Mr. Speaker

Before caling on the right hon. Member for Bristol, South-East (Mr. Benn) to move the Motion, I should inform the House that I have selected the Amendment standing in the name of the Prime Minister and the names of his right hon. Friends.

3.52 p.m.

Mr. Anthony Wedgwood Benn (Bristol, South-East)

I beg to move That this House deplores the rise in unemployment by over 150,000 above that for the same month last year, and calls upon Her Majesty's Government to introduce new and relevant policies which will produce a speedy reduction from this totally unacceptable level. The House has debated unemployment on many occasions in recent years, and in those debates a great deal of anxiety has been expressed about the regions and pressure has been put upon the Government to deal with special problems. The level of unemployment was, as I said myself in a debate on the subject last year, a great cause of concern to the last Government, and we were not satisfied with the progress that we ourselves made. But in recent months the situation has altogether changed. It is more serious in Scotland and the regions, but the problem is by no means confined now to those areas, and forecasts indicate that we might reach a level of 1 million unemployed during this coming winter. In addition, there is a general lack of business confidence and policy statements by Ministers suggest that they regard unemployment as an essential part of their strategy.

This debate therefore is not one of a past series but is the first in a new series in which unemployment is emerging for the first time since the war as a major political issue which threatens to develop into a national crisis. It is not a quantitative but a qualitative change that has taken place, and the Opposition Motion calls for new and relevant policies to deal with it.

I remind the House of the basic facts of the situation as they have emerged. The total number of people out of work in the United Kingdom on 5th April was 815,819, or 3.4 per cent. of all employees. The figures of the wholly unemployed—that is to say, excluding school leavers—who are the real hard core of unemployment, on a properly seasonally adjusted basis reveal the trend more dramatically. If we leave out Northern Ireland, the figure of basic unemployment has been increasing at an accelerating pace since the beginning of the year. From January to February it rose by 10,000; from February to March it rose by 23,000; from March to April by 48,000. Jobs have thus been disappearing at the rate of 2,000 per working day. The total now stands at 704,000, which is 3.1 per cent. nationally compared with 561,000, or 2.4 per cent., in June last year.

The position in the regions is even more serious. In the South-East unemployment is still 1.9 per cent., but in the Northern region it is nearly 5.2 per cent. In Scotland it is 5.3 per cent. and in Northern Ireland it is 7.2 per cent. These over all figures conceal pockets of rising unemployment all over the country, and I give one example from the Midlands. Coventry now has 3.5 per cent. out of work, an increase of about 20 per cent. in 12 months in an area where vacancies have halved.

There is another aspect which gives special cause for concern. This, of course, is the problem of male unemployment. In Britain today one man in 20 is out of work. In Scotland and the North, it is one in 13; in Northern Ireland it is nearly one in 10. According to the Sunday Times, Britain is now the industrial nation with the highest percentage of male unemployment in the world, having overtaken the United States, where 4.3 per cent. of the men are out of jobs.

The age structure of the unemployed is, of course, yet another problem. About half of them are over 40 and the over-40s form a much higher proportion of those who have been out of work for over six months. In Scotland nearly two-thirds and in England and Wales nearly 80 per cent. of those who have been out of work for over six months are over 40.

Mr. Frank Allaun (Salford, East)

Is my right hon. Friend aware that doctors are finding evidence of indirect effects of unemployment among their patients? For when they advise men of 50 years of age or so suffering from chest complaints that they should ask their employers for an inside job, their patients refuse because they are afraid that they will be laid off altogether.

Mr. Benn

My hon. Friend points to an important aspect. Indeed it works both ways. Men who are older are reductant to confide to their employers their state of health, while men who are older and who lose their jobs suffer from consequences which affect their health still further.

Vacancies are also down. The lowest figure of vacancies reached under the last Government was 150,000. It is now only just above 130,000. Between March and April, instead of the usual seasonal increase of about 6,000, the figure of increase was only 359—and that was the first increase since September.

The general picture is one of sharply rising unemployment and falling vacancies, especially affecting older male workers, who are the hardest hit in the regions, but it is beginning to cause anxiety throughout the country as more people face long periods out of work. One need only look at a simple list of published redundancies—those which have appeared in the newspapers. The Transport and General Workers' Union has given me a list which it has been compiling—this one since December. It shows 80,000 redundancies announced in the Press during that period. Since the latest unemployment figures were published, more and more redundancies have been announced and the number being notified to Government Departments is 50 per cent. above last year's level. During last week alone, a further 12,500 redundancies were declared, spread throughout the country.

Mr. James Dempsey (Coatbridge and Airdrie)

While my right hon. Friend is on this important part of his speech and is quoting figures, may I draw his attention to the fact that in Scotland, particularly in North Lanarkshire, there are virtually no vacancies for school-leavers and the emphasis on increasing unemployment is amongst these young persons? Is not this a tragedy? Will he bear this factor in mind in delivering his excellent address?

Mr. Benn

I am grateful to my hon. Friend the Member for Coatbridge and Airdrie (Mr. Dempsey). He may be lucky in catching your eye, Mr. Speaker. I hope that he is. But I hope that if I omit a point which an hon. Member thinks of importance he will not try to insert it in my speech but will try to catch your eye instead, for otherwise I shall find myself occupying the rôle of an impressario presenting the speeches of others.

Of course, it is not confined to manual and skilled workers. According to The Times, 70,000 men and women in professional executive positions were recently declared redundant. Among graduates, according to a report for the C.B.I., there will be a 15 per cent. to 20 per cent. cut back in graduate employment this year.

Another aspect which will need watching is the effect of rising unemployment on race relations. An independent survey conducted in London recently showed that 22 per cent. of West Indians between 16 and 24 were out of work, a figure which included school leavers. A survey in Bradford showed that immigrants and their families accounted for nearly a quarter of the unemployed, although less than 10 per cent. of the work force. I warn the Government that, if the psychology of fear gets a grip on Britain the consequences will be hard to predict.

My right hon. Friend the Member for Kilmarnock (Mr. Ross) and other Members will be dealing with the situation in Scotland and other parts of the country, but I believe I have said enough to carry the House with me in saying that unemployment has already reached quite unacceptable proportions in Britain today. It is very hard to assess the full cost of unemployment, but the Government are always warning us about wasteful public expenditure, and there is nothing more wasteful than maintaining such a large body of men and women paid to do nothing in an economy which is short of production. At the present rate, 16 million working days a month are lost by unemployment, which totally dwarfs figures lost in industrial disputes.

I turn now from the regions and special aspects to some of the problem industries particularly affected. I begin with steel, because many hon. Members representing steel constituencies wish to speak. Last month, 2,600 redundancies were announced, affecting five works, and 7,255 at a further ten works were announced this month, including the loss of over 4,000 jobs at Irlam, which would have been phased out in 1976 but are now to be brought forward to 1973.

There is no question that the Government bear a heavy share of responsibility for the present situation in the steel industry. The Secretary of State virtually sought to take over the managerial responsibility for its investment programme, running into many thousands of millions of £s, to provide new integrated steel works.

Although we welcome the confirmation of Spencer which was announced a year ago, as was made clear today by one of my hon. Friends, we are still awaiting the confirmation of the Ravenscraig authorisation and the other plants in the steel industry's development plan. By halving the 14 per cent. price increase, the Government have accentuated the financial problems of the B.S.C. and are subsidising the steel-using industries like motor cars, which are at the same time being rebuked for settling wage claims at what the Government regard as an excessive level.

In addition, the statement of the Secretary of State earlier this week, with the remaining uncertainty about hiving off and the absurd Ministerial welcome for private steel investment and the slow rate of general economic growth have all contributed to the phasing and severity of steel redundancies.

Another example is shipbuilding. Yesterday, we read in the newspapers that in the first quarter of this year only ten merchant ships were ordered as compared with 49 in the same quarter of the previous year. Yet it is at this very moment that the Minister for Industry has chosen to dismantle the Government's support programme announced in the debate last week. Even the new credit limit of £700 million, which in any case is provided by the banks, is widely thought to be insufficient.

In the coal industry, just one example is very reminiscent of all that was said about smokeless fuel last year. We read in the paper that a £6 million smokeless fuel plant due to be built in the Swansea Valley has been cancelled because of the withdrawal of the investment grant worth £2 million which it would have attracted.

In the aircraft industry, 30,000 or 40,000 jobs have been put at risk by the Government's gross mishandling of Rolls-Royce, which they are now desperately trying to retrieve, but which, even if they succeed, has gravely affected confidence in British products.

In Shorts, we read on Tuesday that a fifth of the labour force is to be dismissed to allow the company, according to The Times, to operate …on a basis suited to a commercial company. And this is in Northern Ireland, where one of the social costs of unemployment appears in the Defence Vote—paying for troops to maintain civil peace.

In machine tools, at a time of Government disengagement, orders for the home market are 20 per cent. less than last year. In engineering, net new orders fell by 11 per cent., according to figures published yesterday.

As for chemicals, in March, Sir Peter Allen of I.C.I. announced a cut of 25 per cent. in his investment programme. It would be interesting to the House and relevant to this debate to quote his reasons: The high cost of borrowing and the low rate of economic growth were the principal factors. It is significant that he chose those reasons and not the ones normally advanced by Ministers.

Why has this level of unemployment risen? Is it because of the balance of payments? Certainly not. Last year's surplus was the biggest we have ever had, and this year the forecast is still for another very substantial surplus. Is it because the rate of unemployment is beyond the control of the Government? This is an argument which is beginning to bubble out of Ministerial statements, but it is wholly false and cannot be justified. To quote the O.E.C.D. Report of last December: A major recession would not longer be a deus ex machina, but only could result from miscalculation or a deliberate act of Government. Is it because Ministers do not care about the level of unemployment? It is no part of my argument that, in a personal sense, they are less kindly as people in their approach to unemployment. But it is politically true that Conservative Members tend not to be elected from areas of high unemployment, and that Cabinet Ministers who represent the salubrious suburbs of Bexley and Barnet, Finchley and Mitcham, might not have the same experience as my hon. Friends in confronting the problems of unemployment. And the Secretary of State for Wales who looks after the principality from the security of a seat at Hendon, South may be in a different position from one who did so from Llanelli or Cardiff. But undoubtedly the Conservative Party thought unemployment important enough politically to be mentioned in three out of four election addresses sent by their candidates last summer, if Dr. Butler's recent book on the last election is correct.

The charge against them is not that they do not care: it is a much more serious charge. It is that unemployment is now seen by the Cabinet as a main instrument of economic policy. That is the charge which we make in this debate. The Daily Telegraph City Editor—not exactly, by nature or appointment, a supporter of this side of the House—wrote of the Prime Minister last week: He is ready for a million-plus jobless. The following day, the same City Editor wrote of the Chancellor: Dining at the Press Club last night, Mr. Barber, Chancellor of the Exchequer, unflinchingly faced the prospect of rising unemployment—in the near term. Indeed, in that speech—I have checked the actual words—the Chancellor said that his aim was "to slow down and later stop"—unemployment? No—"to slow down and later stop the rise in unemployment." This can only mean higher unemployment and the maintenance of it at a new and higher level.

Only the Secretary of State for Trade and Industry, who is, I believe, to speak in the debate, appears to be out of step. Exactly a week ago, The Guardian had a major headline on the front page: Davies Joins in Pressure for Wage Freeze. Other Ministers, the paper said, reported to include the Secretary of State for Trade and Industry, had made it known that unless the present policy of encouraging the de-escalation of wage settlements produces tangible results, there will be no alternative but a freeze. I do not know whether that is true. Perhaps the Secretary of State will say. Does he disagree with the Prime Minister? If not, that must be the first inaccurate leak which has appeared from his Department since he took office last August.

What is the Government's case about unemployment? The answer, of course, is that their case is contained in the wording of their Amendment, which represents a distillation of all the speeches which we have heard claiming excessive pay settlements. But is this really true? It certainly is not the reason they were giving for unemployment before the election.

The Secretary of State for Employment will remember that we both took part in two debates on unemployment last year. I refreshed my memory of what he said almost exactly a year ago, on 6th May: The remaining main component in demand is domestic consumption, and this will almost certainly be the key to the question of unemployment in the next year. Now comes the part of his remarks to which I want to draw attention: On the one hand, we have the wage explosion pushing up demand and, therefore, tending to reduce unemployment. On the other, we have the price explosion mopping up demand and thereby tending to maintain or increase unemployment. Which of these will win? The price explosion is of nuclear dimensions. So far this year prices have been rising at an annual rate of 7 per cent., if not a bit more. Later he said: Will the price explosion or the wage explosion win in influencing the overall level of demand?"—[OFFICIAL REPORT, 6th May, 1970; Vol. 801, c. 425–6.] In Opposition the right hon. Gentleman was arguing a totally different case from that to which he is committed in his Amendment today. Prices in the last 12 months have risen, not by 7 per cent., but by 8.8 per cent. In price terms, that amounts to a hydrogen bomb explosion. The Prime Minister has worked the amazing miracle of getting the £ in your pocked down from £1 to 94p without devaluation. He has achieved that in less than 10 months in office. And many of the prices rises which have caused this situation stem directly from Government policy and the policies of the Chancellor of the Exchequer.

I recently quoted in the House what was said in the Conservative manifesto on this subject. Wages started chasing prices up in a desperate and understandable attempt to improve living standards. That was the Conservative view when seeking to win votes. The words are almost identical with what was said by Vic Feather on this subject last weekend at a conference in Eastbourne: Soaring prices are bound to lead to wage claims: no one willingly accepts a lowering of his standards of living. That was the manifesto on which the Conservatives got themselves to power in the summer of 1970. Vic Feather was quite right when, in Scotland last week, he said: The root of the trouble is not wages. It is the lack of growth in the economy. If the economy was growing at 5 per cent. instead of at less than 3 per cent., prices would not be rising at their present rate, the soaring cost of living would be checked, and people would be working instead of being on the dole…there would be more confidence on the part of industry. There would be investment in modern equipment and the extension in factories The fact is that the Government are deliberately gearing the economy down to a lower level of productive potential. This is not "stagflation"—a word invented by Iain Macleod—but a Government-sponsored recession with serious long-term consequences. One of these will certainly be to create an atmosphere of fear that we shall see the wholesale reintroduction of restrictive practices in industry to protect workers against loss of their jobs. Anything the Government may think they can achieve through the Industrial Relations Bill to keep restrictive practices out will be more than cancelled out by the consequences of the policies they are pursuing.

It is part of the pattern of Government that they should blame the previous Government for allegedly encouraging wage claims towards the end of 1969. It is true to say that that was the time when the incomes policy moved from a statutory to a voluntary basis. But at that time Ministers opposed a statutory incomes policy, and if we had retained that statutory incomes policy from the autumn of 1969 until the summer of 1970, the pent-up demand of nine more months would, when followed by the incoming Government with their total abandonment of this policy, have led to far greater wage explosions than the one which now confronts us.

The Secretary of State for Employment (Mr. Robert Carr)

I believe that the right hon. Gentleman's memory is playing him tricks. The previous Government did not give up the statutory incomes policy. Shortly before Christmas, 1969, the then Labour Government forced the House to approve the incomes policy White Paper for 1970 which kept certain statutory powers, much against the wish of many of their backbenchers.

Mr. Benn

The right hon. Gentleman, who follows these matters more closely than I—my recollection comes from Cabinet discussions on the matter—[HON MEMBERS: "Oh."]—will know that we brought forward a White Paper at the end of 1969. I am saying that if it had been possible to maintain a statutory policy up to the summer and this had then been abandoned in the summer, the pent-up demand would have led to a far more difficult situation than the one the right hon. Gentleman claims confronted him when he came to power.

Mr. Carr

But in the White Paper the then Government said that wage increases in 1970 must not exceed 2½ to 4 per cent. They retained powers of investigation during that period in order, so they told the country, that they could see that they did not exceed that level. In fact, in the first part of 1970, they averaged 12 per cent.

Mr. Benn

The right hon. Gentleman did not hear what I said. I was talking about a statutory as against a voluntary policy. [HON. MEMBERS: "No."] We will check HANSARD and see who is right. If the tide of pent-up wage demands had been dammed for that extra nine months, the situation that would have followed would have hit the Government in exactly the same way.

The difficulty of the Government's analysis is that it does not explain the situation. High wages do not explain unemployment in declining industries where wages tend to be lower. High wages do not cause unemployment where there is high capital investment and a low labour content to permit productivity at a level that can absorb high wages. Higher wages do not explain redundancies when there is a market, nor do they explain the change in structure of unemployment and its longer duration.

Moreover, unemployment nowadays does not weaken the bargaining power of the unions as a reserve army of unemployed once did. The recent settlements in the motor industry should prove that. Neither expressions of Ministerial disapproval nor cosy lunches with Henry Ford at No. 10 could alter the basic balance of advantage of a settlement as Ford saw it. There is only one circumstance in which unemployment would have the effect which Ministers intend that it should have. That is if it rose so high and lasted so long and was so savage in its effect that it succeeded in genuinely frightening the main body of people out of wage claims. But, as a recent Bow Group pamphlet pointed out, that is not politically acceptable.

The real explanation for the Government's policy is simpler. It is that they have always wanted a market economy, and now they have got one. This is why unemployment is high. When the Prime Minister insists that his policy is succeeding, that is the only explanation of what he means. The dreams at Selsdon Park have become the nation's nightmare. There are more people chasing fewer jobs. That is the sort of competition they really believe in.

The Cabinet have dismantled every instrument they could find by which every Government in every modern industrialised society aim to guide the economic system: prices and incomes, effective regional policies; industrial support programmes. Now we really do have the competition of which the Conservatives spoke of in the General Election.

The incentives are confined largely to the people at the very top of the tree. Even at £2,000 a year—the sort of man the Conservative canvasser begins to think of as the Tory working-class—people are actually worse off under these policies. One has to turn to the right hon. Member for Wolverhampton, South-West (Mr. Powell) to find a vivid phrase to describe the policy of unemployment. This is what he said in the Budget debate: It is like a game of musical chairs. When the music of inflation stops, there will always be somebody who for the time being is without a chair until a new pattern of activity, behaviour and expectations is attained which corresponds either with the reduced rate of inflation or with stable money values."—[OFFICIAL REPORT, 5th April, 1971; Vol. 815, c. 75.] The right hon. Gentleman is not in the Cabinet, but he still has a way of putting some Conservative policies better than any Conservative Minister.

The truth is that this is not just a question of reversing the policy of a Labour Government. The Cabinet has deliberably set out to destroy the whole postwar consensus based on the maintenance of a high and stable level of employment and the whole social fabric that went with it.

What, therefore, must be done to correct it? First, I believe that we shall make no progress until a Minister, preferably the Chancellor, makes it clear that the Government accept, as a major objective of policy, a substantial cut in the present level of unemployment. If the Government will not tell us what level they expect, if they decline to forecast—all Ministers, advised by their officials, are reluctant to forecast—will they tell us what level they would accept and how they will get it?

Second, it follows from this that the rate of growth must now be geared above the level of productive potential if unemployment is not to rise. The Chancellor has many instruments at his disposal—public expenditure, tax levels, the regulator and credit controls—to produce the necessary momentum to absorb people back into production.

Third, there must now be a serious attempt to discuss the future growth of the economy with both sides of industry. It is really no good trying to run a modern industrial society unless we are making a serious attempt to inter-mesh corporate plans with national plans. Manpower forecasting too should be an integral part of any Government's industrial policy.

Fourth, the Government will have to rethink their attitude to the trade union movement. It is an act of supreme folly, in my judgment, to decide to make war on organised labour, using the instruments of the Industrial Relations Bill and higher unemployment. The problems of wage negotiations and industrial relations are at least as much a social and political phenomenon as they are an economic phenomenon. As has been said, power has passed to workers at least as much as it has passed to international companies. The pressure for industrial democracy, for the trade unions to be brought into Government policy, is so strong that it is inconceivable that any government should succeed in the long run if they choose to maintain an attitude of the kind which we have seen since the election. The Government must now take up with the T.U.C. some initiative for a fresh look at problems of prices and incomes. Every Government has a prices and incomes policy, and what is wrong with this Government's policy is that it is a bad one and an unfair one. The Government ought to take up the indications given by the T.U.C. for further discussion on this.

No one knows better than somebody who served in the previous Government how many difficulties there are in making it succeed. But everyone knows that this is a long term educational process which can only possibly succeed as part of a broader framework of social justice and, above all, full employment. We had our failures, I confess that; but they were nothing to the disaster lying ahead if, in addition to increasing inequality through budgetary means, the Government throw away full employment as part of their social contract with the people of this country.

The Government must be prepared to take special measures to deal with special aspects of the unemployment problem. There is a Bill next week to abolish investment grants, and these should be looked at again, with R.E.P., which Sir John Hunter said a year ago might lead to the bankruptcy of his and other major companies. In the industrial training field, an expanded programme is necessary to deal with the problem of longterm unemployment for those lacking skills to re-enter production.

The Labour Government did not succeed entirely in getting unemployment down to the level which we thought right. But we had a balance of payments problem which, compared with the record of this Government—[Interruption.]

Mr. Norman Atkinson (Tottenham)

I do not want to add to my right hon. Friend's qualities as an impressario, but before he comes to his final peroration, throughout his speech he has convinced me that the policy being pursued by right hon. Gentlemen opposite is to achieve one million unemployed in this country. May I take it, and may the House take it, that in his opinion, in the absence of any objections to this prediction, we can now read it as being the policy of the Government to have one million unemployed? There has been no objection to my right hon. Friend's words throughout his speech. Therefore, we take it that this is what the Government intend.

Mr. Benn

As my hon. Friend knows, I put a very simple question to the Chancellor: if the Chancellor will not say what level of unemployment he thinks there will be this year, whether he would say what level he will accept this year and, if it is likely to go above that level, what action he would take to reduce it. My hon. Friend's point is right.

Finally, I warn the Government not to fall into the error of supposing that the British people will accept unemployment at its present—or worse still—a higher level. If anything, unemployment is less acceptable in an affluent society, for obvious reasons, than it was 30 or 40 years ago. I warn the Government not to think that they can avoid their responsibility by blaming the outgoing Government, the unions or the nation as a whole. To do that would be to go back to Stanley Baldwin in 1925, and what he said about unemployment has been recorded in the reference books: I have never pretended to have a remedy…If the people cannot save themselves, no Government can save them. There is a frightening similarity between what Baldwin said on unemployment and the speeches made by senior Ministers now.

The Prime Minister may remember what happened to Mr Winston Churchill in 1945. Then, at the moment of his greatest triumph, he was dismissed from office. Why? Because the public, grateful as they were for all he had done during the war, were not prepared to take back the Party which had made unemployment a major instrument of policy throughout the 1930s. If that is to be their policy now, that too will be their fate.

4.27 p.m.

The Secretary of State for Trade and Industry and President of the Board of Trade (Mr. John Davies)

I beg to move, to leave out from "House" to the end of the Question and to add instead thereof: recognising that one of the main reasons for the increase in unemployment is the cost inflation caused by excessive pay settlements, endorses the determination of Her Majesty's Government to defeat inflation and so to make possible a reduction in the number of people out of work. I was concerned and distressed to hear the right hon. Member for Bristol, South-East (Mr. Benn) express the kind of views which he has been expressing and saying such things as that the present Government regard unemployment as an essential part of their economic strategies, and that the present rate of unemployment and, even more, the kind of figures he was postulating for the future, represent, as he said, a deliberate act of government.

I read with interest the debate on the Finance Bill yesterday and I saw that his right hon. Friend the Member for Manchester, Cheetham (Mr. Harold Lever) took a more balanced view than he does, but said that he thought that the present Government had varied the order of priorities as between inflation and unemployment in the terms of their economic management.

I reject absolutely his assertion in this respect. The Government are deeply perturbed at the present level of unemployment and are determined to do something about it. [HON. MEMBERS: "What?"] Perhaps hon. Gentlemen opposite would do me the favour of listening and I will try to draw out the Government's policies.

Surely the concern about unemployment is intimately bound up—the right hon. Member for Cheetham made this clear—with the whole question of inflation, a view which the right hon. Member for Bristol, South-East sought so hard to reject.

Generally speaking, on both sides of the House and in the country at large, there is a very real understanding of the impact of inflation on our national and social performance, the damage that it does and the fearful consequences that the present rate of inflation, which exceeds by far anything we have recently experienced, can have.

There seems to be, however, singularly less understanding of the effect of that rate of inflation upon the whole question of unemployment, and it is to this question that I propose to address myself. I hope very much to enlist the efforts of the House to try to see how important is the restraint of the present level of cost inflation, which has a critical effect on the whole question of the employment level and the unemployment level.

The real place where this bites is in the industrial sector. At the moment the industrial sector is caught in a veritable pincer movement between, on the one side, the very high level of cost inflation and, on the other side, despite what hon. Members opposite say, what is none the less the much lower level of price inflation. For years now the level of wage inflation has considerably outdistanced that of price inflation, and the pincer movement between the two has grossly undermined the resources of industry generally.

Clearly, this works in two ways. There is, on the one side, the ever rising level of industrial costs which are so strongly geared to wages. Wages represent by far the greatest element in industrial costs. The rate at which they have been moving—the upward pressure of industrial costs generally—fatally presses against the generation of resources within industry.

Mr. Atkinson rose—

Mr. Davies

I ask the hon. Gentleman to be kind enough to let me proceed a little further and I will give way in a minute or two. I should like to complete this section.

On the other side, there are the two functions of prices and of the extent of the market. On prices, I have spoken on the question of the Index of Retail Prices which, as a concentration on the statistics shows, has not moved at the same rate. This represents very severe pressure on the major engineering industries in the country and the effect of the movement of cost inflation on the whole of their pricing problems as they have had to face them over the years.

The right hon. Gentleman mentioned the shipbuilding industry. That industry had undertaken contracts at price levels which were by no means sufficient to counter the growing level of cost inflation which it has had to face. The industry has felt the terrific effect of the pincer movement to which I have referred.

Mr. Atkinson

If the right hon. Gentleman seeks to relate wage costs to the level of unemployment, must he not take the figure of direct wage costs? Most recent analyses seem to agree that the wage element within the final price is now about 28 per cent. If this is so, how can the right hon. Gentleman assert that wages are the biggest element in prices?

Mr. Davies

They are certainly the biggest single element in prices. This is what I said, and it is a fact. Faced with this extreme effect, the natural tendency is for industries, generally speaking, to look for wherever there can be cost economies and to take the steps necessary to secure them.

The other side of the question is the size of the market. The right hon. Gentleman had something to say about this, too. The size of the market is at present of very severe concern to industry. Consider what the market is composed of and first the field of exports—our position in exports, where after devaluation a great part of the national production was switched out of the home market into exports, is substantially changing. Last year showed an awkward position in exports. Though the value kept up, because price levels were higher, the volume of exports was not satisfactory. Last year we were moving at a much lower rate of increase—a 3 per cent. rate of increase in exports. In the last six months of last year we were in an absolutely stagnant position with exports in volume terms. This tendency has continued into 1971. So the export market itself is not providing for industry the outlet which it looked for.

Take the position in regard to imports. The fact of the matter is, again, that cost-inflation—the pushing forward of prices—had a very substantial effect and imports were continuing at a relatively high level.

I quote as an indication the position of a very significant part of the economy—the motor car market. British motor car manufacturers saw within this market last year a 7 per cent. increase in their outlet as compared with a 53 per cent. increase in the outlet for imported motor cars. This is an indication of the impact of cost-inflation on the outlets for merchandise.

Mr. Benn

The Secretary of State will be the first to admit that even so imports of cars are substantially less than they are in Common Market countries and that, if the E.E.C. report is right, wages in Italy rose by 19 per cent. last year and imports into Germany by 16½ per cent.

Mr. Davies

I am coming to the point of international inflation. I will certainly deal with the right hon. Gentleman's point. As to imports of motor cars, I agree with the right hon. Gentleman that we are still relatively small importers in comparison with our European neighbours but the contrast and the differential is disappearing fast. Then there is the question of the home market itself.

Mr. Ted Leadbitter (The Hartlepools) rose—

Mr. Davies

I will continue for a moment, if the hon. Gentleman does not mind. Hon. Members opposite are continually recommending my right hon. Friend the Chancellor of the Exchequer to shift the home market rapidly upwards and to reflate. The T.U.C. and others are all giving weight to the thought that there should be a rapid reflation, presumably by the vehicle of a considerable relaxation in taxation in a form which my right hon. Friend the Chancellor has not at present undertaken.

In the light of the disappointing trend of events which the continuing rate of inflation represents and which in my right hon. Friend's own estimate accounts very largely for the very large increase in the total level of consumer demand in the coming year—in his Budget speech my hon. Friend mentioned a figure of 5 per cent.—how could my right hon. Friend, with his eye on the future and to the kinds of problem I have indicated in terms of the sustainability of our export market, responsibly have given a sharp jolt forward to the home market. It would have been very irresponsible.

Mr. Leadbitter

On the question of exports and imports, will the Secretary of State enlighten the House about the level of imports of steel and steel pipes and about the refusal of export orders for B.S.C. in America? Is he prepared to accept some responsibility for the Government's attitude to the steel industry which is causing uncertainty and large numbers of redundancies?

Mr. Davies

I shall certainly come to the question of the steel industry in a minute. I will just remark to the hon. Gentleman that the steel industry has been working to absolute maximum capacity to satisfy the home market latterly. The market is now easing off, but it was exceedingly buoyant until recently.

I return to the question of the crunch in which industry generally finds itself. What it first of all seeks to do in these circumstances is to find cost economies. It finds them largely in the manpower field. Hon. Members on both sides of the House know very well that by international standards we are in many sectors of industry still grossly overmanned. It is therefore natural that industrialists should in those sectors be seeking to get the economies that they can.

The other and not less important factor to which these conditions have given rise is that the resources from which investment is generally generated, and which is the security for future employment, are very seriously undermined. Of course investment levels are not satisfactory. Hon. Members opposite are constantly pressing this point on me, and I do not disagree with them. Investment levels are not, and have not been for a long time, satisfactory. For years the level of investment has been inadequate to sustain the amount of development, not only in terms of security of employment, but also in terms of growing real wages which arise by virtue of improved investment. Of course that is true.

The machine tool industry serves as a good temperature taker of the nature of investment in the economy. Reports, whose details one may question but which none the less give a broad indication of the truths in this respect, have shown that the age of our machine tools is seriously in contrast with the age of the machine tools of our industrial rivals. It reflects sustained years of lack of investment.

These are the kinds of problems which are confronting many industries. The thing which is of great concern is that the treatment of them has for very many reasons in the past been deferred. There has been a dilatory effort to cope with the problems of lack of investment and overmanning to which I have referred.

The steel industry is a case in point.

Mr. John Mendelson (Penistone)

When the Secretary of State speaks of the Chancellor's policy and asks how he can be expected further to reflate now, given the anxieties he is supposed to have, does not the right hon. Gentleman realise—one would have thought that it had been accepted doctrine, at least since Keynes—that the wastage of resources by keeping idle resources at the high level which the Government are now allowing is far more responsible for there not being a reduction in the total price of British products than would be any reflation which the Chancellor brought about, thus allowing 250,000 people to be employed?

Mr. Davies

I understand that, but the hon. Gentleman knows very well that the impact of such a move in the rather special conditions in which we find ourselves would open us once again to all the perils of the balance of payments problem and its resultant evils from which we have had such pain in the past.

I realise that there is special interest in the steel industry in this debate. Here again, we have an industry in which there has been—I do not refer only to recent years—a sustained failure to cope with the problems of over-manning and under-investment. The steel industry has suffered, as I have said in recent debates, from a sense of lack of stability, but it has not yet been able to grasp the intentions which it should have entertained in terms of rectifying these deficiencies.

Nevertheless, the steel industry, back in 1969, made some declarations about its proposals to deal with its over-manning problems, and at that time it said that it proposed, over about a seven-year period, to try to bring down its manning by about 50,000 workers. The closures and redundancies to which that gives rise must obviously be a matter of immense concern not only to the House as a whole but to individual hon. Members and their constituents. But the recent announcement—the right hon. Gentleman referred to this—is absolutely part of the plan which was declared during the period of the Labour Government although, as I say, it has been somewhat deferred until this point.

Mr. Brian O'Malley (Rotherham)

It is true that a large number of the closures and redundancies announced by the steel industry would have come, but, had it not been for the present Government's policy, they would have come by 1975 or 1976 and afterwards, by which time there would have been opportunity to provide new employment.

Mr. Davies

On the contrary. The redundancies and closures are late coming, not early coming, and nothing which this Government have done has forced them forward at all. Above all, what has not forced them forward has been any pricing decisions by this Government, as has been suggested.

Mr. John Mendelson

The documents are there to prove it.

Mr. Davies

On the contrary. The closures are part of the strategic plan announced during the period of the Labour Government.

Mr. Michael Foot (Ebbw Vale)

The right hon. Gentleman is misleading the House and the country about this. What the Steel Corporation proposed was a plan for running down a part of the industry but at the same time for expanding other parts. What the Government have done by their measures has been to increase the pace at which the rundown is happening in certain places while restricting the investment programme which the Steel Corporation has put forward. As regards Irlam, for example, that was specifically on the documents to be dealt with in 1976. So the right hon. Gentleman has his facts quite wrong.

Mr. Davies

What I have said is correct, and it is borne out by the statements of the Chairman of the British Steel Corporation. The closures and redundancies implicit in this programme are severe, but the Corporation has devised imaginative and sensible arrangements for early consultation with the unions concerned and for proper preparatory work in order to try to accommodate what is by any standards a painful process.

I realise that there is specific interest in the plant at Irlam, and I shall now refer to that. Irlam presents a special problem in so far as it combines two rather contrasting elements in the industry. One part, which is in effect the steel making element, is an old-fashioned and out-of-date plant. The other part is a highly modern wire drawing and rod making plant very much within the framework of the Corporation's own plans for the future, It presents very real problems. There has been reference to offers made to take over the plant as a whole. As yet, the Corporation tells me, it has not had any such firm offer for the take-over of the whole plant, but it will consider it if it does.

The Opposition are wrong to try to seek to make political capital out of the present proposals for the steel industry. I recall to them that, during the period of their Government, between 1964 and 1969, they—and they were right to do it; I do not doubt it for a moment—were very much involved in the rundown of the coal industry, ably handled by the then chairman, Lord Robens, which brought its manpower down by 200,000 during the period of the Labour Government.

Mr. Michael Foot rose—

Mr. Davies

No; I think I had better get on.

Hon. Members

He is terrified of giving way.

Mr. Davies

The right hon. Gentleman the Member for Birmingham, Stechford (Mr. Roy Jenkins), who is not in his place at the moment, has asked about the timing of the broad review of the steel industry which I am currently undertaking. For his information, the timing is as follows. The first phase of it, which deals only with the immediate ensuing financial year of the Corporation, will be in my hands in the course of the next week or two. The much more profound survey, which goes into the whole of the future development and investment of the Corporation, will not be in my hands until the autumn.

Mr. James Hamilton (Bothwell)

On the subject of the steel industry, the Government made an announcement yesterday, through the Secretary of State for Wales, that there would be a £60 million development at the Spencer Works at Llanwern. In Scotland, we are greatly concerned about our steel industry. As the Government made a decision in 1969 regarding certain investments—which the Government of the day accepted—may we be told in this debate whether a statement will be made about the Government's investment policy, and will the Secretary of State for Scotland, for a change, tell the Scottish people what the situation of their steel industry is?

Mr. Davies

As soon as I have the first part of the survey in hand and I see clearly what developments this may allow, I shall not fail to see that either the House as a whole or individual hon. Members are informed.

Mr. Eddie Griffiths (Sheffield, Bright-side) rose—

Mr. Davies

It will be of interest to the hon. Gentleman to know that one of the major projects in Scotland which I believe he has in mind—Ravenscraigis not yet even put forward by the Corporation to the Government for approval.

Mr. William Ross (Kilmarnock)

Will the Secretary of State read the Steel Corporation's own report? It was put forward and approved in January last year.

Mr. Davies

I understand what the right hon. Gentleman means, but he knows very well that, after approval is given to the overall investment programme, each item of this kind comes back for final approval. It has not yet come back.

Mr. Benn

In the steel debate two or three weeks ago, the right hon. Gentleman said that his review of the investment programme would be finished in about six weeks, as I understood it.

Mr. Davies

No.

Mr. Benn

In a short time, at any rate. He has now told the House that the review of next year's programme will be with him in the next week or two, but he will not complete his review of the Steel Corporation's investment programme until the autumn. That is a major announcement which he has now made.

Mr. Davies

No, I made it before. I have said that the second phase of the review would not be completed until much later this year. It covers of course a wide range of investments running through to the end of the decade.

The right hon. Member for Bristol, South-East made some reference to the level of international inflation, and I shall now say a word about that. He is quite right when he says that countries like Germany and Japan have been having wage inflation at a rate comparable to or greater than our own. But the rate of productivity of those countries is very much greater than ours. Their rate of growth is very much greater indeed. That, of course, is the great contrast and it has an immense impact on the difference between this country and the others.

The Government's policy in face of the effects of inflation on the economy generally and on the level of unemployment has been clearly stated and will be continued. It is to confront excessive claims wherever they arise, be they in the public sector or the private sector. As I have sat on this Bench over these past months listening to right hon. and hon. Members opposite consistently, on almost every claim that has arisen, trying to force the Government to give way and concede more, I have been literally horrified by their failure to understand the seriousness of the situation with which we are confronted. I am deeply concerned by their attitude, which I believe is very damaging to the level of employment itself. Excessive settlements mean redundancies.

Mr. Eric S. Heifer (Liverpool, Walton) rose—

Hon. Members

Sit down.

Mr. Davies

I shall not give way.

Mr. Heffer

Will the right hon. Gentleman give way?

Hon. Members

Sit down.

Mr. Heffer

On a point of order, Mr. Deputy Speaker. In the event of a right hon. Gentleman being prepared to give way, it is well understood that the hon. Member seeking to intervene does not press the point. But would you ask hon. Members opposite to stop baying like a lot of sheep on every occasion on which hon. Members on this side try to intervene?

Mr. Deputy Speaker (Sir Robert Grant-Ferris)

That is a point of order, at any rate. I think, however, that there is not a great deal of substance in it. I think that the House of Commons is acting as the House of Commons should this afternoon, with cut and thrust, and provided the Secretary of State is given a fair hearing—and I am sure that he will be—I do not see any great harm in what is happening at present. But I think that it ought not to go furher.

Mr. Davies

I turn now to the other side of the picture—the question of lack of investment and the problems with which this confronts us. The Government have been very conscious of the shortfall of resources in industry to meet the needs of investment, and considerable efforts have already been made. Undoubtedly, the Chancellor of the Exchequer's measures in relation to corporation tax and selective employment tax, and his cut in the Bank Rate will have a profound effect on the resources, which are of paramount inportance, available to the private sector. The acceleration of investment grant payments which I have also authorised and the removal of import deposits have also helped.

The objective of the Government is to create the basic conditions in which industrial investment can move forward again, and this means trying to move into the state of growth which allows it. I recall to hon. Members opposite what the levels of growth have been in the economy over recent years. In the period 1959–64, there was a growth rate of 3½ per cent.; in 1964–69 it was less than 2½ per cent.; in 1969–70 it was 1 per cent. The Chancellor is planning to try and get the economy to move forward up to the rate of its productive potential of 3 per cent., which will be a very big improvement on anything we have had recently.

I was interested to note that the right hon. Gentleman did not refer specifically to regional policy, and certainly not in detail. But it is right that I should say a considerable amount about this. I see that, in a debate on this subject last year, he made an association between unemployment and regional problems. I think that to a large degree he is right in saying that this is where the problem is at its bitterest and bites most deeply.

I believe that between the Opposition and the Government there is really not a profound difference in ends as regards regional policy. [Interruption.] I say that there is not a profound difference in ends, although there is a profound difference in means. The ends are not dissimilar. Both sides believe that an active regional policy is an essential part of Government. I believe that both sides see an active regional policy as a development with three particular characteristics.

The first of these characteristics is the purely human one that it is inadmissible to see large sections of the country with large populations having little prospect of employment at all or without prospects of employment over long and sustained periods. The second factor is the obvious danger of allowing under-heating and over-heating to contrast in different parts of the country with the deleterious effects that this has on the economy. The third factor, which plays a very big part in the generation of regional policy, is the unwisdom of failing to use resources. The right hon. Gentleman referred to that and I entirely agree with him.

On assuming office last year, we undertook a major look at the whole of regional policy. We did it in two directons. We sought first of all to look at it in the context of the incentives devised by the last Government in order to try and encourage increased and sustained industrial development in the regions. We looked at it also in the context of the boundaries which had been devised as being the appropriate boundaries within which these incentives were payable.

The trouble about these incentives—and I refer obviously to the differential rates of investment grants, regional employment premium and selective employment tax—was that their coverage had the effect of being exceedingly hit or miss. They were not directed towards specifically securing lasting and self-renewing investment which would generate the resources to preserve itself and continue and expand. These incentives were a generous throw-out of cash which landed where it did and might have and did have uncertain results. In certain cases it did have the effect of creating investment, but that investment proved to be precarious in the event. During the course of the cold winds on the economy, it has proved to be the most subject to withdrawal and deterioration. That is a fact. It is something with which I am confronted day by day.

Again, the provisions made by the last Government inadequately dealt with the problems of the older industrial conurbations. There is no doubt that, in those parts of the country where old industries were inevitably falling into obsolescence and where unemployment was being created, the last Government had inadequate provision in their policy with which to cope.

Mr. Peter Hardy (Rother Valley)

Will the right hon. Gentleman give way?

Mr. Davies

No, I will not. I realise, of course, that in making the changes that we have in terms of incentives or boundaries, one faces difficulty in so far as one of the necessities, as hon. Members opposite have stressed, is that the provisions should be dependable and long-lasting. It was necessary, in the face of the obvious defects of the last Government's policy, to make changes which would have a long-term effect and allow long-term investment to take place.

Mr. O'Malley rose—

Mr. Davies

No. I think I will get on.

We concluded that marked changes in both respects needed attention. As regards incentives, we have introduced a system of depreciation at will on a much wider range of assets than before in place of investment grant differentials. We have decided to maintain the higher initial allowances on industrial buildings and we have gone in for a much intensified use of the Local Employment Acts as a vehicle for more effective deployment of effort in terms of long-term investment. We have, moreover, changed the boundaries. The most important changes have been to deal with this problem of the older industrial conurbations and to extend to them the special development area assistance.

It is necessary to see the incentive system in its proper context. There is an erroneous belief that an incentive system will actually create investment. It does not create investment, or at any rate very little. It provides conditions in which investment under certain circum- stances will be moved into an area from one in which it would have preferred to have deployed itself. This is what has been the guiding light of the Government.

Mr. Peter Shore (Stepney)

While I do not necessarily agree with the last passage of the right hon. Gentleman's speech, surely he must concede that it is absolutely impossible to have a workable regional policy with the present level of national unemployment and the present rate of growth of the economy? He might as well roll up his map of the regions until he persuades the Chancellor to get the economy expanded.

Mr. Davies

Let us not anticipate what I am about to say. The right hon. Gentleman is not entirely correct in what he says. I am sure that the general level of the economy and its general buoyancy, has a profound effect on regional development. I continue to emphasise, I have never suggested anything different, that the incentive system can work only at the margin of decision. It shifts but it does not create, and it is no good imagining that by pouring more and more incentives into regions when investment is low we will create the conditions we wish. It does not happen.

From the indications I am getting it is not correct to say that the general package which the Government have produced is unattractive. On the contrary, industry is more and more becoming of the opinion that it is an attractive package. May I quote somethting which is of some interest. In the first quarter of this year the number of inquiries by industrialists about investment in the assisted areas was twice the level of what it was last year [Interruption.] There have been 1,083 inquiries in the first quarter of this year.

Mr. Leadbitter

Where?

Mr. Davies

I am talking of the total in the assisted areas and this was as compared with the 1970 figure of 538.

In the last nine months, compared with the corresponding period—

Mr. Bob Brown (Newcastle-upon-Tyne, West)

Talk about development areas, not intermediate areas.

Mr. Davies

I am talking about the total of assisted areas. Dealing with I.D.C.s, and hon. Members showed keen interest in this just now, taking the last nine months and comparing it with the preceding nine months, the figures show that the development areas have performed better, not worse, than the nation as a whole.

Mr. Leadbitter

Not so. The North-East Development Council does not think so.

Mr. Davies

The hon. Gentleman must accept that I have taken the trouble to find out the facts before coming to the House.

Mr. Leadbitter

Give way.

Mr. Deputy Speaker

Order. No one knows me better than the hon. Gentleman. The whole House knows that they must give a proper hearing to the Minister, who has a case to make. There will be an abundance of opportunity for hon. Members to express their disagreement, but we must have a fair and proper hearing for the Government case—whatever we may think about it.

Mr. Leadbitter rose—

Mr. Davies

I recognise the reluctance of the Opposition—

Mr. T. W. Urwin (Houghton-le-Spring)

On a point of order. Is it not to the advantage of the House as well as the right hon. Gentleman, that he should at least state the facts as they are known to be—

Mr. Deputy Speaker

Order. The hon. Gentleman knows that that is not a point of order for me, and he should not raise it as a point of order for me. I will deal faithfully with any genuine point of order that is raised, but I ask hon. Members not to raise points like that, which are really not points of order.

Mr. Urwin

If I may pursue that, I accept your Ruling, Mr. Deputy Speaker, but the right hon. Gentleman has made great play about the value of the I.D.C. policy to the development area yet he omits to say that—

Mr. Deputy Speaker

I am afraid that will not do.

Mrs. Renée Short (Wolverhampton, North-East)

On a point of order. Is it a point of order for us on this side of the House to point out to you that the speech we are now listening to is an absolute shambles—

Mr. Deputy Speaker

I have heard enough of the hon. Lady's point to realise that it is not a point of order, because whether the speech is, as she describes is, a shambles, or is not, is nothing to do with the Chair. As long as the speech is in order, and the right hon. Gentleman is perfectly in order, then it is not a matter for the Chair.

Mrs. Short rose—

Mr. Kenneth Lewis (Rutland and Stamford) rose—

Mrs. Short

Further to that point of order. We are supposed to be debating unemployment. Earlier, the right hon. Gentleman promised the House that he was coming to the solutions of his Government for the serious unemployment position. So far, although I have been listening carefully, he has not got to that part of his speech. May I ask that you instruct him to get to it—

Mr. Deputy Speaker

The right hon. Gentleman is perfectly in order in making his speech as he thinks best. No doubt he will get to the point about which the hon. Lady is concerned. In the meantime, it is for the House to listen to him.

Mr. Kenneth Lewis

Further to that point of order. Is it not an unparliamentary remark for the hon. Lady to suggest that the speech of my right hon. Friend is a shambles—[Laughter.]—since—

Mr. Deputy Speaker