacturers, employers and work people to work together to improve their own prospects for securing an expansion of their own output.

Unemployment (Tax Revenue)

5.

asked the Chancellor of the Exchequer if he will estimate the effect of the increase of unemployment over the past year on tax revenue received by the Exchequer; and what effect this has had on public spending.

It is not possible to separate the revenue effects of the increase in unemployment over the past year from other developments affecting the revenue flow. An estimate could be made only by making some essentially arbitrary assumptions about, for example, the income that those now unemployed would have earned in employment, and by simulating an alternative course for the economy on a macro-economic model. The results would be highly dependent on the assumptions used. For that reason, I do not think that this is a fruitful approach.

I am grateful to my right hon. and learned Friend for his answer, although it does not satisfy me. Will he honestly admit to the House that the cost of unemployment through public expenditure is excessive and damaging? Would it not be better if much of the money were directed to capital projects to get people back to work? I am to meet the local authorities' textile action committee at the Department of Trade in a few minutes. Can my right hon. and learned Friend give me any message of hope to take to those people, who represent an important region of the United Kingdom which is being undermined by unfair competition and prices which are rising as a direct result of Government policy?

I agree that the money spent on unemployment benefit is excessive. I wish that it were not as expensive as it is proving to be. My hon. Friend asks for a message of hope. I think that he should draw the attention of the people he is to meet to the facts put forward by my right hon. and learned Friend the Chancellor of the Exchequer about changes in output which are taking place. My hon. Friend should also stress that if moderation in pay claims continues to a greater extent than it has so far, there should be no reason to doubt that the improvement will continue.

Is the Chief Secretary aware that increasing unemployment has pushed up to an intolerable level the crude impost effect of national insurance, thereby creating further unemployment? Will he wind up the national insurance fund and finance unemployment benefit through the Exchequer?

I am not sure that such a change would have the impact that people who ask that question want. There is nothing magical about the present method of financing, and I am prepared to look at any realistic alternatives. However, I do not wish to give the impression that a great change is afoot. I accept that the real problems remain and that financial manipulation will not solve them.

Does the Chief Secretary not yet realise that the more that he cuts public expenditure, the more unemployment increases, the less tax revenue accrues to the Government and the greater is the demand to cut public expenditure? Is it not time to embark on a cumulative expansion rather than a cumulative decline?

I do not accept in their entirety the premises behind that question. The hon. Gentleman might have noticed that on 21 October I made it clear that the Treasury's plans involved an increase in spending above what had previously been planned.

Does my right hon. and learned Friend accept that the suggestion by my hon. Friend the Member for Macclesfield (Mr. Winterton) that the Government should initiate four or five capital projects—presumably to be financed by the City—would be far better than losing tax revenue and paying unemployment benefits? The nation needs to get back to work.

Considerations, such as those put forward by my hon. Friend, have led to plans for increased investment in the nationalised industries.

Does the Chief Secretary recall the many warnings that he received from the Opposition Front Bench during the Finance Bill that the Government's attempt to claw back part of the cost of unemployment by taxing the unemployed would prove both impractical and unjust? Has the right hon. and learned Gentleman noticed the statement today by Mr. Luxton, of the Society of Civil and Public Servants, that, as a result of that proposal, the Government are heading for a gigantic series of blunders?

Does the Chief Secetary accept, even at this late stage, the common sense case for postponing that half-baked scheme? Alternatively, will he at least give the assurance that we sought in vain last spring, that the Government will restore to the unemployed the 5 per cent. which they lopped off benefits in the pretence that it was in lieu of taxation?

I have not read the particular utterance to which the hon. Gentleman referred, but I shall be happy to look at it and to consider whether it deserves credence.

Public Sector Borrowing Requirement

7.

asked the Chancellor of the Exchequer if it is still his intention to aim at a substantial reduction of the public sector borrowing requirement by 1983.

It remains our policy to secure a reduction in the PSBR as a proportion of money GDP over a period of years.

I thank my right hon. and learned Friend for that clear and precise answer. Does he agree that the cause of many of the problems that he is facing is that the Labour Government borrowed excessively to finance current expenditure? Does he further agree that the best way to bring down interest rates is to reduce, not increase, the amount that the Government borrow?

Since the TUC, the CBI and others seek a reflation of the economy, why do the Chief Secretary and his colleagues persist in ridiculing and misrepresenting the work done on the Treasury module by the right hon. Member for Chesham and Amersham (Sir I. Gilmour)? Does the right hon. and learned Gentleman realise that what his right hon. Friend said is supported by the majority of hon. Members?

I am not in the habit of ridiculing anything said by any hon. Member, least of all by my right hon. Friend the Member for Chesham and Amersham (Sir I. Gilmour). However, there is a difference between ridiculing and subjecting what is said to serious scrutiny. It is a compliment to any hon. Member that we seek to deal with points raised in detail and in a responsible way.

Has my right hon. and learned Friend seen the analysis of the PSBR offered by the Clare group at Cambridge? Does he agree that, when the effect of inflation is taken into account, we are running a public sector surplus rather than a public sector deficit?

I have seen that analysis, but I do not find it persuasive. My hon. Friend will take into account that the PSBR, originally projected in the medium-term financial strategy, was adjusted substantially upwards to the tune of £3 billion to reflect changing conditions. In no sense do I present the position as being one of rigidity. It was precisely that situation that led to a measure of lack of specificity in my original answer.

Is the Chief Secretary aware that he has made probably the most important announcement in the House since we resumed? Are we right to infer from what he said that the medium-term financial strategy, certainly as far as it embraces the public sector borrowing requirement, has been abandoned and that events for the third year running are forcing the Government to accept a larger public sector borrowing requirement than they previously envisaged? Of course, we welcome their conversion.

Does it occur to the Chief Secretary and the Chancellor of the Exchequer that it would be better for the country if they did not adjust the PSBR in the wake of an increase in unemployment, with the public sector cost that that imposes? Would it not be better to adjust it first to create employment by using public sector expenditure in a creative way?

I welcome the opportunity to make it clear that I do not accept what the right hon. Gentleman said. I have made no such statement. I said that the public sector borrowing requirement foreshadowed by my right hon. and learned Friend the Chancellor of the Exchequer in the Budget Statement was higher than that posited in the previous medium-term financial strategy statement to the tune of £3 billion. That was made clear in the Budget Statement. As regards progress this year, I welcome the opportunity to clarify and to stress that the PSBR for 1981–82 is on target.

£ Sterling

8.

asked the Chancellor of the Exchequer what is his Department's estimate of the fall in the real value of the £ sterling since May 1979.

According to the general index of retail prices, the purchasing power of the £ sterling is now 71 per cent. of its May 1979 value.

After that remarkable admission of the effects of the Government's policies over the past two and a half years, will the Minister tell us his estimate of the present rate of inflation? By how much does he expect it to increase during the next few months?

The hon. and learned Gentleman will have listened to the immediately preceding questions, when my colleagues were urged to increase the rate of inflation by Labour Members. Such a policy would bring about a record similar to that of the Labour Government. Is the hon. and learned Gentleman aware that in the first 29 months of the Labour Government, the pound that they inherited became worth only 54p? By the end of the Labour Government's period of office its value had fallen to 47p——

The reply to the hon. and learned Gentleman's detailed question is that the current rate of inflation, year on year, is 11·7 per cent.

Having asked the Chancellor of the Exchequer recently what the beneficial effect on the retail price index would be if he were to reduce VAT to 12·5 per cent., may I now be told whether there is any foundation for the rumour that the Government are considering an increase in VAT and that that pressure comes, not least, from our European partners, who think that our rate is far too low?

On a point of order, Mr. Speaker. In view of the unsatisfactory nature of the Minister's reply, I give notice that I shall seek to raise this matter on the Adjournment.

Confederation Of British Industry

9.

asked the Chancellor of the Exchequer if he intends to meet the leaders of the Confederation of British Industry to discuss with them their appreciation of the economy.

I meet the leaders of the CBI regularly as well as at meetings of the National Economic Development Council. I expect to see them at least twice before the Christmas holidays.

Does my right hon. and learned Friend recall the CBI's voluntary prices initiative of about 10 years ago, whereby 200 of our largest firms agreed to keep down price increases by 5 per cent. or less, which resulted in a halving of inflation during the following 12 months? Will my right hon. and learned Friend seek a similar initiative on the part of the CBI and the nationalised industries, given that he is introducing a 5 per cent. guideline for public sector pay?

My hon. Friend's last point was inaccurate, because the limit figure for the growth of pay in the public service sector is 4 per cent., not 5 per cent. I understand my hon. Friend's concern about the need to secure a continued reduction in price inflation. However, I do not think it wise to set about that by seeking such an all-embracing and rigid undertaking. In the years since such an attempt was last made, profitability has fallen very sharply. In the public sector, as in the private sector, it is important that every effort is made to continue to secure a reduction in unit labour costs. I am glad to say that we are making progress in that direction.

If the Government manage to achieve the increase in productivity that they say they will achieve—and with the increase of ½ million in the labour force by 1984—is it not likely that unemployment will continue to rise in the next three or four years towards the figure of 4 million? Why did the right hon. and learned Gentleman and his colleagues reject the advice of the right hon. Member for Chesham and Amersham (Sir I. Gilmour), whose policies would reduce unemployment by 1 million, instead of increasing it by 1 million? When will the right hon. and learned Gentleman give an answer to the right hon. Member for Chesham and Amersham, who has today asked when and why unemployment will fall?

My right hon. and learned Friend the Financial Secretary gave a very effective answer to my right hon. Friend the Member for Chesham and Amersham in the speech that he made last Friday. No doubt the debate will continue elsewhere, as well as in the House. Progress in the right direction on unemployment depends not only on continued good sense about pay bargaining and the reduction of costs, but on willingness to see profits expand, on the tax changes that we have been making since coming into office to improve the prospects of further investment, and on the enterprise of British industry.

As many lean, efficient and well-managed companies have been pushed over the cliff, and as we fear the social consequences of unemployment being over 3 million, is there not a clear commonsense case for my right hon. and learned Friend to support the provision of Government funds for carefully costed capital projects in labour-intensive industries?

As my hon. Friend well understands, the Government are perfectly prepared to make funds available within the limit of the total amount of money that is available for investment, rather than current consumption. It is because so much is being taken in current consumption and so little in investment that we must reverse that trend. We have provided plans for an increase in nationalised industry investment of 15 per cent. in real terms next year. That is a larger figure than for any year since 1975. If we have continued success in reducing current costs there will be scope for going further in that direction.

Interest Rates

10.

asked the Chancellor of the Exchequer whether he will make a statement on the level of interest rates.

20.

asked the Chancellor of the Exchequer if he is satisfied with the present level of interest rates.

When interest rates rose in September we pointed to two main factors—external considerations and the rapid growth of bank lending. Rates have now come down a little. Further progress will continue to be affected by both internal and external factors and not least by the extent to which Governments can restrict the size of their borrowing.

Why has the Bank of England been intervening recently to hold up the high level of interest rates? How does that assist industrial confidence or commercial recovery?

The level of interest rates on any given day depends on a number of factors, including the size of the demand for money and the price at which it is, and can be made available. The Bank of England is only one of the factors present in the market.

Does the Chancellor of the Exchequer realise that his answer will be regarded as complacent by business men? Many of them voted Conservative at the last election and they regard high interest rates as crippling to their businesses and as causing the high level of bankruptcies. By the Government's adherence to such interest rates, they are preventing economic recovery and destroying the nation's industrial fabric.

It is perfectly well understood that high interest rates are less attractive and less conducive to economic effectiveness than low interest rates. They are a manifestation of inflation and of the high demand—particularly of Governments round the world—for borrowing, which pushes up interest rates. This country is close to being unique in being so preoccupied with the proposition that we can bring down those interest rates by spending and borrowing more. If the hon. Gentleman takes counsel from the advice being given to countries throughout Europe and from the advice being given in North America, he will see the central lesson, that interest rates can be lowered by reducing the demand that Governments make for borrowing in the market place.

Although my right hon. and learned Friend wishes to ensure that stimulation of demand comes naturally, does he agree that it can be stimulated by new investment from industry? Does he accept that it is important to point out to industry that although the Government wish to do everything possible to keep interest rates as low as possible, those rates do not rest entirely in the Government's hands?

My hon. Friend is entirely right. As I have said, interest rates are affected by the size of borrowing by other Governments around the world. The possibility of investment by industry also depends on its continued success in reducing its other current costs.

Is not the right hon. and learned Gentleman aware of the perplexity of the money markets, because, despite the fall in interest rates in the United States of America as well as in Europe, the Bank of England intervened to keep up interest rates and, consequently, to keep the exchange rate higher than it would otherwise be? That is to the enormous disadvantage of our manufacturers and exporters, whose interests have been overlooked by the Government for far too long. Will the right hon. and learned Gentleman explain the monetary nonsense behind all this.

The right hon. Gentleman well knows from his experience in Government that the level of interest rates depends not only on external factors but on the rate of growth of the money supply and on the scale of growth of bank lending. All those factors are taken into account. If they are neglected in the pursuit of low interest rates for their own sake and set aside for the sake of expanding Government borrowing, the consequences will be the exact opposite of what industry desires.

Inflation

11.

asked the Chancellor of the Exchequer what is the current rate of inflation.

16.

asked the Chancellor of the Exchequer what is his estimate of the level of inflation by the end of 1982.

18.

asked the Chancellor of the Exchequer what has been the rate of inflation in the most recent 12-month period for which figures are available.

The latest figures for the annual rate of increase in the retail price index are for the 12 months to October 1981, when the increase was 11·7 per cent. As regards prospects for the level of inflation in the coming year, I ask the hon. Gentleman to await publication of the Industry Act forecast.

Given that the true unemployment figure is nearly 4 million, and given the massive and savage cuts in public expenditure over the past two and a half years—which particularly affect the poorer sections of the community—will the Chief Secretary accept that the Government's monetary policies are cracking up? Will the Government change course and make a determined effort to reduce unemployment? When will the rate of inflation return to single figures?

I have already indicated when the forecast for inflation will be made. The unemployment situation is sufficiently serious for no useful purpose to be served by producing inflated and exaggerated figures at the drop of a hat. We all accept that it is serious and that the long-term solution to the problem lies in the structural change in the economy, signs of which are beginning to emerge.

Does not the right hon. and learned Gentleman yet accept that the Government have increased prices by 29 per cent. since they came into office and have done so, moreover, at the cost of intolerable and socially unacceptable high levels of unemployment that will have serious long-term consequences for the social stability and fabric of areas such as Merseyside? How much longer must my constituents suffer before this stupid and destructive policy is changed?

I do not believe that the hon. Gentleman's constituents, any more than the constituents of other hon. Members, including my own, would benefit from a reversal of policies that have led to a fall in the year-on-year rate of inflation from 21·9 per cent. to 11·7 per cent.

Although sterling M3 has been increasing faster than the rate of inflation over the last 15 months, will my right hon. and learned Friend confirm that he does not expect the rate of inflation to rise other than marginally in the foreseeable future? If that is so, how does my right hon. and learned Friend, as an advocate of monetarism, explain that?

As I have said to my hon. Friend, the Industry Act forecast will be made shortly. That will give the Government's latest view of the progress of inflation and the battle against it in the coming months.

Is not the right hon. and learned Gentleman aware that it is a measure of the wreckage of the Government's economic strategy that, of 16 interventions by Conservative Members this afternoon, only three have been remotely sympathetic to the Government's position? Does the right hon. and learned Gentleman agree that as a result of his gross underestimation of the inflation rate up to November, married pensioners have been defrauded by the Government of £1·20 from the pension that they will receive this Monday? Will he promise the House that early steps will be taken to restore the full value of all pensions and benefits under the national insurance and supplementary benefits schemes to compensate for the 11·7 per cent. rise in inflation up to November?

The word "defraud" does not come well from the lips of the hon. Gentleman. I am sure that, on reflection, he will think better of it. I am happy to confirm that the pledges that have been made and repeated by my right hon. Friends the Prime Minister, the former Secretary of State for Social Services and the present Secretary of State for Social Services, will be adhered to.

Can my right hon. and learned Friend recall any occasion since the election when the Opposition, by commending low wage settlements, have played any part at all in helping to reduce the rate of inflation?

My memory is not good enough to search out any such rare occurrence if, indeed, it happened.

Interest Rates

Order. The hon. Gentleman is present, at least he is down here in the Chamber.

12.

asked the Chancellor of the Exchequer what has been the gap between bank rate and minimum lending rate and the average interest paid on premium savings bonds in 1960, 1970, 1980 and at the latest available date.

The gap between bank rates and MLR, and the value of the prize money as a percentage of the value of the total of premium savings bonds, was for the years specified 1·1, 2·6 and 9·9 respectively. The gap in August this year—when MLR was last posted—was 5·0.

Does not the hon. Gentleman feel that the Treasury contribution is too low? Is not this really a cheap money policy, which he is destined to oppose?

I am unaware of the significance of the hon. Gentleman's move from the Liberal Bench. However, the interest was raised on 1 July 1980. It must be borne in mind that premium savings bond prizes do not carry tax. Equally, it is fair to point out that as about £1,400 million is invested in these bonds, it must be a medium which the investor finds attractive despite the fact that the interest rate is lower than prevailing rates from the banks.

Is the Minister aware that there are occasions when people can make more money at gambling than by investing in premium bonds? When he is running short of money and the PSBR is extremely high, he might be advised to go to the Playboy Club, wait until the wheel stops spinning and chuck in the dice.

Many gamblers would be happy if they were guaranteed a 7 per cent. return on their investment.

Prime Minister

Engagements

Q1.

asked the Prime Minister if she will list her official engagements for 19 November.

This morning I presided at a meeting of the Cabinet and had meetings with ministerial colleagues and others. Later, in addition to my duties in the House, I shall be presenting the Harding award on behalf of Action Research for the Crippled Child and having further meetings.

Does my right hon. Friend agree that the so-called centre party has no roots, principles, philosophy or values and that it is little more than a credit card party with the cheap slogan "Vote now, pay later"?

I seem to recognise the quotation as having been made by a person who used to occupy a place on the Opposition Front Bench above the Gangway. However, there is no point in occupying the centre ground, because the centre shifts as the whole spectrum of politics shifts——

I am sorry, Mr. Speaker, but I cannot compete with the kind of mind of Opposition Members below the Gangway. It might suit them better if I were to say that the centre moves as the spectrum of politics moves. Therefore, the only sure ground is the ground of one's belief, on which one can stand like a rock.

Will the right hon. Lady find time to read the report in the Yorkshire Post on Tuesday, in which the former Conservative chairman of the West Yorkshire policy authority accused the Home Office of banning the promotion of senior police officers in that force as a result of their involvment in the Yorkshire Ripper case? If that is true, will she make a statement to the House about why the Home Office found this ban necessary?

I know about the circumstances that the hon. Gentleman has alleged. Perhaps he will raise matters relating to the police with my right hon. Friend the Home Secretary.

Does my right hon. Friend welcome the statement by President Reagan that he would reduce the deployment of American missiles in Europe if that was matched by the Russians? Will she also find time to meet any delegation from the Russian CND which might care to explain what success it has had in getting the Russian Government to reduce their nuclear stockpile?

I cannot meet anyone if there is no one there to meet. I do not imagine that they would be free people if they held those views, because they live in a different society. I formally welcome President Reagan's great initiative in proposing not merely a limitation of nuclear arms but an actual reduction both in nuclear arms and conventional forces. I believe that he has seized the initiative. I hope that we shall find a response from the Soviet Union. We wish to have a balance of arms at a very much lower level than at present. I hope that President Reagan's initiative will lead to negotiations. I do not conceal the fact that such negotiations will be long and difficult, but they will be well worth while and believed in by most of the British people.

Is it not true that the Opposition have been arguing and campaigning for a zero option attitude for many months? Did we not advocate that at the time of the discussions in December 1979? Naturally, we greatly welcome President Reagan's statement. We hope that negotiations will take place on that basis and that they will be successful.

Does the right hon. Lady agree that not only should that statement be welcomed, but that it is much better and offers greater hope than the statements about so-called limited nuclear war? If successful negotiations can be carried out properly on the zero option, cannot the whole idea of limited nuclear war, such as that previously professed by the American Administration and others, be outlawed altogether?

I had hoped that the right hon. Gentleman would give an unqualified welcome to President Reagan's statement. It is a forthright initiative. However, I am delighted that the right hon. Gentleman has been converted to multilateral disarmament.

The Opposition have a much better right to welcome the statement than has the right hon. Lady. Did not the Opposition argue for the zero option in Moscow, Washington, Europe and everywhere else? The last person to support the zero option has been the right hon. Lady herself. The Opposition hope that the negotiations will be successful. That is why I ask the right hon. Lady to recognise the implications of the zero objective by saying that the idea of flexible response and limited nuclear war must be outlawed?

The right hon. Gentleman has been arguing for the surrender of our security, regardless of the Soviet Union's response. I believe in multilateral disarmament. I am anxious that that should happen. I unreservedly welcome President Reagan's statement. I hope that it finds a ready response in the Soviet Union. I see little point in going further than that. We have not yet heard the Soviet Union's response.

Q3.

asked the Prime Minister if she will list her official engagements for 19 November.

Has my right hon. Friend had an opportunity to read in the newspapers the reports of the agreement signed between the Toshiba company and the electricians union, which appears to set an interesting and hopeful precedent for future industrial relations? If she has not done so, will she read it, commend it, and perhaps even go so far as to congratulate both unions and management?

I have not seen the full agreement. I have read the reports of it, which have described it as a no-strike agreement. We all welcome any agreement that eliminates friction between management and work force and maximises output. I understand that the agreement does that and I welcome it.

While the Government proclaim their main aim to be a reduction of inflation, may I ask whether the Prime Minister is aware that when the time comes for her to meet the electorate the rate of inflation will be as high or even higher than that which she inherited, and will be accompanied by 4 million or 5 million unemployed and the production of 25 per cent. less wealth?

I do not accept any of the premises of the hon. Gentleman's remarks.

Will my right hon. Friend spend some time today contemplating our satisfaction at the sudden conversion of the Leader of the Opposition to multilateral disarmament? Does not she find it disappointing that on the first occasion when Russia, which has been campaigning for disarmament for many months, is given a solid proposition, her immediate reaction is to throw it out of the window and call it propaganda?

Most of us unreservedly welcome President Reagan's initiative. We still hope for a Russian response. If that does not happen, there will be serious consequences for the amount of money that we shall have to spend on armaments. I sincerely hope that a response will be forthcoming and that the United States and the Soviet Union will enter into negotiations that will be fruitful for us all and for our peoples.

If the Prime Minister will not accept the premise of the question asked by the hon. Member for Newham, North-East (Mr. Leighton) about the condition of the economy in two years' time, will she at least answer for the condition of the economy today? The right hon. Lady showed flexibility earlier when she spoke about the shift from the centre. What changes does she propose that will bring about a reduction in inflation and an increase in employment and output?

At the time of the last election, when the hon. Gentleman was a member of the Labour Party, inflation was on a rising course. It was rising comparatively fast. He knows, because he was a member of the previous Government, that many price increases were held back for the election. In general, inflation is now on a falling course. As I said in a speech on Monday, because of the change in the pound-dollar exchange rate inflation rose last month and there may be further increases in the immediate future. However, after that I believe that it will resume its downward trend.

Q4.

asked the Prime Minister if she will list her official engagements for 19 November.

I refer the hon. Gentleman to the reply that I gave some moments ago.

Is the Prime Minister aware that a reply given to me yesterday showed that council rents have increased by 78 per cent. during the time that the Government have been in office? How does the right hon. Lady justify council tenants being penalised in that way, especially those millions who do not wish to buy their homes? How does she justify an increase of 78 per cent. in two and a half years when she wants to impose wage increases of 4 per cent. on the working people?

The hon. Gentleman is not comparing like with like. Earnings have risen substantially during the period that he mentioned. I now speak from memory and he must check the precise figures, but I believe that at the time of the last election council rents met only 47 per cent. of the actual expenditure on council houses. That was recognised to be an unduly low percentage by responsible Opposition Members. It had to rise. It was recognised that council rents represented about 6 per cent. of the pay packet, that that was unduly low and that it was dine for them to rise.

Does my right hon. Friend accept that if the Russian Government turned down President Reagan's initiative, any action towards unilateral nuclear disarmament would have no effect on Moscow and would leave us absolutely naked at any conference table?

I entirely agree with my hon. Friend. There must be multilateral disarmament if we are to retain our security. Unilateral disarmament would put the whole future liberty of these islands at risk, and we shall not do that.

Has the Prime Minister seen the courageous letter in The Times today from the governor of Wormwood Scrubs prison in Hammersmith? Will she persuade some members of the Tory Party to allow the Home Secretary to take a more radical and humane approach to the growing crisis in our prisons which is threatening the welfare of prison officers and prisoners alike?

I have seen the letter. My right hon. Friend the Home Secretary has repeatedly stressed that the present levels of overcrowding in prisons are intolerable. He has taken steps to try to reduce that overcrowding. The Government's policy is to encourage shorter sentences, consistent with the protection of the pulic from serious offenders——

The hon. Gentleman must at least he glad that the Government have raised the number of police and increased their pay to ensure a greater rate of crime detection.

Will my right hon. Friend warn the so-called Ulster Loyalists who threaten to make the Province ungovernable that they could succeed where IRA terrorism has singularly failed over the last 12 years in persuading the British people and Parliament to end this country's commitment to the defence of Ulster?

I hope that all honourable, law-abiding citizens in the Province of Northern Ireland will support the security forces and the police in their work. No security forces or police can work without the support of the overwhelming majority of the population. I hope and believe that the security forces will secure that support.

Business Of The House

May I ask the Leader of the House to state the business for next week?

The Lord President of the Council and Leader of the House of Commons
(Mr. Francis Pym)

The business for next week will be as follows:

  • MONDAY 23 NOVEMBER—Second Reading of the Social Security and Housing Benefits Bill.
  • Motions on the draft Agriculture and Horticulture Development (Amendment) Regulations, draft Farm Structure (Payments to Outgoers) (Variation) Scheme, Agriculture and Horticulture Grant (Variation) Scheme, and draft Farm and Horticulture Development Regulations.
  • TUESDAY 24 NovEMBER—Second Reading of the Transport (Finance) Bill.
  • Motions on the London Docklands Development Corporation (Vesting of Land) (Greater London Council No. 2) Order and London Docklands Development Corporation (Vesting of Land) (Tower Hamlets London Borough Council) Order.
  • WEDNESDAY 25 NOVEMBER—Second Reading of the Local Government (Miscellaneous Provisions) Bill.
  • THURSDAY 26 NOVEMBER—Supply (4th allotted day). Until about 7.30 pm there will be a debate on law and order, followed by a debate on the damaging effects of high interest rates.
  • Both will arise on Liberal Party motions.
  • FRIDAY 27 NOVEMBER—Private Members' Motions.
  • MONDAY 30 NOVEMBER—Debate On the First Special Report from the Committee of Public Accounts, Session 1980–81 on the role of the Comptroller and Auditor General, and on the Government's White Paper, Cmnd, 8323.

May I put four matters to the right hon. Gentleman? First, the new unemployment figures will be announced on Tuesday. I renew to the Leader of the House our constant demand that, while there are such appalling and unprecedented unemployment figures, the announcement should be made by the Minister in the House with an early opportunity for the House to debate the question.

In view of the further redundancies that will come in International Computers Limited, I hope that the right hon. Gentleman will arrange for the Secretary of State for Industry to make a special statement in the House. I understand that my right hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman) is leading a deputation to see the Prime Minister on Monday on that subject, but in view of the huge amounts of public money involved, I hope that there will be a statement on that subject, too.

I congratulate the Government on the fact that apparently the Secretary of State for the Environment has dropped the offensive so-called referendum clause from the Local Government Finance Bill. However, although we would prefer it if the whole Bill were dropped, can the right hon. Gentleman assure us that, if the Secretary of State persists with it, there will be a two-day debate on Second Reading on the Floor of the House and that the Committee stage will be taken on the Floor of the House, as it remains a constitutional Bill of major importance?

I say to the right hon. Gentleman once again that as soon as the judgment comes from the other place on the Greater London Council case, concerning Lord Denning's judgment and that of the Court of Appeal, we will wish to discuss the matter in the House, especially if, by some mischance, Lord Denning's judgment is upheld and—[Hon. Members: "Order."]—particularly because of the revelations in the Daily Mirror yesterday, which were interesting.

On a point of order, Mr. Speaker. Am I correct in saying that the Leader of the Opposition is out of order in making an advance assumption on a judgment to be made in another place?

The hon. Gentleman is right that the matter is sub judice. We all know that, including the Leader of the Opposition.

I was not passing judgment on the merits of the matter. I am saying to the house and to the Leader of the House, whatever may be the verdict in that case, that I believe that the matter deserves discussion in the House. The Opposition will demand it. We believe that major questions are involved. Before Conservative Members dismiss what I am saying, I ask them to study the record with great care—for example, the article on that subject in the Daily Mirror yesterday. It cited what has been said by some Conservative spokesmen, including the Prime Minister. It will be found that on the legal aspect of the matter, the views of the right hon. Lady seem to accord almost exactly with those of Mr. Ken Livingstone.

On the important matter of unemployment, it is not the Government's intention to change the long-standing practice for announcing the figures. They will come at their regular time. However, we completely agree with the Leader of the Oppostion that it is an important matter. Already, in the last three weeks, the House has debated it twice and, no doubt, the House will wish to return to it. I have nothing further to say. No changes in the method of announcement are proposed at the moment.

I shall, of course, convey to my right hon. Friend the Secretary of State for Industry the request for a statement on ICL, but it is our view that that is a matter for the company. It is the considered judgment of the new management of the company, in which we have full confidence, that further redundancies are necessary to ensure the long-term future of the company. However, I shall convey the right hon. Gentleman's views to my right hon. Friend.

There is no reference in my Business Statement to the Local Government Finance Bill. We had a debate on it last Thursday. There is no doubt that many hon. Members on both sides of the House find high spending unacceptable. The question is how that problem is to be tackled. My right hon. Friend the Secretary of State for the Environment is receiving representations and considering that matter actively. It is inappropriate to go further as to how any future debate or the Bill might be handled.

Finally, on the matter that is still sub judice, I feel that from the Dispatch Box it is both premature and inappropriate for me to make any comments at this stage, but the right hon. Gentleman's remarks have been noted.

Order. Before we start other questions, I remind the House that today is a Supply day on Scottish business. A large number of Scottish Members hope to participate. We must try to be fair to them, so I hope that questions will be succinct and to the point.

Regarding the Local Government Finance Bill, will my right hon. Friend accept that, although the exact form of that Bill may be a matter of discussion, most, if not all, Conservative Members expect action to be taken to keep down the rates?

I am aware of that view, which is held by many of my hon. Friends, and so is my right hon. Friend the Secretary of State for the Environment.

Can the House have a debate on the state of outer cities? Is the Minister aware that in one estate in my constituency, which is not in the inner city, unemployment is estimated to be above 50 per cent? If the Government are expected to take action to reduce rates, as the hon. Member for Melton (Mr. Latham) stated, will the Government help local authorities to assist outer city areas that are in desperate need today?

I regret that I cannot hold out any hope in the immediate future for a debate on that subject in Government time. That does not mean to say that it is not important, but there are other, perhaps even more important, issues Perhaps the hon. and learned Gentleman can find other opportunities to raise the matter.

May I draw my right hon. Friend s attention to early-day Motion No. 1 in the name of my hon. Friend the Member for Liverpool, Wavertree (Mr. Steen), my name and the names of a number of other hon. Members?

[That this House believes that the pressing problems facing our cities can best be tackled by implementing some of the proposals contained in a recently published study `New Life For Old Cities' endorsed by 62 Conservative honourable Members and Members of the European Parliament representing urban constituencies which offers new hope for the regeneration of our cities, by turning to people rather than Government and relying more on private enterprise than public bureaucracy; and notes that included amongst the recommendations are: (a) the rapid release by auction, on the open market of hoarded public land surplus to requirement, (b) promoting city renewal through self-financing private enterprise agencies which would contract out to existing local businesses and professional firms the job of marketing the city's assets, (c) making urban renewal attractive to private investment by offering cheaper loans through issuing tax-exempt revenue bonds, (d) offering rate holidays not just in enterprise zones but to single-plant family firms elsewhere and inner city retailers who ultimately will pay full commercial rates but only if their businesses prosper, (e) encouraging private business to build new factories, offices and homes in the inner city thus reducing the 60,000 acres of agricultural land and green field sites lost each year to urban sprawl, (f) halting demolition and instead encouraging local authorities to sell off decaying property for £1·00 for those (homesteaders) willing to repair and live in them, and making similar arrangements for shopsteaders to enable run-down shops scheduled for demolition to be saved, (g) encouraging building societies to lend on older houses and discontinue 'red-lining' (that is refusing loans for house ownership in run-down areas), (h) enabling sitting tenants of flats and maisonettes inouter council housing estates to purchase their freeholds for a nominal sum in return for a share in the block's management and upkeep thus saving local authority expenditure and (i) contracting out to private enterprise those local authority services which can be done better and cheaper by private enterprise; and calls on Her Majesty's Government to assume a catalytic role so as to enable public and private enterprise in partnership to realise their full potential, to reduce those checks and controls which militate against new development and to involve more fully those people living and working in cities in the total revitalisation process.]

The motion proposes that the Government should deal with what has apparently become the intractable problem of inner cities by relying on private enterprise rather than public bureaucracy. Does my right hon. Friend recognise the importance of the proposals? Will he do his best to see that we have an early opportunity to debate them?

If an opportunity can be found, yes. This subject is high on the Government's list of priorities. No one has been more forthright on introducing private capital to bring assistance to the inner cities than my right hon. Friend the Secretary of State for the Environment. Indeed, it was his own idea. He is still actively considering various ways in which he can help the inner cities.

Is the Leader of the House aware that the Manpower Services Commission has issued a report that recommends the abolition of the quota system, a system which defends the interests of the disabled in industry? Does he accept that most organisations concerned with disablement and most of the disabled want to preserve the quota system and strengthen it? Will we have a debate on this subject before Government action?

The right hon. Gentleman raises an important matter. I am not sure whether we can find time in the near future to debate it. I shall convey the right hon. Gentleman's views to my right hon. Friend.

In view of the importance to certain constituencies of Mr. Reagan's initiative on nuclear weapons where cruise missiles might in some circumstances be deployed, will my right hon. Friend ask a Foreign Office Minister to make it his business to keep the House informed of the Soviet response? At an appropriate stage will he enable a debate to take place on the initiative on the Floor of the House?

I do not think that anyone is under any illusion—I am sure that my hon. Friend is not—that the negotiations will be long and hard. The reduction in the level of armaments must be won. Until now there has been not the slightest indication that the Soviet Union is willing to respond, but we must hope that it will now. I am sure that it will be a long-running story. The British Government, as my right hon. Friend the Prime Minister said, will put all their efforts behind supporting the President of the United States in his efforts. I am sure that the House will be kept informed from time to time. Indeed, the progress that is made in these vital talks will be public knowledge.

Will the Leader of the House arrange for an early statement on the multi-fibre arrangement renegotiations? As the right hon. Gentleman is well aware, several representations have been made for a Minister dealing with the renegotiations and not a Minister from the Foreign and Commonwealth Office to give the House details of the renegotiations. I am sure that he understands very well that for textile constituencies in Lancashire and Yorkshire the renegotiations mean the retention or destruction of thousands of jobs.

I agree with the hon. Gentleman about the importance of the renegotiations. Progress was made in discussions in Brussels this week. I think that I can say that the Minister involved in the discussions will be making a statement to the House next week.

Does my right hon. Friend accept that arrangements and facilities in the House for dealing with mass lobbies are satisfactory neither to many hon. Members nor to our constituents? In the light of that and of the security dangers, will he review the arrangements?

Mass lobbies are difficult to handle. I think that the arrangements that were made for yesterday's lobby were basically satisfactory. I have heard no general complaint save for the scale of the lobby and the limited opportunities for many of those who participated in the lobby to enter the House to meet Members. Praise has been expressed to me for the way in which the police and other Officials of the House dealt with the lobby. I think that all hon. Members appreciate that. If there were a general desire for me to raise the matter with the Services Committee, or if there were a feeling that the time was appropriate to do so, I should be happy so to refer it.

The Leader of the House will have seen early-day motion No. 16, which is supported by 180 hon. Members, on the closure of the Liverpool-Belfast ferry.

[That this House fully supports the fight to retain the Liverpool to Belfast Ferry; and calls upon the Prime Minister to convoke a meeting with the Secretaries of State for Northern Ireland, the Environment and all interested parties to guarantee the retention of this service, to prevent the further isolation of Northern Ireland and, in view of the high level of unemployment on Merseyside and in Northern Ireland, to prevent any increase in that unemployment, particularly among seamen and port workers.]

Will the right hon. Gentleman find time to arrange an early debate on this issue, which is extremely important to Liverpool and Northern Ireland? Surely the Government are not prepared to sit back and face a possible national strike of seamen.

I have nothing to add at this stage to what my right hon. Friend the Secretary of State for Northern Ireland said in the course of the exchanges in the House last week. We are fully seized of the importance of the issue. I cannot go further than that today.

Is my right hon. Friend aware that nine months have elapsed since the publication by the Select Committee on Energy of its report on the Government's nuclear power programme? When does he expect the House to have an opportunity to debate the report?

I hope to find an opportunity to debate the report in due course. I cannot be precise on time.

Has the Leader of the House seen early-day motion No. 68, an all-party motion that refers to the disgraceful decision of the Government to deport Filipino workers who have been domiciled and who have worked in this country for up to nine years?

[That this House notes that the General Secretary of the General and Municipal Workers Union has requested an urgent meeting with the Prime Minister to ask her to reconsider the decision of Her Majesty's Government to deport a number of Filipino immigrants who are employed in the hotel and catering industries; and calls upon the Prime Minister to intervene immediately to prevent any deportations pending a discussion with Mr. Basnett and his deputation about these people.]

Has the Home Secretary ordered an immediate stop on these deportations? Will the Prime Minister be prepared to meet an all-party deputation accompanied by Mr. David Basnett?

That will be a matter for my right hon. Friend the Prime Minister. I shall convey the hon. Gentleman's views to my right hon. Friend the Home Secretary. I am not able to say anything further than that today.

May I draw the attention of the Leader of the House to the letter that appears in today's edition of The Times from the governor of Wormwood Scrubs, in which he states that he cannot tolerate for much longer the inhumanity of the "penal dustbin" in which he works? As the Home Secretary accepts that there is unacceptable overcrowding in British prisons but seems to have disregarded the most important option of reducing numbers, may we have an early statement on the steps that the Government propose to take to reduce numbers in prisons to create a decent, civilised and humane prison system for both prisoners and staff?

I hope that there will be some opportunity to discuss these matters before very long. I cannot see an opportunity of doing so next week.

May I return to the suggestion of the hon. Member for Bury St. Edmunds (Mr. Griffiths) on President Reagan's statement? Does the Leader of the House consider it sufficient for us to have exchanges on this issue? Surely it would be better in due time for the Government to give a considered view in the light of the Soviet response. It is an issue that has an effect on the whole of our defence strategy, both nuclear and conventional. Its effect is not limited to the areas where cruise missiles might or might not be sited.

There will be an effect on our nuclear and defence strategy generally if the negotiations are brought, as we all very much hope, to a satisfactory conclusion. In the meantime we must give every support that we can to the United States Government in their negotiations with the Soviet Union and watch their progress. There is no call for any change meanwhile. I remind the hon. Gentleman that all British Governments have been in full support of every endeavour to limit and reduce armaments on both sides of the Iron Curtain. That is our whole purpose. A new initiative has been taken on a major scale to achieve that and we want to give every help that we can.

It is welcome news that perhaps we shall have a statement from the Minister who is responsible for the multi-fibre arrangement negotiations. Will the Leader of the House ensure that the Cabinet is made aware of the importance of this issue? If there is no satisfactory renewal that provides better terms, the United States, perhaps, will make its marker difficult to enter with the result that more and more imports will flood into Britain. If that happens, a quarter of a million jobs in textiles will be at stake. That is no exaggeration in areas in which unemployment is already unacceptably high.

I think that we should await the statement that I expect to be made next week, which will take us a stage further in what I agree is an important area of our industry.

Has the Leader of the House given serious consideration to early-day motions Nos. 415 and 39 on nurses' pay that appear in the names of my hon. Friend the Member for Fife, Central (Mr. Hamilton) and myself?

[That this House, recalling the occasion when the British Medical Association in pursuance of a pay claim collected resignation forms from general practitioners, requests the Minister of Health to make contingency planning in the event of the Royal College of Nursing, COHSE and NUPE now deciding upon a similar strategy and further to arrange with the Treasury for the extra funds to be made available if large numbers of nurses had to be re-employed on an agency scale.]

[That this House notes the stark contrast between the claim made by the Department of Health and Social Security in a letter to the honourable Member for Central Fife, dated 29th October 1981, that 'a great deal of progress towards solving the problems of nurses' pay has been made…in the last year' with the more accurate assertion in the Nursing Mirror of 23rd September 1981 that 'nurses are in a desperate situation once again', and, pointing out that a fully qualified staff nurse now has a starting salary of £4,450 compared with £4,956 paid to a raw, untrained police recruit and £5,170 for an 18-year-old in the fire service, urges Her Majesty's Government to implement the proposal made some time ago by the present Minister of Health, the Right honourable Member for Reading South, that nurses' pay should be tied to that of the police, the firemen and the armed services.]

Is the right hon. Gentleman aware that there is some urgency? Negotiations are now under way. The Chancellor's announcement today about inflation rates means that the management side will have to give the nurses an 8 per cent. cut in their pay packets. Will he arrange for a statement to be made next week, either by the Secretary of State for Social Services or by the Chancellor of the Exchequer, that the management side will have money sufficient to meet a justifiable claim?

I shall convey those views to my right hon. Friend. As the hon. Gentleman says, negotiations are under way. It is right that they should continue. It is very unusual for a statement to be given—or to be thought to be helpful—if negotiations are under way.

In view of the decision to allow Scottish Members to debate Scottish affairs in Edinburgh and their anxiety to make the Secretary of State for Scotland face the disastrous effects of the Government's policies in Scotland without the backing of his English majority, will the Leader of the House make arrangements for a meeting of the Scottish Grand Committee in Edinburgh before Christmas?

We have made arrangements convenient to the House for the experimental period during which meetings will take place in Edinburgh. The meetings will not begin before Christmas. They will begin early in the new year.

Order. I shall call the four hon. Members who have risen, one of whom will have the compliment of being last.

May I welcome the fact that we shall have a statement from the Minister for Trade about the multi-fibre arrangement? May I draw the Leader of the House's attention to the serious delay in decisions on applications for British citizenship because of the large numbers who applied a few months ago when fears were raised by the British Nationality Act? Is he aware that there are also delays because of cutbacks in staff dealing with the applications? Does the right hon. Gentleman agree that it is a serious matter that applications for British citizenship—which is a right—are so badly delayed? Is he aware that a statement would be welcome so that people can understand a matter that is causing concern to those who wish—and have the right—to become British citizens?

I am grateful to the hon. Gentleman for his first point. His second point is a matter for my right hon. Friend the Home Secretary rather than for me, but I shall convey those views to him.

Is the Leader of the House aware that millions of people in Britain are watching the progress of the right hon. Member for Chesham and Amersham (Sir I. Gilmour)? As his position is supported by a clear majority of hon. Members and the Government's position is supported by only a minority, should we not have a statement from the Dispatch Box about the right hon. Gentleman's remarks, so that we can have a responsible debate about the only way in which many of us believe the immediate problem in Britain can be solved?

Has the Leader of the House seen the newspaper reports that suggest that the transfer of two Ministers from the Department of Health and Social Security to other responsibilities is a victory for the tobacco lobby? As the allegations cast doubts on the Government's intentions when the voluntary agreement with the tobacco companies expires in the middle of next year, should we not have an early statement about what the Government plan to do after the middle of next year?

No, Sir. The idea that this Prime Minister, or any Prime Minister, would contemplate asking a Minister to move from one Department to another on the basis of a supposed tobacco lobby or any other lobby, is so palpably absurd as not to be worth commenting on.

Can the Leader of the House assure us that early next week there will be an oral statement about the agenda of the EEC Heads of Government meeting on 26 and 27 November? Can he also assure the House that, as the Rome-Bonn proposals are likely to be discussed, a document relating to them will be available to the House and to the public by Wednesday at the latest?

I am doubtful about that, but I shall consider it with my noble Friend the Foreign Secretary.

British Leyland

I beg to ask leave to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,

"the proposed reorganisation of the British Leyland bus and truck division".
The proposed reorganisation will be publicly announced in detail tomorrow at noon. The announcement is likely to contain proposals that will produce the loss of a further 1,500 jobs in the Leyland truck division, which, following the redundancies during the past 18 months, spells disaster to the Leyland Central and East Lancashire divisions where many members of the work force live.

Additionally, there are strong rumours that the brand new and most modern Leyland assembly plant at Moss Side, where test operations are done, is to be sold. The diesel engine franchise which it is suggested will be given to an American company, Cummings, will produce a phased withdrawal at Leyland. The carrying out of any one of those three proposals will be significant for British Leyland.

I am requesting an emergency debate so that the Secretary of State for Industry can tell the House about the precise proposals contained in a document that will be issued tomorrow at midday. Otherwise, the House will not have the opportunity to hear the proposals, which are of serious concern to those who live in my area.

The hon. Member for Preston, South (Mr. Thorne) gave me notice before 12 o'clock midday that he would seek leave to move the Adjournment of the House under Standing Order No. 9 for the purpose of discussing a specific and important matter that he believes should have urgent consideration, namely,

"the proposed reorganisation of the Brush Leyland bus and truck division."
I have listened with care to what the hon. Gentleman said, but I must rule that his submission does not fall within the provisions of the Standing Order. Therefore, I cannot submit his application to the House.

Statutory Instruments,&C

By leave of the House, I shall put together the motions on the three statutory instruments.

Ordered,

That the Colleges of Education(Compensation) (Amendment) Regulations 1981 (S.1., 1981, No. 1088) be referred to a Standing Committee on Statutory Instruments, &c.
That the Erskine Bridge Tolls Order 1981 (S.I., 1981, No. 1375) be referred to a Standing Committee on Statutory Instruments, &c.
That the Rent Assessment Commitees (England and Wales) (Amendment) Regulations 1981 be referred to a Standing Committee on Statutory Instrumens, &c.—[Mr. Pym.]

Orders Of The Day

Supply

[3RD ALLOTTED DAY]—considered

Scottish Economy And Industry

3.56 pm

I beg to move,

That this House condemns the economic, industrial and public expenditure, policies of Her Majesty's Government which have led to record levels of unemployment in Scotland, a disastrous rundown of industry, poorer public services and increased burdens on the Scottish people.
I wish to say something later in my speech about the Scottish implications of any announcement that may be made tomorrow from the British Leyland bus and truck division.

We are having the debate against the background of record levels of unemployment in Scotland, as I have said in previous debates on Scottish unemployment. Last month's figures showed 325,000 people unemployed, which is a rise of 79,000 during the year. Last year the figures also rose significantly. Even more worrying than the crude figures is the fact that the underlying trend is still strongly upwards in the United Kingdom generally and in Scotland. Therefore, the prospects for the coming winter are grim, especially for those leaving school at Christmas.

No doubt the Secretary of State for Scotland will say what he has said on many occasions—that it is not all doom and gloom in Scotland and that a number of good things are happening. I shall come to some of the more hopeful things that have happened in recent months. However, even if good orders are obtained occasionally—whether in nationalised or private industry—and even if there are stories of expansion and additional employment in parts of Scotland, we are swimming against the tide.

The overall position is bleak, Whatever happens in a particular circumstance in one part of Scotland—one welcomes expansion anywhere—the number of jobs being lost generally overwhelmingly outnumbers those created. That situation will not be corrected without changes in the Government's economic policy.

I intend to mention general economic issues only briefly as we had a debate on them only a week ago. I draw the attention of the House to the speeches of my right hon. Friends the Members for Stepney and Poplar (Mr. Shore) and for Battersea, North (Mr. Jay), and of my hon. Friend the Member for Motherwell and Wishaw (Dr. Bray). The case against the Government's obsession with monetarism and the PSBR was put strongly, coherently and rigorously.

Virtually everyone, including a considerable number of Government Members, believe that a radical change in economic policy is long overdue, but there is no sign of it. The Government talk of flexibility, but there has been no action and nor has there been a real change of policy that would have any impact on the situation. Again this week we heard from the Prime Minister, as we often hear from the Secretary of State, hopeful and optimistic talk about the economy turning round soon. That is whistling in the dark. Similar false promises were made one year ago and two years ago, but over the past year the situation has got worse, and all the signs are that it will continue to get worse, at least over the next few months, and I believe for considerably longer.

The right hon. Member for Chesham and Amersham (Sir I. Gilmour) has an article in The Guardian today. The title is apposite—"Will unemployment fall?" When will we see a downturn in unemployment? The Secretary of State has failed to answer the question on numerous occasions. He fobs us off with optimistic talk of signs of recovery and a new industrial revival in Scotland, which will not happen without major changes in Government policy.

Different packages have been suggested by the right hon. Member for Chesham and Amersham, by hon. Members who represent Scottish constituencies, and in the document "Changing Gear". Policies have also been advocated from the Opposition Benches. The two common threads running through all the proposals are, first, that the Government must rid themselves of their obsession with the PSBR, which has been, in any event, completely self-defeating. They are paying so much in unemployment benefits that the PSBR cannot be under control. The second is that there needs to be a general stimulus to the economy. Whether the stimulus comes from national insurance surcharge reductions or from public investment in energy, transport and so on matters less than the fact that the Government should recognise the need for a stimulus and take swift action.

I believe that, with hundreds of thousands of construction workers out of work, it is an absolute scandal that the housing record is the worst not since the Second World War but since the end of the First World War. Additional expenditure would tremendously benefit people in Scotland and elsewhere and would stimulate the economy and the construction and other industries.

I promised that I would mention one or two of the matters about which we are pleased. One is the order the other day from the BNOC to Scott Lithgow, for a dynamically positioned oil-drilling rig. However, we should note that it was an order from one nationalised industry to another. Had the Government had their way, we should not have had the BNOC and certainly not British Shipbuilders. Without nationalisation and Government support, the shipbuilding industry would have been finished. That applies not only to Scott Lithgow but to many other yards, including Govan, which we are also delighted to see has had a substantial influx of orders.

However, despite the record of the BNOC and British Shipbuilders, the Government have made proposals to privatise BNOC. In addition, they have this week made an absurd and provocative announcement that they will privatise British Shipbuilders at some time. When the corporation was running at a loss and needed Government support, they put money in. Now that it looks as if it is turning the corner and becoming profitable, the Government intend to sell it. We shall oppose the sale, as we oppose all privatisation proposals.

I hope that the Secretary of State will deal with Robb Caledon in Dundee. It is a tragedy that the situation has not been resolved. If it cannot be resolved by local negotiation, the Government have a responsibility to intervene. The problem is dragging on and causes considerable concern not only in Dundee but also in other parts of Scotland.

Another bright spot is microelectronics. I welcome the fact that Scotland is maintaining its considerable position in the industry. The initiatives were taken mostly under the previous Government, but I give this Government credit for anything that they have done to attract microelectronics industries to Scotland and to expand those already there.

However, there is a tendency to suggest that, because a little bit of the Scottish economy is doing reasonably well, that is an overall solution. We also have oil jobs, but it would have been a miracle, even under this Government, if we had not. Microelectronics, like any other industry, is subject to world fluctuations, and there have recently been difficulties. The number of new jobs in no way matches the jobs that need to be replaced because of redundancies in many industries in Scotland over the past couple of years. It has reached the stage that, when Hoover announced 500 redundancies, it was regarded as a triumph, as the workers expected the whole organisation to close. In any other circumstances the loss of 500 jobs would be looked on as a tragedy. We have become so accustomed to rundowns, closures and the failure of expansion plans that it is now looked on as not too bad.

The redundancy figures are frightening. Notified redundancies to the Manpower Services Commission were 24,000 in 1978, 34,000 in 1979 and 61,000 in 1980. 1981 will be no better. Most of the redundancies are in manufacturing.

Another illustration of the extent of the spiral of decline is that the figure for industrial production in Scotland published the other day is only 90 per cent. compared with 101 per cent. in the second quarter of 1979. Over two years the reduction has been 10 per cent. The figures include North Sea oil. They show how desperate the situation is.

Events this week at Linwood have been symbolic of the industrial decline of Scotland. The factory was established with great hope and optimism. It is now closed, and the Secretary of State, with his usual sensitivity, has said that it was an industrial relic and ought to be swept away. The right hon. Gentleman obviously does not understand the tragedy, not just of Linwood but of many other places in Scotland where, with the closure of factories, there is a loss of manufacturing capacity which will be almost impossible to replace and which will not be replaced within a measurable period. Yet all the Secretary of State can say is that Linwood is an industrial relic.

At Linwood—the sale of which has given so much offence to Scottish public opinion—press descriptions have shown how new and up-to-date much of the equipment was. Much of it is going overseas, just as manufacturing jobs over the last couple of years have been and are being exported. The Government have helped the process along by removing exchange controls. There is now more British manufacturing investment overseas than there is here. Far from stopping it, the Government are encouraging it.

Labour Members, if they are called to speak, will want to deal with some of the problems of their constituencies. My hon. Friend the Member for Kilmarnock (Mr. McKelvey), whose constituency has been badly hit in recent months, has already raised the matter in an Adjournment debate. No doubt he will raise it again. [HON. MEMBERS: "Where is he?"] Where are the Tories. Very few of them are here today—although we know that there are not many Tory Members in Scotland.

I turn to the serious matter of the expected announcement tomorrow by the British Leyland bus and truck division. To be fair to the Secretary of State, I do not expect him to tell us the details of that announcement this afternoon. However, it would be rather nice if he could tell us that he has at least been consulted and is a party to the announcement. Only a month ago the important announcement of British Airways—which affected much of Scotland, including the right hon. Gentleman's constituency—was made, and he had to tell us that he knew nothing about it. Nobody had told him that the announcement was to be made. I hope he has been told about the announcement which will be made by British Leyland tomorrow, and what will be in it.

Labour Members are apprehensive about the Albion and Bathgate plants. Two of my hon. Friends, the hon. Members for West Lothian (Mr. Dalyell) and Glasgow, Garscadden (Mr. Dewar), made representations to the management there this week about the situation and about our apprehensions about the statement. They were told that there was no point in having a meeting before the announcement, which was cut and dried. That does not give me a great deal of optimism as to what might be said tomorrow.

There has already been a considerable rundown in both Bathgate and Albion since the present Government took office. At Bathgate, there were 5,600 jobs in 1978, the highest figure ever. It is now down to 3,600, and today's press reports suggest that a further 1,200 redundancies may be announced tomorrow. In Albion there were 3,000 jobs in 1978, but that figure is now down to 1,900. Again, that is before we know the results of tomorrow's announcement.

In Albion—as some of us who visited the plant were told—there has been a 30 per cent. increase in productivity since 1978. That has not stopped the flow of jobs out of the plant, in spite of the co-operation of the work forces of Albion and Bathgate. Things are getting worse, and if there are to be further redundancies in tomorrow's announcement they will become intolerable. This is not acceptable to Labour Members.

There may be a number of good reasons why there is a rundown in British Leyland's bus and truck division. We shall have to wait until tomorrow's statement to deal with the matter in any detail. It is crystal clear that one of British Leyland's problems, as with so much of Scottish and British industry, is a simple lack of demand because of the general crisis in the economy brought about by the Conservative Government. There has also been a lack of investment in the past, which led to certain difficulties, although there has been considerable investment in recent years.

One of the things causing difficulty for the British Leyland bus and truck division—it has already caused difficulty in the car side of the industry—is the increasing imports from Japan and other countries which are eating away at our manufacturing capacity. I particularly draw the right hon. Gentleman's attention to this because it is within the control of the Government.

In the truck riarket, BL's share has done down to about 17 per cent. Only a few years ago it stood at 30 per cent. At that time, imports made up 7½ per cent. of the truck market. Imports have now gone up to 21 per cent. of the market. Many of the trucks are imported from countries which, by one device or another, ensure that nothing is exported to their countries to compete with their manufacturing industries.

Japan, for example, exports 50 per cent. of its truck production, but not one truck is imported into Japan. There are various devices, such as national type approvals, which prevent fair competition for trucks from Britain or anywhere else. The same sort of difficulty is experienced in several European countries, although perhaps not to the same extent in terms of keeping out exports from other countries. But they are, nevertheless, using various methods to prevent other countries from competing fairly and effectively in their markets. It is about time we took similar action, because we are a soft option. Trucks come into Britain with virtually no restriction. There is no prior approval of design or anything of that nature. But we are not allowed to compete on the same basis in the markets of those other countries.

Similar action needs to be taken in regard to light commercial vars. Recently the Society of Motor Manufacturers and Traders expressed its considerable concern about Japanese penetration of the United Kingdom market. Unless action is taken, this sector of our vehicle industry will begin to go the way of the car side. We simply cannot afford that kind of loss of capacity and jobs.

Imports of Japanese light commercial vehicles have increased from 2½ per cent. of the market in 1975 to 18·8 per cent. in 1981. The increase, even over 1980, is over 50 per cent. Those imports are causing great damage to the Industry in Britain, and something must be done about them.

I want to put on record in this Scottish debate how much we deplore what is happening in regard to the gas-gathering pipeline. It was not some great idea of the previous Labour Government. It was not produced by bureaucrats or civil servants or by a nationalised industry. It was the result of a study which included representatives not only of the British Gas Corporation but of BP and Mobil, and it had the support of the Department of Energy. The Minister of State made that embarrassingly clear when he had to tell his unfortunate constituents that the jobs he had promised them would not be forthcoming. They were not forthcoming because of a decision, made against the Minister's better judgment, by the Cabinet of which the Secretary of State for Scotland is a member. It would be interesting to know whether the right hon. Gentleman supported the gas-gathering pipeline. If he did not, it was a dereliction of duty. If he did, it was only another example of how he has lost out in Cabinet on that issue as on many other issues affecting Scotland.

The pipeline was abandoned for quite the wrong reasons: not because of difficulties concerned with the gas price, though as part of the Government vendetta against the British Gas Corporation they want to put all the blame on them. The Government can and should be the arbiter on gas prices.

Again, it was not all the fault of the oil companies. It is true that some oil companies were not enthusiastic, but in the last analysis it is for the Government to determine the quantities of gas that are required to come into the pipeline, just as it was for the Government to say that the price for the gas was satisfactory. The Government dallied and dillied. They dithered so much that they lost the Norwegian gas, and ultimately they lost the whole pipeline.

I should like to believe that the project could be reestablished. However, that is very doubtful at present. Some oil companies are producing alternative and less satisfactory proposals which, incidentally, will not solve the gas pricing problem, and if they proceed it will be impossible to resuscitate the gas-gathering pipeline project.

It gives me no pleasure to say that this opportunity, once lost, is lost for ever, and it has been lost through the Government's neglect and negligence, and through their obsession with the PSBR. That was the ultimate reason why the project was abandoned, although in every other respect it was technically, financially and commercially a viable proposition. It was the best proposal for utilising to the fullest extent the important gas resources in the North Sea, much of which will be lost under any alternative proposals by the oil companies or anyone else.

I want to mention two other matters which are disparate, but both concern holding on to what we have in Scotland and giving confidence to Scottish commerce and industry. The first is the Royal Bank of Scotland. I want to put on record what I said in evidence to the Monopolies and Mergers Commission. The Labour Party does not wish either of the bids to go ahead. We want the Royal Bank to remain independent, and we oppose the bids from both the Standard Chartered Bank and the Hong Kong and Shanghai Banking Corporation. [Interruption.] I hope that the hon. Member for Renfrewshire, East (Mr. Stewart), who I think is responsible for health matters, does not take the frivolous attitude on those matters that he seems to be displaying now in connection with the Royal Bank of Scotland. If he does, he is out of sorts with the overwhelming body of Scottish opinion, including Scottish financial opinion, which wishes the Royal Bank to remain independent. I hope that the Secretary of State shares that view, because he and his ministerial colleagues will have some responsibility in considering the Monopolies and Mergers Commission report when that report reaches the Government.

Edinburgh is an important financial centre. In my view, the Royal Bank has shown a remarkable lack of self-confidence in its own ability, not just to survive. but to expand its business. I deeply deplore that lack of self-confidence. Nevertheless, I hope that neither bid will go ahead, because if it did, it could do serious damage to Edinburgh as a financial centre.

I thank the right hon. Gentleman for giving way. From what he has said about the independence of the Royal Bank, can we take it that he does not consider it likely that the bank will be nationalised under a future Labour Government? Is that his policy, the policy of the Shadow Cabinet, or the policy of his party, decided at conference?

It would have been nice if the chairman of the Conservative Party in Scotland—if he felt obliged to intervene—had said that he, too, was against the takeover of the Royal Bank of Scotland. Perhaps the Secretary of State will answer that question, if his hon. Friend cannot do so.

I want to stress three points in connection with the Royal Bank of Scotland. First, I want to re-emphasise that we expect the right hon. Gentleman to stand up for Scotland. I hope that he is doing so. If he does, he will have our support. He is not the Minister with direct responsibility and I understand his difficulties, but there is no doubt that the overwhelming body of opinion is against takeover, and if the right hon. Gentleman takes that view he will receive our support. Incidentally, it is interesting that the leader of the Liberal Party seems to think that it is in accordance with Scottish traditions that the bank should lose its independence. Unfortunately, it is in accordance with what has been happening to Scottish industry in recent years, but that is what we are worried about. We believe that the process should stop. If we cannot protect one of our major financial institutions, everything else will be vulnerable. So the process must stop now. If it requires additional legislation, I hope that the Government will not hesitate to introduce the necessary measures.

Perhaps I may take up that point, because it is important. I am surprised to hear the right hon. Gentleman complain about the statement by the leader of the Liberal Party. Surely he knows that that was the first policy statement ever from the new alliance.

I am reluctant to admit this, but for once I think that the Under-Secretary has a point.

Then there is the question of the Locate in Scotland organisation and the Scottish Development Agency offices abroad. I shall not go into the history of the matter, but I understand that the Locate in Scotland organisation is working satisfactorily and harmoniously. If that is so, I am very pleased. However, the battle is by no means won. The question of SDA and Locate in Scotland independent offices in San Francisco, New York and Brussels, and agencies elsewhere, has still to be settled and is due for review at the end of the year, or perhaps now. I warn the right hon. Gentleman that we would find it quite intolerable if any steps were taken to reduce or modify in any way an independent Scottish presence through those offices in San Francisco, New York and elsewhere. No doubt the right hon. Gentleman will have certain arguments with some of his ministerial colleagues——

I am delighted to hear the right hon. Gentleman say that he will not, so if he makes another disappointing announcement we shall know who to blame. I hope that he will realise that it will be offensive to Scottish opinion if these independent offices are closed down.

Having mentioned the SDA, I find it touching to see the Government's great attachment to it. We remember the hostility and suspicion with which the idea was originally greeted. We remember the difficulties which Conservative Members created during the passage of the legislation. Yet now, whenever there is a problem in Scotland, the right hon. Gentleman says "I stand ready to give every assistance for alternative jobs". That means nothing. Then he says "What is more, I shall ask the SDA to look into the matter". If he is now converted to a wholehearted support for the SDA, that is a conversion greatly to be welcomed, but I am still suspicious of it.

The pity is that in the industrial and economic circumstances in which we currently have to operate it is difficult for the SDA to do the creative job for which it was principally established. Nevertheless, I am pleased that in addition to its earlier work on microelectronics, it is now also undertaking work on health care. I remember trying to do something about that about 12 years ago when I was a Minister, but without a great deal of success as we then lost the next general election and the whole project fell. Nevertheless, the agency is carrying out work in that sphere and we are pleased to welcome that. If there are a few bright spots in Scotland now, the SDA is certainly one of them. That is no thanks to the Government, however, as the agency was established and supported by the Labour Government at a time when the Conservative Opposition were extremely critical and hostile to the idea.

Although there is the odd bright spot, I am sorry to say that the overwhelming picture in Scotland is still one of gloom and, for many young people especially, feelings are bordering on despair. The real reason for that is the failure of the Government's economic policy. Responsibility for that gloom and despair therefore lies fairly and squarely on the shoulders of the Government. That is why we condemn them.

4.31 pm

I beg to move, to leave out from "That" to the end of the Question and to add instead thereof:

"this House, while deeply concerned about the high level of unemployment in Scotland, commends the Government's determination to encourage the development of a new industrial base for economic recovery and the generation of new and secure jobs."
I am grateful to the right hon. Member for Glasgow, Craigton (Mr. Millan) and to the Opposition for having selected this subject for debate today. It is, after all, by far the most important subject to which we must address ourselves on the Scottish scene. I am also grateful to the right hon. Gentleman for his kind remarks about the various improvements currently taking place, which he clearly recognises. The right hon. Gentleman made an extremely interesting and useful speech. It was, however—and I shall return to this later—deficient in one main respect. It was extremely deficient in any coherent, well-thought-out alternative that could be put into effect to help the Scottish economy, or indeed any other part of the economy, without its having unacceptable effects elsewhere.

I wondered why the right hon. Gentleman was not his usual confident and assured self in some of his remarks today. This puzzled me a little, until I recalled that this is a remarkable day in that Glasgow district council has today sold its first council house, and with a true sense of irony it selected a house in the constituency of Craigton. No doubt the right hon. Gentleman will be as pleased as I am about that.

We are debating the Scottish economy against an extremely serious background. This is and has been a most. difficult time for all involved in the Scottish economy and elsewhere. It has affected businesses, both large and small, public authorities' which face great difficulties in recasting their expenditure to take account of the changed economic situation, as well as individuals in all walks of life in Scotland who now have to accept lower standards of living due to the changed circumstances of our country and the impact of the recession. Whether one admits it or not, that is the background to the debate. We are going through the worst recession in the lifetime of most hon. Members. No one can ignore that background when discussing the economy without making nonsense of his argument.

In debating this subject the House is entitled to expect from the Government an account of what the effects are in Scotland and what constructive policies they can introduce to help to alleviate the problems and rectify the causes. I believe that the Government have a responsibility to take action in three main ways. First, we must do all that we can, to the limit of our resources, to help those who are out of work for any reason. Secondly, we must do all that we can to help firms and businesses that are in difficulties but have a prospect of becoming viable and profitable once again if they are given the chance to recover and survive. Thirdly, a major priority for the Government must be to attract new industries in order to regenerate the industrial base and to bring in new jobs to replace the old jobs being lost.

It is my contention that in the extremely difficult situation that I have described the Government are doing everything possible to achieve those aims and are pursuing a sensible and competent policy, not only to ride out the recession, but to create conditions from which lasting prosperity will grow.

No, I think that I ought to make some progress with my speech.

The right hon. Gentleman rightly drew attention to the high level of unemployment. I share the Opposition's concern, and indeed the concern of hon. Members in all parts of the House. That is why, at a time when we have the gravest difficulty in finding money for any of the public projects that we wish to put in hand, we have funded a major expansion of the programme of special measures aimed at alleviating the worst effects of unemployment and safeguarding the skills of the work force.

That is the Government's first responsibility, and we therefore have a very large programme to help with that. We expect 75,000 young people to enter the youth opportunities programme this year. We have provided additional support to encourage the recruitment of apprentices. The young workers scheme will aid the recruitment of young people to other permanent jobs, and the new community enterprise programme is double the previous programme for older workers. My right hon. Friend the Secretary of State for Employment hopes to make an announcement around the turn of the year about the introduction of a comprehensive training scheme for the young unemployed. These measures and initiatives illustrate in a positive way our concern to help the unemployed by developing programmes that will not only help individuals through a difficult period but will increasingly provide lasting benefits to them and to the economy.

Those measures, however, important though they are, do not attack the real causes of high unemployment. As everybody knows, our economy has been fundamentally weak for many years. Throughout the various periods of world recession in recent times, Scotland has always fared worse than elsewhere, due to falling competitiveness and low growth in productivity. Without an increase in national competitiveness we shall see no long-term improvement in the prospects of Scotland or of the United Kingdom. The priority that we attach to tackling inflation is therefore utterly necessary in the interests of Scotland.

To deal with inflation we have to do everything possible to reduce levels of public spending and borrowing. That is essential if we are to avoid even higher interest rates and yet more borrowing on which we can scarcely afford to pay the interest, let alone pay back. That was the main gap in the right hon. Gentleman's few remarks about an alternative strategy. I do not know whether the various strands making Labour Party policy have anything better to offer, but there is no answer to the fact that greatly increased public expenditure cannot fail to mean higher interest rates, higher taxes on already hard-pressed businesses and higher borrowing that is increasingly difficult to repay.

As the right hon. Gentleman well knows, the Government's policies are not responsible for all, or anything like all, of the unemployment. They are designed, instead, to combat the conditions that cause unemployment and to create the climate in which to secure new and lasting jobs.

There are encouraging signs that our policies are beginning to succeed. Despite some recent pressure arising mainly from the fall in sterling—although that has been of considerable benefit to our exporters—the annual rate of increase in retail prices is running at 11·7 per cent. compared with about 22 per cent. last June.

Productivity is improving dramatically. Output per person employed in manufacturing industry in the United Kingdom rose by an impressive 5 per cent. during the first six months of this year. There are indications that there have been even greater improvements throughout manufacturing industries in Scotland, where output rose about 5 per cent. during the first three months of this year—about twice the rate for the United Kingdom as a whole. There are indications, moreover, that in contrast with previous recessions, Scotland is showing greater resilience than elsewhere in the United Kingdom in the present recession.

On the production figures, will the right hon. Gentleman take out of the increase of production in Scotland the big increase that there has been in the output of steel at Ravenscraig, which has been accompanied by a major reduction in the work force there through increased productivity?

I am not sure whether the hon. Gentleman wishes me to take it out for interest or to take it out in order to leave a remaining figure which means something else. That certainly forms part of it, and very welcome it is, too. If we can get more productivity at lower costs, that is exactly the reform that Scottish industry needs. I should have thought that I would have the hon. Gentleman's agreement on that.

The increase in output in Scotland is due to the investment which has taken place over many years under previous Governments and which is now bearing fruit. Because of the failure of the Government to follow that up with new investment to provide more employment for people in Scotland, we are getting this increase in output accompanied by a fall in employment which has nothing to do with recent action and the failure of the Government to create new jobs. We need new enterprises, new initiatives and new investment. That is not coming forward.

I think that the hon. Gentleman has raised a number of points—albeit some good ones—that are different from the original point. The hon. Gentleman knows a great deal about Ravenscraig. I should have thought that the main thing to be pleased about is that it has greatly improved its productivity recently. If it is producing steel with some of the most modern plant in Europe at a lower unit cost, it is doing exactly what we want everyone in Scotland to do. Ravenscraig should be warmly congratulated on doing that.

As the right hon. Member for Craigton and I have made clear, we accept that the level of unemployment is tragically and unacceptably high. But we have experienced during this recession a lower increase in the rate of unemployment than in the United Kingdom as a whole since mid-1980. Over the past two and a half years unemployment in Scotland has risen by 30 per cent. less than in the United Kingdom as a whole. Thus, the unemployment relative has been dropping—from 137 in the first quarter of 1979 to no more than 118 in October of this year.

Crucially, too, our industrial output has been holding up better. Over the year to the first quarter of 1981, the latest date for which we have figures, our total industrial production fell by 2 per cent. less than the United Kingdom's comparable figure, and manufacturing output fell by almost 4 per cent. less than it did elsewhere in Britain. Our manufacturing output in that quarter was 1·5 per cent. higher than in the previous quarter. What this shows is not that we do not have any problems, but that for once they are at least not worse than those in the rest of the United Kingdom.

It is the first time that that has happened in the lifetime of the hon. Gentleman, and he should be pleased about it.

The results of these things are not to be seen simply as cold statistics. In both the public and private sectors of the economy there is plenty of concrete evidence in the form of new orders and new investment. When we took office we were faced—perhaps this chimes in with one of the points mentioned by the hon. Member for Motherwell and Wishaw (Dr. Bray)—with the need to take many hard decisions, particularly with regard to the nationalised industries.

A great deal of damage had been done by the failure of our predecessors to take those decisions. They ducked the hard decisions that were necessary to enable the nationalised industries to operate efficiently and to compete effectively, with results that we all saw only too clearly. We have faced those decisions, and to illustrate the positive results that have been achieved I should like to give just two examples out of no doubt many more that could be selected.

The right hon. Member for Craigton mentioned shipbuilding. I was very grateful for what he said, and I was pleased with what he said about recognising some of the improvements there. But it must be remembered that when, two and a half years ago, we were faced with finding huge sums to keep British Shipbuilders going during the recession and its time of difficulty we had no support from the Opposition. It was said to be a quite inadequate and an impossible way of proceeding, and we had no encouragement from Opposition Members.

Yet what do we now find? In recent months British Shipbuilders has won orders for five bulk carriers at Govan—with, we understand, more in prospect. It won them because it was able to quote prices that were competitive with those of the overseas competition. That is success. All concerned at Govan, from the managing director down to the newest recruit, deserve great credit for that.

The right hon. Member for Craigton mentioned the heavy duty drilling rig for Scott Lithgow. There is a new type 22 frigate for Yarrows, and there are a number of orders for the smaller yards as well. It is significant that British Shipbuilders has plans to start recruiting up to another 250 workers on the Clyde. That is the fruit of taking the difficult decisions. The results are coming through in increased competitiveness and ability to quote for orders.

We all appreciate the increase in orders for British Shipbuilders at various yards, but the right hon. Gentleman will know that the Dundee yard of Robb Caledon has been closed. What action will he take, either with British Shipbuilders or the Dundee port authority, to which he nominates representatives to the board, to ensure that the workers who are currently on a sit-in at that yard are given the opportunity of employment, one way or another? It would be a tragedy if that yard were to be closed, stripped down and left as a deserted waste area without any hope of employment connected with it.

I was going to deal with that matter later in my speech, but perhaps I should deal with it now. I share the hon. Gentleman's concern about it. I have been keeping a close eye on the negotiations that have been taking place between the Dundee port authority, Kestrel Marine and British Shipbuilders. Although the harbour authority has appointed members, it is my right hon. Friend the Secretary of State for Transport who is directly responsible for them. In any case, he does not have power to instruct the port authority to do what it might not otherwise think it right to do.

What I have said is that if there is any way in which I can assist I shall be glad to do so. We stand ready to give advice and financial assistance in the usual forms for any new project that can be got together. If it is a question of any encouragement or assistance that I can give, I shall gladly give it. I hope very much that an agreement will be reached between the port authority and the parties to the scheme, and that it will go ahead. But it is up to them to get on with the negotiations.

I come to the second of the examples that I said I would give. Opposition Members have often criticised the Government, which is easy to do, for failing to invest in the public sector, for cutting capital projects, and for cutting practically everything in sight. Yet not very far away from Edinburgh, where many hon. Gentlemen live and work and have their constituencies, at Torness, contracts worth over £500 million have already been placed or offered. The total value of the project is over £1 billion. It employs 2,200 people on the site, and many hundreds more in associated industries. That represents employment and jobs directly created by a public concern—the Torness power station.

In the private sector, too, there have been many difficult problems.

I suppose that we should be grateful for small mercies in the sense that some public spending is taking place. Will the right hon. Gentleman account for the fact that the use of cement in Scotland—this is also produced in my constituency, near Dunbar—has started to fall, I think for the first time since the war, during the past 18 months? The cement works that produce raw materials for building in Scotland are working at 25 per cent. below capacity. Does the right hon. Gentleman not think that he should take action to stimulate that industry?

I am surprised that the hon. Gentleman thinks that 2,200 jobs in his constituency are a small mercy. If that is his view, I wish that the jobs could be transferred to Ayr, where they would be considered a very big mercy. I am not sure how much cement is used at Torness power station, but no doubt some is involved.

In the private sector, too, there have been many difficult decisions to take. Many companies have found matters extremely difficult. Some have gone out of business and many have had to reduce the number of jobs. This has not resulted, to the disappointment, no doubt, of some, in the industrial desert that is the catch-phrase of all those wanting to make headlines.

During September and October alone, Scottish-based companies announced export orders—those that we are aware of, apart from any others—worth no less than £200 million. The notable example is, of course, John Brown Engineering at Clydebank, with orders from Abu Dhabi, New Guinea and Russia. There are others. Weir Pumps, which would not be trading today but for a major and most successful rescue operation mounted, with Government help, through the Scottish Development Agency, has orders from Qatar and Zimbabwe. Caledonian Airmotive beat off stiff overseas competition to securre a valuable contract with Egyptair for engine overhaul and repair work. Daniel Industries has an order for oilfield equipment for the Norwegian sector of the North Sea.

I could-continue with the list. It is more substantial than is often recognised by hon. Members in many of their speeches. British Aerospace at Prestwick is pressing ahead with building its new Jetstream 31. This involves an investment of several million pounds in the aircraft itself, of which a considerable portion was grant provided from Scottish Office funds. The encouraging number of orders and inquiries already received means substantial new employment at Prestwick. Employees are being taken on now.

There has been success also for home industries. A Scottish construction company has won the main contract for foundation and underground services work at Mossmorran. Another Scottish firm has won a large contract of over £2 million for catering there. Over 200 local firms are engaged in the work at Mossmorran.

The right hon. Member for Rutherglen (Mr. MacKenzie) came to see me to express his concern about the Hoover factory at Cambuslang. I understand the feeling of the workers at the Hoover factory at Perivale over the decision by Hoover to rationalise its United Kingdom operations in Scotland. At the same time, I welcome the company's commitment to invest in new products at Cambuslang, thus ensuring the future viability of Hoover's entire United Kingdom operation. I welcome also the improvements that have taken place in industrial relations at Cambuslang in recent years. I urge all employees there to maintain their commitment to the success of the company.

At Shieldhall, in Glasgow, a new company has announced a big food processing development costing £15 million, which is likely to produce about 250 jobs. An Ardrossan firm is to create at least 50 new jobs for a £500,000 contract in engineering. There are many others. All demonstrate a determination by private companies that have the guts and the drive to see their way through even the depths of a difficult depression. We are beginning to see in Scotland not the industrial desert that had been feared but old-fashioned industrial skill and determination that still exists and still enables companies to surmount the difficulties that they face.

I understand the necessity for the right hon. Gentleman's concentration basically on the Forth-Clyde valley. This is, however, a debate on the Scottish economy. The right hon. Gentleman will be aware that unemployment in the Aberdeen-Stonehaven employment exchange area has increased by 50 per cent. in the last 12 months. Will he be making any reference to the Government's response to the McDowall-Begg report, which forecast that in the next five years companies employing over half of the labour force in the Grampian area expect to shed labour?

I appreciate the hon. Gentleman's point. If, however, hon. Members will forgive me. I do not think that I shall give way again. My speech will otherwise become too long. I have no announcement to make about the McDowall-Begg report, which was commissioned to discover the effect on indigenous industries in areas affected by oil. I consider it a most useful report and intend that it shall be taken fully into account in the review next year of regional development areas.

I do not underestimate the difficulties with which we are faced. A number of areas have been badly affected by the decline of traditional industries. There have been substantial redundancies. The Government have concentrated the full thrust of regional policy on these areas. In addition, we have taken a number of special, new, local initiatives. These include the new enterprise zone at Clydebank, which followed an earlier decision to ask the SDA to establish a task force in an area particularly hard-pressed in recent years, especially by the rundown and closure of Singers. Already over 70 companies with a potential for 860 new jobs have either moved into the enterprise zone or expanded their operations there. Twenty-three companies with 153 employees are operating on the Singer site. Over 1,000 inquiries have been received. This cannot be described as anything other than an outstanding success in the early months.

We have continued our support for the Garnock Valley task force, which has already secured the creation of 300 new jobs, with a further 500 in prospect from developments likely to take place in the next two or three years. Similar initiatives involving a concerted effort to tackle the deep-seated problems of an area are taking place through the SDA's integrated projects at Dundee and Leith, where the agency is committing a total of £17 million over the next three years.

Elsewhere, the Enterprise Trust, established in the Ardrossan, Saltcoats and Stevenston area, has dealt with about 90 inquiries since it was launched in May by my hon. Friend the Minister with responsibility for industry and education. These initiatives are each tailored, and in particular ways suited, to the circumstances of the area. They are making a positive contribution to the regeneration of some of our hard-hit localities.

I have been asked about what appeared in the newspapers this morning concerning the possibility of developments at the British Leyland factory in Bathgate. What appeared in the newspapers is necessarily speculation. I understand that British Leyland is to make an announcement tomorrow about action that it proposes to take to bring capacity in its truck business into line with prospective demand. While this will involve, I understand, some reduction in the work force, I am assured that there is no proposal to close either Bathgate or Albion.

Like everyone else, I deeply regret any reduction in jobs. As is known, the truck business has been going through extremely difficult times. The right hon. Member for Craigton recognised that it is counter-productive to speculate today about details in advance of the statement tomorrow. The decision that is taken is entirely a matter for those who run